In this series, we will see how three questions for business success are approached and provide some practical tools and techniques for the SME owner to answer them.
Since businesses have been in existence, these questions that have perplexed most of their owners. Before AI, before the internet and even before electricity.
Who is my ideal customer?
What makes my product or service attractive?
How should I be pricing my product or service?
An article in the NZ Herald from June 2024; Big Red, What went wrong for The Warehouse, highlighted the struggles of one of New Zealand’s most famous retail brands, The Warehouse. A senior analyst at investment house Forsyth Barr posed the question, “I don’t know if they [The Warehouse] know what they are and how they fit into the New Zealand retail landscape, or what they are going to compete on”.
Another analyst, Greg Smith of Devon Funds Management, commented, “They need to recalibrate what is the value proposition”. For The Warehouse, which has used bargain prices as it’s core attraction, now has its competitors like Kmart dictating to Warehouse customers what a bargain actually is.
Given The Warehouse is a large, complex business in a highly competitive market, you might believe that it’s relevancy doesn’t apply to SME’s. But it does. No matter what size of business, the principles of success are all the same.
Who are you selling to, why should they buy it and how much will they pay, are the foundations of success for global conglomerates through to food trucks. In fact, these questions are all linked and once you unlock the first two, then the third is much, much easier to answer.
In this series we will take a look at each of the three questions and shed some light on some approaches to get to the answers. This article looks at identifying a value proposition.
What makes my product or service attractive – my Value Proposition?
Borrowing from the world of advertising, Rosser Reeves of US agency Ted Bates was the first to coin the single minded proposition phrase in his book Reality In Advertising back in 1961.
He concluded that unless an ad (or any communication) had a core proposition at its heart, then what you are saying is a waste of both the readers and and the advertisers time.
A great value proposition should:
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- Be easy to understand for your target audience, something that resonates with them.
- Communicate specific results that the target customer will get.
- Explain how you’re different from an alternative they might be considering.
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A good value proposition has to be both relevant and compelling. Click bait is sometimes quite compelling but often not very relevant. Making you click, only to reveal that the compelling nature of the message is completely missing. Don’t be that person.
Good value propositions that find their way into the wider world can stem from:
The product: M&M’s: Melt in your mouth, not in your hands.
Service: Avis: We’re no 2, so we try harder.
Location: Disneyland, The happiest place on earth
Price: Walmart: Save money, live better.
So, how do you go about writing one for yourself?
Answering these questions is a good foundation:
- What difficulty do you solve for your audience?
- What do you do to solve it?
- How does your product or service do it differently from other options out there?
To the extent you can, fight the temptation to break your business down into different product lines or services. Try to think about the big picture — your business as a whole. To write your value proposition, start by aiming to answer all of these questions in a single sentence.
It may be a long sentence, but that’s OK. Then start to reduce the longer sentence down to something short and punchy. A good test is to think of it as if it was the only piece of signage you could have that told people passing in the street what was good about your shop or office. What would it say?
So, it goes to show that if you are struggling to answer the three questions or want to step back from the day to day for a minute to consider these questions – then it’s a good exercise.
If a publicly listed company like The Warehouse is struggling to answer them, then you are not alone and shouldn’t see it as a problem but an opportunity to ensure your business has some of the fundamentals of success covered.
The following content was originally published by BOMA. We have updated some of this article for our readers.