by Tony C. - Founder Coach | Nov 26, 2019 | Uncategorized
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.
Defining “Value”
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.
Summary
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
Examples
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.
by Tony C. - Founder Coach | Nov 7, 2019 | Uncategorized
I recently gave a presentation at GSVLabs on Effective Storytelling for Startups (a recording of the workshop is here). GSV Labs is an accelerator with offices in Silicon Valley and Boston and works with early stage founders to help them improve their odds of success.
The first part of the workshop was partially about redefining storytelling as something we do with practically everything we say and do. The clothes we wear, the words we use, our body language, the cars we drive, our tendencies to exaggerate, etc. In other words, we aren’t just telling stories in board meetings, at investor pitches, in our advertising, or when setting company culture. We are telling stories all the time.
What most people don’t take advantage of is their ability to manage the narrative. That’s partially because they don’t recognize the amount that they’re telling stories. It’s important to note that the stories you tell in aggregate form your “personal brand”. The stories you tell about your company create your corporate brand. And the combination of those two brands have a huge impact on things like:
- Your ability to raise investment capital
- You ability to recruit great people
- Your ability to form strategic partnerships
During the presentation I spoke about how you can instantly improve the quality and effectiveness of communications with a few storytelling tips. At the end of the presentation, someone asked what I thought was the most important part of great storytelling. And while there are lots of videos about storytelling that focus on how you “tell” a story, I realized that I thought the most important parts of storytelling happened BEFORE you actually tell the story.
When I’m coaching founders, I encourage them to consider a few things when creating a story (pitch decks, presentation, meeting, etc.). My top 4 pre-story considerations are:
- Who is your story for?
- What emotions do you want people to feel?
- What do you want people to take away?
- How can you help them see what you see?
I’m surprised at how often people don’t start with the impact of a story when crafting one. So I thought I’d write a quick piece to let you know how these things help.
Who is your story for?
Most stories are not universal. Stories affect different people in different ways. Have you ever gone to the movies with a friend and discovered that while you loved the movie, they hated it? Or can you imagine how commercials for a fast food burger joint are received very differently by a vegan versus a fast food lover? People hear your stories through different filters and mindsets. If you know what some of those filters are before you tell a story, it gives you the opportunity to decide whether the story is right for that audience as is, might be right for them with some adjustment, or just isn’t right for them at all.
Let’s use a fundraising pitch as an example. I sometimes see founders who are are at the seed stage trying to tell their story to Series A investors. It should be easy to see that this is not the right story to tell to this audience. And yet people try.
Another version might be someone that is pitching the right type and stage investor, but telling them the same story they use in their consumer advertising. Investors and customers have completely different concerns and motivations. In that instance, the founder should tell the “investor story”, which addresses things about the business prospects, not focused on the product benefits.
A third variation would be someone trying to pitch an investor on a product that focuses on a use case that the investor has no direct experience with and little empathy for. The question there is whether the founder can help the investor relate to the product or market be relating it to something that the investor is already familiar with. That’s why so many founders include analogies in their pitch. It’s an attempt to help the audience connect with something unfamiliar by comparing it to something familiar Another tactic is to use a case study and give the investor the perspective of a customer.
If your audience doesn’t relate to, care about, or understand your story, you won’t get the reaction you want. Craft a story that’s right for the audience you are telling your story to. I’m not suggesting that you lie or change facts, but rather that you be thoughtful about who would appreciate, understand, and be positively impacted by the words you choose to use and the picture those words create..
What emotions do you want people to feel?
When I say “positively impacted” in the section above, I mean a positive from the standpoint of the “hoped for” impact. Good stories can create an emotional response, enhance a pre-existing emotional state, or have no emotional impact at all. The question to consider in this case would be: what emotional responses are you hoping for?
