If you want to build a business, you need one thing above all: a strong value proposition. That’s why people should choose your offering over hundreds of others. How can you become the most relevant offer for your target group?
In this article you will learn what exactly a value proposition is, how you create it with the value proposition canvas and what it is used for.
What is a value proposition?
The value proposition is the core element of your business model. It allows you to define and articulate the core promise you make to your customers – what value or benefit you bring to them by providing your service. In other words, it’s not about the products and services you provide. Rather, it’s about the value and benefit proposition associated with them.
What is the purpose of a value proposition?
A company without a value proposition simply does not know enough about its customers. It doesn’t know why its products are bought and what the strength of that why is. As a result, it can develop, market and price its products without considering its customers, because it misjudges their value and usefulness.
If you understand who buys your products and why, you can use this knowledge at all levels of your business model to always better meet the needs of your target group. Marketing, sales, work environment, manufacturing – every element of your business model must serve the customer value and the value promise. This is the best foundation for getting your business off the ground.
Systematically developing your value proposition is the basis for your marketing, pricing and subsequent success in the marketplace. And the Value Proposition Canvas is the ideal tool to systematically maintain your value proposition.
What is the Value proposition canvas ?
In 2012, Alexander Osterwalder introduced the Value Proposition Canvas on his blog.
The Value Proposition Canvas is a great tool to go even deeper into your customers’ needs and adapt your services to them. Only when you really understand your customers, you can offer them the maximum added value.
Business Model Canvas: Evolution
The Business Model Canvas (BMC) is a conceptual framework for visualizing and structuring business models. It covers not only the value proposition, but also the following areas
- Key business activities
- Key partners
- Core resources
- Everything about the customer (relationships, channels, how to reach them, etc.)
While the Value Proposition Canvas focuses on the customer and adapts its product/service to the customer, the BMC integrates the business model in a broader context.
Why a Value proposition canvas
The goal of the Value Proposition Canvas is to help customers accomplish their tasks, solve relevant customer problems and provide benefits with products and services. Only if a value proposition succeeds in doing this, it has a chance to prevail in the market.
A Value Proposition Canvas is designed by first choosing a specific customer segment. For this segment, tasks, problems and benefits are identified. In the simplest case, this is done on the basis of experience. But these assumptions must then be verified later with the customers. It is best to base the customer profile on observations and testimonials. You have to be careful not to focus too much on your own offers, but to get as complete a customer profile as possible. Rather than vague data, it is better to determine a concrete threshold at which something is perceived as a problem, for example. Then the items are prioritized, as some tasks, problems and benefits are more relevant to customers than others. Similarly, products and services, solutions and benefits are collected and prioritized.
On this basis, it is possible to check whether problem solutions and benefit providers solve real problems for a customer segment and provide real value. An offer usually does not address all elements of the customer profile, but only some of them. It is wise to create an outline for each of the relevant customer segments and to experiment with several variations for the same segments. The resulting value propositions should then be tested and refined with customers to ensure that they are actually accepted. At the same time, a compelling value proposition must be integrated into a profitable and scalable business model.
The structure of the value proposition canvas
As you can see, the Value Proposition Canvas is divided into two parts :
- On the right, the Value Proposition Canvas describes a specific customer segment in terms of tasks, problems and benefits. Customer tasks describe the tasks that customers are trying to solve in a given situation. This includes not only functional tasks, but also social and emotional aspects. Problems represent the obstacles that clients encounter in completing their tasks or that prevent them from completing them. Benefits describe the desired outcomes that are required and desired by clients.
- The left side, on the other hand, is the supplier’s perspective. The products and services relevant to the relevant customer segment are listed here. Problem solvers describe how these offerings can solve one or more customer problems. Similarly, benefit providers describe how these offerings generate benefits. This side can be designed and thus controlled by the providers. In contrast, providers have little influence over the right side. It is essential to understand the tasks as well as possible through empathy in order to develop a suitable offer.
The right side where you focus exclusively on your customer segment
The customer profile of a Value Proposition Canvas consists of the following elements:
This part of a Value Proposition Canvas helps you to reach your customer in his reality. You need to understand what their daily tasks are and what they need help with. You need to distinguish between functional, emotional and social tasks. The latter often fall victim to an overly analytical and functional approach.
Pains : concerns/ problems/ needs
As the name implies, this is a list of all the obstacles the client has to overcome in order to perform their tasks. For you, it is a question of knowing and understanding their problems thanks to the Value Proposition Canvas.
