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Offer Your Customers Value Propositions, Not Products

 

You offer your customers and potential customers more than just a product. What you’re really offering is a value proposition – the sum total of the product, its benefits, its price and the services you provide that go with it.

Your value proposition will vary from one customer segment to another. It’s important to define the value proposition for each segment in your customer base before you begin your marketing.

What is a customer really looking for?

Remember that customers buy for their own reasons – usually to acquire a solution to a need. If you can segment your customers into groups that share the same reasons for buying, you will be able to communicate the right value proposition to each group and maximise your sales.

Very few products appeal to only one segment of the total market. Computers are a good example. They’re used by businesses for commercial purposes and by young people for ‘chatting’, playing games and downloading music.

If you’re selling PCs, your value proposition for business customers will be entirely different from the value proposition for teenagers, although the product is the same. To optimise your marketing you would target these segments separately with an appropriate value proposition for each segment.

Promote your value proposition

Develop a detailed profile for each segment in your customer base. Then you can create a value proposition that appeals to each because it represents a solution to their particular needs.

When defining a customer segment identify all the important details. Gender, age, lifestyle, frequency of product usage, preferred media and geographic location are just some of the factors you need to identify before you can begin your marketing work.

Going back to our previous example of PCs where we segmented business customers from teenagers, there are a number of ways to use this kind of detailed information. A PC package for businesses could include software designed for commercial purposes, would be advertised in the financial press, and could include in-office installation.

Teenagers on the other hand would be more likely to respond to bonus games software, ads in youth-oriented publications or websites, and high-quality sound and graphics.

Market to the most profitable segments

If you analyse a product and find it sells to five identifiable customer segments, does that mean you need to promote to all five segments? Not necessarily. It does mean you need to identify your most important segments and direct your marketing expenditures accordingly.

If your business is like most SMEs it will follow the 80/20 rule – 80% of your profits will come from 20% of your customers. Focus on that 20% and you’ve just done 80% of your marketing.

That doesn’t mean that there will always be only one customer segment represented in your top 20%. What it does mean is that you should identify the most profitable segments and concentrate on them.

Note that you’re looking for 80% of the profits, not 80% of the sales income. Chasing sales volumes without regard to profitability is a trap that can lead to price being the only differentiator between you and your competitors.

Remember, the ideal value proposition is a statement of customer benefits rather than product features - if you’re selling hand lotion to women in the 40-60 years of age bracket and who spend a lot of time outdoors, your value proposition is beautiful hands that don’t show the effects of weather and aging. If you also know the magazines she likes to read, then you know both how, and where, to reach her.

Until next week,
Mike Reddy
www.syb.com.au