In the case of a pitch presentation, you likely want the audience to feel a number of things. You’d want them to feel:
- Confidence in you as a founder
- Curiosity in wanting to learn more about what you do
- A sense of exhilaration about something new and exciting
- Belief that this is a strong potential investment opportunity
These may seem obvious, but when I am working with founders I see a lot of pitches that don’t do enough to try and create an emotional impact. Instead they’re focused on just presenting facts and figures. Large market numbers might be a good start in creating some good emotions, but if they are not the right numbers, the response you get might now be the one you want..
If your story is the story of your brand, what emotion or feeling do you want that brand to evoke? Volvo makes you think of safety. Tesla is sexy. What do you want your personal or company brand to make people think of? Should they be confident that you do what you say? Worried that you don’t care about certain things that are important to them? Thrilled that your corporate values seem to align with their personal values?
I know I’m using feelings and emotions as the same thing here. And while they aren’t the same, they are intertwined. How do you want your stories to make people feel? With early stage founders, if your brand doesn’t suggest confidence (not cockiness), investors aren’t likely to feel confident in your potential for success.
What do you want people to take away?
Take aways are another thing. What do you want people to remember from your presentation? What would you like them to do or want to do? This is important because if you can decide what you want people to take away from your story, it becomes easy to look at your story, presentation, or pitch and decide what information in the story doesn’t support your takeaway goal.
With some of my Founder Coaching clients, one of the big issues they start with is not having enough time to cram all of the things they want to say into the amount of time that they have to say it. They want to cram 30 minutes of story into a 10 minute window. More often than not, when we start looking at the story and look at the intended takeaways, it’s easy to see that a lot of the story content has nothing to do with the takeaways.
The issue with that is that the audience’s brains have limited storage capacity. Generally speaking, they will only remember a fraction of what you include in your story. If you dilute your story with a lot of words that don’t support your intended takeaway, there is a good chance that your takeaways will get muted. Think about a glass of your favorite drink (pick something other than water). That drink is your story with a focused goal of takeaways and emotional responses. Now imagine that each additional thing you add to the presentation is adding water into the glass. Each drop dilutes what you get from that drink. The same dilution happens when you add non-essentials to your story.
How can you help them see what you see?
I covered this one a little bit in the section about audience, but there is a special case that deserves its own section.
Founders are creators. They are the parents of a bouncing baby business that is going to grow up and conquer the world. They are proud of what they are building and see their business from a place of unadulterated love and excitement.
Some founders (clearly not you), fail to imagine that outsiders don’t implicitly know the same things they know. Sometimes the audience doesn’t “get it”. Some of those times, it’s because you didn’t tell them something they needed to know so they would “get it”. Something that sits in your head and seems so obvious to you that you think you don’t need to include it in the story. When I sit down with founders, I often hear great insights and information that somehow didn’t get into the pitch. When I ask why, it’s usually because the founder just assumed that “everyone knows that”. If your story hinges on key information, don’t assume that everyone knows that info.
Remember when you couldn’t see the typos in your term paper and needed someone else to put “fresh eyes” on it and help you see what you couldn’t? Founders should speak with people unrelated to their business and discover what people need to see to share their excitement..
And this doesn’t just go for pitches. This applies to all stories. When you tell someone about something that “John at the office” did today, ask yourself if you’ve given them enough context about John to understand and appreciate the story. Is John your boss, friend, company jerk, new hire, etc.? People don’t always know what you know. Make sure that the things they need to know are in the story. Context and insight are key.
The End
The fact is that good storytelling takes more than a single blog post to teach. But whether you work with a storytelling coach or not, I will say with some certainty that if you are mindful about the things mentioned above and make a few tweaks to all of your stories, you’ll start to see how storytelling should be a tool in every founder’s arsenal.
Before I go, I have to pay homage to one of the great founder/storytellers, Steve Jobs. He understood the power of stories to affect hearts and minds. Here is a video of his iPod launch in 2001. Clearly the man knew what he was trying to achieve. There’s no reason you can’t do the same.
