Developing

   

Value  Proposi-ons  
Phillip  H.  Kim  
 
Associate  Professor  of  Entrepreneurship  
Babson  College  
 
 
 What  is  a  value  
proposi-on?  

Reason(s)  your  customers  

buy  from  you  

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 New  Venture  Transac-onal  Understanding  

Customer  
Segment    

Value   Revenue  
Proposi7on   Genera7on  

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 New  Venture  Transac-onal  Understanding  

•  You  have  to  get  to  the  point  

of  where  the  transac7on  
happens.   Customer  
Segment    

•  If  you  do  not  understand  

this,  you  do  not  understand   Value   Revenue  

anything!   Proposi7on   Genera7on  

•  And  nothing  else's  maFers  

no  maFer  how  brilliant  your  
idea  is!  

 
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 Write  your  value  
proposi-on!  

Reason(s)  your  customers  

buy  from  you  

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Elements  or  Characteris-cs  of    
Value  Proposi-ons  
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BABSON COLLEGE — ALL RIGHTS RESERVED
BABSON COLLEGE — ALL RIGHTS RESERVED
 Classic  Value  Proposi-on  Characteris-cs  

1.  Newness   7.  Cost  Reduc7on  

2.  Performance   8.  Risk  Reduc7on  
3.  Customiza7on   9.  Accessibility  
4.  “GeHng  the  Job   10. Convenience/Usability  
Done”   11. Trust    
5.  Design   12. Price  
6.  Brand/Status  
 
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 What  is  a  Value  Proposi-on?  
•  It  is  a  concept  about  why  customers  buy  your  product  
or  service  
•  Collec7on  of  reasons  why  customers  would  want  to  
purchase  from  you  
–  Resonate  –  Fulfills  the  most  important  Need    
–  Differen;ate  -­‐  Stands  out  and  is  unique  from  alterna7ves    
–  Substan;ate  -­‐  Belief  and  Trust  that  you  can  deliver  on  the  
promise    

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 Three  Types  of  Value  Proposi-ons  

•  All  Benefits  
•  Favorable  Points  of  Difference  
•  Resona7ng  Focus  

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 Alterna-ve  Value  Proposi-ons  
 VENTURE                                  COMPETITOR                          CUSTOMER    

Favorable  Points  of  

Value  Proposi-on:   All  Benefits   Resona-ng  Focus  
Differen-a-on  
Consists  of:   All  benefits  customers  receive   All  favorable  points  of   The  one  or  two  points  of  
from  a  market  offering   difference  a  market  offering   difference  (and,  perhaps,  a  
has  rela7ve  to  the  next  best   point  of  parity)  whose  
alterna7ve   improvement  will  deliver  the  
greatest  value  to  the  customer  
for  the  foreseeable  future  
Answers  the  customer   “Why  should  our  firm   “Why  should  our  firm   “What  is  most  worthwhile  for  
ques7on:   purchase  your  offering?”   purchase  your  offering  instead   our  firm  to  keep  in  mind  about  
of  your  compe7tor’s?”   your  offering?”  

Requires:   Knowledge  of  own  market   Knowledge  of  own  market   Knowledge  of  how  own  
offering   offering  and  next  best   market  offering  delivers  
alterna7ve   superior  value  to  customers,  
compared  with  next  best  
alterna7ve  

Has  the  poten7al   Benefit  asser7on   Value  presump7on   Requires  customer  value  
pihall:   research  

BABSON COLLEGE
Source:  Customer   — ALL
Value  Proposi7on   RIGHTS
in  Business   Markets,  RESERVED
HBR  Mar  2006  
 What  is  a  Value  Proposi-on?  
•  It  is  a  concept  about  why  customers  buy  your  product  
or  service  
•  Collec7on  of  reasons  why  customers  would  want  to  
purchase  from  you  
–  Resonate  –  Fulfills  the  most  important  Need    
–  Differen;ate  -­‐  Stands  out  and  is  unique  from  alterna7ves    
–  Substan;ate  -­‐  Belief  and  Trust  that  you  can  deliver  on  the  
promise    

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 Failure  in  any  one  weakens  the  VP  

Resonate   Differen-ate   Substan-ate   Conversion  

Weak     Difficult  to   Able  to   “I  don’t  need  it”  

Resonance   Subs-tute   Substan-ate   “Not  important  enough  to  me”  
  “  Not  a  big/important  problem”  

Strong   Easy  to   Able  to   “What’s  your  best  price?”  

Resonance   Subs-tute   Substan-ate   “I  can  do  without”  
“Next”  

Strong   Difficult  to   Not  Able  to   “I’m  skep-cal”  

Resonance   Subs-tute   Substan-ate   “Can’t  take  the  risk”  
“Need  more  proof”  

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 Failure  in  any  one  weakens  the  VP  

Resonate   Differen-ate   Substan-ate   Conversion  

Weak     Difficult  to   Able  to   “I  don’t  need  it”  

Resonance   Subs-tute   Substan-ate   “Not  important  enough  to  me”  
  “  Not  a  big/important  problem”  

Strong   Easy  to   Able  to   “What’s  your  best  price?”  

