Andrey Prigulniy says, that nowadays start-ups and incumbent organizations are forced to operate in conditions of a high degree of uncertainty and variability of the external environment. To stay competitive, companies need to quickly adapt to these changes. The experience of successful companies shows that the development and use of a value proposition is an effective management tool that helps leaders cope with new challenges. The aim of the study is to study existing approaches to the development of a value proposition in the activities of companies. To achieve the goal of the study, the following tasks were formulated: to analyze the need to use the value proposition; to consider the challenges and opportunities associated with the value proposition; to analyze the main elements of the value proposition model; to characterize the elements of the value proposition model.
As a hypothesis, the idea is put forward that the use of a value proposition in entrepreneurial activity allows leaders to increase its efficiency, thereby contributing to maintaining the competitiveness of a startup or an operating organization. The study was conducted using benchmarking methods, systems analysis, management methods and firm theory. The analysis showed that the use of a value proposition is an effective management tool that provides an opportunity to adapt the company’s potential to changes in the demands of existing and potential customers.
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One of the most important elements of interaction between the company and the consumer is the creation of a value proposition that matches the problems and needs of customers, as well as the search for opportunities to meet the identified needs.
A common approach to creating a value proposition is to use a template [1; 2]. It can be used not only to create, but also to test the value proposition in the process of finding opportunities for customer satisfaction.
Value proposition development is the process of developing and maintaining the created product up to date. It is created using certain tools.
An entrepreneur who creates a startup project usually encounters the problems of creating a value proposition for the first time. First of all, it is necessary to understand what problems and what opportunities work on the preparation of a value proposition opens up [3].
Let us point out some problems:
- the need for the founder of a startup project to understand the possibility of its implementation;
- the possibility of attracting investors to finance the project;
- evaluation of the financial model for the monetization of the project.
As for the possibilities, the following should be noted:
- efficiency in making managerial decisions;
- active involvement of investors and project founders in the process of developing a value proposition [4].
The tools that we will consider can be used to prepare new value propositions, as well as to develop existing ones, that is, value propositions created earlier.
Success in entrepreneurship requires developing skills that enable you to continually create
and adjust value propositions that target specific customer segments.
While preparing a value proposition, you can use the template proposed by A. Osterwalder and I. Pignet [1]. The template will enable to create:
- a customer value map to show how value will be created for that customer;
- a customer profile in order to clarify the customer’s understanding. This assumes that the value map and the customer profile must be consistent.
We create a value map for the consumer, representing a list of those goods and services
that are planned to be offered to the consumer as part of the value proposition.
It should be borne in mind that the value proposition should be focused on a specific
consumer segment.
The value proposition can include a variety of products and services, for example: digital
and online products and services, tangible, intangible products, financial products and services.
The value proposition should include only those products and services that solve the customer’s main problems or provide him with new market opportunities.
The goods and services offered to the consumer that are part of the value proposition may have different values for him.
Therefore, it is necessary to separate those goods and services and their characteristics that may be of key importance to the consumer and those that complement the value proposition. Basic goods and services are aimed at solving those problems of the client, which are the main ones. Additional products are of secondary importance and play an additional role.
In the process of creating a value proposition, it is important to understand what benefits it will bring to the consumer. Product benefits are those benefits that a consumer experiences when they use a particular product. Such benefits can represent benefits in features, savings opportunities, and positive emotions from using the product.
It is important for an entrepreneur to understand the most important consumer benefits that a product represents. If the benefits from the product meet the consumer’s expectations, the value proposition is successful.
What actions can lead to alignment of value and benefit?
In order to determine the relevance of value and benefit, it is advisable to start developing a value proposition. Compliance must be ensured, above all in relation to issues of key importance to the consumer.
Matching what is offered with what is needed for the consumer is the main task for the entrepreneur. The solution to this problem can be carried out by implementing the following measures:
- identification of those benefits that are important to the consumer;
- obtaining customer approval for the value provided;
- development of a business model of the product, allowing to obtain the planned financial
results.
In the sphere of activity of the creators of start-up projects, the search for the correspondence of problems that are of key importance to the consumer and a profitable value proposition looks like a diagram: problem - solution - product - market.
Once it is clear that the value proposition will be viable, the transition from idea to prototyping of the product takes place.
The starting point for preparing a value proposition can be consumer information, prototype research, or data from other sources.
The next step is prototyping capabilities.
At this stage, several simple models of new product value propositions are created and presented to the consumer in order to understand his reaction. Each model provides the consumer with a specific set of benefits and opportunities that must be tested with the consumer.
Alternatives are explored in the prototyping process. The findings can help you prepare the
best value proposition.
In the process of preparing prototypes, it is important to resist stereotypes. Practice shows that the correct value proposition is difficult to obtain at an early stage. The desired result will be received after a certain period of time.
When choosing a starting point for developing a value proposition, it is important to understand that not in all cases it is the customer who is the source that is the generator of the new value proposition. At the same time, a value proposition is created primarily in order to solve significant consumer problems and receive tangible benefits for them.
To develop a value proposition, an understanding of the consumer’s perspective is essential.
The analysis shows that there are a variety of methods to understand the needs of clients [5].
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- Research of all available information. Customer reports can be the basis for getting started on creating a value proposition.
- Conversations and interviews with potential clients can help to understand the views and
perspectives of the consumer on the value and benefits of a particular product.
