Create a strong value proposition for clients to pay more for your services

 

Unique marketing determines whether a visitor will understand and buy your product or move elsewhere. FILE 

By Scott Bellows

Wangechi designed a revolutionary new roofing material for use on Kenyan homes. She spent years with engineers developing her product to scientifically meet all her criteria.

Wangechi desired to provide Kenyans with a method for keeping homes cool during day times from the hot East African sun. She unveiled her product at the bi-annual Nairobi Homes Expo.

Many of the show’s atendants seemed curious and stopped to feel the material. Pleased with the responses, Wangechi followed up with potential clients after the expo. But much to her surprise, very few clients actually placed orders.

Months passed by and Wangechi struggled to sell her product. She expected to sell the most new roofing material in the housing boom areas of Athi River, Kitengela, Bamburi, and Diani – all geographies with higher average temperatures than other Kenyan populated areas.

Most of the orders that she did end up receiving came from Runda in Nairobi and Milimani in Kisumu. The most puzzling aspect, orders also started coming in from Cape Town in South Africa.

Wangechi decided to bring her product back to the Nairobi Homes Expo six months later. However, she endeavoured to come prepared this time with questionnaires to solicit specific prospective client feedback.

Following her second expo, she understood where she failed. Wangechi neglected to grasp the value proposition that clients felt about her product.

While she believed customers would pay a premium to keep their homes cool in certain areas, clients did not desire to pay extra for a few degrees cooler temperatures.

Instead, buyers in Runda and Milimani loved the newness of the quality product and purchased it as status symbols for their roofs.

Cape Town purchasers actually bought because it, contrary to Wangechi’s intentions, kept their homes warmer in the winter months of June, July, and August.

Do not miss your clients’ value propositions like Wangechi.

Last week, we covered customer segments in Business Talk. Value propositions describe the bundle of products and services that create value for a specific customer segment.

What value do you deliver to your customer? Which of your customer’s problems are you helping to solve? Which client needs do you satisfy? What bundles of both products and services do you offer to each customer segment?

Perhaps the client derives value from the product or service because of its newness. Clients in Runda and Milimani with Wangechi’s roofing material valued exactly that —the newness.

Alternatively, purchasers could value the added performance from the product compared to other similar options, such as a new iPad or the Mark X.

Next, you may create value for your customers by customisation of the product through engraved names, exact sizes and unique features. Also, clients may value the ability of your product or service to get a job or task done faster, better, or easier.

Consumers also value the design of a product, such interesting designs in clothing, electronics, homes, or automobiles. Additionally, customers may attach value to the status or brand of the product like with Mercedes, Gucci, or Rolex.

Interestingly, your merchandise might actually reduce costs or reduce risks for your purchasers. Low energy light bulbs reduce our electricity costs while smoke alarms in our homes reduce the fire risks.

Likewise, Wangechi’s roofing product lowered the cost for homeowners to heat their homes during distinctively South African cold months.

Buyers also value goods that increase accessibility of certain comforts or luxuries previously unattainable, like solar panels bringing electricity to rural homes and mutual funds enabling diversified NSE portfolios for average income Kenyans.

Further, if you make items more convenient, usable, or easy to use, then customers gain tremendous value from the products.

Our very own famous Kenyan example involves Safaricom’s M-Pesa that transformed the convenience and ease of transferring money. It now dominates the market.

Finally, the most well known value proposition involves the provision of low priced products and services of comparable quality.

If you decide to add value to your customers based on price, authors Osterwalder and Pigneur recommend that your whole business model emphasize low cost delivery.

Looking at your own business, how do your customers in your customer segments value your products and services? Once you identify which aspects of your product adds value to your clients, then comes the difficult part.

Try to quantify with specific shilling amounts how much value your customer segments gain from utilising your product or service.

Do NOT start by asking how much your clients might be willing to pay. Instead, understand how much value they feel they gain by using your product or service.

As an example, Wangechi’s average client might only believe they value a slightly cooler house by Sh20,000 per year.

However, if Wangechi priced her roofing product at Sh100,000 above the price of roofing the average customer’s home, then the client would never purchase the product since their value gained would exist as less than the cost for the product.

As an entrepreneur, you need your clients’ value proposition to exceed the price of the product or service.

As the USIU, Colorado State University, Massachusetts Institute of Technology, Business Daily and USAID’s Jamii Social Business Plan Competition begins on Saturday, January 18, and continues until April 4, free social entrepreneurship sessions will commence every Friday morning at 10:00am beginning on January 31 at USIU’s Chandaria School of Business behind Safari Park Hotel – only an eight minute drive from the city centre on the Thika Super Highway.

Come learn and implement your own value propositions, among other practical insights.

 

 

Prof bellows serves as the Director of the New Economy Venture Accelerator (NEVA) at USIU’s Chandaria School of Business and Colorado State University, www.usiu.ac.ke/gsse, and may be reached on: bscott@usiu.ac.ke or on Twitter: @ScottProfesso