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Wednesday
Dec072011

Day Five: Value Proposition 101

I'm working on a project right now, where the client’s value proposition is not resonating with their new user group in the way they had expected or hoped for. So today my job is to define, dismantle, and help redefine a new value proposition for this client. This is a really interesting process that doesn't really get talked about much, so I would like to give you some tools that I've stolen, adopted, and transformed over the years.

So first let's talk about the problem: my client is trying to launch an upgraded version of their current products to a new market. Their current product is geared toward consumers, and in the new product will be geared toward small business owners. There is currently a bit of competition in the space, but no one really does it quite like my client.

Here is an example of a situation similar to what my clients are working (in a completely different industry).

Think about small businesses and how they get groceries. Things like soda, coffee, tea, produce, etc. There are currently two main ways to do this:

  1. Administrators go to the grocery store or Costco with a shopping list
  2. The business uses a service like Peapod where groceries are delivered to your door

Essentially what my client is trying to do is offer a third option.

Again this is  only an example, but if this was my client’s project, it would be similar to them offering technology enabled way to deliver the best local produce to your office. They would use digital tools to measure your employee’s nutritional intake, and deliver the fruits and vegetables that would best meet their dietary needs. They would offer a white glove service where your shopping list is automatically generated for you, your food is delivered, put away, and expired food is disposed of for you.

The problem is that instead of charging you weekly or monthly, the service requires an upfront capital expense that has the perception of being more expensive than Peapod.  Also the service doesn't deliver soda or bottled water but it does fruit, vegetables, coffee and tea very very well. This means that you would still probably need another option to get soda and bottled water to your company.  

You can see that there are some obvious pros and cons with this current value proposition. The company is using technology to make your life easier but they are also asking you to make a trade-off. They have upfront costs and are not providing a complete solution. It makes sense that a service like this might not resonate with a small business owner.

In option one the customer is not paying anything extra to have their groceries acquired, but they are losing a little bit of efficiency.

In option to the customer pays weekly or monthly and they're getting a complete solution.

In option three the customer is making a trade-off.  They have to  justify an upfront expenditure, while  part of what you need is being over-delivered, and part of what you need isn't being addressed at all.

So what do we do about this? We need to redefine the value proposition.

The value proposition is the gift you gave your customers. It's what makes your offering compelling, and hopefully more compelling than your competitors. Some of the common ways that companies describe their value proposition include: newness, performance, customization, design, brand/status, price, cost reduction, risk reduction, accessibility, reducing inconvenience and improving usability.

In his book Business Model Generation, Osterwalder explains: “The value proposition describes the bundle of products and services that create value for specific customer segment. The value proposition is the reason why customers turn to one company over another. It solves the customer’s problem or satisfies the customer’s need. Each value proposition consists of a selected bundle of products and/or services that caters to the requirements of a specific customer segment. In this sense the value proposition is an aggregation, or bundle, of benefits the company offers consumers. Some value propositions may be innovative and represent a new or disruptive offer. Others may be similar to existing market offers, but with added features and attributes.”

I have run workshops for clients where we turned  value proposition creation  into the game of Mad Libs. After doing field research with the client team we came back together for a debrief workshop where we analyzed each participant and articulated the value proposition for them.

This is 1 of 20 posters we made with a fortune 100 company who was trying to revamp their business model. We started with what we knew about the user and their values, created journey maps to discover areas of unmet needs, and connected needs and values to draft a value proposition.

Here is the worksheet we used for that project:

For me today is all about dismantling that current value proposition, outlining exactly what this product and service stands for, and comparing it to what the new consumer actually needs and wants.

My team will spend the day asking ourselves-

What value do we deliver to the customer?

Which one of our customer’s problems are we helping to solve?

Which customer needs are we satisfying?

What models of products and services are we offering to each customer segment?

Does a right proposition have strong network effects?

Are there strong synergies between our products and services?

Are our customers very satisfied? Is there anything we can do to improve their satisfaction?

Are substitute products and services available?

Are competitors threatening to offer better price or value?

Do we generate recurring revenues by converting products and services?

Can we better integrate our products or services?

What complements to or extensions of our value proposition are possible?

What other jobs we do on behalf of our customers?

If you were in my shoes, what would you change about the current offering to make it more desirable? How would you start to articulate a value proposition for this new service?

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