3.2.2 Social media options for activity Business model: value propositions

Learning Goal: Recognize and understand the value proposition area of a business model and be able to define and shape the impact and use of social media for this part of the business model.

Reading time: approx. 23 minutes

Exercises: Exercises are in the PDF of all exercises of this course. Download it from here.

Basics

This section gives you an overview of

  • the definition of value propositions and
  • their importance in the business model and
  • the impact of social media on the value proposition of business models
  • The fundamentals of using social media for a business model’s value proposition.

We use the value propositions in Osterwalder & Pigneur’s Business Canvas as a basis for analyzing the use of social media for value propositions and the potential for change of social media on the value propositions of a business model.

Value propositions and customer segments

Value propositions are the services provided by the company. These services are targeted at specific customer groups or customer segments in all Regal. Therefore, we will find different content such as needs in both the business model both the customer segments and the value propositions. Nevertheless, it makes sense to work through both areas of the business model (value propositions and customer segments) completely and carefully for several reasons, especially because

  • It is possible that not all companies use customer segments consistently.
  • value propositions is not always clearly assigned to a customer segment.
  • needs in the customer segments are used primarily as a differentiation criterion, in the value propositions needs are understood much more comprehensively as the basis of performance. If we limit ourselves to the needs of customer segments, we exclude important elements for business success (also in social media).

We develop the input for our social media strategy via these work steps

  1. Definition of the value propositions
  2. Define impact of social media on value propositions.
  3. Derive requirements from value propositions for social media strategy.

Definition value propositions

Value propositions describe the package of products and services with which the company generates value in a particular customer segment. Value propositions are a company’s services for the needs or problems of a customer segment.

Important: The evaluation of problems / needs and performance has an impact on the value of the value proposition.

Importance of value propositions: Value propositions are central to a business model. They describe what services the company offers its markets. The provision of this service and the marketing of the service are central tasks of the company. Changes in value propositions thus have an impact on the company’s entire business model.

Categories and their criteria

Putting value propositions into categories makes it easier to keep track of their specific characteristics. These categories also facilitate the assessment of the value proposition in its context, particularly in the importance of the value proposition to the market and in competition.

Osterwalder and Pigneur form subsequent criteria for value propositions:

  • Novelty
  • Risk mitigation
  • Convenience / user friendliness
  • Brand / Status
  • Performance (scope, quality, quantity)
  • Customization
  • Work facilitation
  • Availability
  • Cost reduction
  • Design

Novelty

These value propositions fulfill new needs, or satisfy needs for which there was previously no offer, or which were not previously recognized or conscious as a need.

Osterwalder & Pigneur cite smart phones or mobile telephone devices as an example here. (Attention network effect).

For understanding – the need for telecommunication was present and -line-bound – also used. The need for mobile telecommunications was therefore easy to awaken – and precisely because it brought additional benefits for users.

As a reminder, the network effect says that the more people use a service, the more valuable it becomes.

Performance improvement

Osterwalder & Pigneur describe performance improvement – for products as well as for services – as the traditional form of value creation. The value of this offer is an improvement in performance over competitive offers or previous, prior performance.

Example computer manufacturer

Performance improvement as a driver of value creation has provided an increase in demand in this market, as this performance improvement has been useful for the user. The less the incremental benefit from the performance improvement becomes apparent or necessary, the smaller the effect on demand.

Brand / Status

The value of this offer is that it can be used to express or emphasize a certain status. The offer is thus a means by which the user can represent or imply a certain status.

They recognize the extent to which social media impacts this category of value proposition. Status always has a social context. This means in this case also that the social context also defines the effect status with. Social context, in turn, stands for the individual’s known circle of friends or personal social network

Work facilitation

The value proposition facilitates problem solving for its users. For example, by relieving the user of tedious tasks or by linking the offer to a comprehensive service package that simplifies problem solving.

This category of value propositions can be found – in addition to b2c markets – particularly in b2b markets, for example, when companies take over entire service modules as suppliers, including their development or maintenance. This may also result in an expanded or new revenue model.

