This is the second lesson in our free business model canvas course. In this lesson we cover the role of the value proposition in the business model canvas. Customers have problems. They need solutions to THEIR problems. A value proposition solves the problem for them. Shell solves the problem of how people get to work. It provides the petrol that powers their cars. Google solves the problems of not knowing about X. It provides the most relevant useful results on the internet. Jim Bean solves the problem of emotional pain and loneliness by reducing inhibitions.
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Customer Pain and the Value Proposition
So when we start thinking about the value proposition the first step is always to think about the problem that we are solving. There are some great questions that you can ask as you think about this.
- What is the pain
- Who has the pain
- How painful is it
- How is it being solved now
- How much will people pay to avoid it?
Let’s use knowledge as an example. There are frequent times during the day when i want to do something. Often I don’t know how to do it. It may be treating a child for a bumped head, finding a particular item in a shop, translating something someone says or learning how to water avocado trees.
The problem is that I do not know the information I need to do a good job for any of these tasks. the pain is that I have to spend lots of time finding out answers. alternatively I have to accept a substandard solution as I solve it myself.
In this case almost everyone in the developed world has a lot of problems that they don’t have immediate answers for. This is a function of the size and complexity of the society and the rate that it is changing at.
When I want to do lots of things the pain is pretty intense. In some cases it can be a matter of life or death – “How do I say that my daughter has been bitten by a sea snake in Thai? (ลูกสาวของฉันได้รับการกัดโดยงูทะเล). In other cases it is trivial.
Right now this problem (in the 90’s) was being solved by asking friends or family, using encyclopaedia and calling companies in the yellow pages.
How much will people pay to avoid the pain of not having a good answer almost immediately. As it turned out, people didn’t want to pay. They’d always got the information for free. Why should they start paying for it now. And anyway how do you value the information in so many cases and for so many people?
We now know how Google developed it’s value proposition to answer these questions. This is the process that every business needs to go through as it determines the value that it provides to customers. It is no longer enough to say “We make X”. Too many industries are being disrupted to make that viable for more than a few years. You need to say “We are solving this problem” A value proposition is a clear way of doing that.
The Value Proposition in the Business Model Canvas
The Value Proposition in the business model canvas is the unique offer your company provides to the customers. It can be a product or service that solves the customer’s problem.
Domino’s Pizza delivers hot fresh pizza to you within 30 minutes or else it is free.
Hence, Domino’s Pizza value proposition is the guaranteed short delivery time customers receive.
What is my Value Proposition?
Your value proposition has to be clear to convince customers to do business with you and benefit from it.
Here is a formula that will assist you in crafting a value proposition:
End Result Customer Wants + Specific Period of Time + Addresses the Objections
(End Result) Customers want hot fresh pizza to be delivered to their doorstep.
(Specific Period of Time) Domino’s Pizza aims to deliver hot fresh pizzas in 30 mins.
(Address the Objections) If Domino’s Pizza fails to do so, customers do not have to pay for the pizza
It is ideal to include all 3 categories into a value proposition but not necessary.
This formula allows your customers to immediately understand how the product benefits them. Customers choose Domino’s Pizza because they are guaranteed hot fresh pizza in 30 mins, if not they will receive other benefits (free pizza).
Moreover, it forces you to think more about the customer and less about the solution. This is emphasized over and over again as we have the tendency to focus on the (first) solution instead of listening to the customers’ problems.
The following will give you the confidence you are on the right track:
Will your value proposition tempt your customer to read further if it was used a the header of an article?
Check if your focus is on your customer problem instead of your product.
Example: We sell green salad vs Take a healthy lunch and feel better each day
How to Build a Great Business Model Canvas – The FREE Course
- Lesson 1 – Customers
- Lesson 2 – Value Propositions
- Lesson 3 – Marketing & Distribution Channels
- Lesson 4 – Customer Relationships
- Lesson 5 – Revenues
- Lesson 6 – Key Resources
- Lesson 7 – Key Activities
- Lesson 8 – Key Partners & Suppliers
- Lesson 9 – Costs