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VALUE PROPOSITION CANVAS THE BUSINESS MODEL ANALYST 1

SUPER GUIDE: VALUE PROPOSITION CANVAS BY DANIEL PEREIRA 2

THE BUSINESS MODEL ANALYST The Business Model Analyst is a website dedicated to analyzing business model types, patterns, and innovation using the business model canvas as its primary tool. The site o ers a wide variety of free and premium content, including digital products such as PDF tools, presentations, spreadsheets, ebooks & guides, and much more. Check it out here. Daniel Pereira The Business Model Analyst Ottawa, ON, Canada businessmodelanalyst.com ff 3

TABLE OF CONTENTS Introduction 1 What is the Value Proposition Canvas? 2 The Two Sides of The Value Proposition Canvas Explained 3 Customer Pro le 4 Value Map 4 Why use the Value Proposition Canvas? 6 When to use the Value Proposition Canvas 8 How to Fill the Value Proposition Canvas - Step by Step Guide 10 Always Start with the Customer 10 Move on to the Value Proposition side 13 Additional Tips 16 Fit or Mis t 18 Value Proposition Canvas Examples 21 Tesla 21 Toyota 22 Airbnb 24 Harvard University Website 25 Apple Pay 26 Adidas x Parley 27 Tips for Using the Value Proposition Canvas 28 Advantages of value proposition canvas 29 Keeping direction 29 fi fi 4

Engaging customers 29 Marketing assertively 30 Why the value proposition canvas usage may be ine ective 31 Canvas distinction 31 Customer segments 31 Way of lling 31 Conclusion 32 References 33 About the Author 35 ff fi 5

INTRODUCTION Every day, companies around the world develop new products or services, with the aim of improving or at least making their consumers' lives easier. However, about 72% of these ideas fail simply because they don't meet customer expectations. This means that 7 out of 10 new products or services are not approved and adopted by a su cient public to remain in the market. The Value Proposition Canvas is a tool that allows entrepreneurs to test their idea before e ectively launching it on the market - and, thus, increase their chances of being among the approximately 30% embraced by the consumer public. ff ffi 1

WHAT IS THE VALUE PROPOSITION CANVAS? The Value Proposition Canvas is a tool that focuses on developing the customer, to make sure that the product or service is produced and positioned around their values and needs. It can be used to re ne an existing o ering or where a new one is developed from scratch. The more they know about their customer, the clearer the process becomes. The Value Proposition Canvas has been created by Alexander Osterwalder, Yves Pigneur and Alan Smith, the same authors of Business Model Canvas, in order to map the value perceived by the customers, by creating a t between the product and the market. For this to happen, Value Proposition Canvas explores more deeply these two (out of the nine) blocks from the Business Model Canvas: Customer Segment and Value Proposition. That is why the canvas is composed of Customer Pro le and Value Map. fi fi ff fi 2

THE TWO SIDES OF THE VALUE PROPOSITION CANVAS EXPLAINED The customer pro le/segment and the value proposition are the core of the business model because they focus on “What” and “To whom”. In short, how the company delivers value to its audience. The right side, the Customer Pro le, is divided into Customer Jobs, Pains, and Gains. On the left side, the Value Map is divided into Products & Services, Gain Creators, and Pain Relievers. fi fi 3

Customer Jobs This is about what your customer is trying to do. It must include all tasks customers are trying to perform, the problems they are trying to solve, and the needs they want to satisfy. It’s also important to note down the frequency and the importance of each job, and all the di erent roles the customer has to play, and in what contexts. The tasks may be: Functional (day by day tasks, problems at work, etc.); Social (get a promotion, gain status, have a network, etc.); Emotional (get in shape, feel good, feel motivated, etc.); Or basic needs (communication, sex, hygiene, etc.). --- Pains This one encompasses everything that annoys your customer while they are performing their jobs, such as negative experiences and emotions, challenges, risks involved, nancial costs, mistakes, and consequences, etc. It is important to classify each pain as severe or light and note down how often it takes place as well. Gains Gains are all the bene ts your customer expects or wishes – or even something that would surprise them positively. In other words, everything that delights them and makes their life easier or more successful. You may rank each gain by relevance and indicate the frequency of them. T VALUE MAP Products and Services That must include all the products and services you are going to deliver, identifying if it is tangible, digital/virtual or nancial; fi ff 4 fi fi CUSTOMER PROFILE

