Strategy Talk

What Is Value Proposition And Why Is It Critical To Your Business Success

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I attended many networking events since I started my business. When talking to event attendees, I’m often asked the following questions: “How do I know your product/service is what I need?” “I’m happy with my current provider, why should I choose your product/service instead?” “How can your product/service solve my problems?” In the early years of my business, these are the questions I dreaded the most, and I know for a fact that I’m not alone. Many business owners when I popped the same questions also jabber for hours about various quality of their business that the audience doesn’t really care about. You may also do this very thing, not because you don’t know your stuff, it’s generally because you haven’t really thought and developed your value proposition properly.  

Your business is a value delivery system

  Michael J. Lanning and Edward G. Michaels from McKinsey stated that “Customers base their buying decisions on two criteria: the benefits of a particular product or service and its price”. In short, customers would like to buy things from you with great value at a fraction of the cost. If you hire a consultant for $5,000 yet it will cost you $20,000 of your own time doing it yourself, then the consultant just provides you with a $15,000 value with his/her service. Generally speaking, customers will acquire products/services, among competing alternatives, that creates the most value for them. If you wait until the start of your marketing campaign to think about your value propositions, then it’s already too late. Yes, a value proposition is at the centre of marketing messages to promote and capture your target audience’s attention, but its development and creation should have happened way before the product/service being marketed. It is NOT a marketing message. Many companies regard their mission statement or elevator pitch as their value propositions. Instead, these statements are the outcome of the very value created from the beginning. A Value Proposition is bigger and wider than a simple statement.  

What is it?

  A value proposition is a description or a series of descriptions which target a specific audience and deals with the benefits your business offers with your products/services to alleviate the pain points that your customer segment has and create gains for them. These statements are ultimately set out why your customer segment should do business with you as opposed to a competitor or other alternative products/services. An effective value proposition is clear and grounded in authenticity. It’s not a conceptual summary of your business’ vision, mission, values or tagline. Therefore, the key to developing a great value proposition is to first understand your customer segments. This includes what jobs they’re trying to accomplished, and all the related pains and gains in doing those jobs.  

Elements of a Robust Value Proposition

  Creating a robust value proposition requires you to ask the right questions. There are essentially 3 questions that you need to ask yourself to write your business value propositions.  

Who are your customers?

  All good value propositions start with the customers. It involves identifying the company’s main audience, or target market, the consumer group likely to give your company the largest revenue stream. You need to have a clear idea of who your ideal customer is and shape your value proposition to appeal to that customer segment. But more than just simply identifying the typical demographics (e.g. age, marital status, income, etc), you need to understand the jobs that your customers trying to accomplish, then design the value proposition to speak to that segment’s job’s pain points and gains.   A quote from the late Clayton Christensen,
“If you understand the job that the customer is trying to do, it becomes clear how to improve the product.”
  The “job to be done” approach focuses on what people are trying to get done, not just who they are and what they want.  

What pain do you remove for customers or gain you create for them?

  Once you find out your customer’s job, you need to understand their pains and gains related to those jobs. The popular saying goes: ‘People don’t want a drill; they want a hole in the wall”. But if all that you think is that hole in the wall, then you miss the real purpose of that drill. What your customers really want to do with that drill is to help them to hang a bookshelf, or picture or mirror (their goal). Why? Because they need somewhere to place their books in easy to reach places to do their work, photos in places that can make their house feel warm, or a mirror that is easy for them to access if they want to check their hairs (their pain). By nature, we as human beings, only care about our own problems and pleasures. Directing your value proposition around your customers’ pains and gains surrounding their jobs ensures your messaging will be consistent, and relevant, to your customers.  

What products and services do you offer to alleviate this pain or create customer’s gain?

  The degree of your value propositions depends on your ability to design your business to create the products/services that will alleviate these pains and create gains for your customers. The greater the pain you remove from the customers, the greater the perceived value of your products/services. The same goes with gains. When the solutions you offered through your products/services alleviate pains and create gains, it is said to achieve a “fit” You achieve fit when customers are enthusiastic about your value proposition, which happens when you tackle essential jobs, alleviate immense pains, and create important gains that customers pay great attention to. It is a hard thing to find and maintain but essentially, it is the only thing that drives the size of your value propositions. It is also important to quantify your value proposition whenever it’s possible. It doesn’t always have to be financial quantity, but being able to put a number in the value is of great value in itself. Using the consultant example at the beginning of this article, if your consulting service helps save customers time, calculate how much time. What is the dollar value of that time saving to your customers? Or to take a different perspective, what could the customers do with the time they saved for hiring you.  


  Your business is a value delivery system it is not simply a marketing message. How you create your value propositions for your customer will determine how strong that message you convey to the customers. In future blogs, I will discuss various case studies on how these principles apply to real-life companies.  
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Emmanuel Setyawan

A Strategyzer coach and Blue Ocean Strategy Australia consultant, Emmanuel brings remote delivery and time-proven, case study backed frameworks to remote strategy coaching and facilitation while helping customers create new or improve existing business models, design value propositions that capture new market or untapped needs and create a new way to generate revenue streams. Contact Accolade Coaching now and let Emmanuel help you work on your innovation strategy.