What’s Your Value Prop? Using customer insight to guide product and service development.
If you’ve seen “This is Spinal Tap,” you no doubt remember the scene where Nigel Tufnel (Christopher Guest) points out that the volume controls on his guitar amplifier “go up to 11” while all other bands’ amps go just to ten. When Marty diBergi (Rob Reiner), the director of the movie within the movie, asks why they don’t just make the “10” louder, Nigel, somewhat confused, replies “These go to eleven.” Looking at some of the new product and service ideas that companies test via market research, at least a few firms seem to think about value propositions in the same way that Nigel thinks about his volume controls.
I learned a long time ago that successful new products and services have these four things in common:
- The product or service delivers a benefit to the customer.
- The promised benefit is important to the customer.
- The customer believes that the product or service will deliver on this benefit promise.
- The product or service has to be a better value for the money than the alternatives.
A bit of clarification on this last point—the product or service does not have to be less expensive than alternatives but it does have to deliver perceivably more bang for the buck.
More recently, innovation thought leaders such as Clayton Christensen of Harvard Business School have shifted focus away from “features/benefits” thinking and to understanding the customers’ “jobs to be done” or the problems that consumers need to solve. Mark Johnson offers this formula for maximizing a customer value proposition in his 2010 book Seizing the White Space:
- Identify an important problem that customers are trying to solve and that is poorly addressed by currently available products or services.
- Develop a product or service that does a better job of solving the problem than the alternatives, at the lowest appropriate price.
We’ve tested many value propositions over the years and when they fail (either in research or in the market) it’s almost always because they did not satisfy one or more of these criteria (occasionally poor marketing execution will doom an otherwise good idea). For example, engineering-driven firms often start with improving their products on some technical performance attribute before determining if the improvement solves an important customer problem or completes an important customer job-to-be-done. When we put these “value propositions” to the test, we find that customers usually like the idea of the improvement but 1) don’t see it solving an important problem and 2) are not willing to pay for the improvement.
The firms that are most successful in creating and delivering new value propositions begin by understanding the relevant customer jobs-to-be-done. That often means conducting “deep dive” qualitative research into the customer’s world. This deep dive must satisfy the requirements of step 1 in Mark Johnson’s value prop formula by identifying important problems that are not addressed adequately by existing products or services. Once the right problem has been identified, small scale quantitative research might be conducted to find out how much customers are willing to pay for a better solution to the problem. Working from an understanding of the customer’s willingness to pay helps to focus design efforts on achieving the lowest appropriate cost. All too often firms “design to the benefit” and hope that customers will pay at least what it costs them to deliver that benefit.
It’s a truism in new product development that the way to make economic profit from new products is to keep bad ideas from progressing too far through the development process. The insight-driven value proposition formula allows us to evaluate ideas against these criteria at each stage of the NPD process and increases our chances of bringing successful new ideas to market.
– David Bakken, PhD, Chief Insight Officer