Value proposition: What it is and how to create one

Published Tuesday 20 January 2026

Table of contents

• What is a value proposition?
• What is the function of a value proposition?
• Value proposition examples for small businesses
• Craft your own value proposition
• Communicate your value proposition
• Strengthen your business foundation
• FAQs on value propositions

Key takeaways

• Identify your target audience's specific problems and research their needs through surveys or interviews before crafting your value proposition, as different customer segments require tailored messaging that addresses their unique pain points.
• Focus on customer benefits rather than product features when writing your value proposition, clearly stating what problem you solve and how your solution addresses it with specific, quantifiable outcomes when possible.
• Use simple, direct language and proven templates like "We help [X] do [Y] by doing [Z]" to create a clear, memorable statement that differentiates you from competitors and aligns with your brand identity.
• Communicate your value proposition consistently across all touchpoints including your website homepage, marketing materials, and internal documents, while regularly testing and refining it based on customer feedback and market changes.

What is a value proposition?

A value proposition is a short statement that communicates the unique value your product or service delivers to customers. It answers why customers should choose you over competitors. A strong value proposition captures attention and drives purchasing decisions.

Your value proposition serves as your marketing foundation:

• Internal alignment: Rallies employees around a unifying business principle
• External messaging: Drives consistent advertising and communication strategies

What a value proposition isn't

A value proposition differs from other marketing tools:

• Mission statement: Explains why your company exists
• Value proposition: Focuses on specific product or service benefits
• Slogan or tagline: Captures one memorable aspect of your business

For example, suppose you own a landscaping business.

• Your mission statement might read: 'To improve the environment by designing and maintaining beautiful landscapes.'
• Your tagline might read 'Your native plant experts.'
• Your value proposition might read: 'To use native plants to create a natural look.'

What is the function of a value proposition?

The function of a value proposition is to present specific benefits your product or service delivers to customers.

Your value proposition adapts based on:

• Target audience: Different customer segments require tailored messaging
• Communication channel: Social media messaging differs from direct sales approaches
• Market changes: Product updates or new competitors may require proposition adjustments

What makes a good value proposition?

A good value proposition:

• Clarity: Uses simple, direct, and concise language. According to the Global Management Accounting Principles, influential communication provides insight, which clear language helps achieve.
• Relevance: Addresses specific customer needs or pain points
• Differentiation: Highlights unique offerings that set you apart from competitors
• Benefit-focused: Conveys clear advantages for customers
• Brand alignment: Reinforces your brand identity and overall strategy

Value proposition examples for small businesses

Seeing how other businesses do it can help you craft your own. Here are a few examples tailored for different types of small businesses.

For a local cafe

Your cafe’s value proposition could be: 'Your daily escape with locally roasted coffee and freshly baked pastries, served with a smile in under three minutes.'

This focuses on quality (locally roasted, freshly baked), speed, and a friendly experience, which are key benefits for busy customers.

For a freelance graphic designer

A freelance designer might say: 'You get a memorable brand with custom logo design and branding packages, delivered on time and on budget.'

This highlights the target customer (small businesses), the specific service (custom design), and addresses common client concerns like time and cost.

For a construction company

A construction business could say: 'You get beautiful, durable home extensions with transparent pricing and a dedicated project manager, so your project runs smoothly from start to finish.'

This proposition emphasizes quality (beautiful, durable), trust (transparent pricing), and peace of mind (dedicated project manager), which are major benefits for homeowners.

Craft your own value proposition

To create an effective value proposition, you need to understand your customers and explain your value in clear, simple language. Here are practical steps to help you do that.

Identify your target audience

Start by getting clear on who you want to reach. Then work through these steps.

1. Define your target audience: Identify who will buy your product or service.
2. Research customer needs: Survey or interview customers to understand their specific problems and priorities.
3. Validate insights: Confirm what matters most to your audience before crafting your message.

