Get this one thing right to make your company thrive!
Your business’s value proposition is like its heartbeat. If it’s not clear and consistent, you risk a slow and painful death.
In my work with entrepreneurs on how to build and expand their businesses, the most common issue we focus on is the importance of defining their company’s value proposition.
So often, founders can’t articulate what their business does and who benefits from their product or service. This leads to confusing customer communication, unfocused product development and sales activities, and more importantly, organizational confusion and frustration. Eventually, all this leads to ‘corporate death.’
Getting this piece of the business development puzzle right is so critical, I’ve made ‘identify your value proposition’ Step One of The Launch CodeTM, my productivity framework that helps founders find their focus and accelerate their business growth.
The good news is Nirvana awaits! If you get your value proposition right, you’ll be able to convey a clear message to a well-defined audience and as a result, you’ll regularly attract new customers and close deals quickly.
So, what exactly is a value proposition?
It’s a clear and concise explanation of…
- what problem your product or service solves,
- for whom you solve this problem, and
- how you solve the problem in a unique way.
In short, your value proposition tells your target customer why they should use or buy your product.
Here are two examples:
- Facebook is a social utility that helps people communicate more efficiently with their friends, family and coworkers by connecting them through an easy-to-use online platform.
- Salesforce is a software that helps businesses improve their sales results by collecting and analyzing customer information and creating quality sales management processes.
A powerful value proposition reflects your business’s key focus.
Crafting your value proposition forces you to decide exactly what product or service you offer, who should buy your product or service, and what unique method you’re using to solve this customer’s problem. The more focused your value proposition, the more likely you are to grow quickly in your sales and marketing efforts.
The stakes are high. If you get any of your value proposition building blocks wrong, you will find it much more challenging to build your business.
Here are the most common mistakes my clients make in writing their value propositions.
- It highlights the features of your product or service and not the benefits it provides to your target customer.
- XYZ Corp is a leading developer of nanotechnology. [Ok, but why is this good for me?]
- The target customer is either unclear or too broadly defined.
- XYZ Corp is a leading developer of nanotechnology to the medical profession world-wide. [Just because everyone CAN use your service, doesn’t mean everyone SHOULD use it. How about narrowing your focus to say, cardiologists working in private hospitals in the Northern Europe?]
- The value proposition includes industry buzzwords that cloud your message.
- XYZ Corp is a leading developer of micro-cellular nanotechnology built on polymeric and lipid-based nanoparticles and used in the medical profession world-wide. [Huh?]
Your value proposition may differ for various customer segments.
You can have multiple value propositions if you have different types of customers who engage with your service.
For example, Uber’s value proposition to riders is, “we help city residents travel conveniently, 24 hours a day, seven days a week, by calling a ride with one click, and tracking the driver.” The company’s value proposition to drivers is, “we help you earn income using your vehicle to transport passengers by making your availability visible to potential customers.”
Both statements are equally relevant, but a word of warning: make sure you only have one value proposition for each customer segment, otherwise you risk losing focus and clarity in your communication.
How do you create a powerful value proposition?
Step 1: Start by identifying the problem you solve.
You should be able to articulate a clear problem or need that exists for a group of target customers.
If you operate a business-to-business service, typical needs include increasing revenues, saving costs, boosting efficiency or raising awareness. The closer you are to impacting your customers bottom line, the more ‘must have’ your product or service will become.
Step 2: Narrow your customer focus to those who benefit most from your solution.
Don’t fall into the trap of marketing your product or service to ‘everyone.’ This is like trying to boil the ocean. It takes too long and it’s just impractical.
Instead, start by defining a typical customer segment according to certain demographic and psychographic characteristics. These may include ‘facts and figures’ like age, income or revenue level, industry, or geographic location, and ‘touchy-feely’ characteristics like ‘believes in customer care’ or ‘places a high value on quick response time.’
Targeting a clearly defined niche will help focus your marketing message and select your sales channels because you’ll know exactly what your audience wants to hear and how they access this type of information. Once you successfully target a niche, you can always expand to a broader market later.
Remember: before Amazon became the world’s biggest retailer selling virtual everything to everybody, founder Jeff Bezos focused on marketing one product to one customer: he sold books to technology savvy book lovers.
Step 3: Define why your solution is especially unique and valuable.
Identify one or two reasons why your target customer should buy your product or service over that of your competition.
Is your technology safer or more reliable? Do you offer greater convenience? Are you a better value for the price? Whatever your ‘special sauce’ is, make sure it meets three basic criteria.
As my friend Paul Garrison writes in his book ‘Exponential Marketing’, the special benefit you offer should be meaningful (something your target customer values), deliverable (something you can actually implement) and defendable (something you can protect versus your competition).
Explain your value proposition in a single sentence.
If you’ve followed each step carefully, you should be able to complete the following sentence.
[Company name] is a [company or service definition] that helps [target customer] to [service or product benefit] by [unique solution].
To test this sentence for clarity, read your value proposition to an intelligent 12-year-old. S/he should be able understand exactly what your company does and why your customer should use your product or service. If s/he doesn’t get it, it’s time to rethink your value proposition.
Creating a value proposition is a process.
Don’t get discouraged if you don’t get your value proposition right the first time. It’s likely that you’ll need to test several versions before you start seeing its impact.
You need to follow a process of ‘trial and error’ to define exactly what benefit your product or service offers and who will be most likely to pay for this benefit.
More importantly, finding your focus requires you to ‘let go’ of some initial assumptions, and make tough decisions on what you will not include in your value proposition. Oftentimes, letting go is the toughest part of the process.
Eventually, you will be able create a clear message that resonates with your target customer. Get it right, and you’ll not only boost your bottom line, you’ll also ensure that your business lives a long, healthy and prosperous life!