So many new businesses buy into the “If we build it, they will come” fallacy.
But here’s the thing. It’s not enough for your business to provide a product or service. What your business is and what it is you offer must be ‘worth’ something to potential customers.
This is your value proposition – a statement that answers the ‘why’ someone should do business with you. It should convince a potential customer why your service or product will be of more value to them than similar offerings from your competition.
So, as your business takes its first steps, how can you evaluate your start-up’s value proposition to ensure that your offer won’t be met with a shrug?
There are two things you need to understand:
Firstly, your value proposition is not about the products or services you sell. Instead, it articulates a highly valued outcome your prospective customer desires.
It’s not about you, then – it’s about them. Your prospective customers care about their desires and outcomes far more than the functions of your products and the details of your services. You need to understand this distinction.
Secondly, across all business sectors, businesses are being commoditised by the sheer abundance of choice customers have. And this is your reality whatever your type of company, whether you’re a small business selling products or a large service provider.
Customers have choice and they decide who leads and who follows. When customers have so much choice, the competition is always fierce.
Product features, claims of expertise and quality delivery don’t distinguish the real ‘value’ and promise your enterprise makes to customers. When there is abundant supply, customers need something more than superficial claims to make purchase decisions, and more importantly, become loyal advocates of your business.
Those entrepreneurs who do eventually dominate their market represent a compelling ‘idea of value’ in the minds of customers that is simply not available from the alternatives in their market or vertical.
So, let’s look at how you start to build your value proposition. There are six pillars that you must consider:
- The Target Audience
What are the attributes that define the ideal customer segment your business serves? These could include your ideal customer’s industry, location, business size, attitudes, motivations, and demographic descriptions. You need to define those people who closely represent your most fervent customers and clients.
- The Customer Need / Business Problem
Next, consider the specific ways your products or services fulfil customer needs. These needs are often unspoken. People weren’t expressing a need for Apple’s iPhone. However once realized, they couldn’t live without it. What needs do you fulfil that are unrealized by your customers, and once revealed to them, will have them standing in line to do business with you?
- The Value of Your Solution
What are the functional and emotional benefits customers receive from your products? What is the business value of your solution to your clients? You must always provide more ‘use value’ in the mind of your customer than they pay you in cash value. This will make your price irrelevant and enable your business to command premium prices.
And remember, buying is an emotional decision too and not simply made out of necessity or convenience. The more emotionally engaging your value proposition is, the more competitive advantage you’ll gain in your marketing and sales activities.
So, help your current and future customers realize WHY they should fulfil their need or solution by purchasing your products and services.
- Your Products and Services
Notice that your products or services are not the first order of importance here. Your offerings do not lead your value proposition. Take a customer-centric approach and frame your offerings within the context of the needs you help your customers fulfil, or the solutions you provide that improve the client’s condition. It’s about providing outcomes – experiences – your customers love!
- Reasons to Believe
How do you substantiate your claims? How do you deliver what you promise? How have you demonstrated your products and services work for customers?
Prove your offerings deliver on the value promised by providing compelling reasons to believe in the form of stories, case studies and testimonials.
- The Point of Difference
Why are your products preferable to other alternatives available? You must have a compelling, emotional benefit that is highly valued in the minds of customers and clients and difficult for your competitors to match. It’s not enough to be different for difference’s sake. Your difference must also be highly valued!
Having the courage to say “no”
Here’s another way to look at your value proposition. For start-ups, it’s often easier to say “yes.” It’s often easier to talk about what your value proposition is going to be and about all those new things you will do. But strategic competitive advantage — especially for an emerging start-up company — often comes more from your ability to say “no” than it does from your ability to say “yes.”
The most powerful value propositions are not those that try to do many things well, but rather those that try to do one thing really well. Focus is one of the most essential components of a strong value proposition. Unfortunately, focus is often one of the hardest things to find in a business, but the following questions will help:
Who will you not serve?
Your business can’t be all things to all people without diluting the power of your value proposition. By its nature, a specific value proposition must appeal to a particular prospect type. This can be counterintuitive, but knowing who your customers are necessitates knowing who your customers are not. Recognizing this distinction is essential. To preserve the value proposition that serves your true customers, you have to turn away those who aren’t a good fit for you.
What will your product not do?
When it comes to value propositions, ‘more’ is not necessarily better. In fact, it often means diffusion. More is only better when more is actually better. Nevertheless, many businesses do more to make up for the fact that they don’t excel in any one thing.
So, don’t have a knee-jerk reaction to a competitor and launch a campaign that tells customers, “Hey, we have all those same features too!” You’ll just weaken your value proposition.
You need to understand that a value proposition necessitates that you excel in at least one way — not in every way. Have the courage to focus on that one way.
When will you not compete?
Finally, achieving a strategic competitive advantage does not mean you must compete with your competitors on every possible level (price, service, speed, quality, etc.). Your business cannot feasibly compete on all fronts. Just as an athlete must give themself completely to one discipline, your start-up must give itself to one competitive advantage.
But don’t think this has to be a secret. Customers can know what your strengths, and weaknesses, are. In fact, when you’re transparent about what you can’t do, customers are more likely to believe you when we tell them what you can do.
In the end, the businesses with the most forceful value propositions are NOT those that have constantly shifted while trying to keep up with their competitors. The most powerful value propositions come from those that knew who they were and who their customers were.
As Peter Drucker says, successful businesses are not those always looking at what it takes to beat the competition, but rather those who focus, courageously, on “creating a customer.”