This article is part of our “Business Startup Guide” – a curated list of our articles that will get you up and running in no time!

Whether you’re a new entrepreneur or thinking about joining the ranks, one question you’ll have to answer is: What sets your business apart? The answer to that question usually leads entrepreneurs to define their unique value proposition, also called unique selling proposition, or USP.

To help entrepreneurs create a value proposition, we’ve written this handy guide to walk you through the process.

What is a value proposition?

Your unique value proposition, selling proposition, or USP (all of which refer to the same thing) is what separates your business from your competitors. It defines your unique position within the marketplace and gives you an edge over other businesses.

Your value proposition isn’t meant to appeal to everyone. On the contrary—you want a value proposition that is attractive and effective to your niche audience. This will help you advertise and market your business alongside competitors while carving out a market share all your own.

Why is a value proposition important?

Every competitor in your field is vying for attention. From marketing plans to advertisements, consumers hear a lot of noise. To cut through this clutter and turn your target audience into loyal customers, you need a value proposition.

In a crowded marketplace, you need a value proposition to compete. That’s probably the biggest reason why a value proposition is vital to your business.

KISSmetrics spells out a few more reasons to create a USP.

How do you create a value proposition?

Finding a value proposition takes some time and legwork. It’s more than whipping up a clever tagline. To create a value proposition, you have to know your customer and your business. Plus, you have to understand how your product or service fits into our consumer-driven world.

And, that’s just a start. We’re not saying this to scare you, rather to express how in-depth the process is.

Here are six tips to help you create a value proposition:

1. Define your target audience

You need to figure out who your customers are. Who will buy your product or service? A lot of first-time business owners want everyone to be a customer; this is a rookie mistake. If you try to appeal to everyone, your business and product will get lost in the noise.

Instead, hone in on exactly who your audience is. Research everything about them. You want to know demographic information, income statistics, and family makeup. How old is your target audience? Are they male or female? What kind of income does your target audience have? Get specific. What does your target audience do on the weekend? What kind of music do they listen to? You might think these last questions are a bit far-fetched, but you want to create a complete profile of your target audience.

You can’t create a value proposition alone in your basement, either. You have to test it. Run it by a small group of your target market to ensure your value proposition resonates with customers you’re trying to reach.

2. Know your competitors

To separate yourself from your competitors, you have to know who they are and what they stand for. Research your competitors inside and out, from their mission statement to the types of employees they have. You can only set yourself apart if you know what’s already been done.

3. Define the needs your product or business meets

Write down how your business or product can help others. Can your product do something that other products can’t? Does it save time? Is it more affordable than other products? Take that list and cross off any need that your competitors can claim too.

This exercise is meant to help you find areas where your business is different than others. Simply having the best product, or the best customer service in the market isn’t enough differentiation. Remember, every business thinks they have the best product. Take some time to figure out how your product meets the needs of your target audience in a way that others can’t.

4. Dispel myths

Can your business or product dispel any myths or stereotypes? Let’s say you’re planning to open a computer repair store. What stereotype springs to mind when you think of a computer technician? You might think of a nerdy person in oversized glasses with a vocabulary you can’t understand, right? Well, if your business plans to buck that stereotype, you can use that to build a USP. If your business or product is “going against the norm” in any way, or breaks commonly held myths, you can use that as leverage.

5. Create a clear mission and message

A unique selling proposition goes deeper than a marketing plan; it should connect with your brand’s mission. What does your business stand for? It’s a big question, one that takes some time to figure out. Once you have a solid and clear answer, see if your mission overlaps or coincides with the list of things that sets your business apart. Now you’re starting to hone in on your value proposition.

Once you’ve done your digging, make a list of possible value propositions that fit your business. Again, this isn’t going to be something you whip up in 20 minutes. Write a few down, stew on them for a bit, and refine them. You want a clear message.

Using your list of unique attributes and your brand’s mission, you can start to mold that information into a clear message. Rework it until you have one succinct sentence that will become your value proposition.

6. Bring it to life

Once you’ve defined your value proposition, you have to figure out a way to bring it to life. In other words, you need to figure out how to take that unique selling proposition and turn it into a marketing tool. From mascots to slogans, website designs and packaging, your value proposition should seep into every aspect of your business.

Examples of great value propositions

One of the best ways to learn is by example, so let’s take a look at a few businesses that have created unmistakably unique selling propositions:

The Mast Brothers Chocolate

brothersThis duo of bearded, lanky brothers create chocolate bars by hand. Their dedication to their craft alone is unique, but the brothers have infused their love of old-time traditions into their business. When they need to purchase more cocoa beans, they charter a wooden sailboat to stay true to their pioneer-like roots. Now that’s a unique position you can market.

Dollar Shave Club

DSCThis online business sells and ships razors and blades to its audience for a buck. They poke fun at the fancy, vibrating 10-blade razors that are on the market today and encourage men to go back to basics. But don’t think that means they’re selling an inferior product. Their slogan is: “Our blades are f***ing great,” which provides another memorable selling proposition.

 

Ellusionist

ellusionistHere’s a business that created a value proposition by catering to a very specific audience. Ellusionist is an online store that sells playing cards to magicians. Some of the decks are marked, others have a vintage appearance, but the variations are meant to build showmanship for its unique target audience.

 

Palo Alto Software’s value proposition

Note from the Editor:

Shortly after publishing this article, one of our readers asked if we could share our own USP.

Here’s what Noah Parsons, Chief Operating Officer at Palo Alto Software, has to say on the matter:

Noah Parsons

Noah Parsons, Palo Alto Software COO

For Palo Alto Software, our goal is to provide entrepreneurs with the tools, knowledge, and know-how to help them grow faster and better than their competition.

We’re not just in it to make a buck—we actually want to help people succeed in business as much as possible. Our commitment to entrepreneurs is shown in our thousands of pages of free content that helps demystify the complexities of starting and running a business.

We also provide simple yet powerful tools for entrepreneurs so they can focus more on doing what they love and less on trying to build and understand complex reports and spreadsheets.

A few final thoughts

Julie Cottineau, a self proclaimed "brand passionista" offers tips to create a USP.

Julie Cottineau, a self proclaimed “brand passionista” offers tips to create a USP.

Creating a value proposition is time consuming, but certainly to your advantage in the long term.

Julie Cottineau, the former Vice President of Brand for Virgin, and current owner of a brand consultancy BrandTwist, offers a few parting tips to remember.

1. Don’t try to please everyone

You want a well-defined audience. “Don’t be afraid to alienate a few people along the way. Brands that target everyone, connect with no one,” she says.

“The biggest mistake businesses make is casting too wide a net, for fear of leaving anyone out. Women 25-54 is not a valid target segment, it’s a census box.”

2. Differentiate yourself from the pack

“In my practice, I think of a USP as a twist. Something unique, unexpected, and meaningful that can set you apart from the pack,” she explains. “A USP is any aspect of your brand or business that is different from competition and can be communicated to your audience to encourage people to try your brand or switch from another brand.”

Whatever your value proposition is, it has to be something that the competition can’t claim, or at the very least something they don’t use as a marketing tool.

3. Make a connection

One of the best ways to create a successful selling proposition is to make a connection with your audience that pushes them to act.

“It’s not about shouting louder. It’s about marketing smarter. Creating compelling messages that connect with consumers, engage their hearts (not just their minds), and turn them into loyal brand ambassadors who will help you get the word out and build your brand,” says Cottineau.

Have you created a value proposition? If so, tell us what it is and how you defined it in the comment section below.

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