Value proposition canvas explained
The value proposition canvas is a great way to help businesses design a value proposition for their products or services. This simple yet effective tool can be used to identify and understand the different value propositions that a business could offer, and it can help them to better understand what their customers want and need.
They can help businesses to create a value that is tailored to their specific products or services, and it can help them to better understand their customers’ needs.
In the following article, we will explain what a value proposition canvas is, how to create one, and how it can be used to understand your customers better.
- What is the value proposition canvas?
- Why do we need them?
- What are the benefits?
- How to create a value proposition canvas
- 3 Value proposition examples
What is value proposition canvas?
It is a tool and methodology that can be used to help businesses create a value proposition for their products or services. It was created by Stratgeyzer, which was founded by Alex Osterwalder, a Swiss business strategist, speaker, and consultant, who is known for his work on business modelling. You can download a value proposition canvas template here.
It can help businesses to identify and understand the different value propositions that a business could offer, and it can help them to better understand what their customers want and need.
The canvas is split into three distinct areas:
- The customer profile – This is where you define the customer segments that are meaningful to your business. You also describe the jobs (goals) this type of customer is trying to undertake, as well as the pains and gains outcomes they experience in performing the job. This is externally focused and does not include your business.
- The value map – This describes how your company creates value for the customer segment through its product or services. This can be the current state of your business or could be the value you hope to generate by introducing new products or services. This is broken down into the products and services you offer, pain relievers which detail how these products elevate a customer’s pain and gain creators which describe how the products generate the gains that customers value. This is internally focused and only includes your product suite.
- The fit – This is perhaps the hardest bit of defining a good value proposition. This is where your value map intersects your customer profile to service the highest priority jobs, pains and gains. Quite often it is more important to service 1 or 2 jobs very well than to hard a product suite that services many jobs in a rudimentary way.
The canvas can help businesses to create a value proposition that is tailored to their specific products or services, and it can help them to better understand their customers’ needs. Download a copy here.
Why do we need them?
In short, the canvases are an essential tool for businesses to design value propositions which in turn are the linchpin of a good business model. A good value proposition is the main reason why customers return to the same company over another.
Some value propositions satisfy an entirely new set of needs that customers hadn’t previously perceived, for example, the iPhone created the smartphone segment. Others might offer a performance benefit, and therefore save people time, for example, Apple M1 Max laptops. Finally, value propositions can offer customisation to suit the needs of specific customer segments for example Oakley’s customisable glasses.
What are the benefits of using a value proposition canvas?
They can help businesses to:
- It keeps product and marketing teams focused on customers. It validates product development through the lens of the customer, so businesses are less likely to develop new offerings which are just ‘nice to haves’ rather than tackling key functional jobs that customers are willing to pay to have solved for them.
- It helps businesses to find and maintain a better product-market fit. Consumers and the market are constantly evolving, so it is increasingly important to embed a practice to ensure your product suite is evolving in alignment with changing jobs and needs.
- It helps simplify the R&D process. Product development can be an immensely messy and complex area, but having a robust methodology simplifies the process and results in better products.
- Finally and most importantly, a robust tested value proposition will serve as the main building block of your marketing strategy. Without a clear value proposition that serves a need, thousands of pounds could be lost on ineffectual marketing with the wrong proposition (I see this more often than you might think). Without a value proposition messaging architecture cannot be set up and marketing teams will be testing variants based on hunches.
9 Steps of how to create a value proposition canvas
Here are nine steps you can follow to create your own. Always start with the customer, and the value proposition canvas customer profile:
1. Define your customer segments.
Try not to model more than three segments at any one time, especially if it is your first time using this canvas. If you have more than three segments form a consensus on which is the most important for driving value to your business.
2. Describe the jobs that customers are trying to undertake.
This is a critical part of the process, don’t gloss over this or move on until you have explored all the jobs these customers are trying to undertake. The jobs might be functional, social or personal. There might also be more than one job performer, or your job performer may not be the same person that buys the product. Do this for each segment individually.
3. Identify the pains and gains associated with those jobs.
Pains are anything that annoys or prevents a customer from getting a job done. These could also be risks of the outcomes of a job being performed badly or not at all. Gains on the other hand describe the benefits and outcomes that customers do want as part of getting their job done. These might be rational expectations when purchasing a solution, or they might be unforeseen benefits that surprise and delight customers.
