Value proposition: concept, model, basic patterns, creation, development with examples and expert advice

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Regardless of the products or services produced, there is always competition among companies. What makes a client choose one company among many similar ones? The answer lies in the best value proposition. Marketers use it to show why this particular enterprise is better than competitors. They also try to attract the attention of more customers to their company. For a business model, the value proposition is critical. It is possible to create the best quality product, the best presentation, the most amazing price, but the client will not know about it unless they are informed.

What is a value proposition

Start with a definition of the term. There are many descriptions of it, but one of the best explanations of the value proposition comes from entrepreneur Michael Skok. He believes that this is a statement that explains what benefits can provideproduct or service and who it is intended for. Value proposition - a short statement that describes the portrait of the target audience, the problem of the consumer, which the product will help to cope with, why it is definitely better than alternative options. The key to this definition is the word "unambiguously". A compelling value proposition is a promise designed to show how different the brand is from the competition, why the target audience should choose it over the rest. You also need to make sure that it is expressed in only one sentence or phrase. If marketers cannot achieve this, there will be a significant flaw in brand positioning.

Options for creating offers

Let's look at a few examples of value propositions to get an idea of what we're talking about. For example, for a firm that creates toolkits that enable businesses to manage online payments, the target market will be business owners. The main advantage and unique offer for the product is the simplicity and transparency of payments. Therefore, when developing a value proposition, it is necessary to focus on the ease of use of tools. The phrase might sound like this: “A clear tool to help business owners easily manage online payments.”

Another option is taxi services. The target audience of this company is people who need to get from point "A" to point "B". The main advantage can be immediateoperator response. The emphasis in developing a value proposition for such a company should be on saving the client time. Therefore, it can sound like: “We will take you to the place in minutes.” Another example is the mass market, focused on economical buyers. The main advantage of the company is that it offers its customers quality products for little money. At the same time, the prices in the store are lower than those of competitors. Therefore, you can focus on the quality and cost of the product. Let's create a value proposition template based on these criteria. It might be: “Get more for less.”

How to write a unique offer

Now let's look at some tips for writing your own value proposition. The first thing to start with is the development and creation of a special template. Swiss business management theorist Alexander Osterwalder developed a specific design for the ideal value proposition. Its design is designed to develop products that customers really want. The Osterwalder value proposition development model has become one of the most widely used. The theorist has developed a template that focuses on the client and their requirements. Use this template to identify the key determinants in a value proposition.

Business questions for model building

When compiling a template, you need to answer how many questions about the product and the client:

1. What does your product do?
2. What does the client feel whenuses your product?
3. How does your product work?
4. What functions does it have?
5. What are the emotional drivers of purchases?
6. What are the problems and hidden needs of the client?
7. What are rational buying drivers?
8. What are the risks for a customer to switch to your product?

The result will be a template with a description of the product and the needs of the client. This structure is very similar to the business model template and is a simple visual basis for brainstorming before creating a value proposition model. It will help to find out why the customer needs the supplier, what the customer may perceive as an added value, what they find annoying or disadvantageous.

Advantages of the Osterwalder Model

The value of the model lies in the fact that it allows you to understand exactly what customers want and visualize products and services that perfectly match their needs. The Osterwalder value proposition collects information about the client into a single structure and helps to find matches to their needs and requirements. This makes it possible to design a more efficient business model. Ultimately, this will lead to profitability. At the same time, time will not be wasted developing ideas that may not interest customers.

Added value for the customer

When developing new business models, and before creating a value proposition, organizations tend to focus on internal issues and tend toforget about the needs of your customers. Anyone can think of good and creative ideas, but the main goal is to create added value for the client that they can feel. With the help of the value proposition model, organizations identify needs in a visual and structured way, as a result of which they are able to develop a template that will reflect the requirements of customers. In doing so, they gain a profitable business model for themselves and their clients.

Understanding customer problems

Using a value proposition, companies get the opportunity to understand what customers really want, to see the problems they are experiencing. With such knowledge, one can understand how customer needs can be met. If all this is expressed in a structured and visual way, it immediately becomes clear which points and features of the product or service need to be adjusted in order to meet the requirements. To properly apply the value proposition model, it is important to have a clear understanding of customer requirements.

