Value Proposition

To start any business you need to have a clear value proposition. The value proposition is the reason customers use your product or service. Technology is a part of your value proposition, but it isn’t the value proposition. Value propositions define what you’re building.

The value proposition should be easy to communicate, easy to understand, and not include buzzwords.

Buzzwords are almost always focused on you - the startup - and not on the most important person that deserves attention in your pitch: the user or customer. Buzzwords rarely reflect the value to customers. Words like “revolutionary” or “patent-pending” - do those things really matter to users? What about “next generation” or “innovative”. These are all words focused on you, the startup.

Customer Segments

Value propositions include who would benefit from your product or service. You need to understand your customers in enough detail to create customer archetypes. The archetypes help you identify people to reach out to in order to validate your value propositions.

Steve Blank states four reasons for having customer archetypes.

• To identify who to talk to during customer development.
• To determine how to market to those customers.
• To guide hypothesis formation during product development.
• To help define the minimum viable product.

Once you have a value proposition for a customer segment you can begin testing them with your minimum viable product using a physical channel. Products and services often have different value propositions for different customer segments. Market places often address two different needs. Sellers want to sell something and buyers want to buy something. Make sure you validate each value proposition with each customer segment.

Value propositions can include features, but they need to be demanded by the customer segments. Developers love talking about features, but a feature has to be tied to something gained or a the removal of pain.

Solve a Pain or Create a Gain

Value propositions aren’t about great ideas. They’re about fulfilling a need people have. Value propositions either solve a problem (pain) or address a need (gain) someone has.

Value propositions which are pain killers end current challenges or problems people in the market have. This can be done multiple ways and some examples include:

• Produce savings by reducing or eliminate wasted time and costs.
• Avoid negative emotions.
• Avoid risk.
• Solve frustration, annoyance, or headaches.
• Fix bad solutions through new features or a better or faster product.
• End current challenges. Make things easier or eliminate current resistance’s.

Value propositions focusing on gain creation allows customers to get something they didn’t have before. The customer is gaining something for a need they have. Examples of gain creators:

• Getting a date for Friday night.
• Communicating more effectively.
• Getting a competitive advantage.

Interestingly, products which allow customers to gain something tend to have stronger growth than products solving pain problems. People love spending money on products that solve want problems and don’t seek products to solve pains until they directly have the pain.

Common Mistakes of Value Propositions

There are three common mistakes which can be made when stating your value propositions. All three of the mistakes can be solved by asking your customer segments to rank each gain your product or service creates according to it’s relevance.

Nice Feature: The most common problem is creating a feature that would be great in another product. Many of these value propositions arrive in your mind when using another product. To avoid this mistake figure out if people are willing to pay for just this one feature done amazingly well.

Nice to Have: It’s a nice to have instead of a got to have. To avoid this mistake, ask your potential customers to prioritize their pains and gains. The value propositions which are most important to them are the ones you want to solve.

Not Enough Customers Care: Only focus on value propositions that target huge customer segments. Many value propositions can avoid this trap by doing your market size research. Make sure the problem is large enough and people actually care about the problem. If the service has been attempted by others, ask why did it fail.