The end goal of any entrepreneur is to generate profit through the products they are working on. To reach this goal these individuals simply need to ensure that the values they offer to the end customers through these products are needed and worth the customers spending their hard earned money on.
However, Simon.Kucher & Partners found out in 2014 that 72% of new products and innovations fail to deliver on customer expectations. In other words, 7 out of 10 new products and innovations introduced to the market does not matter to end customers. To turn this around, the entrepreneur needs to offer a product that fits the end customer’s needs.
Figure: 1-0, source: www.strategyzer.com
A rational customer would spend their money on a product that would fulfil an existing need of theirs. Depending on the customer and the economic background, customers tend to spend their money to fulfil a set of needs based on order of priority. These needs can be categorized into 3 types: functional needs, social needs and emotional needs. A typical customer would not analyse their needs or types of needs and think of new products they would like to have. Instead, they can be introduced to new products that would solve a current need or pain point of theirs through a product advertisement or a recommendation. Firstly, these needs or pain points need to be understood and verified by the entrepreneur.
A famous quote by Henry Ford says “If I had asked people what they wanted, they would have said faster horses.” What is to be learnt from this statement is that the customer will never tell you what the best product or solution is. Instead, they will tell you what their problem is. It is upto the entrepreneur to come up with the product in this case, after identifying that the customer’s need is to travel faster.
What triggers a customer to realize a need that a product is solving for and make them want to purchase it?
It is the Value Proposition of the product.
The value proposition is a descriptive statement of the value which will be offered to a customer through a particular product that compels the customer to make the purchase.
It is significant for entrepreneurs to identify a unique value proposition for a product to succeed and continue to make revenue in the marketplace.
To make the lives of those who wish to arrive at unique value propositions easier, Swiss business theorist Dr. Alexander Osterwalder has invented a tool called The Value Proposition Canvas. This tool simplifies the complexity of visualizing, designing and testing how value can be created for customers. It helps visualize the profile of the target customer in terms of their needs and the value that needs to be offered to them to arrive at the product-market fit in a collaborative manner. It also helps entrepreneurs map, think through and discuss the value proposition in relation to the targeted customer. Most importantly, the tool makes it easier for us to put ourselves in the shoes of the customer when we design the product and avoid making products that the end customers don’t want.
It is ideal that a value proposition canvas is used at the beginning of designing a product itself. However, if a product is already developed, using the canvas will help identify where the already designed product would fit in the market or what improvements can be made so that customers actually want the product.
The Value Proposition Canvas
The value proposition canvas consists of two main components, the customer profile and the value map.
Figure: 1-1, source: www.strategyzer.com
The customer profile
Figure: 2-0, source: www.strategyzer.com
The customer profile lets us have a closer look at the customer we are targeting and consists of three parts, the jobs, pains and gains.
Figure: 3-0, source: www.strategyzer.com
The jobs refer to the jobs that the customer is trying to get done through a new product, or their needs in other words. As mentioned above, these needs could be functional, emotional or social.
If you are the entrepreneur and needs to understand the customer jobs better, ask yourself the questions below,
- What functional jobs is my customer trying to get done? (e.g. perform or complete a specific task, solve a specific problem, …)
- What social jobs is my customer trying to get done? (e.g. trying to look good, gain power or status, …)
- What emotional jobs is my customer trying to get done? (e.g. esthetics, feel good, security, …)
- What basic needs is my customer trying to satisfy? (e.g. communication, convenience, …)
Once the jobs are identified, they need to be verified and prioritized or ranked through conversations with actual customers. The importance of considering all three types of needs is that it helps understand everything that matters to the customer when it comes to their overall need. The value proposition statement can address the need that matters most to the customer and get the customer’s attention easily.
Figure: 4-0, source: www.strategyzer.com
The pains can simply be described as the reasons why a customer is looking for a new product. These are negative emotions, undesired costs or situations, and risks that the customer experiences or could experience before, during, and after getting the job done. These are mostly attributable to the current existing solutions.
A good understanding about existing solutions can be obtained by carrying out a product landscaping.
