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How to Create a Compelling Customer Value Proposition

Create a Compelling Customer Value Proposition

When asked to describe their customer value propositions, most entrepreneurs start reciting a laundry list of product features. Features are near and dear to the hearts of most people close to the product, whether they are software and hardware engineers, marketing folks, or those in operations. But most customers do not care about features. They care about benefits.

“Price is what I pay,” said Warren Buffet famously. “Value is what I get.” Value is what a customer derives from a product. Most companies are unable to articulate the customer value they offer.

When I worked at HP two decades ago, it was an engineering-driven firm, deeply afflicted with “next-bench syndrome,” which meant that the engineers were most comfortable designing products for their colleagues sitting next to them. It worked very well for the company so long as it remained in technical and scientific instrumentation segments, where it was by far the market leader. But when it ventured into consumer products such as PCs and calculators, the next bench syndrome hurt its chances to succeed. The company was so feature driven, that we used to joke internally that if HP were to sell sushi, they would call it “cold, dead fish.” Accurate, but hardly palatable. It describes features, not benefits.

There are 3 ways to approach customer value proposition creation:

  • Job to be Done: Describe a customer’s problem in terms of a job to be done. Then describe how your product does that job better than the competition. When Chrysler designed the first minivan, it articulated a clear job to be done: Create a vehicle that transports families. It took over from the station wagon, and created a new market segment. When Tata Motors in India designed the Nano – a $2,500 mini-car, the job to be done was simple: Design a mini-car that can carry a small family that is currently being transported in auto-rickshaws. When the job to be done is clearly identified, the features get prioritized in favor of the value the customer derives from the product. Hence the importance of the word “customer” in describing value propositions.
  • Customer Pain and Pain Relievers: Think about the customer pain you are alleviating. It should be a very clear statement. PayPal removed the customer pain of trying to make payments to strangers online. Netflix removed the customer pain of having to drive to a store to rent a movie, and be saddled with late fees if you don’t return them in time. Evite removed the customer pain of having to send out physical invitations in an envelope to invitees. Dropbox relieved the customer pain of having to carry files stored on a thumb drive when traveling. When the customer pain is clearly identified, you have a better chance of designing a solution that creates significant customer value.
  • Customer Gain and Gain Creators: Sometimes you can create a solution that creates a value surplus. No one was terribly unhappy with his or her music player until the iPod came along. Then suddenly everyone had to have the iPod, because it made the process of acquiring and carrying music so easy. “1,000 songs in your pocket” was the positioning of the first iPod. No one really thought they needed to carry 1,000 songs in their pocket. And all of a sudden, they could not live without their iPods.

When crafting your value proposition, start with brainstorming sessions to develop three specific statements describing the job to be done, customer pain relievers, and gain creators. Then synthesize these three ideas into one compelling customer value proposition. Now you are ready to delight the customers.

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Author(s) (other articles by )
Original Publication DateAugust 27, 2013
Related categoriesStrategy

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  • Benson Garner

    Great post regarding Value Propositions! Very clearly articulated with great examples. However, it would be a good idea to give credit where credit is due for the “3 ways to approach customer value proposition creation” that you describe in the last half of your post (specifically Tony Ulwick, Clay Christensen, and Alex Osterwalder).

    • Shyam Jha

      Thank you for your comments. Each of the individuals you mention has contributed to this thinking in their unique ways. But the notion of customer value proposition predates all of them. I am specifically referring to the work done by Theodore Levitt, Michael Porter et. al. Levitt was famous for having said: “Customers don’t want a quarter inch drill. They want a quarter inch hole.” The notion of value surplus is a well known economic concept going back at least a century. I do not think anyone you mention can claim to have invented or trademarked or even have been the first to write about the idea of customer value proposition. These are well known concepts, and business textbooks and journals dedicated to these concepts have been around for some time.

      • Benson Garner

        I’m no business novice Shyam and I completely understand that all of the individuals I have mentioned have improved upon the previous works of others, specifically as it relates to customer value propositions. However, what you have posted here in this blog post as if it were your own thinking or that of Cayene Consulting, without reference to where it comes from and credit to others is not ethical. It is a direct copy of Alex Osterwalder’s structure of the Value Proposition Canvas. Don’t misunderstand me Shyam, it’s a great post with great examples. I simply think you should credit the sources where this thinking comes from, the same as Ulwick, Christensen, and Osterwalder would do, or even Levitt and Porter for that matter.

  • Amel

    Thank you for making it so simple and applicable! Amel