The client's problem is something that gives him trouble, annoys him. It is also what he perceives as something negative. These are unpleasant side effects, such as rising costs, high risks, reduced sales, fierce competition, negative emotions and atmosphere. But not all problems are perceived by consumers as equally important. This needs to be considered.

Customer Objectives and Benefits

Tasks are what the client wants to do but can't do. Companiesneed to know if their products or services are up to the task. There may be several tasks that the product can solve. Benefits are a positive result from the use of the product that the customer wants to receive. We are talking about customer expectations that need to be exceeded in order to outperform competitors. For example, cost savings, user friendliness, quality service, and a pleasant work environment.

Market Research

The company can obtain information about the needs of customers in the process of negotiating with them or analyzing the market for their products. By recording responses, categorizing and prioritizing, marketers get a clear picture of how a company can best serve its customers. The most important elements will then form the basis of the new product or service. By providing them, it is important to manage the client's biggest pain.

Proposal testing

By carefully examining the customer's problems and their solutions, the chances of product failure are minimal. But at the initial stage, testing is still required. The product creator is faced with the task of conducting a final check. The generated proposal will need to be tested at an early stage so that adjustments can be made in a timely manner. It may happen that customer requirements are misunderstood or misinterpreted. Therefore, the value proposition must be put into practice. It is important to always test it with the client,so that it can be established whether it really works and meets the requirements. The Company conducts a step-by-step assessment of the correctness of previous assumptions and interpretations. After all, it is the client who determines whether this value proposition is attractive to him. You must always remember that it is for the client that the product is created.

Geoffrey Moore ready template

You can successfully use ready-made options for building a value proposition. For example, in Jeffrey Moore's book Crossing the Chasm. How to bring a technology product to the mass market,” the following template is suggested: “For the [target customer] that [statement of need or opportunity], our [product/service name] [product category] that [statement of benefit].” Example: "For marketers looking to increase social media ROI, our product is web analytics software that translates engagement metrics into actionable revenue metrics."

Steve Blank variant and Venture Hacks slogan

Another version of the proposal was called XYZ. Created by Steve Blank. His template is: "We help X do Y by doing Z." Example: "We help parents spend more time with their children by providing comfortable playgrounds." The slogan from Venture Hacks is a value proposition template that is used by businesses already in your industry to create their own unique value: "[Proven industry example] to/from [new area]." Example: "Flickr forvideo.”

Eric Sink Proposal Template

Value proposition expert Eric Sink says the main idea is to put things like this in a few sentences:

• Why does the customer need this product.
• What product is this.
• Who needs him.

Example: "Easiest laptop OS".

Pattern by David Cowen

This specialist suggests highlighting the scale of the task that your company is solving. Tell people what your company offers them. Then wrap it all up in one simple sentence. For example, say that every 62 minutes in the world a person dies of melanoma. The sentence might sound like this: “We offer an application for the iPhone that allows you to self-diagnose the condition of the skin.”

Customer-Problem-Solution Pattern

Brent Cooper and Patrick Wlaskowitz in the book “Startup Around the Customer. How to build a business right from the start" suggested using what they call the "Customer-Problem-Solution" pattern: "Customer: [who is your target audience] Problem: [what problem are you solving for the client] Solution: [what is your solution to the problem].

"The Elevator Ride" by Dave McClure

Founder of California-based 500 Startups accelerator Dave McClure offers a three-step checklist for writing your own unique value proposition. In his interpretation, this is a simple, memorable slogan of short phrases that is understandable to most people, inwhich answers three key questions: what, how, why. Example: "Our product is a program that reduces costs by saving time."

Employer Value Proposition

Another area where such a proposal applies is hiring employees. It reveals how the labor market and employees perceive the privileges they receive by working in this organization.

There are five components of an employer value proposition in total:

1. Opportunities. Includes conditions for development in the organization and career growth of employees.
2. Man. This is a team and corporate culture.
3. Organization. It combines the company's position in the market, the quality of its products or services, as well as social responsibility.
4. Work. Includes bonus part, convenient schedule, working conditions.
5. Reward. This includes pay for work, as well as the social part, such as sick leave and vacations.

The problem is that some of the value propositions that are written contain the wrong attributes or are completely indistinguishable from competitors, while others actually show a significant gap between the promise and what the client receives. This leads to a decrease in employee commitment. But it is important to understand that a strong and competitive value proposition can attract talented employees and increase their involvement in the company's business.