This is the second part of business advisor Phil Symchych’s new four-part series on how you as a business owner can increase value for your customers, your company and your shareholders. Find part one in our Summer 2021 issue and online.
Do you conduct business with companies or with people?
My first lessons in business, when my family operated Clear Lake Lodge during the times of 23 per cent interest rates, I learned that connecting with the customer and meeting a variety of needs was critical to success. Some people wanted peace and quiet to escape the frantic pace of their daily lives. Others wanted to socialize and meet new people. Since we couldn’t be all things to all people, we had to select our value points carefully.
We didn’t focus on our competition. We focused on our customers. And our customers, like your customers, are people.
What is your Value Proposition?
Years ago, I developed a customer value framework that I still use today with clients because of its effectiveness in helping companies define their value propositions. Whether you sell to other businesses, to individuals, families, online or in person, this framework will help you to identify and communicate your value.
Communicating your value clearly will help you attract your ideal customers, differentiate you from price competitors, and make growing your business easier.
The customer value framework is based on neuroscience where our brains are always in survival mode and trying to protect us from pain or seek pleasure. It’s also built on the economic realities that we need to create results—whether that’s solving a problem or helping to pursue an opportunity—for our customers and clients.
The Customer Value Framework
The customer value framework, a simple two by two matrix, demonstrates that we all provide financial (logical) and non-financial (emotional) results for our customers. Our customers may be an end consumer (shown in the ‘personal column’ in the table) or a business buyer (shown in both columns in the table).
Let me explain with a business example. If a business leader wanted to host a retreat at a lodge, they would want their team to strengthen relationships, hopefully develop new skills and ideas for future success, and have an overall positive experience. These benefits—both financial and non-financial—accrue to the business.
The leader or organizer of the retreat also receives benefits. They get recognition for organizing a successful retreat and increased status by acting as host or organizer. They also get exposure from interactions with the entire group and hopefully future promotions and raises as they build upon stronger relationships and increase their responsibilities. These benefits are both financial and nonfinancial, although they may not occur immediately.
To help you grow your business, your next step is to analyze a particular product or service and a specific customer and apply this framework to identify all the components of value you deliver. It’s common for many businesses to deliver value to customers that the customer is not aware of and would be willing to pay for. Identifying and articulating your unique customer value is very powerful for attracting the right customers and reducing price competition.
You may improve your value to your customers, enhance customer loyalty, and increase revenues in two ways. First, you may bundle more value to create an attractive offering. My mechanic includes a full inspection with every oil change, and there are cheaper oil changes in the market, but I have comfort (an emotional benefit) that our vehicles are in top condition.
Or you can unbundle value that you may have been giving away for free, that costs you money, and that the customer was not aware of and is willing to pay a higher price to acquire. In my consulting work, clients want results. Results come from executing clear action plans. Clients don’t want or need lengthy reports that overanalyze the obvious. Therefore, I’ve stopped writing reports that sit on shelves and now focus on creating one-page strategic plans that drive results.
When you apply the value framework to your business, you will see multiple ways to communicate your value more effectively to your customers, to differentiate yourself from competitors, and to increase your margins, and thus enhance your business valuation.
At Clear Lake Lodge, our value focused on providing our guests with a clean and quiet environment, a convenient location, and charming hosts.
What are the logical and emotional components of your value proposition?
Full speed ahead!