Customization

The real value of this service lies in individualization, i.e. further adaptation to customer needs. The performance becomes more “customer-oriented”. Customization but also mass customization are examples. The ability to configure a mass-produced product into a customized product is common, for example, in new car orders.

Design

The value of an offer may lie partly or entirely in its design. For example, in a more attractive appearance compared with other offers. Or the product is in itself a pure design object in which the actual function recedes far into the background.

There are many examples of this, e.g. in automobiles, in home interiors (furniture, lighting) or in fashion (haute couture, designer clothing) or consumer electronics (iPhone, Bang & Olufsen).

Risk mitigation

In the case of risk mitigation as a value proposition (as part of a service), the reduction of a risk associated with the service is an important component of the service for success. Osterwalder & Pigneur mention here, for example, the used car warranty in the used car trade for consumers or availability guarantees in IT services.

Cost reduction

For example, the value cost reduction of a service is to reduce the total cost by economically integrating services into a package. The customer receives a service that is more cost-effective for him in total. Osterwalder & Pigneur cite hosted CRM services as an example of this, which become cheaper for the customer overall as a result of the service bundle (because the customer receives an overall package that would be more expensive in total if it were provided by the company itself).

Availability

This category of value propositions enables customers to take advantage of value propositions that would otherwise be inaccessible to them. For example, through appropriate forms of sharing or financing. Osterwalder & Pigneur list investment funds, among others, as an example of this, enabling customers to use an investment portfolio that they would not be able to build on their own.

Convenience / user friendliness

The actual performance of this category of value propositions lies in making an existing service easier to use or operate.Apple, with its products, is an excellent example of how successful this category of value propositions can be in the market. Apple’s achievement has been and continues to be, among other things, making devices easier and more convenient to use.

Price

Offering a comparable value at a lower price is not really new. Consistently enforced, this becomes its own business model. Osterwalder & Pigneur cite so-called low-cost airlines as an example here. Free email accounts, free newspapers or free social media services are other examples of this category of value offers. And let’s think about Wikipedia here as well. The expensive encyclopedia commodity became a service available free of charge to almost everyone.

Impact of social media on value propositions

Social media can impact value proposition issues and needs as well as performance.

Both in the impact on problems and needs and in the impact of social media on the value proposition of a business model, the social context (of the user) plays a significant role. Therefore, this mechanism is additionally addressed following the impact on problems and needs and benefits.

  • Impact of social media on problems and needs: The more urgent a problem is perceived to be – or actually is – the more valuable and important its solution is to us. The urgency can be physical or psychological in nature, and besides that, it can also be influenced by the social environment. The pressure to behave in a socially appropriate manner is one example of the impact of social media on needs. Another classic example is the orientation toward brands and lifestyles, which is particularly pronounced in certain age groups. In target or age groups that are particularly strongly oriented toward peer groups, the impact of social media is correspondingly greater. Problems are amplified by this orientation.
  • Impact of social media on performance: Not only the physical quality of a company’s performance is relevant for its success, but also its personal acceptance and appreciation. If the assessment of a service by a peer group or another social authority is important for the user, this assessment can gain greater weight for satisfaction with the service – up to and including recommendation – than an objective fact. Emotional belonging to a community or a brand are other examples. Just think of the soccer fan, whose sense of belonging does not necessarily depend on the club’s standings, but can also find its source in social affirmation.
Explanation Social context of value propositions

The social context consists of the user’s social environment and its influence on attitudes, values, decisions, opinions, etc. The social context is an individual variable. Thus, the social context is an individual variable, i.e. it is different for each individual. The social context can determine the importance of needs and problems but also of services and offers.

Example: A social environment, such as a group or circle of friends, influences the value/importance of problems, needs and achievements, brands.

Whenever we talk about needs and problems but also achievements, which are the subject of social communication, we can assume a – more or less pronounced – social context. In order to identify a possible social context, we can also build on insights from our own social environment, in addition to our life experience and our own insights from everyday life. In addition, we can gain valuable insights with the help of monitoring.

Analysis of existing problems and needs.

