Value Proposition and Customer Segments: Crash Course Business - Entrepreneurship #3

Summary

In this Crash Course Business episode, Anna Akana explores the concept of value in entrepreneurship. She explains that value is the core of any business, guiding decisions and customer targeting. The video teaches how to create a value proposition, emphasizing the importance of understanding customer jobs, pains, and gains. Strategies such as disruption are discussed to create new markets and provide unique value. The episode uses Stitch Fix as a case study to illustrate crafting a compelling value proposition that saves customers time and enhances their shopping experience.

Takeaways

• 💡 The concept of 'value' is central to entrepreneurship, defining a business's worth, importance, and usefulness.
• 🌟 A value proposition is a clear statement that articulates what a business does, who it benefits, and why it is beneficial.
• 📈 Value can be tangible, like a product's price or quality, or intangible, such as excellent customer service.
• 🛍️ Slack exemplifies a value proposition by offering a messaging app that simplifies work life, aiming to increase productivity with less effort.
• 🚫 Without a clear value proposition, businesses risk developing products that customers do not need or want.
• 🤔 Crafting a value proposition requires confidence in one's work and the ability to communicate its worth effectively.
• 🧐 The Value Proposition Canvas is a tool for understanding customer experiences and aligning them with product capabilities.
• 🔍 To understand customers, entrepreneurs must ask about their 'jobs' (needs), 'pains' (problems), and 'gains' (desired outcomes).
• 📊 The canvas helps in defining what products or services to offer, how they alleviate pains, and whether they create new gains.
• 📝 Researching potential customers involves methods like interviews, focus groups, and surveys to gather insights into their lives and needs.
• 📈 Customer 'jobs' can be functional, social, or emotional, and understanding these helps in creating products that resonate with them.

Q & A

What is the core concept of entrepreneurship according to the script?

The core concept of entrepreneurship according to the script is 'value,' which is the worth, importance, or usefulness of something to customers.

What is a Value Proposition?

A Value Proposition is a statement that clearly articulates what a service, business, or organization does, who it brings value to, and why it's valuable to those people.

What are the two fundamental questions at the core of any business model mentioned in the script?

The two fundamental questions are 'What value do I deliver?' and 'Who are my customers?'

How does the script describe the importance of understanding customer needs?

The script emphasizes that understanding customer needs is crucial because it helps to develop products or services that customers actually need or want, thus avoiding the creation of something irrelevant.

What are the three main questions to ask when trying to understand customers' jobs?

The three main questions are: 1) What are their jobs? 2) What pains do they experience? 3) What positive gains are they looking for and receiving?

What is the Value Proposition Canvas mentioned in the script?

The Value Proposition Canvas is a tool created by Strategyzer to help entrepreneurs understand their customers and define their value proposition.

How does the script suggest finding and connecting with potential customers?

The script suggests finding and connecting with potential customers through methods like one-on-one interviews, focus groups, or conducting surveys, either in person or through online services.

What is the significance of the 'jobs' that customers do according to the script?

The 'jobs' that customers do are significant because they represent the functional, social, or emotional needs that customers are trying to fulfill, which can guide the creation of products or services that add value.

What is the strategy of disruption as described in the script?

Disruption as a strategy involves creating a new market or format that allows customers to achieve their needs in a completely new way, rather than competing within an existing market.

How does the script use the example of Stitch Fix to illustrate a value proposition?

The script uses Stitch Fix as an example to show how a value proposition can be crafted by understanding customer jobs (shopping for clothes), pains (time constraints, budget limitations), and gains (looking good and feeling confident), and then offering solutions that address these aspects.

What does the script suggest as a method to judge the value of art?

The script implies that judging the value of art like a movie, song, or YouTube video is subjective and complex, as it's tied to personal meaning and emotional connection.

Outlines

00:00

💡 Understanding Value in Entrepreneurship

The first paragraph introduces the concept of 'value' in the context of entrepreneurship. It emphasizes that value is central to any business and influences all future decisions, innovations, and customer targeting. The script explains that a business must deliver value to be successful and poses two fundamental questions: 'What value do I deliver?' and 'Who are my customers?'. It introduces the term 'Value Proposition', which is a clear statement articulating what a business does, who it benefits, and why it's beneficial. Examples are given to illustrate tangible and intangible value, such as lower prices or better customer service. The paragraph also discusses the importance of understanding customer experiences and capabilities of a product or service to create a compelling value proposition.

