Nine Dangerous Mistakes When Designing Value Propositions
Creating new business models is really tough – even the biggest brands struggle to stay profitable.
The major challenge is creating desirable Value Propositions; offers that are so compelling that our customers rush out to pay for them.
I’ve taught hundreds of companies about the Value Proposition design process, and have spotted some common pitfalls along the way.
By avoiding these traps, you can create and test new ideas in cheap, easy ways, and build something that customers love.
1. Solving low value problems
Not all problems are created equal.
Humans have the tendancy to constantly spot various parts of their lives that need improvement, but only a limited amount of resources with which to fix them.
Money is the obvious one, but there are also limitations on time, energy and brain cycles.
Therefore, we’re not just looking for problems our customers encounter, but problems that are worth solving ahead of all others.
These stem from pain points that are really annoying our customer, or gains that excite and inspire them.
Our customers tell themselves a story about what their lives would be like if they made a change, then compare that with the cost of the solution.
In order to win that battle, our proposed improvement needs to look much more appealing than the money in their wallet.
Strategyzer have a good diagram that shows what constitutes a high value problem, it needs to be:
- Important (serious consequences if it goes wrong)
- Tangible (they can see a result)
- Unsatisfied (nobody else has solved it)
- Lucrative (it’s worth paying for a solution)
2. Appealing to charity, not self-interest
When I was a kid, I used to claim I had two stomachs:
One for dinner, one for dessert.
You probably did the same thing; and used it to rationalise how you were too full to eat more vegetables, but miraculously hungry enough for chocolate mousse.
This same shaky logic applies to our customers.
People have a natural appetite for charity – it feels good to do something nice.
But that appetite is quickly satisfied, whereas our appetite for self-interest is harder to suppress.
If there are hundreds of other groups out there competing for that charity dollar, are we confident that we can consistently win?
Therefore, the question that needs to be asked is: What purchase will this customer want to make after they’ve made their charitable donations?
Once they’ve “ticked that box”, they still need food, clothing, entertainment, transport, healthcare and friendships.
How do we incorporate those needs into what we sell?
3. Confusing supporters with customers
A customer is someone who pays you.
Specifically, they’re paying money in order to create a gain or relieve a pain.
A supporter is someone who likes your brand and your story.
They like your posts on social media, tell their friends about you, and read all of your articles.
There might be an overlap of these two groups, but it’s not a 100% correlation.
When we’re designing Value Propositions, we’re looking at appealing to customers who generate revenue.
Supporters are great, but if they don’t buy your stuff, they’re not the ones keeping you in business.
They might become your channel, or your referrers, but their contributions are comparatively small.
Would you rather 100 more supporters, or 10 more customers?
If your marketing attracts “Likes” instead of revenue, it’s time to change your marketing.
We need to focus on where our cashflow comes from, and double down on segments who are happy to pay for our services.
4. Assuming customers are sophisticated buyers
Have you ever experienced “Sticker Shock”?
This is the unpleasant feeling when you discover how much something actually costs, which is much higher than what you’d previously assumed.
Outraged, you talk to others about your surprise - but they seem unfazed.
“Yep, that sounds about right, we paid something similar”
This is known as being an “Unsophisticated Buyer” – someone without much knowledge of the industry, the process or a sense for what is “normal”.
A “Sophisticated Buyer” has seen it all before, able to spot a good deal when they see one.
They know what can/can’t be promised, and speak your industry’s language.
Which term best describes your customer?
Is this their first time buying this sort of product/service?
Are they currently buying from your competitors?
It’s costly to get this wrong.
If they’re new, then your communications and service design need to be adjusted accordingly.
If they’re experienced, you can cut to the chase and focus on what makes you better than what they’ve encountered before.
Apple do this really well – their products are easy to use and are intuitively laid out.
PC fans mock their simplistic design and underwhelming features, but they miss the point.
Apple aren’t selling to customers who would have otherwise built their own computer.
Instead, they’re selling to people who want to know where the “Volume Up/Down” buttons are, and who value simplicity over performance or affordability.
Even if PCs are technically better in every specification, the intricacies on the argument are lost on the Apple fan.
They were never interested in specs.
5. Inventing customers to suit products
Invention is painful.
