Table of Contents
- Congratulations on Completing Your Value Proposition Canvas
- Why You Should Validate Your Value Proposition
- How to Validate your Value Proposition
- How to Objectively Score Your Value Proposition
- Value Proposition Risk Analysis
- Value Proposition Canvas Questions
- Methods for Validating a Value Proposition
- Great Validation Creates…
- Sales Prospect Profile Template
- Recommended Reading
1. Congratulations on Completing your Value Proposition Canvas
If you’ve invested time to complete the Value Proposition Canvas you have now built a solid foundation for selling and starting to generate revenue. In business regardless of our products or services we all have competition, which is healthy, as competition drives innovation and service levels to new heights. Even start-ups with Disruptive Technologies that no other company yet has, have to compete with the status quo and because of this competition, we need to make sure our Value Proposition is going to resonate with potential buyers which is what we call Validation or Proving the Value Proposition.
As you know the Value Proposition must first serve as a compelling reason to change from the status quo and then be a compelling reason to choose us. These compelling reasons must provide a Value to the buyer after they have purchased our products or services and are experiencing the benefits thereof. This would typically be either:
1) an Impact on their business,
2) a Financial Impact on their business and/or them personally
3) and/or a Personal Impact.
The outputs of your Value Proposition Canvas are a list of assumptions which may or may not be correct.
Sales Prospect Profile Example
2. Why You Should Validate Your Value Proposition Canvas
a) Time. The more time spent validating the outputs of your Value Proposition Canvas then the faster success in the form of sales revenue will come. The more time spent in the Validation phase will help the Entrepreneur: a) Confirm assumptions b) Gather data c) Refine the Value Proposition d) Confirm Feature/Functionality and Minimal Viable Product e) Gather messaging for marketing purposes f) Gather data for sales purposes g) Build relationships h) Take pre-sales orders
Every business is under pressure to get products and services to market and Entrepreneurs are no different. Pressure may come internally from fellow stakeholders in the organisation or externally from other stakeholders such as Investors to skip validating the Value Proposition Canvas. Entrepreneurship can be an exciting roller coaster of emotions as they juggle with multiple roles & responsibilities and often the Entrepreneurs passion, enthusiasm and excitement can lead people to give a “light touch” to certain steps in the Business Model canvas.
Unfortunately, the business world is littered with failed start-ups and more importantly the majority of start-ups miss their initial sales targets. Failing to reach sales targets puts pressure on cash flow and in the worst-case scenarios Entrepreneurs return to seed investors and surrender further equity to stay afloat. Spending money on Validation is an investment in the future success and a shortcut to early sales revenues. Good Validation creates an early-stage market awareness and studies show 49% of successful start-ups prioritise spending on Marketing compared to only 20% of businesses who failed.
The Validation process will invariably cost the organisation money, which at a time when many businesses may be Pre- Revenue is sometimes difficult to justify. Furthermore, due to financial pressures, conflict can often arise between the most effective Validation programmes and the least expensive Validation programmes. Often at the start of any Entrepreneurs business journey, they understandably have a mind-set of survival and there can be a reluctance to spend money even when it is available.
It’s difficult to have our ideas challenged, however, it’s beneficial to be challenged during the Validation phase rather than pushing on, and then down the line being challenged by prospects and watching potential sales revenues disappear because we did not have the humility to accept feedback at the Valuation stage. Startups struggle to take on board any feedback that is not consistent with their beliefs which may be biased. Human beings are hard-wired to find the path of least resistance which often means they take shortcuts and in the Valuation phase of a Value Proposition this can be critical. Feedback is not fatal, it is an essential part of successful Entrepreneurship and should be welcomed.
Every human being has a natural desire to be right. Having external people challenge our ideas can be difficult for any Entrepreneur to accept. It is difficult to accept that external people without the Entrepreneurs expertise or insight could have any form of valid contribution.
3. How to Validate your Value Proposition Canvas
Validation is the process of seeking external confirmation from our target market of all the assumptions we have made when building our Value Proposition Canvas. These assumptions are your reasons that prospects will buy. The reality is that prospects will buy for their reasons, not ours and hence we need to confirm and understand these.
Validation is objective market research that will help provide insight however in order to be objective we must first create a list of questions.
The questions must be objective and cannot be influenced by our inbuilt Confirmation Bias which has a tendency to search for, interpret, give favour to and recall information in any way that confirms our own beliefs or ideas, and at the same time giving disproportionately less consideration to alternative possibilities and options.
4. How to Objectively Score Your Value Proposition
There are 7 main areas we need to focus our questions around and we have listed our generic suggestions for these questions. You should consider the relevance of each question for your product or service and if necessary change any question to something more specific. These questions should serve as the minimum number of questions that we should ask not the maximum. The reality is that effective Validation will include a number of equally important supplementary questions that will help us build a wider picture. This additional background information can often hold the essential information that will help us both position the product and market the product in the future.
