Designing a value proposition

By Joseph Wilson

Over the last year, we have been leading workshops across Ontario designed to help entrepreneurs with the basics of business development.

The ideas coming out of Ontario cover an impressive range of technologies, from cleantech manufacturing solutions to online platforms for innovative services.

Yet we found that the entrepreneurs often had the same challenge: they were unable to explain the value of their offering in a clear and concise manner. We also hear this comment from venture capitalists and investor relations professionals — that entrepreneurs spend too much time thinking about technology and not about value.

Watch this video to see how scientists are often so passionate about their technology they can’t articulate the value of their offering.

A value proposition is essentially an answer to the question “what do you do?” The temptation is to explain the technology that your business is based on, but the reality is that there are very few industry-specific people who care about your technology. People want to know what the value of your technology is.

Values can be vague and very personal, but when people pay for products, the same patterns keep cropping up. When engaging in B2B sales, for instance, potential customers are often drawn by promises of saving time or money. These aren’t the only things that get people buying, however. Products and services can be sold on the promise of higher quality, convenience, lowering risk or enabling productivity.

When selling directly to consumers, values are often harder for customers to articulate. Instead of being rational and business-driven, consumers make emotional decision based on latent values, such as status, aesthetics or newness.

The next step is to find out exactly which values matter to your target customer. When you craft a value proposition, it should speak to a very specific market segment. Even if you have a wide-ranging “platform technology,” you need to start selling your product to a specific target customer and then expand later.

The best way to find out what your target market values is to get out of your office and ask them. Observe them at work, read their publications and get into their head to find out what problems they are trying to solve when they go to work. You can use other tools, too, like Alexander Osterwalder’s Customer Empathy Map or the Day in the Life Scenario in our Entrepreneur’s Toolkit Market Strategy Workbook.

When you’re finally ready to draft your value proposition, use these points as a guideline:

1. What are you offering?
2. Who is your target customer?
3. What value are you bringing your target customer?
4. How is your product unique?

If you can get those four points into one sentence, you’re finally ready to talk about your product in a way that investors will understand.

Downloads and resources from the Entrepreneurship 101 lecture on value proposition:

• Class summary: Value proposition
• Video: Developing a value proposition
• Presentation: Value proposition
• Workbook: Market Strategy Workbook: Critical Value Factors
• Articles: 1. Value proposition. 2. Target customers
• Join the Facebook Group: Entrepreneurship 101
• Register to get weekly updates

Reposted from MaRS

JosephWilson is currently an education advisor at MaRS. He also writes on issues of technology and culture for NOW Magazine, the Globe and Mail, Spacing and Yonge Street. He is the Executive Director of the Treehouse Group, dedicated to fostering innovation by hosting cross-disciplinary events.

The RIC blog is designed as a showcase for entrepreneurs and innovation. Our guest bloggers pro vide a wealth of information based on their personal experiences. Visit RIC Centre for more information on how RIC can accelerate your ideas to market.

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Three easy activities to help identify your value proposition

By Shantanu Mittal

All successful businesses have one thing in common; they have a clearly defined value proposition. But what constitute a good value proposition? Do you think that Google would have been so successful had its value proposition been “Google uses a patented page-ranking algorithm to make money through ad placement” instead of its current “The world’s largest search engine that allows internet users to find relevant information quickly and easily” (Source: Google)?

So how can you as an entrepreneur create your perfect value proposition? Well, here are some tips and resources to help.

Components of a value proposition: there are 3 key parts of a value proposition:

a.       Target Customer

b.      Customer Problem

c.       Product or Solution

A well written value proposition connects all these 3 together in one or two simple sentences. Here are some resources to help you identify these three key parts.

1)      A-Day-in-the-life Scenario: This technique helps you identify your target customer and the customer problem. Imagine that you are the ideal customer for your product – what would your regular day be like, what problems or stresses are you under and what are its economic consequences. Then you overlay the enabling factors of your product and see if they can solve the problems and lead to economic benefit.

2)     Strategy Canvas: This is a powerful exercise to help you identify your competitors to see how you can differentiate yourself (see example for Southwest Airline in Fig 1). Think of all the factors that consumers consider when buying a product or service in your market. Plot these factors along the horizontal axis of your strategy canvas and then rank yourself high, medium or low compared to your competitors for that factor. This exercise shows you in a very visual way where you differ from your competition and these unique factors that your customers are looking for are what you should be including in your value proposition.

3)     Buyer Utility Grid: This is a useful exercise in trying to determine at what point in your product’s life cycle  you can add value. The columns on the grid represent the different phases of your product’s life cycle and rows represent common value-add factors that consumers are looking for. If you are struggling to find ways to differentiate yourself from your competitors, I would encourage you to go through this exercise to see how your ‘whole product’ (core product + services and ancillary products) can give you new competitor advantages.

All these exercises were included as part of working group activities by entrepreneurs in a workshop organized by RIC Centre in partnership with the Business Mentorship and Entrepreneurship Program based at the MaRS Discovery District. This workshop, facilitated by Joseph Wilson and Jon Worren from MaRS, was highly engaging and all the invited entrepreneurs who attended this session were able to write and share a concise value proposition for their company by its conclusion.

