Most small businesses that I work with think about advertising and promotion when we begin talking about a marketing plan for their business. While advertising and promotion are very important, they should be the last step in any marketing program. Before you can decide where to advertise and what you want to say in an advertisement you must be able to define your "value proposition."
Your value proposition must simply and succinctly state the value you bring to your customers (solving a problem or satisfying a need), and why they should buy from you and not your competitors. In order to define your value proposition you must be able to answer several questions that are the foundation of a good marketing plan. I like to think of these as the five important first steps to developing a solid marketing plan.
What is your business? Here you will describe your business from your customer's perspective by defining: the products and services that you provide; how you will provide these products and services to your customers; and, the benefits that your customers will gain by buying your products and services. You will want to identify what is unique about your products and services and what special benefits they bring to your customers. The starting point in your marketing plan is to describe what you offer today. As you answer some of the questions below you may learn that changes to your products and services may be necessary to achieve maximum success (profit) with your target customers.
What are your target markets and market segments? Being able to clearly describe the different markets that you will address with your products and services and the specific segments of these markets is critical. As the business owner and leader, having this clearly established is necessary to ensure that everything you and your employees do every day is focused on these specific targets. When a business fails to define these targets it is very easy to get sidetracked, spending precious energy, time and money on "perceived opportunities" that are not central to the success of your business.
To qualify, each target market segment must be measureable, sizable and reachable. This means that you must to be able to quantitatively measure each segments size, and then determine its potential business for you (your market share) to make the judgment that there is enough potential business to make it a worthy target. If the market segment meets these first two criteria, you then must be able to identify how you can reach the customers in this market segment to make them aware of what your business can do for them. If you cannot get your message to them they do not qualify as a target market segment.
Who will be your customers? You must be able to clearly define your customer in each of your target market segments and what will motivate them to buy the kind of products and services that you sell. Certainly you will have a variety of customers within each segment, but by defining the typical customer you have a better chance for success. In this definition you will include typical demographic information such as: age; sex; income; education level; geographic location; type of employment; hobbies; number of children; and any other demographic information that is important to describing your target customer.
Another key component is psychographic information that includes attributes of how your typical customer thinks and behaves, and why they do so. If your business targets professional (such as doctors, lawyers, tradesmen, or athletes) or special-interest groups (such as hobbyists, parents of small children, local thespians, or hunting, fishing and camping) it is very important to consider how your customers view themselves and their motivation to buy.
What is your competitive situation? Every business has competitors! Knowing who they are, their strengths and weaknesses, and how they are viewed by your target market is critical to your business. It requires real market research in order to develop and accurate and unbiased assessment of your competition. Do not assume you know the answers to this question. Go out and talk to their customers and your customers! Ask them for their rating of you and your competitor. Find out why your customers selected your products and services; and, why the people who buy from your competitors selected them. When you go out to get this information go prepared with a specific list of questions that when answered will help you be more competitive.
One very important point to mention here is that your competitive situation is a snapshot in time that will help you develop a strong marketing plan! To remain competitive this market research cannot be a one-time event. Your competitors will change what they do if they see that you taking business away from them and you must adapt by analyzing the new situation and modifying your marketing plan.
What are your competitive differentiators? This is where the rubber meets the road! It is very difficult for most business people to view their products and services in a competitive environment from the potential customer point of view. When you can answer the questions above you will be better prepared to compete for your target market customers. If your products or services need to be modified to increase their value to your target customer you must make the required changes. As you make change, and you must over time, consider how your competition will react. Look for changes that will be very difficult for your competition to copy! If you can position your business, its products and services with an advantage that is defensible and sustainable over time you will be able to hold a more profitable market leading position.
It is up to you! When you can answer these five questions you are ready to define your value proposition. It takes a lot of work to get here and the results will be worth your time and effort. With a well-defined value proposition you will have a compelling reason why your potential customers should buy from you. You will know what motivates them to buy.You will know how best to get your message to them. You will know how your products and services compare competitively and can insure that they give the greatest benefits per dollar to your target customers.
Gary Smith has more than 35 years of experience engineering, marketing, sales and general management in the high technology electronics industry. He is a SCORE Counselor and is actively working with several businesses in northern Nevada. Contact him through www.score-reno.org.
