Let’s Discuss Value Proposition

Customer loyalty is earned, not owed

I was recently corresponding with a small business owner about her frustration in losing business to a larger, and cheaper competitor.

To be frank, I will say that this small business owner appeared to be very entitled.

For the sake of discussion, let’s call her “Anna” (not her real name). 

Anna believed that because she spent time discussing her product with a customer that it was “unfair” when this same customer had then chosen to get the same item cheaper elsewhere.

Informing her of their expressed decision, the customer left and took their money with them.

Our correspondence took place via social media, under a post proclaiming:

“McDonald’s can mess up your order 1000 times and you still support them. A small business owner makes one mistake and you bash them for eternity.”

My immediate response was as follows:

“So what is McDonald’s doing right which many small businesses are not? Providing a quick, cheap satisfying service. This is not a feasible business model for most small businesses, so how else can small biz owners provide an irresistible service? If customers are not returning following a mistake then that is not the fault of corporate giants, but of small businesses themselves not offering irresistible value or service. 

This is a problem which can be rectified by increasing value and improving service. So how can small biz owners increase their value and improve their service?

Great question! And some excellent food for thought for all small business owners, including myself.”

Refusing to share any more information about her business (other than that she charges £5 more for one of her products than her competitors), Anna reasoned that her terrific reviews prove that she provides excellent customer service, and that there is nothing she can do to improve her value proposition to customers.

“In the last 2 weeks I’ve had to give customers my knowledge that they can’t get in the big stores only for then to say I can get it £5 cheaper and go buy from them which is very unfair of a person when you’ve spent half an hour giving them your time and knowledge” – Anna

When challenged to share a quick fix for her problem and the problem of many small business owners with big corporate competitors, I explained that Value Proposition can only be increased with:

  • Thorough and informed study of the small business, its products, its competition and the industry and therefore the customers it serves

I asked if losing business to bigger completion was a frequent problem for Anna – which would indicate a great need to increase value proposition for her – and she replied that actually her business is doing well, but that she was thinking more about small businesses which were not doing so well.

It is true that you can have a wonderful small business with excellent reviews and still lose custom to bigger business – in truth, it happens all the time.

“Supporting small businesses” is a practice which is apart from regular bargain hunting.

  • The very choice to support a small, local business owner and therefore to support local economy is part of the value proposition of a small, local business itself
  • Supporting local businesses gives many customers a sense of loyalty and pride

But purchases need to be worth the extra investment, and often “pride in supporting a small business” does not bridge the price gap between large and small companies and their price differential –

Without any further information about Anna’s business, except that it is generally “doing well”, it is likely that she presents a good quality sales environment, and that she provides helpful customer service. 

The customer who took their business elsewhere may simply have rejected the notion of “supporting local business” as a given obligation (this relates back to my sense of Anna’s entitlement to local customer loyalty) –

And despite Anna having kindly offered her time and expertise to describe the product and its uses (a free courtesy you could expect from any proud, small business owner), the customer was not bought.

Perhaps there was:

  • An addition service Anna could have offered with her product e.g. a valuable guarantee?
  • Another improvement she could have made to her sales environment (did it communicate value, welcome and expertise?)
  • A special offer for future purchases granted upon purchase of this initial product?

Without more information about Anna’s products, competition and industry, it is hard to say. But it should be clear to all small business owners, including myself:

  • We are each responsible for the value propositions we offer to customers
  • Customer loyalty is earned not owed
  • There is ALWAYS room for improvement with a small business and its products
  • Blaming big business and their cheap prices does not remove the responsibility a business owner has to present a competitive (not a cheaper) alternative to customers
  • There is usually no “quick fix” – dedicated small business owners must be prepared to assess their business models critically in order to improve them

Understanding Value Proposition is essential to every small business owner’s success.

I will continue to discuss this topic in further posts.

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