crucial or trivial; and how often it will be used by your customer. Gain creators De ne how the product/service o ers value, what are the bene ts your product brings, and if your customer’s wishes and expectations are met. After all, how it makes your customer happier. You ought to rank every gain your product or service creates according to relevance to your customers (if substantial or insigni cant) and indicate how often it occurs. Pain relievers Describe how your product/service relieves the customer’s pains. Identify if you reduce their costs, negative feelings, e orts, risks, negative consequences, mistakes. Anyhow, you make your customer feel and sleep better. As with the previous block, it’s important to rank each pain, according to its intensity, in order to be able to understand how deeply your product/service will help your customer. ff fi fi fi ff 5

WHY USE THE VALUE PROPOSITION CANVAS? The bene ts Value Proposition Canvas can bring to your business modeling include: Better customer pro ling This canvas is customer-centric, which means you begin developing the business from the customer's perspective. That will bring light to every aspect that will make you understand your customer better. The better you do it, the bigger the chances to create a product/service that meets customer’s expectations or desires. Value prioritization Since the canvas focuses on adding value to your customer’s life, you end up selecting value propositions that are really relevant to them, the most important components of your o ering able to make them motivated to take action, whether signing, acquiring, etc. Focus on the product The Value Proposition Canvas not only helps those who are beginning a new business or launching a new product but for the ones who need to update their processes and results, due to the fact that knowing your value proposition keeps your product moving in the right direction - and following your customers’ needs. fi fi ff 6

Context understanding Value propositions can change relevance according to the space, environment, and circumstances amongst where they take place. This canvas helps you to be more assertive around your customer’s situation. Right messaging As this canvas analyses your customer’s pains, gains, and needs, it is easier for you to determine the right message to attract your consumers and build your MVP. Product-market t Adjusting your value proposition in accordance with customer understanding enables you to more easily achieve productmarket t, which is, in very simple words, when the market is satis ed with the product. That prevents your company from spending time, money, and energy on a product or service that nobody wants. Fewer chances of failure With new ideas, it is easy to lose focus, and the developed product may not meet customer expectations. The Value Proposition Canvas stands for a visual guide, providing a targeted approach to a high-demand product. It will not stop failure, but can certainly reduce risks, especially when it comes to innovation and/or iteration. fi fi fi 7

WHEN TO USE THE VALUE PROPOSITION CANVAS When creating a new feature If you are going to develop a new feature for a product that is already in the market, you can bene t from Value Proposition Canvas since it helps you get to know your audience better, with their problems and wishes, so you can gure out if the new feature is going to meet their expectations. When entering a new market If you want to expand your business into a new market or even to embrace a new customer segment, you can use the canvas to check whether the market you want to approach really needs/wants your product/service. This can avoid unnecessary expenses. When testing product-market t Maybe the nest objective of the Value Proposition Canvas is to identify and understand the market, and, thus, develop a product/service this market wants to have. This match between customer and product is the product-market t, which will signi cantly reduce the risks of failure. When addressing your customer As you are going to learn what triggers your customer’s emotions you will be able to write e cient and motivational value propositions, giving them reasons to acquire your product or service. fi fi fi ffi fi fi fi 8

When re ning marketing strategy Sometimes you have more than one customer segment to approach, and you don’t realize and end up spending money and time using the same marketing strategy for di erent audiences. The Value Proposition Canvas helps you identify your customer segments through their pains, gains, and jobs. Once you have de ned them, you are able to develop one canvas for each segment, thus re ning your strategy and driving each audience properly. ff fi fi fi 9

