What value proposition really means?
Insights and cases to understand the concept.
In 2011, Google+ was launched as Google’s attempt to create a social networking platform to compete with Facebook. However, its value proposition was unclear. Google+ lacked a distinctive feature that set it apart, and users were often confused about why they should use it instead of other social media platforms already well established. Despite heavy promotion, Google+ failed to gain significant traction and was eventually shut down in 2019.
In 2012, The Google Glass was launched as a wearable technology with an integrated heads-up display. While the concept and technology were innovative, there were privacy concerns and its value proposition was unclear to consumers. It was marketed as a hands-free smartphone, but people didn’t fully understand its purpose or how it could fit into their daily lives. Despite the initial hype, Google Glass failed to gain widespread adoption and was eventually discontinued in 2015.
In 2011, J.C. Penney, a department store chain, attempted to rebrand itself by adopting an “everyday low prices” strategy, eliminating sales and discounts. The value proposition was confusing to consumers who were used to the classic bargain-hunting experience. After a significant drop in customers loyalty and sales, the company reverted back to its pricing and promotional strategies.
Those are examples of promising ideas that generated products that failed due to a poor value proposition. Google+ did not differentiate from other products, Google Glass did not addressed a relevant problem, and J.C. Penney did not understand what customers valued about the brand.
What exactly is a value proposition?
The concept of value proposition is often associated to an statement summarizing what your business, product, or service does. However we must draw a distinction between what is called a "value proposition statement” — which is a catchy phrase used to market the benefits or value offered by brand, product or service — an the the idea of value proposition as guiding principle, that goes beyond your marketing strategy to drive your whole business offering, including your business model, your products and services, and your overall customers experience.
Because this is such a abstract and multifaceted concept, I decided to dedicate a post to explore this topic, bringing some of my personal experience working in the field, research on the subject, and some iconic product cases that illustrate core aspects behind this idea.
Value proposition is about benefits, not features.
It is easy to be led to think about your product in terms of its features and how they perform. The feature is one of the multiple ways a problem can be solved or a need can be attend. As stated by Martin Cagan in the article called “The Top 12 product management mistakes and how to avoid them”:
The product’s value proposition speaks to the benefits, not the features.
Your product simply must have a crystal clear, simple and compelling value
proposition. Your target market must be deeply understood, and the people in that market must perceive that your product solves a real problem.
Becoming overly attached to your product features can blind your vision for completely new approached to solve your customer's needs.
Case 1 - Blockbuster X Netflix
When Blockbuster started, its business model was compelling and clear: enabling consumers to watch hit movies in the comfort of their homes. The company established an extensive network of stores conveniently located on every corner, and it quickly grew to have over 5,000 retail outlets and 60,000 employees. It also had a smart financing model that allowed the company to rent movies at an attractive prices to customers, while paying very little to no upfront fees due to a revenue sharing model agreed with the Studios. In 2002 Blockbuster’s market value rose to $5 billion, and in 2010 the company filed for bankruptcy. So what happened?
Blockbuster was so invested in their current business model, that didn’t see the emergence of DVD as a disruptive technology or a threat to their business model.
Netflix didn’t invent any new technology. DVD optical disc storage technology had already been invented. What Netflix invented was a new business model.
Netflix created a business model based on new value proposition: watch unlimited movies for a fixed monthly price, at the comfort of your home, without due dates, late fees or shipping and handling fees. By focusing on its value proposition Netflix aggressively tested with technology to evolve its business and operating model. For instance, the first business model was based only on renting DVDs by email with plans varying according to number of titles order at a time. When the streaming technology emerged, the company tested to bundle streaming as a new product offering within its current business model. With streaming becoming a more competitive technology, the company was split in two business units — Netflix and Qwikster. Netflix would focus exclusively in the streaming business. Soon after this shift, Netflix grew massively year over year to become one of the most relevant players in the online entertainment industry.
Case 2 — Airbnb's focus on value proposition
I was an earlier adopter of Airbnb’s service and followed up on its product’s evolution and introduction of new features.
The image above is a print screen from Airbnb’s website, taken a few years ago. It highlights Airbnb value’s proposition, both for traveler and home owners, in two words: trust and safety.
I few years back, I did a map to study the correlation between Airbnb's product's features and it's value proposition. Most of the features, at that time, would bring benefits that would reinforce Airbnb's value proposition as shown in the diagram above. In my view, this was one of the main reasons as to why the company was able to successfully create a product that disrupted the hospitality industry.
Value proposition is more than a catchy phrase.
Having a simple statement is a great way to validate if the value you provide to your customer is easy and simple to communicate. This can also serve as a great pitch for a new product idea to investors. Nevertheless, the value proposition is more than that: it must be an integral part of your business model, bran, and customer experience. And all those elements must also align around your value proposition and consistently communicate the same message in different ways.
