Value Proposition Research Methods

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Value Proposition Research Methods

There are multiple stages at which testing of value propositions (or particular aspects of those props) should be done. Some methods of testing value prop include the Value Proposition Canvas, value map conjoint analysis through a program like Buy-A-Feature, a value proposition designer tool, A/B testing through Google Ads, and an outreach combination approach using a microsite and cold email campaign.

Spring Health learned a lot during their value prop testing (via a value prop canvas approach) and refined their campaigns to be ultra-focused on reaching the target market most successfully. Volkswagen successfully used conjoint analysis to test their value propositions by building a reliable environment in which to test.

The Basics of Testing for Corporate Value Propositions

  • Strategyzer describes an example testing structure for corporate value propositions; they break it down into three testing stages: Testing the circle, testing the square, and testing the rectangle. There are different methods for testing at each stage (described more later).
  • The first stage of testing is “testing the circle,” or “testing the job, pains, and gains of your customers.” This testing stage involves determining if there are potential customers for the products/services to be offered, and involves identifying if the target customer persona has the needs and issues that the product will solve/address, and if they are willing to utilize those services to address those needs.
  • The second stage of testing is “testing the square,” or “testing the products, services, and features of your value proposition.” This involves identifying, testing, and refining which products/services are wanted (and most wanted) by the target customers. To do this correctly means completely identifying and understanding the target customers’ priorities and current methods of solving similar issues.
  • The third stage of testing is “testing the rectangle,” or evaluating the customers’ willingness to pay for the particular products / services. This involves gauging the revenue stream by determining the sweet spot for product/service pricing that is what customers will pay, is what will keep the company competitive in the market, and is within range to keep the company’s bills paid.


METHOD/TOOL: Value Proposition Canvas (Customer Persona: Create & Test w/ Focus Groups)

  • One method of testing at the first stage (“the circle”) is through the use of a value proposition canvas; this involves the creation and testing of a customer persona (and very specific points-of-need for target clients). [1] Extensive and detailed research should go into identifying the specific aspects of the target client(s), and then testing each of these points with focus groups.
  • The persona should include the clients’ “perceived pains,” or what issues they are facing. It should include the “gains, [or] the positive outcomes and benefits that your customers would like to have, require, or desire.” The testing pieces should come in drilling down to the exact pains the client have and the exact gains they’re looking for, for starters.
  • The testing pieces should be geared toward identifying which particular product/service is most-needed / most-desired, which features are most wanted, which customer pains are being relieved (and how), and which parts of the product/service offer the most gain for the clients.
  • The testing will be conducted via focus groups with potential customers (in the beginning and ongoing) and with other relevant groups, like sales people (selling similar products/services or this particular product/service). Other stakeholder groups could be involved in focus groups, as well, depending on who/what is available and what is being tested.
  • Strategyzer offers a quick video on this type of testing, which can be found here. They also offer Value Proposition Canvas services and tools to those wishing to use this methodology for testing their own value propositions.

