To quickly draw a picture of what the idea entails.
It allows us to get an understanding of your business and to go through the process of making connections between what your idea is and how to make it into a business.
It looks at what kinds of customer decisions influence the use of your systems.
It allows everyone to get a clear idea of what the business will likely be.
How to use it
The Value Proposition is foundational to any business/product.
It is the fundamental concept of the exchange of value between your business and your customer/clients.
Generally, value is exchanged from a customer for money when a problem is solved or a pain is relieved for them by your business.
Good questions to ask when defining your business/product:
What is the problem I am solving?
Why would someone want to have this problem solved?
What is the underlying motivator for this problem?
A good way to approach this for users/customers is by looking at your customer segments and figuring out where your product/service solves the problem for your customer, based on Maslow's Hierarchy of Needs.
If you are selling your product or service to another business, you are a key partner in them achieving their Value Proposition for their customers.
It is important to have context around the goals the company is trying to achieve for their Customer Segments and where your business/product/service fits in the value chain.
Customer Segmenting is the practice of dividing a customer base into groups of individuals that are similar in specific ways, such as age, gender, interests and spending habits.
Things to consider when determining your Customer Segments:
Who are we solving the problem for?
Who are the people that will value my value proposition?
Are they another business?
If so, what are the characteristics of those businesses?
Or, are they other people?
Does my value proposition appeal to men/women or both?
Does it appeal to young adults aged 20 to 30 or teenagers?
What are the characteristics of the people who are looking for my value proposition?
Another thing to gauge and understand is your market size, and how many people there are in the Customer Segment. This will help you understand your market from a micro and macro perspective.
A great place to start understanding your customer is to create customer personas for each of your Customer Segments.