Value Proposition Canvas - How to develop products that your customers love

The Value Proposition Canvas (VPC) is a powerful tool that you can use to systematically work on your value proposition. As a supplement to the Business Model Canvas, the VPC is central to customer-centric product development. An important aspect of this is the development and testing of your business idea to assess its viability, scalability and innovation potential. Today you will find out how to work with the VPC and what you should bear in mind - including a download link for the VPC.

What is a value proposition?

Let's start with the basics first: A "value proposition" describes the benefits and value that a product or service offers customers. It answers the question of why customers should buy a certain product and what problems it solves for them. A strong value proposition communicates clearly and convincingly what added value the offer provides and why it is relevant for customers.

A good value proposition sets you apart from the competition and creates a differentiating factor that makes customers choose your offer. It is effective if you specifically address the customer's needs, wishes and challenges and tailor your offers to them in order to convince them that your product or service is the best solution for their requirements.

Was ist das Value Proposition Canvas?

The Value Proposition Canvas is a tool for systematically developing and analyzing a company's value proposition. It was developed by Alexander Osterwalder and is used to define and improve the value proposition of a product or service. The aim is to achieve a "problem-solution fit", i.e. a tailor-made solution for the customer's needs.

A key component of this is the creation of a precise and comprehensive customer profile in order to understand the specific needs, challenges and wishes of the target customer segment.

‍

Source: https://www.strategyzer.com/canvas/value-proposition-canvas

The VPC consists of two main components:

• Profile of your customers or your segment (right)
• Value proposition of your product (left)

You can also use the VPC as a "plug-in" for the Business Model Canvas, as it describes the Customer Segment and Value Proposition fields in more detail.

Here* you can find a short video from Strategyzer, Alexander Osterwalder's company, which briefly introduces you to the canvas.

How do you use the Value Proposition Canvas?

Now the question naturally arises as to how you should fill out the VPC in order to really benefit from it. It's important to identify the tasks (customer jobs), i.e. the specific tasks and activities that your customers need to complete in order to achieve certain results. Thomas shows you how it works in today's video.

Right-hand side: The customer profile (customer segment)

The right-hand side of the VPC is dedicated to customer segments. This is where you identify and analyze a target or customer group. Your aim is to develop a deep understanding of the needs, wishes, challenges and behaviorsof the target groups.

Thomas, it is important that you really only use a canvas for one customer group. If you have several customer groups, use several canvases. If necessary, you can also work with different Post-it colors, but this quickly becomes confusing. Especially if you work with digital tools such as Miro or Mural, it is advisable to simply create a separate canvas for each potential target group.

‍

‍

Source: https://www.strategyzer.com/canvas/value-proposition-canvas(excerpt)‍

Now let's take a closer look at the elements on the right-hand side:

• Customer jobs: Here you identify the customer's main tasks or goals that they want to accomplish. What needs do they have? What challenges are they focusing on? The term "job" comes from the terminology of the job-to-be-done framework. Always ask yourself what the customer wants to achieve at the end of the day(finished story benefit).
• Pains (pain points): In this section, you note the obstacles, frustrations, fears or risks that customers are currently facing. What problems or difficulties do they have when using current products? What fears and concerns are there when using current solutions?
• Gains: Here you describe the goals, wishes, expectations or benefits that customers want to achieve. The German translation "Gewinne" is not very accurate. It's more about what the expectations are and which dimensions are perceived positively - for example, fast delivery time, environmental friendliness or faster turnaround time. What positive results or benefits are customers hoping for?

On the right-hand side of the canvas, you analyze the specific customer segment in detail in order to better understand their needs and challenges. This knowledge is crucial so that you can later develop a precisely tailored value proposition for the segment.

Left side: The value proposition

The left-hand side of the value proposition canvas deals with the value proposition itself that a company offers its customers. You can use these unique features, advantages and added values of your product or service to define and communicate your offer.

