In this comprehensive series, we will delve into the fundamental questions that underpin business success and provide practical tools and techniques for SME owners to effectively address them. These questions have puzzled business owners since the inception of commerce, long before the advent of AI, the internet, and even electricity.
- Who is my ideal customer?
- What makes my product or service attractive?
- How should I be pricing my product or service?
An article in the NZ Herald from June 2024, “Big Red, What went wrong for The Warehouse,” highlighted the struggles of one of New Zealand’s most renowned retail brands, The Warehouse.
A senior analyst at investment house Forsyth Barr posed the question, “I don’t know if they [The Warehouse] know what they are and how they fit into the New Zealand retail landscape, or what they are going to compete on.”
Another analyst, Greg Smith of Devon Funds Management, commented, “They need to recalibrate what is the value proposition.” For The Warehouse, which has used bargain prices as its core attraction, competitors like Kmart are now dictating to Warehouse customers what a bargain actually is.
Although The Warehouse is a large, complex business in a highly competitive market, its challenges and principles of success are highly relevant to SMEs. Regardless of the size of your business, the core questions remain the same: Who are you selling to, why should they buy from you, and how much will they pay? These questions form the foundation of success for global conglomerates and local food trucks alike. Once you unlock the first two, the third becomes significantly easier to answer.
In this series, we will explore each of these three questions and shed light on effective approaches to finding the answers. This article focuses on identifying a compelling value proposition.
Table of Contents
What Makes My Product or Service Attractive – My Value Proposition?
The concept of a value proposition can be traced back to Rosser Reeves of the US advertising agency Ted Bates. In his 1961 book, Reality in Advertising, Reeves coined the term “single-minded proposition.” He asserted that without a core proposition at its heart, any advertisement (or communication) is a waste of both the reader’s and the advertiser’s time.
A robust value proposition should:
- Be easily understood by your target audience and resonate with them.
- Communicate specific results that the target customer will achieve.
- Explain how you differ from alternative options they might consider.
A good value proposition must be both relevant and compelling. It should not be mere clickbait that entices people to click, only to disappoint them with a lack of substance. Avoid being that person.
Effective value propositions can originate from various aspects:
- Product: M&M’s: “Melts in your mouth, not in your hands.”
- Service: Avis: “We’re No. 2, so we try harder.”
- Location: Disneyland: “The happiest place on earth.”
- Price: Walmart: “Save money, live better.”
Crafting Your Value Proposition
To develop a strong value proposition, consider the following foundational questions:
- What pain points do you solve for your audience?
- How do you solve these issues?
- How does your product or service differ from other options available?
Resist the temptation to break your business down into separate product lines or services. Instead, think about the overarching value your business offers as a whole.

Begin by aiming to answer all these questions in a single sentence. It may be lengthy initially, but that’s acceptable. Gradually refine it into something concise and impactful.
A good test is to envision this sentence as the only piece of signage that tells people passing by what is great about your shop or office. What would it say?
Example of a Value Proposition in Practice
To illustrate, let’s consider a hypothetical small business owner running a boutique coffee shop. The shop’s value proposition might initially be: “We provide a cozy, community-centered environment where customers can enjoy high-quality, ethically-sourced coffee, crafted with care by expert baristas.”
Refined, it could become: “Your neighborhood coffee haven, serving ethically-sourced brews crafted with love.”
This statement is short, engaging, and clearly communicates what makes the coffee shop special to its target customers.
The Importance of Revisiting Fundamental Questions
It’s essential to periodically revisit these fundamental questions, especially if you find yourself struggling to answer them or want to take a step back from daily operations to reflect. If a publicly listed company like The Warehouse grapples with these questions, you are not alone. This should be seen not as a problem but as an opportunity to ensure your business has the fundamentals of success firmly established.
By thoroughly understanding your ideal customer, defining a compelling value proposition, and strategically pricing your products or services, you set a strong foundation for your business to thrive. In the upcoming articles of this series, we will further explore strategies to enhance your competitive advantage, improve customer experiences, and develop effective marketing strategies that resonate with your target audience.
Stay tuned as we continue to explore the essential elements of running a successful business, helping you navigate the complexities of the market and drive sustainable growth for your SME.