Aca

ra C

halle

nge

2011

Value Proposition

Overview

• Review: Business Model Canvas• Value Proposition: What it is

– Types of Value – Economic Vs. Social

• Creating Your Value Proposition• References

Review: Business Model Canvas

Source: Business Model Generation, p. 44

This presentation will focus on the Value Proposition building block of the Business Model Canvas.

Want to buy some wax & string?

• Would you convince someone to buy a candle by offering them some string and wax?

• You wouldn’t be telling them a lie about it, but is that why they buy it?

• What is it that they are buying?

What does the candle mean?

Religious symbol?

Ambience for a romantic dinner?

Light source when there’s no electricity?

Birthday cake topper?

Customers need to know not just what it is, but what it can do for them, and what that will mean to them.

What’s in it for the consumer?

• Your customer is not buying the candle because it is wax and string.

• Let’s say your customer is a young father buying birthday candles for his son’s fourth birthday party.

• He might be thinking:– “I’ll look foolish in front of my in-laws if the party isn’t

perfect”– “I want my son to succeed—he has to be able to blow out

the candles on the first try”– “Buying these candles will show him I care”

• When you address those issues, you give your customer a reason to by from you

Definitions

• A Value Proposition will help you communicate what your product can do for your customer

• Different people will define value proposition differently

• They all focus on – What the customer thinks is important– Why they should get it from you

• Following are a couple of examples

Definitions

“A value proposition is a short statement that tells your prospect why they should buy from your company. It is focused on outcomes.”

-Kinesis, Inc. article “How to Write A Powerful Value Proposition”

http://www.kinesisinc.com/marketing/how-to-write-a-powerful-value-proposition/

Definitions

“A value proposition is a short statement that clearly communicates the benefits that your potential client gets by using your product, service or idea. It ‘boils down’ all the complexity of your sales pitch into something that your client can easily grasp and remember.”

-MindTools article “How to Create a Value Proposition”

http://www.mindtools.com/CommSkll/ValueProposition.htm

Importance of Value Proposition

• Your value proposition can spark interest in your product among potential consumers

• It help prospects easily understand what your offering will means to them

• Creating it reminds you of your customers’ needs and how you are solving their problems

A Strong Value Proposition…

• Differentiates your offering from that of your competitors

• Is presented from the customer’s point of view, taking into account their needs and problems

• Includes concrete results or outcomes – This could mean metrics, such as percent cost savings,

increased sales, etc., but not necessarily

http://www.kinesisinc.com/marketing/how-to-write-a-powerful-value-proposition/

Types of Value

• Your value proposition can include one or many types of value, depending on what your customer finds important

• Economic value focuses on price• Functional value focuses on what offering does• Emotional value focuses on how the offering makes

the buyer or user feel• Symbolic value focuses on what the offering

communicates to self or others

Source: Rintamaki, T., Kuusela, H. and Mitronen, L. “Identifying competitive customer value propositions in retailing”

Types of Value: Example

• Economic value: These birthday candles are cheaper than competing products.

• Functional value: These candles light easily and won’t drip wax on the cake.

• Emotional value: Shopping for these candles is a pleasure.

• Symbolic value: These candles represent a milestone in my child’s life. The color is both masculine and festive.

One Size Doesn’t Fit All

• Think back to the Segmentation presentation; does your offering appeal to more than one segment?

– If so, should you create different value propositions for them?

• Who besides customers will you need to create a value proposition for?

– Strategic partners?– Suppliers? – Potential employees?– Possible investors?– Others who will need to “buy” your idea, literally or

figuratively

Economic vs. Social Value

• You will need to think about a value proposition for the purposes of the Acara Challenge

– Why should your team be selected?

• Acara wants to see the impact of your business plan in an economic and social impact sense

Economic Vs. Social Value

• Economic Value may include– Return on investment and other standard financial

measures– Cost savings or increased income to purchasers– Economic impact on the region where it is implemented

• Social Value may include– Number of people who could be helped by your solution– Ways in which lives will be changed by your offering,

directly and indirectly– Positive environmental impact

CREATING YOUR VALUE PROPOSITION

Step 1: Know Your Customer

• Thinking from the perspective of your customer, ask the following:

– Who is he or she? What does s/he do and need? – What problems does s/he need to solve? – What improvements does s/he look for? – What does s/he value?”