05:04

🔍 Deep Dive into Customer Jobs, Pains, and Gains

The second paragraph delves into understanding the customer experience to craft a value proposition. It outlines the process of identifying customer jobs, which are the tasks or problems they face in their daily lives. The paragraph humorously suggests considering customers as 'cats' to empathize with their experiences. It explores the questions of what, where, when, why, and how customers encounter problems and emphasizes the importance of understanding these aspects to create effective solutions. The discussion then moves to the concept of 'pains' and 'gains', which are the negative and positive outcomes customers experience. The paragraph uses the example of college applications to illustrate these points and suggests that entrepreneurs should aim to alleviate pains and create gains to add value. It also touches on the idea of 'disruption' as a strategy to create new markets and deliver value in a novel way.

10:06

📈 Crafting a Value Proposition with Stitch Fix Example

The third paragraph focuses on the practical application of creating a value proposition using Stitch Fix as a case study. It describes Stitch Fix as a personal styling service that sends clothes and accessories to customers, aiming to save them time and enhance their shopping experience. The paragraph outlines the customer profile, their pains such as time constraints and budget limitations, and the gains they seek, like looking good and feeling confident. It details how Stitch Fix addresses these pains and gains through its services, such as a mobile app, different packages, doorstep delivery, and an easy return system. The paragraph concludes with a concise value proposition for Stitch Fix, emphasizing how it leverages technology and personal stylists to save its clients time by doing the shopping for them.

Keywords

💡Value

In the context of the video, 'value' refers to the worth, importance, or usefulness of something or someone. It is central to the theme of entrepreneurship, as businesses must deliver value to their customers to succeed. The script uses phrases like 'I value your opinion' and 'That hat seems like a great value for the price' to illustrate the concept. Value in a business context is what drives customer decisions and can be tangible, like a product's quality, or intangible, like customer service.

💡Value Proposition

A 'Value Proposition' is a clear statement that explains what a company offers, who it benefits, and why it is valuable to those people. It is crucial for businesses to have a compelling value proposition to stand out from competitors. The script mentions that Slack's value proposition is to 'make work life simpler, more pleasant, and more productive,' which directly addresses the customer's needs and the product's benefits.

💡Customer Jobs

'Customer Jobs' are the tasks, needs, or problems that customers are trying to accomplish. Understanding these jobs is vital for creating products or services that add value. The video script suggests asking 'What are their jobs?' to understand what customers do in their daily lives and what issues they face, which helps in crafting a value proposition that meets these needs.

💡Pains

'Pains' represent the difficulties, risks, or negative outcomes that customers experience. Identifying and addressing these pains can create significant value for customers. The script gives an example of college applicants who might face pains such as high application fees, lack of family support, or the decision between working and studying.

💡Gains

'Gains' are the positive outcomes or benefits that customers seek when they engage in a job or use a product. The video emphasizes the importance of understanding what customers hope to achieve, such as better career prospects or a fresh start, to create value propositions that deliver these gains.

💡Value Proposition Canvas

The 'Value Proposition Canvas' is a strategic tool used to map out and understand the value a product or service offers to customers. It helps businesses visualize and refine their value proposition by considering customer jobs, pains, and gains. The script mentions this tool as a way to organize thoughts and research to create a compelling value proposition.

💡Disruption

'Disruption' in the video refers to the strategy of creating a new market or product that changes the way customers achieve their jobs, often without direct competition. It is a way to deliver value by offering a novel solution to a problem. The example of television disrupting radio illustrates how a new format can redefine customer expectations and create a new market.

💡Target Market

The 'Target Market' consists of the specific group of people who are most likely to buy a product or service. The video script emphasizes the importance of researching and understanding the target market to create value propositions that resonate. Techniques like interviews, focus groups, and surveys are mentioned to connect with and learn from potential customers.

