As a product manager, you are in a unique position within the business, responsible for aligning people across the organization to achieve a common goal that delivers value to the customer while helping the business succeed.

Making sure you have a solid product strategy is a key part of this. In fact, product strategy is one of the most common areas our coaching clients want to work on (we even created a Product Strategy Handbook because so many people ask for help with it).

But the reality for most people in your organization is that no matter how clearly you present your product strategy to them, they are unlikely to remember most of it. It's simply too far removed from many people's day-to-day for them to engage with.

A tight, well-crafted value proposition makes it easy for people in your company to make decisions in their daily work that align to your product strategy. It's not so long and detailed that people will forget it, and it's tangible enough for them to understand it easily and use it as a part of their work.

There are many great methods for creating your value proposition and it's easy to fall down a rabbit hole spending months on research in search of the perfect value proposition before testing it with customers. In fact, one of the most common pitfalls people encounter with their value propositions is working on them for too long without involving users and other internal stakeholders.

For most situations, getting to something roughly correct and getting fast feedback from customers is the best way to get to a value proposition that truly represents what customers value while aligning with the goals of the business.

In this article, we'll look at what a value proposition is, why to have one, what a good value proposition looks like, then outline a quick method you can use to sketch your value proposition in enough detail to test it out. We'll also link to some resources you can use to dive deeper on your value proposition once you've completed your first version.

So, let's get started by exploring what a value proposition is.

What is a value proposition?

Simply put, a value proposition is a statement that articulates why customers should buy your product instead of a competitor’s, and makes the benefits you provide crystal clear.

You likely have a product vision which explains why the company exists and the value proposition is the equivalent for the customer – it explains the 'why' behind the product.

It's a good idea to start writing your value proposition using the format: We help (customer) do (thing) by doing (what we do). This will help you make sure you capture the key elements, which you can then reword into more natural, inspiring language later.

In our Product Strategy Handbook, we recommend using the slide below to capture your value proposition as a statement, then adding more detail by writing the core benefits to the customer in the boxes.

What does a good value proposition look like?

An effective value proposition statement has the following qualities:

• Talks from a customer point of view. The statement emphasises what's most valuable to the customer not the business. It's an honest representation of the value the product creates and doesn't use 'sales' language as an elevator pitch might.
• Addresses a specific customer segment. Even [the most popular products in the world aren't targeted at everyone. -link] Your value proposition should mention who your product is for, as specifically as is realistic.
• Describes the ultimate 'why'. The statement should focus on the core job the customer wants done by your product and why your product is the best way for them to get that job done.
• Is differentiated from competitors. If other products solve the same problem for the customers, what makes yours different?
• Is short enough to be easy to remember. As in the slide above, we recommend not more than 2 sentences for the value proposition and not more than 5 benefits of the same length.

Here’s an example of the value proposition of Fiverr, a freelancer marketplace targeting small and medium businesses who don’t have adequate in-house support. It hits most of the points above, although differentiation is covered in some other messaging on the site:

And here's another from Wise (formerly TransferWise), which differentiates the product against bank accounts:

How many value propositions do I need?

There's no hard and fast rule for this, but the general advice would be 'as many as is useful'. That means one for each core product you work with, then possibly variants for different customer segments that use your product, if they buy it for very different reasons. Don't create too many, though. It'll mean they lose their impact and become difficult to manage.

Why have a value proposition?

As mentioned at the beginning of the article, there are many benefits to having a good value proposition, primarily that it means you can identify whether customers will find value in your product. Let's explore some of the other key reasons that having a solid and well-written value proposition is so useful for product people.

It helps you align on what provides value to the customer

Not everyone in the organization will have the same opinion on what customers find valuable. People tend to overestimate the importance of their own area of the customer journey and that can create challenges when it comes to prioritization.

It forces you to focus

The brevity of the value proposition format itself is one of its many virtues. By limiting yourself to a single statement and five benefits, you have to ignore things that aren't important. Without this limitation, it's easy to want to expand your scope or write more reasons for your customer to buy. But by adding more, you start to lose the points they really value.

