Sunday, September 30, 2012

Mapping Customer Pains to Value Proposition

Alexander Osterwalder gave a talk at Stanford in January 2012 called "Tools for Business Model Generation." I have not had a chance to watch the entire talk yet, but I did watch some of the shorter clips. One clip is called, "Mapping Customer Pains to Value Proposition."

In the clip, Osterwalder describes the tight relationship between Customer Segments and Value Propositions. Essentially, he said that it's important to know your target customer well. Explicitly document the "jobs" (or tasks) that the customer needs to accomplish. For each job, describe the customer's "pains and gains." The example he chose was a mom who is shopping for salad. The job is to go to the grocery store, select the ingredients, go to checkout, and return home. The pains could be that the store is out of stock for the ingredients she wants, or that the checkout line is really long, or that she hits traffic on her way back home. The gains could be that the salad tastes fresh and good, that she gets to try a new recipe, that the ingredients are healthy, etc. (Some of these pains and gains are elaborations by me, not actually in the video.)

He then gives advice about how to create the value proposition and map it back to customer pains. First, decide what your "offers" are. The offers could include the product itself, services, or features. For a local business, perhaps part of the offer is convenience (location). Then for each element of the offer, explicitly show how it's either a "pain killer" or a "gain creator." 

To sum up:
  • Figure out who your target customer is.
  • Identify the key "jobs" or tasks that they need to accomplish.
  • Determine the customer's pains and gains.
  • When creating your value proposition, think of the offer as everything that could provide value: the product, service, location, etc.
  • Then, for each aspect of the offer, explicitly map it to whether it's a "pain killer" or "gain creator."

This is great advice for anyone contemplating a new startup venture. The more explicit you can be about who your customer is, and what their pains and gains are, the easier it will be for you to craft your value proposition. When you are first starting out, you can use a tool like this to document your hypotheses about the customer segment and the value proposition. Then you explicitly test those hypotheses in the market by going out and talking to real customers.

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