Define Market Value Proposition “ a start-up is an idea searching for a business model “

1. The Value Proposition Builder
Dr. Celen P.Paul

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Introduction

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Define Market Value Proposition
“ a start-up is an idea searching for a business model “
• Definition:
• A value proposition is a statement of the functional, emotional
and self-expressive benefits delivered by the proposed solution
that provide value to the target customer.
•
• A value proposition is a clear, simple statement in 1 sentence and in
simple words :
“ WHAT do we offer to WHOM and what is his BENEFIT / VALUE “
• The key to generate profitable business
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Define Market Value Proposition
“ a start-up is an idea searching for a business model “
• Key components / questions:
• What you offer and how you offer it to customers
• What type of value or benefit is associated with your offering
• How much of it the customer can expect
• How the value is generated
• Why it differs from anything else on the market
• Key components :
• Relevancy : what & who / where is the (urgent) need / pain
• Quantified value : benefit / gain / cost vrs risk /
• Unique differentiation: why would customer buy from us
• Value ?
•Why do we buy things ? Why do we buy things ? Why does he want to buy from ME / US. How to
describe the “ urgent “ NEED
• List 15 to 20 business values you derive from buying or doing things. e.g. cost savings, time savings,
revenue increase, customer / employee satisfaction, emotions,…
• Then create a short list that most accurately describes the value your product offers your customers
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Difference B2C-Sales B2B-Sales
•Decision Making : Emotional Rational
•Value : Latent Overt / Objective

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Example : Google‘s Value Proposition
Bad :
• Google uses a patented page-ranking algorithm to make money
through ad placement
Good one :
• Google is the world‘s largest search engine that allows internet
users to find relevant information quickly and easily.
Expanded one :
• Google is the world‘s largest search engine that automatically
provides advertisers with potential customers tailored to the
ad content, increasing click-thorugh and conversion rates

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• The components of a good
•Value Proposition

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Value Proposition Builder ( Barnes,et al. 2009 )
1. Market :
• who wants /needs to buy from us
• Where is the urgent NEED / low hanging
fruits
2. Value experience :
3. Offering : WHAT ??
4. Benefits : f ( NC, NP, EM )
5. Differentiation :
• Uniqueness
• Aaa
6. PoC : Proof of Concept
7. Test market concept :
• Interview
• Analyse / Adapt
• Iterate
• Example : iPda - steve jobs 7x

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The Value Proposition Builder™ is a
six-step iterative process.
1. First, you need to decide who to talk to. This means analysing and identifying the MARKET segments,
or specific clients, or target individuals within those clients for whom your solution has the potential to
deliver Value, profitably.
2. Next, analyze and define the VALUE EXPERIENCE that clients get from your organisation from its
current activities. You need to define good, bad and neutral experiences, but what will really make a
difference are those experiential outcomes that have the power of “Wow!”
3. Then, (re)-define the OFFERINGS mix capable of leveraging your proven Value Experience with the
defined target Market group. Fix your first MVP !
4. When you have done this, you are in a position to assess the BENEFITS of the Offerings in the context
of the Value Experience you are able to deliver to the Market group. There is a cost component of
benefits here which includes Price and Customer Risks, enabling the calculation of Value where
Value = Benefits – Cost.
5. You are then able to go on to work out how that provides ALTERNATIVES & DIFFERENTIATION for
your organisation … Please include a competitive analysis or positioning in the VALUE Chain
6. … and back it all up with relevant, substantiated, measurable PROOF. The PoC ! ( Proof of Concept )
Crucially, each element and each step MUST be viewed through the filter of responses already generated.
Iterative Process !!
So, for example, the Value Experience for a particular situation will be related to specific Market segment(s)
or client(s) identified in a Market. Then, the Offering is analysed in terms of the identified Value Experience
related to the specific Market segment. And so on. By so doing, you are forced to focus and drill down in
ever more specific terms.