HOW TO FILL THE VALUE PROPOSITION CANVAS - STEP BY STEP GUIDE ALWAYS START WITH THE CUSTOMER As you ought to focus on what the customer wants or needs, it is imperative that you start lling the Value Proposition Canvas with the Customer Pro le. The great challenge here is to think only about the customer, forgetting the solution you are trying to launch or rede ne. So, even though you may start with hypotheses and guesses, it is important that you later validate that information, through interviews or regular talking to your current clients. De ne the Customer Jobs Jobs, as mentioned above, encompass all the tasks and goals the customer wants to satisfy, whether functional, emotional, social, or basic needs. To unveil your customer’s jobs, you may ask yourself and your team: What can’t your customer live without? What tasks does your customer try to perform in their job? And what about their personal life? What functional regular problems is your customer trying to solve? What emotional needs (get in shape, feel good, feel motivated, etc.) does your customer want to satisfy? How does your customer want to be seen by others? --- fi fi fi fi 10

-- What do they need to do or have to be perceived that way? How does your customer want to feel and what do they need to feel this way? What goal does your customer want to accomplish? How do their goals change according to the contexts your customer is inserted in? Are there other problems that your customer is not aware of? Lay out the Customer Pains After listing all the jobs your customer wants or needs to have done, it is time to consider everything that may prevent them from getting there, all the things that they can directly or indirectly run into when trying to accomplish their tasks. The pains can be: Outcomes: unexpected bad results; Problems: frustrations and annoyances that harm customer experience; Characteristics: features that may not be appealing either visually or functionally clunky; Obstacles: things that prevent the customer from getting things done or slow them down; Risks: things that make the customer fears adopting a new product or service. -- To identify the pains, you may use these questions to help you out: What is too costly for your customer? (regarding time, cost, e ort, etc.) What makes your customer feel bad? (frustrations, disappointments, failures, physical pain, etc.) What are the main di culties and challenges your customer faces? (physical, intellectual or emotional limitations to do something, resistance, understanding certain situations, etc.) - ffi ff 11

How are current solutions leaving to be desired for your customer? (bad performance, much e ort, lack of functionality, defects, etc.) What are the negative consequences for your customer? (losses of power, status, money, time, trust, etc.) What risks is your customer afraid of? ( nancial, social, technical, etc.) What is keeping your customer awake at night? (concerns, challenges, debts, bad health, etc.) What are the most common mistakes your customer makes? (creating expectations, misunderstandings, errors in use, etc.) What is preventing your customer from adopting solutions? (investment, learning curve, resistance to changes, etc.). Uncover Customer Gains On the other side, besides having their pains relieved, your customer also expects or desires some bene ts when getting their jobs ful lled. Customer gains can be: Required: the minimum requirements that a customer expects from your product or service. Expected: what your product or service needs to be of value to a customer. Desired: he gains that a customer would love to have. Unexpected: innovations that create new ways of doing things and delight the customer. -- Moreover, gains are the keys to delight your customer and, to nd that out, you can follow some questions, such as: What kinds of savings would make your customer happy? (time, money, energy, etc.) What results does your customer expect, and which ones can mesmerize them? (quality level, pro ts and gains, savings and improvements, etc.) What current solutions enchant your customer, and how? (functionalities, performance, quality, etc.) - fi fi fi ff 12 fi fi -

- What can make your customer’s tasks easier? (lower learning curve, more services, lower costs, etc.) What positive consequences does your customer expect? (power, status, acknowledgment, satisfaction, motivation, etc.) What is your customer looking for? (design, guarantees, speci c features, functionality, etc.) How does your customer measure success and failure? (cost, performance, speed, quality, beauty, likes on social networks, etc.) What would increase the chances for your customer to adopt a solution? (lower investment, longer guarantee, better performance/quality/design, etc.) Di erentiate between Customer Pains and Gains It is important to highlight that Pains and Gains are not direct opposites. You may not write something in the Pains section just to write the contrary in Gains. For example, when your bus is late, that represents a pain, because it makes you get late to your appointments. However, the bus running on time does not mean a gain, because it is simply the way it is supposed to be. Gains are motivational and emotionally driven, it is the outcomes. Pains are function-driven – it is the obstacles and frustrations. Gains are harder than pains to nd, because you need to walk in the shoes of your customer to understand them. MOVE ON TO THE VALUE PROPOSITION SIDE Now, you must forget everything about the Customer Pro le side before starting to ll in the Value Map. That is to avoid adding elements in the value proposition that satisfy the customer but are not truly part of your solution. fi fi fi fi ff 13

