An introduction to Value Proposition Design
Value Proposition Design is a framework to define and create products and services that customers want. It helps organizations build and offer innovative solutions that help customers achieve their goals in the simplest way possible.
When working on high-risk projects like the development of a digital product, many teams suffer from a lack of proper organization and direction. This situation often translates into unproductive meetings, team misalignment, money waste, or worse: a total project failure.
Following a VPD methodology helps companies deeply understand their customers and achieve product-market fit.
In this article, we offer an overview of Value Proposition Design and the Value Proposition Canvas. If you're interested in learning more about these concepts, we recommend reading the book Value Proposition Design: How to Create Products and Services Customers Want by Alexander Osterwalder.
Why you need a Value Proposition Design framework
Value Proposition Design helps teams adopt a strategic mindset and align under the same goal: creating value through utility.
This allows companies to develop value propositions targeting customers' most important jobs, pains, and gains (concepts that we'll explain later).
Created by Alexander Osterwalder from Strategyzer, the VPD framework uses a tool called Value Proposition Canvas to facilitate the process of defining a compelling value proposition.
The main benefit of VPD is that it helps teams avoid wasting time and money on projects that won't work. Through an iterative process that involves testing and evolving your value proposition continuously, you can validate the hypotheses underlying your business ideas and reduce the risk of failure.
Designing a Value Proposition
1. Understanding the Customer Segment
The Customer Segment is the group of people an organization aims to create value for with its products and services.
To map your customers' characteristics and create a value proposition adapted to that target segment, you need the Value Proposition Canvas.
The Value Proposition Canvas has two sides:
- Customer Profile
- Value Map
The Customer Profile is where you write down the customer characteristics you assume, observe, and verify in the market.
The Customer Profile includes:
a) Customer Jobs
Customer Jobs are the things your customers are trying to get done in their work or their life.
Jobs can be the tasks customers are trying to complete, problems they are trying to solve, or the needs they are trying to satisfy.
There are different types of Jobs:
- Functional Jobs: jobs involving completing a specific task or solving a problem. For example, ordering food, writing a report or sending an email.
- Social Jobs: jobs describing how customers want to be perceived by others. For example, be perceived as good looking or as a competent professional.
- Personal/emotional Jobs: These jobs happen when a customer seeks a specific emotional state. For example, reducing stress or feeling comfortable at a workplace.
It's important to stress that not all Jobs have the same importance to customers.
Some matter more because failing to get them done may implicate serious consequences. Understanding what Jobs matter the most to your customers allows you to prioritize them.
b) Customer Pains
Customer Pains are the circumstances that impede a customer to get a job done and the risks related to getting a task done poorly.
The three main types of pains are:
- Problems or undesired outcomes: occurrences that impose a difficulty for customers or provoke an undesired result.
- Obstacles: things that prevent customers from getting started with a Job or slow them down.
- Risks: things that could go wrong or represent a negative consequence in the future.
c) Customer Gains
Customer Gains are essentially the benefits your customers obtain from using a product or service. Some Gains are required, expected, or desired by customers, and others can surprise them.
- Required gains: things without which a product or service wouldn't work. For example, a required gain of a music app would be to allow users to play music.
- Expected gains: benefits that customers expect from a solution, even if it would work without them. For example, users expect an app to run smoothly and be simple to use.
- Desired gains: Things customers would love to have on a product or service. For example, phones that seamlessly integrate with other smart devices and applications.
- Unexpected gains: benefits that customers don't expect nor desire. For example, before Apple introduced the multi-touch screen to the mainstream, nobody thought of that feature as a fundamental part of a phone.
d) Ranking Jobs, Pains and Gains
After you've identified customers' Jobs, Pains, and Gains, you need to understand which Jobs customers consider a top-priority, which Pains they deem extreme, and which Gains they find essential.
Ranking Jobs, Pains, and Jains is crucial to designing a value proposition that satisfies needs customers care about.
