A value proposition is where your company’s product offer intersects with your customer’s desires. It’s the magic fit between what you make and why people buy it. Your value proposition is the crunch point between business strategy and brand strategy.
When you’re starting a new project or a new company you need quick and dirty tools to help you focus on executing things faster and better. Good strategy tools exist only to help you focus on getting the right things done. The value proposition canvas is a simple tool that quickly gets you to the ‘minimum viable clarity’ required to start building and testing.
The value proposition sits at the pivot point of the entire business model. Mapping the business model of a new product or service is one of the most important parts of building a business strategy. Strategy frameworks have traditionally been the domain of MBAs but they are so important that these days the tools have been democratised for use by entrepreneurs, designers and technical teams.
Business model canvas
The Business Model Canvas is a toolkit from 2009 that drew on Michael Porter’s value chain maps and Peter Drucker’s theories of the firm (among other sources). The Business Model Canvas is a chart that maps the key things that a business needs to get right to be successful.
The Business Model Canvas has become the preferred tool for modern startups to use when rapidly testing a business idea. It’s attractive because it condenses years of business school and management consulting practise into a single page (with some straight-fowards questions for each section). – This is either a good or a bad thing depending on how much you love management jargon.
Any strategy tool is only as good as the facilitator or team who are using it. Each tool carries hidden biases and assumptions. So choosing a good tool is important. Strategy tools are great ways of providing structure to a conversation and allowing people outside of the pure strategy professions to think about whether they are doing the right things at the right time, in the right order.
Having used it in several client workshops, my issue with the Business Model Canvas used to be that it didn’t do enough to encourage empathy with customers and to force the startup to be accountable for how they communicated with their audience. In short, it didn’t place enough emphasis on the company’s value proposition.
A “value proposition canvas” is a chart that maps the key things that make up your product and why people buy it. There are many different value proposition canvases. Some are proprietary, some are open source and some are creative commons. Any canvas that helps you understand your customer, your offer and how the two fit together will help you clarify your value proposition.
Alex Osterwalder’s value proposition canvas
In 2012, Alex Osterwalder and his team released their Value Proposition Designer. Their version of the value proposition canvas is copyright and can only be used with credit to www.businessmodelgeneration.com. The Value Proposition Designer includes several bits of thinking from the Lean Startup movement such as “jobs to be done” and “customer pain”. It’s good, but it’s not perfect.
The Business Model Generation team renamed their 2012 Value Proposition Designer as a value proposition canvas and published an excellent book in 2014 on the topic called Value Proposition Design. My critique of the Osterwalder (et al.) version of the value proposition canvas is that:
- The product proposition side isn’t grounded enough in marketing, copywriting and persuasion techniques. It doesn’t guide the user into creative thinking and honest self-evaluation.
- The customer side isn’t grounded enough in behavioural psychology or customer behaviour research. It doesn’t guide the user into deep empathy for their customers or draw out enough new insights.
The psychology of why people buy things
I (like many brand strategists and advertising planners) often find myself standing in a supermarket transfixed, watching other people shop. I could literally stand for hours observing the range of human experience and emotions that go into making even the most banal decisions. So many different parts of a person’s brain are engaged when they make even the smallest buying decision.
If you’ve ever eaten a donut while on a diet then you know that not all human decision making is rational. – But even if purchasing behaviour is irrational, it’s still predictable. That’s why I’ve drawn from behavioural economics and choice psychology to rebuild the value proposition canvas. Modelling human behaviour and decision making is a rich an diverse field of study. You can read more about how people make decisions in books such as Nudge, Predictably Irrational and Influence. Personally, I’ve drawn my models from the field of cognitive psychology and behavioural economics.
A new value proposition canvas template
I’ve created a canvas to guide startups into examining the human experience of their customers. This canvas contains questions and sections that manoeuvre users of the canvas into thinking through the customer experience.
The new product section uses the widely accepted marketing syntax of features and benefits with the addition of experience (from design thinking and UX). The product understanding sections include:
- Features – A feature is a factual description of how your product works. The features are the functioning attributes of your product. The features also provide the ‘reasons to believe’. Many FMCG marketers deride the importance of features because features are no longer a point of difference in most FMCG marketing. But for technology products and innovative new services the features can still be important.
- Benefits – A benefit is what your product does for the customer. The benefits are the ways that the features make your customer’s life easier by increasing pleasure or decreasing pain. The benefits of your product are the core of your value proposition. The best way to list out the benefits of your product is to imagine all the ways that your product makes your customer’s life better.
