"What’s your unique value proposition?" That's a question every entrepreneur is destined to hear.
Entrepreneurs can all recall the moment that they first thought of their new venture. It felt like a stroke of genius. We can become so overpowered with eagerness to jump right in and begin building that we forget to carve out the time required to build integral parts of the business strategy. One such puzzle piece is the value proposition. Your value proposition is integral to any new venture’s success story and deserves significant time and energy to build.
What is a Value Proposition?
A powerful value proposition comprehensibly answers the following:
What product or service do you sell?
To whom are you selling?
How is your product or service differentiated from competitors?
Simply put (and as the term value proposition suggests) what is your proposed value-add from both a product and market perspective?
How to Build A Unique Value Proposition
While enrolled in my Starting New Ventures MBA course, I read Michael Skok’s article 4 Steps To Building a Compelling Value Proposition. From the hundreds of readings assigned during the program, Skok’s work was one of the stand-out, memorable reads that stayed with me. With a digestible approach, 4 Steps to Building a Compelling Value Proposition maps out the main considerations to help design your business’ value proposition.
1) Identify The Problem You Solve
The ability to make a strong case for the problem you solve is critical to your value proposition. If your product or service doesn’t address real pain points, then your business isn’t a solution, at which point a red flag should immediately raise. The inability to identify how you help your target audience effectively creates an alarmingly unstable foundation for your business.
Conversely, if you quickly identify addressable, specific pain points, resist the urge to become married to them too quickly. In other words, don’t put all of your eggs in one basket. Stay open-minded to possible problems that your product addresses, perhaps in not-so-obvious ways.
Ethnographic research is one strategy to discover possible pain-points to which your business wasn’t initially designed to cater. Ethnographic research includes a combination of target market face-to-face interviews and natural observation. The more conversation and observation, the more organic your insights will be. Interviews can reveal problems that customers face in their daily lives that weren’t considered in your initial scope. Watching customers in their natural environments illustrates their honest habits and allows for authentic insights. Get to know your target market. Their contributions might surprise you!
2) Know What Makes You Unique
A strong pulse on existing solutions plus a highly differentiated solution is the recipe for a competitive edge. First-movers and category creators position themselves at much higher risk but do gain more flexibility than the players in saturated markets. Have you ever ideated what appeared to be a brilliant and original idea, only to find that it already exists? Don’t be discouraged. Chances are incumbents have gone to market with a parallel solution. If you find yourself in this scenario don’t throw out your idea. Ask yourself, “How do I make the solution better?”
Don't throw out your idea if you find yourself in this scenario. Study your incumbents and take note of alternative solutions’ strengths and weaknesses. Make it your mission to discover what competitors lack and fill in the gaps to best differentiate. Leverage marketing initiatives to highlight your solution’s inimitable features.
3) Assess Your Customers' Willingness to Adopt
As mentioned above, it’s almost inevitable that your target markets already employ alternative solutions. Once you define the problem you solve, then study your competitors to best differentiate, next it is time to study your potential customers’ habits and asses their willingness to adopt.
Skok uses a measuring tool called the Gain/Pain Ratio. The Gain/Pain Ratio takes inventory of the potential gains and pains customers may experience in the adoption phase.
Ideally, customer adoption should be simple and painless. During the product development phase, it’s paramount to develop with a simple, easy-to-use design as the central focus. Difficult UX will cloud customers with confusion and diminish their appetite for change. Gains and pains might include better accessibility/distribution or higher switching costs, respectively. If the pains outweigh the gains, it’s back to the drawing board.
Humans are creatures of habit. When they find a product or service that works for them, is easily implemented into their routines, and is compatible with their lifestyles, it’s incredibly difficult to interrupt those habits. To bring it full circle, habits are most accurately assessed through ethnographic research mentioned above.
In order to poach customers, your businesses’ benefits should eclipse current solutions so dramatically that they have no option but to be persuaded to adopt. The more powerful your value proposition, the greater your chances to persuade.
4) Begin Designing your Value Proposition - And Keep Editing It
Now you have identified the problem you solve, differentiated your product, and assessed your customers’ willingness to adopt. The building blocks are all in place and it’s finally time to begin designing your value proposition. If the three prompts above cause more doubt than confidence, tweak as you see fit and try again.
Your first value proposition is not set in stone. As your business model evolves and iterates, the same will happen for your value proposition; this is perfectly normal. As product features and target markets pivot, it’s natural to be caught up in the hustle of the business. I encourage entrepreneurs to take the time to revisit their value propositions during pivot periods. Proactively redefining your value-add will bear fruit in the long run.
Trying to navigate a business without a defined value proposition is like setting out on a cross-country trip without a GPS. In both scenarios, you’re on a long and aimless journey. A well-vetted value proposition will surely make your journey less challenging.
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