The registration of online businesses in the Philippines skyrocketed to 75,876 as of September 2 from 1,753 recorded in January to March 15as more and more entrepreneurs conduct business via the internet due to strict lockdown restrictions imposed to stem the spread of COVID-19, according to the Department of Trade and Industry.
These online businesses are primarily selling and trading essential goods, such as food and food stuff, and home supplies. Even celebrities and entrepreneurs jumped into the bandwagon of launching food delivery apps to take advantage of the quarantine and work-from-home setups.
But like my usual questions to any newbie entrepreneur seeking advice on opening a new business, I always ask –What is your value proposition? What is your unique selling proposition (USP)? I sometimes get good answers, but majority of greenhorn businesspeople retort with such answers as ‘my pricing is competitive’, ‘my hamburger is more delicious’, or ‘we offer more selection’.
When you’re an aspiring entrepreneur, you are more often subjected to genitive biases that cloud your judgment about your new business venture. One is overconfidence bias which is the tendency people have to be more confident in their own abilities such as starting and growing a business. Another is optimism bias, a cognitive bias that causes someone to believe that they themselves are less likely to experience a negative event, such as business failure due to external factors.
These biases make inexperienced entrepreneurs ignore planning and preparation, and instead follow their instinct and experience, and adopt a ‘me-too’ strategy. This is why many startup businesses fail after a few years of operations – a testament to the often-cited statistic that 9 out of 10 new business fail. The business failures may even be larger.
Think of ‘me-too’ business ventures that people jumped into and failed – lechon manok (roast chicken), beauty parlor, internet shop, milk tea store, coffee shop, and now potentially online business.
One critical gate you have to pass through when starting a business is clearly identifying the value proposition and unique selling proposition of your offering. People confuse these two and often treat them as one and the same; and they’re not.
A value proposition is a promise of value to be delivered and acknowledged and a belief from the customer that value will be experienced. It is a clear statement of the tangible results a customer gets from using your products or services. It is what will make your target customer ‘consider’ your offering.
One great example of a value proposition statement is that of iPhone. It says, ‘Every iPhone we’ve made – and we mean every single one – was built on the same belief. That a phone should be more than a collection of features. That, above all, a phone should be absolutely simple, beautiful, and magical to use.”
Value proposition is based on the target customer’s needs, wants, and fears. Needs are the rational drivers of purchasing or using; Wants are the emotional drivers of purchasing and using your product; and fears are the risks of the target customer for switching to your product or service.
These are then translated to the features and benefits of your product or service to your customers and the experience they will go through using the product.
A value proposition statement guide I use is this: “For [target customer] who [statement of need, want, or how to address fear], our is ]product category] that [statement of benefit & experience].”
USP, on the other hand is a part of value proposition. It is what sets your offering apart from competition. It is what will make you customer decide to ‘buy’ your product. An example fo a great USP is that of Domino’s Pizza: “”You get fresh, hot pizza delivered to your door in 30 minutes or less — or it’s free.” A USP statement includes the unique solution that your offering provides to a specific problem of customers. It involves identifying your competition, what they are known for, and identifying what your offering can do that’s unique from competition.
A USP statement guide that I use is this: “We at [Business name] help you[resolve the consumer’s need]by/with only/without [unique benefit].”
Once you have your value proposition and USP statements, then you can wordsmith them to make them more appealing. These are also your bases for crafting your elevator pitch or the primary message that you can use in promoting in social media and other communication channels.
Value proposition and USP are just the first gates toward a successful business venture. You also need a sound business plan that includes how to scale your business.
The author is CEO of Hungry Workhorse Consulting, a digital and culture transformation consulting firm. He is the Chairman of the Information and Communications Technology Committee of the Financial executives Institute of the Philippines (FINEX) He is the Country Representative of the Institute of Change and Transformation Professionals Asia (ICTPA) and Fellow at the US-based Institute for Digital Transformation.He teaches strategic management in the MBA Program of De La Salle University. The author may be emailed at firstname.lastname@example.org