Value Propositions and Your Business Model

The second step in creating your Business Model Canvas is to identify your value proposition.

What is a value proposition? Simply put, a value proposition is a collection of products and services a business offers to meet the needs of its customers that helps to differentiate it from its competitors.

For example, several manufacturers offer basketball shoes. However, playing basketball requires that the shoe fit tightly and provide good ankle support. To that end, Nike designed a shoe with small air chambers and a pump built into the tongue so that once the shoe was laced up the player could use the pump to fill the air chambers and create a much tighter fit. In the end, Nike created a new product with a unique value proposition for a specific customer segment.

When completing the value proposition for your Business Model Canvas, you need to look at the specific customer segment and answer the following questions:

  • What value do you deliver to the customer?
  • Which one of your customers’ problems are you helping to solve?
  • What bundles of products or services are you offering to each customer segment?
  • Which customer needs are you satisfying?

The value proposition may be quantitative in nature such as lower price or higher efficiency or qualitative in nature such as providing an overall better customer experience or outcome.

Some specific examples of a value proposition you might provide as part of your differentiation might include better performance (as is the case with many new cars), the ability to customize the solution to their specific needs (as is the case with many software applications), improved usability (such as error catching), a better design (as with the Dyson vacuum), and a host of others.

Do you have a clear picture of your value proposition for each of your customer segments?

Next post in the series: Channels

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