Value Proposition7:05 with Pasan Premaratne
The value proposition is the core of our business model - the product or service we're selling. In this video we're going to look at what what value we deliver to our customers and what needs or wants we're satisfying.
In our last video, we decided to start by exploring our value proposition. 0:00 What is a value proposition? 0:05 It's pretty simple, actually. 0:07 It's the meat and potatoes of our business idea, our product or our service. 0:08 A company can have many value propositions, 0:14 each with its own business models. 0:16 Take Amazon. 0:18 Their retail store is one value proposition. 0:19 Their web services are another. 0:22 Kindle, yet another. 0:24 Streaming movies and TV, you get the picture. 0:26 To clearly define or 0:29 communicate our value proposition to others, let's answer a few questions. 0:30 First up, [SOUND] what value do we deliver to our customer segments? 0:35 Let's go back to my hypothetical idea. 0:39 My biggest issue, looking at some of the existing solutions, 0:42 is that it's either too complicated or too simple. 0:45 There are lots of great feature in individual products, but 0:48 none of them have the perfect combination. 0:51 For example, Trello is great. 0:53 It's simple to use right out of the box and if you've used a whiteboard and 0:56 marker, Trello makes sense immediately. 0:59 I think it could do with a few more power features though, 1:02 like sub-tasks or sub-carts. 1:04 Asana, another product, handles this really well. 1:07 Sometimes, a task has an extra step or 1:11 two that doesn't merit it being in its own list or section. 1:13 Another thing I like is OmniFocus' sequential and parallel tasks. 1:17 If a task can't be completed because it's being blocked by another task, 1:22 I'd like the software to tell me. 1:25 Back to our question. 1:27 The value I deliver to my customers is a project management software that serves 1:28 small teams by offering them simple software with power features that 1:33 larger teams get. 1:37 I'm fairly certain there's a large market for 1:39 this because I've had these discussions with quite a few different people. 1:41 Businesses fail unless they solve real problems or 1:46 unless they satisfy a particular need or want. 1:49 The next question we should ask [SOUND] ourselves is, 1:52 what problem are we solving for our customers? 1:55 If we're not solving a problem per se, the relevant question is, 1:58 [SOUND] what customer needs or wants are we satisfying? 2:02 Project management tools solve a huge problem in general and 2:05 we won't have any trouble advertising that. 2:08 But to focus in, 2:11 we're going to alleviate problems that are experienced by smaller teams. 2:12 I recently advised a friend's small business and encouraged them to get some 2:16 project management software in place and recommended a few different products. 2:20 He found that the learning curve was a bit too high for him. 2:25 I want to eliminate that and create a much simpler experience. 2:28 You can develop your value proposition by listing out the features you think will 2:32 convince customers, but an alternative method would be to write out user stories. 2:36 Let's apply this to my example. 2:41 Project management software currently on the market isn't all that great for 2:44 small teams or really small businesses. 2:47 They spend more time learning about the product and 2:50 fighting it, rather than letting it become a tool in their workflow. 2:53 The power features are either too complex and 2:56 the pared down versions are way too simple. 2:59 Using my software, small business will be able to break down large projects into 3:02 tasks split across various groups, individuals, or teams. 3:06 They can reduce project delays and 3:11 improve efficiency by clearly underlying dependencies. 3:13 They can also provide high level views of projects or tasks within a team or for 3:17 each individual, similar to a Gantt chart. 3:22 As oversimplified as that example sound, 3:24 writing it in terms of our user stories allows us to think about how to frame it 3:27 from a customer's perspective, by solving the problems that they face. 3:31 This allows us to explain our value proposition more clearly and 3:36 drives the direction of the product or service instead of a list of features. 3:39 Your idea does not always have to be unique. 3:44 There are many ways your value proposition can appeal to your customers and 3:46 it can be through either qualitative or quantitative means. 3:50 [SOUND] Let's look at some of the different types of value propositions. 3:53 Your value proposition can satisfy needs that customers didn't even think they had. 3:57 [SOUND] The Business Model Canvas folks called this [SOUND] newness. 4:02 This value proposition applies to new technologies or 4:06 products like the iPhone or the iPad. 4:09 Value can be delivered by upgrading existing products or services. 4:12 This type of value proposition is based on [SOUND] performance. 4:17 Car makers offer this type of value proposition. 4:20 It's not like cars are completely reinvented every year. 4:23 They improve the technology slightly and release a new product. 4:27 A better example perhaps is a mobile operating system update, 4:31 value through increased performance. 4:35 [SOUND] Convenience or usability. 4:36 Taking existing solutions and making things more convenient and easy to use. 4:39 When Apple made the iPhone, they didn't reinvent the wheel. 4:45 They took a bunch of existing technologies like GPS, 4:48 mobile internet, cell phone cameras and they put it all in one easy to use device. 4:51 Now, you can also provide value through [SOUND] design. 4:57 I didn't realize a thermostat could be a cool product until Nest reinvented it 5:00 to be a much better designed product that allowed customers to 5:04 really control the temperature in their homes. 5:07 The big fashion houses around the world that are synonymous with 5:10 luxury offer the value proposition of [SOUND] branding to provide status. 5:14 Think in terms of Burberry, Gucci, Armani, and so on. 5:18 One of the most common types of value proposition is price. 5:22 You can frame your product or service around constantly low prices, 5:26 like WalMart, or build it around exorbitantly high prices, 5:30 like Rolex, in combination with your brand. 5:34 Those were just a few categories. 5:37 There are many different types of value propositions and 5:39 understanding which category you fall in to will help you think about how 5:42 other companies in your category frame their message to their customers and 5:46 how they operate their businesses. 5:50 The type of value proposition will help you frame other sections of 5:52 the business model as well. 5:55 For example, if your value proposition is new, 5:57 you will need to define your customer segments more carefully. 6:00 Spend more time on your customer relationships since there may be a lot of 6:03 problems early on. 6:07 And if you provide value through upgrades, your marketing strategy needs to 6:08 be focused around convincing people to purchase from you again. 6:12 Most often, value will be created through a mix of these elements. 6:16 My project management software will focus on convenience by building 6:20 a project solely for small teams in new businesses, and 6:24 on usability by removing some of the complexity in existing solutions. 6:28 So let's recap. 6:32 A business' [SOUND] value proposition is a product or 6:33 service through which we offer value to our customer. 6:36 We [SOUND] create this value by solving a problem for the customer or 6:40 by satisfying a need or a want. 6:44 This is very important. 6:46 Finally, [SOUND] our value proposition can be a mix of different elements, 6:48 including newness, performance, convenience, design, and so on. 6:53 See, that wasn't so hard. 6:57 Now I have a better picture of what my value proposition looks like and 6:59 I can move on to the next segment. 7:03
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