The procedure

  1. Definition of the problems and the company services aimed at them
  2. Analyze the impact of social media on social context level problems.
  3. Analyze the impact of social media on problems and performance at the network effect level.
  4. Analysis at the level of usage formats / performance potential social media
Definition of the problems and the company services aimed at them

Work steps:

  • For each customer segment, we create a list of the customer segment’s value propositions. This first gives us an overview of all the company’s value propositions. Depending on the company, this list can be quite comprehensive. Verify that all value propositions are equally important to the company and should be handled with social media. If this is the case, include all value propositions in the strategy development. If individual value propositions are of minor importance or no longer relevant for the future of the company, you can remove these value propositions – in consultation with management – from your overview and from strategy development.
  • For each value proposition, we examine which needs and problems this value proposition – the company performance – relates to.
  • For each need and problem, as well as for each related business performance, we check if there is a social context. We can use the topics and their communication for this test. The goal of the test is to determine the extent to which this social context affects behavior, attitudes, and evaluations of problems and needs.

At the same time, we check whether from social media – that is, by the social media users themselves,

  • a change in the importance of the customer’s need can be identified or expected.
  • services could be provided that make our problem solving obsolete or less relevant.

On the second point – benefits from or through social media – think of the Wikipedia example.

Impact Social context

We check if there is a social media context with impact on problems and needs as well as performance by monitoring social communication in existing groupings on relevant topics and their use.

  • Question wording: Are needs, problems and services discussed, recommended or evaluated in social media?

Here it is first of all decisive whether this social context exists. In a second step, check how pronounced this social context is. So what meaning it has.

In a third step, check what significance / impact this social context can have for the company(social media change potential). The question for this could be:

  • Can the problem or need or its meaning be changed or solved through social media?
  • Could social media users provide parts of our service or the complete service as well.

Examples

  • Problem cost effective transport
  • Solution: Anyone with vehicle can provide services
  • Market development: possible via social communication (recommendation)

Uber offers people a platform on which they can use their own vehicle to transport others.

  • Problem: inexpensive overnight stays
  • Solution: networking of supply and demand via social technologies / platforms
  • Market development made possible via social media

AirBnB offers people a platform on which they can easily rent out their own apartment or apartments. This has a direct impact on the traditional vacation rental business as well as on the business of hotels.

Insight: Social media enables or facilitates disruptive business models .

  • Question wording: Is the evaluation of the problem solution in a social context?

If the experiences of other customers with the same services are important for the purchase decision / evaluation of the service, this social context will help determine the success of the service.

Examples

Holidaycheck offers people a platform on which they can share their experiences with vacation offers. Social context: Acceptance of the service through user ratings

AirBnB offers people a platform on which they can easily rent out their own apartment or apartments. Social context: Acceptance of the service through positive reviews from users is a basis for the success of the platform.

Realization: the evaluation of problem solutions can have a great influence on the success of the problem solution.

Tasks for social media strategy for value propositions from social context

Several tasks for social media strategy can arise for supporting value propositions through the use of social context.

Task categories

  • Audience: Information about problems from the customer’s point of view and appropriate solutions.
  • user generated content (Audience): Experiences and ratings of users regarding problems and services.
  • Community: mutual support and exchange in case of problems or use of services.
  • Information platform / Opinion leadership: Establish an information platform on a topic around
  • To become opinion leader (communicative market leadership)
  • become a central point of contact for information and problems relating to its own performance (information acquisition and problem management).

Impact of social media on value propositions – network effect

To identify a network effect of social media on problems and performance, we examine whether the benefits of a service increase or decrease with the number of people using that service.

Explanation network effect: The problem solution / service becomes more useful the more people use it.

  • Question wording: Is there a network effect in problem solving?

Last but not least, a network effect for a customer need has a direct impact on the marketing/dissemination of this service. Check if the benefit of your service for the users increases / becomes bigger / more valuable if more people use this service.

Example network effect

Messenger for social communication on the Internet: The more people use a particular messenger, the more attractive this messenger becomes for other social media users. A messenger that is little used is correspondingly less attractive.

Computer games in which users act in teams and compete against each other: The more people play this game, the more attractive it becomes for others to play this game as well, because it is easier to find game partners and exchange information about the game.

Finding: A performance that corresponds to a network effect benefits to an extraordinary degree through strong to exponential growth.

