What Is a Value Proposition?—Business Basics

This article is an excerpt from the Shortform book guide to "Business Model Generation" by Alexander Osterwalder and Yves Pigneur. Shortform has the world's best summaries and analyses of books you should be reading.

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What exactly is a value proposition? Why is it important to provide unique value to your customers?

As the name suggests, your business’s value proposition is the value you provide to your customers in the form of products or services. When defining your value proposition, consider the nature of your product/service and how it is different from your competitors’ products/services. If you’re servicing the same customers, with the same needs, at the same price, you are not providing unique value.

Here are some things to consider as you define how you intend to offer value to your customers.

Defining Your Value Proposition

Your business’s value proposition outlines the benefits you intend to provide in the form of products and services. The authors state that successful value offers align with the needs of your customers and differentiate themselves from existing solutions.

When creating your value offer, consider these questions:

  • Do you intend to disrupt the market with an innovative value offer, or do you intend to improve upon what’s already out there?
  • What specific value do you intend to deliver to the customer?
  • How will you adapt your value offer for each of your customer groups?
  • What makes your value offer more appealing than that of your competitors?

(Shortform note: Osterwalder and Pigneur’s Value Proposition Design delves further into the topic of creating, testing, and improving your value offer.)

Businesses often associate value creation with competition—they assume that they need to offer something that outperforms and displaces what’s currently on the market. However, Sesame Street, life coaching, and Viagra all prove that it’s possible to create innovative products and services without disrupting existing markets. Instead, the businesses behind these products and services bypass competition by focusing on creating demand in entirely new marketplaces.

Communicating Your Value Proposition

Creating a story centered around the value that your business offers, from the perspective of either an employee or customer, will enable you to engage your listeners and effectively communicate your business’s value proposition. You can create multiple stories for different customer groups your business intends to target.

Marketing expert and author of Purple Cow, Seth Godin, argues that businesses can’t overcome resistance unless they create and frame their stories from the perspective of each audience they target. In other words, to effectively engage and resonate with your listeners, you need to recognize that each audience you address has different priorities. For example, your team cares about how your business model will affect their jobs, whereas your investors care about how they’ll profit from your business model.

What Is a Value Proposition?—Business Basics

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Darya Sinusoid

Darya’s love for reading started with fantasy novels (The LOTR trilogy is still her all-time-favorite). Growing up, however, she found herself transitioning to non-fiction, psychological, and self-help books. She has a degree in Psychology and a deep passion for the subject. She likes reading research-informed books that distill the workings of the human brain/mind/consciousness and thinking of ways to apply the insights to her own life. Some of her favorites include Thinking, Fast and Slow, How We Decide, and The Wisdom of the Enneagram.

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