Danielle MacInnis – Marketing Blog for Small Businesses

Sometimes we marketers forget that there is a whole language that we use just and this jargon is confusing for the novist. Value proposition is one such term. What does it mean?

Well to me a value proposition is the unique offering that a product or service has that is hard to replicate by competitors and what sets it apart from other offerings in the marketplace.

A value proposition is the positioning of this unique characteristic and communicating it is such a way so that the target market (key audience for the product or service) can understand the value that it offers them.

The 3 key elements to creating a great value proposition are as follows:

1. Understand your customer: in detail describe them and if you can define them in detail you are on your way to be able to communicate to them effectively.

2. The second element is to understand why your customer would buy your product/service. What is in it for them? What makes it so special?

3. The third element is being able to position your offer against the competition and be able to defend your claims. What are the key proof points that helps the customer understand your offer well.

Lets look at my favorite brand. Nudie. www.nudie.com.au . They have a target market of young healthy hip people probably between 18 and 40 years that have a good sense of humour, like the healthy option and are conscious of the environment.

Why do I buy off Nudie, well I know what is in their juice. They make it perfectly clear that some of the fruit is of a multicultural nature (appealing to my sense of humour, plus they let me know in my language ( 2 apples, 1 carrot, etc). It is fresh, but not as expensive as a juice from a juice bar and it has no preservatives or additives and it fits my budget as well.

They have differentiated themselves . They are fun. Their packaging is honest and simple, their language and marketing is all focused on the audience they are appealing too.

So when you are thinking about developing a value proposition, maybe you need to think of a company who has done it well and follow their example.

When I consult with small businesses, my first meeting is all about understanding their business model. Some have it well planned and have given it great consideration, evolving it as their customers mature and with technological advances. Others (the majority), have not given it a second thought.

People start small businesses for a number of reasons, but it is those that have a keen eye on business, that end up creating a business rather than a job.  So what are the building blocks of a successful business model?

The Best book I have found and model to use as a guide and template is called Business Model Generation written by Alexander Osterwalder adn Yves Pigneur.

Let’s look at this model in more detail. 1. Customer Segment. It is a simple concept. Picking the customers that we create the greatest value for and then forming our business around these. However, with most businesses I coach, this is the first stumbling block. Instead of focusing on one, or at the most two segments, they focus on everyone as a potential customer. This concept is flawed from creating a good business model. In order to best attract customers you need to address THEIR particular needs. Usually, their needs are serviced by distinct offers, reached through particular channels and then have certain behaviours and attributes. By trying to be all things to everyone, you end up having no real point of differentiation. Surprisingly, most small businesses still don’t focus on customer segments. It is insane. What a waste of marketing dollars!

In order to satisfy people with chronic back issues, you need to have this as a focus of your Osteo clinic (like my client). If you you want your clients to have a spiritual and nurturing treatment, then this is your point of different as a wellness spa. Your customer segment should not purely be demographic based and in fact I would argue it should be based on meeting the needs of certain customers with a problem.

So let’s say you nail the target audience for your product or service, the next step in your business model is:

2.Value proposition. This term seems to be misunderstood by people. Let me make it simple. It is the value that your product or service delivers to your customers. Which problem are you solving for them? Your value proposition is the reason why your customers choose you over your competition.  In essence it is all the benefits that you offer your customer. Value propositions can be based on any criteria but many choose, Innovation(newness), Customer Relationship Management (customer experience) or Infrastructure Management(performance). Others include:

Convenience – 7/11

Accessibility – Bank Kiosk, McDonalds

Cost Reduction – Kmart

Risk Reduction – guarantees

Price – Hyundai

Design – Alannah Hill

Brand Status – Coca Cola

Customisation – Dell

Fast – Fedex

Understanding the value that your service is going to provide and how that is perceived is another critical element in a business plan. Most small businesses choose to differentiate on service and whilst I think this is a good choice, there are two considerations that they need to make. 1. You need to still have a great product or service innovation and your performance or management of the business still needs to be great. It just means that customers remember you for your service. 2.This doesn’t happen without a system and without customer feedback. This is the hardest to get right. Most businesses think they are doing an outstanding job and their employees and customers are not as impressed. So when you choose customer service as your point of difference, you have better thought about it long and hard and have in-place how you are going to treat your customers in the way they want to be treated from their first touch-point till the last. To delight customers, to provide the best experience takes real vision, a special set of values that are LIVED, planning and excellent communication.

