How Technology- Based Startups Can Use Customer Value Propositions to Gain Pilot Customers

Abstract

ABSTRACT Purpose Customer value propositions are promoted as critical for technology startups. However, empirical evidence supporting the beneficial effects of startups using customer value propositions is lacking. We draw on a theory of integrating devices to develop and empirically test a model that describes how a technology startup may use customer value propositions to learn about customers and adapt its market offering to gain pilot customers. Methodology/approach Using structural equation modeling, we test our theoretical model with a dataset of 293 German new technology-based startups. Findings We find support that adopting the customer’s perspective, quantifying monetary value, and substantiating the value proposition are critical steps to gaining pilot customers. Research implications Our findings suggest that a customer value proposition can be understood as catalyst for learning about customers and tweaking the market offering – making the offering more compelling because of the value proposition’s specificity through monetary quantification. Future research could investigate in more detail the role of monetary quantification in the uncertain context of startups, the role of pilot customers to provide support and resources, as well as antecedents and consequences for startups of working with pilot customers. Practical implications Our research underscores the importance for a technology startup to look at its own market offering from the customer’s point of view – that is the starting point for benefitting from customer value propositions. Furthermore, a startup should start early sharing ideas with prospective customers about its market offering and the initial customer value proposition. And despite considerable uncertainty, a startup should aim for monetary quantification, because that focusses data gathering and helps to substantiate the customer value proposition. The role of a customer value proposition is not to portray a definite calculation of customer value, but to provide a startup with a concrete but also evolving understanding of customer value to help the startup improve its market offering and attract pilot customers. Originality/value/contribution of the paper Most of the literature on customer value propositions has focused on established supplier firms. Startups, however, face some unique conditions that do not allow simply transferring ideas about customer value propositions for established firms to startups. The primary contribution of this study is the development and empirical test of a theoretical model of the process for how, together with customers, technology startups use customer value propositions in business markets to guide learning about their market offerings to achieve market success.