5. Value Proposition Risk Analysis
How to Score Each Section
- NOT IMPORTANT
- The prospects have declared the solution of little or no relevance to them. Please note these people may show interest due to their natural curiosity, however after discussing the solution they will have no interest in further contact.
- SCORE – 0 Points
- LIKE to HAVE
- The prospects declare some interest in the solution but have a low commitment to ongoing communication, relationship building and helping to Validate the solution.
- SCORE – 1 Point
- NEED to HAVE
- The prospects share with you a defined Need for the solution and are willing and able to further communicate, build a relationship and help you Validate the solution.
- SCORE – 2 Points
- The prospects share with you a defined Need for your solution which they perceive as a high priority in their business and explain why this is to you.
- SCORE – 3 Points
6. Value Proposition Canvas Questions
In order to complete the table in section ask the following questions to prove your Value Proposition Canvas.
BUSINESS IMPACT How does the problem currently impact the business? How will eliminate the problem impact the business? Have you learned to live with this GAP?
FINANCIAL IMPACT Does the product or service either increase sales or reduce costs to the organisation? Is there a demonstrable Return on Investment for the solution? How much do these problems cost the business?
PERSONAL IMPACT Will the solution have a direct impact on the persons’ ability to build or run their department or organisation? Will the solution have a direct impact on the persons’ standing, credibility, prestige & respect? Will the solution have a direct impact on the persons’ ability to reduce time wasted, inefficient or ineffective work process and systems?
TECHNICAL FIT Does the solution meet or exceed existing technical, safety or regulatory standards? Is the solution compatible with existing systems? Can the solution be integrated easily with existing systems?
USER FIT Does the solution make the users’ life easier? Does the solution save the user time? Does the solution give the user a positive feeling?
MARKET FIT Is the need for the solution firmly established in the market? How many people in the Total Available Market are WILLING to pay for a solution? How accessible is the Decision-Making Unit of the prospects?
COMPETITIVE FIT Are there any similar solutions available and if so what is your Unique Selling Point? Are there any similar solutions available that could be modified to solve the same? How embedded is the status quo in the industry?
Less than 21 points – analyse all the responses and find out why there appears to be no fit here. If the original GAP is real the solution may just need refining or altering. 21 points to 42 points – you have some barriers to sales which unless you address upfront will cost you money both in terms of COCA and lower Opportunity conversion rates.
42 points and above – great stuff, but use every piece of information to further refine and improve both your solution and the positioning of the solution.
7. Methods for Validating your Value Proposition Canvas
Now we have the right mind-set and a list of questions there are a number of options open to us in terms of how we validate our Value Proposition Canvas. In most cases, it would neither be appropriate nor practical to use every validation method available. We would, however, suggest that a minimum of three methods are selected and a maximum of seven.
Priority in terms of selection should be given to those methods that will allow you to:
Build customer databases Gather market insight Gain the most customer contact Gain the most objective feedback Start building relationships for potential future sales
Achieving the priorities above are unfortunately rarely the least expensive, or easiest but they are essential and will save time and money in the long term.
- Electronic Surveys. This is popular however face to face and data surveys are also highly relevant. Re-purpose survey answers to generate powerful PR campaigns.
- Advisory Boards. Build an advisory board of high profile thought leaders from your target market.
- Focus Groups. Create focus groups to help you define and refine the best solution. Let these groups create your solution roadmap.
- White Knights. Build relationships with appropriate ‘White Knights’ who can influence your target prospects.
- Social Media. Create Social Media pages to track and measure market awareness and build early relationships.
- Ambassadors. Use industry leaders to help raise awareness and be powerful advocates of your solution.
- User groups. Use early adopters to provide feedback, first base testimonials, endorsements and that ever-important Social Proof.
- Forums. Use industry forums to create contacts, raise awareness and gain market insight.
- Landing pages. Test value propositions, messaging, conversion rates and estimate COCA.
- Polls. Gain insight into the customers’ perception and importance of problems.
- Interviews. Interview both face to face and via the telephone high profile people, industry experts, thought leaders and prospects.
- A/B testing. Confirm MVP and gain insight into price sensitivity based on simple a/b testing.
- PPC campaigns. Quickly test interest by running ad campaigns on Search engines and Social Media
8. Great Validation Creates
1. Requests for trials
3. Industry Listings
4. Letters of Intent
5. Proof of Concepts
6. Pre- Launch Orders
7. Strong relationships with contacts you can return to
Whilst receiving any one of the above would be great news there is often equally as much value in the total intelligence gathered during the validation process. Please pay particular attention to the reasons people are not interested, as they most often can provide the best lessons learned in order to move the solution forward.
9. Sales Prospect Profile Template
The most important output from the Validation process is the information that you can collect which you can use to start building your Prospect Profile Templates. These are used to help sales and marketing target the people and companies who are most likely to buy.
10. Recommended Reading
You can read more about and download all the FREE tools templates and guides mentioned in this article via our Sales Tools page.
You can learn more about creating the Perfect Sales Prospect Profile and how to use it via this post.