Value Proposition (Part 2)
How do you communicate your value to customers? In this article, we'll explain what a Value Proposition is, how to create your own Value Proposition Canvas with examples, how to customize our template to get you started, and if you read until the end, you'll learn how Gamestop – the video game retail that was about to go bankrupt in 2020 – communicates the value proposition of its new NFT marketplace.
Our customizable Value Proposition (Part 2) template includes some of the top tools to evaluate if your value proposition matches customer expectations and perception, such as a Value Proposition Canvas, Value Proposition Statement, the Pain vs Gain Ratio, a Customer Value Perception map, and a Product Features Audit, plus 25 other tools which you can use to position your products better.
Value proposition canvas
A traditional Value Proposition canvas visualization represents the company's offer on the left, and the customer segment on the right. Both need to address three key things. On the Value prop side, the first third covers the details of your product or service. The second lists the gains that the product or service provides to the customer. The third is the pain relievers the product offers. This is arguably the most important portion of the value statement, but we address the proper balance between gain versus pain maneuvering below.
On the other side, the same elements of a value proposition are addressed from the customer's point of view. The customer has particular pains that need to be solved, and they should also find benefits in the product or service that are directly applicable to their needs. The last third is "customer jobs", or the tasks a customer needs to accomplish with a given product or service offering. A strong value prop addresses all three of these customer needs and how your company will answer them.
Value propositions can and should be continuously reevaluated over your company's lifetime, as the market perception of your offering changes over time. Your key value might also change based on your product or feature offerings and monetization strategy. (Slide 3)
Value proposition statement
So now that you have a canvas, how do you communicate all this to customers? A Value proposition statement is an external tool structured to communicate key value messages to customers. Here, the basic structure of the value prop canvas is listed. First, who is it for? What does that person need? What is your product or service? What benefit does it provide? In the example provided, the product is, "for freelance writers who have trouble getting their clients to pay on time, our software package tracks past-due payments and sends automated reminders so you can spend your time earning money, not tracking it down." (Slide 7)
You can also craft an extended value proposition statement with more details. The same components are listed on the left, but a secondary sentence covers why your product is different or better than other competitors with proof of the benefit to be delivered. (Slide 8)
The gain vs pain ratio
What about a quantitative method to assess your value proposition? The general rule of thumb is that in order to overcome a customer's resistance to your product, you need a pain-to-gain ratio of 10 to 1. Here, a seesaw tracks product gains against the pain, or cost, to adopt the product. While your product might have gains like increased revenues, cost or time savings, or a competitive advantage like reduced time to market or faster customer acquisition, there are just as many costs for the customer to adopt you.
There's a cost to find your company, cost to try your solution, cost to buy, and cost to implement, which takes inertia to overcome. And since your offering is an unknown alternative, you come with risk, as the customer's default is to do nothing, which takes zero energy. Position your value proposition to offer a net benefit that is so disruptive and defensible that it is ten times greater than the cost required to adopt your product or service. If you find your gain to pain score is less than 10 to 1, you should reassess how well you address your customer pains or if you have targeted any pains at all. (Slide 11)
Customer value perception
So how do you assess the customer perception of your value? Customer surveys can be used to collect input on what customers think your value is and why. A treemap diagram can then divide the value that customers perceive about your company into two main sections. In the example below, the two values are "overall quality" and "price." You can add additional branches if needed. While it sounds counterintuitive, the fewer values a customer perceives, the better. This is so your value proposition is not diluted by offering too much at once.
Under each value, your distinctive business elements that determine the specific value can be listed. For example, under overall quality it could be reputational, it could be service related, or it could be based on billing. Under price, maybe your company always offers discounts. An alternative visualization plots this customer perception on a value perception map to compare how customers view your value versus how they perceive your competitors. (Slide 22-23)
You can also use data from customer surveys to create a perceived value comparison table, which lists critical success factors that can be weighted and scored according to your company's most important components. These scores can then be compared against a "booster option" to include a little kick to each critical success factor. For example, a limited-time sale can temporarily boost the value perceived by customers, which would rank your pricing score higher. This functionality helps assess where boosters can improve your overall value. (Slide 25)
Product features audit
So how do you determine where the value of your product or service comes from? A product features audit assesses who within the customer base uses what feature and how frequently they use that feature. This is a validation method to clarify what users genuinely value about your product, feature by feature. This insight guides what functionality you should hone in on and which to avoid.
Oftentimes, customers value a product for a different reason than what it was designed for, in which case it's good to pivot your messaging and product development around what's working and what features are most desired. To more accurately assess usage, this graph can be edited and customized to whatever range or percentage of users makes the most sense to you. (Slide 18)
How GameStop uses the value proposition framework
So how does Gamestop use the value proposition framework to communicate the core value of its new NFT platform to new customers? Here's the text straight from their website: "Power to the players. Buy, sell, and create NFTs at low fees and high speeds." This is a gain and also a pain for NFT traders. "Secured by Ethereum Mainnet and Loopring Layer 2, truly own your digital goods." The platform's secondary prioritization is "True ownership", a pain of current NFT traders. This second sentence also adds credibility. Connect your GameStop Wallet for a super streamlined experience."This is a secondary gain for novice traders who haven't traded NFTs before but trust the Gamestop brand.
So how could Gamestop write this in a Value Prop Statement like we showed you above? "For players and traders who want low fee, high-speed NFT trading, the Gamestop NFT marketplace lets you buy, sell, and create NFTs with an easy-to-use wallet for a powerful, streamlined experience." And the second statement could be: "Unlike current platforms that offer high fees and slow speeds, our product provides low fee, high-speed trading, allowing for true ownership of your NFTs secured by Ethereum Mainnet and Loopring Layer 2 so you can truly own your digital goods."
For additional tools and slides that are fully customizable like the Jobs-to-be-done Canvas, Value Prop Test Card, Value Prop Booster, Customer Empathy Map, Value Prop with Mockups, plus many more to save time and hours of work, download the Value Proposition (Part 2) presentation template today. And don't forget, we also have another Value Proposition template you can download for additional tools and visualizations.