4. Take a break.
At this stage, it is really important to take a break and reset. This is because everything that has been considered so far is from the perspective of a consumer. The next stage will be product and business-focused, so it is important to approach it from the perspective of what your business currently offers.
5. Start the value map and outline your whole product suite.
This should be a relatively quick process as most people will be familiar with what products or services you provide. It is really important at this stage just to list the products or services and not to consider their features or benefits.
6. Identify the pain relievers and gain creators as they relate to your product suite.
It is important to note that the first time you do this you should approach it from a current state (i.e. what your company offers today). In later iterations, you might want to consider what pain reliever and gain creators your business could offer in the future. Pain relievers describe how your product specifically alleviates customer pains, while gain creators describe how your product is designed to offer expected gains or benefits.
At this point, I would suggest that you end the session and tackle the fit on a different day. In my experience, approaching fit with some time to reflect and a fresh mind yields quicker and better results.
7. Evaluate the fit between your products and the pains and gains of your customer segments.
8. Gain consensus on what the most important jobs are for each customer segment.
Once you have done that consider whether you have evidence for your most important jobs. Next consider, the same for pains and gains. Which pains are most pressing and really need elevating and which gains are most needed. Once you have a consensus on these, it is time to start looking at fit.
9. Take each customer segment in turn and take the top three jobs and see how your existing product suite solves that job.
This is your value proposition, how your products solve a really pressing job. Do this for each of your three jobs and you will have nine basic value propositions by the end.
Once you have completed all these steps you should be able to move on to refine your value proposition and a create messaging hierarchy. If you don’t know what this is, or if you would like help to create a value proposition canvas please feel free to give us a call.
3 Value proposition examples
- Segment 1 – Free search
- Segment 2 – Targeted performance ads
- Segment 3 – Monetising content
At the heart of Google’s multi-sided business model is its value proposition which creates value for three distinct customer profiles.
Firstly consumers who want to find useful information online. For these people, they have the most relevant free search tool in the world.
The second customer is advertisers who want to drive traffic, enquiries and sales to their websites, apps and in-store. For this, they have Google Ads the most targeted ad platform in the world.
Finally, publishers need to generate incremental income from their online content, for this, they have Ad Sense and Google Ad Manager where publishers can tap into demand for Google’s advertisers.
Apple Genius Bar
- Segment 1 – High-end devices with built-in tech support
Based on a growing direct-to-consumer trend Apple decided to launch a range of flagship stores in 2001. This was the first time in their history that they had ever sold through physical stores. Why?
To underpin the demands of tech early adopters they recognised that consumers wanted high-end devices but needed support in upgrading and maintaining them. To manage the customer experience from end to end they launched stores and created the Genius Bar to service the needs of these early adopters.
The Genius Bar adopted a human-centred approach to help customers feel enabled and masters of their cutting-edge devices.
- Segment 1 – Movies by Mail
- Segment 2 – Content streaming platform
- Segment 3 – High value commissioning budgets
As internet speeds increase around 2007, Netflix saw an opportunity to evolve its value proposition which in turn revolutionised its business model. Netflix’s value proposition quickly evolved from a mail-order DVD company into a streaming platform with some unforeseen benefits.
Technology drove the innovation but Netflix capitalised on this with a subscription model which financed its platform development and serviced customers better than their original value proposition.
The economies of scale or operating a platform rather than paying for the cost of distributing DVDs meant that they could disrupt the traditional commissioning process of TV and Movie markets, giving production companies an alternative choice.
Production companies enjoyed more generous production budgets versus TV, as the TV industry was starting to come under pressure from changes in consumer habits. Scheduled TV was beginning to become a thing of the past and consumers were demanding to be able to watch their favourite programmes on-demand in their own time.
Drop us a line if you would like to learn more about Netflix’s business model and receive a free Netflix business model canvas.
Value proposition canvases are amazing strategic tools to create business alignment. They can be used to create a common language within your business to describe the challenges you face as well as the value you provide. They help people in all areas of your business understand how it works and service your customers’ needs better.