One suggestion is to leave at least 24 hours between both sessions (left and right sides) so you can really leave the Customer Pro le behind. But, if that is not viable, just try to be as honest as possible. Outline the products and services Simply specify the products or services you are o ering. Remember to di erentiate if they are: Tangible: physical products that you sell; Intangible: services that support your product; Digital: products and/or services that are digital/virtual; Financial: products such as investment funds, insurance, and similar. --- List your Pain Relievers Describe how your product/service relieves your customer’s pains. Identify if you reduce their costs, negative feelings, e orts, risks, negative consequences, mistakes In short, how you make your customer feel and sleep better. To help you out, ask if your product/service: produces savings (in terms of time, money, e ort, etc.); makes your customer feel better (ends up with frustrations, discomforts, things that give headaches, etc.); performances solutions (new features, better performance, better quality, etc.); puts an end to the di culties and challenges your customer faces (make things easier, help accomplish tasks, eliminate resistance, etc.); eliminates social consequences that your customer encounters or is afraid of (losses of respect, admiration, power, con dence, status, etc.); eliminates risks that your customer fears ( nancial, social, technical risks, or anything else that can go very wrong); helps your customer sleep better at night (help with major problems, reduce worries, etc.); limits or eradicates common mistakes that your customer makes (errors of use, di culties of use, etc.) -- ff ff fi ffi ffi ff fi fi ff 14

- eliminates barriers that prevent your customer from adopting new solutions. List the Gain Creators Now, the gain creators involve how the product/service o ers the customer added value, what are the bene ts your product brings, and if your customer’s wishes and expectations are reached. After all, how it makes your customer happier. You may ask yourself: creates savings that make your customer happy (in terms of time, money, e ort, etc.); produces results that your customer expects or that goes beyond their expectations (better level of quality, more of something, less of another); copies or does better than current o erings that delight your customer (concerning speci c functionalities, performance, quality, etc.); makes your customer’s tasks or life easier (lower learning curve, better usability, accessibility, more built-in services, lower cost of ownership, etc.); creates positive social consequences desired by your customer (make it look good on tape, produce or increase power, status, etc.); does/has something the customer is looking for (good design, speci c or better functionalities, etc.); meets customers dreams (help on large goals, produce great relief, etc.); produces positive results that match criteria of success or failure (better performance, lower cost, etc.); makes adoption easier (reduce cost, lower investment, lower risk, higher quality, performance or design, etc.). - Ensure your t After having both sides of the canvas ful lled, it is time to analyze and measure the actual t between your customer’s needs and wishes and the value proposition you will o er ff ff fi fi ff fi fi ff fi fi 15

them. Gains Creators usually link to Customer Pains, whilst Pains Relievers link to Customer Gains. But have in mind: don’t expect to achieve 100% t between both sides. Real ts usually respond to 50-70% of a customer's jobs, pains, and gains. This means you have a clear message to deliver to your customer what they want. ADDITIONAL TIPS Before you start Choose a nice and comfortable environment to ll in the canvas with your team (not a meeting room), print the canvas on a big sheet of paper, or draw it on a big board (you can cut the canvas in two halves to separate the analyses), have a lot of sticky notes and markers, separate enough time for the process (at least, 45 minutes). Ask the right questions When you are adding jobs, pains, or gains, it is important to go deeper into them, understand why and how your customers feel that way. This understanding will help you know better your consumer audience, by unveiling other associated jobs, pains, and gains, besides the ones on the surface. Ask yourself the right questions to gure out what your customer really aspires to. After nishing Once you have lled out the Value Proposition Canvas, you must check out your work. Verify if you have mapped only one customer segment per canvas (you can’t have more than one segment in the same analysis); review if you have identi ed at least ve jobs, ve gains, and ve pains; check whether or not your pains relievers and gain creators address your customer’s pains and gains, and, nally, if your solution covers the gain creators and pain relievers your customer aims to. fi fi fi fi fi fi fi fi fi fi fi 16