CASE STUDY: Spring Health

  • Spring Health is a “for-profit social venture firm founded in 2008 by social innovator Paul Polak to bring low-cost and innovative products to millions of people living on less than USD 2 per day.” Their primary drive is to provide fresh water supplies at affordable costs to families in India; they hope to reach a long-term goal of 2 million customers over 20,000 Indian villages.
  • When the initiative first began, the company had to face a wall of skepticism from potential customers. Since they had no brand recognition, the target clients didn’t trust them. To better understand their pain points and how to overcome them, the company worked to identify the reasons Indian villagers struggled with access to water and the pains they suffered from consuming unsafe water. Then, they identified the gains the customers would see by using their product.
  • One pain point was the waterborne diseases spread through unsafe water, which cause significant health risks for all who consume it, increase infant mortality rates, and leave customers with healthcare costs their income levels will not provide. Research into this from Spring Health identified that many of their customers are “day labourers or independent workers for whom a sick day is not a paid day but a direct loss of income.”
  • Armed with this information, and the research behind how clean water reduces illness and medical expenses (and therefore reduces the need for sick days), the company changed their marketing tactics to include these findings. The company noted that once they linked the specifically-identified pain with the beneficial gains, “customers were convinced more rapidly to purchase as they realized what the effect of drinking safe water has in their lives.”
  • The company’s customers’ access to safe drinking “varies dramatically between 25% and 75%,” so they experimented with different ways to provide the water to their customers. Their studies of customer behavior showed that on average, the women would spend about an hour collecting water from wells each day. With this knowledge, they decided to set up a micro-entrepreneur model of sales where a certain number of water containers would be delivered to customers’ homes via centrally-located water kiosks. This experiment proved highly successful because they paired it with the information that demonstrated how the minimal cost outweighed the one-hour of time spent.
  • In this region today, “more than 80% of safe water sales are through delivery.” This also serves to increase their brand awareness and recognition in the area for attracting new customers. Through their value prop testing, Spring Health saves valuable time in reaching their customers, which them see increased value/revenue margins.
  • Through their initiatives (and smart testing), Spring Health has grown to serve “more than 280 villages, reaching out to over 150,000 people” today, and are well on their way to reaching their target goals.

METHOD/TOOL: Testing Value Maps: Buy-A-Feature (Conjoint Analysis)

  • One method of testing at the second stage (“the square”) is a tool described by Luke Hohmann Buy-A-Feature, which is a “game that you can play with customers to identify what features a large number of customers value most.” This type of innovation game is best used to “help a product team that is struggling with a complicated feature ‘wish list’ and limited development resources,” as an example.
  • The Buy-A-Feature Prioritization Model helps companies “identify the features that customers and key stakeholders value the most.” The approach involves setting up a game simulation wherein each feature of the product/service is assigned a price, test customers are given a budget, and they are asked to purchase the features they want most within their budget allowance.
  • To utilize this testing method, the company will begin by making a list of features and assign them prices; at least one feature should be priced high enough that no one participant can afford it and participants should be encouraged to work together on purchasing features if they see it as valuable to them. The prices should be assigned based on a correlation to the potential development costs for those features.
  • A participant group (of current customer or potential customers) is then invited to go shopping. They are given a specific budget and asked to purchase (or co-purchase) the features that would solve their most-urgent issues (or those issues that are most-pressing to them). As the company monitors the group’s “shopping” adventures, discussions, negotiations, and collaboration efforts, much will be learned on what features are most important and why.
  • More can be found at the ProductPlan website.

CASE STUDY: Volkswagen

  • The Buy-A-Feature product described above uses conjoint analysis to conduct value proposition testing. Simply put, conjoint analysis “is a complex type of market experiment simulating a real-world purchasing situation.”
  • Volkswagen, a long-established brand, had noticed they were “underperforming on [market] penetration of maintenance plans,” so they wanted to identify how to increase their sales of this service and how to find the best solution to the problem. So, they paired with Aga Analytics, which used a combination approach, which started with a customer persona pain-point identification (similar to the Value Proposition Canvas mentioned previously), then moved into conjoint analysis.
  • The team determined that they needed to ensure their testing environment was robust enough to test what they wanted to evaluate in real-world conditions, reliable enough to provide valid results, and that provided findings that could be translated “into successful decisions” by Volkswagen. Additionally, they noted the importance of systematically testing different value prop elements, as this methodology “dramatically reduce[s] risk,” which can mean the difference between success and failure.
  • In the exploration phase, they focused in on the problem(s) through customer interviews, which identified the pain-points. Then, they moved to the design phase, where they agreed on the exact problem to solve and which pains/gains to focus on, and mapped the customer journey.
  • They used the information gained in these sessions to develop the perfect “customer profile consisting of jobs, pains, and gains,” and determined they needed to focus on two points in particular: [a] issues within the pre-purchase process, and [b] measuring the value of the maintenance plans for customers. This also helped them determine three levels on which to search for reasons: [1] awareness of the plans, [2] sales advisor interactions and effects on sales, and [3] which elements of the plans represented the most value to customers.
  • Lastly, they moved to the testing phase, which involved “survey testing, prototyping, and experimentation.” The team tested specific steps within the sales funnel to determine which were stopping points for customers and why. They also tested each component of the maintenance plans (based on the information found through their initial customer surveys and interviews).
  • The last phase of each set of testing for each value prop was the conjoint analysis, where they set up an online survey environment where customers could virtually shop for features based on ranked pricing. Through their analysis of the results, they found that one element a loan car, which they had initially thought was not a top-ranking feature, turned out to be highly important to customers and very value-added to selling the plans. Additionally, they were able to use the data from the tests to calculate how much customers would pay if the option were included in the plans.
  • Through the systematic testing of variable combinations, the company was then able to identify “the optimal price for all possible combinations of maintenance plans,” as well as “related market shares, revenue and even profits.”