The next step:

3.Channels or how you are going to reach your customer segment/s. Can you see how this is a whole lot easier if you have narrowed your focus to meet a certain group’s individual needs? The channel is how you interface with your customers. They are your touch-points and play an important role in your customer’s experience. The functions of the channels are:

• Create awareness
• Evaluate the value you provide
• Allow them to purchase
• Deliver value
• Provide post purchase support

What channels are you using for your communications, distribution and sales? Are they the best for your customers?

The next section in your business model should be:

4. Customer Relationships sometimes called Customer Relationship Management (CRM). This term describes the types of relationship established with each target market. It is often are grouped from personal to automation and move through the customer life-cycle from acquisition, retention to up-selling and referral. As a small business the benefit we can have is to have a high personal touch with customers. While self-service is an okay strategy for a high volume business, most consumers like to be speaking and interacting with a real person. However, there is some automation of business services that make sense. I have a automated email responder that people interested in marketing tips can subscribe to, but I also do 1:1 consultation for those people who want personal advice. So deciding how you manage your customer relationships and what tools you use is an important consideration in your business model. I am surprised how many businesses still have no, or little data on their customers, and yet this is one of the best ways to improve their service. At the very least, you should have a customer database. It is one of your biggest assets.

5.Revenue Streams. This is all about how much money you are going to generate from each customer you serve. Costs must be subtracted from revenues to create earnings. What price are your customers willing to pay for your service?  What value do they give it? When setting up your pricing model you can use a number of strategies, usage, subscription, lease, licensing, fee based, project based. The key is to understand each in terms of the revenue that is generated and what is most attractive to your customers. I have some fixed pricing and some dynamic pricing based on supply and demand. I also have an array of services and packages to augment my offering to my ideal small business customer. Understanding the building blocks of pricing and what the ROI is of each service you offer is critical to having a successful business model.

6. Key Resources. What are the assets you need to make your model work? What physical, financial, intellectual and human resources? What need to be owned and what can be outsourced? I find that small businesses often lease a office space  too early because they believe that is what they are meant to do to be running a “successful” business. Rent is a cost that can be put off if you have a home office and you run a service business where you can visit your clients. I have run my home office for 5 years and I have contractors whom I meet with virtually. Be careful before you take on costs and really consider do I need this now? I lease a lot of my software so that I have small payments and have the flexibility to change to a newer technology at any time. I have a flexible workforce that can ebb and flow with the demands of my business. Resources are worth planning for and ensure that you only acquire them as you need them to keep your overheads low. Here is a list of small business apps that I have found useful.

7. Key Activities are one of most important sections of your business model and what I spend most of my time doing. It is the activities that you do to attract, nurture, educate and sell to potential and existing customers. It should be a list of activities that is well thought out, tweaked with feedback and testing and measured for the return on investment made. There are two issues small businesses seem to face with this part. One is narrowing down the list of possible activities that is realistic to implement and then implementing the activities they have put in their calendar. It seems simple, but it is easy to get swayed by the latest distressed advertising and all of a sudden you have spent $1500 on an ad because it seemed like a “deal”. Having a plan or as I like to say a sales and marketing plan forces you to focus your marketing spend. It also requires you to think about the cost in time and dollars to do each activity. Small businesses are in a great era because social media and the Internet have given you an avenue for increasing your reach without the large expenditure that might be required in the past. However, it is all a waste of money without focusing on your target market, and having a call to action that is compelling in every communication medium. When planning your next marketing and sales activities start by thinking what do my ideal customers read, what are their problems, where do they go, what associations are they apart of and you will be on the way to creating a list of good mediums to communicate with the right people.

Critical to your success is understanding from your customer’s perspective (not yours), the value you provide, the problems you solve and where your customers go to find your service.

Having a customer centric mindset will ensure that you will have a service that your customers are going to want to buy and that is the basis of a good business model. How customer centric are you? Answer this question, does your website speak more about you than to your specific customers? Good gut-check hey!

So there you go. A list of sections that I have in a business model. Love to find out about your model.

Grill’d is doing a lot of things right as a new hamburger franchise. However, what I truly love about them is they have taken the time to know who they are and put it out there for everyone to see. Some might call it good branding but I call it authenticity. It is knowing what you stand for and why.  It is all about your story and your values and it can create the most compelling value proposition when it is authentic. It is hard to replicate and can gain loyal followers fast. So many small businesses start the business with a vague idea but start with your story, the values you find important and build the business from the inside out and it will feel right, not just to you, but to everyone else as well.