💡Functional, Social, Emotional Jobs

These terms categorize different types of customer jobs based on their nature. 'Functional jobs' are work-related tasks, 'Social jobs' involve maintaining social relationships or status, and 'Emotional jobs' are about personal growth and feelings. Understanding these different types of jobs helps in crafting comprehensive value propositions that address various customer needs.

💡Thought Bubble

The 'Thought Bubble' in the script is a segment that provides an example or case study to illustrate the concepts discussed. In this case, it uses Stitch Fix as an example to show how a company can identify customer jobs, pains, and gains to create a value proposition that adds value and meets customer needs.

💡Competition

While not explicitly detailed in the provided script, 'Competition' is a concept that will be discussed in future videos. It refers to other businesses or products in the market that offer similar services or products. Understanding competition is crucial for positioning a business's value proposition effectively and differentiating it from others.

Highlights

Value is central to any business, guiding decisions, innovations, and customer targeting.

A value proposition is a clear statement of what a business offers, to whom, and why it's valuable.

Value can be tangible, like price or quality, or intangible, like customer service.

Slack's value proposition is to make work life simpler, more pleasant, and more productive.

A value proposition saves time and money by ensuring a product meets customer needs.

Understanding customer experiences and product capabilities is crucial for crafting a value proposition.

The Value Proposition Canvas by Strategyzer helps in understanding customer jobs, pains, and gains.

Customer jobs can be functional, social, or emotional, revealing what they value.

Disruption can create new markets and provide value in a unique way, avoiding competition.

Pains are risks or annoyances that customers face, which a business can address to add value.

Gains are what customers seek or receive from doing a job, which a business can enhance.

Stitch Fix uses technology to save clients time by personalizing their clothing shopping experience.

A well-crafted value proposition can clearly state why a business is superior to competitors.

Customer-driven thinking is key to showcasing a business's unique value.

Understanding customer jobs, pains, and gains is essential for creating a compelling value proposition.

The next episode will discuss competition and learning from observing competitors in entrepreneurship.

Transcripts

When we use the word “value,” we’re usually trying to describe something’s worth,

importance, or usefulness to us.

I value your opinion.

That’s nice.

That hat seems like a great value for the price.

Cha-ching!

He had nothing of value to say and completely talked over the professor the whole time.

Rude.

And when it comes to entrepreneurship, value is everything.

Value is the core of any business, and it directs all future decisions, innovations,

and customers that get targeted.

Even if we’ve thought about the big picture, if we can’t explain how an idea makes someone’s

life better, then why should anyone pay attention?

So let’s talk strategies to answer the two fundamental questions at the core of any business

model: “What value do I deliver?” and “Who are my customers?”

I’m Anna Akana, and this is Crash Course Business: Entrepreneurship.

[Opening Music Plays]

Sometimes business jargon can seem confusing, but here’s the trick: the words usually

have pretty literal meanings.

Since value means worth, a Value Proposition is the worth you offer to your customers.

Typically, a value proposition is a sentence or paragraph that clearly articulates what

your service, business, or organization does, who it brings value to, and why it’s valuable

for those people.

It should be clear why someone should choose your company over the competition.

Value can be something tangible like offering products at a lower price or higher quality,

or something more abstract like better customer service.

For example, Slack is a messaging app designed to reduce email and streamline team communication

-- or, in their words, “make work life simpler, more pleasant, and more productive.”

Slack states the value for the customer right up front with their value proposition: Be

more productive at work with less effort.

No matter the business idea, a value proposition saves us precious time and money.

Without thinking about value, we risk developing something that customers don’t need or want.

Cheetos lip balm anyone?

No takers?

You sure?

Alright.

And don’t get me wrong, creating a value proposition can seem daunting.

We have to be confident in ourselves and the work we’ve done to develop our ideas.

Anna 1: So… what are you worth?

Anna 2: Excuse me?

Anna 1: What are you worth?

What’s your value?

Why should people care about you and your work?

Anna 2: Uh, I guess...

I tell stories with my art that help people find meaning and feel less alone… but also,

how do you even judge the value of a movie or a song or YouTube video or ANY art, you

know???

