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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 Buffett 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.

Shyam is a consultant and mentor to entrepreneurs. He has over 3 decades of international technology industry experience. He earned his MBA from Oregon State University, and Bachelor of Technology from Indian Institute of Technology. View details.

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