- Experience – The product experience is the way that owning your product makes the customer feel. It’s the sum total of the combined features and benefits. Product epxierence is different to features and benefits because it’s more about the emotional reasons why people buy your product. The product experience is the kernel that will help identify the market positioning and brand essence that is usually built out of the value proposition.
The customer section draws on nuero-lingusitic programming and psychology research into motivation. It focuses less on “pains” and “gains” because people can be motivated by both pains and gains in different ways. The customer empathy sections include:
- Wants – The emotional drivers of decision making are things that we want to be, do or have. Our wants are usually conscious (but aspirational) thoughts about how we’d like to improve our lives. They sometimes seem like daydreams but they can be powerful motivators of action. The wants speak more to the pull of our hearts and our emotions. I may need a car to get from A to B, but I want a BMW.
- Needs – The customer’s needs are the rational things that the customer needs to get done. Interestingly, needs are not always conscious. Customers can have needs that they may not know about yet. Designers call these “latent needs“. The best example is that none of us knew that we needed a portable music player until we saw an iPod for the first time (we also then suddenly wanted an iPod rather than any other perfectly good music player). The needs speak more to the pull of our heads and rational motivations.
- Fears – The dark side of making a decision is that it carries fear. Fear of making a mistake, fear of missing out, fear of loss and dozens of other related fears. Fears can be a strong driver of purchasing behaviour and can be the hidden source of wants and needs. Customer fears are often the secret reason that no one is buying your widget. For any product there is a secret “pain of switching“. Even if your product is better than the competition, it might not be a big enough improvement to overcome the inertia of the status quo.
- Substitutes – These aren’t the obvious competitors, instead look for the existing coping behaviours. This is on the canvas because it shocks us into remembering that our customers are real people with daily lives who have made it this far in life without our product. No matter how much better your product is than the competition, if it isn’t better than the existing solutions then you don’t have a real world value proposition.
A key finding from the process of mapping a value proposition is often “we don’t have enough information to answer this section”. That is a perfect moment to adopt a lean startup approach and to get out of the building to ask existing customers and potential customers about their wants, needs and fears.
Examples of a value proposition canvas
Mapping a company’s value proposition is a great shared exercise for a cross-functional management team. It gets people from outside the marketing team to contribute to marketing insights without having to admit that what they are doing is “marketing” (because marketing can be a loaded term for some professions).
Startup accelerator: Uncovering new value in an existing feature
The Innovation Warehouse is an angel investing syndicate with a co-working space for the member investors and their portfolio of startups. Building a value proposition canvas identified that a key need for a startup is a quiet and productive space.
The productive environment was already a feature of the existing space but wasn’t being promoted in the marketing materials. It was a simple matter to add the feature into the collateral to address the customer need.
Evernote: Value proposition and marketing messages
Evernote’s value proposition is translated directly into their marketing materials. Their landing pages lead with copywriting that includes features, benefits and the experience on offer. Their product and customer are carefully matched.
The features, benefits and experience of the product are carefully matched with the wants, needs and fears of their target audience. Evernote uses multiple landing pages to account for different products and different audiences.
Evernote could improve their copy by addressing a few more of the common fears such as data loss, backups and data portability.
Using the value proposition canvas live in a workshop
The value proposition canvas can be used in testing and iterating a startup or new product concept. The canvas is useful a tool to:
- Get people from different teams working together.
- Test assumptions about customers and marketing priorities.
- Rapidly define copywriting and brand messages for campaigns.
The value proposition isn’t a substitute for brand strategy and copywriting but if used well it will translate very quickly into usable and persuasive messaging.
The value proposition canvas is not a full brand strategy and doesn’t include the long-term story telling elements that you would need to create a well rounded brand over time. Even so, the value proposition canvas is a useful tool to use to establish product-market fit in a hurry.
I’ve made the PDF (Value Proposition Canvas.pdf) and editable Apple Keynote Presentation (Value Proposition Canvas.key) files available for you to download so that people can print out the canvas, edit it and create their own versions. No need to attribute it to me, just say thanks on Twitter at @peterjthomson if you find it helpful and check out my book on Digital Marketing for more in-depth strategy techniques.
The tool can be used to map your existing value proposition, your competitors and the proposition for any new products and services that you are considering building.