When we write a value proposition, we have to think about two main things: first, the

experiences of our customers

and second, the capabilities of our product or service.

If we’ve got those down, it’ll basically write itself!

To make sure we’re covering our bases, we can use the Value Proposition Canvas created

by a company called Strategyzer.

Half of the work is understanding customers.

Gotta catch ‘em all!

And to do that, there are 3 main questions to ask:

Number 1: What are their jobs?

And this is a little confusing, but I don’t mean their literal jobs.

More like… what do they do at work and in everyday life, and what problems do they have?

Number 2: What pains do they experience, like risks, obstacles, or bad outcomes?

And number 3: What positive gains are they looking for and receiving?

Everyone is trying to maximize gains and minimize pains, or at least strike a healthy balance.

So we entrepreneurs can try to tip the scales towards gains.

After considering the customer experience, we can turn the spotlight onto our potential

business with 3 response questions:

Number 1: What products and services are we offering customers to help them complete jobs?

Number 2: Is what we’re offering a pain reliever that cuts out risks, obstacles, and

bad outcomes?

And number 3: Better yet, is what we’re offering a gain creator?

Together, customers and products help us define our value!

So let’s get down to the nitty-gritty details of writing a value proposition, shall we?

In order to figure out the jobs, pains, and gains of our customers, we have to find them

and get nosy about their lives.

But keep it professional -- this is entrepreneurship!

Leave your Facebook stalking skills out of it.

Some might call this research finding your target market, the people most likely to buy

from you.

There are lots of ways to connect with potential customers, but industry favorites include:

interviewing them one-on-one, holding focus groups, or conducting surveys

-- either in person or through an online service like SurveyMonkey.

Remember, the goal is to learn from potential customers to turn your idea into a top-notch

solution to a problem,

whether you’re working on spill-proof takeout containers or more affordable childcare.

So sleuth out the Who, What, Where, When, Why, and How of your target market.

Who do you think or know is experiencing the problem?

How old are they, do they have a family, or do they speak different languages?

Are they a cat?

Please say they’re a cat.

I understand them.

What are they doing when they experience the problem?

Are they working at a desk job, crafting something, or exercising?

Maybe they’re hiding under a blanket away from the world and their problems until they

crumble into dust.

Where are they experiencing the problem?

Are they at work or at home?

On a plane?

A train?

An automobile?

When are they experiencing the problem?

Is there a time of day, week, or year?

Is it a seasonal problem?

Maybe it changes with the phase of moon and the flow of the tides -- we can’t help it

when Mercury’s in retrograde. Take it from a Leo.

Why are they experiencing the problem?

Why are others not experiencing the problem?

And, like, why me?

Why is it always me???

And, finally, how are different people experiencing the problem differently?

How are they learning to cope with the problem or develop their own solutions?

I mean, ignoring the problem is an option.

But, uh, not always the best way to cope.

Says my therapist.

All these questions paint a picture of who we’re dealing with, and give us a peek at

their jobs.

And when we’re dealing with value propositions, customer jobs can be functional, social, or

emotional.

Functional jobs are what we’d traditionally recognize as work that pays the bills.

A big mistake when writing a value proposition is only focusing on the functional jobs of

our customers.

But customers feel social obligations to look good or support their community.

And emotional jobs are all the work we put in to grow as humans.

The ultimate goal of understanding customer jobs is to get into their heads.

What they do illuminates what they value, or what they’d like to value.

Entrepreneurs want to change the status quo.

So if we know what customers value, we can figure out how to get them what they want

in a new or better format.

Remember the point of the value proposition: why should people choose you over everyone

else?

Disruption is one strategy to give customers value, and it’s a hot business vocab word.

Instead of challenging existing markets and trying to make our idea stand out in a field

of others, why not create a new market (often called a blue ocean) so our idea is like a

seed sprouting a whole new garden?

Here, we’re not talking about value that comes from lower prices or faster delivery

-- we’re talking about letting customers achieve the same jobs in a totally new format.

Like once upon a time, radio was the cream of the crop for media in everyone’s home.

Radio listeners had two needs: one, to be entertained, and two, to stay informed.