Benefit of a network effect

A network effect means that the networking of social media users can be used particularly successfully for distribution and marketing.

  • The dissemination of a problem solution / an offer with a network effect is supported more strongly by the users than without a network effect.
  • The users themselves generate further leads and customers. The company’s social media activities should specifically support and promote this opportunity.
Effects of usage formats on value propositions
  • Question: How do the individual usage formats of social media affect a value proposition?

This question concerns both the need-problem side and the performance side.

We answer this question by decoding the effects of the social media usage formats(social network, audience,community) with their respective performance potential (see the corresponding chapters) for our value propositions (both for the problem side and for the performance side). If one of these usage formats results in a potential competitive advantage / market advantage, we as a company should take advantage of this opportunity before our competitors.

Tasks for the social media strategy for the value propositions from the network effect

The network effect works through the personal social networks of social media users. Accordingly, it is important to be able to use the users’ personal social networks as extensively as possible for dissemination.

This results in requirements for the content of the social media strategy, in particular for the usage format and strategy component channels, content, communication and participation, and also for social media management. If we are dealing with a network effect in one or more value propositions, we should pay special attention in our social media strategy to

  • Activation of the social media users of our reach(user benefit, motivation, participation)
  • the smoothest possible integration of our users’ social networks(channels) and the use of channels suitable for this purpose

pay attention. The use of the community usage format should also be considered.

Corporate targets for value propositions

The value propositions of a business model can change in line with corporate objectives. We should definitely consider this in our social media strategy.

Examples of changes in value propositions due to business objectives and their consideration in pbsm.
  • new value propositions: the company adds new value propositions to its services. We take this change into account by including the topics of the new value propositions in our options for action (and in the further steps of our strategy development).
  • Abandonment of value propositions: the company discontinues corporate services. We take this into account by removing the topics of the discontinued value propositions that are no longer required from our options for action and the further steps of strategy development.
  • higher priorities for existing value propositions: the company gives higher priority to certain corporate services: we take this corporate goal/these corporate goals into account by giving higher priority to the topics of this value proposition/these value propositions accordingly.
  • lower priority for existing value propositions: the importance of certain company services to the company has reduced / will reduce. Accordingly, we reduce the importance of the topics and themes of these value propositions in our options for action and the subsequent steps of strategy development.

Changes in markets, in corporate priorities and growth directions are reason to adapt our social media strategy accordingly. Adapting existing social media strategies to changing circumstances requires that we perceive these changes and understand their effects or requirements on our strategy, classify them correctly, and know and master the corresponding adjusting screws for adapting our strategy. In this case, adjusting the topics and subject areas affected by the changes.

Social media potential for change Services

A potential for change from social media on existing services can be, for example, in the evaluation of the service, or in a partial or complete replacement of the company’s service by social media itself.

Depending on the situation, we can try to counteract this potential for change through appropriate presentation, or compensate for it by adjusting performance. In both cases, information about causes or wishes of customers is extremely valuable for adjustments.

Tasks for social media from the potential for change Services

For the social media strategy, tasks analogous to the potential for change on problems and needs result from an identified potential for change.

Application

The practical application is always as individual as the markets and companies for which we apply the method.

Note practical application for reminder

The following procedure and the templates used in it are examples. Please do not assume that the approach and templates can in every case one hundred percent meet the individual requirements of each company and its business model.

The procedure is intended to clarify a method for you and, on the basis of its exemplary procedure, hopefully also facilitate the adaptation of this method for the specific situation of a concrete company.

In other words, you can rarely get by in practice without customizing procedures and templates.

Process overview

The application process runs through these stations.

  1. Value propositions of the customer segments
  2. Problems, needs, services
  3. Topics, usage formats, impact formats
  4. Summary social media action options for value propositions

We use the list of customer segments that we want to work with social media. Not all customer segments of a business model are automatically handled with a social media strategy. In some cases, the customer segments and the markets, target groups and topics they contain are so different that it becomes difficult to address them in a common strategy. We have most likely already developed this list in the Customer Segments process. We use this list to create the overview of value propositions for each customer segment we want to target with social media.

Value Propositions

In the next step, we summarize the value propositions of the customer segments in a list that is as clear as possible.

