Relevance and importance

Most studies suggest that focus and strategic coherence are important to successful SMEs. Ensuring your business proposition is in strategic alignment with the needs of your core market will signify that you are building a business proposition the market wants to buy. If relevance and differentiation are evident, it will go some way to satisfying investors and customers.

Overview

Understanding what customers value and developing the appropriate capability in an organisation is crucial. Customer needs may differ between market segments and indeed the customer perception of value may be multi-dimensional e.g. some may value technical quality, others after-sales service, while others value delivery reliability and so on.

Market segments

An awareness of the market segments being addressed and how best to serve them will inform the business proposition. The product or service may be provided to a broad market segment, a sub-segment or niche, or even at the individual customer level, e.g. customising.

Positioning

Once the segments of the market have been chosen the product or service needs to be "positioned" for successful market entry. Positioning refers to the way the customers define the attributes of the product/service in comparison to those of the competition. The product or service needs to be differentiated from the competition in a meaningful and worthwhile way. They may be differentiated, for example, in terms of performance, design, people or image. How the company positions itself and whether it delivers on that position can result in achieving competitive advantage in the market.

Pricing strategy

Your pricing Strategy should take into account the marketing objectives such as positioning and segments, organisational considerations such as costs, the nature of the market and the demand for the product/service, and the competition.

Sustainability

In developing a business proposition issues of sustainability need to be considered. The speed of change in technology can potentially erode a company's competitive advantage. Competitors may be able to imitate the proposition or even innovate, develop it further and move ahead. New competitors may enter the market. Customers over time may find substitute products or services which reduce the value of the proposition to them. Suppliers may be important to your business proposition. If circumstances with your suppliers change, e.g. you have to switch, how will it affect the proposition?

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Recommendations and practical tips

When developing the business proposition:

	Identify exactly what your proposition is, what it does, what it means, and why it will be important to the customers/stakeholders.
	Research and analyse the market to improve your understanding of what the customers actually value.
	Attempt to segment the market identifying distinct groups of buyers and their different needs, characteristics and behaviour.
	Understand clearly how your product or service is different to the competition and whether the customers will understand and value the differentiation.
	Plan how to redevelop and change the proposition over time to ensure it remains sustainable.

Warnings and potential pitfalls

Ensure the segmentation selection is relevant to the purchase of the product/service. e.g. will it matter if you segment customers into those with 10 employees or those with 50 employees?

Carefully select the way in which your proposition will distinguish itself. Not all differences make a good differentiator and each difference has the potential to create costs for the company.

Your pricing strategy should recognise that internal as well as external factors will affect pricing decisions. e.g. you may have set the right price for the market but can the company continue to meet its financial objectives?

Things can change and what started as a sound business proposition may need to be reappraised or redeveloped over time. Continually pay attention to the external factors, e.g. competitors, customers, suppliers, to ensure your proposition remains relevant and successful.

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