The term value proposition was first used in a research paper by McKinsey & Company in 1988. It is defined as “a simple statement of the benefits that the company intends to provide to each segment, along with the approximate price the company will charge each segment for those benefits.”
A value proposition is a company’s promise to a customer or a specific market segment. It clearly explains why a customer should choose a particular product or service. The proposition should emphasize how the product meets a specific need, highlight additional benefits, and explain why it is better than the competition. A good proposition can be key to converting potential customers into real customers, so it’s important to reflect your products and services and differentiate itself from others on the market.
Value Proposition Components
The value proposition statement has four key parts: customer, industry, benefit, and strategy.
- Customer: Clearly define your target customer. Focus on their needs, challenges, and specific problems you can solve. Avoid trying to appeal to everyone. Narrow down your audience to those who benefit most from your solution.
- Industry: Identify the specific industry or segment you’re addressing. Understand the industry’s trends, demands, and pain points. Highlight the specific problem you’re solving within this industry. Ensure your value proposition is relevant to the industry’s current and future needs.
- Benefit: Clearly explain the value your product provides. Focus on the customer’s most pressing issues. Quantify your value by showing how your solution improves outcomes. Compare your product’s benefits to existing solutions in the market. Explain why your offering is superior or more effective.
- Strategy: Describe the unique approach you’ll use to fulfill your promise. Highlight any processes, technologies, or insights that differentiate your strategy. Ensure your strategy supports your ability to deliver value consistently. Consider under-promising to over-deliver and exceed customer expectations.
How to Write a Value Proposition
Value Proposition Canvas
To create an effective value proposition, start by using Peter Thomson’s value proposition canvas. This tool helps you identify the essential components that contribute to a strong proposition. Analyze the benefits from the customer’s perspective, focusing on how your product increases pleasure and reduces pain. Delve into the emotional drivers, rational needs, and fears that may influence the customer’s decision.
Harvard’s Essential Questions
Another effective method is to address Harvard Business School’s essential questions to define your proposition. Begin by brainstorming around three key prompts: identify which customers you intend to serve, determine the specific needs your product will meet, and decide on a price that offers acceptable value for customers while ensuring profitability for your company. This triangle approach helps create a cohesive and integrated proposition.
Steve Blank Formula
Lastly, apply Steve Blank’s formula to distill your insights into a concise value proposition. Use the structure: “We help (X) do (Y) by doing (Z)” to clarify your offering. This intuitive template encourages straightforward communication about how your product or service provides value. Ensure that the language you use reflects the terminology and phrases your customers naturally use, bridging the gap between your message and their understanding.
Value Proposition vs. Mission Statement vs. Slogan vs. Tagline
According to HubSpot’s article, it’s important to distinguish a value proposition from mission statements, slogans, and taglines. A value proposition explains what you offer your customers and why they should choose you. A mission statement, on the other hand, details your purpose as an organization.
A slogan is a short and catchy statement that brands use in their marketing campaigns. For example, the popular slogan of the De Beers Group: “A diamond is forever.” A tagline is also a short statement that summarizes some aspect of your brand or business and is easily recognizable. A famous example is Nike‘s tagline “Just do it.”
A value proposition is key to clearly communicating the benefits a company offers to its customers. It explains how the product or service meets specific customer needs, why it is better than the competition, and why they should choose it. A well-defined value proposition helps a company stand out in the market, attract the right customers, and ensure sales success. What unique benefits does your business offer?
