Crafting customer value proposition (CVP) with value map and value curve

In this article, I will describe two analytical tools (value map, value curve) to bring to life your CVP as part of product design/development. As indicated in my prior article (The role of customer value proposition (CVP in product strategy), defining CVP is the critical element of product strategy management.

Conceptually, there are three layers that make up a CVP, with the CVP statement being at the core and three layers (see below) around defining 1) target market 2) Product position 3) Product design attributes (features/benefits/offers). Another layer (customer experience along the customer journey) is not covered in this article - but is of increasing importance.

 Let’s focus on the second and third CVP layers- where to compete (product positioning) and how to compete (proof points/elements of value). I will not cover the second layer Target market (customer segments) in this article-

So where to start, on Where or What ?

VALUE MAP – visualising product market position

In my opinion, you should start on Where to compete to define the target market/market position you want to play in.

A value map is a two dimensional representation of your product price versus its customer benefits value score. It is a very simple analytical tool to get a quick visual snapshot of your product market positioning relative to competitors. It is based on the principle of value pricing (not always applicable for all types of products- e.g luxury goods mostly based on emotional pricing rather than value pricing).

It is also relative easy to create and is customer centric, focusing on price (y-axis) vs customer benefits (x-axis) – useful for either new product development analysis or product review assessment (to monitor products positioning movements).

 Value maps are used for …

• Understanding relative product position vs competitors
• Identifying degree of customer benefits delivered vs price (and assess how close your product/service is relative to fair market value line)
• Monitoring your product positioning over time as the market is dynamic, identifying where competitors move (competitors benchmarking)
• Helping set or re-calibrate your product price in relation to value delivered

.. and help answer the following questions

• Have we set pricing right in relation to the value we are delivering to our customers ? Can we justify price premium relative to the customer benefits delivered ?
• Do we occupy a crowded value space (make it hard to differentiate and communicate point of difference) ?
• Do we need to re-position our existing product/service to be more competitive in market (and increase our CVP appeal/ attractiveness) ?

How to create a value map ?

Whilst the y-axis is very straight forward (price $), the x-axis (customer benefits) is more difficult to quantify and set (score based) – the difficulty is to condense/quantify all customer benefits into a score. There is also the complication of perceived value versus actual value delivered.

The difficulty in scoring value is due to the fact that customers perceive and weight up benefits (value) in different ways. There are three broad types value (functional, emotional, social) addressing different customer needs – refer to Bain Consulting elements of value hierarchy (the 30 elements of consumer value).

Therefore, in order to score value you will need to define the specific elements of value for your product category and rank/score (through customer research) how your product and competitors product rate on a scale of 0-10 (perceived customer benefits). A value map can be used to define where you want to play as part of product development (from a product position perspective) or track how customers perceive relative to competitors by displaying price-value on a simple matrix. Also, value map axis could be mapping other dimensions such as price to performance.

The key is to be as close as possible to the Fair value line, which represent the optimum mix of price/value – if you are above you are delivering insufficient value for price, if you are below the line you are delivering positive value for the price.

As an example, the company Prospa (unsecured lending for small business) focuses on competing on three key elements of value : speed of access (simple and quick application process), configurability (flexibility duration terms, variable of fixed interest rate) and convenience (digital only customer experience to use/manage) - price (interest rate) will be on the x-axis. Prospa plays in the unsecured lending space targeting small businesses (with loans needs of $5k-300k).

I have built a crude value map for Prospa (based on observed customer value based on desktop research- customer research would be needed to refine customer benefits score) giving an indication of the market space that Prospa is occupying- relative to its competitors.

VALUE CURVE – creating and visualising detailed value propositions

The next step is to set the parameters of your product design attributes based on the market space you have identified on where you want to compete (with the value map).

A value curve is an analytical tool that shows graphically where differing products compete within a particular marketplace. This concept was introduced by academics W Chan Kim and Renee Maugorne and codified in the 2005 book “Blue Ocean Strategy”.

For example, Prospa likely used a value map to define its market position relative competitors (high price for an unsecured small business loans offering providing high customer value (quick access, easy to configure loans, convenient digital only customer experience) than a value map for product design to calibrate each of its product element of value (see below graph).

In effect, a value curve is the DNA of your product, defining the underlying guiding principles on what your product will be built on and create its unique characteristics (personality). It is a product strategy tool to visualise how to deliver customer value

Value curves are used for …

• Defining in a detailed your CVP elements of value to build/assess/refresh your product/service proposition (those elements are specific to your industry and target market)
• Ranking each individual customers value dimensions on a scale (Low/high)
• Visualising in a quick snapshot how your product compare to competitors and identify on what dimensions you are choosing to create a point of distinction
•  Playing and testing different configuration of products elements of value to optimise CVP appeal (other tool such as conjoint analysis can be used to identify optimum set of attributes and price)

.. and help answer the following questions

• What is my product elements of value breadth to take into consideration in the product design ?
• Which elements of value do I want to emphasis/push on to create a point of distinction ?
• How (and where) to calibrate my product attributes to match my intended product strategic positioning ?

This tool can be used to identify and create additional value dimensions to reinvent/disrupt your industry (think of Netflix creating on-demand streaming dimension for movie consumption – time [to consumption] becoming the expanded element of value).

How to use value curve for new products ?

Let’s create Prospa (small business lender) value curve for illustration (indicative) – this clearly shows that Prospa has forged differentiation by rating high on ease of access/convenience/customer experience elements of value- three dimensions which have become increasingly important for business customers in their purchasing decision criteria.

How to use value curve for existing products ?

This tool can also be used to review/refresh existing product CVP (as customer expectations/need evolve over time and competitive landscape change). One framework to use is to apply the four actions framework (see below) introduced in the Blue Ocean Shift book to identify actions to do to enhance your current product appeal

Conclusion

Around the core element (being the CVP statement) are three layers to complement the product design (Who ? - Target market, Where ? Product positioning, What ? – Product attributes elements). You can use value map and value curve analytical tools to help define Where and How to compete by visualising your relative product market positioning and individual product elements of value ranked. Having a systematic, analytical approach is critical for product strategy design and evaluation to create /sustain winning customer value propositions.