Alexander Osterwalder (creator of the business models Canvas) developed a tool that facilitates the design of the value proposition focused on customers and their needs and customer requirements. The Value Proposition Canvas promotes teamwork, enabling the understanding of what added value is in the eyes of the client.
The Value Proposition Canvas helps organizations and teams systematically create solutions that fit the real needs of their customers. The tool is used before and during the development of deep client knowledge; since this framework allows us to collect, structure, and make the client's information tangible: their needs, requirements, joys, and frustrations. Before developing your value proposition (solution), highlight what you should learn from customers. Once you collect customer information, analyze and evaluate the adjustment of your solution to customer needs. This will allow you to save time since you have the input to develop products/services that customers want.
Generating Added Value
The Value Proposition Canvas is developed as a complement to the Business Model Canvas, which helps teams pay special attention to the main purpose of every business model: customers. Anyone can generate creative ideas, yet they might not satisfy their clients’ wants and needs. When using the Value Proposition Canvas, organizations can identify the needs of customers in a visual and structured way, since it allows them to identify, in a simple way, the requirements of the clients (their sources of pain or frustration and joy).
Joys and Sorrows
The Value Proposition Canvas helps us identify:
- What customers want, their problems
- The way we can solve problems with a focus on the relief of pain or frustration and generating joy or memorable experiences.
Once the previous points have been identified and you have a structured visualization of them, you will be able to identify how you can correctly generate a value proposition of the product. Use the following questions as a guide for your team to apply this tool successfully:
What are the Jobs that Your Customers are Trying to Do?
The jobs represent the tasks that customers are trying to perform, and are why they "hire" their solutions (products/services). Organizations should ensure that their products/services are aligned with their customers’ needs and requirements. To properly carry out the analysis, it is important that the team has a clear understanding of the three types of work (needs and requirements) which are: functional, social and emotional. Here are some basic questions you can keep in mind for this:
- What tasks do your clients perform in their personal and professional lives? What functional problems are they trying to perform?
- What problems do you think your customers have but ignore?
- What emotional needs are your clients trying to solve? What jobs, if completed, will make your clients feel fulfilled?
- How do your clients want to be perceived in the eyes of other people? What do customers want to be perceived that way?
- How do your clients want to feel? What do customers do to feel this way?
We understand pain as anything that causes frustration to your clients before, during and after trying to do the job or that prevents you from doing the work for which you hire a solution. Pain describes the unpleasant effects in the process of completing the work to be done. Among the effects are: costs, risk, sales reduction, competition, among others. It is important to clarify that not all pains have the same importance and that they are weighted differently. Some questions that will allow your team to investigate the pains of their clients are:
- How do your customers define that something is very expensive, takes a lot of time, or that it requires a lot of effort?
- What makes your clients feel bad? What are their frustrations or headaches?
- How do your customers value existing value propositions? What features are missing? Are there performance issues? What bothers them or what do they say works badly?
- What social consequences do your customers fear? Do they fear a loss of status, power, trust, etc.
- What are the common mistakes your customers make? Are they using a solution incorrectly?
- What are their sources of happiness?
By happiness or gain we mean the results and benefits that your customers want. Some profits are required, expected or desired, and some will surprise your customers. Earnings include functionality, status, positive emotions, and cost savings. Some questions that will allow your team to inquire into the profits of their customers are:
- What savings will make your customers happy? Consider the savings in terms of time, money and effort.
- What level of quality do your customers expect?
- What are your customers most looking for? Are they looking for design, warranty or some feature?
- What do your clients dream of, what do they aspire to achieve or what would be a great relief for them?
- What would increase the likelihood of your customers adopting a value proposition? Do they want lower costs, to invest less, reduce risk or improve quality?
Obtaining Information from Customers
To obtain customer information we recommend doing an ethnographic study, which consists of talking to and observing customers. As you acquire the information, take notes and make categories of your notes. You will see how you’ll begin to have a complete picture of how to serve your customers in the best possible way (what we call fit or fit with the market). Remember that, as providers, it is important to solve the biggest pain customers have. When we are clear about what our customers want, we can know how to offer a value proposition that contains the most important elements for our customers.
Fit Solution - Market
It is important that there is a fit between the value proposition and the market. This is achieved with solutions that relieve pain and generate profits for our clients. The Value Proposition Canvas helps us minimize the chances of failure as it puts us in a position of advantage to develop a service that helps our customer segment. Remember that the fit is initially evaluated by us as a business, but that it is the customer who has the last word.
Test Your Value Proposition
Now that you have created a value proposition that looks promising, you should test it at an early stage so you can make adjustments on time. It may happen that the requirements of the clients on jobs, profits, and pains have been misunderstood. There could also be a problem with the assumptions made in the process. Therefore, the value proposition must be translated into practice. In a Value Proposition Canvas, it is important to always test the value proposition together with the customer so that it can be established if the proposal adds value to the customer. The client is guided through a step-by-step process to assess whether these assumptions and interpretations are correct. After all, it is the customer who determines whether the value proposition will produce results for him/her or not.
Characteristics of a Value Proposition
- Remember at all times that the value proposition is a crucial part of the business model.
- Focus on the generators of joys and pain relievers that are the most meaningful for your clients.
- Align your success criteria of the value proposition with the criteria of customer success.
- It must be distinguished from the competition in a more meaningful way.
- Address functional, social, and emotional jobs.
- Be sure to beat the competition substantially in at least one dimension
- Focus on jobs, pains, or unsatisfied joys.
- Make your value proposition difficult to copy.
Recommendations for Better Results with the Value Proposition Canvas
- Print the tool in a B1 format (707 mm x 1000 mm).
- Buy markers and post-its of different colors of intermediate size.
- Write down one idea per post-it and mix ideas with drawings.
- Generate a post-it color code.
- People who have frequent contact with customers should not miss from your team.
- Keep your product/service simple, avoid trying to relieve all pain or generate all possible joys.
- Do not mix present with future ideas, if you need to do so, use the color code.
- Do not mix value propositions, use one tool for each.