Business Models For Dummies
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Your customers determine what your unique selling proposition is. Other companies may be fighting for a similar USP with the same customer. Many companies are battling for similar USPs in the toothpaste market. You may be a Colgate user and view that toothpaste’s value proposition as the best one for you. Your next-door neighbor may be a Crest user and feel the value proposition for Crest is better.

Effectively, the USPs for Colgate and Crest are nearly identical. However, in the mind of the customer, the USPs are very different. What the customer believes the USP is matters — what you believe it is doesn’t matter. What a product represents to an individual is called branding or, more specifically, brand loyalty.

Ask yourself whether most prospects or customers would agree that you own your USP. Many businesses claim that they’re the most reliable plumber in town or the best product to meet some specific client need. Would your customers agree with your claims? Ideally, there should be no doubt in the customers’ minds that your product has the best value proposition for their needs.

If you can clearly communicate a differentiated strategy in one sentence or less, you have a much better chance of successfully owning this USP with your customers. If it takes a paragraph or a long-winded soliloquy to communicate your value to customers, your odds of owning the USP in the customers’ minds are slim.

The best value propositions are usually the simplest ones because they’re the easiest ones on which to build a strong brand.

Can customers clearly differentiate your product? This is the “me too” test. Your value proposition is highly differentiated and incredibly valuable — to you. Let’s face it, this is your baby and it’s beautiful. Every other business owner feels the same way about his or her business.

Unfortunately, sometimes customers don’t see things the same way you do. They may not view your differentiators as all that differentiated. It’s frustrating, but take a pragmatic and customer-centered view of your differentiators. Do customers see you as just another plumber, dentist, or product?

A simple way to tell whether your product may be undifferentiated or commoditized in the eyes of the customer is excessive price competition. If the customer is obsessed with low price and discards or undervalues your features and differentiation, the message from the customer may be, “We don’t view your product as differentiated,” so the only thing left to discuss is the price.

Creating strong value proposition isn’t easy. What’s meaningful to you may not be meaningful to the customer. These phrases are usually a signal that your value proposition needs some work:

  • Best: Okay, you say you’re the best. Doesn’t the customer get to decide who’s best?

  • Fast: Does this mean fast by your definition or mine? What does fast service mean? To me, fast means “right now,” but I bet the service guy doesn’t show up right now.

  • Quality: Does quality mean it never breaks or doesn’t break very often? The customer’s expectations define what quality means, and it typically can be defined as something less ambiguous. “Never needs repairs,” “always starts on the first pull,” “perfect fits and finishes,” and “the last one you will ever buy” are much more meaningful ways to say “high quality.”

  • Customer service: Every company views its customer service as exceptional. I’m sure the credit card companies even have stats to show the excellence of their customer service. That doesn’t mean the customer thinks their service is good. Better value propositions include: all calls answered on the first ring, all calls answered by a human, or all calls resolved on the first call.

Does your product solve a problem customers want to be fixed, rather than need to be fixed? “Need” can be a dirty word. Many times businesspeople say, “People really need this,” and try to sell something customers need but don’t want.

The market for health clubs should be significantly larger than it is. As society gets less and less active, the need for health clubs continues to grow. However, only those who want to exercise join a health club — not all those who need to exercise.

Create a product the client wants to buy, not one the customer needs to be convinced to buy.

Sensing a change in consumer preferences, McDonald’s introduced the Arch Deluxe in 1991 with a $150 million advertising campaign. Boasting fewer calories and less fat, the Arch Deluxe seemed to be a perfect fit for the growing health-conscious demographic. Companies like Whole Foods were growing rapidly by catering to this market.

However, the Arch Deluxe failed miserably and McDonald’s removed it from its menu in 1996. The lesson of the Arch Deluxe is that people buy what they want — not what they need. McDonald’s learned the hard way that all the research in the world can tell you what the customer should want, but only customers can tell you what they do want.

About This Article

This article is from the book:

About the book author:

Jim Muehlhausen is the founder and President of the Business Model Institute as well as consultant and speaker to businesses large and small. He is the author of The 51 Fatal Business Errors and How to Avoid Them and a frequent contributor to Entrepreneur, Businessweek, and dozens of other publications.

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