Austin McCraw

Value Proposition for Startups: 3 questions every startup must have the courage to answer

September 5th, 2014
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“Every time a person says ‘yes,’ they are saying ‘no’ 10,000 times. One ‘yes’ equals many ‘no’s.’ The power of ‘yes’ is not in its affirmation but in its negation.”

– Flint McGlaughlin

Leading a new business to achieve a sustainable competitive advantage is not easy. It often involves difficult choices and a certain level of courage. But for the startup, it isn’t solely the courage to say “yes” that enables it to thrive; rather it’s the courage to say “no.”

Recently, I had the privilege of spending some time with a young startup company and working with them on their value proposition. Like many startups, this group had done well without any formal process of identifying a value proposition.

They had a group of founders, who, like many, built a unique product to solve a problem for a particular group of people. Intuitively, they had launched with a successful value proposition.

 

When competitive advantage is challenged

However, times had changed for this group. They used to be the first in their space, but now their market was crowded, and their customers had many similar competing products to choose from.

During the course of our conversation, I could feel the pressure the leaders of this company were up against, which stemmed from the worry about maintaining their strategic competitive advantage.

The temptation was to attempt to be everything their (new) competitors had become — in some sense, to be all things to all people. This is a common pressure, but it is often this precise pressure that causes many organizations to “acquire” their way right out of a good value proposition.

The most forceful value propositions are not those that try to do many things well, but rather those that try to do one thing really well.

Focus is one of the most essential components of a strong value proposition. Unfortunately, focus is often one of the hardest things to find in a business. Focus requires courage, especially the courage to say “no.” Learning to say that two-letter word was precisely the kind of negating focus this startup needed to answer three essential questions:

 

Question #1. How will you not serve?

A business cannot be all things to all people without diluting the power of its value proposition. By its nature, a specific value proposition must appeal to a particular prospect type. This can be counterintuitive, but knowing who your customers are necessitates knowing who your customers are not. Recognizing this distinction is essential.

The startup I mentioned above had created the most respectable and trusted cloud-based email distribution service. Because of their intense focus on accepting only those clients who send reputable emails, they had the highest deliverability rates, a serious evaluation process and strict guidelines. But ultimately, they had to make the difficult choice to turn away potential customers in order to preserve the value proposition that served their true customers.

 

Question #2. What will your product not do?

Somewhere along the way, we started believing that more is always better, but when it comes to product (or offer)-level value propositions, “more” often means diffusion. More is only better when more is actually better. Many companies do “more” in an effort to make up for the fact that they do not excel in any one thing.

I was once working with a large B2C company that was trying to understand the value proposition of a recent campaign they had launched. I cannot reveal the campaign, but the main tagline of the campaign could have easily translated to “more stuff.” I am not exaggerating.

This company had a knee-jerk reaction to a competitor and decided to launch a campaign that let the customer know, “Hey, we have all those features too!” The unfortunate part was that this company actually had a value proposition, but their campaign completely overlooked it in an attempt to “catch up” with their competitors.

We need to understand that a value proposition necessitates that you excel in at least one way — not in every way. We must have courage to focus on that one way.

 

Question #3. When will you not compete? 

Finally, achieving a strategic competitive advantage does not mean you must compete with your competitors on every possible level (price, service, speed, quality, etc.). The reality is that a company cannot feasibly compete on all fronts. Just as an athlete must give himself or herself completely to one sport, a startup must give itself to one competitive advantage. But don’t think this has to be a secret. Customers can know what your strengths, and weaknesses, are.

In fact, when we are transparent about what we can’t do, customers are more likely to believe us when we tell them what we can do.

The obvious example of this is price. You do not have to be the cheapest product on the market. Many companies get lost in trying to compete at price, but those companies that have a solid value proposition do not have to compete at price. People will line the streets for the next iPhone, but not because it’s going to be cheap.

 

Having the courage to say “no” 

For startups, it’s often easier to say “yes.” It’s often easier to talk about what your value proposition is going to be and about all those new things you will do. But strategic competitive advantage — especially for an emerging startup company — often comes more from their ability to say “no” than it does from their ability to say “yes.”

In the end, the companies (not just the startups) with the most forceful value propositions are not those that have constantly shifted while trying to keep up with their competitors. The most powerful value propositions come from those that knew who they were and who their customers were.

As Peter Drucker says, effective businesses are not those always looking at what it takes to beat the competition, but rather those who (courageously) focus on “creating a customer.”

 

Editor’s Note: Interested in hearing more from Austin on value proposition development? Attend his two-day workshop at DMA 2014 on achieving a sustainable competitive advantage and maximizing your value proposition’s potential to convert. 

 

You might also like

Value Proposition Online Course [Gain more valuable insights into developing an effective value proposition]

Value Proposition: 4 questions every marketer should ask about value prop [More from the blogs]

Value Proposition: How to turn a shiny new value proposition into a high-performing page [From the MarketingSherpa webinar archive]

Value Proposition: 4 key questions to help you slice through hype [More from the blogs]

Marketing Research Chart: Is value proposition testing part of your lead gen strategy? [MarketingSherpa chart]

Austin McCraw

About Austin McCraw

Austin McCraw, Senior Director, Editorial Content, MECLABS From Web clinics to certification courses, Austin works behind the scenes to bring our research analysts’ discoveries to our audience in clear and creative ways. Before joining MarketingExperiments, Austin was the Promotions Director for a PBS affiliate in Gainesville where he was in charge of publicizing local and national programming. A graduate of the University of Florida’s College of Journalism and Communications, Austin specializes in new media and video production by day and producing family memories with his wife and two children by night.

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  1. September 6th, 2014 at 17:12 | #1

    Austin, this is a great article. As a general contractor in a very crowded field I had to come to this same conclusion. I found that specializing in our core competency, roofing, we were able to satisfy more customers and maintain a distinct competitive advantage in our area. Like your article outlines, we sometimes have to turn away customers but in return we’re able to deliver a high rate of satisfaction to our value customers.

  2. September 16th, 2014 at 08:24 | #2

    One thing I would add is that this is extremely difficult if you’re in a B2B niche with an emphasis on client service. Especially (this may seem counterintuitive) once you start to achieve real success / growth.

    Clients (especially large ones with clout) will always ask for more, and when you’re just starting up there is a real sense that saying “no” may have a detrimental impact on that relationship.

    The questions above provide a great lens to filter these customer requests through, because if you’re a sales driven organization there will always be added pressure to “just add one more thing.”

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