It may happen that we offer the same or a very similar service (value proposition) for different customer segments. This can lead to irritation. In this case, examine why similar services are used in different customer segments in your business model and be careful not to let social media interfere with the distinctions made with this decision.

Explanation: If we offer similar services in different customer segments at different prices, it can be counterproductive to treat these services and customer segments together within social media.

Content sources: Customer segments: We have already defined our customer segments that we work with social media in the Customer Segments business model component. ()

Selection of value propositions for the social media strategy

In many cases, we will not consider all value propositions as the basis for our social media strategy. There are good reasons for this. For the selection, we consider both social media-specific and company-specific criteria.

Suitability of value propositions

Not all value propositions are equally social media savvy. Once we recognize that value propositions lack social media affinity, it becomes unpromising to include these value propositions in our social media strategy. We achieve little success with this. We can tell whether and to what extent a value proposition has social media affinity by whether the service or the underlying needs are present in social communication, whether there is a social context or not.

Entrepreneurial necessity

We will not be able to support an unlimited number of value propositions with our social media strategy. That’s why we focus on the offerings that are indispensable for the company because of their importance – and which naturally have social media affinity. Criteria for indispensability include economic importance via sales or importance for market development.

Social media compatibility

Our social media strategy should be social media compatible. This is actually logical, but not always the case as a matter of course. By its very nature, social media is not a mail-order catalog or a product directory. We have to move with our entrepreneurial goals according to our environment. Otherwise, we achieve little. Social media compatible behavior should also include offering our social media users a concrete benefit with the help of our strategy. This can be close to or upstream of our services or the problems and needs of the users, but it does not necessarily have to be.

Example work template

Below is a simple example of a working template of a list of value propositions. They note the value propositions from the customer segments that are being worked with social media. Prioritizing value propositions and customer segments ensures focus on the value propositions that are important to the business. Priorities can be derived both on the basis of the current importance of the value proposition and on its future importance (growth targets). The same applies to customer segments.

Analysis value propositions

For all value propositions, the next step is to create a work template () in which you define the needs and services that make up the individual value proposition. You can express different meanings of needs/problems and services using priorities.

Value offer: we create a template for each value offer from template. If value offers have appeared several times, one work template per value offer is sufficient.

Need: we list all the needs on which the respective value proposition is based and assign a priority (Prio) to the individual need for better orientation. We work out the needs together with our colleagues from marketing and the market (distribution / sales / support).

The needs of our value propositions are the basis for the next step (4.3.3) in which we work out the topics and the social media affinity of these needs. This, in turn, is the basis on which we work out how to change/influence value propositions through social media.

Performance: we list all the services included in the respective value proposition and assign a priority to the individual services – where possible and appropriate – to make the significance clearer. The services of our value propositions are the basis for the next step (4.3.3) in which we develop the topics and the social media affinity of these services. On this basis, we work out the potential for change / the influenceability of value propositions through social media.

Problems, needs, services

Value propositions are based on problems, on needs, and on the services that address those problems and needs.

For the value propositions that we want to and can specifically support with our social media strategy (social media affinity), we identify the problems, the need, and the particular service that the value proposition involves. Problems / needs and services are therefore equally important for our social media strategy because both sides of the value proposition can be influenced by social media (assuming social media affinity). At the same time, we need both levels to address the market in a promising way. Social media users may well be interested in specific services – if they have a current problem or need for them. However, when addressing users, it is recommended to enter argumentatively about the users’ problem. As a rule, users know their problem better than its solutions and therefore presumably feel better addressed via problem (unless the problem is of a sensitive nature).

Result: For each relevant value proposition, we create an overview of the problems and the specific need that is causal for our services, i.e. for which we provide services.

Source: To do this, we leverage the company’s technical expertise – particularly from marketing, market research, and sales – to capture the problems and needs that underlie value propositions.

Needs and issues

Task: identify topics that represent the relevant needs of our social media users. These are all topics we want to address in order to reach social media users with a connection to needs relevant to our services.

Approach: we create a list of needs that our value propositions are designed to address. In addition to the company’s own knowledge, the know-how from marketing and market research must also be included as a source for this.