For instance Apple communicates core elements of its value proposition — Simple, Elegant, Intuitive, and Seamless Design — through its product minimalist design concept, heavy focus on user's experience and interface design, and the development of a proprietary ecosystem in which software and hardware peripherals can easily work together.
Value proposition is a cost X benefit relationship.
A value proposition always involves a cost-benefit relationship in the consumers’ minds.
It’s about how much customers are willing to invest to have something or solve a problem through your product or service. The perceived value of your product can increase or decrease depending on how these two dimensions are balanced. For example, in markets with many competing products, you can offer the same for less and compete on price, create a completely new way to fulfill a need and thus shift the balance of value.
Case 3 — Cirque du Soleil: a case of value innovation
The Cirque du Soleil is a great example of a company that deeply changed the customer's perception of value and the relationship between cost and benefit. By ditching costly animal acts, streamlining setups, and enhancing artistic performances, they reduced expenses significantly. Their modular sets and standardized acts made the production scalable, reaching audiences globally. Simultaneously, by elevating the show’s emotional depth, adding engaging narratives, and creating visually stunning experiences, Cirque du Soleil made their performances not just entertaining but profoundly moving.
This strategic blend of reducing costs, enhancing scalability, and amplifying audience appeal exemplifies the concept of value innovation, which is the central concept in the Blue Ocean Strategy, a book written by W. Chan Kim and Renée Mauborgne. It refers to the strategy of simultaneously pursuing differentiation and low cost to break free from competition and achieve growth in untapped markets.
Cirque du Soleil's value proposition triggered interest from an audience willing to pay a Premim price for a Cirque du Soleil show. They altered both variables — perceived value and price — which allowed the company to sell tickets at higher prices, while transforming the circus into an engaging, entertaining, and unforgettable spectacle enjoyed by millions worldwide
Case 4 —The failure of Apple's iPhone 5C
Another example of a change in the relationship cost-benefit can be observed in the case of the iPhone 5C. Apple sought to alter both sides of the cost-benefit balance. They created a simpler and less sophisticated model, using plastic materials, and offering it to the market at a more affordable price. It seems reasonable to think that this would be a success and that the company would capture a large portion of a consumer base that was not previously served by the company. However, this audience does not see the same value in the Apple brand as their traditional customer base, and opted by competing products even cheaper than the iPhone 5C. The value proposition of this product simply was not aligned with the Apple brand’s value proposition, as stated by Steve Jobs:
Value proposition is simple and compelling.
Your value proposition needs to be simple: the benefit must be easy to understand and the message must be compelling.
For instance, Airbnb, make its message compelling, by exploring the emotional aspect of it's value proposition. In the image below the company highlights in its product homepage the connection between two opposite universal feelings: being away (traveling), and being at home (by staying at someone's home through Airbnb).
Case 3 — Dyson: from complex to compelling value proposition
Another iconic story about the power of a compelling and simple message is the story of Dyson’s vacuum cleaner.
Dyson had a groundbreaking technology, they had the quality, but they were missing something crucial — a compelling way to convey the value of their products. For years, they touted their technological prowess. They boasted about engineering excellence and advanced features. Yet, sales didn’t quite take off as expected.
But then, a shift in mindset happened. They decided to rethink their approach. Instead of leading with technology, they decided to focus on the problem their product solved. It was a simple change, yet it would alter the trajectory of their business forever.
The new message was revolutionary: “No Need for Replacing the Dust Bag.” This was more than a statement; it was a solution to a problem people faced every day. Imagine not having to deal with the hassle of constantly buying and changing vacuum cleaner bags. It resonated deeply with consumers who were tired of the old way of doing things.
It wasn’t about technology anymore; it was about making their lives easier. And that made all the difference.
Final words
As you may have noticed, there is no single answer for the question: What value proposition really mean? However, I expect that this post can help you see the concept from multiple perspectives and reflect about the value proposition of your company, brand, and products or services. Are you addressing a relevant problem? Are you differentiating your offering from the competition? Is your message clear, compelling and relatable to your customers’ needs and feelings?
If your product’s worth isn’t evident within a minute of explanation, it’s time to reassess either its actual value proposition or your messaging strategy.
Remember, simplicity and relevance are the bridges to a successful product journey. That might be the simplest answer!
References:
Cagan, M. Top 12 Product Management mistakes and how to avoid them — 2005, Silicon Valley Group (online)
Browlee, J. Why The iPhone 5c Flopped — Feb 2014, The culf of Mac (online)
Stähler, P, The offer is only one building block to fulfill the value proposition — June 2015 — Business Model Innovation (online)
Kaplan, S. How not to get “Netflixed” — Oct 2011, Fortune Magazine (online)
Kim, C. & Mauborgne, R. The Blue Ocean Strategy: How to create uncontested market space and make competition irrelevant. Jan 2015 — Harvard Business Review Press.
