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    Why Value Propositions are Critical for Business Ideas [Mini Masterclass]

    Most products and services fail because they don't have compelling value propositions. Don't let that be you.

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      Vaughan Broderick

      Vaughan Broderick

      Hey friends ๐Ÿ‘‹,

      You’ve probably heard the term ‘value proposition’ and might have thought that it was marketing to communicate the value of your product or service.

      Communication of value is essential for attracting and retaining customers. However, before you can communicate the value proposition, you must understand it.

      Value proposition design is discovering and understanding what customers need and matching products and services to meet those needs (product/service fit).

      When you have ‘fit,’ you can clearly describe how your products and services provide value.

      Today we’ll uncover the following:

      • Why a value proposition is critical.
      • How to understand what people need.
      • Intro to the value proposition canvas.

      Let’s go!

      ๐Ÿง  Why a Value Proposition is Critical

      According to CB Insights (technology market intelligence platform), a leading cause for the failure of startups is ‘no product/market fit’.

      “Tackling problems that are interesting to solve rather than those that serve a market need was cited as the No. 2 reason for failure, noted in 35% of cases.”

      Note: Multiple reasons can be attributed to each startup’s failure.

      This research supports Alberto Savoia’s earlier work in forming the ‘pretotyping’ approach detailed in the article, How to De-risk Your Business Using the 4 Pillars of Testing Business Ideas.

      In my experience, building products and services that people don’t want is endemic across many sectors.

      And it doesn’t matter whether you are a startup or an existing business; designing value propositions for new ideas or redesigning existing ones necessitates a robust process to provide a more certain outcome.

      ๐Ÿง How to Understand What People Need

      So, you have an idea for a solution (product or service) for a problem you believe exists. What next?

      Design thinking offers a valuable way of navigating problem discovery and definition within the discovering and understanding phases.

      The central concept is ‘to get out of the office’ and build empathy for people. Rarely will the answers to your questions be found behind a desk.

      Your best approach is to learn by interviewing and observing potential customers in their familiar environment.

      Other techniques offer value, too, such as reading forums or taking inspiration from how similar problems are solved.

      Observations are so powerful because people will often unintentionally do something different to what they say (the say/do gap).

      Once you have gathered notable comments and observations, the challenge is to make sense of the data, derive insights and form points of view.

      Here are my top five insights-generating tools including, affinity mapping, empathy mapping, journey mapping, personas and jobs to be done.

      The ‘jobs to be done method’ forms the value proposition canvas’s (VPC) right-hand side (customer profile).

      ๐Ÿ’ฅ Intro to the Value Proposition Canvas

      The VPC, invented by Alex Osterwalder, is a tool to describe and visualise how a business creates value for customers.

      It’s a way to map out a customer’s jobs, pains, gains, and the products and services that relieve pain and create a gain, which forms the value proposition.

      Most importantly, the VPC maps a story of how the six interrelated segments create a value proposition which forms the foundations of the Business Model Canvas (BMC).

      Use the VPC and BMC in combination to hypothesise, test and validate business ideas.

      The Customer Profile

      Within the customer profile, begin with understanding the jobs the customer is trying to complete. There are three main types of jobs to identify:

      1. Functional Jobs – these are often the tasks they are trying to complete or the specific actions (e.g. read a book, buy some milk).
      2. Social Jobs. – these are how someone wants to be perceived within society (e.g. be perceived as environmentally conscious).
      3. Emotional Jobs – are emotional states that are sought (e.g. peace of mind).

      Customer pains are any problem, dislike, obstacle, risk, adverse experience or undesirable outcome before, during and after trying to get a job done. An example, as in the case of a business traveller, might be the slow check-in process at a hotel.

      Customer gains are not simply the opposite of pains. Instead, they are the required, expected, desired or unexpected outcomes, or in other words – what success looks like.

      An example of a customer gain in the case of a business traveller might be that they expect free wifi now but require a good night’s sleep.

      The Value Map

      The value map describes the products and services your customers will hire to get specific jobs done and, in the process, address (create value) for some (often not all) pains and gains.

      The products and services don’t have to work in isolation; these can be new bundles of existing offerings.

      Pain relievers are descriptions of how the products and services you offer reduce the customer pains that are in the way of satisfactorily completing the jobs.

      Consider how your products and services might reduce fear, eliminate mistakes, stop frustrations, or eliminate barriers or concerns. As in the case of the business traveller, there is no need to wait and check-in.

      Again, once you have identified the pain relievers, prioritise them as essential to those less important.

      Gain creators describe which benefits and outcomes you intend to focus on that customers expect or wish for.

      An example of a gain creator for a business traveller might be that the rooms are very well designed for short stays as opposed to the needs of families.

      Consider how you might compete against existing value propositions, outperform customer expectations, or surprise them with better quality.

      Then rank the gain creators from most impactful to less impactful.

      Ultimately, when you have designed a strong value proposition:

      • There is alignment with product-market fit.
      • You have differentiated enough that you have achieved a competitive advantage.
      • You have created a value proposition that is hard to emulate.
      • It addresses the important jobs, pains and gains.

      If you would like to know more, here is a comprehensive guide on the value proposition canvas.

      That’s all for today friends!

      Give the value proposition canvas a go, I’d love to know what you think.

      Feel free to reply to this email if you have any questions or newsletter requests.

      Thanks for reading and I’ll catch you next week.

      Keep future-state thinking,

      Vaughan

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