What is value proposition?
Developing an effective value proposition is an essential part of business development. It helps you communicate why your product or service will be valuable to potential customers, investors, and other stakeholders. The value proposition is usually the first thing a customer hears about a company or product and communicates the value of this specific offering.
A value proposition is a statement communicating the benefits a product or service will offer to target customers or users. It should catch your customers’ attention, win them and even gain their loyalty.
Before determining a value proposition, it is important to research your target market to understand who they are and what they are looking for in a product/service like yours. The information to gather here includes their values, firmographic data, psychographic data, demographic data, behavioural characteristics, and the challenges they are currently experiencing, with their desired benefits. These answers can be found on competitor product reviews, social media forums, case studies, interviewing subject matter experts, product and software review sites, and more.
You will then use this data to develop the ideal customer persona to which you can tailor the value proposition.
How is your product better or different?
Product differentiation is the trick to being successful. It’s not just about making a product better than your competitors but also differentiating yourself by what you are not offering. You can communicate your unique value proposition in a variety of ways, including the product itself (its features, design, and technical details), how the product is packaged (orders of magnitude more important for physical products) or how you promote (the language used in your marketing copy and website). The right combination of these factors can make or break a company or brand.
An essential part of a value proposition is the unique selling point or feature(s) that sets your product/service apart. Potential customers will compare your offering to existing, similar alternatives, so you’ll need to convince them that you are better.
Competitor research is a great way to understand existing solutions that you are up against. It can take the form of installing free trials, signing up for newsletters and marketing campaigns, and even checking out their websites.
After gathering the competitors’ data, then answer the following questions. Answering these questions will help you introduce a feature or set of features that will establish your product’s unique selling point (USP). This will help you to identify and scope out a niche market for yourself and to attain a competitive advantage over other offerings.
- What is the gap in solving the customer’s needs or pains? Why is that gap important to customers? What value will customers get when this gap is closed?
- What do you do better than the competitors? What are you good at, or what do you have that will make you address the gap in the market in a way that no one else can, and in a way that would be hard to copy?
- Is there room for innovation? That could be removing or adding some of the features from existing alternatives, solving a different pain, and targeting a different market.
Effective value proposition
Value propositions should be clear and concise, clearly communicating why customers should choose you over the competition. Remember thatcustomers have very short attention spans due to the sheer number of options and amount of information that the internet provides. Therefore, the value proposition should present a powerful argument the first time customers come across your product or service.
The value proposition definition process starts by answering the following key questions:
- Why would customers want to use my product instead of the existing alternatives?
- What benefits do you offer that users may not find elsewhere?
- What are your product or service’s distinct values and measurable benefits?
You should combine the answers to the questions above into a clear, concise statement that tells your target customers what you offer and why you are different.
An effective value proposition should:
- Lead to attracting the right customers as defined by your customer research.
- Differentiate your product/service from competitors.
- Make a strong first impression, catch customers’ attention and win them.
What next after setting a value proposition?
You can put together several value proposition statements and then test them out with different target customer groups. Your product website and social media are great places to conduct value proposition A/B testing to learn which one has the most impact.