It’s all about the WHY

As entrepreneurs we all set off with a clear idea of the product or service we are offering, in effect the WHAT.  What is harder to define is the WHY.

There are two parts to this question:

  1. WHY do you exist?
  2. WHY should your customers’ buy from you?

Let us explore part one first:

WHY you exist?

Do you have a clear purpose?  Your purpose is the reason WHY your business exists.  With the purpose driving your strategy it is important you get this right.  That is why the Value Proposition is fundamental to any business model.

The Value Proposition must be developed with the-customer in mind.  What is the ‘job to be done’?

Theodore Levitt, a Harvard Business School professor illustrates this well with his example of a drill.   “People don’t want to buy a quarter-inch drill.  They want a quarter-inch hole!” 

Another textbook example is the milkshake.  This is a great example of a product that has a different value proposition for different target markets. E.g.

  1. A businesswoman grabs a milkshake to drink on the way to work.  The job to be done is “nourish me on my commute”. 
  2. A parent picks up their child from school and buys them a milkshake. The job to be done is “treat my child.”

Two very different propositions, which operate in different competitive spaces and need different marketing messages.   The direct competitors for “nourish me” could be a muesli bar or a banana, whereas for “treat my child” it could be a small toy.


WHY should your customers’ buy from you?

This leads us nicely to the second WHY.  What is your differential?

Michael Porter, a renowned strategist, argues there are two ways to achieve competitive advantage –have the lowest cost or differentiate your product in some way.

Having the lowest cost may not be the right strategy as often all that happens is your competition start to undercut you and margins across the whole industry become tighter.  Nobody wins – except the customer!

Showing your value through differentiation makes more sense – but how do you do this?  To have true competitive advantage you need to excel in one of these areas:

(a) Product design

Does your product offer unique features?  Is the quality of the highest specification.  Are you continuously looking at ways to enhance the products?

Apple are a great example of this strategy and customers will happily pay a premium in return for the quality, innovation, and range of features.

(b) Customer experience

Do you go above and beyond to deliver outstanding customer service?  Do you build customer intimacy through personalising your approach?  Do you look after your customers beyond the initial sale?

Virgin Atlantic are often used as a case studies here, but this is a great value proposition for local, smaller businesses, as they can build strong relationships within their communities and adapt quickly to meet customer needs.

(c) Operational efficiency

Do you have slick, streamlined processes? Do you use technology to its fullest advantage?  By being operationally efficient, and eliminating wasteful activities, your cost base will be lower than your competitors, and you can reflect this in your pricing.

McDonalds are a great example of this and run a massively successful franchise model due to their strong processes and procedures.

So, taking the drill as an example:  Why should the customer buy your drill?  Is your value proposition based on product design, customer service or operational efficiency. E.g.

  • Product -your drills are manufactured from the highest grade of metal and are guaranteed to last for 25 years.
  • Customer – you have a loyalty scheme that provides customers with a replacement drill bit every year.
  • Efficiency – your drills are made in a factory that uses robotics; therefore, your product is cheaper to produce, without compromising quality.

To summarise, to understand your value proposition you need to understand:

  1. WHY you exist
  2. WHY should your customers’ buy from you

There are lots of strategy tools available to business owners to help with this, but as I said earlier it is really hard to do this for your own business.  That is where I come in….get in touch to book in an initial chat on how I can help.