The Value Proposition House framework was developed by Philips. It was built to ensure that all their products would provide actual tangible value to the customers, regardless if it was a B2B or B2C product.

It has turned into a globally used tool that helps businesses understand the value that their products or services provide to their customers. The core idea is to utilize the framework early in the product development phase.

A value proposition should be sharp, not a bit of everything. And it is more than a description of customer needs and product specifications! A value proposition solves your customers’ challenges. And is discussed and verified with them. The final value proposition is the fundament of the messaging framework and every launch plan for the product-to-market strategy.

Philips’ Transition to Customer-Centric Design

Philips introduced its “Sense and Simplicity” brand promise in 2004. And with that a goal to evolve into a truly customer-focused organization. This was a significant shift from the company’s past focus on technology-driven innovation.

The brand promise emphasizes understanding the needs and aspirations of users to deliver solutions that are both advanced and user-friendly. According to Philips, the key capabilities to achieve this promise are understanding people and integrating this knowledge into technology and product design.

Products are designed to improve lives by being intuitive and simple to use.

Value Proposition House: A Framework for User-Centricity

To operationalize this customer-focused approach, Philips introduced a framework known as the Value Proposition House (VPH) across the company. The VPH framework outlines when and how to incorporate customer and user perspectives in the early stages of new product development (NPD). It provides steps for utilizing research findings in the NPD process.

For instance, the VPH framework suggests generating “platforms” and “end-user insights,” which capture themes or needs using keywords, mood boards, and short textual descriptions. Philips Research has also experimented with empathic design as a method to address these objectives more effectively.

What are the components of the Philips Value Proposition House?

The first three components are typically what you would see be “Outside in” and are Target, Consumer Insight, and Competitive Environment (alternatives), while the three final would be “Inside out”. The End User/Consumer Insight is the one that determines the Target and how we will deliver the Benefit. While the Competitive Environment and USP need to be differentiated.

Target

Who are we innovating for? Determine the end users related to the insight as specifically as possible. Also, make sure that you cover the situation the user is in. For B2B, you should also identify the Key Stakeholder: Part of the value chain that stands to gain or lose the most.

Example: The target audience for Philips electric toothbrushes is people who are concerned about their oral health and are looking for an effective and easy-to-use toothbrush.

End User / Consumer Insight

End user insight is the understanding of how the end users of a product or service perceive, use, and benefit from it. It can help to improve the design, functionality, and value proposition of the product or service, as well as to increase customer satisfaction and loyalty. What unaddressed end customer need have we figured out? An insight should not be a commonly known fact and should be data-driven.

This is written out in one sentence!

Example: Philips Ambilight: You do not watch TV always the same way. Sometimes when you watch TV you look for the most immersive cinematic experience.

Competitive Environment / Alternatives

The competitive environment is the landscape of businesses that offer similar products or services to yours. Who else solves the insight?

• Directly: Same type of product/ service
• Indirectly: Other ways to address

This determines whether the insight is still relevant, if we are a ‘Me too’ or do the alternatives fail to adequately satisfy the need.

Example from Philips Ambilight (2005):

• Philips is the value market leader in FTVs(12%)
• The market for “standard” Flat TVs is very competitive, with many brands claiming superior picture quality through video processing engines.
• Design is widely used as a differentiator in the Flat TV market by all players.
• High Definition standard to breakthrough in Europe in 2006.

Benefits

How will we deliver the value proposition? Here you need to list your top 3-5 functional or emotional benefits. Emotional benefits are normally stronger. This needs to have extreme clarity and if you can work with just one single benefit it would be great.

Example: The Philips Cineos Flat TV with Ambilight Full Surround gives you the ultimate viewing experience: you can now choose to project yourself into the most immersive cinematic experience.

Reasons to Believe

The reasons to believe are the evidence that you can provide to support your claims about your product or service. This evidence can include clinical studies, test data, user research, statistics, testimonials, technical expertise, unique and patented technology, or awards.

Why would the customer or stakeholder believe we can deliver the benefit?

Example from Philips Ambilight:

• Ambilight Full Surround
• Pixel Plus 3HD
• Breakthrough design

Discriminator

The USP (unique selling point or value proposition: Why do we address the relevant insight better? Think of what we do, rather than how.

Such as Volvo. Their USP = Safety (not airbags or any other technical advanced solution)

It should be clear, concise, and compelling, and communicate the main benefit and reason to choose the product.

For example, Philips’ discriminator for its Amara View minimal contact full face mask, which is designed for sleep apnea patients, is that it offers the widest field of vision of all leading full face masks, allowing patients to wear glasses, read, watch TV, and use a computer or tablet before falling asleep.

Brand Positioning

Philips’ brand positioning for the Cineos Signature TV was “Maximise the Experience”. It had three subsets:

Designed Around You: A breakthrough design that supports and enables optimal Ambilight performance:

• Ambilight on 4 sides
• Built around canvas
• Ambilight allows you to personalize (control) your viewing experience

Easy to Experience

• Ambilight is active on all content and initiated by the push of a button
• Enjoy the Ambilight feature irrespective of the home environment.

Advanced

• Ambilight responds to content variations on each side of the TV, maximizing the immersive effect.
• Design that represents the configuration of Flat TV identity (“picture frame“, “floating“)
• Pixel Plus 3 HD

PS! In an earlier version of this blog, the content was more focused on the Value Proposition Canvas and not Philips Value House. Follow this link for the full story about Value Proposition Canvas or read the short version here.

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