Unique Value Proposition: It’s all about the value prop, baby
When you have a deep understanding of who your customer is, what they are looking for, and what they’re motivated by, you can easily frame the value of your offering. This is known as your value proposition.
What is a value proposition?
A value proposition is the promise of a value to be delivered and why a customer should buy from you. A unique value proposition (“UVP”) is how you and the value you promise are different or better than your competition.
Without a clear value proposition, it doesn’t matter how amazing you think your product is - you will have a hard time growing your business because customers won’t know why they should purchase your solution. In fact, you can literally lose business to a competitor just because they can articulate their value proposition better than you can.
A unique value proposition has three components:
Relevance/ Applicability: how it is applicable or relevant to them or how it addresses their needs
Value: the specific benefits your solution delivers
Differentiation: how you are better or different from alternative solutions
A non-unique value proposition only addresses relevance and value; a unique value proposition helps you stand out from the crowd.
Features vs. Benefits
Before we move on, it’s important to distinguish between a feature and benefit. A feature is a specific part of your product or solution. It’s what your product does or has. A benefit is the outcome of using your solution - the value to the customer. Put simply, a feature explains “what” and a benefit explains “why”.
For example, the features of a shoe could include its materials, its color, or its style. But the benefits of wearing those shoes could be to keep your feet dry, to protect your soles, to make you taller, to make you run faster, or even to make you look cooler. Sure, customers might be buying your shoes because of their specific features, but those features only matter because of the benefits they provide.
When you’re crafting your value proposition, you’ll need to think about both your features and your benefits, and how you’ll focus your messaging around delivering the results your customers need.
The importance of differentiation
One of the examples we use at 500 to illustrate the importance of differentiation is to imagine you’re hungry and craving pizza. There are three pizza shops that deliver nearby, and all you know is the following:
Pizza Shop 1: Better ingredients. Better pizza.
Pizza Shop 2: Hot pizza delivered in 30 minutes or it’s free.
Pizza Shop 3: Hot pizzas for $5.
How would you choose where to order from? The short answer is - by what’s important to you. If you care about quality ingredients, you’d probably order from the first shop. If you’re really hungry and you just want your pizza fast, you’d probably order from the second shop. And if your number one priority is price, you’d probably choose the third shop. Without knowing those differentiators, though, choosing the “right” pizza place would be a shot in the dark.
Looking it from another angle, if you were a pizza delivery company, you’d want to articulate why you’re better than the alternatives. When you’re thinking about your unique value proposition, you need to understand what your target customer segment [read more here] would value and clearly articulate it. Cuz you see, “We satisfy your hunger with pizza delivery” just isn’t enough… whatever way you slice it.
XYZ Value Proposition Framework
One way to think about your value proposition is by using the XYZ Value Proposition Framework:
We help [X] do [Y] by doing [Z]
X = who, or customer segment
Y = what, their job to be done
Z = how, functionally
Put simply, “we help a specific customer segment meet a specific need by doing something distincitve”.
An example we like to use at 500 Global is Airbnb. Airbnb is a double-sided marketplace where travelers can book rooms and experiences through local hosts instead of hotels and tour companies.
Airbnb’s benefit to hosts is to earn money hosting travelers. A value prop could be “We help locals make money by renting their homes and by providing curated experiences to friendly travelers”. In this example, X = locals, Y = make money, and Z = renting their homes and providing curated experiences. Their target segment (locals) can achieve their job to be done (make money) by doing something distinctive (renting their homes and curating experiences).
Airbnb’s benefit to guests is they can feel at home anywhere and experience different cultures. A value prop for travelers could be “We help travelers feel at home wherever they go by offering a curated selection of stays and experiences hosted by locals”. In this example, X = travelers, Y = feel at home, and Z = offering homes and experiences curated by locals. Their target segment (travelers) can achieve their job to be done (feel at home) by doing something distinctive (offering homes and experiences curated by locals).
💡TLDR: A value proposition is the promise of a value to be delivered and why a customer should buy from you. A unique value proposition (“UVP”) is how the you and the value you promise are different or better than your competition. When you have a compelling value proposition, marketing, selling to, and converting your target customers will be much easier - and may be the difference between closing them and losing them to a competitor.
📖 Exercise: Use the XYZ framework to craft value proposition statements for each of your target customer segments.
📎 Download: XYZ Value Proposition template
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