Pains could be better understood by asking yourself the questions below,
- What does my customer find too costly? (e.g. takes a lot of time, costs too much money, requires substantial efforts, …)
- What makes my customer feel bad? (e.g. frustrations, annoyances, things that give them a headache, …)
- How are current solutions underperforming for my customer? (e.g. lack of features, performance, malfunctioning, …)
- What are the main difficulties and challenges my customer encounters? (e.g. understanding how things work, difficulties getting things done, resistance, …)
- What negative social consequences does my customer encounter or fear? (e.g. loss of image, power, trust, or status, …)
- What risks does my customer fear? (e.g. financial, social, technical risks, or what could go awfully wrong, …)
- What’s keeping my customer awake at night? (e.g. big issues, concerns, worries, …)
- What common mistakes does my customer make? (e.g. usage mistakes, …)
- What barriers are keeping your customer from adopting solutions? (e.g. upfront investment costs, learning curve, resistance to change, …)
Similarly to the jobs, it is important to prioritize the pains according to the intensity that is relevant to the targeted customer through conversations with real customers.
Figure: 5-0, source: www.strategyzer.com
Gains are how customers measure the success of a job done well. Gains in other words are the positive outcomes, benefits and aspirations customers need to achieve that supersede what is offered through existing products. These will increase the likelihood of customers adopting a new value proposition.
Gains could be better understood by asking yourself the questions below,
- Which savings would make my customer happy? (e.g. in terms of time, money and effort, …)
- What outcomes does my customer expect and what would go beyond his/her expectations? (e.g. quality level, more of something, less of something, …)
- How do current solutions delight my customer? (e.g. specific features, performance, quality, …)
- What would make my customer’s job or life easier? (e.g. flatter learning curve, more services, lower cost of ownership, …)
- What positive social consequences does my customer desire? (e.g. makes them look good, increase in power, status, …)
- What are my customers looking for? (e.g. good design, guarantees, specific or more features, …)
- What do customers dream about? (e.g. big achievements, big reliefs, …)
- How does my customer measure success and failure? (e.g. performance, cost, time taken…)
- What would increase the likelihood of adopting a solution? (e.g. lower cost, less investments, lower risk, better quality, performance, design, …)
At times it may seem that the pains and the gains are differentiated by a blur line when you actually start working on a value proposition canvas. The key difference between the two is that pains refer to negative outcomes the customer is trying to eliminate and the gains refer to what the customer will be delighted with.
Similarly to the jobs and pains, gains should be prioritized according to how significant it is to the targeted customer through conversations with real customers.
In sum, the customer profile can be used to visualize, test and understand the customer we are creating value for. Upon understanding each section of the customer profile, the entrepreneur can start filling out the value map addressing each point that was listed.
Figure: 6-0, source: www.strategyzer.com
The Value Map
Figure: 7-0, source: www.strategyzer.com
The value map consists of three parts; products and services, pain relievers and gain creators.
Products and Services
Figure: 8-0, source: www.strategyzer.com
This is the list of products and services the value proposition builds on. This could be a list of products the entrepreneur (or you) has in mind that will fulfil the customer jobs, pains and gains.
- Which products and services I offer will help my customer get either a functional, social, or emotional job done, or help him/her satisfy basic needs?
Products and services may either be tangible such as manufactured goods, face-to-face customer service, digital or virtual such as downloads, online recommendations, intangible such as copyrights, quality assurance, or financial such as investment funds, an insurance policy or a financing service.
Ranking each of these products and services based on importance to the customer will help you to arrive at the best fitting solution.
Figure: 9-0, source: www.strategyzer.com
The pain relievers are descriptions on how each of the customer pains are addressed through the proposed new product to eliminate or minimize the pains. This needs to fit the list of identified pain points of the customer. These will also describe how underperforming products can be fixed.
To arrive at a refined set of pain relievers ask yourself,
- How will my product eliminate or reduce negative emotions, undesired costs and situations or risks my customer experiences or could experience before, during, and after getting the job done?
