LESSON FOR SAS 2 WEEK 3-4 : RECOGNIZE A POTENTIAL MARKET

This lesson will allow you to learn independently the knowledge and skills in recognizing a
potential market. It will guide you to identify the market problems to be solved or the market
needs to be met; and let you propose solution/s in terms of product/s and service/s that will
match the need using techniques on seeking, screening, and seizing opportunities. Also, in this
module we are going to identify the market problem and propose solutions with regards to
products and services, to continue discovering the ideal buiness you are going to offer for your
community. Basically, in return for your hard time of selling your product you can generate
profit.

MARKET NEEDS
Market needs refer to the functional needs, desires, and goals of a target audience. A
company may identify an area of the market with unmet needs and create a product or
service that addresses them. If that audience has a large amount of need, the company may
receive a significant profit. Some details that marketing professionals look for to determine
market needs may include:
⮚ Age of buyers ⮚ State of the current market
⮚ Size of the market ⮚ Competition
⮚ Customer buying patterns ⮚ How to distribute the product
⮚ Customers' income

Understanding Needs vs. Wants

Some needs are easier to nail down. You need a place to live, clothes to wear, and
enough food and water to maintain your health—these are the elemental things that you need
to survive. They are indispensable. You can argue that everything else is not imperative, but this
is where the lines start to blur. The reality is, we make many of our purchasing decisions
subjectively rather than objectively. For instance, some people consider health insurance to be
a necessity. For others, the benefits of health care insurance are just a luxury.

Needs are something that you must have, to live (such as drink, clothing, and shelter). On
the contrary, Wants are something that you wish to have, to add comforts in your
life. Needs represents necessities while wants indicate desires. Needs are important for the
human being to survive.

Product vs. Services

A product is a tangible item that is put on the market for acquisition, attention, or consumption,
while a service is an intangible item, which arises from the output of one or more individuals.

Here are some key differences that may help you distinguish between products versus services:

1. Tangibility
A product is generally tangible, meaning a consumer can interact with it through one or
more of their five senses. When marketing products, you might use design elements that
indicate the tangibility.
Service-based marketing requires the creation of tangible elements that can connect
the consumer to the brand or company offering that service.

2. Perishability
 Some products are perishable by nature. Food products, for example, go bad after a
certain period. Other physical items might become too old to function. This perishability can
create a useful market for companies who hope to help customers replace old products with
new ones.
Services generally avoid perishability because their intangible nature makes it more
challenging for them to perish naturally. This means that some marketers may add artificial
expiration dates to services to encourage individuals to use the service within a certain time
frame. It's also possible for services to become obsolete. For example, an automotive
mechanic who offers service on a car that's no longer manufactured would offer an obsolete
service.

3. Initial company costs

The initial costs of creating a product can be high, as the producer may need to pay for
the rights to the idea, the raw materials and the labor to assemble the product. The company
may also be thoughtful when producing an initial product batch because excess items may
cost money without generating revenue.
A services-based business often has lower overhead costs. This is because a company
that sells a service can do so without buying and maintaining inventory. This can also allow
them to avoid the challenge of excess product.

4. Demonstration of quality
The quality of a product might be measurable at the time of purchase. A consumer can
feel the fabric of a shirt or touch the seats in a car to make a personal assessment of the
quality.
The quality of service may be more challenging to show. Methods for demonstrating
quality include reviews and testimonials from previous clients.

5. Variety
Unless a product has protection under a patent, it's likely that many versions of it exist. For
example, consumers may have thousands of choices when they want to buy a shirt or a pair of
shoes. Physical products come in many formulations and options.
Companies that provide services may offer less variety, depending on the type of
service. For example, seeing a doctor typically includes the same elements, whether you
choose one provider over another.

6. Ease of returns
Customers can often return products after purchase. This may allow them more freedom
when making purchases, as they know it's possible to reverse the decision. Some stores require
the item to retain its original packaging or that the customer returns with the receipt within a
certain time to get their money back.
Returning a product is often easier than returning a service. This is because, after the
company provides a service, it can be challenging or impossible to give it back. Some service
providers offer a satisfaction guarantee, wherein the customer might get their money back if
they have a negative experience of the service.

