Journey of a Serial Entrepreneur

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How to get from where you are to where you want to be

5 Steps to Write a Customer Value Proposition

“The toughest thing about the power of trust is that it’s very difficult to build and very easy to destroy. The essence of trust building is to emphasize the similarities between you and the customer.” Thomas J Watson

A customer value proposition (CVP) is a direct reflection of how your organization brings value to your target segment. It helps them answer the fundamental question “Why should I buy from you instead of your competitor?” A well developed CVP has the ability to transfer your target segment’s attention to the distinctive advantages of your product/service, and the reason they should select it. If the CVP is generic and abstract, with fancy words which do not translate into tangible value for the customer, it is of no consequence. Listed below are five steps to help you develop a winning CVP.

1. Customer Identification: Who is your target customer? Instead of answering this question with generic answers such as multinational companies, teenagers or women, be more specific in your approach. An analysis outlining the customer’s needs and their current pain points is the need of the hour. If your product/service does not fulfill a need, it will be difficult for your organization to generate substantial traction. Therefore, the first step requires understanding your target customer and ensuring that the essence of your CVP reflects an unfulfilled need. To read more about customer identification please click here.

2. Distinct Advantages: What makes your product/service special? If your product/service is homogenous in comparison to the rest, chances of getting lost in the crowd are, high. Your product/service must provide customers with a simple and clear reason to choose your organization over the competition. This being a vital component of your customer value proposition, it is essential that substantial time and effort is put into identification and development of these edges. To read more about discovering your organization’s distinct advantages please click here.

3. Measuring Value: If your product/service does not bring tangible benefit to your target customer, chances of recurring business is diminished. During customer research, you will discover pain points for your customers. These need to be addressed by adding metrics to monitor positive changes through your product/service. Once the customer understands the value you bring to their organization, they are able to select you with greater ease and provide recurring business. To read more about measuring the value brought by your product/service please click here.

4. Sustainability: With the claims made in a CVP, an organization is making a promise to its target segment. This could be in the form of creating efficiency, increasing productivity, stimulating sales or even making life easier. When the customer selects your service, they expect to receive the benefit promised to them. It is critical that organizations understand what it takes to keep those promises, and to continually make good on them. Making big claims is the easy part, delivering on those claims is what sets the winners apart. To read more about sustainability of your CVP please click here.

5. Competitor Comparison: Every company has their strengths and weaknesses. However most companies are so engrossed internally, they forget to pay attention to their competition. For a CVP to be most effective, it must clearly provide the prospect with a reason to be selected over another competing product. It must bolster its strengths and play against their competitors most exposed weaknesses. With the constant changes taking place in our world today, do not lose sight of the competition, always remain vigilant about all potential and major changes. To read more about competitor comparison and your CVP please click here.

Developing a good CVP takes time and effort. It is not something which can be done in a single day. It requires a thorough analysis of your industry, competitors and yourself. A comprehensive understanding of market dynamics and the industry’s pain points will help construct a CVP which addresses market concerns and bridges it with solutions. A well developed CVP can be a great source of inspiration and motivation for the entire organization. Make sure you allocate adequate time and resources for its construction.

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Competitor Comparison

“Concentrate your strengths against your competitor’s relative weaknesses.” Paul Gauguin

Your customer value proposition (CVP) needs to be benchmarked against your competitors. Prospects will always ask the question “Why should we choose you over them?”. As mentioned in earlier posts, ensure a distinctive advantage, tangible metrics and a proposition which is sustainable over a period of time. When formulating a CVP the competition must always be kept in mind. Irrespective of whether you have experienced success relatively quickly or whether it has taken a longer period of time, the tendency to become complacent  is always there. It is at these moments that we are at our weakest, and our vulnerabilities exposed.

When initially constructing your CVP, it is vital to do a sweep of all the local competition. This will enable you to:

1. Position yourself: It is important to position yourself correctly in relation to your strengths and the competition’s weakness. We are always looking to operate in that sweet spot where our competitors are at a disadvantage, and target customers are able to make a clear and easy choice about whom to choose and why.

2. Focus: There are areas, where our competitors have clearly developed strong competencies, which make it difficult for new entrants to penetrate. After a thorough analysis, the aim should be to collect all the vulnerabilities in the competition’s defense and amplify them. This is best done by focusing marketing and research efforts to ensure development in areas where the competition is at its weakest.

