Quantifying the Value Proposition: what is it and why it is critical to any startup
Updated: Jan 7
What is to quantify the value proposition?
The value proposition quantification is nothing more than the difference between the value of the current situation (as is) and the value to be achieved by the product (to be).
Value Proposition = Total Value Achieved by the Product - Current Situation Value
Defining and quantifying the value proposition are very decisive steps for the success of a product. If the solution doesn't bring any value to the persona when compared to the current situation, it doesn't have any reason to exist.
The best way to understand whether the added value is significant is to quantify it. In general, the benefits that a product brings fall into one of three groups:
Therefore, we must follow these steps to quantify the value proposition:
Define a metric to be evaluated (quality, time or price): In this step, the pain points of the previously mapped personas must be reviewed and evaluated in order of priority. If the personas stated that their greatest pain is the great manual work and time spent on a task, it doesn't make any sense to focus on another pain that is less important. In this case, we should focus on increase speed (or time reduction) achieved through the solution.
Raise the value of the current situation: At this stage you should map the process performed by the persona currently, where he feels the pains already mentioned, but focusing mainly on the metric he is measuring.
Raise the achieved value of the product: Just as we did with the current situation, the intention is to understand how much the solution adds value to the user process.
Assess the differences and formulate the quantified value proposition: With the current situation and the value generated by the product mapped, we can assess the differences between them and calculate the value proposition in value and percentage. With this consolidated value, just formulate a sentence, for example: "Our product reduces the time in step Y of process X by 50%". So, the value proposition is quantified and consolidated in a sentence that directly clarifies the solution's added value.
Example of a value proposition quantification
The image above illustrates what value proposition quantification is. Imagine a company which produces teddy bears and whose target audience is the product developers. We don't understand anything about this industry, but most likely there is a stage of ideation, designing, production and marketing.
This company wants to heal the pain of these product developers in the ideation and designing stage, where there is little collaboration between team members because of the software used today, making the stages slower.
Thus, the solution is precisely focused on facilitating the collaboration of areas that work with ideation and design, reducing production time and accelerating the launch of new products.
As we mentioned before, the first step is to identify the metric to be measured, which in this case is time. The second and third is to raise the respective times of each step in the current situation (as is) and the projected times for the solution (to be).
Finally, just calculate the differences in value and percentage of each step and the complete process to identify the value proposition.
In this example the value proposition could be summarized as follows: "Reduce the ideation step by 33% and reduce the designing stage by 50%, making the product launch process 18% faster."
We hope that this value proposition quantification step has been made clear. This post is based on the book Disciplined Entrepreneurship by Bill Aulet, professor at MIT, which has a clear step-by-step guide on how to get an idea off paper and launch your startup.