Business Model Canvas - Building Blocks - 02 - Value Propositions

Value Proposition = Bundle of Products / Services / Benefits which satisfies the needs of a specific customer segment.

Value Proposition is what attracts customers towards a company.
It is the reason for loyalty shift of customers.
Value Proposition is the solution to customers problem.

Value Proposition maybe:

• Innovative and Disruptive in terms of offerings to customers.
• Value addition to existing offerings in the market like: additional features and attributes.

Values maybe:
Quantitative: Price , Speed of Service
Qualitative: Design, Customer Experience


Questions to ask while thinking about value Propositions:

• What value is being delivered to the customer?
• Which particular customer problem are we addressing?
• Which needs of the customer are we fulfilling?
• What Bundle of Products is being offered by us to each Customer Segment?

Handy Tips for that can contribute to customer value creation:

1. Newness
• Satisfy entirely new set of needs. Not always Technology
• Example: Technology: Cell Phones
• Example: Non-Technology: Ethical Investment Funds
  
2. Performance
• Most common way to create value
• Example: PC sector - new machines more powerful than previous ones.
• It has limits: faster PCs, more disk storage, better graphics have failed to produce growth in demand.
  
3. Customization
• Tailoring products to suit customer (individual / segment) needs creates value.
• Mass Customization and Customer co-creation have gained importance.
4. "Getting the Job Done"
• Simply by helping certain jobs of customer to be done.
• Example: Airline customers rely entirely on Rolls-Royce to manufacture and service their jet engines. This arrangement allows the customer to focus on running their airlines. Rolls Royce is paid for every hour the engine runs.
  
5. Design
• Difficult to measure Design.
  
• A product may stand out due to superior design.
• Example: Fashion and Consumer Electronics.
  
6. Brand / Status
• Simple act of using and displaying specific brands.
• Example: Wearing a Rolex.
  
7. Price
• Similar value offered at lower price - meets the need of price-sensitive customer segments.
• Example: Reliance Jio, Air Deccan
• Example: Tata Nano - makes automobile affordable to a whole new segment of Indian population.
  
8. Cost Reduction
• Help customers to reduce their costs.
• Example: salesforce.com sells a hosted CRM application. Relieves operating and maintenance costs for customers.
  
9. Risk Reduction
• Customers value reducing the risks
• Example: One year guarantee for used car buyers reduces the risk of post purchase breakdowns.
  
10. Accessibility
• Making products / services available to customer segments who previously lacked them - creates value.
• This is result of: BusinessConvenience / Usability Model Innovation, Technology , Both
• Example: Mutual Funds - made it possible even for those with modest wealth to build diversified investment portfolios.
  
11. Convenience / Usability
• Make things convinient / easier to use - creates value.
• Example: iPod and iTunes - apple offered customers unprecedented convenience searching, buying, downloading and listening to digital music.
  

Slack - Value Proposition Canvas: