Mastering Value Proposition for SaaS: The Ultimate Guide
Discover how to master crafting compelling value propositions for your SaaS business with practical lessons and real-world experience.
Imagine you've built a SaaS business from the ground up. You've put in the work and developed a groundbreaking product. However, there's a catch – it's not taking off as expected.
It feels like you've got all the puzzle pieces except one, crucial piece: a compelling value proposition for the product that makes the customer buy into it. This missing piece can mean the difference between a product that's merely liked and one that's truly loved.
Crafting a value proposition isn't just about stating what your product does. It's about offering and then communicating the unique value it brings to your customers in a way that resonates with their needs and wants.
Whether you're a SaaS startup founder, a product manager, or anyone in between, mastering this can transform how customers see your product.
Enter Abhishek Ballabh, co-founder of ExtraaEdge. He knows first-hand how vital a strong value proposition is. He has been an active startup ecosystem supporter and actively mentors startups. He is one of the brightest minds in SaaS and would be the best person to talk about building a Value Proposition early.
In this piece, we're tapping into the key insights from his talk at GTMDialogues Pune event.
What You'll Learn in this article:
Why Value Proposition Matters: Understand the role of a value proposition in connecting with your audience and why it's often the missing link for SaaS businesses struggling to gain traction.
How to Craft Your First Value Proposition: We'll guide you through creating a value proposition that speaks directly to your customer's needs and sets you apart from the competition.
What is Value Proposition?
In simple terms, a value proposition is a statement that clearly outlines the unique benefits and value that a customer can expect to receive from a product or service.
It is derived from a deep understanding of the customer's needs and preferences, typically gathered through direct customer interviews and feedback.
This ensures that the value proposition accurately reflects what is truly important to the customer, rather than being based solely on the company's perspective.
The process of developing a value proposition involves a careful analysis of how the product or service can solve a problem or improve the customer's situation in a way that is distinct from competitors.
“It's a beautiful dance between your product’s value for your customer, which needs to come from the customer side (not from your side), through customer interviews, and so on and so forth,” says Abhishek.
Signs That You Need to Revisit Your Value Proposition
Building a value proposition is a crucial step for any business, particularly for SaaS companies. It acts as the foundation of your marketing and sales strategy, defining why customers should choose your product over others.
But when is the right time to build your value proposition?
What Goes Wrong While Building Value Proposition
When building a value proposition for a SaaS, things can go sideways fast. Let's break down the common mistakes SaaS companies make while building a value proposition.
Why is Value Proposition important?
In the world of SaaS, your value proposition isn't just a fancy statement on your website; it's the core reason your product exists and why anyone should care. Here's why spending time crafting a rock-solid value proposition is not just good practice but essential for your success:
The Biggest Mistake Companies Make Interviewing Customers + Correcting It with SMART Questions
A common mistake companies make in the Extracting Hypothesis stage is asking the wrong questions while interviewing customers during customer discovery.
During customer interviews, companies often ask leading questions that inadvertently guide respondents towards self-diagnosis, influenced by the biases of the interviewers.
For example, we might ask the customer - What is the problem they are having with a specific product, like Salesforce. Here you are guiding them towards an answer.
These questions can skew the data collected and hinder the gathering of genuine insights. To rectify this, companies should shift towards SMART questioning techniques, focusing on understanding the jobs customers need to get done and their daily experiences.
Instead of posing leading questions, companies should ask about the specific tasks and activities customers need to accomplish in their daily lives. You can ask questions like:
“What does your day look like?”
“What problems are you having with a specific task?”
“What are the top 3 challenges in your job?”
Abhishek mentions that a great question he came across was “When do you generally get promoted?” and “What will happen in your job to get you promoted?” When you ask SMART questions like these, the customer will start talking about it, giving details of his first promotion and what worked, what his personal motivation is, and so forth.
By reframing questions to focus on customers' daily routines and challenges, companies can gather authentic insights without leading them towards preconceived answers.
Here is the correct mechanism to interview your customers:
Rather than beginning interviews with biased hypotheses, companies should start by exploring what customers do throughout their day and the problems they encounter.
Place customers at the center of the conversation and understand their daily struggles, goals, and needs without imposing preconceived notions.
By adopting SMART questions that revolve around customers' daily jobs to be done, companies can move away from biased inquiries and better understand real customer needs.
Value Proposition Canvas
Now that we understand what value Proposition is and why its important, it is time to lay out and create our first value proposition in an easy-to-understand, visual format. For this, we will employ a free tool called The Value Proposition Canvas.
The Value Proposition Canvas, created by Alexander Osterwalder, serves as a practical tool to ensure alignment between a product and its target market. It comprises two main components that provide a structured framework for understanding customer needs and designing value propositions:
Customer Profile
This section of the canvas focuses on the Ideal Customer Profile (ICP), detailing the specific characteristics and preferences of the type of customer who would most likely benefit from your product or service. They are the customers who are the least resistant to your sales efforts and are the easiest to sell to.
