Value Proposition: Understanding Customer Needs

• Module 3 is titled: Recognize and Understand the Market

Value Proposition

• A value proposition is a simple explanation of why people should choose a product or service.
• It explains the problem a product solves, how it helps customers, and why its better than other options.
• For example: “Healthy, delicious meals delivered to your doorstep in under 30 minutes, saving you time and helping you eat better."
• It answers the questions:
  • What problem are you solving?
  • How do you help?
  • Why are you better?
• Entrepreneurs will consider these basic elements when creating a value proposition:
  • Target Customer
  • Needs/Opportunity
  • Name of the product
  • Name of the company
• A value proposition example:
  • “FreshBite Meal Kits by FreshBite Inc. delivers pre-portioned, ready-to-cook healthy meals for busy professionals who want to save time while eating well. With easy recipes and fresh ingredients, you'll have a delicious meal on your table in under 30 minutes, no grocery shopping required!"
  • Target Customer: Busy professionals who are struggling to find time to cook healthy meals.
  • Needs/Opportunities: They need convenient, healthy food options that fit into their busy schedules.
  • Name of the product: FreshBite Meal Kits
  • Name of the company: FreshBite Inc.

Unique Selling Proposition

• A unique selling proposition refers to how you sell your product or services to a customer.
• It addresses the wants and desires of customers.
• What do the customers want?
• What brand does well?
• What does the competitor sell well?

Target Market

• The target market is the specific group of people or businesses that a company aims to sell its products or services to.
• The customers are most likely to be interested in what the company offers, based on factors like age, income, lifestyle, location, and needs.
• For a healthy meal delivery service, the target market may include:
  • Busy professionals who don't have time to cook but want healthy meals.
  • Health-conscious individuals who prefer nutritious food options.
  • Fitness enthusiasts who want balanced meals to support their workouts.

Market Segmentation Methods

• Four commonly used methods for segmenting markets:
  • Geographic Segmentation
  • Demographic Segmentation
  • Psychological Segmentation
  • Behavioral Segmentation

Geographic Segmentation

• The total market is divided according to geographical location.
• Variables to consider:
  • Climate
  • Dominant Ethnic Group
  • Culture
  • Density (either rural or urban)

Demographic Segmentation

• Divided based on consumers.
• Variables to consider:
  • Gender
  • Age
  • Income
  • Occupation
  • Education
  • Religion
  • Ethnic Group
  • Family Size

Psychological Segmentation

• Divided in terms of how customers think and believe.
• Variables to consider:
  • Needs and wants
  • Attitudes
  • Social class
  • Personality traits
  • Knowledge and awareness
  • Brand concept
  • Lifestyle

Behavioral Segmentation

• Divided according to customers' behavior patterns as they interact with a company.
• Variables to consider:
  • Perceptions
  • Knowledge
  • Reaction
  • Benefits
  • Loyalty
  • Responses

Customer Requirements

• Customer requirements are the specific characteristics that the customers need from a product or a service.
• There are two types of customer requirements:
  • Service Requirement
  • Output Requirement

Types of Customer Requirements

Service Requirement

• What customers expect from the service experience.
  • A food delivery service should be fast, friendly, and reliable.
  • A hotel should provide clean rooms, good customer service, and a comfortable stay.

Output Requirement

• The final result or quality of the product/service.
  • A customer buying a laptop expects it to be fast, durable, and it to has long battery life.
  • A person getting a haircut expects it to look stylish and well-done.

Market Size

• The total number of potential customers or the total sales value of a product or service in a specific market.
• It helps businesses understand how big the opportunity is for selling their product.
• Example:
  • The market size for fast food in the U.S. is huge because millions of people eat fast food every day, generating billions of dollars in sales.
  • The market size for electric cars is growing as more people switch from gas-powered cars.
  • The market size for electric cars is currently smaller than the regular car market.

Explore the value proposition, explaining why customers choose a product or service. Understand how it solves problems, helps customers, and offers advantages. Entrepreneurs consider target customers, needs, product names, and company details when crafting value propositions.