Journey of a Serial Entrepreneur

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

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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