Once you have a business idea, have done your market research and set some business goals, it’s time to think about the unique value you can offer your customers.
Sharon Oxendine of TenBiz (tenbizinc.com) recently outlined the process of starting a business during a class offered through the Small Business Center at Western Piedmont Community College (wpcc.edu/sbc). She emphasized the importance of creating a value proposition, or a compelling reason people will buy from you.
A value proposition positions you as the logical choice for purchase, persuading potential customers to exchange their money for what you’re selling.
“Generally, there’s already something like what you have, or some direct or indirect competition,” Oxendine said. “What is it you will do differently that will clearly set you apart from the competition and will allow you to connect with that customer?”
The value proposition should be no more than a few sentences long.
“What makes a good value proposition is that it is unique and easy to understand,” Oxendine said. “It explains what your business does to someone who’s never heard of it before.”
Asking the following questions can help you clarify your business’ value proposition:
· What is the problem the product/service will solve?
· How does your business offer a solution?
· What is unique about your business that no one else is doing or that you can do better?
Harvard Innovation Labs, an institution within the business school at Harvard University, has a class on creating a value proposition for your business on its YouTube Channel, free for all to watch (https://youtu.be/q8d9uuO1Cf4?si=kv-ZGQuD2ELiex1s). The class is taught by Michael Skok, an executive fellow at Harvard Business School and venture capitalist.
Skok’s approach to creating a value proposition begins with the customer. He said entrepreneurs should start by identifying their target market and clearly defining the problem they plan to solve for that market.
“The number one reason companies fail is because they’re not solving a valuable enough problem, and therefore they don’t create the value that’s worth investing in,” he said.
He suggested using the “4U” formula to outline the problem you want to tackle:
· Unworkable: Are the consequences of not purchasing your product or service going to be costly or painful to people in your market segment?
· Unavoidable: Is the problem so fundamental that people can’t avoid it?
· Urgent: Is the problem a priority for people to solve?
· Underserved: Is the problem addressing a gap in the market that you can capture uniquely well?
“If you can really, clearly identify what pain or need or opportunity you’re going to address, it becomes very easy to start getting your team to focus on what product or service you will build,” Skok said.
Once you determine the problem you’re able to solve, you can create your minimum viable product, or the smallest size at which your product can still dominate the market. You also must identify your minimum viable segment, or the particular niche of buyers you need to capture in the market for your product or service to be successful.
In defining that segment, Skok urged his students to “look at everything through the eyes of your customers,” figure out what their priorities are and ask them to evaluate and review your proposed offerings.
“Don’t pitch them anything – ask them everything.” Skok said. “If the user can identify with the product you’re selling, you’re on the right track.”
This process will lead you to a unique, effective solution, which should be “disruptive, discontinuous and defensible,” he said.
Disruptive and discontinuous mean that your product or service breaks the mold of how customers have met their needs in the past and provides a new way of doing business in that space, like Uber and AirBnB disrupted transportation and lodging, respectively. Defensible means how you protect your business from competition and how you stay relevant through various market, technological and societal changes. No one wants to be the next Kodak.
“Your business or value proposition needs to be something that is going to last, endure and be sustainable,” Skok said.
At this point, I wondered if creative entrepreneurs selling one-of-a-kind works of art or uniquely creative skill sets should diverge from the traditional business approach to crafting a value proposition. How could creatives prove that their works of art would add value to others? The framework outlined by Oxendine and Skok didn’t quite seem to fit this aspect of the marketplace.
I scoured the internet for clarity, but it was strangely quiet on this topic. I was only able to dig up one nugget of helpful advice.
Parsons at The New School, a prestigious design school in New York City, shared insights from John Jones, a strategy and design expert who taught a workshop on this very subject. Jones said creatives looking to monetize their products or services should identify their minimum viable market segment by finding “true fans” that resonate with their creations and explore why their work matters to them. (https://www.parsonsentrepreneuracademy.com/blog/how-to-craft-a-value-proposition-for-your-creative-business).
I still wasn’t satisfied, so I reached out to a business consultant friend and asked him about this issue. Matt Rudisill is the founder and CEO of the Leadership Academy (ncleadersacademy.com), a company that helps startups achieve success.
He observed that, ultimately, it’s up to potential customers to decide if the work of an artist or creator is of value to them in the marketplace.
“In life, there are businesses and hobbies,” Rudisill said. “Sometimes, they can be the same, but often they are not. A business makes a profit, and a hobby usually does not. Some artists run businesses, and some just enjoy their hobby. The value proposition a business has revolves around what the customer wants. Usually, the value proposition an artist has revolves around what the artist wants. All of this is OK, and is all a personal preference. However, the magic happens when an artist is able to create what they want and the public (the customer) sees value in it and decides it also is what they want. Then, the value proposition meets the customers' needs, and the artist starts to make money and have an actual business.”
If you develop a value proposition, Oxendine said it’s a good idea to share it with people to receive feedback on how they perceive it. It may require some fine-tuning. Your final value proposition should be featured on your website and all of your marketing materials so customers have a clear idea of that unique value you have to offer.
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