LESSON 4:
Recognize and Understand the Market
Value Proposition (VP) - is a business or marketing statement that
summarizes why a consumer should buy a company's product or use
its service. This statement is often used to convince a customer to
purchase a particular product or service to add a form of value to their
lives. In creating Value Proposition, entrepreneurs will consider the
basic elements:
Target Customer
Needs/opportunity
Name of the product
Name of the enterprise/company
Recognize and Understand the Market
Unique Selling Proposition (USP) – refers to how you sell your
product or services to your customer. You will address the wants and
desires of your customers. As an entrepreneur, you should think of
marketing concepts that persuade your target customers. You may
ask the following questions in doing this: What do the customers
want? What brand does well? What does your competitor sell well?
Some tips for the entrepreneur on how to create an effective unique
selling proposition to the target customers are:
Identify and rank the uniqueness of the product or services
character
Be very Specific
Keep it Short and Simple (KISS)
There are three factors that will determine your customers.
A. Target Market
Market Targeting is a sage in market identification process that aims to
determine the buyers with common needs and characteristics. Prospect
customers are a market segment that an entrepreneurial venture intends
to serve.
In targeting a specific market, it will exclude people if it will not fit your
criteria. Rather, target marketing allows you to focus your marketing
money and brand message on a specific market that is more likely to
buy from you than other markets. Choose a product that is more
affordable, efficient, and effective to reach potential clients and generate
business.
Commonly used methods for segmenting the markets are
follows.:
1. Geographic segmentation – the total market is divided
according to geographical location.
Variables to consider:
a. Climate
b. Dominant ethnic group
c. Culture
d. Density (either rural or urban)
2. Demographic Segmentation – divided based on consumers
Variables to consider :
a. Gender
b. Age
c. Income
d. Occupation
e. Education
f. Religion
g. Ethnic group
h. Family size
3. Psychological Segmentation – divided in terms of how
customers think and believe
Variables to consider:
a. Needs and wants
b. Attitudes
c. Social class
d. Personality traits
e. Knowledge and awareness
f. Brand concept
g. Lifestyle
4. Behavioral Segmentation – divided according to
customers’ behavior pattern as they interact with a
company.
Variables to consider
a. Perceptions
b. Knowledge
c. Reaction
d. Benefits
e. Loyalty
f. Responses
B. Customer Requirements
Customer requirements are the specific
characteristics that the customers need from a
product or a service.
There can be two types of customer requirements:
1.Service Requirement
2.Output Requirement
Service Requirement: An intangible thing or product that cannot be
touched but the customer can feel the fulfillment. There are elements in
service requirement like on-time delivery, service with a smile, easy-
payment etc. It includes all aspects of how a customer expects to be
treated while purchasing a product and how easy the buying process goes.
Output Requirements: Tangible thing or things that can be seen.
Characteristic specifications that a consumer expects to be fulfilled in the
product. Costumers will avail services as a product, then various service
requirements can take the form of output requirements. For example, if the
consumer hires a multi cab, then on-time arrival becomes an output
requirement. Customer buys gadgets (phone speaker) the specification like
the loudness and clarity are the output requirements.
C. Market Size
The entrepreneur’s most critical task is to calculate the market size, and the potential value
that market has for their start-up business. Market research will determine the entrepreneurs’
possible customers in one locality.
What is Market Size?
Market size is like a size of the arena where the entrepreneurs will play their business. It is the
approximate number of sellers and buyers in a particular market. Companies are interested in
knowing the market size before launching a new product or service in the area. In determining
the market size, the entrepreneur will conduct a strategic marketing research from reliable
sources using the following method. The first step is to estimate the potential market –
approximate number of customers that will buy the product or avail your services. The second
step is to estimate the customers who probably dislike to buy your product or avail the
services. The third step is for the entrepreneur to estimate the market share, that means
plotting and calculating of the competitor’s market share to determine the portion of the new
venture. Market size becomes the most important factor if you ever need to raise funding for
your business.
ACTIVITY:
As an entrepreneur, you are planning to have a business.
Using the following guide questions, answer them so you
can now start drafting your business plan.
1. What product do you want to sell?
2. How will you apply the concept of value proposition
and unique selling proposition?
3. What is the best tagline of your chosen product?
4. Who is your target market?
