Article written by me in a previous role:

http://www.mycustomer.com/cgi-bin/item.cgi?id=133995&u=pnd&m=phnd#comments

How do you identify the right questions to ask, the right data to collect and the right tools to use to develop insight and understanding?

Value propositions are defined from two perspectives: the internal perspective looks at the need that has been identified and looks to match how well a product or service fulfills that need. From this, an external definition is created which highlights the need and identifies the points of differentiation between one offering and their competition.