How to create a Winning Value Proposition?
If you’re struggling how to create a winning Value Proposition, this article is a must-read. Maybe you know the theory. You may have spent a few hours playing around with one of the many canvases out there.
But creating a winning Value Proposition isn’t about writing documents or filling out canvases.
Creating Value Propositions is about mastering the skills needed to identify customer needs and turn them into real problem solvers and gain creators for your customers. A good process also helps you to stay focused on improving your value propositions.
What is a Value Proposition?
In essence, a Value Proposition is where it all comes together: the customer segment you serve, your product, how these two match, and as a bonus how you stand out of the competition. What is great to have all together! So, I like to see the Value Proposition as a hub where you plug in insights from customer, product and marketing perspective in order to create the winning value proposition.
What isn't a Value Proposition?
Your Value Proposition is not your Business Model. These two go hand in hand though. You can fairly say that your Value Proposition is the heart, the core of your Business Model. The other elements of your Business Model are enablers to bring the value of your products and services to your customers and build a healthy company.
Also, your Competitor Analysis is not your Value Proposition. A good competitor analysis though can help you to improve your Value Proposition. Use this knowledge to craft a Unique Value Proposition and make razor-sharp where you stand out from the competition.
Don’t mix up your Value Proposition with your Sales pitch deck. A Value Proposition is generic for a customer segment, a sales deck is specific for that prospect you are pitching at that moment. A sales pitch is not only about spelling out the value you can deliver with your products and services, or how to fulfill the customer needs. It is also about building a relationship, gaining trust, and… closing the deal. Obviously, that is only possible if you have a clear customer value proposition.
What makes a good Value Proposition?
In the long term, the metrics will show if it is a Winning Value Proposition to customers. When your dashboard shows revenue growth, high retention rates, low churn, and referrals are coming in, you know you are definitely on the right track. Scaling as fast as you can is your biggest challenge to further growth!
A good Value Proposition is easy to understand. Your VP is in one, max. two sentences. That forces you to keep it simple. Make sure it is explainable to anyone. That forces you to go the extra mile when you actually felt that you were done and your customers will understand. So, when crafting your Value Proposition, don’t rest in the thought “The customers have complex problems, we offer complex solutions, and therefore it is hard to explain what we do. But we’re doing fine, look at our slide with all the customer logo’s.”. This thought is a silent killer for your business because if you can’t explain what problem you are exactly solving, don’t expect your customers can. And churn is around the corner.
Also, a good Value Proposition is backed up by evidence. Have you tested the most important assumptions you made in your Value Proposition? If so, very good! Even if you are a zero-budget startup, testing your Value Proposition is always well spend time and money. How well are the test results documented? Doing so with some key insights will help you tremendously with future decisions. E.g. when prioritizing new roadmap features, or when recalibrating your marketing messaging.
Value Propositions are not living in a document but are broad common understanding amongst employees within the organization. Compare it with your company’s core values. Are they just some words on the wall, or part of the company’s culture? The same is true for your Value Proposition. What answer do you get if you ask a random employee about the company’s Value Proposition? Is the answer “Let me look that up for you, I think we have a document with that title somewhere…”, or “Ask Marketing…”. Or do you get a razor-sharp answer in a split second, where the employee knows to reproduce the Value Proposition clearly and comprehensively?
Develop the right skills to create a great Value Proposition
Creating a Value Proposition for customers is no abracadabra. You don’t have to wait for ‘inspiration’. You don’t have to be a ‘born entrepreneur’. What do you need? A simple process and the following skills: Be a good listener, humility, perseverance, perseverance, and… perseverance. The process how to create a Winning Value Proposition is described below. But why specifically these skills?
Being a good listener is essential to really understand the pains and gains for the customer. Just like a doctor who asks the right questions to make the right diagnosis. Sometimes the patient does not know how to describe the problem. In that case, the doctor runs some tests to find out. In the same way, you have to ask the right questions to come to the root of the problem the customer faces. Also doing tests with MVPs is a tremendous help.
