Value Proposition

Value proposition is the interface between your core offering and your target market. Your customer's needs form the basis for your business offering. Here, we examine how the process has evolved and what the critical factors for effective positioning are.

Product Focus

The product era focused on the utility of the product. The manufacturer had designed a desirable product and created demand for it and what mattered for the market was to have it. The story of the Ford Model T, which Henry Ford is said to have stated would be “available in any colour as long as it is black” is a classic example. So was the telephone set installed in your house by the phone company. They just installed the set they had and there was one type for every customer. What mattered was the connection and not the gadget. The opposite is true for the cellphone generation.

Market Driven

When variety improved and the customer’s wishes started to matter, the focus shifted to customer preferences. Often these had no qualitative difference, except where the quality of the offering was significantly differentiated along with the price e.g. standard vs. premium or front row vs. the cheap seats. Psychological variations like colour shape or taste often didn’t have a significant effect on the price difference.

The winning formula here was aggressive marketing that focussed on the features, attributes and benefits of the product to the client. There was always an external aspiration that drove the desire hence the dominance of celebrity advertising and the sexy appeal.

Customer Centric

In a world where there are a million and one choices and price difference competes downward, there must be a way that your value proposition is defined to be appealing to the client, but also justify why they are keen to spend on you rather than your competition. This is the era of positioning. The value is defined by the customer and framed as their “problem” or “challenge” that they turn to you to solve.

The business model development process helps you to nail it here. This is the market where the customer is powerful, the competition aggressive and the rest of the business operation process complicated.

Many clients that I have worked with tend to start their business on their strong points i.e. what they are good at. So, if you are an accountant then you open an accounting firm and if a lawyer, open a law firm etc. There is merit in this, I have actually written an article on this. However, before starting the legal firm, the positioning approach asks the question: What legal aspects are being sought after by my market? Market research will inform you before you invest anything. That becomes your core offering rather than a generic legal service that you will then struggle to sell.

Value Proposition is not informed by your genius, but rather by the demand/needs of the market. That is why we work not only with those crafting new business models, but also with those who are reviewing their existing models because these may be outdated and out of sync with the business’ present reality.

Positioning is defined by the following:

• What your brand stands for in the mind of the customer.
• What category your brand falls into because consumers think category first.

Today’s marketers would advise you to buy adwords, SEO and a range of other algorithm manipulation activities so you come up first on Google searches. However, if you show up and are not recognised as the best fit for the customer's needs, then the prospects will simply scroll down to find a brand they can trust to solve their problem.

While these marketing elements are important, I have come to realise that the design of the business model is the most important part of the process of in business leadership. It qualifies all the other activities.

Is your business positioned properly as the best to solve the clients’ problems? If not, then it’s time to review your business model and align it with what clients are going to be willing to pay for.

Niq Sibanda is a business model development specialist who works with executives and entrepreneurs who value external expert input.

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