VALUE PROPOSITION-A PROMISE OF VALUE TO CUSTOMERS
Welcome to the second part of our exciting Business Model Canvas Series. In the first part, we gave you an overview of what the BMC is, and why it is important for an entrepreneur. In case you missed the first part, or want a recap, have a quick read here before we take a deep dive into the first building block of the BMC.
The first building block we will be talking of, is Value Proposition. What is Value Proposition? In simple words, it is a promise of value to be delivered to your customers. It is the set of benefits a company promises to deliver to customers to satisfy their needs.
Your Value Proposition will help you to differentiate and position yourself. In reality, a value proposition is the art of communicating “here is why you should buy from us” to your customers.
So how do you define Value Proposition for your startup?
Value Proposition will define what product or service you are building, and what problems it will solve for your customers. I cannot emphasize enough on the fact that IT IS NOT just about your idea or product-it is about solving a customer problem or need. Value Proposition works hand-in-hand with your Customer Segments- which we will discuss in detail in our next article, and it is this relationship between these two that determine whether your startup will succeed or fail. This relationship is called Product-Market Fit. So, as a founder, ask yourself this question ‘Is what I am building, desired by a set of customers or not?’ And if you find the answer to this question NO, do not worry, because the beauty of this canvas lies in how you can iterate between the two till achieve that Product-Market Fit.
Building on this discussion, lets define Value Proposition in detail. Essentially, it consists of three parts- what your product features are, what pain(s) the product is solving for the customers, and what gains it is providing to them. I recommend every founder to remember this as a rule of thumb, as this will stop you from building products in the dark. For every feature you build in your product, ask yourself this question-what benefit will the customer derive from this? And this is really the key to building a customer-centric product.
So, we talk of iterations, but how to exactly go about it? This is where the processes of customer validation, and building a Minimum Viable Product come in. In simple words, you have some hypothesis or assumptions, which you will go out and validate through market research-conduct short surveys, focus groups with potential customers, listen to their feedback and draw a rough sketch of what your product will look like. And then you make a Minimum Viable Product-a version of your product, having that minimum set of features that will help you determine how customers will respond to your product, and you keep iterating and pivoting, taking customer feedback, till you reach to the point of achieving your PRODUCT-MARKET Fit. And only then, you can move towards Product Development.
This entire rigor of moving back and forth between your Value Prop and Customer Segments, is essentially helping you discover and validate your customers- and these are the two most crucial aspects of the Customer Development Process. And this is the key takeaway from this article, specially for founders from a technical background- DO NOT be obsessed with your product, and rush into Product Development. As a founder, you should be prepared to do Customer Development for a long time, and only when you achieve your Product-Market Fit, can you move towards Product Development.
So, Customer Development is all about customers, right? How do we define our customers? Stay tuned for the next article on Customer Segments, and Customer Relationships, to understand how we define Customer Personas, and what different strategies we can use to acquire, retain and grow our customer base.