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- Observation of the consumer in his natural environment. This is necessary in order to understand the behavior of customers in real life conditions. This method involves studying the problems that consumers are focused on and the actions they take to solve problems.
- It is allowed to conditionally take the place of the consumer and use the offered goods and services. Spend some time at the consumer’s site and draw conclusions from your own consumer experience.
- Embed customers in the value chain to jointly develop new ideas or jointly experiment.
In order to more accurately determine the further path of promoting the value proposition, it is necessary to understand in the context of which environment decisions and actions are to be made.
However, it should be correctly understood that analysis and modeling will justify a step-by- step movement towards a given goal, but only the market finally determines whether the value proposition will receive recognition from the consumer, and the entrepreneur will receive profit.
The high degree of uncertainty in the results that the creators of start-up projects expect from the implementation of ideas for creating value propositions compels testing and experimentation.
Practice shows that it is advisable for an entrepreneur to test a business idea by conducting
inexpensive experiments, rather than immediately funding the final product development.
Carrying out test activities allows you to accumulate a large amount of knowledge about the consumer for making decisions and taking the necessary actions in a less uncertain and risky situation.
What should an entrepreneur test?
The experiment is to find out if consumers are interested in what constitutes a value proposition? Will the products and services that are marketed help overcome challenges and generate benefits that are meaningful to the consumer?
In order to start testing, it is necessary to formulate a hypothesis about the conditions when the attractiveness of the value proposition will be confirmed by the consumer. A critical attitude to the data obtained will help to avoid failure. The most relevant data are obtained during the experiment.
What is usually understood as an experiment?
During the experiment, the hypothesis about the attractiveness of the product or business
model should be confirmed.
The task is to develop and conduct experiments to test the consumer for:
- understanding the relevance and interest in the value proposition;
- availability of effective demand for a product or service.
It is important to obtain confirmation that the users of the product agree not only to respond
to the call to act, but also to pay for the goods and services provided.
To study the problems, benefits and interest in the value proposition, or lack thereof, from consumers, advertisements are used by tracking clicks on the advertising link. This technique is used as a method of effective advertising.
You can test your value proposition using services such as social networks, Google Adwords service.
A minimum viable product (MVP) can be used to test interest in a value proposition [6].
To test your value proposition, you can create a website or mobile app describing the product and its key features. In this case, it is important to track the number of visitors who signed up for the newsletter or imitated a purchase.
Split testing tools are also widely used to identify facts of consumer interest in a value proposition. Split testing is used to compare multiple value proposition options in order to determine more accurate information about consumer motives and behavior.
If we consider the procedure for creating a value proposition, then it can be thought of as an opportunity to coordinate decisions and actions all the way from a business idea to a product launching to the market.
When an entrepreneur develops a value proposition, he has the opportunity to present to all interested parties information about what consumer problems a new product can solve or what benefits it provides to customers.
It is also important to perform a number of interrelated actions:
- Conduct events to familiarize partners who will sell a new product with the specifics of
the value proposition.
- Conduct explanatory work among sales representatives (sellers) about which market segments the value proposition is focused on, what are the problems and benefits of consumers. It is necessary to systematically educate and educate about which aspects of the value proposition will ensure commercial success by helping consumers solve consumer problems and reap benefits. To promote ideas for commercializing the value proposition, it is possible to create consistent presentation scenarios for business partners and customers.
- Base marketing stories, from advertising to packaging, on problem solving and consumer benefits. All marketing measures should be developed in the same style and with a general idea for the benefit of the consumer. Stakeholders’ attention should be especially focused on the factors that form the value from and the benefits of the product for the consumer.
- Help employees understand the specifics of the value proposition, what problems the customer solves, and what benefits it provides.
- Explain that there is a correspondence between the company’s current business model and value proposition.
- Show other owners how the value proposition is created and how it fits into the business
model and keeps the company competitive.
Analysis shows that it makes sense to apply the value proposition template after a new product is launched on the market. It allows you to assess the effectiveness of the functioning of the business model and the results of the company.
The success of companies in the marketplace is related to how well value propositions are incorporated into current business models. At the same time, it is important to work on the efficiency of business models, which are currently rapidly changing and becoming obsolete, as well as on the search for new market opportunities [7].
What an entrepreneur can do to seize new opportunities?
- Carry out systematic work on the creation of new value propositions, as well as their adjustment.
- Track successful business models in the market and work on preparing your own business models.
- Experiment constantly with new value propositions as well as new business models.
- To renew production without waiting for the moral and physical aging of equipment and technology.
- Consider new ideas and opportunities as a motive for action, a signal to mobilize employees for new actions.
- Evaluate new ideas and opportunities based on the results obtained by experimenting with new products.
The analysis shows that it is very important for business founders and entrepreneurs to identify and monitor the success of an existing value proposition on an ongoing basis. This is due to the rapid changes in the external environment in which the company or startup operates.
We need to maintain a high rate of value proposition renewal and business model transformation. There is no need to wait for market conditions to force these decisions and actions. You should go ahead of changes in the external environment.
The results of research show that the use of value propositions by leaders increases the efficiency of entrepreneurship. This tool allows you to timely adjust the company’s business model, as well as interaction with consumers in connection with changes in their preferences, as well as other environmental factors.