And radio met those needs by broadcasting different programs, from music to dramatic

theater to news.

Then, along came television -- a new, disruptive media format that entertained and informed

people.

Because TV achieved similar customer needs in a fresh way, TV entrepreneurs didn’t

have to compete within the world of radio.

They built their own world, created new value, and maybe even found new customers who weren’t

interested in radio at all.

Of course, we know jobs don’t come without pains.

We’re all human.

The struggle is real.

So when we think about our customers, we need to consider what risks or annoyances are getting

in their way.

If we can address those pains, that means we’ll create a better business with more

value.

If a customer’s job is applying to college, some pains could be: the clunky admissions

website from 2002, application fees and tuition costs,

a lack of family support, or the trade-off between working to earn money now and shelling

out money for another degree.

And customers wouldn’t do jobs at all without gains, which tell us what they need or want

to experience before or after a job.

Sticking with that college application example, the gains might be: better career prospects,

a higher salary after graduation, exposure to new thoughts and ideas, a fresh start,

or new friends.

Now how are you going to help them - product

Now that we’ve researched our potential customers, we’ve filled out half of our

Value Proposition Canvas.

Or you can sort all that knowledge with one of those conspiracy investigation walls with

pushpins, multiple colors of string, and newspaper clippings.

You do you.

It’s your value proposition.

Using all this info, we can prune our big entrepreneurial idea to make sure our products

and services are truly alleviating pains, creating gains, and adding value to people’s

lives.

Once we’ve done this, our value proposition will be flourishing.

To see how, let’s go to the Thought Bubble.

Stitch Fix is a personal styling service that sends clothes and accessories to people.

It has customers all across the U.S. and soon across the U.K.

Those customers have many jobs to do, but an obvious one is to shop for clothes.

Let’s think of Stitch Fix customers as busy, technology-savvy people ages 25-50 living

in the U.S., of all genders, and working across all fields.

And they’ve been willing to consistently spend some money on fashion.

They might be pained by lots of things, like no time as they try to juggle work and family,

a limited budget, living far from clothing stores, or having no idea what their “body

type” is.

Pear?

Apple?

...Pineapple?

After exploring their target market, Stitch Fix offers pain relievers like a mobile app

for convenience, different packages for different budgets,

doorstep delivery, an easy return system, and personally styled wardrobes for different

body types.

Now, these customers might shop for clothes because they want gains of looking good and

feeling confident in and out of the workplace.

So Stitch Fix wants to deliver that gain.

But they also create new gains using technology, like their surveys for measurements and preferences,

algorithms,

and personal stylists to help their customers feel good about the clothes they get and save

time by not wandering around a mall.

Combining all this information, Stitch Fix came up with the elegant value proposition:

“We save our clients time by doing the shopping.”

If we were to get a little more detailed for them, we might say, “Stitch Fix leverages

technology to save working clients time by using personalized measurements, preferences,

and stylists to shop for clothes, which are delivered straight to their doors.”

Thanks, Thought Bubble!

After all this thinking and research, our value proposition is done.

So when you’re asked “What are you worth?”, squish down that panic.

You put in the work, so show ‘em what you’ve got.

Anna 1: So… what are you worth?

Anna 2: My audience values entertainment and authentic connection.

So I use writing, acting, motion graphics, and music to tell stories that make people

feel less alone and highlight the complexities of the human experience.

Also cats.

Today, we learned about value and how customer-driven thinking can help us show off what our business

has to offer.

By understanding customer jobs, pains, and gains, we can make sure our products and services

alleviate pains or create gains.

And then -- boom -- we have a value proposition, a statement basically saying why we’re better

than anybody else.

Next time, we’ll target the competition.

Well, not target them like in target practice.

But we will talk about how to figure out who you’re competing with in this entrepreneurship

arena, and what can be learned from observing them.

Thanks for watching Crash Course Business, sponsored by Google. And thank you to Thought Cafe for the graphics.

If you want to help keep Crash Course free for everybody, forever, you can join our community

on Patreon.

And if you want to learn more about how to collect data to understand people, check out

this Crash Course Sociology video about research methods.