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Does your startup have a unique selling proposition (USP)? What it is and why it is important!

As a startup founder you may believe your company is following a new and unique approach. However, in a few years time, your market will have other entrants, so you should not only make sure to differentiate yourself in the beginning, but also in the future.

Especially if you are looking for VC funding or debt financing, your formal business plan will start with an executive summary, which should explain succinctly and understandably what your unique selling proposition (USP) is.

Also if you are pitching to new employees, prospective partners or Co-founders, your USP needs to be compelling enough for them to consider working with you. No-one is going to be passionate flogging a dead horse. Employees want something they can get behind and help push forward with energy and excitement. As the business grows, employee engagement is key to making your business grow. Engagement and productivity are inextricably linked to a belief in the company ethos. This starts with your unique selling proposition.

If you know you are entering the market with other competitors, then it helps to consider the questions from your prospective buyers, “Why should I buy what you sell, when I can buy from one of your competitors?”. This wake-up call question can help form your USP.

It also helps to differentiate so you can focus on a clear buyer persona or ideal semi-fictitious customer you can sell to. How you differentiate forms your unique selling proposition. It is evident your USP is not a prosaic exercise to be ticked off, it should be the very core of why your business exists.

In formulating your USP, it helps to ask yourself the following questions:

  1. What benefits will your customer get?
  2. Can you sell to this market, or buyer persona, and maintain profitability? Selling mortgages to potential homeowners on low incomes and benefits was never a good business model, ending eventually in the subprime financial crash of 2007-8.

USP – what is it?

What you sell, who you sell to and why do you sell is the best explanation of a USP in a brief sentence. Simple, but often difficult to pin down.

An example of this is Southwest Airlines, now often used as an MBA case study due to their success in changing the airline industry and influencing so many other companies following it. Southwest is the largest Worldwide low-cost carrier, imitated, by differing degrees of success by Easyjet, AirAsia, RyanAir and Lion Air amongst others.

SWA’s low-cost airline model originated in high employee and airline productivity with low unit costs and standardisation across the fleet and business. This differentiation has been a tremendous success. Their motto is, “Low fares. Nothing to hide. That’s transfarency”.

Identify your customer target and the problem needing to be solved. In SWA’s case, it was the gap in the market for low-cost, no-frills air travel. What sets your products/services apart from your competitors? This is the start of creating your USP.

Your USP must create a specific benefit for your customers they see as attractive. Better, more value, more experience, faster and other vague terminology doesn’t work. The same applies to the use of ‘technobabble’, which your customers don’t understand. Terms such as CRM, PPC, CAC don’t mean much to many customers. For example – a website states their “USP is increasing Long-Term Customer Value (LTCV) for clients”. OK, marketers would be able to understand this, but it’s missing what the real benefit is and a simple definition what they mean by LTCV.

Your USP will help in targeting a market as it’s likely your product or service offers benefits to many customer segments. Remember: No one ever served everyone well.

It’s easy to get bogged down and over-complicate segmentation factors. Keep the segmentation as simple as possible. In the Business to Business space (B2B) segmentation can be done by business size, position, location and industry. The same segmentation applies to domestic or private customers, also known as Business to Consumer (B2C) but sometimes in more detail. B2C segmentation can be by gender, age, education level, income, family status and interests. A business can have multiple segments, but it is best to keep them as close together as possible.

The ingredients of a USP include:

Unique: The product or service does not necessarily need to be unique, but the benefits to the customer should be.

Selling: Will customers part with their cash for your offer. It is not about being the cheapest. An example is online concierge services for time-poor, cash-rich customers.

Proposition: What problem does your offer solve? Difficult to narrow down when dealing with the psychology of selling. A classic example we hear, for the second time around, the deadly warning signs for the Swiss watch industry due to smartwatches and phones. The first time was in the early 70’s the ‘Quartz crisis’, or invasion of the Japanese quartz watch, which are still more accurate and cheaper than hand wound or automatic watches.

No-one understood the real test of time a mechanical watch offers, the longevity of materials, craftsmanship and design that a Swiss-made, high quality wristwatch provided. I can see this being repeated again, this time with smart-watches and their inherent design flaw of built-in obsolescence.

The point here is that there is still a market for high quality, mechanical watches, even against new entrants designed to displace them.

To summarise there are four elements of a USP

  1. Know your audience, buyer persona, ideal customer. Know what motivates them and why.
  2. Solve a genuine problem. There are a lot of problems still to be solved – the market is changing, almost on an exponential scale compared to 100 years ago.
  3. Demonstrate unique benefits. Make sure you deliver on these benefits.
  4. Get paying customers as soon as possible. OK, this isn’t quite part of your USP, but it helps to get some early adopters you can test your USP. If needed you can iterate your offer to suit the market and drive further growth.

Now that you understand the importance of a USP for startups – what is your Unique Selling Proposition?

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Stuart Phythian
Stuart Phythian
As an experienced Senior Director of various business, from private equity financed SME’s to Managing Director of UK and overseas divisions of blue chip companies, Stuart has a wide range of experience in the engineering and technology sector.

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