Gains : Desires/ benefits/ expectations
The “gains” are of two kinds: on the one hand, they are the positive experiences that the customer obtains concretely by accomplishing his tasks. On the other hand, the gains in the Value Proposition Canvas also refer to the experiences and successes that the customer wants to have. Here again, a distinction is made between functional, emotional and social aspects.
How to fill the right side ?
You first describe your customer’s tasks, i.e. the problem they are looking to solve. This is not only the functional factors, but also the emotional and social factors of the task.
Tip: If you don’t know what the differences are between the functional, emotional and social aspects of a task, we recommend you read the article on tasks. There you will find an explanation with examples!
If you are developing an offer for different customer groups, create a Value Proposition Canvas for each of these groups. This will allow you to tailor the benefits of your offer to each target group.
For problems, write down all the points that your customers perceive as challenges in performing the task. The more you know about your customers’ obstacles, the easier it will be to develop an offer that eliminates them.
Problems are outweighed by benefits: Describe the results your customers want. What goal was achieved? And how does your customer base feel about achieving those goals? In this context, you should also refer to the functional, emotional and social aspects of the task.
When the right side of the canvas is filled in, you have spent a lot of time focusing on your customers. The focus now shifts to the left side of the canvas, where you deal with your value proposition:
The left side
Your half of a Value Proposition Canvas consists of the following three elements
Products & Services
Your offer is the answer to your customers’ needs. Therefore you list in detail the different qualities that correspond to the wishes and needs of your target group. You differentiate between functional, emotional and social services.
Here you distribute pain medication to your clients. You address your target group’s problems and indicate how your offering solves them. As mentioned above, you must be able to offer a solution or at least relief for all problems.
The benefit creators address the gains in the Value Proposition Canvas that the customer wants to get from their work. You show how your offering can help them achieve these goals. At the same time, you can also list here the added values of your offer, unexpected by the target group, which are a kind of “extra”.
How to fill the left side
Start by naming the products/services you want to offer. Ideally, they should be designed to solve your customers’ problems and challenges. Remember, again, you need to distinguish between functional, social and emotional factors.
Time to solve problems: now write down all the aspects of your service or product that work against the problems of your customer segment. The more problems you solve with your offer, the more attractive it will be for your target group.
Your problem solutions are already very useful in themselves, but you can consider the benefits as the icing on the cake: Maybe your solution offers a value that your customers do not expect? List anything here that should be really exciting.
Ultimately, the development of the Value Proposition Canvas aims to optimally adapt products and services to the needs and wishes of your customer segment. In the best case, your offering solves your customers’ problems and adds value. If this is the case, you have a good chance of prevailing over the competition.
Value Proposition Statement
Finally, it is also important to highlight your value proposition. Two templates particularly useful.
Value Positioning Statement by Geoffrey Moore
In his book “Crossing the Chasm”, Geoffrey Moore proposes the following formula for formulating the value proposition:
- For ____________ (target customer),
- the ____________ (problem statement, need)
- provides our product ____________ (solution)
- with the promise that ____________ (Unfair Advantage, Outcome).
Customer Development – Steve Blank
Steve Blank is one of the fathers of the Lean Startup movement with his publications in the area of customer development. He offers a very concise formulation for the value proposition:
- We help ____________ (target customer)
- ____________ (problem) to solve
- by sending ____________ (solution).
Advantages & disadvantages of the value proposition canvas
- Like the Business Model Canvas, the Value Proposition Canvas is a visually appealing, easy to understand and accessible tool.
- The concept focuses on relieving pain and creating benefits for a group of customers, so it is highly customer oriented.
- The Canvas is particularly well suited for workshops and meetings. There is a common foundation of work that all participants see, understand, and complete.
- Just because a value proposition reads logically and conclusively on paper doesn’t mean it does in reality. The Value Proposition Canvas is not a substitute for customer dialogue or large-scale market research.
- The concept only considers the attractiveness of an offer for the customer (desirability). Commercial viability and feasibility, as well as potential competing offers and profitability, are ignored.
- On the customer profile side, the Value Proposition Canvas does not distinguish between facts and assumptions. Especially in the case of new value propositions, the elements of pain and utility are often only assumed.
- The Value Proposition Canvas is only a snapshot. However, customer wants and issues change over time, requiring recurring updating.
The Value Proposition Canvas allows you to find out what makes your product/service strong in the eyes of the customer and what could be improved. The concept allows for a change of perspective: thanks to the Value Proposition Canvas, you leave your role as supplier and become a customer.
Your value proposition is the most important element of your business model. And the Value Proposition Canvas is an excellent tool to systematically build your value proposition. The Value Proposition Canvas is above all a communication tool. It helps you develop a common understanding of your value proposition within your team.