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The components of a good VP
1. Market Positioning
Composing the correct product / Market mix
( Ansoff)

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Positioning : questions to ask
• Start is a hypothesis :
• What is my idea ? What is my proposal ?
• Do not suffer from the „ engeneer-syndrom „
• Questions to ask :
• Who is your target customer? Who is my potential buyer ? (IDEAL CUSTOMER
PROFILE module )
• What kind of problem do you solve for them? Is this an important problem for
this customer? Is it an urgent problem? Where is “ Low Hanging Fruit” ?
• How do you plan to solve this problem for the customer? What type of benefits
will it generate.
• Position your solution : here is the process in steps
1. Find out the „ Demand type „ - it will define/ influence the business model
2. Find out in what phase of the technology transfer your market and potential
buyers are ( Chasm-principle ) or the PLC-cycle of your market
3. Summarize a viable MVP, test it and start proposing it to the early adapters

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Positioning : 1. Demand Type
• Definition of Demand. An economic principle that describes a customer's desire/NEED and
willingness to pay a price for a specific good or service. Holding all other factors constant, the
price of a good or service increases as its demand increases and vice versa.
• Why important ?
• Because yr TOTAL „GTM- / Marketing & Sales plan“ will depend on it
• It will tell you : who to contact, at what org-level, what message to deliver, how to deliver /
style and what probable stage of the buying cycle ( Buyers Journey)
• Types Of Demand
• Steve Blank : ??? incomplete - confusing
• New Market / Existing Market / Redefine Existing Market ( Niche / Low-Cost entrant )
• Sirius Decisions

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MVP Whole Product
2. Technology Adoption Life Cycle

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2. Technology Adoption Life Cycle
where and how to sell
Name % Type Character
Sales :
Place / Message
Innovators
3
Technology
enthusiast
Central interest / Curious
Pleasure of exploring new
• Trade shows
• Great Technology
Early
adopters 12 Visionaries
Buy new concept early
Not technologists
First to get the new stuff
• Congress, Trade shows
• You can be the first
• Beat yr competition
Early
majority 35 Pragmatists
Strong sense of practicality
Need PoC(oncept)
• Meetings, Office
• ROI, efficiency, save $$
• Case studies, examples
Late
majority
35 Conservatives
Wait until something has
become an established
standard
Not comfortable with technology
• Awareness Campaigns
• References
Hopefully you prepared yr exit
Laggards
15 Conservatives
Don’t want anything to do with
new technology Just do nothing

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Crossing Chasm
Why is the Chasm / Gap there ?
• These 2 groups have not the same expectancy
• Visionaires go for a personal win
• Pragmatists want a company win, a productivity
improvement : ROI
• Interviewing will give DIFFERENT answers for each group
Technology Adoption Life cycle
• Develop in parallel : MVP & Whole Product
• Product for early adapters to survive and gathering
knowledge
• „Wole Product“ for achieving cash cow ( partners / allies )
Pricing / Business Models
• Visionaries: value-based pricing
• Pragmatists: competition-based pricing
• Conservatives: cost-based pricing

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MVP versus „Whole product“
Minimum Viable Product ( MVP )
A Minimum Viable Product is the smallest feature set that lets you start learning about customers.
Don't confuse your MVP with a minimal product. Your MVP needs to address your top customer problems and deliver on your Unique Value
Proposition.
Objective Details Step-by-Step Process
Define the minimum
feature set needed
to solve your top 1-3
problems.
For each of the problems outlined earlier, sketch out
the top features or capabilities that will address those
problems.
• Outline a possible solution for each problem
• Don't spend too much time detailing
• These features will form the basis for your Minimum Viable
Product

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Create +Test the MVP
Describe the key aspects of your MVP for which you are currently seeking
market feedback.
Answer the following questions after testing the MVP.
• Is our understanding of the customer problem accurate and relevant?
• Does the MVP solve the customer’s problem?
• Does the product solve the problem better than a viable alternative currently
on the market?
• Would they use the product? Can they imagine the product as part of their
everyday life?
• What is their primary concern about buying and implementing the product?
• How much would they be willing to pay for the product?
• What process would the customer employ when deciding to buy such a
product?
• Who is involved in the decision-making process?
• Whose budget will the funding come from?
• Who will be the users of the product?