- How will my product produce savings? (e.g. in terms of time, money, or efforts, …)
- How will my product make my customers feel better? (e.g. kills frustrations, annoyances, things that give them a headache, …)
- How will my product fix underperforming solutions? (e.g. new features, better performance, better quality, …)
- How will my product put an end to difficulties and challenges my customers encounter? (e.g. make things easier, helping them get done, eliminate resistance, …)
- How will my product wipe out negative social consequences my customers encounter or fear? (e.g. loss of image , power, trust, or status, …)
- How will my product eliminate risks my customers fear? (e.g. financial, social, technical risks, or what could go awfully wrong, …)
- How will my product help my customers better sleep at night? (e.g. by helping with big issues, diminishing concerns, or eliminating worries, …)
- How will my product limit or eradicate common mistakes customers make? (e.g. usage mistakes, …)
- How will my product help my customers get rid of barriers that are keeping them from adopting solutions? (e.g. lower or no upfront investment costs, flatter learning curve, less resistance to change, …)
Similar to the rest, pain relievers also need to be ranked according to the intensity that is relevant to the customer.
Figure: 10-0, source: www.strategyzer.com
Gain creators are descriptions on how the product will produce, increase or maximise the customers’ expectations or desires. Gain creators also explain how the new product will outperform what the customers are currently using. These need to address the gains mentioned in the customer profile.
To arrive at the set of gain creators, ask yourself,
- How will my product create savings that make my customer happy? (e.g. in terms of time, money and effort, …)
- How will my product produce outcomes my customer expects or that go beyond their expectations? (e.g. better quality level, more of something, less of something, …)
- How will my product copy or outperform current solutions that delight my customer? (e.g. regarding specific features, performance, quality, …)
- How will my product make my customer’s job or life easier? (e.g. flatter learning curve, usability, accessibility, more services, lower cost of ownership, …)
- How will my product create positive social consequences that my customer desires? (e.g. makes them look good, produces an increase in power, status, …)
- How will my product do something customers are looking for? (e.g. good design, guarantees, specific or more features, …)
- How will my product fulfill something customers are dreaming about? (e.g. help big achievements, produce big reliefs, …)
- How will my product produce positive outcomes matching my customers success and failure criteria? (e.g. better performance, lower cost, …)
- How will my product help make adoption easier? (e.g. lower cost, less investments, lower risk, better quality, performance, design, …)
Gain creators too need to be ranked according to how substantial it is to the customer. It is important to consider how often each gain would occur.
Creating the Product-Customer fit
Figure: 11-0, source: www.strategyzer.com
The product-customer fit can be achieved by making a clear connection between what matters to customers and how the products and services listed in the value map eases each pain and creates the gains. The great value proposition targets the customer jobs, pains and gains that are most important for the customer. The canvas will help highlight the key points that need to be focused in order to arrive at a good value proposition and at the same time make sure that there are no more solutions than problems.
Below is a simple and basic real life example of how the value proposition canvas was used to identify a fitting use case for a product that was already designed.
The product is a UVC germicidal box and the target customer is the head of the house keeping department of a healthcare facility that is not a current user of existing UVC solutions. (UVC refers to ultraviolet light with wavelengths between 200 – 280 nanometers and can be used to destroy harmful microbes.)
It is important to select the customer who makes the buying decision as well as to consider the customer who actually uses the product. Both types of customers were profiled to arrive at this value proposition (open for refinement). Indicated is one example.
This was a collaborative effort between the Business Analyst and the Product Engineer. The customer profile was filled by the Business Analyst based on secondary research and requirements elicitation to cover the customer jobs, pains and gains of health care professionals/staff members related to sterilizing needs of delicate utensils. The value map was filled by the product engineer to address each identified customer job, pain and gain.
The improvement done to the already designed UVC germicidal box was to add a tray which standardizes the way delicate utensils are placed inside the box ensuring proper exposure to UVC and to provide instructions on how items need to be placed. Because once the pains were analysed, it was realized that there will be a challenge in sterilizing irregular shaped items as the UVC may not reach all of its surfaces.
