A key element of any startup effort is to discover the value proposition for its first customers. In the past, this was often overlooked as the team became enamored of the technology and lapsed into “If we build it, they will come” mode. Thankfully, the Lean LaunchPad approach pioneered by Steve Blank at Stanford is changing this.
Even when founders accept the importance of the value proposition, it can be difficult for them to identify and explore a range and combination of options. To help with this, here is a multidimensional way of thinking about value propositions that I find helpful.
What is a value proposition? In short, it’s the answer to why customers buy and why they buy from you. Strong value propositions reflect a deep understanding of your customers and serve to unify and align efforts across all of the blocks in the business model canvas and beyond as the startup grows into a company.
Sound value propositions address customers’ operational, economic, or emotional concerns.
Operational value propositions appeal to customers who need to solve, ease, or prevent problems, that is, change the conditions under which they operate. For example, a new drug might cure a previously incurable disease, slow its progress better than existing treatments, or prevent those at risk from contracting it. When a breakthrough technology is at the core of the product, an operational value proposition typically appeals to visionaries — early adopters who are most likely to be open to and excited by the promise of a new, relatively unproven offering.
Economic value propositions resonate with customers who are cost-driven. But cost can be measured in a number of ways. Customers may seek the lowest purchase price, more predictable total cost of ownership, or some other cost-related benefit. Economic value propositions can be powerful or painful depending on how low-cost is defined and achieved. Wal-Mart achieves every day low prices through superior logistics and supply chain management forcing others to lower prices or find some other way to compete.
Emotional value propositions appeal to customers’ feelings, attitudes, ethics, and/or self-image. Designer labels command a premium price from customers who see themselves as fashionable and perhaps affluent, even as others fail to see any significant difference with a no-name version that may be from the same contract manufacturer. Products branded as “all natural” or “low fat” may speak to the emotional needs of health conscious customers even when the only change is relabeling to accentuate product attributes that were already present. Fad products such as the legendary pet rock may offer fun, frivolity, happiness, or the cool factor to customers. Clothing associated with a school, club, or team offers a sense of belonging. Fear, love, generosity, and other basic motivations are often the basis of compelling emotional value propositions.
Multidimensional value propositions mix operational, economic, and emotional appeals and are especially powerful. Customers buy for different reasons in response to evolving conditions, public opinion, marketplace developments, and even modes. One-dimensional value propositions can lose their relevance in the face of short-term factors and it can be very challenging to know how to adjust. By recognizing the inevitability of evolving customer needs and market uncertainty, multidimensional value propositions can help startup founders maintain perspective as they determine how and when to iterate or pivot. In addition, such value propositions can more easily address the needs of different individuals involved in product selection and purchase decisions.
© Copyright 2015 Karen Utgoff. All rights reserved.