When you’re good at making something, you’ll want to keep making it, and hope that your customers recognise your brilliance.
Sometimes this works, but it’s often dangerous – our optimism and laziness stops us from developing something fresh and compelling.
A way of using the Value Proposition Canvas is to keep everything on the left hand side static, and change the customer.
Here’s the trap: we need to discover customers, not fabricate them.
Identifying new groups who would love our product for new reasons is great, but inventing a mythical “Perfect Customer” who just so happens to love everything we offer is distracting and unhelpful.
The Customer Canvas is an exercise in observation, not design.
We can study them like we’re David Attenborough, but not invent them like we’re George RR Martin.
In Service Design, this is sometimes done through a “Safari” – going out into the world to observe customers in their natural habitats, to see how they behave when they think nobody is watching them.
This is a fine line: we need to think creatively to list all the customers who are worth investigating, not to be creative in making them up.
6. Clogging the canvas with “nice to haves”
People don’t tend to make one decision for ten different reasons.
Instead, we make a decision for 1-2 reasons, then use a list of other reasons to justify it to ourselves later.
The proof of this is the concept of a dealbreaker – the piece which, if removed, would lead to the customer walking away.
When we brainstorm, it’s good to get as many ideas on the page/board as possible, without filtering or editing as we go.
The next step is distilling the most important factors, which means keeping the “must have” and removing the “nice to haves”
This is particularly important when pitching these new value propositions to your team or to investors.
A few stunning reasons are more valuable than twenty side benefits, and it makes the concept much clearer.
It also makes testing easier – we’re only looking to validate a handful of assumptions, rather than ranking an exhaustive list of things customers might like.
7. Designing something “as good” as the competition
Our behaviours are often influenced by invisible walls that keep us stuck on the same paths.
These are known as Switching Costs – the barriers to making a change.
For example, what would someone need to offer you to make you change bank, or phone company?
You probably wouldn’t do it for a small bonus, like $10 or a slightly better app.
Instead, you’d need to be convinced that this new option is significantly better that what you’ve already got.
We call these “costs” because they take up a resource, like our mental energy, the time to fill in paperwork, and the nuisance of learning a new PIN or a new payment system.
Peter Thiel argues that a truly innovative product or service needs to be 10x better than the competition, otherwise it won’t be embraced.
How much better is yours?
Do you think it’s even possible to create something that much better than what’s available today?
8. Solving problems for beneficiaries, not customers
There is a temptation to focus on our beneficiary, which is not a bad thing in itself.
However, this can become a distraction from our customer.
Sometimes their interests are aligned, but they’re often quite different.
If we focus too much on why this business helps people in need, we lose sight of the real goal – making sales and thereby perpetually funding our mission.
“Buy this because it helps someone else” works for some of the people, some of the time.
“Buy this because you’ll love it…and because it helps someone else” is a much more successful pitch.
9. Locking in your customer profile too early
Uncertainty is uncomfortable, so we naturally try to cement in our customer personas.
This limits our innovation - it’s sometimes much easier to find new customers than it is to invent new services.
Innovation can come through finding customers with similar pain points, or by reimagining the way your product/service affects people’s lives.
For example, Nespresso appeals not only to home coffee drinkers, but to hotels, conference centres and offices.
Alternatively, Instagram removed most of their app’s features and retargeted towards a customer who wanted to share photos, which led to their rapid growth.
There’s also opportunity to think about customers who don’t yet exist, but will in the future. What pains will they worry about, or what previously impossible gains will suddenly become accessible?
You may also enjoy Nine Big Business Model Mistakes, as well as the broader series on Value Propositions:
Part One featuring Louis Vuitton, AFL, Uber and TOMS
Part Two featuring Nespresso, Heineken, and Shoes of Prey
Part Three featuring a variety of Men’s Watches and Chocolate brands
Part Four featuring the classic iPod ads, Whiskey, Hardware, Butter and Barossa Tourism
Being The Best explores how companies frame themselves as industry leaders
Being The Cheapest covers strategies for demonstrating value for money
Social Proof examines how brands make themselves look popular and trustworthy
Cologne looks at how intangible gains are conveyed through imagery and design
Bottled Water compares ten brands selling the same product in different ways