Lesson 3: Recognize and Understand the Market (PDF)

LESSON 3 Recognize and Understand the Market  Value Proposition and Unique Selling Proposition Before focusing on the topics of value proposition and unique selling proposition, you must first know the marketing process. In a nutshell, marketing is all about knowing the cus...

LESSON 3 Recognize and Understand the Market  Value Proposition and Unique Selling Proposition Before focusing on the topics of value proposition and unique selling proposition, you must first know the marketing process. In a nutshell, marketing is all about knowing the customers. A value proposition (VP) šimply states why a customer should buy a certain product service. The value proposition is the major driver in customer purchase or service availment. The following are some tips for the entrepreneur on how to create an effective value proposition to the target customers: 1.Prepare a situation analysis that details the problem(s) of the customers, 2.Make your value proposition straight to the point, simple, and specific; in short there should be no complications. Your value proposition has to target your major objective. 3. Highlight the value of your product or service so that customers will easily get what benefits you can provide. 4. Adapt to the language of your market. Ensure that your target market understand clearly what you are trying to say and avoid putting unnecessary and inexplicable phrases. 5. Add credibility-enhancing elements such as actual testimonials from customers. Several quality management certifications, such as the ISO seal, add more credibility to the product or service that you're trying to sell. 6. Differentiate your value proposition with your competitors. Examples of value proposition differentiators are the originality of the product or service, its functionalities, or if the product or service can be tailor-fitted to the customer's preference, among others. To illustrate, here is a sample potential value proposition from the most common small businesses in the Philippines. Aling Tere's Sari-Sari Store Situation analysis: Prior to the establishment of a sari-sari store, Aling Tere notices that there is a convenience store in her vicinity, where many call center agents, nurses, and construction workers buy food, beverages, and other products during odd hours (from 10 PM to 6 AM). Proposed value proposition: "Tindahang Unique selling proposition (USP) refers to how you will sell the product or service to your customers. It addresses the customers' wants and desires. After you create your value proposition, you have to figure out how to advertise or promote certain unique features of the product or service that you're trying to sell. The following are some tips for the entrepreneur on selling proposition to the target customers: Identify and rank the uniqueness of the product or service attribute. Be very specific. KISS (Keep it short and simple) Proposed unique selling proposition: "Tindahang maaasahan, bukas kahit anong oras” You will notice that the proposed value proposition and unique selling proposition are the same. Why? Because the most compelling differentiating factor is positioning the value proposition is also the perfect unique selling proposition, considering all the factors enumerated were all met (defined unique attribute, specific, 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. 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 Market Research Market Research or Marketing Research Process can be defined as the process of gathering, analyzing and interpreting the information about the products or the services to be offered for sale to the potential consumers in the market (De Guzman, 2018, p. 25) DATA COLLECTION is the most valuable tool in any type of research study. Inaccurate data collection may cause mistakes and ultimately lead to invalid results. (Edralin, 2016, p. 80) TIPS in COLLECTING DATA  Organize collected data as soon as it is available  Know what message you want to get across and then collect data that is relevant to the message  Collect more data  Create more data Three different data collection techniques – SURVEY (Questionnaire), INTERVIEW and FOCUS GROUP DISCUSSION – and evaluate their suitability under different circumstances SURVEYS are the most common way to gather primary research with the use of questionnaires or interview schedule. These can be done via direct mail, over the phone, internet (e.g. Google) or email, face-to-face or on the Web (e.g. Skype or Viber). When designing or constructing your own research questionnaire, remember the following guidelines. (Edralin, 2016)  Keep it as simple as possible  Make sure it is clearly appealing and easy to read  Cluster or block related questions  Move from complex questions to more specific questions  Make sure questions are concise and easily understood  Avoid questions that are difficult to answer  Make sure response scales used are consistent with categories that are mutually exclusive INTERVIEW is one of the most reliable and credible ways of getting relevant information from target customers. It is typically done in person between the researcher/entrepreneur and a respondent where the researcher asks pertinent questions that will give significant pieces of information about the problem that he will solve. Personal interviews are the traditional method of conducting an interview. It allows the researcher to establish relationship with potential participants and therefore gain their cooperation. It generates highest response rates in survey research. FOCUS GROUP DISCUSSION (FGD) - is an excellent method for generating and screening ideas and concepts. It can be moderated group interviews and brainstorming sessions that provide information on user’s needs and behaviors. The following are considerations in the use of focus group discussions in market research:  The length of the session is between 90 and 120 minutes.  Conduct focus groups discussion with 8 to 10 participants per group.  Assign an expert moderator / facilitator who can manage group dynamics.  Use a semi-structured or open-format discussion  Strive for consistency in the group’s composition (for example, it may not be advisable to have business customers and retail customers in the same focus group, their needs are very different) Activity BY GROUP You are to open a “___________” business in our school. Conduct a simple market research to know if it is feasible or not. The learners’ output will be evaluated according to the following criteria: Creativity - 15 points Content / Information - 15 points Total 30 points