Since the inception of businesses, this question has perplexed most owners: What makes my product or service attractive? This query has existed long before AI, the internet, and even electricity.
An article in the NZ Herald from June 2024, titled “Big Red: What Went Wrong for The Warehouse,” highlighted the struggles of one of New Zealand’s most famous retail brands, The Warehouse. A senior analyst at Forsyth Barr posed the question, “I don’t know if they [The Warehouse] know what they are and how they fit into the New Zealand retail landscape, or what they are going to compete on.” Greg Smith of Devon Funds Management added, “They need to recalibrate what is the value proposition.” The Warehouse, which has traditionally relied on bargain prices as its core attraction, now faces competitors like Kmart redefining what constitutes a bargain for its customers.
Despite The Warehouse being a large, complex business in a highly competitive market, its challenges are relevant to SMEs. Regardless of business size, the principles of success remain the same. Understanding who you are selling to, why they should buy from you, and how much they are willing to pay are foundational to the success of both global conglomerates and small enterprises. These questions are interconnected; once you answer the first two, the third becomes significantly easier.
What makes my product or service attractive – my Value Proposition?
Rosser Reeves of US agency Ted Bates first introduced the concept of the single-minded proposition in his 1961 book, Reality in Advertising. Reeves asserted that without a core proposition, any advertisement or communication is ineffective and a waste of time for both the reader and the advertiser.
A strong value proposition should:
- Be easily understood by your target audience and resonate with them.
- Communicate specific results that the target customer will achieve.
- Explain how you are different from alternative options.
A compelling value proposition must be both relevant and engaging. Clickbait, although often engaging, tends to lack relevance, leading to disappointment. Avoid this approach.
Successful value propositions can stem from various aspects:
- Product: M&M’s: “Melts in your mouth, not in your hands.”
- Service: Avis: “We’re No. 2, so we try harder.”
- Location: Disneyland: “The happiest place on earth.”
- Price: Walmart: “Save money, live better.”
Creating Your Value Proposition
To craft a compelling value proposition, consider the following questions:
- What problem do you solve for your audience?
- How do you solve it?
- How does your product or service differ from other available options?
Think holistically about your business, avoiding the temptation to break it down into separate product lines or services. Start by answering these questions in a single, albeit lengthy, sentence. Then, refine this sentence into something short and impactful. Imagine it as the only piece of signage for your shop or office—what would it say?
Reflecting on these fundamental questions can be a valuable exercise, especially if you are struggling with them or want to take a step back from daily operations. The fact that a publicly listed company like The Warehouse faces similar challenges demonstrates that you are not alone. View this as an opportunity to ensure your business covers the basics of success.