‍

Source: https://www.strategyzer.com/canvas/value-proposition-canvas(excerpt)‍

The left side of the canvas consists of the following elements:

• Products and services: This is where you describe the specific products or services that your company offers. Note the features, functions or characteristics they have.
• Gain Creators (unique selling points): In this section, you list the specific benefits (gains) that customers receive from using the offering. Determine how the product or service helps to fulfill the customer's goals, wishes or expectations and achieve positive results.
• Pain relievers: Based on the problems or pain points addressed in the customer segment on the right, list here how your offering alleviates or solves them. Make it clear how the product or service reduces or eliminates the customer's obstacles, frustrations or fears. The pain relievers should be relatively clearly assigned to the pains on the right-hand side.

On the left-hand side of the canvas, you can formulate the value proposition of your offer clearly and convincingly. It helps you to emphasize the unique value and convince customers that you offer the best solution for their needs.

Problem-solution fit: Tailor your value proposition to your customer segment

If your value proposition specifically addresses the needs of your customers, you will achieve a problem-solution fit. This means that your products and services successfully tackle your customers' jobs and challenges and offer them tangible benefits.

This means for the Value Proposition Canvas:

• that you address a customer segment with the right products and a suitable value proposition
• and the left side (your product) fits the customer's goals and challenges.

To determine whether you have achieved a problem-solution fit, you need to interact with your customers. You should be able to get a concrete commitment from your customers for your product. Ideally, this is money, but it can also be letters of intent, lots of email addresses or similar.

Value Proposition Canvas: Application and example

In the video linked above, Thomas uses video recording software as an example to describe how the VPC works in practice. He starts with the question: "Where can we find the existing solutions on the value proposition canvas? The answer: nowhere, actually." They are hidden in fields around the value proposition of your own product on the left-hand side. For video recording, there are OBS, Loom or QuickTime, for example. Keep in mind:

"There is virtually no product that doesn't have a competitor. You always have a certain competitive situation - this can also be non-consumption.

From the perspective of a potential customer for video recording software, Thomas considers what is good or bad about the solutions he is currently using and fills the Gains and Pains on the right-hand side of the VPC customer page. He likes the split screen function in OBS, for example. What bothers him, however, is that the program is resource-intensive. This is where customer interviews help you to really understand what advantages and disadvantages customers see.

In these customer interviews, you should also ask what the customer wants to achieve in the end. This will tell you what the customer's job or goal is - for the third field on the right-hand side of the customer page. Thomas wants to record good videos, for example.

Now it's time for the value proposition of your new product - the large field on the left in the VPC. You should derive the pain relievers directly from the pains identified on the customer side. For each pain point, there should ultimately be a pain reliever that solves the problem. New video recording software for Thomas should therefore consume few resources, which can be achieved with a new architecture, for example.

In addition to the improvement points of current solutions, you then consider what additional benefits (gain creators) your new product should have. Which feature can you and your team develop particularly well or offer additionally? What can you do better than the market?

Use these key points to get to the heart of your value proposition and define your product before you start developing it. This will save you unnecessary work and increase your chances of success.

‍

5 most common mistakes when using the Value Proposition Canvas

Basically, the VPC is simple and easy to use. However, Thomas has discovered a few stumbling blocks in the course of his career that you will probably also face. In another video, he already talked about 5 hacks, which we will appropriately revisit here.

1. only 1 customer segment per canvas

Segmentation is a crucial step in VPC. Depending on the customer segment, you need a value proposition that fits the specific needs of these customers. If you consider several segments in one canvas, it will either be overloaded with information or your value proposition will be diluted and no longer customer-specific. What's more, there is never just one segment in a market. So take the time to spread your ideas across different segments in order to gain valuable insights.

Here are two examples of what your value proposition canvas should not look like. They are completely overloaded and several segments have been combined in one canvas:

‍

It is better to create a separate canvas for each segment. That way you can work out the differences. In the example below, we have chosen customer segments with different levels of knowledge for a start-up:

‍

Use the following definition for a customer segment:

A customer segment is a consistent group of people who are in the same situation and have the same task (challenge).

This makes it clear that segmentation is more than just demographic data. Focus on understanding the situations your customers are in when they consider buying your product. This situation is often the driving force behind their purchase decision. To do this, you also need to know what the specific task or desired outcome is that they want to achieve. Otherwise, you will develop the product around the customer's wishes.

