By Peter Birkett. Whether you are an entrepreneur, start-up or founder of a well-established business, the key ingredient of a successful strategy is creating a winning value proposition.
But what is it exactly? In a nutshell, a value proposition is a promise of value to be delivered. It is the core of your competitive edge – the reason why a customer chooses your business over your competitor. It is important to get right because it not only acts as the foundation of your business but also determines the price you are able to charge for your product or service. Once established, it sits at the heart of all your brand communications.
However, it can be difficult to define! It is challenging because it is much more than just a marketing slogan or a tag line. It’s not even directly about the features of the product or service you sell. Rather it is a succinct description of the way your company meets a customer’s need by solving a pain point or creating a new opportunity which improves their life or business.
Arriving at a good value proposition is an iterative and experimental process. The most important part of this is testing out your value proposition on customers. Very few initial value propositions survive contact with potential customers and it is important to listen to what they say and adapt the proposition until you are sure you have something that will really address a key problem or need. Ideally you want them to become enthusiastic advocates for your solution.
But once you have your first attempt at a value proposition, how do you go about approaching a customer? First of all, do your research and make sure you understand as much as you can about your customer and what is important to them. Ask yourself whether your value proposition addresses something that matters to them or whether it is of marginal interest. Secondly, make sure you get the tone of voice right. Your value proposition needs to be in the language of the client/customer, which is often different from the way in which you communicate your products or services. Think about the language your customers use to describe your offering and how they benefit from it. Thirdly, when you get the chance to talk to a customer, don’t tell them what you think they need. Ask them. Listen to what they say and don’t be offended or discouraged if they are not as enthusiastic about your proposition as you are. Take note of what they say and consider what they have told you about their real needs. Then revise your value proposition and repeat.
There are a few traps to beware of when creating a value proposition:
1. Make sure you do not focus on just one customer. Remember you are looking for a market niche where you can dominate not providing a bespoke product or service to address a singular problem.
2. Don’t get distracted by customers’ “nice to have” issues. Make sure that you are focusing on something that matters so much to them that they are prepared to pay for a solution.
3. When you get to talk to customers, don’t talk so much about your product/service that you don’t give customers time to talk to you.
4. Don’t allow price to influence your perception of value. It should be the other way round – value should influence your ideas about price.
5. Think about value in terms of the difference it makes to your customer not the difference it makes to your business.
6. If you feel your value proposition doesn’t quite express what you want it too, don’t just add more words. Remember, less is more and it needs to be clear, succinct and memorable.
7. If the perfect value proposition feels elusive and you can’t quite seem to get it right, don’t be tempted to build product or write software as this will just burn valuable cash. Rather, talk to more customers or focus on a slightly different market niche.
So once you have a value proposition which you think is up to scratch, why not subject it to the NABC test? This allows you to think about the Needs you are addressing, the Approach you have adopted, the Benefits that you are bringing and how you are dealing with the Competition. It is also an important stepping stone towards building a robust business strategy. Try writing a paragraph against each heading:
Need: What is the important customer and market need addressed by your business? This is your chance to explain how your business is responding to a specific target market and show how that need has not yet been met.
Approach: What is your unique approach for addressing this need? This is where you can show off your compelling solution! Show here what makes you different. This is your approach to designing an experience that your target customer will want.
Benefits: What are the specific benefits that result from your approach? Benefits are not just the features and performance of your product or service but also how an experience with your business makes your audience feel.
Competition: How are your benefits superior to your competition? To define why customers should buy from you vs. your competitors, you need to understand who your competitors are and what they stand for. Research your competitors thoroughly, from their mission statement to their strengths and weaknesses to really understand them and use this research to show in your value proposition why your approach is significantly better!
Once you have this, you will have the rudiments of a business strategy and will be well on the way towards putting your plan into action and seeing your new business or product line become a reality. But remember, a value proposition is only a vehicle for communication so keep telling people about it until it becomes second nature. You don’t have to be in an elevator to try it out.
About the author
Peter Birkett is a Lead and Mentor for the Somerset Catalyst Programme.
Somerset Catalyst was launched in September 2020 and is a fully-funded programme that will run annually, for a six-month duration. Its goal is to give Somerset-based start-ups and early-stage businesses the best chance of success. The bespoke programme features one-to-one expert coaching for the successful applicants, providing workshops hosted on key aspects of running a business, a peer support group, business review panels with industry experts, help to access business finance and profile-raising marketing support.
Throughout his career, Peter has conceived and implemented a series of challenging development projects and transformed the working environment into a vibrant community of innovative high-tech businesses with significant growth ambition. Since retiring in 2019, he has continued to work as an independent consultant, providing support to early-stage businesses.