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What is a Value Proposition?

A value proposition is a clear statement that conveys a) how the product or service your social enterprise sells will meet an important and unmet customer need, and b) why these customers should buy from your business vs. a competitor. 

Why is a Value Proposition important? 

The actual, literal value proposition statement is important to memorize since, as an entrepreneur, you’ll want to have a sharp, concise pitch at your fingertips at any given time (with prospective customers, community members, etc.). A compelling value proposition statement can also serve as a good tool to excite, rally, and motivate staff around a clear and common goal. 

But the most important part above all is what goes into the statement. It’s all about the thinking behind the statement! It’s the many revisions it’ll likely take to get your business oriented with the right customer base, right set of products and services, in the right markets, etc. that manifest in a compelling value proposition that constitutes the majority of the value. 

To say it even more simply: how can a business succeed without a clear value proposition? With an unclear, muddied, slapdash value proposition, you may be able to win some amount of business over some period of time, but your chances of truly creating a growth-oriented, sustainable business without a clear value proposition is basically zero. If your product or service doesn’t meet a real customer need, or is demonstrably worse than similar products and services that your competitors sell, it’s unlikely you’ll stick around without significant subsidies. 

How is this topic different in an employment social enterprise context? 

The business value proposition itself isn’t different in a social enterprise context. All the same rules apply. What is different is that it’s easy to conflate the social enterprise’s mission (i.e., the set of programmatic goals it aspires to achieve) with the social enterprise business’s value proposition. It’s easy for social entrepreneurs to assume that their business’s value to consumers lies in the fact that its employees are from mission-related groups. Be very careful with this. It’s often not the case – in some cases highlighting the mission may detract from the overall value proposition – and it’s easy to overestimate. 

Best practices

It’s worth breaking down a value proposition into its constituent parts and analyzing each. 

Identifying unmet customer needs

Michael Skok, in an article in Forbes, lays out “4Us” related to evaluating real unmet need. To paraphrase: 

  • Is the customer facing a problem that is Unworkable? I.e., is the customer facing a problem that current processes/solutions aren’t fixing, but is a problem that, gone unaddressed, will lead to serious consequences? 
  • Is the problem Unavoidable in the sense that the customer by mandate or requirement will have to address it at some stage? 
  • Is the problem Urgent, in that it represents a high priority for the customer segment? I.e., among many other problems or needs, this unmet need is at the top of the list? 
  • Is the problem Underserved, in that there are few – if any – competing products or services in the market that are addressing the unmet need? 

While there are many ways to riff on this framework, REDF likes it because it focuses on more issues than just the last one related to the need being underserved. Most folks in our experience focus primarily (or entirely) on that last issue, but a truly compelling value proposition will likely meet at least one of the other conditions too. 

To get to this information, there’s really no path other than to talk to prospective customers – whether through interviews, focus groups, or surveys. Secondary research can play a role (e.g., researching competitors, looking at industry reports, etc.), but in order to home in on a proposition

Differentiating from the competition

This is the second part of the value proposition – detailing out why a prospective customer would purchase from you vs. any of the competition. There are some fairly standard ways business offerings can be differentiated from one another:

  • Price – the same product for a cheaper price is going to be very attractive to most consumers
  • Quality – a higher quality product at the same price point will be very attractive to most consumers (it’s of course possible to have higher quality and higher price point too…)
  • Functionality – your product or service may offer a feature that none of the competition currently offers 
  • Availability – there may be an element of timeliness to your product or service (e.g., on-call support) that the competition doesn’t offer
  • Design – your product may have a more aesthetically appealing look and feel than the competition 
  • Team – the team building and selling the product is a differentiator as well. Consider the value proposition minority-owned businesses wield when bidding (solo or in partnership) on certain RFPs in construction or other related fields 
  • Social mission – the ESE’s mission is definitely a differentiating factor! Whether it’s enough to persuade a customer to make recurring purchases of your product vs. a competitor is another story

There are other differentiators such as a product or service that offer something truly transformative from the status quo (i.e., “disruptive”) or being built behind some sort of technological moat – but in general these types of differentiators won’t apply in an employment social enterprise context. 

Assembling a good statement

The best value propositions out there are ones you likely know by heart (or at least feel quite intuitively). For example, Uber’s value proposition is about the ease of getting a car (one tap), having it come directly to you, with a driver that has the directions in the system, and all done through a transaction without cash. This, of course, completely disrupted traditional taxi service – and it did so because the value proposition was so blindingly clear once the service rolled out. 

Success metrics 

When thinking of success metrics related to your value proposition, think in terms of customer behavior. Some signs that you have a great value proposition include:

  • Whether the business is regularly soliciting feedback that includes some form of evangelism, or data to suggest high disappointment should the product or service go away
  • A high percentage of repeat or recurring customers
    • If you operate a product-based business, loyalty programs can provide good data here; if you operate a service-based business, consider how many contracts are renewed 
  • A high number of word-of-mouth referrals 
  • A high volume of consistently great reviews online (e.g., through Yelp)
  • Business revenue that has grown consistently over multiple periods (q/q, y/y)
  • Business revenues that consistently exceed business costs (i.e., generating a business profit) 

Additional Resources