The Customer Value Proposition in a Seed Stage Startups
A sum up of my experience of making first sales in 10+ startups
WTF is a CVP!?
The moment your product stops being purchased for some reason, your revenue is not growing at the same rate, and your hypotheses about a customer need look more and more like a Tony Robinson standup, it’s time to form a USP or CVP.
Let’s go over some classic examples, and leave your answers in the comments:
✈️ What does Boing or Airbus sell?
🚗 What does BWM sell? What does Mercedes do?
🍏 What do you buy from Apple?
What is NOT to do:
❌ Form a USP “from the other side,” i.e., from a competitor. First of all, they probably did. Second, you’ll depend on them for every move, not the customer’s needs.
❌ Form one USP for everyone. If all of your clients are identical, then you’re lucky and will have one USP for everyone. But chances are you don’t understand what you’re selling initially, so each client will see a slightly different value in you. Your job is to articulate and crystallize.
❌ Offer multiple USPs to customers in the same segment. This is the other side of the coin of the previous point; the focus is everything.
What are we doing?
1️⃣ We tested three types of clients: regulars, those who are not our clients, and those who are not our clients at all (those who don’t see any value);
2️⃣ Formulated hypotheses by segment;
3️⃣ We once again made client interviews and made sure that these segments were similar to the truth and real people;
4️⃣ We tested the behavioral patterns of these segments on the data and divided our audience by them (at least half of the core audience should converge here);
5️⃣ Went back to do interviews to confirm the extrapolation;
6️⃣ Let’s formulate a CVP according to the golden formula.
The golden formula for a CVP: We help customer X in situation Y solve problem P with solution S and get value V
A case study
Next, the segments are laden with attributes. It’s easy to recognize the first level of pain and desire, but it can be hard to look deeper. Let me tell you a story.
A startup was making a machine with algae that, like plants in the jungle, converted CO2 into oxygen. The technology was invented in the Soviet Union for a flight to Mars, but it was screwed up in the bowels of the Research Institute and picked up by clever young scientists.
🤧 It was rebuilt for a segment of allergy sufferers who flew to Malta (an island without plants, just rocks) during the spring. Some people cannot fly anywhere, so they stay home close to the apartments. This segment is quite perspective, but the market is small. This occurred before the pandemic, and nobody didn’t know how to work remotely.
🐽 So a startup pivoted (as usual, tested 100500 hypotheses) into industrial livestock cleaners. Pigs are dying of methane from the smell of their poop, you know that? So the place is cleaned, and the pigs are alive. And it’s a big market!
Let’s break this case down by attribute
Customer needs/pains + market
🤧 People can stay home for a month or a half but must go to the island, which is expensive. You put a box of chlorella at home without flying to the island; this is not expensive!
🐽 Piggies die, and purification systems fail expensively. You put in purifiers with chlorella, which are very expensive! But the pigs are alive, and the business can be scaled without much CAPEX!
Barriers
🤧 People in confined spaces were considered weird before the pandemic; delivery services weren’t yet advanced.
🐽 What are the brand algae cleaners? WTF? A CTO at a farm won’t let you come to the decision-maker.
The formula for the segment
🤧 We help allergy sufferers in a “birch blossom” situation solve the problem of maintaining their lifestyle with a case of chlorella at 1/2 the price of a month’s stay in Malta and get the value of being a good father/employee, etc.
🐽 We help small and medium-sized livestock farms in a situation of limited acreage solve the problem of increasing headcount with a box of chlore
Enablers
Your project likely has a gap between your current and target positions. The gap is covered by forming enablers: features that bring you closer to your target picture.
For example, you are now selling for $100 to 10 clients in the medical clinic segment.
You want to sell for $ 1000 to 5 clients in the segment of dental clinics. To do this, you need to:
Tighten your online booking functionality for services.
Add the cost of additional services as consumables to form the final price for the client.
Immediately put it on the calendar.
Every such feature is an enabler.
Every such feature is an enabler.