Did you know that 90 percent of startups fail within the first five years, approximately 10 percent of startups fail within the first year, and around 70 percent of startups fail within two to five years? A majority of the time a startup fails because the product or service it created was not needed by customers.
When creating a product, you need to make sure you are building a product to solve a problem or serve a need, not just for fun.
To evaluate whether your product meets customer needs, you can use a value proposition canvas. This framework can be used to refine an existing product or to build a product from scratch.
Dr. Alexander Osterwalder, a Swiss entrepreneur and consultant, created the value proposition canvas to help people understand their customers and achieve product market fit.
The value proposition canvas has two components: a customer profile and a company value proposition.
Each component has three sections and the goal is to fill out the sections on the customer profile and then to determine links between the customer needs and product benefits:
A value proposition canvas provides a platform to think about customer needs and product offerings simultaneously. This helps in evaluating how your product matches up with existing pain points of the customer or how a new product might be a good fit with the pressing needs of the customer.
A value proposition canvas helps product teams in three key ways:
Creating a value proposition canvas and identifying pain relievers helps your team stay focused on core value. Customers want pain relieving features and staying focused on this core value helps ensure you keep creating an even better product.
A value proposition canvas clearly conveys the purpose of the product and how it helps the customers. This enables the marketing teams to build a strong brand image that can connect with customers and allows you to develop a recognizable brand.
Anyone can use a value proposition canvas to start thinking about the customer profile and the offerings of their product. However, you must know your target segment very well before using this tool otherwise it will not give you the results that you expect.
Utilizing a value proposition canvas has its advantages, however there are certain pitfalls that need to be avoided:
While creating the customer profile on a value proposition canvas, the biggest mistake is to assume the wants and needs of the customer. If this is done based on instincts and without any actual validation via surveys, interviews, then this could jeopardize the foundation of the value proposition canvas.
It is important to note that the value proposition for a product needs to be unique and it cannot be similar to competitors. Hence, while creating a value proposition it is crucial to identify what the unique value proposition of the product is that makes it stand out among its competitors.
The value proposition canvas should be aligned with product vision, strategy, and business goals of the company. Inconsistency between these can lead to an unsustainable and unrealistic value proposition.
A value proposition canvas needs to be revisited frequently as the customer needs can change with time. Creating a static value proposition canvas can lead to a product that will not evolve with changing market needs. Hence, it is crucial to update the value proposition canvas to meet changing conditions and make sure the product offerings still stay relevant to the customers.
Many times, there are multiple segments of target customers. In such situations, it is best to create a value proposition canvas for each customer segment. Putting all different types of customers on one single proposition canvas can be detrimental and will lead to confusion.
A value proposition canvas is a dynamic document and needs to be circulated among the key stakeholders whenever it is updated. Circulating the updated value proposition canvas makes sure that everyone stays on the same page.
Let’s use Uber Eats as an example to create a value proposition canvas and understand if the product is meeting the customer demands.
Uber Eats is an online food ordering and delivering platform launched in 2014. As of 2021, it is operational in 6000 cities across 45 countries. Users can sign up with their phone number or email address and then buy food from local restaurants via their mobile app or web platform.
The purpose of the app is to connect the users to local restaurants by providing their menus available on one platform and enabling the users to purchase the food that they like while giving them the option to pick up the food or get it delivered.
By asking questions for the customer profile and analyzing its product offerings, the value proposition canvas has been created below:
A value proposition canvas is a great tool to utilize when creating a new feature, entering a new market, or testing product market fit. That being said, its benefits can only be reaped if it is used appropriately.
Using a value proposition canvas helps you to understand your customer and market from a different perspective by asking questions that are generally not asked. This information enables you to achieve product market fit, improve your product strategy, and even identify new customer segments.
Featured image source: IconScout
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