We juxtapose the needs with the topics that address those needs or that users talk about those needs. The source for this, in addition to the company’s own knowledge, are the specialist departments of marketing and market research as well as findings from the monitoring of relevant communication in social media.

Involved: Social Media Management, Marketing / Market Research

Result: themes of needs that underlie our value propositions.

Use of the result: the topics of our social media users’ needs relevant to our value propositions flow into the summary of all topics from markets and business model, form the basis for the topic areas of our strategy and thus one of the foundations of our social media strategy.

Example of a working template for the results.

Services and topics

Task: we identify the themes that represent the performance of our value propositions.

Procedure: We create a list of services in our value propositions and prioritize those services. We then identify the topics that are relevant for communication and sharing about this performance on social media. We prioritize these topics based on the priority of the underlying service And the importance of the topic in social media communication. As a source for the latter, we monitor the corresponding communication in social media.

Involved: Social Media Management, Departments of Marketing, Market Research

Result: themes that represent the performance of our value propositions.

Use of the result: the topics that stand for the services of our value propositions flow into the summary of all topics from markets and business model, form the basis for the topic areas of our strategy and thus one of the foundations of our social media strategy.

Example of a working template for the topics that define our services.

Next steps

The topics from markets and business model are summarized. The competitive situation of the subjects is determined. Themes are summarized from the topics.

Value Propositions

The role as a gamechanger for value propositions is based on the influence of social media on needs and on the evaluation of services.

For example, if social media has an impact through the evaluation of services – which is the case in many industries – we have a general potential for change from social media.

  • A broader potential for change in value propositions lies in the influence of social media on needs. We examine whether social media – via communication between users – has an influence on needs. Social media monitoring can help us here, provided that the topics and channels in which this communication takes place are recorded accordingly. In the event of a change in needs – for example, in their priority – or in the evaluation of the company’s performance, we should pass this on to those responsible as valuable market feedback within the company.
  • An even more fundamental potential for change from social media to value propositions lies in the total or partial destruction of the economic value of a value proposition. This is the case, for example, if the value proposition can be provided or distributed more cost-effectively through social media – i.e., by users. We certainly know the example of Wikipedia well enough. Wherever similar basic conditions exist, we should expect potential change on the economic value of a value proposition.

The analysis of the business model and its modules for its specific potential for change should have taken place before the social media strategy is defined. It is not advisable to define a social media strategy if the business model on which the strategy is based has not yet undergone a significant adjustment.

Exercises

The individual exercises for these topics can be found under “Tasks” linked between the heading of this section and the table of contents.

Procedure: The exercises are primarily for self-monitoring. I.e. you perform the described exercise and thereby recognize to what extent you can apply the learned contents yourself and where you may need to reread and rework. You solve open questions

  • in which you review the material of the section (basics, applications).
  • check the FAQ for answers,
  • use the forum for open questions.
  • if the previous sources do not contain an answer – ask the lecturer (eMail)
  • use the Individual Lecturer Consultation (only participants with coaching package).

Participants without coaching package: Participants without coaching package do not upload any exercises and accordingly do not receive any feedback.

Participants with coaching package: The coaching package includes written feedback on submitted exercises. Participants submit their exercises as a 1 pdf document using the upload function at the bottom of the web page and receive my feedback via eMail.

Industry suggestions for further exercises

  • Media: apply the exercise to Gruner + Jahr’s CouchStyle project ( https://www.couchstyle.de) or ZEIT (zeit.de).
  • FMCG – Brand companies: Nike, Barilla, Paulaner
  • Retailers / chain stores: Douglas Cosmetic, dm-markt or Lidl
  • b2b: Würth, Liebherr (cranes)

The individual exercises for these topics can be found under “Tasks” linked between the heading of this section and the table of contents.

Exercise value propositions own company

  • Define the value propositions of your company's business model.
  • Define the needs and deliverables that underlie these value propositions.
  • Create a list of topics that are important for communicating about the needs and deliverables of the value propositions.
  • Define the social media affinity of these topics.
  • Define the business priority of these topics.
  • Define the usage formats appropriate for these topics.
  • Justify your assessment in each case.