Growing Small Businesses

Lesson 2: Positioning your product or service

Added value

The concept of added value is a useful tool to let you tailor what you do to the needs of your customers. You buy things. You do your work. It costs money. You want to sell the result. If, for some particular group, the value of your work is greater than the cost, you can sell what you produce to that group because you have added value to what you bought. If you can't find anyone who values your work more than it cost, then you can't sell at a profit and you have a questionable business concept.

This is a useful way of looking at your business because most businesses do lots of things. They buy their raw materials, they use them in many ways, they change them, they process them, they pack them and they deliver them to customers. Then they offer service and support afterwards. The question is, "Does each of these activities add value for the particular customers of my target group?" If the activity costs money and doesn't add value for that particular group, why are you doing it? On the other hand, are there things which the members of that particular group value but which you aren't doing?

This kind of analysis is the key to positioning your products or services so that they will appeal to a particular group. You want to do work which will result in added value for that group - then you let them know about these valuable features of your product or service. You have positioned what you produce to appeal to your target market.

Now let's look at the cost side again. Your target customers want and need all kinds of features and many cost more to provide than the value they would attach to them. It is therefore not a good strategy to provide these features because your customers are not willing to pay what it costs.

But even for the features which add enough value to cover the cost, there are usually so many that the overall cost of what you produce would scare people off and the product would become very complicated. The best strategy is to select a few of the most valuable features which also cost you relatively little and concentrate on those. If you can choose some which you can do better or at lower cost than your competition, than that's even better. Add those features and display them prominently in all your literature and advertising. They will serve to distinguish your product or service and will be your selling points. They will be why members of your target groups will be calling you with orders because you will have positioned what you offer to appeal to them.

  1  2  3  4  5  6