This week, the Iowa Western Small Business Development Center staff spent time in Iowa City watching its Venture School kick-off. Iowa Western Community College is hosting its own Venture School cohort in March, and as we observe the event, shadow the participants, and learn about their business ideas here in Iowa City, the concept of value proposition is one of utmost importance.
The reality is, small business success or failure depends heavily on value proposition. The fact that your firm can create, provide, or do something means absolutely nothing if it’s not considered valuable to potential clients. The old adage, “make it and they will come,” is false – your product or service must be worth something to your prospective market. You must provide a solution that directly alleviates a customer “pain” – otherwise you’re bound to fail.
Below are four questions used in Venture School to help participants identify, develop, and evaluate their businesses’ value propositions. As an existing or prospective entrepreneur, asking yourself these questions will help guide you in the right direction to ensure you position your products and services for success.
1) Where Is A Gap? The first step in creating a value proposition is determining if there is a real, unmet need your business can solve. Create a list and compare existing competitors in the marketplace. Identify where gaps, shortfalls, and opportunities exist. If you can identify a gap, this provides a great springboard for building your value proposition. If you can’t identify any gaps, try viewing the market from a different angle, and consider positioning your offering in an alternate way.
2) How Am I Better? It’s okay if a competitor already produces what you produce, does what you do, or provides what you provide. Create a competitive advantage over rivals, and aim to develop something that far surpasses existing products and services. Consider Chipotle, for instance. Prior to entering the market, a multitude of fast-casual Mexican restaurants already existed; however, Chipotle quickly gained huge market share away from established competitors through quality – better ingredients, simplified ordering, great value, and memorable experience. The key is setting yourself apart from rivals.
3) What Do People Want? You must be intimately aware of peoples’ wants, needs, and “pains.” Conduct market research, do your due diligence, and most importantly, get out there! Interact with prospective customers, gather honest feedback, and explore various angles. Investors, colleagues, friends, and family do not possess the same perspective as potential buyers themselves, so it is absolutely essential to identify exactly who your prospective customers are and to interact with the people who will actually be buying your product or service.
4) When Should I Launch? Launch strategy is another critical consideration. You can be either a “first mover” (first in the market) or a “fast follower” (launching after competitors) — and both have their respective advantages and drawbacks. Being the first in the market creates brand loyalty and establishes solid market share, but also frequently entails hefty R&D expenses. If you choose to launch after competitors, others absorb this R&D expense, allowing you to learn from their trials and errors and to create a superior offering accordingly. Additionally, traction already exists in the market, making your idea more promising to investors. By launching after competitors, however, you must work harder to convince customers to switch to your brand and to steal market share away from established rivals.
Developing a value proposition early in your entrepreneurial endeavor is critical, as it will provide focus and guidance along your entire life cycle. If you have a business idea and need assistance in vetting your value proposition, our SBDC office can help. Contact us at (712) 325-3376 to schedule an appointment with one of our experienced counselors.
The Iowa Western Small Business Development Center is a free resource for small businesses and start-ups in Southwest Iowa. We serve seven counties – including Cass, Fremont, Harrison, Mills, Page, Pottawattamie, and Shelby – and provide consulting services to help businesses start, grow, and prosper.
(Photo credit: Heinrich-Böll-Stiftung | Flickr)