TOOL: Value Proposition Designer Tool

  • One straightforward and simple way to identify the benefits of a product/service is through the use of a value proposition designer tool, like this one from Board of Innovation. The tool helps companies drill down and “zone in” on how the product/service (or its features) will specifically serve the target customers.
  • Companies can use this tool to see things from their target customers’ perspective, as it provides a “structured way to present your solution and how it solves consumer problems.” The company offers a step-by-step guide for completing the tool, as well as ways to use company teams to generate and test variations of the value props.
  • This is one alternative for smaller teams (or smaller budgets), those without access to focus groups, and/or those seeking a simpler way to identify a specific value prop prior to initiating supplementary testing.

METHOD/TOOL: Google Ads: A/B Testing

  • Another method of testing is running “a keyword advertising campaign using Google Ads;” this will help provide a sharper focus on the prospective customers’ “interest by measuring how frequently people conduct searches regarding the problem” the product /service solves by counting the number of Google ads clicks. Note that this can also be done at any phase in the overall process of testing all points of value prop.
  • Google Ads allows for A/B testing of ads and keywords, which can help testing a particular value proposition (and how that proposition is presented to potential customers). The program offers companies a quick-and-easy way to test click-through-rates (CTRs) to see which is more appealing to the target customers.
  • The program also offers the option to use Ad Variations, which makes coming up with new copy to test much easier. Notably, experts at Wordstream state that, although the feature is “a lovely innovation, [it] does strip a few shreds of creativity from the ad writing process in favor of sheer efficiency.”
  • This Wordstream article details how easy it is to set up the testing variations in Google Ads.

METHOD/TOOLS: Testing Revenue Streams: Outreach Combination Approach

  • One method of testing is through a mini-outreach campaign that involves a combination of a microsite launch and an email campaign.
  • To conduct this test, the company should build a microsite (a very-very small version of the website) and launch it. The site should be one or two pages only and feature the core product/service (with all relevant features), a price point, and contact information. The microsite should be launched at least a week (or two) before the emailing campaign begins.
  • After the site has been up a week or two, launch a cold email campaign to prospective customers; note that the prospective customer list should be built prior to this so it’s ready to go at the right time. This kind of laser-focused offering provides the company with ultra-fast validation of a specific value proposition, so the company knows if there’s a direct need for the specific product/service, if customers are willing to pay at that particular price point, and which type of customers would be most interested.
  • This type of testing might benefit from an A/B test where two microsites that test different value propositions for the same product/service are launched. The change could be in the needs being met (or issues the product/service address), could be the price point, or any number of factors, depending on what is identified as being the priority for testing.
  • One expert recommends using the following tools for this combo-approach: Squarespace to quickly/easily set up the website with Google Apps email addresses; PersistIQ, which is software that makes it easy to send out cold emails (Mailshake is a secondary, lower-cost alternative); and Dux-Soup, which is a tool used for “basic LinkedIn outreach automation.”

ADDITIONAL INFO: Examples of Strong Value Propositions