It delves into the jobs these ideal customers need to accomplish, the pains they experience in their daily activities, and the desired gains or outcomes they seek.
By identifying and analyzing these aspects, businesses gain valuable insights into what motivates their customers and how they can address their needs effectively.
The customer segment of the canvas includes the following aspects:
Jobs: What tasks or objectives is the customer trying to accomplish?
Pains: What challenges, frustrations, or risks do they face while trying to accomplish these jobs?
Gains: What benefits, outcomes, or features do they desire or expect?
Value Map
The Value Map represents the product or service side of the equation, outlining how the offering aligns with customer requirements.
It highlights how the product or service alleviates customer pains by addressing their challenges and obstacles.
Additionally, the Value Map showcases how the product creates gains for customers, providing benefits and solutions that meet their aspirations and desires.
It includes the following specific aspects:
Services: How does the product or service deliver essential functions or support that enhances the customer's experience?
Pain Relievers: How does the product/service alleviate specific pains?
Gain Creators: How does it create added value or benefits for the customer?
How to Use a Value Proposition Canvas (With Example)
When using a Value Proposition Canvas, the focus should always revolve around customers rather than internal roles or assumptions.
Buyer Persona
The first step will be focused on customer discovery. In this stage, the focus will be on building a buyer persona template from your Ideal Customer Profile. This will be a fictional or semi-fictional representation of your ideal customer.
It is based on a mix of customer research (customer interviews, feedback, etc.) and educated speculation. It helps you understand the goals, challenges, and opinions of potential clients.
Abhishek gives a very pertinent example of this with a taxi booking app.
In developing a taxi app, the focus is on understanding the specific needs and preferences of customers like Naina (the buyer persona), a business professional residing in Delhi.
Here’s a buyer persona template of Naina:
Naina's key pain points include concerns about unsafe drivers, competition for taxis, long waiting times, and overcharging. On the other hand, her desired gains are fair pricing, easy payment methods, timely arrival, and a professional service experience.
To effectively utilize this tool, follow these structured steps along with the example to ensure alignment between your value map and Customer Profile:
Steps to Map on the Customer Profile:
Customer Jobs to be Done:
Dive deeper into the jobs or tasks customers hire your product to accomplish. Understand the core functions customers expect from your offering. This will help you refine your value proposition to meet their functional requirements.
Example: Essential jobs for a taxi service include enabling customers to call a taxi, find a taxi easily, provide directions, and facilitate smooth payments.
Customer Pains:
Identify the specific pains and challenges that your target customers face when dealing with the jobs related to your product or service. Understand these pain points and see what annoys the customer before, during, and after getting the job done related to your product or service. This is crucial for tailoring your product or service to address real customer needs effectively.
Example: In a taxi booking app, customer pains may include concerns about unsafe drivers, competition for taxis with other customers, long waiting times, and overcharging.
Customer Gains:
Explore the desired outcomes and benefits customers seek from using your product or service. By pinpointing these benefits or gains, you can align your value proposition to resonate and answer these customer aspirations and motivations.
Example: Gains for a taxi app user could be fair pricing, easy payment methods, timely arrival, and a professional service experience.
Ranking of Customer Profile Features
Next, you rank the 3 aspects as follows:
Rank jobs according to their importance to customers.
Rank pain according to how extreme and severe it is in their customers' eyes.
Rank gains according to how vital they are in the customers’ eyes.
Steps to Match on the Value Map:
Services:
Outline the specific services or offerings of your product that support customer needs and preferences. Write the various services and features in a way that aligns with each of the customer jobs to be done requirements.
Example: Services in a taxi app may include customer support options, easy issue reporting, and regular updates for enhanced user experience and safety.
Pain Relievers:
Identify how your product reduces customer pains and addresses their challenges effectively. Highlighting these pain relievers in your value proposition demonstrates the value your product provides in mitigating customer struggles.
Example: Pain relievers in a taxi app can be driver verification for safety, an optimized dispatch algorithm for facilitating instant booking, and transparent cashless pricing to prevent overcharging.
Gain Creators:
Define how your product creates gains for customers by delivering benefits and solutions that align with their desired outcomes. By emphasizing gain creators in your value proposition, you showcase the positive impact your product has on customer experiences.
Example: Gain creators could include competitive pricing strategies, a driver rating system, a visual map, punctuality in pickups, and high standards for driver professionalism.
Ranking of Value Map features
Next, you rank each aspect of services, pain relievers, and gain creators on the value map:
Rank products and services you listed from nice to have to downright vital (based on customer answers)
Rank pain relievers from nice to have to essential
Rank gain creators from nice to have to essential.