7. Customer-company relationship importance

While forming a relationship with a customer can help when marketing a product, it's
often more important that the product appeals to the consumer's needs. If the product is
convenient and seems appropriate, they may be happy to purchase it from a new company.
 Marketing services often require a strong relationship between the consumer and the
business. This is because the customer might be more likely to return if they trust the company to
do a good job with the service.

Potential Market
● Recognizing a Potential Market is all about understanding your consumer’s needs
and wants.
So, by knowing their NEEDS AND WANTS, how do we find the NICHE in the market for
our products? We should understand consumer behavior.
● Consumer Behavior
It is the process and activities people engage in when searching for, selecting,
purchasing, using, evaluating, and disposing of products and services to satisfy their
needs and wants.
● Determine the possible Products/Services that will meet the need of the market.

Target market
Is a group of customers within a business's serviceable available market at which a business
aims its marketing efforts and resources. A target market is a subset of the total market for a product or
service. Important market information can only be obtained by conducting good market research. The
more the entrepreneur knows about his or her relevant market, the mo
re customers can be properly segmented and reached, products can be positioned, brands can be
promoted, prices can be set up, and locations can be pinpointed.

There are two kinds of a target market, they are:

1. Primary Target Market – are people who need your product, willing to buy, and have the power to
buy.
2. Secondary Target Market – people who have limited purchasing power and fewer demands but can
be enticed to buy once effective marketing strategies are applied.

The STEP Formula

If you are looking for a simple way to remember and summarize the STP marketing concept,
the acronym STEP is extremely useful:

Segmentation + Targeting Equals Positioning

This formula clearly illustrates that each segment requires tailored positioning and marketing mix
to ensure its success. Let us take a closer look at each of the three steps in the STP marketing
model.

What is Market segmentation?

Market Segmentation - is the process of grouping similar or homogeneous consumers
according to:
1)Demographic Segmentation - Process of grouping customers according to relevant
socioeconomics variables (income range and social class,
occupation, gender, and age, religion, ethnicity) for the
business venture.
2)Psychographic Segmentation - the process of grouping customers according to their
perceptions, way of life, motivations, and inclination.
3) Geographic Segmentation - is simply grouping according to their location (It can be a
street, a village or a barangay, municipality, city, province, or
religion) This segmentation matters more if the
 locations targeted have different sets of qualities mentioned
previously.
4)Behavioral Segmentation - is the process of grouping the customers according to their
actions. – This behavior is instigated by occasions, desired
benefits, loyalty, and usage of products or avail of services.

PRODUCT AND SERVICES CREATION/INNOVATION

THE NEW-PRODUCT/SERVICES-DEVELOPMENT PROCESS IN 7 STEPS

1. Idea generation
Many aspiring entrepreneurs get stuck on the first stage: ideation and brainstorming. This
is often because they’re waiting for a stroke of genius to reveal the perfect product they should
sell. While building something fundamentally “new” can be creatively fulfilling, many of the best
ideas are the result of iterating upon a product already in the wild.
The SCAMPER model is a useful tool for quickly coming up with product ideas by asking
questions about existing products. Each letter stands for a prompt:
Substitute (e.g., faux fur for fur)
Combine (e.g., a phone case and a battery pack)
Adapt (e.g., a nursing bra with front clasps)
Modify (e.g., an electric toothbrush with a sleeker design)
Put to another use (e.g., memory-foam dog beds)
Eliminate (e.g., get rid of the middleman to sell sunglasses and pass the savings on
to consumers)
Reverse/Rearrange (e.g., a duffle bag that doesn’t wrinkle your suits)
By considering these prompts, you can come up with novel ways to transform existing
ideas or even adapt them for a new target audience or problem. Using insights from business
analysis can also be helpful to better understand the opportunities in the market.