Humility is helpful to keep listening with an open mind to what customers are telling you. This can be hard sometimes. If you think you have found the Silver Bullet, the risk is that you try (unconscious) too much to convince the customer about your idea instead of humble listening and summarizing the problems and challenges the customer is facing.
Perseverance is the obvious one. Crafting the perfect Value Proposition is never a linear process. Count in regular setbacks and multiple iterations.
Value Proposition process
Making a valuable proposition for the market requires a process-oriented approach. It is a process of searching and adjusting before you can scale up. What are the minimum steps you need to take in your process? Here’s an easy-to-copy four-step process:
Step 1: Collect information
Collect as many info as you can in a reasonable amount of time. Are there already sources of data or knowledge available that can give you a jumpstart in crafting your Value Proposition? Think of: CRM data and website data if you design a new Value Proposition for an existing customer segment. But also think about colleagues that are domain experts and application data. Are there market research reports available? What is written on the internet about your customer segment? Do you know what is driving them? Can you find out what their biggest challenges are? Are there new regulations coming? The pressure of growing international competition? This could open up a new opportunity for you to offer a new product or service.
Golden advice: consider scheduling some exploratory customer conversations at this early stage already. Most certainly you won’t solve their puzzle at once, but it gives you a lot of good background information. And if you treat these contacts well, they may soon be your launching customers.
Step 2: Make assumptions
Time to start crafting the first outlines of the Value Proposition. There are multiple ways how to do this. A good practice is to do this as much as possible in a multidisciplinary group where if possible Product, Sales, Marketing, and Customer Success are represented. This broad, holistic view helps you look openly at the Value Proposition.
Plan a value proposition design workshop where all stakeholders get the opportunity to share freely their thoughts and opinions.
A very hands-on technique is to use the Value Proposition Canvas of Strategyzer (free download here!) to structure the design workshop. Print the Canvas in large format, buy a bunch of sticky notes and markers and have fun! No, seriously. This is a very effective way to come to good results in a short period of time.
Make sure to introduce the concept of a Value Proposition, do a warm-up exercise, and from there give the group a short (!) timeframe of 10-20 minutes to write down their thoughts about one segment of the canvas. Let them use a new sticky for every thought they want to write down. Work from the right to the left on the canvas. So, start with the customer jobs, then their pains/gains.
Let every attendant present his stickies, summarize what has been said, and move on to the next segment on the canvas.
Repeat the same steps for the product/services side of the canvas.
Consider splitting this workshop up into two workshops: the first workshop about the customer profile, the second about the product/service you aim to deliver.
Also include the assumptions you draw from the data you collected in the preparation phase. Although the data might seem unambiguous, they might not tell the whole story. So make sure you also validate these assumptions with a peer group in the next phase.
Step 3: Validate
Don’t be afraid of being wrong. Be afraid of ignorance.
Therefore, validate your assumptions as quickly as possible. The longer you work in the ‘bubble’ of ignorance, the more you probably tend to think you have found the silver bullet, the harder it is to humbly receive honest feedback from customers.
A very cost-effective and quick method is to plan some interviews with prospects or customers. This gives you good qualitative feedback and is easily repeatable. So, peer interviews are an effective validation method to start with as soon as possible.
Next, build your Minimal Viable Product, your MVP. Depending on the Value Proposition you are validating, this can be a landing page with bought traffic from Google/Facebook Ads. But for a physical product maybe a cheap 3D-printed model works out better and in some cases. Even a paper-and-scissors exercise will do in some cases. The point is, take the efforts to validate your most important assumptions.
As a last step in the validation phase, create a system to document your learnings. This can be as simple as a spreadsheet where you list your assumptions and the evidence you found. This way you avoid working in circles.
Step 4: Iterate
As stated before, the more you learn about how to create a Winning Value Proposition, the more you experience that it isn’t a linear process. It is likely that you have to iterate many times to even find the right direction.
So, use all the insights you harvested from the validation phase and recalibrate your assumptions, prioritize your most important assumptions again and validate them. Run this feedback loop and increase your Product Market Fit. Keep your end goal in mind: creating a Winning Value Proposition!