It is a foundation for decision making

A clear value proposition makes it easier for you to make product decisions. For example Moleskine and Staples both sell notebooks. On the face of it, all notebooks might seem pretty similar, however, these products are both successful and sell to their respective audiences for very different prices (about $15 for the Moleskine and $5 or less for the Staples equivalent).

The differences in the value propositions of these products mean that a product team can more effectively make decisions on how to deliver value to their customers. The little company history booklet that comes with the Moleskine is probably unimportant to the Staples customer and just adds a few cents to the cost of the notebook. But if it makes the Moleskine customer feel a connection to their literary heroes and helps them justify the higher price, then it's worth adding for the Moleskine team.

How to create a value proposition

As mentioned at the beginning of the article, getting to a perfect value proposition takes a lot of work. However, these simple steps should get you to a version of your value proposition you can test with customers and iterate on.

This works best as a collaborative piece of work, involving colleagues who are close to customers on a regular basis. For example, marketing, sales, and customer support.

1. Collect evidence of why customers choose to use your product, such as customer interview data, testimonials, feedback, and surveys. If you work for a B2B company and have win/loss reports, these are perfect. Have your collaborative group review all the data.
2. Once everyone is aligned on what the data shows, run a group workshop session in which you:
3. Start by identifying things that customers like most about your product and get the greatest benefit from. Write each one on a sticky note.
4. Group them into themes.
5. Prioritize the top three to five themes*.
6. Refine what is in each theme to the top ideas/features.
7. For each theme, write a statement that encapsulates its main benefit. These should be very short, eight to ten words maximum. If you can use fewer words, even better.
8. Once you have your list of benefits, write a value proposition statement that summarizes all the benefits. Start with the format: We help <customer> do <thing> by <what we do>, then rephrase this into natural, inspiring language.
9. When you are happy with both your value proposition statement and the accompanying benefits, test it both internally and with customers to make sure it’s accurate.

*If you don’t know which themes are most compelling to customers, write a benefit statement for each of your themes and test them with your target audience. A survey with existing customers is the quickest way to do this. You can present them with the list of benefit statements and ask them to prioritize those statements in the order which resonates most.

It’s very tempting to use the value proposition as a representation of where you want the product to eventually be. But to be most beneficial to the entire organization, it should really reflect the current reality of why customers buy your product today.

You can always have a second version in your back pocket, for the product team’s use only, that hypothesizes the value prop you are aspiring to. Then, as you roll out new features that expand the list of benefits, you can update your public version.

How often should I update my value proposition?

At a minimum, every time you revise your segmentation, customer profile, or major features, you need to review your value proposition and bring it in line with how you’re positioning the product.

Going deeper with your value proposition

There are plenty of great tools to help you develop you value proposition and work through it in more depth, should you need to. Here are our three favourites:

• The Mom Test by Rob Fitzpatrick. Excellent, practical advice on how to ask simple discovery questions that help you quickly validate product ideas with your customers. More info here: http://momtestbook.com/
• The Strategyzer Value Proposition Canvas. This classic canvas is useful when organizing your research and connecting the jobs customers want done with the features and benefits of your product. More info here: https://www.strategyzer.com/canvas/value-proposition-canvas
• The Product Strategy Handbook: Volume 1 - Getting started. A short, tangible guide to help you make sure your value proposition fits with your broader product strategy, including a template slide deck to help you communicate it clearly. More info here: https://www.theproductrefinery.com/elp/product-strategy-handbook

In summary...

Creating your value proposition is a vital part of making your product successful. Being able to articulate why the customer wants it helps your whole organization focus and align on building the right thing, and talk about it in a way that resonates with the customers.

It's tempting to sit on your value proposition for a long time, trying to perfect it in a vacuum.but this article has given you a simple way to work through it more effectively, involving key people from inside your organization, and customers, to get to a version that you can test and refine.

So, what's the next step? Get out there and do it! And remember, if you need any help along the way, you can contact us and talk through your challenges in a free coaching consultation.

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