Moreover, after reviewing your whole canvas, it is time to test your o er, by creating a prototype able to validate (or not) your assumptions. ff 17

FIT OR MISFIT As mentioned previously, the Value Proposition Canvas’s objective is to achieve product-market t, i.e., the match between what the market wants/needs and what your product/service is o ering. The more items from the right (Customer Pro le) match items from the left side (Value Map), the higher the possibility for your business to be successful. Let us see how this works in practice, with Nissan and Tesla compared examples. Customer Pro le: Jobs: personal mobility regular long-distance trips being di erent from others ---- Pains: insu cient number of charging points lack of luggage space slow charging Gains: durable battery lifetime brand recognition interior ergonomics fi fi ff fi ff ffi 18

Tesla’s Value Map: Products & services: Model S Model X Model 3 ---- Pain relievers: growing network of charging points developed interior ergonomics 75 minutes to charge 100% with supercharging stations Gain creators: 8 years battery warranty reputable brand self-driving option Nissan’s Value Map: Products & services: Leaf --- Pain relievers: best-selling electric car potential savings from tax credits and other incentives limited battery warranty Gain creators: advanced tech features numerous awards Fit: Tesla Tesla’s map meets more ts with the customer pro le. Because when driving a Tesla model, the customer will di er from other e-vehicles, since they are not so common on the streets, there are huge investments in the network of charging points, with supercharging stations that take only 75 ff fi fi 19

minutes to charge 100%, it is a reputable brand, which also develops interior ergonomics. Mis t: Nissan Nissan’s Leaf, as the most-selling electric car goes against the job of being di erent. The numerous awards contribute to making the brand recognizable, but the other pains and gains are not covered by its gain creators and pain relievers. ff fi 20

VALUE PROPOSITION CANVAS EXAMPLES TESLA Here, there is a t between Value Map and Customer Pro le. Jobs include commuting to work, but also feeling comfortable in long-distance travels, while being di erent, and conveying an image of success. Pains, as that comes to electric cars, involve not only nding charging stations but, moreover, getting to do it too often, and, if not possible, not reaching the destination. fi fi ff fi 21

Gains combine design, safe trips, and high-end battery technology with being recognized and complimented by friends. On the left side, we can see that Pain relievers provide a charging network and a reasonable autonomy to do so, and the gain creators focus on design, style, technology, and performance that will contribute to being admired by customer’s peers. On top of that, products and services o er 8 years of battery warranty. TOYOTA This rst Toyota example shows a mis t in the Value Proposition Canvas. Because the Customer Pro le is the same as Tesla’s, but the Value Map does not cover this segment. The pain relievers and gain creators do not t customer’s pains and gains. The solution presented is simply a Toyota car with a battery, and that is not what this customer ff fi fi fi fi 22

is looking for. Now this second example shows a t, because it is about another customer segment. This Customer Pro le is about a di erent man, with a smaller budget and focus on his family's safety and comfort. In this case, Toyota’s products and services cover his pains and gains, so there the t comes. fi fi fi ff 23

AIRBNB Airbnb was able to make a t in their Value Proposition Canvas. Their customer is someone looking for accomodation for a group, whose pains include nding the right place for the right price, deciding on too many available options, and, on the top of that, the risk of not receiving what you paid for. The company’s pain relievers o er lower prices by cutting middlemen, searching according to personal preferences, and also reviews of other visitors to solve the risk of fraud. fi ff fi 24

HARVARD UNIVERSITY WEBSITE Harvard's platform was designed to improve all of their students’ jobs. Their jobs include social, functional and emotional aspects: Social: communicate with faculty and peers, feel integrated into a larger university community; Functional: plan class and reading schedule on a day-today basis, keep up-to-date with course requirements, submit assignments on time; Emotional: feel comfortable and con dent. - These jobs are covered by Havard’s website’s products and services, since it o ers a peer-to-peer interaction tool (social and emotional needs), course dashboard, homework management tool, links to external sites, assignment alerts and submission (functional needs), and integrated calendar (functional, emotional and social needs). fi ff 25

