Business Model‎ > ‎

Value Proposition

A quantified value proposition contains calculations where the costs and benefits of both the problem and the solution are compared.

For example:
  • Cooking on open fire causes health problems and destroys the environment
  • Costs for an average family for cooking on open fire:
    • firewood about $20,- per month (short term)
    • health costs and loss of income due to smoke inhalation $5,- month (medium term)
    • destruction of habitat (lost harvest due to drought and crop disease) $5,- month (long term)
  • Total costs of cooking on open fire (short and medium term) is $25,- per month
  • Say you develop this efficient wood stove that eliminates smoke and reduces consumption of firewood by 50%
  • Say that people are willing to invest in a new wood stove that repays itself in 15 months
  • A family saves $10,- in fuel cost and $5,- in health related cost when they switch to your woodstove
  • Multiply $15,- by 15 (= $225,-) and you have the amount of money your customers can spend on your wood stove to break even on customer value. Can you sell your wood stove for less, you create positive customer value.
Compare your value proposition with the following scenarios:
  • Customers use what the are using now
  • Customers stop using what they are using now
  • Customers switch to available alternatives
  • Customers buy into your proposition
Read:
And read:

You can either use Osterwalder's canvasThomson's canvas or create your own based on the Advanced Value Proposition below.

Advanced value proposition
Key Partners
Key Activities
Value Proposition

Product Features
Customer Benefits
User Experience

Value to customer
minus
Costs to customer
=
Value Proposition
Customer Relationships
Customer Segments

Customer Desires
Customer Anxieties
Jobs to be done

Competitors
and
Alternatives

Urgency
Will to sacrifice
Availability of means

Key ResourcesChannels
CostsReveneus