Define and develop your value proposition

Being able to clearly state what makes your business different and the value you offer customers is an important step in your development. Your value proposition should give your customers a reason to choose your products and services over your competitors’ offering.

When you’re in business, one of the most important success factors is being able to define the value you provide to your customers, which is called your value proposition. It’s a way of articulating your point of difference to your clients, customers and prospects.

It lets potential clients and customers know:

“When I put them on the spot, most business owners can’t give me a compelling reason why people should choose them over their competitor. They usually tell me something generic about great service and quality. But not only do you need to offer something different, you need to articulate it,” explains business growth adviser Caren Hendrie.

“It sounds obvious, but most businesses have never taken the time to spell out those differences. They expect people to buy from them simply because they’re in the marketplace. But they need to give customers a clear and compelling reason to buy from them,” she adds. 

Get Outside Melbourne is a premium hiking business based in Victoria. Founder and sole trader Kane Ford explains his value proposition is about the mental and physical benefits of hiking. “That's the core product we offer. The hiking is just the activity we use to achieve that.”

Kane recently launched a new positioning statement, ‘seek adventure, find balance and feel energised.’ “That really sums up the journey for many of our customers. It links back to my own mental health journey and the balance hiking brings to my life. My value proposition is authentic and people connect with it. There’s a direct link between the product and the value proposition.”

Most businesses just promote their products’ and services’ features without offering any other point of differentiation. So whatever your point of difference, you need to find out how to state it so your potential clients or customers understand those differences in an instant.

Answer these questions to work out your value proposition:

1. What customer problem are you solving?
   
2. How are you solving it?
   
3. Why does what you offer beat the competitor?

Food delivery business Love Local is a great example of a firm that clearly states why what it does is better than the competition.

Here’s its value proposition:

By being able to state why its offer is better than other similar businesses, it can confidently approach eateries with an offer than stands out from the crowd. Better still, it means it’s competing not just on price but on the advantages it can deliver.

Engler uses weight loss programs as an example. “They’re not selling the weight loss. They’re selling the feelings that come as a result of the weight loss.”

In this example, the mistake businesses often make is to talk about product features and attributes – two daily shakes is all you need – rather than the problem they are trying to solve, which is a desire to feel healthy and fit. “It’s about selling what the customer wants. To do this, identifying, understanding and solving the problem is key,” Engler adds.

Engler has an exercise she uses to help businesses develop their value proposition. Imagine your customer is standing in a room that has six doors leading from it. Each door represents a way your customer’s problem may be solved by your product or service. You and your major competitors are represented by all the doors. What will make the customer choose your door over your competitor’s door?  

The answer lies in how well you communicate your value proposition – how well you articulate how you will solve their problem, meet their challenge or help them with something and what life will look like after. 

If you already have a product or service and a customer base, but you haven’t yet figured out your value proposition, it’s a good idea to get customer feedback.

Ask them about:

• The words that come to mind when they think about your business
  
• What they find most valuable or distinctive about your business

Your minimum viable product (MVP) is the most basic version of your product you can offer. It can be an important part of the product development cycle, that allows you to launch a product quickly with a small budget. This version, usually the first, must incorporate the most important feature your product needs to have to get people to buy it.

Use this feedback to refine your product before producing and marketing a larger, more comprehensive version of your product or service. 

But an MVP may not work in every arena, says Engler. “It works in the tech space because it allows you to test the market with minimal spend, and that can be good. It lets you understand whether the product meets a need and get instant feedback from users to give you insight into user experience and expectations to lead to a better end product.”

But she says it’s not always appropriate for non-tech businesses to focus too heavily on doing the minimum. “You can probably already get the minimum in many places. The real value is providing a product that does much more than the minimum, which builds value and ongoing client relationships. As with all things in business, it’s a case by case assessment as to what is most practical and suitable.”

There are plenty of ways you can easily and cheaply test new products and services:

• Give prototypes to friends and family and ask for their feedback.
  
• Ask your best customers about what new services and product features they value.
  
• Hold small focus groups and ask the members to use and rate you’re offering.

Remember, testing is only valuable if you use the feedback. So don’t forget to incorporate the insights into the next version of your innovation.

A great value proposition is one of the best ways to encourage your clients to keep coming back to your business. It’s also one of the best ways to generate ongoing cash flow and revenue, the lifeblood of every business.