The value proposition is “A trusted and consistent 50 second sterilization mechanism for delicate medical utensils and electronic items” The specific time 50 seconds mentioned in the value proposition is how the customer measures the success of the solution. Everything that is listed in this canvas including the value proposition needs to be validated through interaction with actual customers.
The reason for selecting a non-user of existing UVC solutions as the target customer was that there were already similar existing solutions out there in the market at the time this exercise was done. The importance of using the value proposition canvas prior to designing a product is, it allows us sufficient time to carry out a product landscaping which helps us identify existing solutions to the identified customer jobs, pains and gains and help us create a differentiated and unique product.
Indicated in the table below are few questions that was asked to arrive at the points listed in the above value proposition canvas
|What functional jobs is the customer trying to get done?||Have an efficient and productive sterilization mechanism in place for the fragile utensils and electrical equipment such as stethoscopes, pressure cuffs, mobile phone, and digital thermometers.|
|What emotional jobs is the customer trying to get done?||Have a trusted sterilization mechanism in place.|
|What makes the customer feel bad?||Concerned about harmful side effects caused to staff and patients by chemical residue|
|What does the customer find too costly?||Higher time and effort of cleaning staff needed in sterilizing fragile utensils one at a time|
|What would increase the likelihood of adopting the solution?||Quick and efficient process of sanitizing delicate equipment|
|What is the customer looking for?||Efficient sterilization of delicate electronic equipment of regular and irregular shape which can’t be sterilized in high heat or using chemicals|
|How does my product make the customer feel better?||Uses UVC irradiation for surface sanitization enabling sterilization of electronic equipment and eliminating the need for chemical use|
|How does my solution produce outcomes the customer expects or that go beyond their expectations?||Emits a dosage of UVC rays capable of removing disease causing microbes in 50 seconds|
Described below is an example where it was recommended to disregard a solution as existing solutions superseded in terms of solving the target customer pains. This is an example where the value proposition canvas can be used to make sure we “Fail Fast” if we are not creating the correct product-customer fit. It is important to identify the unfit early before we pour our blood, sweat and tears into designing a product solution.
The purpose of the product was to sterilize an aircraft. The proposed design was a movable platform with UV tubes mounted on retractable wings to reach from one end to the other of the aircraft cabin. The estimated sterilizing time per one row of seats was three (3) minutes. However, it was realised that the product would not meet the main requirement of sterilizing the aircraft in the short time span which lies in between domestic flights. It was important to sterilize the aircraft in between flights to ensure that the germs which come from one set of passengers do not get passed to the next set of passengers. A solution that eliminates the pain point of having to sterilize the aircraft in between flights itself was eliminated by an existing solution which was a chemical spray which remains on the interior surface effective for 10 days in absorbing and inactivating the germs. Hence, there was no requirement of creating a value proposition for the product. It is an example why it is important to carry out a product landscaping after identifying customer jobs, pains and gains.
Indicated in the table below are few questions that was asked to arrive at the points listed in the above value proposition canvas
|What functional jobs is the customer trying to get done?||Ensure cleanliness and sterilization of the cabin spaces, galley and washrooms is achieved within the limited time available between flights|
|What are the main difficulties or challenges the customer encounters?||Impossible to sanitize all surfaces touched by passengers within the limited time available between flights|
|What is the customer looking for?||Quick and effective method to free the aircraft interior from disease causing microbes within the timeframe available between flights. (It was found that the solution already exists in the market)|
As a Business Analyst or Entrepreneur if you are required to design a winning product with a unique value proposition, please make use of the value proposition canvas which helps you visualize, design and test your value proposition. Please try this out and you will understand the benefit it creates in terms of stimulating your creative thinking.
In my opinion, “Stimulate your creative thinking to achieve product-customer fit” is the value proposition that is offered to you through the value proposition canvas.
Note: According to the owner of the value proposition canvas Alexander Osterwalder, software companies are required to license the value proposition canvas poster from Strategyzer prior to using it.