Business Posts

Unique Value Proposition, Part 2: Use Your UVP to Create a Value-Based Pricing Strategy

As we have written in previous posts, a business’ unique value proposition (UVP) should clearly state why customers will want to buy from that business. It must identify the value promise being made for a service or product. That means that a strong UVP is relevant to a target customer group’s specific problem, promises certain benefits of quantifiable value, and states how a service or product is different from other offerings in the marketplace.

There are several common types of pricing strategies. Cost-plus pricing is simply calculating your costs and adding a mark-up. Competitive pricing is setting a price based on what the competition charges. Price skimming is setting a high price and lowering it as the market evolves. Penetration pricing is setting a low price to enter a competitive market and raising it later. Each of these strategies has its pros and cons and may be appropriate in certain situations.

However, after differentiating your business by building delivery capabilities so that the value promised in a strong UVP becomes reality, your best pricing strategy is value-based pricing. This means setting a price for products and services based on the value the customer believes they are getting from what you are selling. The better you solve people’s problems, which simply means the more value you deliver, the higher the price you can charge for your products and services.

If the product or service offering has been built to match the requirements of a strong UVP – it is relevant to customer problems, delivers beneficial quantifiable value, and is unique in some way – then the business owner and the customer have a win-win outcome when doing business together. When the target customer perceives beneficial value in the solution you offer, then you have a better customer fit. Value-based pricing allows you to be more profitable, meaning you can acquire more resources and grow your business.

You cannot be all things to all people. By establishing a UVP, you are assured that you will be targeting a market segment with a solid customer-to-product fit that will attract the customers who need and will appreciate your offering. The relationship between a UVP and a value-based pricing strategy can lead to greater success.

For more guidance on these topics, contact a NaperLaunch coach or register for the NaperLaunch Academy.

Posted: 
Wednesday, January 27, 2021 - 14:00

4 Steps to Creating a Unique Value Proposition

Unique Value Proposition, Part 1: 4 Steps to Creating a UVP

So you’ve identified a customer problem and built a product or service to solve it. How can you convince potential customers to buy from you rather than the competition? It’s time to define your unique value proposition (UVP).

A UVP is a single, clear, compelling message that states why you are different and worth a customer’s attention. In other words, it’s a promise of value to be delivered.

Understanding how to communicate this value statement is one of the most important parts of developing your business idea. Having a strong UVP will solidify your idea and consolidate your overall message into a simple statement. It will also serve as the starting point for developing your marketing messages.

You can write your own UVP using this 4-step formula:

Step 1: State the end benefit you’re offering.

This single, short sentence should be an attention grabber. It can mention the product and/or the customer.

Step 2: Explain specifically what you offer, for whom, and why it is useful.

Identify your ideal customer (if you already haven’t done this in step 1) and describe how your product solves their problem or improves their situation. Explain why they should buy from you and not from the competition. Keep it concise, no more than 2 to 3 sentences.

Step 3: List the key benefits of what you do/offer.

In a few bullet points, list the specific benefits your product delivers.

Step 4: Evaluate your completed UVP.

Your UVP should clearly answer the following questions:

  • What product or service is my company selling?
  • What is the end benefit of using it?
  • Who is my target customer?
  • What makes my offering unique and different?

Congratulations! You’ve created a first draft of your UVP. Now you can refine it by editing out extraneous words and eliminating jargon. The better you can distill the answers to the above questions to their most basic forms, the more powerful your UVP will be.

In our next blog post, we’ll explain how to use your UVP to develop a pricing strategy for your product or service. This process is also discussed in our Startup Financial Essentials workshop; visit the NaperLaunch Academy webpage for more information and a schedule of upcoming dates.

Posted: 
Monday, January 11, 2021 - 15:30

4 Steps to Starting a Business in Illinois

You have assessed the feasibility of your business idea and created a plan to get started. What comes next? How do you turn your idea into a legally recognized Illinois business? Here are the four things you should do first.

1. Choose an organization structure for your business.

There are several ways to organize businesses in Illinois, each with its own legal and tax implications. Your form of business determines which income tax return forms you must file. 

The most common forms of business are:

  1. Sole proprietor: A person who owns the business and is personally responsible for its debts.
  2. Partnership: An arrangement in which two or more individuals share the profits and liabilities of a business venture. Types of partnerships include general partnerships, limited partnerships, limited liability partnerships, or limited liability companies.
  3. Corporation: A legal entity that is separate and distinct from its owners. Corporations enjoy most of the rights and responsibilities that an individual possesses.

Before selecting a business type, you may want to consult an attorney or accountant for assistance in determining which one is best for your business. The library also has many excellent books covering the legal requirements on each of these formats; look for titles published by Nolo.

2. Decide on a business model or format.

Like your organization structure, your business format will have legal and tax implications depending on where you do business and what kind of product or service you are bringing to market. When choosing a business format, consider the following:

  • Will you be making a product or offering a service?
  • Will your customers find you online or at a brick-and-mortar store location?

Other options for budding startups might include creating a new product and selling it to another company or buying an established business that you might take over and operate or buy a franchise.

3. Register your business with the state of Illinois.

When the operating business name is different from the owner’s full legal name(s), the Illinois Assumed Name Act requires sole proprietorships and general partnerships to register the business name with the county clerk's office of the county where they reside.

In Illinois, many businesses are required to be registered and/or licensed by the Illinois Department of Revenue. If you plan to hire employees, buy or sell products wholesale or retail, or manufacture goods, you must register with the IDOR by applying for a tax account number on the MyTax Illinois website and submitting Form Reg-1: Illinois Business Registration Application, online or by mail. Registration should take 2-3 days and will cost approximately $150. You will receive a certificate of registration that must be displayed in your place of business. An Employer Identification Number (EIN) also will be assigned.

Depending on your business type, you may also need specialized registrations (e.g. a liquor license or a professional license). The Illinois Department of Financial and Professional Regulation is the main licensing agency for the State of Illinois for most professions. Individuals must be licensed prior to conducting business as one of the professions listed on their website.

4. Obtain the necessary licenses and permits.

A business license from a city, village, or county may be required in certain circumstances. The license gives you the right to conduct business activities in that location. A license may not be necessary if customers do not visit your place of business. (For example, online-only companies probably will not need a local license.) The extent of the application process will depend on a business’ reach (local, state, national). Be sure to check with your locality, as heavy fines may be assessed if you do not obtain the required license.

Some municipalities and counties impose their own taxes in addition to the state and federal taxes that most businesses are responsible for. New businesses should contact their local revenue department to determine if additional taxes apply to their business activities. Many communities restrict advertising, regulate pricing, or require zoning permits. Contact your city or county clerk's office for information on local restrictions.

For more information on starting a business in Illinois, check out the NaperLaunch BizVids Startup in Illinois series or register for an upcoming NaperLaunch Academy workshop. You can also make a one-on-one appointment with a NaperLaunch business librarian.

Posted: 
Thursday, December 31, 2020 - 09:15