3. Understand trends: By continuously monitoring the competition, a keen insight into future trends in your industry is developed. This enables developing core expertise in those areas before the competition and can put you in a strong position to potentially disrupt the market. 

Once the analysis is complete, the wordings in your CVP should reflect the strengths of your organization in comparison to those of your competitors. With the constant changes taking place in our world today, do not lose sight of the competition, always remain vigilant about all potential and major changes. 

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Keeping Promises

“Never promise more than you can perform.” Publilius Syrus

Imagine if FedEx did not get your package to its target destination overnight! Would you use or recommend the service to anyone again? Probably not. As customers of products/services, we expect them to deliver on their promise. Inability to match expectations, results in unhappy customers, and more importantly, negative word of mouth publicity. Such publicity is viral in nature, can spread like wildfire, and could well mean the end of the road for your organization. Deciding to play it safe and not putting anything on the line, chances are you will never really stand out in a crowd. A fine balance has to be maintained to ensure customer satisfaction, while ensuring your organization is able to stand out in a crowd.

Look at renown brands in the market place today, notice the promises each is making. Volvo promises safety, Energizer batteries promise to last longer, Domino’s promises to get you your pizza in less than 30 minutes and Disney promises entertainment for the entire family. Each one of these companies makes a commitment, then ensures they deliver on the promise. Anyone of them, failing to consistently deliver on their promise, would not find their name on the list above. Many companies however, make big promises these days, come through initially, but are not able to make that commitment a sustainable one. 

When developing your customer value proposition (CVP) and committing to increase efficiency, boost productivity or bring a smile to your customers, it is critical to lay a solid foundation to continually provide those experiences. Making big claims is the easy part, delivering on those claims is what sets the winners apart. Carefully think through promises to your clients, ensure the ability or develop the capability to deliver on those promises on an ongoing basis. Remember, all it takes is one major fall to bring down everything you have worked hard to build. 

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Measuring Value

“The trouble with measurement is its seeming simplicity.” Anonymous

If you have ever pitched a product or service to a prospect, there is no doubt you have heard the question “How is this product/service going to help my organization?”. If the reply to this question is abstract, vague and includes words such as speed, efficiency or productivity, without any tangible figures or results, closing the deal will be a challenging proposition. When I say tangible results, it does not mean they have to be precise, they should however provide the prospect with something to create a frame of reference. For example, Domino’s Pizza gets your pizza to you in less than 30 minutes, FedEx gets your packages to its target destination overnight and M&M say, their milk chocolate will melt in your mouth and not your hands. Three world renown companies, each with a differing degree of measurement attached to their product/services. 

The bottom line is, if your product/service does not have the ability to bring tangible benefit to your target market, chances of success are slim. The question coming to mind now, should be, “What sort of tangible benefit can my product/service provide my target market?” Entire books, courses and seminars have been created around this one critical question. If a company is able to answer this question with a tangible benefit of great value to its target market, success is not far. However, answering this question is not as straightforward as it appears.

These are a couple of pointers to help start discussions around this particular question with your team:

1. Identification of pain points: An organization’s product/service is developed in order to address a certain pain point that the target market may have. Initially national post offices promised prospects that they would get their packages to their destination. The process was slow but efficient and there was no alternative. FedEx comes along, and addresses this pain point by promising to get your package to it’s target destination, over night. This example shows,  to get faster traction your product/service has to address correct pain points.

2. Establishing metrics: Once you have addressed a particular pain point, measure how it is superior to the  alternatives. FedEx aims to get your package to its target destination overnight. The stress is on the speed  of package delivery. Identify key metrics to ensure, that prospects will be able to clearly measure the benefits of using your product/service. There are many examples in the market place, mutual funds offer specific returns, sports cars tell you how fast they can go and some software promises specific increases in productivity. 

3. Case Studies: Actions and results speak larger than words. If you are a new company and have a product/service which has not been commercially tested, I strongly suggest you find your first pilot customer as soon as possible. Most established companies look at start-ups with suspicion, at the back of their minds, they wonder if you can actually deliver. I believe it is a justified stance and one which we need to learn to live with. To counter it, find a customer, do a commercial implementation and track just about everything you can. Afterwards, analyze which metrics have value and focus on those.