‍

2. Job-to-be-Done (JTBD) has a hierarchy

The question about the customer job is another important step in VPC: What do your customers want to achieve? What is the task? What goal are they pursuing? There are more obvious and less obvious answers.

As in the following example image, you could simply answer that customers want to drill a hole in the wall with a drill. That's obvious. However, if you then ask why, you will get different answers. Some want to hang a picture, others a shelf and others a wall light. By asking why again, you might find out that this group of people want to beautify their home.

‍

So be aware that customer jobs (JTBD) have several hierarchies. Each time you ask why , you move up a level and get to know your target group and their wishes better. This knowledge makes it easier for you to develop a tailor-made value proposition and product.

Thomas also points out that innovative ideas often come from developers asking "Why?" more than the competition.

‍

3. use the hidden fields on the value proposition canvas

Be aware that customers have several options for satisfying their needs and finding solutions. This is especially true if your product or service competes with existing alternatives. Examine the different solutions in boxes that you can draw around your value proposition on the left-hand side .

In the following picture, we did this once for the Product Masterclass. Training courses for product managers are not only available from us. We are aware that there are also books, conferences, coaching and other resources from potential competitors.

‍

By exploring these hidden solution areas, you can identify gaps and opportunities to differentiate your offering.

4. the Pains & Gains are part of a solution

Existing solutions offer valuable insights into the problems and benefits that your customers experience. So analyze their advantages and disadvantages carefully. This will ultimately give you a competitive advantage.

Let's stick with our previous example: What are the Pains and Gains of the Product Masterclass alternatives? Books can provide valuable knowledge, but they also require a significant time investment to read, digest and apply the tips in practice. At conferences, you can make contacts, but as a participant, you may find it difficult to put the knowledge imparted into practice afterwards.

‍

So get to know the pain points and benefits of your competitors' products. This will allow you to create a value proposition that effectively meets your customers' needs.

5. customer interviews are the basis for the value proposition

Structured interviews are essential for gaining customer insights and confirming your assumptions. Proceed as follows:

• Start the conversation by filtering out users from the practice who have experienced the problem you are trying to solve.
• Then ask open-ended questions that explore the trigger for seeking a solution, the specific problem they had, the desired outcome and any challenges they encountered.
• Then discuss the solution they are currently using. What do they like or dislike? What improvements would customers like to see?

With a well-structured interview approach, you can gather valuable information to refine your value proposition.

You can learn more about our approach to structured JTBD customer interviews in this recently published article.

How to get started with the value proposition canvas

So far, we've talked a lot about how the VPC works, how you use it and what pitfalls you should be aware of. The solution sounds simple, but it is very effective and applicable to everyone. There's just one question left: where do you start?

In our experience, it is easiest to start with a single customer and ask about their goals, problems and challenges in detail and capture them on the value proposition canvas.

Focusing on a single customer to learn how to use the VPC has many advantages:

• Elimination of discussions: Working with individual clients eliminates any debate or uncertainty about what they really want. By interacting directly with individual clients, you gain accurate insights into their requirements without having to rely on assumptions.
• Clarity on gains and pains: With individual customers, you can clearly recognize the positive and negative perspectives. For example, a customer might see speed as an advantage (gain), while they see slowness as a pain point (pain). This clarity makes it easier for you to solve problems in a targeted manner and create added value.
• Concrete customer focus: By mapping individual customers on the canvas, you develop a tangible representation of the target group. These individual customers become the focus of the analysis, which leads you to more specific and personalized solutions.

Once you have created a value proposition canvas for individual customers, you can consider whether they are representative of a larger customer segment . Consider whether there are other customers who have similar goals, problems and challenges. If so, you can expand the VPC to include the characteristics of the entire segment.

The most important facts in brief

• The value proposition is the key component of your business model. It is therefore essential, especially for new products and services.
• The value proposition canvas is very widespread and virtually the standard for systematically developing your value proposition.
• Because this tool is so widely used, it helps you and your team as a communication tool to develop a common understanding of the value proposition within the team and in your company.
• We start most projects with our customers with the Value Proposition Canvas - and it is also an integral part of the Product Masterclass.

You are also welcome to send us your VPC for a free review (in the form of a YouTube video) to hallo@product-masterclass.com! That way we can learn together.