Building a Value Proposition for your company By Janie Pritchett-Clark
It has been a buzzword for some time now, but many of us still stumble when asked to put our value proposition into words.
So what is a Value Proposition? In the simplest of terms, it’s the reason why customers will buy from you and what they get when they do. It’s a half handful of words that describe, upfront and quantifiable, how doing business with your company will benefit them.
Perhaps the most visible value proposition in Northwest Arkansas (and around the globe) is Walmart’s tagline: Save Money. Live Better.
You can’t get any clearer than that.
The value proposition isn’t exclusive to big business and may even be more significant to small business, says Maxie Carpenter, whose past experience in retail now helps companies build culture, leadership and strategy. Carpenter is president of MVC Advisory Resource in Bentonville.
“The majority of small businesses still operate without a long-term business plan or budget,” he says. “Because of this deficiency, the concept of a value proposition is completely lost on them. It becomes even more significant given the downturn in the economy. Because the short-term economic prognosis hasn’t changed much, understanding the concept of a value proposition, especially over the long-term, becomes even more important.”
How would you use a value proposition in your business? You can use it to explain to customers why they should buy your product or service, says Carpenter. You can use it to encourage potential partners to forge a business alliance, explain to internal departments how they influence the outcome of business decisions, help HR see how they can “sell” the company when recruiting, retaining or motivating employees. You can use it to reinforce supplier or customer commitment. And finally, if you are a business of one – it can keep you focused and on track as you move through the wearing of each of these hats.
Barry Cobbs is president at Livelight!, a marketing and creative services company based in Rogers. They help clients communicate with their targeted audiences.
“One thing the recession has really caused us to do is look at what we really add to a company, and what separates us from competing companies,” Cobb says. It’s a two-step process: Why do they need your product or service and why do they need you?
For many small businesses, the value proposition is based on a personality sell around the owner and face of the company. That’s especially true when the product or service is common in the marketplace, such a real estate, insurance and banking.
Differentiating your company from the next may require that you extrapolate and promote a value you personally bring to the table. Qualities that sell would include trust, expertise, customer / consumer insight, business connections, approachability and social involvement. Interestingly enough, studies have shown that how long you’ve been in business has little or no value impact on the consumer.
Another way to differentiate yourself in a cluttered marketplace is to identify the ideal customer you want to reach and develop a value proposition that serves their interests, Cobbs says.
“The biggest challenge small businesses face is how to get the message out there in the right channel,” Cobbs admits. “Small businesses are bombarded with opportunities to advertise which may not be the best place to communicate their message.”
Marketing messages should be tested for effectiveness. “The best way to test the effectiveness of a value proposition is to conduct surveys and focus groups,” says Carpenter.
Cobbs says that for small business this usually happens informally. It’s important, he says, to make sure you are talking to people who are relevant to your business – people who are part of your audience.
Don’t just collect feedback, says Carpenter, act on it.
Before you plan out your marketing campaign for 2011, take time to organize your approach. Take time to identify your value proposition, put it clearly and succinctly into words, and finally, test and measure its effectiveness with your target audience.
Here are 5 elements to assimilate before you begin:
1. Know your market. Detail everything you know about your target customer, their needs and desires. For what market is the value proposition being created? What is the primary reason a customer should buy from you? What product or service is being offered? What value or customer experience does the market value most?
2. Talk less. Learn more. Talk to your current customers to better understand the company and its value from their perspective. What do they see as your value? What are the benefits the market will derive from the product or service? What is their ideal level of desire for your product or service?
3. Know the competition. How exclusive is your proposition? Can your competition make the same claims? If so, what is the one thing that truly differentiates you?
How does your company performance stand up to theirs? Understanding their strengths is as important as understanding yours. What alternative options or access does the market have to this product or service?
4. Compare notes. What are the value propositions of other companies in the marketplace? Look at successes and failures to gain a clear perspective. Do your product(s) or service(s) optimize your value to the consumer? What is the top element of value your business offers the customer? How do you excel in delivering it?
5. Get creative. Involve others in your company to brainstorm ideas, concepts and benefits associated with your brand. Get all the ideas down and then begin to weave and unravel until a clear pattern appears.
Ready to write your Value Proposition? Here are 3 steps to get you on track.
1. Start with a verb. Sentences that begin with present tense action pull us in right away. Like a director of a Hollywood movie, a solid verb actively shows us our mark and tells us where we stand.
2. Be credible. We know hype when we see it. Or rather, when we experience the opposite in the store. What quantifiable data can you ascribe to your claim that makes it true? What proof exists that the product or service is viable?
3. Make it visible. Incorporate your VP in all your marketing and corporate materials. You want to make sure your business name and value proposition go hand in hand. When developing communications of any kind, make sure your position is well aligned and supported everywhere you look.