Sheldon Joseph from Rejuven8 said that he found the interactive nature of this workshop very useful and added that “I’m writing an executive summary [of my business] as we speak”. The next workshops will cover business models.

**Disclaimer

All information for this blog was taken from content discussed at the “RIC workshop series: Designing a Value Proposition”, courtesy of Jon Worren and Joseph Wilson. The models and activities can be found in the ‘Entrepreneurs Toolkit – Market Strategy Workbooks’ designed by the Business Mentorship and Entrepreneurship Program.

Shantanu Mittal is graduate student pursuing his Masters of Biotechnology from the University of Toronto Mississauga. He is currently the communications officer for the RIC Centre, a role which has helped him understand the world of entrepreneurship and business development. With his expertise in the life sciences and green technology sector, he has been able to provide valuable feedback to clients along with the entrepreneur-in-residence. Shantanu hopes to pursue a future in business development in the biotechnology or green technology industries.

The RIC blog is designed as a showcase for entrepreneurs and innovation. Our guest bloggers provide a wealth of information based on their personal experiences. Visit RIC Centre for more information on how RIC can accelerate your ideas to market.

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Nothing’s free in this world

By Jeff Bowman

There are some levels of customer service that shouldn’t  be breached.  Sacred.  Alas, one of the last bastions of free extra value has gone the way of the Dodo.

I am fortunate that I grew up in an era where an oil check, windshield wash and hockey stickers were the norm with every gas fill up. “Can I check under the hood” was a familiar phrase from a smiling attendant.

If you are old enough to remember the Esso Power Player sticker series, then you are in my age bracket.  Picture yourself pulling into a gas station today where first of all the attendant is in a uniform and cap. He checks your oil, cleans your windows, and gives you something extra.  It could have been a glass, a sticker book, gas cap tiger’s tail, whatever, it was free and it kept my parents going back to the same station over and over.

Times have changed.  Today you pump your own gas, walk into the cashier and pay,  sometimes without even a simple thank you. You can check your own oil, or not, and you count your lucky stars first of all if there is clean water in the washer bucket and second if the washer itself has any foam left on the cleaning side.

Today was the ultimate value squeeze for me.  I have always gone to a certain gas station to fill up, partly because they still have free air for my tires.  Yes, free air!  Today I went to use the air and to my horror it was $1.00.  I understand paying for suction to clean your car, but a service like providing air to fill up a low tire.  Too much.

Consumer’s have a right to value for the products and services they buy.  In a competitive marketplace, a company’s value proposition is often what creates and maintains brand loyalty.

Well it seems in a marketplace where price is essentially the same, service becomes an additional cost, so it’s easy to cut.

Imagine if that happened in banks – no tellers, high service charges and, wait that might be a bad example.  Imagine going to a grocery store where you had to scan your own items, bag your own groceries and….

When will the big wheel of service levels roll back to the consumer’s side? I predict it won’t be too long from now. Consumers need to take note of where they still get value, and let the owners know that it is still appreciated.

Isn’t it strange that when I was growing up the place where you went for gas was called a “Service Station”!

What reductions in service levels have you up in arms?

Reposted from The Marketing Pad

Jeff Bowman is a Sales and Marketing Specialist with The Marketing Pad Inc.. Follow Jeff’s blog at Blogpad or visit www.themarketingpad.com.

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Customers know best, so engage them

By Ingo Koenig

Guess who knows best what customers dream of, need, and value? You guessed right; customers themselves.

So why not integrate them into the product development process? What is the use in first secretively developing what we think should be the newest gadget or, what is often called these days, “disruptive technology”; and then failing to communicate its value proposition to the target customers? Failing because we can’t really reach them through outbound marketing (i.e. shouting really loudly at someone, somewhere).

The best marketers and most innovative companies in the world already partner with their customers in product development. They literally let their customers do the creative part of new product’s development for them: finding really new customer benefits or experience. All that these intelligent companies have to do then, is design and build these ideas into technology that delivers this customer benefit. Ideally, when it’s ready to roll out, it can be announced at a single eagerly awaited event, like Steve Jobs presenting the products to a cheering crowd of unpaid product co-developers. This would generate enough outbound marketing to sell the product – good job!

Surprisingly, all this can be achieved without giving away any valuable intellectual property. What it needs is a step-by-step approach to engaging the customers.

Inbound marketing, social online networking and blogging help to create awareness, identify and then slowly engage interested and creative customers. These engaged individuals can then be directly addressed via email and invited to join the closed club of privileged customers allowed to help the company with new product development. A strong and fruitful relationship is created, boosting the customer’s status within the community, and keeping those precious product ideas flowing freely into the product development pipeline.  The best thing of all, is that it’s all been approved by the customers themselves, right from the beginning.

Ingo studied business administration and economics at Kiel University where he received a PhD in economic policy and also earned an MBA from the University of Southern California in Los Angeles, USA. Visit www.koenigconsultants.ca

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