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The components of a good VP
2. Target Market - WHO ?
Composing the correct product / Market mix
( Ansoff)

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WHO ? : Market segmentation definitions
• Market Segmentation is the sub-dividing of customers into
homogenous sub-set of customers where any sub-set may conceivably
selected as market target to be reached with distinct Marketing Mix –
Philip Kotler
• Market segmentation is the process of dividing the whole market of
goods or services in groups of people with similar needs. By making
this division there is a high chance that each group responds in favour
to a specific market strategy. - PPC

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WHO ? = Target segmentation
• Market Segmentation:
• Dividing a market into distinct groups with distinct
needs, characteristics, or behavior who might
require separate products or marketing mixes.
• Target Market
• Consists of a set of buyers who share common
needs or characteristics that the company decides
to serve
• Evaluating Market Segments
• Segment size and growth
• Segment structural attractiveness
• Level of competition
• Substitute products
• Power of buyers
• Powerful suppliers
• Company objectives and resources

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Seven Steps to Successful Segmentation
for Startups
• Step 1: Determine where you really are within the startup life
cycle. Relative position in chasm / demand type
• Step 2: Create as broad idea of an addressable market and then
break it down in to all possible sub-segments. Use CSF’s and
MPRS
• Step 3: Create customers profiles for all remaining sub-
segments. Use problem/Need search process
• Step 4: Assess profiles again critical flaws criteria and eliminate
those that fail
• Step 5: Assess remaining profiles against selection variables
continuously until top segment remains. Define Beachhead…
• Step 6: Test target segment against SWOT and performance
goals
• Step 7: If no segment apparent, repeat process

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Ideal Customer ??

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The components of a good VP
3. Value

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Value and Value Perception
„ Give a man a fish and you feed him for a day.
Teach a man to fish and you feed him for a lifetime „
- old Chinese proverb

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Value Proposition
Difference B2C-Sales B2B-Sales
• Decision Making Emotional Rational
• Value Latent Overt
Key components :
A value proposition is a clear
statement
• Relevancy : what & who
• Quantified value
• Unique differentiation
= ONE sentence

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Uniqueness
This requires to differentiate the offer against competition.
How to become the preferred choice of the target market ?
1. Evaluate the following :
• Match competitor in all but one.
• In at least one element of value you need to excel.
• Value proposition for company and for product separate
2. Uniqueness Scale :
• Rate the quality and uniqueness
• Use a 1-5 scale to rate
• Outcome must be better than 3
3.Value Proposition Evaluation Matrix
• Total must be more then 2
Score Value Market
size
Compete Barrier of
Entry
1 limited small heavy low
2 substantial medium limited extensive
3 strong medium heavy low
4 unique large low extensive
5 unique large exclusive extensive
Desire / NEED
Rank 0 1 2
Exclusivity
0 0 0 0
1 0 1 2
2 0 2 4

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Perceived Value
• Perceived Value = ( Impact – Cost ) / RISK
o Impact =
 The emotional & analytical end-state vision of the buyer
 Real benefits vrs Perceived ones
o Cost =
 the cost of everything that must be purchased, allocated or incurred to realize that
goal
 Including the change/pain and adaptation of all internal processes
o Risk = discounted by various factors that could derail benefit realization or
create buyer uncertainty
● Valuable conversations are timely, relevant and in context
o Timely =
 Phasing. Where in their problem solving processare they ?
 Where on a maturity chart are they ?
o Relevant =
 what are the customer's problems ? How do they solve them ?
o In context =
 who is involved in solving problem ?
 Why do they care ?

