Lesson 2: Customer Value Propositions

Customer Value Propositions

At the heart of every business, and every business model, lies a customer value proposition. This can be defined as the experiences a target user will realise upon purchasing and using a product or service. It encapsulates the sum of all the customer touchpoints within a business and should be viewed as a blueprint for the business to deliver authentic value to customers.

Remember, a touchpoint is any point where a customer might encounter your brand. This can include social media, in-store purchases, ads, and more.

You should remember that developing a business involves stepping into the shoes of your customer and seeing the world through their eyes. The same applies when developing a customer value proposition. What are the serious pains or gains that your target audience is experiencing, and how can your value proposition be crafted so that you’re seen as the best possible solution?

A customer value proposition is more than simply a bullet list of product benefits or a statement of what you do. Instead, it explains what your product or service is, why your audience should care, and how it’s different from competitors.

Developing a great customer value proposition might sound easy, but don’t be fooled! A business needs to understand their target audience perfectly and focus on their needs instead of what the business offers. This can often feel counterintuitive, especially when the business is yours and you love it!

A great customer value proposition is:

  • Distinct
  • Concise
  • Interesting

The value proposition canvas is a great method for developing a customer value proposition that helps startups achieve a product/market fit. The canvas was developed by Alex Osterwalder, and when used correctly, it can be a superb tool for figuring out why anything is valuable.

Check out this video for an explanation on how the canvas works! https://www.youtube.com/embed/ReM1uqmVfP0

Four ways to define your customer value proposition

Failing to craft your customer value proposition properly could cost you the opportunity to engage with and speak directly to your target audience. How else are they going to know that they should choose you over the thousands of other businesses out there? A customer value proposition isn’t just a bullet list of benefits, but it also shouldn’t be an essay about your company. To define exactly what you’re offering your audience, contemplate and answer four questions:

1. What exactly do you do?

Define the industry your business is in. Maybe it’s hospitality, construction, or marketing and communications. Then ask:

  • Who the are competitors in your industry?
  • How is your business different from them?
  • What makes your business unique?

2. Who is your target audience? 

Try to get as detailed as possible when describing your customers or who you hope to target. Some businesses might have more than one target audience, which means crafting a different value proposition for each customer segment.

A good example of this is Uber: one customer segment consists of the passengers in the cars, while the other covers those who want to drive the cars – the drivers. The customer value proposition for each is most certainly going to be different.

3. What are their pain points?

As we said, you want to be seen as the best possible solution for the pain points being experienced by your target audience. Remember, the pain point isn’t just the problem the customer is experiencing; it is the why – the reason that customers will go with you as a solution instead of someone else. 

Let’s go back to Uber. What might the pain points be for potential riders?

  1. They need a reliable form of transport
  2. Safety is always a concern, so they don’t just want to jump in a car with anyone
  3. Some forms of transport only operate at certain times of the day/night
  4. They don’t want to have to worry about paying in cash.

The pains for a potential driver might be:

  1. They need an income
  2. They want the freedom to choose their own work hours
  3. They have a limited amount of startup capital.

4. How will your product or service remedy the issue?

Hopefully, the first three questions helped you identify what makes your target audience(s) tick and what their needs are. Now, you need to link those back to your product or service and start crafting a compelling customer value proposition.

Very often, the value proposition is not about the product itself, but rather the job that product or service does. Sometimes these “jobs” aren’t always a function. Think about the social, emotional, and supportive jobs that your product or service might do for your target audience.

For example, Uber do the job of providing provide passengers with the security of knowing that all drivers are screened, tracked, and rated. Walking to a destination or taking a bus could just as easily get the job done, but Uber fulfils their passengers’ emotional need for safety and comfort.

Developing your value proposition

Now that we’ve been through the process let’s have a look at what two customer value propositions for Uber might be:

For passengers, the value proposition might be:

For drivers, the value proposition might be:

Developing a successful customer value proposition takes time and patience. – and empathy. If you want to see the world through your customer’s eyes, you need to understand where they’re coming from!

Mistakes to avoid

This isn’t an easy task, and you may well make some mistakes. Forewarned is forearmed, though! Let’s look at some to avoid when you’re working on your customer value proposition.

  • Mixing several customer segments into one: Everyone is different. Don’t try to create a message that will work for everyone, or you’re not going to resonate with anyone.
  • Work one customer profile at a time.
  • Creating your customer profile through the lens of your value proposition: Don’t try to fit your customer to the proposition. Do it the other way around – the proposition needs to fit your customer.
  • Only focusing on functional jobs: Your product can do more than just something physical. Think about the emotional, social, and supportive jobs it can do.
  • Trying to address EVERY pain and gain: No product can do everything. Focus on customer priorities first.

Keep these potential pitfalls in mind, and you should avoid some of the most common mistakes.

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