Now let’s put the ranked customer profile (on the right) to match with the ranked value map (on the left). This way, you have a first-hand look at your ranked value proposition canvas.
By following this structured approach and aligning customer pains, gains, and jobs to be done with your product's value map, businesses can develop a compelling value proposition that resonates with their target audience effectively.
Fit Overview and Reiteration
Once you are done filling your VPC, it is important to test it and validate it again via the customer. This is crucial for fine-tuning our understanding of customer needs and iteratively tuning the product offerings towards the right direction.
Here’s how to do it:
1) Bring in the value map and customer profile you completed earlier.
2) Select a small group of customers from your ICP.
3) Go through the pain relievers, gain creators, and products and services one by one. See if they definitively fit the customer's pain, gain, or jobs to be done, respectively.
4) Put a checkmark on each one that does
5) Keep tweaking and adjusting until you find all the wrong assumptions.
6) Reiterate until you find the best fit.
Make this a repeatable exercise by constantly communicating with your customers and updating the Value Proposition Canvas accordingly.
Value Proposition Statement Template
Next, you can use the value proposition canvas to extract a Value Proposition template for your business.
A common template might look like this:
"Our [product/service] helps [target customer] who want to [customer job] by [minimizing a customer pain] and [increasing a customer gain]. Unlike [competing value proposition], we [unique differentiator]."
This statement can be used as a tool to help you craft a powerful Hero section” of your website copy (above-the-fold copy that states what your product does), create a crafty elevator pitch, and optimize all your sales collaterals to make it more sticky and value-driven.
Action Steps to Value Designing
To effectively design and refine your value proposition, a series of structured action steps can guide your team towards creating a compelling message that resonates with your target customers. Here’s a group exercise you can do with your team to get started with value designing.
Group Exercise to do with your team:
Download the Value Proposition Canvas: Begin by obtaining the Value Proposition Canvas to facilitate the visualization and organization of key insights.
Use sticky notes for brainstorming: Encourage team members to jot down ideas, customer feedback, and observations on sticky notes via collaborative brainstorming sessions.
Map out your Customer Profile: Reference your Ideal Customer Profile (ICP) to align customer characteristics, needs, and preferences with the value proposition design process.
Organize insights on the Value Proposition Canvas: Transfer key takeaways from customer interviews onto the canvas to visually represent how customer needs align with the product offering.
Identify gaps and opportunities: Analyze the mapped-out insights to identify areas where your product can better address customer needs and pain points.
Develop MVPs or prototypes: Create minimum viable products or prototypes based on the insights gathered from the canvas to test initial concepts with customers.
Gather feedback: Solicit feedback from customers on the MVPs or prototypes to assess how well they meet customer needs and expectations.
Iterate based on feedback: Use customer feedback to refine and enhance product features, ensuring they align closely with customer requirements.
By following these structured action steps, businesses can systematically design, test, and refine their value proposition to ensure it remains closely aligned with customer needs and expectations.
Practical Steps to Create Your First Value Proposition as a SaaS Business
When figuring out what to build first, the process might seem overwhelming. But breaking it down into manageable steps can make it more straightforward.
Here's how to go about it:
1. Hiring a Product Marketer
First off, get a product marketer on your team. Why? Because they're the bridge between your product and your customers. They listen to what customers are saying, identify their main problems, and figure out what they need most. This feedback is gold. It tells you what's important to your customers, helping you decide what to work on first.
2. Prioritizing What to Build
Now, with customer feedback in hand, it's time to decide what features or services to develop first. But how? Use a simple method like ranking each potential feature based on its impact on the customer and how easy it is to implement. Things that make a big difference to the customer and are easy to do should go to the top of your list. This helps ensure you're always working on stuff that matters most and can be delivered quickly.
3. Reiteration
The tech world doesn't stand still, and neither do your customers' needs. That's why reiterating your approach is crucial. Keep asking for feedback. What do customers like about your product? What do they wish it could do? Also, keep an eye on tech developments and market trends. They can offer clues about new features or adjustments you might need to make.
Why This Approach Works
Customer-Centric: It keeps the focus on the customer. After all, if they're not happy or don't find value in what you're building, why bother?
Adaptable: It's flexible. Markets change, technology advances and customer preferences shift. Regularly updating your approach based on fresh feedback means you won't get left behind.
Efficient: It helps you work smarter, not harder. By prioritizing tasks based on impact and feasibility, you can make significant progress without wasting resources on less important features.
Summary
Deciding what to build first doesn't have to be a shot in the dark. By building a robust Value Proposition based on customer feedback, and regularly revisiting and optimizing it, you can ensure that your efforts are always aligned with what's most important: delivering value to your customers.
This approach isn't just practical; it's necessary in today's fast-paced world where customer needs and technology are always changing.
Abhishek puts it best: “Let’s build a company that works backwards from customer problems and gets faster to product-market fit.”
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