Resonance   Subs-tute   Substan-ate   “I  can  do  without”  
“Next”  

Strong   Difficult  to   Not  Able  to   “I’m  skep-cal”  

Resonance   Subs-tute   Substan-ate   “Can’t  take  the  risk”  
“Need  more  proof”  

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 Failure  in  any  one  weakens  the  VP  

Resonate   Differen-ate   Substan-ate   Conversion  

Weak     Difficult  to   Able  to   “I  don’t  need  it”  

Resonance   Subs-tute   Substan-ate   “Not  important  enough  to  me”  
  “  Not  a  big/important  problem”  

Strong   Easy  to   Able  to   “What’s  your  best  price?”  

Resonance   Subs-tute   Substan-ate   “I  can  do  without”  
“Next”  

Strong   Difficult  to   Not  Able  to   “I’m  skep-cal”  

Resonance   Subs-tute   Substan-ate   “Can’t  take  the  risk”  
“Need  more  proof”  

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Value  Proposi-on  Designer  
 Your  Venture  ?  

•  All  Benefits  
•  Favorable  Points  of  Difference  
•  Resona7ng  Focus  

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 What  Does  the  VP  Describe?  

•  The  Offering  -­‐    What  is  it?  

•  The  Customer  –  Who  is  it  for?  
•  Compelling  Reason  to  Act  –  Why  is  it  needed?  
•  The  Experience  –  How  does  it  work?  
•  The  Benefit  –  What  value  is  delivered?  
•  The  Timeframe  –  When  will  it  pay  back?  
•  The  Advantage  –  How  beler  than  alterna7ves?  

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 Create  a  short  &  compelling  paragraph  
•  The  …        (product  name)  
•  Is  a  …        (high-­‐level  summary)  
•  For  …          (target  audience)  
•  Who  …      (need  or  opportunity)  
•  That  …      (compelling  reason  to  buy/act)  
•  Unlike  …  (primary  compe77ve  alterna7ve)  
•  Our  Product  …  (primary  differen7a7on  from  
alterna7ves,  payback,  value  delivered,  the  experience)  

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 Objec-ve:  Make  it  easy  for  the  customer  to  buy  
•  Make  it  easy  for  the  customer  to  buy  
•  Go  to  whatever  lengths  you  must  to  prove  tangible  
value  as  compared  to  alterna7ves  
–  Value  Word  Equa;ons  –  use  words  to  express  a  simply  
mathema7cal  equa7on  
–  Value  Case  Histories  –  document  cost  savings  or  added  value  
received  from  use  of  your  product  
–  Value  Calculators  –  spreadsheet  apps  that  demonstrate  value  
received  or  cost  savings  

BABSON COLLEGE
Source:  Customer   — ALL
Value  Proposi7on   RIGHTS
in  Business   Markets,  RESERVED
HBR  Mar  2006  
 Remember  
•  Value  proposi7ons  are  not  determined;  
they  evolve  from  sa7sfying  a  need  
 
•  Refine  the  value  proposi7on  un7l  it  can  be  
done  in  one  sentence  
–  E.g.,  “Acme  is  the  exclusive  provider  of  patented  non-­‐
explosive  road  runner  traps  for  coyotes,  saving  coyotes  
more  than  $100k  in  medical  expenses  in  2010.”  
 

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 Final  Points  to  Consider  
•  Ask  yourself  why  someone  would  buy  from  
you  and  not  an  alterna7ve.    If  the  answer  is  
“great  service”,  or  “great  selec;on”,  start  
over  since  these  are  not  unique  durable  
advantages.  

•  The  VP  must  be  what  you  DO  and  ARE,  not  
what  you  WANT  to  become  

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Pulling  it  all  together!  
 What  is  the  
narra-ve  of  your  
venture’s  success?  

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 Answers  to  five  ques-ons:  
1.  Why  are  you  in  business?    
è  Vision  and  ul-mate  purpose  
2.  What  are  your  objec7ves?    
è  Goals  &  targets  for  personal  success  (by  when)  
3.  What  business  are  you  in?  
è  Scope  and  guard  rails  
4.  What  is  your  compe77ve  advantage?  
è  Key  differen-a-on  
5.  What  is  your  value  proposi7on?  
è  Reasons  your  customers  buy  from  you  
 
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Hometown  Newspaper  
 Summarize  the  
answers  to  the  5  
ques-ons  for  your  
hometown  
newspaper  

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Final  Thoughts  
 References  and  Further  readings  
•  “Lean  Strategy”  by  David  Collis,  Harvard  
Business  Review,  March  2016  
•  “Customer  Value  Proposi7ons  in  Business  
Markets”  by  Anderson,  Narus,  and  van  
Rossum,  March  2006  
•  “Value  Proposi7ons”  in  Business  Model  
Genera7on    by  Osterwalder  and  Pigneur  

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