2. Market Research
With your product idea in mind, you may feel inclined to leapfrog ahead to production, but
that can become a misstep if you fail to validate your idea first. Product validation ensures
you’re creating a product people will pay for and that you won’t waste time, money, and
effort on an idea that won't sell. There are several ways you can validate your product ideas,
including:
⮚ Sharing your idea with your target market on online forums etc.
⮚ Sending out an online survey to get feedback
⮚ Starting a crowdfunding campaign
⮚ Test marketing, releasing your idea to a very small group of your target market to get
initial feedback.
⮚ Researching market demand using Google Trends
⮚ Launching a product launch roadmap to gauge interest via email opt-ins or pre-orders
⮚ Asking for initial feedback on forums like Reddit
However you decide to go about validating your idea, it is important to get feedback from
a substantial and unbiased audience as to whether they would buy your product. Be wary of
overvaluing feedback from people who “definitely would buy” if you were to create your
theoretical product—until money changes hands, you can’t count someone as a customer.
Asking advice from your family and friends (unless they have prior experience) is also something
to avoid.
You may want to run a feasibility study or an assessment of whether your proposed idea is
worth investing in or not. Validation research will also inevitably involve competitive analysis. If
your idea or niche has the potential to take up market share, there are likely competitors
already operating in that space.
Visiting your competitors’ website and signing up for their email list will allow you to
understand how they attract customers and make sales. Asking your own potential customers
what they like or dislike about your competitors will also be important in defining your own
competitive advantage. The information compiled from doing product validation and market
research will allow you to gauge the demand for your product and also the level of
competition that exists before you start planning. Research is a critical part of product
development so definitely don't neglect it!

3. Planning
Since product development can quickly become complicated, it’s important to take the
time to plan before you begin to build your prototype. At this stage, it can often be helpful to
have a clear product roadmap. When you eventually approach manufacturers or start looking
for materials, if you don’t have a concrete idea of your product’s design and how it will
function, it’s easy to get lost in the subsequent steps. The best place to begin planning is with
a hand-drawn sketch of what your product will look like. The sketch should be as detailed as
possible, with labels explaining the various features and functions.

4. Prototyping
The goal of the prototyping phase during product development is to create a finished
product to use as a sample for mass production. It’s unlikely you will get to your finished product
in a single attempt—prototyping usually involves experimenting with several versions of your
product, slowly eliminating options and making improvements until you feel satisfied with a final
sample. Minimum viable product is a great standard to hold yourself too.

5. Sourcing
Once you have a product prototype you’re satisfied with, it's time to start gathering the
materials and securing the partners needed for production. This is also referred to as building
your supply chain: the vendors, activities, and resources needed to create a product and get it
into a customer’s hands. During this stage of product development, project management is
crucial. While this phase will mainly involve finding manufacturers or suppliers, you may also
factor storage, shipping, and warehousing into your choice. In Shoe Dog, a memoir by Nike
founder Phil Knight, the importance of diversifying your supply chain is a theme emphasized
throughout the story. Finding multiple suppliers for the different materials you will need, as well
as different potential manufacturers, will allow you to compare costs. It also has an added
benefit of creating a backup option if one of your suppliers or manufacturers doesn’t work out.
Sourcing several options is an important part of safeguarding your business for the long term.

6. Costing
After research, planning, prototyping, and sourcing is done, you should have a clearer
picture of what it will cost to produce your product. Costing is a business analysis process where
you take all information gathered thus far and add up what your cost of goods sold (COGS) will
be so you can determine a retail price and gross margin. Begin by creating a spreadsheet with
each additional cost broken out as a separate line item. This should include all of your raw
materials, factory setup costs, manufacturing costs, and shipping costs. It is important to factor
in shipping, import fees, and any duties you will need to pay to get your final product into the
customer’s hands, as these fees can have a significant impact on your COGS, depending on
where you are producing the product.
7. Commercialization
At this point you’ve got a profitable and successful product ready for the world. The last
step in this methodology is to introduce your product to the market! At this point, a product
development team will hand the reins over to marketing for a product launch. If you don’t
have the budget for expensive ads, don’t sweat it. You can still run a successful go-to-market
strategy by using the following tactics:
⮚ Sending product launch emails to your subscriber list
⮚ Working with influencers on an affiliate marketing campaign
⮚ Getting your product featured in gift guides.
⮚ Enable Instagram Shopping
⮚ Run Chat Marketing campaigns.
⮚ Get reviews from early customers.

