Reaching Product/Market Fit is a key objective in the life of a startup, whether it’s a journey, a continuum or a given point in time. But right after that, it becomes really important that your product roadmap remains totally coupled with your value proposition. I’m calling this condition the “Product/Value Alignment.” The first thing you should do after being satisfied with your market size validation, metrics traction and right features (i.e. product/market fit), is to check and update your value proposition. Your value proposition is the most convincing promise you make to your users, customers, and prospects. It might have already been iterated upon, but it should become progressively more ambitious and unique, as your product/market fit gains maturity.
What is a strong customer value proposition?The Value Proposition is a clear articulation that includes who you are targeting, what differentiated benefits you are promising them, at what price (and/or effort), supported by what evidence, and resulting in what advantage. There are 6 key elements to it:
- Differentiation of Benefit
- For Whom: Your targeted customer segmentation ==> Identification of who will say “this is me, or this is for me”
- Your Promise of Benefits: What you will do for the customer. What are the compelling benefits? They should be: ==> Differentiated – why is your approach or product better, superior? ==> Credible – how you support your promise so that it’s a believable statement
- At What Price: What do they have to give up to get it? ==> What it will cost, in time, effort or activity
- Resulting in what Outcome: How does it change them? ==> What is the utility, value or how does it transform your customer?
Who is the Value Proposition for?The Value Proposition is for your Customers, Prospects and Partners, and no one else. It is not yours to keep private. And it should be strong enough to become a lever that brings users and customers to you. It should be squarely aligned with your current capabilities, but with a tilt on the future.
Who defines the Value Proposition?It’s very important to keep a user-centric (or customer-centric) view of what value is. Only the customer determines the value of your product, based on the outcomes resulting from using it, the activities they perform to achieve these outcomes, and how it transforms them. Value is not based on the product’s features. The product is simply a means to an end, and I’ve covered this distinction in Forget the Product, Start Focusing on the Model. Put bluntly, the customer has no interest in your product, but only in what it does for them. What you sell, and what they buy are two different things: you sell a product, but they buy value or use the utility. But the more they use it, the more they see value in it, and the richer that value proposition becomes, once you properly extract it from them. That’s why you need to continuously iterate and strengthen your value proposition, as your customer usage becomes deeper and broader. A simple test is to ask your users what value they see in your product, and use that body of knowledge to carefully craft your value proposition. Steve Blank called this phase customer discovery, but I’m stressing here what you should bring back from it.
Why do you need a strong Value Proposition?Strength is an important requirement in your value proposition because it needs to make an impact on your prospects when they see it. It needs to convince them to choose your product instead of the competition’s or doing nothing. And if it’s a free consumer product, it needs to give them a strong enough incentive or reason to try it, with the promise of returning more gain than pain, whether it’s used once or repeatedly. The exercise of crafting your value proposition is also important, because you may end-up with a proposition that is not strong enough, forcing you to focus on closing the gaps.
Evolution of the Value PropositionValue is a moving target. With more users, usage and features, comes more value diversification and realization. But when you’re starting out and your product is still maturing, it may not be possible to have a strong value proposition, because you may not have all 6 elements well defined. So it’s OK to start with simpler value propositions, but do make them stronger over time, as long as they remain credible, each time. Actually, Aaron Schildkrout says, “value propositions are the central hypothesis of your company”, in Value-Driven Product Development: Using Value Propositions to Build a Rigorous Product Roadmap. He further adds that “The more effectively you can hone your understanding of these value propositions, the more laser-like your company will become.” He then continues with specific steps to ensure that your value propositions are translated into product imperatives.
What Does Alignment Mean?Alignment means there is a clear and straight cause and effect relationship between any two functions, tasks or ideas. Anything that is connected should have a strong alignment between its components. Alignment also means there are clear relationships between these components, such that one of them drives, influences, limits, shapes or supports the other.
Basically, the Product/Market Fit strengthens your Value Proposition and allows you to enable the realization of the Business Model, as long as the Product Roadmap is not deviating from contributing to that Value Proposition.
Why is it important to align the value proposition with the product?The value proposition is the bridge to your business model. The stronger it is, the easier you can realize that business model (including revenues, if it’s part of it), and the less disagreements or deviations you might encounter between what users want and what the business objectives are.
Public vs. Private – What to reveal?Your Value Proposition has to be public and it has to be unique so that a competitor couldn’t just take it and replicate it. If they do, it should blow-up in their face, and make them lose a lot of credibility. Your value proposition is the single best public representation of how your customers will value the usage of your product.
How about the competition?Your competition is not always another company. It can be a user doing nothing. Or maybe you’re not offering more gain than pain because users need to change their current habits.
What if you have 2 products?Then, have 2 different value propositions, one for each.
What are the risks of non-alignment?If you add product features that don’t contribute to the value proposition, or don’t reinforce the necessary conditions for the realization of the business model, it becomes more difficult to achieve the goals of the business model, and you will drift or stagnate.
Value Proposition ChecklistFirst, it has to be communicated clearly on your website. You’ll be surprised by how many startups do not do that. (but that’s for another post). Check for the following characteristics:
- Not risky
- Not ambiguous
- Has an Outcome
Strategic Alignment Checklist
- Does increasing your Product/Market Fit strengthen your value proposition?
- Does the Product Roadmap never deviate from contributing to the value proposition?
- Is your Value Proposition clear enough that it is making it easier for you to realize your Business Model?