APPLE PAY Here we have a great t as the solution is able to cover all the pains and most of the gains. Carrying cash, cards and wallets, theft and fraud, photo ID required, cards don’t read properly, credit/debit cards are insecure, and losing your wallet, cards and cash are all solved by using Apple Pay via an app. fi 26

fi ADIDAS X PARLEY In 2015, Adidas partnered the ecological organization Parley to produce sneakers made with recycled ocean plastic. The t in this Value Proposition Canvas takes place because: the jobs of looking good, being fashionable, standing out and the athletic performance are covered by apparel and shoes with attractive and functional design; the gains of belonging to an exclusive club and contributing to a better future are covered by the gain the gain creators of limited editions, ocean plastic storytelling and visible branding; and the pain of uncertain quality is covered by the pain reliever of 6-month warranty. - 27

TIPS FOR USING THE VALUE PROPOSITION CANVAS 1. Although each component of the Value Proposition Canvas is unique, they are all correlated. Each of them must be seen independently, to avoid “cheating”, but the nal solution needs to be what the customer desires, in order to build a successful business. 2. It has already been mentioned above, but that is not too much to repeat: each customer segment is distinct and must be analyzed separately on their own Customer Pro le. The biggest mistake here is to create an only Customer Pro le trying to encompass them all together. 3. Another common mistake - that also has been cited before - is to ll in the customer pro le thinking of the solution you want to o er. That will just create a false sensation that your business will work out. So, when you are building the customer pro le, forget about the value map, and try to only put yourself in your customer’s shoes. 4. Focus on social and emotional jobs. Functional jobs are the most obvious reasons to buy a solution. However, it does not provide the same feeling of satisfaction that social and emotional do. 5. And always remember: not all pains and gains can be covered by your solution. So, center your business on the topmost priorities when developing the product or service. fi fi fi fi ff fi fi 28

ADVANTAGES OF VALUE PROPOSITION CANVAS KEEPING DIRECTION When you are starting a new business, you may “fall in love” with your brand new idea and end up losing track of what really works about your business. And sometimes that can make you invest money, time and energy in a product that nobody is interested in. The Value Proposition Canvas will help you keep on track, by understanding your audience and its demand. Thus, you can build a solution that actually meets that demand, preventing money and time loss. 1. Which traditional factors of the industry should be eliminated? 2. Which ones can be reduced below the regular standard? 3. Which ones must be raised above the industry’s standard? 4. And which factors can be created and added to the industry, as never seen before? ENGAGING CUSTOMERS fi The engagement from your customer depends closely on how much you can understand your audience’s needs, wishes and expectations. The Value Proposition Canvas provides the opportunity to develop a product based essentially on what your consumer wants. By that, you can build a solution with speci c features that are able to attract and engage the customers. 29

MARKETING ASSERTIVELY Again, when you e ectively design your Customer Pro le, you will get to know where and how they nd worthy to spend their money with. With that in mind, you are able to develop an accurate marketing strategy, exploring the right message through the proper channels. fi fi ff 30

WHY THE VALUE PROPOSITION CANVAS USAGE MAY BE INEFFECTIVE CANVAS DISTINCTION The rst way to aw the Value Proposition Canvas is not to design it as two separate parts. Of course the tool is a whole, but the right and left side really must be lled in as independent components and, only after this process, have both sides analyzed together. CUSTOMER SEGMENTS The second way to aw this tool results is to mix all your customers segments into one single customer pro le. When you do it, you make it challenging (maybe impossible) to determine the top-priority jobs, pains, and gains. And that prevents you from building a nice t. WAY OF FILLING Yes, in this case, the order of factors does alter the result. You have to start from the right side in order to de ne what your customer wants and, next, o er a solution for their problems. If your start from the left, you will be beginning from the product, and the product cannot underst

When to use the Value Proposition Canvas 8 How to Fill the Value Proposition Canvas - Step by Step Guide 10 Always Start with the Customer 10 Move on to the Value Proposition side 13 Additional Tips 16 Fit or Misfit 18 Value Proposition Canvas Examples 21 Tesla 21 Toyota 22 Airbnb 24 Harvard University Website 25 Apple Pay 26

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