We recently asked a project team to describe the value proposition for their new product.
From the broad range of responses we received, it was obvious that team members differed substantially in their definition of what constitutes a value proposition.
This seemed to reflect variations in the term’s common usage, which at one end of the scale might involve a detailed statement of a product’s various benefits to the customer, versus the other, where the value proposition simply refers to some distinctive or ‘standout’ product feature or functionality.
Value Proposition & It’s Importance in Product Development
Well, I’m not usually such a stickler with definitions, but I believe the concept of a value proposition is of such fundamental importance in product development that its use deserves greater care and specificity than it typically receives.
The value proposition describes the values or benefits the customer will accrue from your product, including the point of differentiation from your competitors. The customer should perceive the importance of those benefits, and enable your product to stand out in their mind—to the extent that they will be willing to pay for those benefits.
The value proposition is not the same as a competitive strategy. The value proposition is a perception of the customer. Competitive strategy, on the other hand, is perceived from the company’s point of view—it is what the company does differently that ultimately results in the value proposition.
The value proposition may vary by customer segment. The company should therefore focus on one segment at a time and determine the segment-specific activities and resources needed to deliver the value proposition to the customer.
Here are some questions to consider when developing your value proposition:
- How will you determine if there is a problem to solve? (if there is a problem, can you solve it?)
- How is the product need being met right now?
- Why is the customer seeking a new solution? (are they willing/can they afford to pay for it?)
- How can your company provide new solutions to address the need? What capabilities and other assets can the company leverage? What can the product do differently and better than the competition?
- What and how does the customer evaluate a potential purchase?
- How does the customer view your company/product/brand versus other options (direct competitors or substitute products)?
- Can your existing business model deliver? Do you have the right infrastructure in place, and the appropriate resources for delivering the value proposition?
The value proposition is one of the most important product development terms because it expresses the value from the customer’s point of view. It is not about what you do differently, it’s about how that difference provides valuable new benefits to customers. From our old friend, Jack Welsh…if you can’t differentiate, don’t compete.