The value proposition canvas’s customer profile side captures the customer characteristics you first assume, then observe and verify on the market. So the first step is to capture your assumptions in a productive way (recall hypotheses are testable assumptions). This content is intended to help you do that

[VPD] “Customer Profile” pp 9-25

This core section of the Value Proposition Design framework lays out their customer profile tool for capturing hypotheses about customer jobs, gains, and pains. This tool helps you clarify your assumptions and initial observations about customers so they can be verified in the marketplace.

Guiding Questions:

• Can you define the three elements of the customer profile: jobs, pains, and gains?
• What are the main types of jobs, pains, and gains?
• How many customer segments should a customer profile cover?
• What are some common mistakes and best practices for mapping jobs, pains, and gains?

[VPD] “Going to the Movies” pp. 54-59

This is an example of how you can use the value proposition canvas to think through and map out hypotheses around variations on needs, given different situations where needs arise may result in different customer preferences for solutions.

Guiding Questions: 

• Is the focus on jobs, pains, and gains a substitute or complement to the traditional approach to developing customer profiles?
• How many job contexts should one customer profile focus on?

Video Lecture: Value Propositions: Elements of customer value

This short video complements your Value Proposition Design reading, integrating it with other frameworks from psychology and economics.  It introduces the value proposition as a balance of benefits (gains) we propose to create and costs (pains) we claim customers will incur.  This video breaks down this framework into five elements: functional, social, and psychological benefits as gains and price and transaction costs as pains.  These five elements are how your offer is perceived by customers when they are in an active buying process and experienced by customers when they are using your value proposition.

Guiding Questions: 

• What are two core groups of social benefits that we use products and services to help us achieve?
• What are some types of psychological benefits that we can provide to customers?
• What are the five types of transactions costs?
• What cues can we use to identify possible transaction costs when observing, conversing with, or imagining customer interactions in the marketplace?

Value Propositions: Our Model of Customer Value

We’re going to build a bunch of hypotheses about customer value. We claim to create value for customers in three dimensions, psychological, social, and functional. And we ask them to pay two different types of costs. One is the price that they pay to us in exchange for the value we create for them. And the other is the set of transactions costs that customers incur when they interact with.

[0:28] Pains/Gains = Costs/Benefits

This is a cost-benefit model, the model that comes from economics. The basic principle is if the benefits exceed the costs, then we’ve created customer value. Putting things into these two buckets of all the benefits that we provide to customers and all the costs that we claim that they’re going to have to pay in order to get those benefits is a useful way for us to organize as we’re thinking about designing value propositions, as we’re thinking about communicating value propositions.

I find it useful to think about the stuff on the left being gains and the stuff on the right, being pains. This is a little bit of a simplification. I’d like to think a refinement. It’s the same principle as SWAT, where you can have strengths and weaknesses. You can have things that are framed as gains or lack of pains, and I find that if I just think about the gains as being benefits and pains being costs, that definitely helps me think about things.

[1:25] Functional, Social, and Psychological Benefits

You had some content from the value practice design book on functional, social and psychological benefits. This is a longstanding, useful categorization model to give you a checklist to look through it, the range of potential functional benefits, the range of potential symbolic and the range of experiential/psychological.

[1:46] Functional: Solves a Problem

Solves a problem. It solves it in a way that’s sufficient and convenient.

[1:51] Types of social benefits

Symbolic, we use our purchases as signals to send messages about ourselves, to ourselves and to others. There’s two strong groups of social benefits that purchasing things can have for us. These are the social, psychological words for them.

Self enhancement group. If we think about Peloton, for example, Peloton solves a problem of enabling me to get the exercise I need to keep my body in shape and stay fit and do it at home without having to travel somewhere. I’m also joining. A tribe of people who ride Peloton, and I can demonstrate my relationship with that tribe through the experience of joining Live. Peloton has leaderboards. The leaderboard tells you where you stack, where you rank. We all have innate reactions to competition. They’re not all the same reactions, but we all have a reaction to being evaluated against others.

Self enhancement, how I stand out. Group affiliation, how I fit in. Peer pressure being another way of thinking about that. I buy things that help me fit in. I buy things that connect me to the me I aspire to be.

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[3:06] Experiential/Psychological Benefits

Finally, experiential, psychological is a whole nother area, the entire entertainment industry. Why do I pick the particular movie I’m watching? Because it has things that are cognitively engaging, emotionally satisfying, providing some interest. It’s new, it’s variety.

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[3:20] Transactions Costs

Transactions cost. This is the classic list of transactions, costs, search, acquisition, startup use, and disposal. If I’m gonna try something new, these are all the steps I have to go to search, acquisition and startup. I have to figure out how to use it, and then once I’m done with it, I have to figure out how to get rid of it.

So this is, again, a checklist of areas that you might think about. How easy or hard is it to find information to help me make a decision on doing something different? How easy is it for me to acqua? What’s the cost of startup? How do I have to integrate it into my life? Are there ongoing costs of use and are there cost of disposal?

All of these costs, lower convenience and increased perceived risk. So one way of unpacking and finding some concrete hypotheses around transactions costs is to ask yourself or ask your customers. What would make the this, um, job more convenient? What would make it more or less risky for you? Digging into these areas?

If you hear the word convenience or risk, or you thinking the word convenience or risk, it has to do with transactions, cost, and you can think about how to break those down into these five categories.