Clarify your unique selling points

Once you know who you are serving, pin down what makes you different:

1. Identify differentiation factors: Work out what sets you apart through features, pricing, or quality.
2. Gather customer feedback: Ask existing customers why they chose your business over competitors.
3. Consult your sales team: Talk to sales staff, who hear directly from customers about what influences their decisions.

Include the benefits to the customer, not features

Customer-centric messaging focuses on benefits rather than features. Your value proposition should:

• Identify the problem: Clearly state what customer challenge you solve
• Explain the solution: Describe how your product or service addresses this problem
• Quantify benefits: Use specific numbers or outcomes when possible to increase sales impact

Value proposition templates

Value proposition templates provide structured frameworks for crafting your message. These formulas ensure you include essential elements:

• 'We help [X] do [Y] by doing [Z].'
• 'For [target customer] who [needs or wants X], our [product/service] is [category of industry] that [benefits].'
• The Harvard Business School method, which recommends that it should answer several questions: 'What is my brand offering?', 'What job does the customer hire my brand to do?', 'What companies and products compete with my brand to do this job for the customer?' and 'What sets my brand apart from competitors?'

Writing guidelines:

• Use customer language: Write in terms your audience naturally uses
• Keep it simple: Avoid jargon or complex terminology
• Include emotion: Connect with customer feelings and motivations
• Ensure brand alignment: Match your overall brand identity and market positioning

If you're still working on brand identity, check out the guide How to write a business plan and grab a free business plan template.

Test and refine

Once you have your value proposition, test it out and update or refine it as needed.

Testing methods:

• Customer feedback: Share your proposition with existing customers for validation
• Internal review: Get input from colleagues and mentors
• Market monitoring: Update your proposition as competitive landscape changes

Review regularly: Revisit and adjust your value proposition based on feedback and changes in your market.

Communicate your value proposition

Effective communication ensures your value proposition reaches customers consistently across all touchpoints. Train your team to deliver the message and place it strategically across marketing channels.

Key placement locations:

• Digital presence: Website home page and product pages
• Print materials: Brochures and marketing collateral
• Advertising campaigns: All marketing and promotional materials
• Internal documents: Business plans and funding presentations

You'll also include the proposition in your internal documents, like your business plan, and in any documents you present to potential funding sources. Research shows that small businesses working with professional advisers are significantly more likely to have a business plan (59% vs 25%), so your plan becomes a handy tool to keep everyone in your business focused on the same goals.

Strengthen your business foundation

A clear value proposition is a core part of your business. It guides your entire business strategy and helps you make better decisions about your products, services, and customer relationships.

When you know the value you deliver, it becomes easier to manage your finances and plan for growth. In fact, small businesses that invest in professional advice to clarify their strategy are more likely to be growing, with 66% reporting growth compared to just 44% of those who don't.

Getting your business basics right gives you the confidence to focus on what you do best. With tools that simplify your bookkeeping and provide real-time financial insights, you can spend less time on admin and more time delivering on your value proposition. See how you can run your business, not your books, when you try Xero for free.

FAQs on value propositions

Here are answers to some common questions about value propositions.

How is a value proposition different from a mission statement?

A mission statement explains why your company exists and its overall purpose. A value proposition is more specific. It focuses on the unique benefit a customer gets from a particular product or service.

How long should a value proposition be?

It should be short and clear. Aim for one or two sentences that are easy to understand and remember. The goal is to quickly communicate value, not to tell your whole business story.

Can I have different value propositions for different customers?

Yes, you can. It's often a good idea to tailor your value proposition to different customer segments. Each group may have different needs, so a message that speaks directly to their specific problem will be more effective.

How often should I update my value proposition?

Review your value proposition regularly, perhaps once a year or whenever there's a big change in your business or market. If you launch a new product, face new competition, or your customer needs evolve, it's a good time to refine your message.

What's the difference between a value proposition and a unique selling proposition?

A unique selling proposition (USP) is the one specific thing that makes your business different from all competitors. Your value proposition is a broader statement that includes your USP but also covers the full range of benefits you offer to solve a customer's problem.