Value Proposition Generator

Where the term "value proposition" came from

The term is traced to two McKinsey consultants, Michael Lanning and Edward Michaels, and a June 1988 staff paper called "A Business Is a Value Delivery System"¹. Their definition: "A business unit promises customers some value, a combination of benefit and price. It thus offers a value proposition"¹. To them, value meant the benefits a customer sees minus the price they pay.

Today the phrase often means a line of homepage copy. The original meant much more. Lanning and Michaels described it as a choice: "what precise benefit or benefits at what price will be offered to what customer group, at what cost?"¹. Once chosen, it had to be echoed in every part of the business, from how the product is made to how it is sold and serviced¹. Their examples read like strategies, not slogans. Volvo offered safety and durability to upscale families at a 20% premium over U.S. station wagons¹.

Two things follow. A value proposition names a price, not only a benefit. And a sentence is only the visible end of it. If the business cannot deliver what the sentence promises, the sentence is wrong.

Three kinds of value proposition, and the one that works

In a 2006 Harvard Business Review article, James Anderson, James Narus and Wouter van Rossum sorted the ways companies use the term into three types². Their research was in business markets, where buyers are increasingly held accountable for cutting costs².

The authors call resonating focus "the gold standard"². It rests on the few differences that matter most to the target customer, backs them with evidence, and is written in a way that shows you understand the customer's priorities². More is not better. They even suggest giving up small advantages so you can pour effort into the one or two that customers value most².

Every type is measured against the next best alternative. That might be a rival, but it might also be solving the problem another way, or doing nothing at all².

How to write a value proposition well

Name one customer group. "Businesses" is not a group. "Sales teams of 10 to 50 people selling across three or more time zones" is. If two groups want different things, they need two value propositions.

Name the next best alternative. Write down what this customer does today without you. Your difference only exists next to that.

Pick one or two differences, not six. Choose the ones this customer would pay for. Keep a point of parity only if customers will not consider you without it.

Back it with a number. Anderson and his co-authors describe "value word equations," which turn a difference into money, such as hours saved times the cost of an hour². "Saves time" is an assertion. "Saves each rep about two hours a week" can be checked.

Say what it costs. Price is half of the original definition¹. A promise that only holds at a price the customer will not pay is not a value proposition.

A weak value proposition and a stronger one

This rewrites the scheduling tool shown in the example above. The product and its numbers are invented for illustration.

The stronger version reads: "For sales teams selling across time zones, one link replaces the five-email scramble, because buyers only ever see their own local time. $12 per rep a month." Every part of it can be tested with a real customer.

Using the Value Proposition Canvas

The best-known tool for this work is the Value Proposition Canvas, from the 2014 book Value Proposition Design by Alexander Osterwalder, Yves Pigneur, Gregory Bernarda and Alan Smith³. The official template is copyright Strategyzer AG, which offers it free to download⁴. It was built to sit alongside the same team's Business Model Canvas³.

It has two halves⁴:

• The customer profile: the jobs customers are trying to get done, their pains (what gets in the way), and their gains (the outcomes they want).
• The value map: your products and services, the pain relievers that remove those pains, and the gain creators that produce those gains.

You have "fit" when the value map answers the pains and gains that matter most. Strategyzer is blunt about the limit: "Fit is a claim until customers confirm it"⁴. Fill in the customer side from interviews, not from guesses, and test the matches with real customers before you write the sentence.

Use the canvas to find what to say. Use the options this tool generates to test how to say it. Then check the sentence against the canvas: the one or two differences it names should be the pain relievers or gain creators your customers ranked highest.

What a value proposition does not answer, and what to use next

A value proposition says what you promise to one group of customers. It leaves big questions open:

• Whether the business makes money. The promise has to be delivered at a cost that leaves a profit, as Lanning and Michaels stressed¹. The Business Model Canvas places the value proposition among the other eight parts of the business, from channels to costs.
• Who the customer really is. If you cannot describe one person in the group, start with a user persona.
• Where to compete. Choosing which customers to serve, and which to turn away, is a strategy choice. Playing to Win frames it. If every rival makes the same promise, Blue Ocean looks for a different one.
• How to say it out loud. A value proposition is the substance. An elevator pitch is how you say it in half a minute.

Last, the test Lanning and Michaels set in 1988: can every part of the business deliver what the sentence promises¹? If sales, product and service each work toward a different promise, the customer will hear only the one they experience.