Who values your Value Proposition?
A value proposition tells people why they would buy your product, yet a lot of startups have value propositions that are met with little, if any, enthusiasm. This post should help you look critically at your value prop and see if it has the right ingredients.
Each year, CB Insights publishes a research brief called “The Top 20 Reasons Startups Fail”. And each year, the #1 reason is “No market need” (42%). You might wonder how it is that there is no market need for products and services that are clearly better than legacy products, faster than legacy products, and cheaper than legacy products?
Generally speaking, the answer is: because the product wasn’t created with a real understanding of a particular customer. That may sound like an oversimplification, but hear me out.
A big part of my coaching work with founders is about helping them see what’s holding them back. And because founder coaching is about both the founder and the company, I help them surface what is holding their company back as well. I recently wrote a blog article about how Founder Bias was one of the things that held companies back. In that article, I spoke about why customers might not be interested in your product. Your value proposition, when done correctly, focuses on why they would be interested.
I started this piece talking about the necessary ingredients of value props. If you Google: “definition of a value proposition”, you get a pretty wide range of answers. Some of the definitions that I like the most are:
- “A value proposition refers to the value a company promises to deliver to customers should they choose to buy their product.” Investopedia
- “Your value proposition should describe; how your product or service solves/improves problems, what benefits customers can expect, and why customers should buy from you over your competitors.” Impact
- “Value Propositions are the products and services that create value for a specific Customer Segment. They do so by solving a customer problem or satisfying a customer need.” E-Commerce Digest
I like those particular definitions because they include clues to the “necessary ingredients” that I mentioned earlier as being part of great value propositions. Each of these definitions include the words “value” and “customers”. I see a ton of startups that either don’t understand “value” or don’t understand their customers. Value is what people pay for, not features. Customers are the folks that make the purchase decision.
The first thing you need to understand is that value, like beauty, is subjective. Two people can be presented with the same set of product benefits and have two wildly different perceptions of the value of a product. Among other things that means that you can’t generally create a product or service that has “universal appeal” and by extension, universal value.
The second thing to know is that generic benefits don’t necessarily correlate to a person’s perception of value. Value is a personal calculation. It’s a net of a lot of different things and that calculation is different for different people. One’s perception of value is a primary driver of what someone would be willing to pay for something. And what people are willing to pay for your product or service is a critical component of your business model.
The calculation that I mentioned isn’t always numeric, it’s quick and intuitive. “Will this product add more value for me than the cost of adopting the product?” “Does this product improve my life in a meaningful way?” “How often will I use this?”
So if value is based on “personal” perception and an individual’s specific net calculation, you can see that a great value proposition has to start with a specific set of individuals in mind: your target audience. Your value prop should start with a strong idea about who needs your product. So when we talk about the “pain point” or the “problem”, you need to have given some thought to who exactly has the problem you are seeking to solve. This might seem obvious, but you might be surprised how many founders assume too broad a target audience.
- Good startups start with a thesis about who would really value their product.
- Better startups validate that their original guess was correct.
- Great startups dig deep into the motivations and worldviews of this set of potential customers to understand what they would see as valuable.
What about not-good startups? Those startups start with a product. They get wrapped up in the bells and whistles, the features and capabilities, and the “cool factor”. Bad startups think about the customer last. They build the tool and then go around looking for people that might want the tool. They work hard at trying to convince or persuade potential customers that their product has value. If you need to do much persuading that your product has value, your product might not have the value you think it does, or you are trying to sell to the wrong person.
As a startup, you should always start with a strong need and knowing exactly who has that need. That way, you don’t have to persuade them that they need a solution, you just need to let them know why you should be the solution they select.
Theorize your initial ideal customer
So how do you create an effective value proposition? Start by thinking about a specific group of people that are experiencing a certain use case and would love to improve their situation by a meaningful amount. In other words, find a group of people who care about a current use case outcome and are ready to make a change.
I emphasize “change” because that often gets missed by founders. The fact is that adopting your product requires a change of some sort. Humans don’t especially like change. We’re creatures of habit. We change when we think that the personal value of the improved outcome is worth the risk or the switching pain.
Personal value is different from generic value. For example, if I made a “better” running shoe, the word better doesn’t mean the same thing to all people. To some, better means more comfortable. To others, it might mean more breathable. To still others, it might mean that it helps you run faster. So your “better” shoe might not be better to me. You need to start with a group that aligns with your idea of “better.”
The value to any customer is going to be outcome focused. For example, the product will get them to their destination quicker, or make it easy to coordinate all of the transportation and housing for a vacation, or help them get investor funding in half the time. The value won’t be centered around features or the mechanics.
Don’t stress about whether you will initially guess right about who the best customer is. A lot of startups either misidentify the target audience or the problem, or both. If you pay attention and iterate, there should be time to adjust. The key here is at least having a starting customer in mind that you can build assumptions for and that you and do customer development interviews with.
Don’t be married to your starting assumptions
Your value proposition is likely to evolve over time. It could even evolve the moment you start having conversations with your target customers or seeing how they interact with your product. What matters is that you start with a theory and validate your assumptions as quickly as possible. Your initial thinking might be wrong about the ideal customer, wrong about the perceived value, or both. If customers are not as excited as you expected about your product, it’s likely due to a mismatch in their perception of value and yours.
Also keep in mind that, in addition to showing value to your target clients, the best value propositions include strong value relative to other products and solutions. After all, the target buyer has 3 choices:
- Stick with their current solution
- Switch to someone else’s product
- Switch to your product
Lastly, be clear and simple. Although your value proposition will be targeted to a particular audience, anyone should be able to understand it. Use short, simple sentences. Don’t use big words or jargon or try to make it sound overly professional. And don’t exaggerate or use hyperbole. I see startups that make unsupported claims or overstate their value. As a startup, it is vital that you deliver the value you promise.
Having a strong value proposition has lots of obvious benefits, but it can also serve to make sure that your entire company is focused on exactly how you deliver value to your customers. A well crafted value proposition will impact all of the departments in your company and help you to establish your place in the market.
A great value proposition will:
- State clearly what you do
- Be created with a particular user in mind and be based on what they would see as valuable
- Be short and simple. Value propositions don’t include jargon or buzzwords.
- Show not just absolute value, but show value relative to other options in the market
- Be a work in progress that will evolve as your users, your market, and your competitors evolve
To finish, I wanted to show 10 company value props done right. Enjoy!
Slack: Slack gives your team the power and alignment you need to do your best work.
AirBNB: Top rated, unique experiences around the world
Uber (for drivers): Get in the driver’s seat and get paid
Uber (for riders): Tap the app, gt a ride
Unbounce: Create custom landing pages with Unbounce that convert more visitors than any website—no coding required.
Stripe: Stripe is the best software platform for running an internet business. We handle billions of dollars every year for forward-thinking businesses around the world.
Zapier: Easy automation for busy people. Zapier moves info between your web apps automatically, so you can focus on your most important work.
Spotify: Music for everyone. Millions of songs. No credit card needed.
Asana: Asana is the work management platform teams use to stay focused on the goals, projects, and daily tasks that grow business.
Dollar Shave Club (clearly evolved): A top-shelf grooming routine. Personalized for you.
MailChimp: Our all‑in‑one Marketing Platform gives you the tools to find the right customers, build your audience, and bring your brand to life.