This is by far one of the most challenging steps one has to take in the development of a good customer value proposition (CVP). Much time needs to be spent in identification of correct metrics and related data collection. However it is well worth the effort. The next time you pitch your product/service to a prospect remember to tell them exactly how you will be benefiting their organization. It will clearly increase the probability of closing the deal, the incremental increase however will depend on how well you have mapped out your CVP. 

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Distinctive Advantages

“Strategy used to be about protecting existing competitive advantage, but not any more. Today it is about finding the next advantage.” Vijay Govindarajan, Chris Trimble

A customer value proposition without a distinctive competitive edge is an incomplete one. If your organization can sell books online just like any other seller why should customers buy from your store? When you create a distinctive competitive advantage, it sets you apart from your competitors and gives your organization an edge. For example Amazon has this brilliant one click ordering system, huge variety, and an intelligent reviewing system. Put it all together, and that is a most compelling reason to buy books from Amazon as compared to other online book stores. 

When FedEx started out they promised getting your package to its target destination overnight. Suddenly all other courier companies were scrambling to put together the resources required to offer the same. However, only very few have been able to come close, and today FedExing a document or package has become the norm. FedEx was able to leverage on this distinctive advantage and used it to create a high entry barrier. This clearly demonstrates how an organization can strengthen its position in the market place with a distinctive competitive advantage. 

Identification and development of your organization’s distinctive advantage entails:

1. Internal review: Do a thorough scan of your organization’s strengths and capabilities. Do a function by function analysis which includes looking at your, management, production, sales, customer support, finance, operations, marketing and Information technology functions. Analyze which ones are helping you most in promoting and expanding your business. 

2. Developing: Once you have identified a function or process which sets your organization apart from the rest, you need to develop it further. This is done by strengthening the advantage with a greater allocation of resources as well as developing complementary assets around your competitive edge. This will not only widen your edge it will make it much harder for the competition to replicate it quickly. 

3. Reviewing: To remain competitive in today’s dynamic market place requires your organization to be extremely vigilant about changes taking place. Many organizations become too comfortable and in their complacency allow competitors to catch up. Constantly innovating and reviewing your edge is an expensive exercise which does not show immediate results. However to ensure that your organization keeps its position in the market place, it is a must. 

Distinctive advantages do not necessarily have to be unique. They must however provide customers with a simple and clear reason why they should choose your organization over the competition. Being a vital component of your customer value proposition, it is essential that substantial time and effort is put into the identification and development of these edges. Without them, the probability of long term success is greatly reduced. 

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Who is your customer?

“The road toward being successfully different usually involves one of three broad initiatives: leveraging a deeper understanding of customer needs; exploiting a deeper understanding of industry economics; or simply having the courage to challenge conventional wisdom-to overturn “the way we’ve always done it.” David Rhodes, Michael Ackland

On the surface this seems a trivial question. Everyone has a vague idea about who their customer is. Ask any business owner or entrepreneur and the answer will vary according to their respective businesses. Answers I hear often are, Small Medium Enterprises (SME), Multinational Companies (MNC), Teenagers, Baby Boomers or Technology Enthusiasts. A lot of the businesses then proceed to market and pitch to everyone in their market segment. Eventually they find themselves back at the drawing table wondering why their product/service is not selling. The fact of the matter is, many smaller and younger businesses hardly ever invest the time to research and find exactly who their customer is. Going after broad segments like SMEs or Teenagers is suicidal for most start-ups, this takes up a lot of resources and is unable to effectively cater to such a large target audience. 

When an organization is developing its Customer Value Proposition (CVP), this question needs to be talked about and researched in great deal. This will not only save time and resources, it will provide a foundation to effectively market and sell your product/service. Some key concepts to keep in mind when mapping out your target customer are:

1. Be specific: Targeting everyone, with limited resources, is a strategy with a low success rate. Evaluating your product/service needs in-depth analysis of those who will most benefit from what you have to offer. Being specific will allow you to zone into a segment, and develop a niche, in the long run this will also develop into a competitive advantage. Some key concepts to keep in mind when profiling your target segment are:

2. Understand who your target customer is: Say for example, your organization provides services related to alternative advertising. Your target customers are SMEs with a turnover of less than $2m with products targeting the 18-24 demographic. To successfully sell your services, not only will your organization have to understand the SME’s marketing patterns but will also have to understand who their target segment is. Failure to do so will create a mismatch between what you propose and what is required.

