Patchwork Value Propositions Sink Businesses
Social entrepreneurs have a lot of good things going for them.
They have a product, a service, a story, impact statistics, pictures of their beneficiaries, and a call to action.
That makes for a great presentation, 10-20 powerful slides and a heartwarming pitch, that leaves the audience intrigued and inspired.
Everyone follows the enterprise on social media, and decides they’ll “keep an eye on them”.
The problem is, this positivity and goodwill isn’t leading to sales, and sales keep the whole thing afloat.
A pattern has emerged – one that caught me by surprise.
Enterprises with a “Patchwork Value Proposition” attract a lot of attention, media and love from the community, but then experience cashflow issues.
When these groups fill in their Value Proposition Canvas, they have lots of good points, but no killer advantage.
Jack of all trades, master of none.
That leads to a full canvas and a lot of optimism. The problem is, their customers don’t make a purchase decision for six different reasons.
Instead, the customer makes one purchase for one reason, then justifies that decision with a bunch of other “bonus” value propositions.
Maybe they’re torn between two identical offers, and use these bonuses to pick a winner.
Either way, there’s a primary driver/dealbreaker, and it determines which option will be selected.
This isn’t optional, our minds simply can’t hold six top priorities. There will be a crunch point, and some will be determined as being more important than others.
This is true for every considered purchase we make – like a house, car, computer or holiday.
Something will settle a split decision, and it might not be something we’d like to admit.
It’s worth separating our requirements into “Must Haves” and “Nice To Haves”
Must Haves are the dealbreakers; the things which we can’t do without.
It might be the number of airbags in your car, or the number of bedrooms in your house.
Maybe it’s compatibility with your other possessions – like with your phone, console or camera.
Maybe it’s a long held personal bias; “I only use…” or “I wouldn’t be caught dead with a…”
Nice To Haves are more common and less powerful; optional bonuses that can sweeten a deal and choose between equally valid options.
It might be the pattern/colour of the product, like your car or new shoes.
Maybe it’s the little courtesies we’re offered, like a nice waiting room or staff who remember our names.
Maybe it’s the bragging rights that come with our purchase, like choosing a brand with a good reputation, or one that makes us feel like insiders.
If you’re in a competitive industry, you might find that many brands compete on these Nice To Haves – talking about the great social life you’ll have in your new car, or the free extras they’ll throw in with your purchase.
The problem is, a collection of Nice To Haves can’t substitute for a deficiency in the Must Haves.
That sounds obvious, but this is what keeps sinking social enterprises. They trade on their stories, their impact and their goodwill – but these are often Nice To Haves built on top of a mediocre core product/service. Like a Swiss Army Knife - lots of strengths, none of them as good as a specialised competitor.
These groups attract ambassadors, wonderful people who love the cause.
They’ll do what they can, but there’s only so many washing machines and haircuts one person can buy.
Then comes the struggle - bringing on the next waves of customers. These are people whose wallets are connected to their head, not their heart.
They like the story, but can’t justify choosing a second-rate option.
You’ll earn people’s appreciation, not their business.
Maybe you’re selling to a large company, thanks to an internal champion who puts in a good word.
What happens when that champion leaves?
Will their replacement share the same passion?
Or will they look at the decision analytically, and choose the cheaper/superior option?
This is not an abstract thought.
Over the last few years, I’ve seen so many lovely entrepreneurs shut up shop because of their inability to compete, even though they were creating immense social change.
· Cafes who employed marginalised people, but made 7/10 coffee.
· Cleaning companies who employ marginalised groups, but don’t do a good job of the cleaning.
· Tech companies that can save the industry millions of dollars, but use software that’s hard to navigate.
· Research teams who do great work, but looked down their noses at Cash Cows.
· Ethical clothing companies that sell unremarkable basics for 3x more than their competitors.
All of them did well in bringing on their first round of customers, all of them told great stories.
It’s upsetting that they no longer exist, but the market voted with their wallets.
Looking at the social enterprises that win awards, you’ll see that they all deliver a strong core offer.
· STREAT make great coffee. The story is an incredible bonus.
· Thank You make cheap bottled water and delicious muesli bars. The branding and impact make the deal even more appealing.
· ASRC Catering make good food. The impact for their employees adds a certain joy to what they serve.
If they drop the ball on their core offering, customers will politely and unconsciously begin to look elsewhere.
Customers have too many choices. There are too many alternatives – including the option of doing nothing. Blame the internet, blame Zomato or Amazon or the NDIS – but it won’t change the facts. Choice empowers customers to pick the best option – and if you want to be the best, you have to beat the best.
Your competitors are driven towards making themselves better, faster, louder, tastier or cheaper.
By competing on your customer’s Must Haves, you can competitors step-for-step, and let your social impact sweeten the deal.
Patchwork Value Propositions make for great stories, not great businesses.
In the immortal words of Ron Swanson:
“Never half-ass two things. Whole-ass one thing”
Just make sure you’re whole-assing the Must Haves.