• You should have this information from your field research

Source: http://www.mindtools.com/CommSkll/ValueProposition.htm

Step 2: Know Your Product, Service, or Idea• From your customer view point:

– How does the product, service or idea solve the problem or offer improvement?

– What value and hard results does it offer the customer?”

• Include numbers and/or stories from other customers if available and relevant

Source: http://www.mindtools.com/CommSkll/ValueProposition.htm

Step 3: Know your competitors

• Keep on thinking from the perspective of your customer, and ask: How does your product or idea create more value than competing ones?

• Your product must not only solve the customer’s problem, but do it better in some way:

– Price– Speed, efficiency– Design– Ease of operation

Source: http://www.mindtools.com/CommSkll/ValueProposition.htm

Step 4: Distill the customer-oriented proposition

• The final step is to pull it all together and answer, in 2 or 3 sentence: ‘Why should I buy this specific product or idea?’

• Try writing from the customer viewpoint by completing the following, (and don't forget to include the numbers and percentages that matter!):

– ‘I want to buy this product or idea because it will...’ – ‘The things I value most about the offer are...’– ‘It is better than competing products or ideas because...’

Source: http://www.mindtools.com/CommSkll/ValueProposition.htm

Step 5: Pull it all together

• “Now, turn around your customers 'answer' from step 4 into a value proposition statement.”

Source: http://www.mindtools.com/CommSkll/ValueProposition.htm

Questions to Keep In Mind

• What's the next best alternative to your offering?– Especially if they are already familiar with the alternative,

you should clearly state why yours is better – It’s hard to change the status quo

• Why hasn't your offering been done before? – If appropriate, address these issues in your value

proposition 

• In a BOP setting, what are things that have value?• How do you compete if your offering costs more?

– You may have to show this can help you make more money, for example.

Previous Acara Value Propositions

• I don’t have to take time from work to wait for water – Textra

• I will be safer and less likely to get sick if I have a toilet in my community, rather than using the forest – Sewasan

• I can get more crops from same amount of land, and pay for less irrigation water – myRain

• I want to buy food from the street cart vendor that I know is safe to eat and I won’t get sick – Prosperity Cart

Summary: Value Propositions

• What problem are you solving, or what need are you satisfying for your customer?

• A Value Proposition is a “bundle” of benefits that serve particular customer segment

• The Value Proposition is not the product or service itself but the attributes that make people want to buy it

– For instance, the Value Proposition for an insulated water bottle could be that it keeps water cold, it has an attractive design, it is easy to clean, and fits in a purse.

– To the customer, he has clean, cold water when he wants it and it’s cheaper than buying a commercial bottle of water.

Source: Business Model Generation, p. 22-23

Remember …. You are not selling this……..

…. You are selling this

REFERENCES

Osterwalder, A., Pigneur, Y., Smith, A. et. al Business Model Generation (2010), John Wiley & Sons, Hoboken, NJ

Arussy, Lior “Customers Don’t Buy What You Sell” on Destination CRM.com, accessed 21 Feb. 2011

http://www.destinationcrm.com/Articles/Columns-Departments/Customer-Centricity/Customers-Dont-Buy-What-You-Sell---60802.aspx

Konrath, Jill. “How to Write a Strong Value Proposition” on The Sideroad, accessed 21 Feb. 2011

http://www.sideroad.com/Sales/value_proposition.htm

“How to Write a Value Proposition for Your Company” on Kinesis, accessed 21 Feb. 2011 http://www.kinesisinc.com/marketing/how-to-write-a-powerful-value-proposition/

“Creating a Value Proposition” on Mindtools, accessed 21 Feb. 2011

http://www.mindtools.com/CommSkll/ValueProposition.htm

Rintamaki, T., Kuusela, H. and Mitronen, L. (2007), “Identifying competitive customer value propositions in retailing”, Managing Servie Quality, Vol. 17 No. 6, pp. 621-34