Value proposition and jobs to be done: build your offer around the job the customer wants done

Most owners feel their price is under pressure. Fewer can say exactly why customers choose them, which is what a value proposition should answer, and that gap makes every price increase feel risky. Yet price is the strongest lever in the profit and loss account. On the average income statement of an S&P 1500 company, a 1% price rise at stable volume lifts operating profit by about 8%, nearly 50% more than a 1% cut in variable costs (source: McKinsey, February 2003).

A sharp value proposition gives you the confidence to use that lever. It starts with one question: what job is the customer trying to get done, and in which situation? Below, jobs-to-be-done theory and the Value Proposition Canvas turn customer interviews into an offer and a price.

What is jobs to be done?

Clayton Christensen, Taddy Hall, Karen Dillon and David Duncan set out the idea in Harvard Business Review (September 2016). Customers do not simply buy products; they hire them to get a job done. If the product does the job well, they hire it again; if not, they fire it. The circumstances in which customers try to get the job done matter more than their characteristics, such as age, income, company size or industry. And jobs are never only functional: they have social and emotional sides.

The Christensen Institute calls a job the progress a person is trying to make in particular circumstances. In the article's example, condominium sales stayed weak until the developers saw they were not in construction but in helping people move on to a new stage of life.

The Value Proposition Canvas: customer profile and value map

Alexander Osterwalder, Yves Pigneur, Gregory Bernarda and Alan Smith worked the idea out in Value Proposition Design (Wiley, October 2014). The Value Proposition Canvas zooms in on two blocks of the Business Model Canvas: one customer segment and the proposition for it. It has two halves.

There is fit when your pain relievers and gain creators address the pains and gains that matter most. Strategyzer warns that fit remains a claim until customers confirm it. An offer that tries to relieve every pain relieves none of them well.

How to run jobs-to-be-done interviews

1. 01

   Choose recent buyers and recent leavers

   People who switched to or from you recently still remember why; long-standing customers remember habits.

2. 02

   Go back to the first thought

   When did they first think "this has to change", and what happened that day? The trigger points to the job.

3. 03

   Map the alternatives

   What else did they consider, including doing it themselves, hiring staff or doing nothing? Those are your real competitors.

4. 04

   Ask what nearly stopped them

   Doubts, switching costs and habits explain why good offers are not bought. Your proposition must answer them.

5. 05

   Sort the answers in the customer's words

   Group jobs, pains and gains, and rank them by how often and how strongly they come up. Patterns usually appear after eight to twelve interviews per segment.

Value proposition example: a commercial laundry for hotels

A commercial laundry with 40 staff washes linen for hotels and restaurants in one region. It keeps losing tenders to a larger rival with a lower price per kilo and has answered with discounts. Before cutting further, the team interviews ten housekeeping managers and four restaurant owners, including three who left in the past year.

The answers barely mention price per kilo. The job is every room ready for afternoon check-in, with complete and spotless linen, without staff counting and sorting. The biggest pain is a shortage on a full Saturday.

Fictitious Firmfocus example.

The arithmetic changes the price discussion. One hotel with 120 rooms told the team its housekeepers spend about six hours a week counting, sorting and chasing linen. At €25 an hour that is €150 a week, or €7,800 a year. A 3% price rise on its laundry bill of €90,000 a year costs the hotel €2,700. If the new service removes most of the counting work, the hotel is better off even at the higher price.

The laundry stops quoting per kilo for hotels and offers a price per occupied room-night, with the service level in the contract; small restaurants can still buy the basic service. The conversation moves from kilos to rooms ready on time.

Fictitious Firmfocus example. Amounts in euro; the logic works in any currency.

Price: the lever behind a sharp value proposition

If volume and costs stay the same, a price rise goes straight to profit:

With an operating margin of 5%, a 1% price rise adds about 20% to operating profit; at a margin of 10% it adds about 10%. The same logic works against you. With a contribution margin (revenue minus variable costs) of 40%, a 5% price cut needs 5 / (40 - 5) = about 14% more volume just to keep the same profit.

Fictitious Firmfocus example figures. The formula assumes volume and costs stay the same.

Look also at what you actually keep. Marn, Roegner and Zawada of McKinsey call it the pocket price: what remains of the list price after discounts, bonuses, payment terms and free delivery, mapped in a pocket price waterfall. The practical side is on the pricing page.

Disruption: what it is and what it is not

Jobs to be done grew out of Christensen's work on disruptive innovation, a term now used for almost any new competitor. Christensen, Michael Raynor and Rory McDonald corrected that in Harvard Business Review (December 2015).

Use the theory as a warning sign rather than a forecast: watch who is taking your smallest customers with a simpler offer. To create a new market yourself, see Blue Ocean Strategy.

Value proposition pitfalls

• Opinions instead of behaviour: asking customers what they would want gives polite answers. Ask what they did.
• Segments by characteristics: customers with the same job behave alike across industries and sizes.
• Every pain counts the same: a list of twenty pains is not a proposition. Pick the two or three that cost the customer most.
• Only the functional job: looking in control or avoiding blame often decides the purchase.
• Giving value away: broad standard discounts reward customers who would have paid more. Tie the price to the job, not to the haggling.

Value propositions in a small business and a larger organisation

How the proposition earns money is worked out in the Business Model Canvas. A market and customer analysis puts numbers on the segments, and Porter's generic strategies help decide whether you win on cost or on difference. All models for this decision are in strategic choices, part of the strategy overview.