It doesn't matter if at the beginning you rank these characteristics based on what you think is important, as long as you strive to test and iterate that ranking until it truly reflects priorities from the customer's perspective.
2. Creating a Value Map
The other side of the Value Proposition Canvas is the Value Map. A Value Map is how you intend to create value for your customers, considering their Jobs, Pains, and Gains.
A Value Map has three parts:
a) Products & Services
Products & Services is simply a list of what you offer. An enumeration of the products and services your value proposition builds on.
Your products and services allow your customers to get Jobs done. However, products or services don't create value alone. They do it only in relation to a specific customer segment and their particular profile.
There are four types of Products & Services:
- Tangible: Physical goods, such as manufactured products.
- Intangible: Products or services of a non-physical nature, such as copyrights or after-sales assistance.
- Digital: Products or services entirely digital, such as music downloads or online recommendations.
- Financial: Products and services related to finances, such as insurances or financing options in credit cards.
b) Pain relievers
Pain Relievers are the characteristics of a product or service that alleviate specific customer Pains. When defining a Pain Reliever, you have to outline how it eliminates or reduces the occurrences that affect your customers before, during, or after they're trying to complete a Job.
A great value proposition focuses on solving the Pains that matter the most to customers. You can't solve every Pain a customer has. That's why you need to focus only on the most relevant ones.
c) Gain Creators
Gain Creators outline how your product or service produces positive outcomes and benefits to customers.
Like Pain Relievers, Gain Creators don't have to address every Gain from the customer profile. A successful value proposition focuses only on the benefits that are relevant to customers and where the product or service can make a difference.
3. Finding "Fit" between customers and value proposition
Mapping your customers' needs and the valuable aspects of your solution is only the beginning. The next step is to achieve fit between your value proposition and your customers' profile.
Essentially, achieving fit means getting your customers excited about your value proposition. And that only happens after you address important Jobs, alleviate extreme Pains, and create essential Gains for your customers.
Let's take a look at the three types of Fit.
a) Problem-Solution Fit
Problem-Solution Fit takes place when you
- Have evidence that customers care about certain Jobs, Pains, and Gains.
- Design a value proposition that addresses those Jobs, Pains, and Gains.
At the early stages of product development, you can't be sure if your customers will care about your value proposition. That's why you have to identify your customer's needs and expectations and design a value proposition accordingly.
At this point, you can only prototype alternative value propositions and hypothesize which one will produce the best fit.
b) Product-Market Fit
Product-Market Fit takes place when you
- Have evidence that your Products & Services, Pain Relievers, and Gain Creators produce value and get traction in the market.
During this phase, you set to validate the assumptions you made regarding your value proposition. You will most likely discover that many of your initial ideas don't create customer value, and you have to pivot your approach.
Finding Product-Market Fit is a long, iterative process that involves a lot of back and forth, prototyping, and testing with real users. It doesn't happen overnight, and it doesn't happen without collecting factual evidence from your customers.
c) Business Model Fit
Business Model Fit takes place when you
- Have evidence that your value proposition can be embedded in a profitable and scalable business model.
A great value proposition without a business model can end up in a complete failure. No value proposition can survive without a sound business model.
You will only achieve business model fit when you can generate more revenues with your value proposition than the costs you incurred to create it and deliver it.
Creating a successful value proposition that meets customer needs involves a continuous back and forth between designing prototypes and testing them with real customers.
The process is iterative rather than sequential. In this sense, the goal of Value Proposition Design is to test ideas as quickly as possible to learn from the outcomes, improve your value propositions, and test them again.
We'll explain in detail the steps of prototyping and testing your value proposition in a future article.
How we help startups achieve product-market fit
At Bixlabs, we help top-tier startups validate their business ideas, build user-centered digital products, and achieve product-market fit.
Through an iterative product validation process, we ensure your product aligns perfectly with your customers and your business' needs.
If you're looking for an experienced, fully dedicated team to help you build your product, give us a call.