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Value Perception matrix (Forrester )
1. Keep it simple -
2. Buyer requires different configurations or
solutions /large portfolio
3. Buyer has problem that needs sophisticated
knowledge transfer to solve
4. complex
1
3
2
4
1
2 4
3

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Porter Value Chain
Internal Value Chain useful to:
• layout cost building
• Vulnarability against competition
• Position in external value chain
External Value Chain useful to:
• Understand back- & forward
integration
• Understand competition, players
• Contribute 5-forces analysis
Important notice !
As a start-up you should not be too worried about competition, but be
aware of external value chain.

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Porter 5 - Forces

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Example : internal value chain

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Example : external value chain

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The components of a good VP
4. Result

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Once you’ve clarified your value proposition,
you can use it in your:
• Voicemails
• Email messages
• Conversations
• Presentations
• Proposals
In short, in every customer interaction.
The key word is
OUTCOMES!

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The best ones include
these 3 components:
So what makes
a value proposition
powerful & effective?
• Business driver
• Movement
• Metrics

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Tips
• A business driver is related to an important objective that your prospects are
measured on. The best business drivers are very specific. Being specific makes
you stand out from your competitors. Here are some examples…
• Profitability Cost of goods sold Productivity Revenue Costs
• Speed to market Customer satisfaction Quality Returns Reviews
• New clients Market Share Competitive advantage Turnaround time
• Because people only change if a new option is better than the status quo and
can positively impact their key business drivers.
• “Movement” words like these belong in value propositions:
Eliminate Speed Up Raise Minimize Decrease Cut Shrink Increase
Maximize
• Metrics : Strong Value Propositions Have Metrics Too
Dollars/Euros Time frames Percentages
To your prospects,
19.7% is much more
believable than 20%.

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The components of a good VP
5. Validate with Test & Interviews

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Prepare to talk to customers
• What are the key political, regulatory, economic, environmental,
social, cultural and technological trends that affect the space
you are in?
• What are the key issues facing customers in this space?
• Who are the key stakeholders?
• Who are the analyst firms, analysts, journalists, bloggers and
conference presenters that talk about relevant issues and
technology?
• What are the main conferences and events?
• What are the main media outlets that keep people informed
about the industry and its technology?
• Prepare your list of questions and issues to address in your
customer meeting / talk / interview

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Understand Customer Problem and Need
• What problem causes the pain or frustration? Sketch a scenario in which the
customer attempts a task and feels pain as a result.
• How does the customer try to cope with the problem now?
• What is causing the problem? What is interfering with a speedy solution? What
goes wrong and why?
• How much money is the customer losing, either in additional costs or lost
revenue? Quantify the pain.
• Who is the individual who feels the pain first and how does it “waterfall” up or
down?
• Who else feels the pain? The customer’s customers? Suppliers? Partners?
Investors?
Think
Plan
ExecuteAnalyse
Adapt
Phase 1
Test customers /
prospect‘s perception
• of the problem and
• his urgency / need to
solve it

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Initial Approach : Search not execute
a structured process for testing business model hypothesis
Think
Plan
ExecuteAnalyse
Adapt
Think
Plan
ExecuteAnalyse
Adapt
Understand Customer
Problem and Need
Develop Validate
Develop Sustainable
Business Model
Adaptive
Learning
When not enough paying customers
GTM
?

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Evaluate market feedback
• Is the market problem urgent? Will customers care if
the problem is not solved? Do they have another
way to solve this problem?
• Is the market problem pervasive? Determine if the
identified market problem applies to a significant
percentage of your desired target market.
• Will your buyers pay to have this problem solved?
• On the basis of the answers to the above questions,
which direction should you take?

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Update your problem statement
Write a brief description of the specific problem your
target customers face, as well as the impact of the
problem and its pervasiveness. Include the following
information:
• The objective of their work: What are they trying to
achieve?
• How they perform their work
• The problem they face
• How the problem impacts their objective

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Describe your product vision
Write a statement that describes your product vision,
which identifies one or more of the following:
• Your target customers and their problem
• The product solution you are making
• How the user goes about their job and will use the
product solution
• Customer outcomes and benefits
• Three- and five-year scenarios for your product and
company

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The components of a good VP
5. Use Workbook if necessary