Unique Value Proposition: Promise to Enhance Customer Quality of Life
The first year is crucial to a start-up's value discovery process, but it also marks the beginning of the end for 20% of start-ups. It is often due to a lack of clarity on the unique value that their product or service offers or provides, which is one of the many causes for failure.
Establishing a compelling value proposition may help a start-up attract customers in the early stages of its life cycle. Customers are mostly drawn in by a product or business that has a unique value proposition that promises to enhance the quality of their lives. How does one go about developing the best possible USP (Unique Selling Proposition)?
"If you build it, they will come" may turn out to be a nightmare for start ups' marketing strategy. The quote is from Field of Dreams, a 1989 American sports fantasy drama movie, and while Kevin Costner's character in the movie found the advice to be effective, in reality, it's an extremely vague strategy, and no one should run a business around any such pretentious statement.
20% of start-ups fail during the first year of their value discovery phase. Some tech entrepreneurs speculate that customers will discover the start-up's exceptional product as they adopt new technologies.
Such teams invest a great deal of time and money in the search for product/market fit by concentrating on their own (typically overly optimistic) ideas of what value will or might be useful, downplaying the step of doing research into what their customers need.
Pay By Touch, a US fintech firm that raised $130 million for biometric payment solutions for shoppers; Loon, an Alphabet company that aimed to provide high-speed internet to inaccessible areas of the world via a fleet of balloons; and Shyp, which was positioned as Uber for on-demand shipping, are examples of businesses that died because their customer value propositions were severely lacking.
In my experience working with start-ups and small businesses, one of the most common mistakes they make is relying on vague and ineffective value propositions built like 30-60 minutes ago before their customer pitch.
Besides, the material issues that plague the value proposition are that it is either product or service centric, borrowed from a competitor, or based on price benefits. Moreover, every team member may have their own version of a value proposition for the same product, which adds to the ambiguity.
The early phases of a start-up's customer discovery process may benefit tremendously from the efforts to establish a compelling value proposition for the start-up's product or services.
The teams behind a successful company will undoubtedly have conducted extensive research on the requirements of their target demographics as well as the consumer subsets they want to service.
If the successful businesses of recent years (like Apple, AirBnB, Uber, and so on) are examined, you will note that with their succinct messaging, each is able to address a problem for a larger pool of customers who were previously underserved in terms of the values offered to them.
When Slack started in 2013, its messaging implied that their service could address all of their customers' email concerns. After making a single marketing choice on their customer value proposition nine years ago, Slack has grown to be worth $27 billion. Their unique value proposition to customers is to "make work life simpler, more pleasant, and more productive."
Customers who are buying your product are always interested in knowing how it is going to improve their quality of life.
A century back, Paul M. Mazur, a Wall Street banker, defined "marketing as the delivery of a standard of living."
The core of marketing is captured by this definition. Clearly, it's designed with the customer in mind. As such, it upholds the marketing concept that represents a shift from product to customer-orientation, or catering to the needs and desires of the customer.
In 2015, Bain & Company identified 30 "elements of customer value." Their model is based on Abraham Maslow's "hierarchy of needs", but it goes further by focusing on people as consumers and describing their behaviour in relation to products and services.
They arranged the elements in a pyramid based on four types of needs, starting with "functional," then "emotional," "life changing" and finally "social impact" at the top. Read the article in the Harvard Business Review here.
Each level needs to be addressed in order to provide maximum value to the customer and, if possible, to all four layers.
For example, a cookie can address functional (sensory) needs and help with weight loss, but has little emotional value and is unlikely to have much social impact. A movie can address emotional and social needs, but its impact on life changing or functional needs is limited.
An app with both functional and emotional value that is also likely to have a social impact and improve life changing needs would be the most valuable product in terms of delivering value.
A good example of addressing all four layers is the fitness band like Fitbit that addresses functional needs, provides emotional value by supporting weight loss and fitness goals, has social impact through leaderboards and challenges, and can change life-changing needs as it provides a more active lifestyle.
As a side note, the app version of this same product may provide a similar combination of value (for example, Nike+, Runkeeper) but is unlikely to address all layers. Our final example, the Xbox gaming console, addresses all layers by allowing the player to have fun and gain status in the gaming world while simultaneously addressing functional needs with daily exercise.
A value proposition is thus a clear indication of how your business will create value for your customers. A compelling value proposition can be constructed around a clearly understood group of customers who suffer from certain problems that are negatively impacting their quality of life and can be exchanged for the benefits offered by your product and service.
Your value proposition must show why your customers will benefit from buying your product or service, as well as convey your reason for existing as a business. Value propositions can be simple and direct, communicating a unique benefit to the customer and prompting the question, "What's in it for me?".
Drafting a unique value proposition require a systemic approach. The following three steps should be followed while developing your value proposition:
Step 1: Define a customer persona and determine the value that your company can offers addressing customer needs, their pain areas, current solutions and how it can enhance their quality of life.
Step 2: Give life to the value proposition by composing a message that explains what the buyer will benefit out of making use of your product or service.
Step 3: Put your value proposition to the test by conveying it to your target demographic in order to stimulate demand.
During our work on developing the value proposition for one of my start-up customers, we tested and refined his product's message until it could clearly resonate with potential buyers. Success is the greatest teacher.
If you still find it difficult to create a value proposition, have a look at Steve Blank's format to begin penning down your business value proposition. "We help X do Y by doing Z."