Grill’d have a simple promise. They promise to deliver a great tasting meal that’s a, good for you. Simple, compelling and timely. Using their “Made with Love” tagline their burgers use the highest quality freshest ingredients and are cooked-to-order using super lean patties that are full of flavor. Their chips are thick cut and cooked in cholesterol free oil and sprinkled with a herb mix. Well customers are feeling the difference and voting with their feet. With glowing reviews from the Herald Sun “pray for one in your neighbourhood” to The Australian ” the best hamburgers in Australia or the World”.

It is not just the big dogs but many, many personal reviews as message gets out about this great new burger place.

What I really liked was the way the staff are. Happy and themselves. It showed in the food served. It also showed in the ad in the window for new staff members. It read something like this:

We are always keen to hear from energetic, friendly, customer focused & rockin’ people that may be potential Team Members or Team Leaders. A sense of humour is a ‘plus’, along with a scrupulous work ethic, resolute disdain of ‘slackers’, possibly ‘unhealthy’ love for all things related to burgers, and a good soul. No inter-office politics are indulged here – we have too much to accomplish.

It is really nice how the Grill’d experience carries through to the culture they are trying to create. They aren’t just all talk, they are living the experience person to person. And you know what, that formula is a definite recipe for success.

So it looks like founder Simon Crowe has got the foundations right and the nice thing is he continues to look for new ways to invest back into his people and the customers that support him.

So as my husband and son joined me in eating one of the best hamburgers ever, I sat in the lovely sun outside and read a note that was attached to my  Simon Says chicken burger. It was a recycled card tied around my burger with a rubber band and it read in hand written type face:

My friend, Magnesium is your energy friend and grill’d burgers are jam packed with magnesium to keep you going throughout the day!

Wow now I felt even better for having eaten the burger. I am with Lachie, big thumbs up!

Lesson for small business owners: Get your story right! Get your value proposition clear and focus not just on the what but the how of your business. People want to buy into the emotional stuff, the story more now than ever. Give us a reason to choose you. Sure the offer needs to be compelling but the soft stuff that no-one can replicate and even if they tried we still pick the original Nudie, red balloon, Lorna Jane, Ipod or Freshbooks brand because it is authentic and we want to be loyal to the brands we love. Do you want to build a brand that people will rave about? I sure do. Thanks Simon, nice one !

Technology Tip: Look into Lynda.com for some great training videos on any software you need to brush up on!

I was speaking with a client the other day and he suggested I need to separate  me Dan the person,  from MacInnis Marketing the brand. This statement got me thinking. Is this advisable or even possible when you are a small business delivering a service?

The personality of the brand MacInnis Marketing is all tied up with who I am and my values. My value is intricately tied to that. The very reason clients choose to use me as a consultant is I would argue because of who I am? Obviously this is different if you run a  large company with a number of employees, but in a small business doesn’t the person count more? Isn’t it more relationship based? Do you choose your dentist, accountant, lawyer and doctor because something about their personal brand resonates with you?

Tom Peters from FastCompany says how important it is to nurture your personal brand “Regardless of age, regardless of position, regardless of the business we happen to be in, all of us need to understand the importance of branding. We are CEOs of our own companies: Me Inc. To be in business today, our most important job is to be head marketer for the brand called You.” Tom explains in today’s world of self publishing, of social media, of 1 to many everyone has the chance to stand out as a brand.

Anyone can have a website, twitter account, Facebook page and as Tom explains, any body does, so how do you know which one is worth visiting or following? The answer Tom suggests is branding. The branding is the promise of value you receive so you go back again and again. Professional service firms are all about delivering an intangible service and so to stand out it is the individual that must distinguish him or herself. As Tom explains “if you’re really smart, you figure out what it takes to create a distinctive role for yourself — you create a message and a strategy to promote the brand called You.

What if you don’t want to grow beyond yourself as a entrepeneur. What if you are not looking to hire, then what? Laura  Bergell’s wrote a great article on discovering your brand and Laura would suggest the essence is knowing who you really are and how your customers see you.

Here is how my customers say they see me:(worlde)

So I believe your personal brand is all wrapped up in your company when you are a small business and particularly a sole practitioner so here are some ways you can work on your personal brand:

1) Identify the qualities that makes you distinctive from others.
2) Think about the things that can add remarkable,measurable,distinguish and distinctive value in you.
3) Increase your visibility
4) Analyze the feature and benefits you are giving to your customers.
5) Continuously evaluate your self,how you as a brand is doing.
6) Never limit your scope. (Thanks Kuldeep-Kashyap – student)

So I guess thinking about my client’s comment I am really glad that my personality, values and strengths are part of my brand and I hope to evolve and grow by the gift of feedback from my clients. I don’t think can separate myself from my brand and in fact I want to do the opposite and use forums like this to further build my profile and identity with others.

Good food for thought!