FEASIBILITY, VIABILITY, PROFITABILITY, AND CUSTOMER REQUIREMENTS

Feasibility is a study that aims at uncovering the strengths and weaknesses of an existing
business or a proposed business venture. It takes into consideration the opportunities offered by
the environment, its resources, and the subsequent success of the venture. It should include the
description of the product or service, its historical background, operational details,
financial data and accounting statements, legal and tax requirements, and its policies
on management and marketing research.

Viability on the other hand, is the study or an investigation of the existing business or
proposed venture’s sustainability. It determines whether the proposal should be approved or
not. It involves dealing with strategies on how to make the business grow and last. Business
growth is an important aspect of viability. How long a business will last is determined by its
viability, and it can be seen in the profits that the business has made for a certain period. Good
profit means a better chance at success for the business.

Profitability is ability of a company to use its resources to generate revenues more than its
expenses. In other words, this is a company’s capability of generating profits from its operations.

Value Proposition
Your value proposition should describe; how your product or service solves/improves problems,
what benefits customers can expect, and why customers should buy from you over your
competitors.

Tips on how to create an effective value proposition

1. Prepare a situation analysis that details the problem.
2. Straight to the point, simple and specific
3. Highlight the value of your product or service
4. Adapt to the language of your market
5. Add credibility-enhancing elements (Ex. Testimonials, mgt. certifications, ISO seal
6. Differentiate your value proposition with your competitors. Make it original.

Unique Selling Proposition (USP)-This refers to how you will sell the product/service to your
customer. It addresses the NEEDS & WANTS
• Tips on how to create an Effective Selling Proposition
• Identify and rank the uniqueness of the product or service attribute
• Be very specific – put details.
 • KISS (Keep It Short Simple) – catchy unique selling proposition in the simplest and
shortest way

Once you are done identifying the needs and wants, the environmental scanning, the
screening, and selecting the business opportunity, you should now be ready to prepare a
comprehensive business plan that covers the marketing, operations, and financial plans.

BUSINESS PLAN DEVELOPMENT

A business plan is a written description of your business and where you want it to go in the
future. It is a document that tells you what you plan to do and how you plan to do it. It is a set
of documents that shows the business how to look ahead, allocate resources, focus on key
points, prepare for problems and opportunities, and outline how to achieve the goals. It is a
blueprint of the business policies and strategies which are continually modified as conditions
change and new opportunities and/or threats emerge. This definition highlights the need to
have a business plan for small and big businesses alike because it optimizes growth and
development based on set priorities. A business plan is prepared for defining the business,
setting the goals, persuading business investors, winning over business partners, and organizing
the business structure, the positions, people occupying the position, and varied tasks or
responsibilities. Peterson, Jaret, and Schenk (2013) gave several advantages of having a
well-written business plan and the risk that the business may encounter in the absence of a
business plan. There are four basic components of a business plan: a summary of the project,
economic aspect, technology feasibility, and financial plan.

The purpose of a business plan

Business plans differ in the number of pages which can range in size from a few simple
sentences to over 100 pages consisting of a formal section, a table of contents, and a title
page.
A comprehensive business plan is made up of four (4) parts: 1) summary of the project,
2) economic aspect which includes the market, demand, supply, and competitive position, 3)
technology feasibility which is broken down into various areas such as products, manufacturing
process, plant size and productions schedule, machinery and equipment, plant location and
layout, building and facilities, raw materials, utilities, waste disposal, production cost, and labor
requirements; and 4) financial plan. Even a one-page business plan, however, is important and
should carry a purpose… The success of the business.