3. Understand your target customers needs: It is essential that you satisfy your target customers needs and requirements. Sometimes these needs will be lower prices, higher quality products, 24/7 customer service support, environmentally friendly products or other specific requirements. Not understanding your prospect’s needs,  will cause a gap in your selling strategy. These will in turn, result in low conversion rates and directly impact the success of your business.

4. Research your target segment: To truly understand your customer, in-depth research is vital. This research must include maximum data collection, ranging from company size, turnover, organization structure, decision makers, influencers, press releases and product/service information. I like to build customer market research files, in which we gather data on all major players in our target segment and document them on a single sheet of paper for easy reference. 

Successful profiling of your target segment is an arduous task at the start of a venture. Many questions will come to mind, such as, “Are we limiting our target segment too much?”, “Is this a profitable segment to be in?”, “Am I sure who my target segment should be?”  as well as other such questions. These questions are good, they show a conscious effort to find the answers to the questions at hand, it does take time and experience to find these answers . However, if you adopt a “see how it works” strategy, document all your feedback and findings. Once you have collected substantial data, convert it into finding the segment you should be operating in as soon as possible. 

So who is your customer? 

Related Posts:

- The Customer

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What is your Customer Value Proposition?

“An organization’s value proposition is a reflection of its brand promise, and answers the question “Why should I buy your product?” It identifies the tangible value customers can expect to receive.” Anonymous

Customer value propositions (CVP) is a term I have heard frequently over the last couple of years as an entrepreneur. It is an abstract concept, which appears simplistic at times and complex at others . The notion of pinning down the exact value your product/service provides to your target segment can be a challenging exercise. Without adequate groundwork, we usually end up with generic CVPs such as:

- Our solution guarantees increased productivity of your workforce

- We offer small businesses state of the art web development services

Such CVPs are weak at best, and do not help you stand out in a crowd. Pitching to a prospect and just repeating the generic benefits you offer, is not going to impress the customer . They have probably heard the same pitch from your competition and will in all probability end up making a decision based on whoever they “liked” more (based on the assumption that the competitor has also not outlined a clear CVP). If steps are not taken to rectify this position, the business will most likely experience stagnant growth and not achieve projected goals and targets.

Given that CVPs are essential to the success of any business, why is it that so many organization hardly pay any attention to them? There are a couple of reasons which come to mind:

1. Businesses usually underestimate the importance of this exercise. 

2. Weak and generic CVPs are thought to be as effective.

3. Lack of data and research to formulate a good CVP

Based on personal experience, it appears that many organizations are taking the easy way out, or, are unaware of the strategic element a well crafted CVP brings to a business. Over the course of this week I will outline some key elements to help develop a good CVP. I look forward to getting feedback and examples of value propositions that you may have developed for your business.

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Strategic Partnerships

“Our success has really been based on partnerships from the very beginning.” Bill Gates

The world continues to become smaller as time goes by. As competition increases and products and services become commoditized, competing on price alone is a recipe for disaster. With the rampant use of the internet making an abundance of information available to customers and clients, competitive advantages become critical to a firms success. That is where strategic partnerships come into place, they enable you to create multiple barriers of entries which could be both, tangible and intangible. Usually they are developed outside your area of expertise to complement your current offerings.

However over the last 5 years of doing business I have discovered that creating these strategic partnerships succesfully is not an easy task. Having entered into such agreements without careful due diligence in the past has resulted in a fair share of frustration, brand and monetary loss. It has however now taught me some key lessons which I will share with you over the course of the next week. The process will show how to correctly identify, align and commence a successful strategic partnership.

A key factor to be kept in mind before entering into any such partnership should be, to look at the larger picture for your company or startup. Partnerships help you to scale your business effectively and efficiently if done correctly. They allow you to focus on your core expertise while you develop complementary assets around your service to give it competitive advantages. By not leveraging on them in this day and age is a mistake a lot of startup companies make. Keep your eyes peeled for any potential partners  in your segment or industry  and watch your business prosper.

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