Entrepreneurs can build a thriving business off a great value proposition!

2012-09-12 09:33

Last week Thursday on the Money Show on 702 Talk Radio and 567 Cape Talk, Bruce Whitfield and I spoke about value propositions, what they are, how to get one and once you do how to build a great business using one!

What is a value proposition and do I have one?

Simply put, it’s the solution you offer to the customers that buy from you. This may be a particular service that you offer or  a product that you make available at a certain place, time and price. The reason that customers buy from you is already an indication of your value proposition. Knowing why they buy from you and what you need to do to meet their expectation is your value proposition.

How do I develop my value proposition?

There are five primary steps that you need to roll out in order to build your value proposition.

  1. Be clear on what business you are in. Remember, you cannot be all things to all people. The more specific you are, the better your value proposition will be. “I sell cars” to “I sell high performance cars” already means that you are in a different business!
  2. Identify customers that you believe are best suited to your particular product or service. This is the most difficult element of any business. It’s called customer segmentation and it looks at all the possible customers that would want what you offer and then requires you to break them up into many groups that have distinct attributes or characteristics. Only some of these groups should be your customers that you focus on and that your service is most relevant to.
  3. Do a needs analysis by asking 10 of them why they buy from you and most importantly, what needs they have that your product or service satisfies for them. That’s a novel idea, ask your customers what they want, give it to them and see the business roll in.
  4. Design your service or product offer to meet the needs of your identified customers in their language. Their language means all the words you use in marketing, selling and communications must be words familiar to your identify customer segments or groups. Using “twin CAM” in any sentence to someone that catches a bus to work every day is not very clever. This technical term is best suited to someone who is big time into cars instead. In the former case, it would alienate the bus passenger from your car selling pitch making him feel that you don’t understand him. This is a customer who does not see your offer as a value proposition to them.
  5. Build your business model to deliver this customer experience or value proposition. Now the hard, never ending work begins. If you are unfamiliar with a business model and how to build one, refer to my previous blogs. We did a great show on that one!

Some value propositions that you might offer!

The list below is not exhaustive by any means but what is how many value propositions you offer your customers. At most you can combine two or three value propositions in any offering that you have. What is important however is that you have one that distinguishes you from your competitors, one that you are by far the best at.

For example, your store might offer convenience and price but which value proposition is strongest for you in the eyes of your customers? Take a look at supermarkets that offer both value propositions but when you come down to it, SPAR is convenient (they typically are open longer hours and wider spread) and Shoprite is cheaper. At the same time they mostly serve different groups of customers that have different needs from each other. SPAR targets mostly working folk where time is at a premium, rushing to and from work requiring late trading hours even at a slight price premium. Shoprite looks at lower income families where price is the overall determinant of decision making.

  1. Price – above all else are you the best priced in your industry and if so is this reflected by price beating policies “if you find it cheaper, we will refund you the difference”!
  2. Convenience – are you the most convenient option? Are you open on the weekend to serve the busy executives that are your customers and don’t have time during the week?
  3. Status – will buying your product or service say that I have arrived? Rolex, a7 series BMW rather than a 3 series BMW!
  4. Simplicity – a great example of this today (31 August 2012) are Cell C’s new cell phone deals. Compared to the other networks, it’s easy and simple to get onto their website and buy what you need without any fuss or confusion!
  5. Performance -
  6. Design – let’s admit it, there is a chair and there is a beautiful chair. You can sit on both, move both, use both but if the look of something like a chair is important to you, then its design will matter.
  7. Speed – this could relate to service where, for example, if you buy a bicycle from a store and want it now, the store ought to keep stock of everything it offers and ensure that you can get it now. For that you may pay a premium as opposed to the same bike from another store that has to order it and deliver it in 2 weeks’ time. The price might be better but then you would need to be patient.

Think carefully about your customer segments that you serve. They don’t see the world through the same lenses that you do. They operate differently from each other and the better you understand what this means, the better the quality of your value proposition. Without this, your marketing efforts will go amiss, your frustration will increase and your chances of failure will escalate dramatically. A great value proposition is one that matches the needs of your customer segment that speaks their language so that when your marketing efforts bring them to your door, the sale is as easy as 1, 2, and 3!

If you are struggling to define your value proposition or the one you have is not generating the business you hoped it would, let’s chat. It is really not that hard to get right but until you do, your business will languish!


AB praises selfless skipper

2010-11-21 18:15

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