A value proposition defines the benefits your company’s products and services offer to the customer. This short statement, based on your Business Concept Statement, should express the essence of your business in a way that compels the customer to buy.

It’s important to expend the necessary time and effort to craft a compelling value proposition since it will form the basis for all your sales, marketing, and product development efforts. The value proposition is also part of your Business Plan.

A value proposition is a valuable tool to guide your marketing efforts. Here are some benefits that you will receive by having a clear, compelling value proposition:

• Create a strong differentiation between you and your competitors.
• Increase not only the quantity but also the quality of prospective leads.
• Gain market share in your targeted segments.
• Improve your operation efficiency.
• Increase your revenue.
• Ensure that everyone in your company communicates the same message.

Follow these guidelines to create a value proposition that will compel customers to buy your product or service:

• Use your Business Concept Statement as a starting point for expressing your value proposition.
• Address the needs of your target market. What problems do your target customers need to solve? What’s not working for them? Where do they want to go?
• Emphasize benefits, not features. Don’t explain what the technology does; explain what the buyer will get out of using the technology. Some examples of benefits are greater revenue opportunity, a competitive advantage, reduced costs and expenses, greater convenience, greater Return on Investment (ROI), and better results.
• Use tangible examples. Be as precise and specific as possible. Include numbers, percentages, and time frames.
• Be clear and concise. Condense your message into two sentences.
• Differentiate yourself from the competition. What do you have that no one else has? And-most importantly-how is this an advantage to your customers?

Research and test your value proposition. Ensure that your message strikes the right note with the right people.

© 2007 Ewing Marion Kauffman Foundation. All rights reserved.

Simply stated, market research is defined as the process of gathering data on goods and services to determine whether the product or service will satisfy customers’ needs. Market research can identify market trends, demographics, economic shifts, customer’s buying habits, and important information on competition. You will utilize this information to define your target markets and establish a competitive advantage in the marketplace. For market research to be useful, the information must be timely and relevant to your business.

A successful new venture sells customers goods and services they want or need and continually grows a base of satisfied customers. Hundreds of thousands of people consider starting new businesses each year, and each of them will ask themselves the same questions: Does my product or service fill a need? Who will buy my product or service? What will my price point be? What are the trends in my industry? Who are my competitors?

This information isn’t just interesting or “nice to know.” Rather, it is essential information to guide you in making strategic business decisions. By gathering research about your business concept, industry, potential customers, and competitors, you can uncover or verify unmet customer needs in the marketplace, and, many times, discover new ideas for products or services. Market research can provide you with value that should exceed the time and cost of the research itself. It can help you minimize your financial risks by determining if your product or service will succeed or fail in the marketplace, and perhaps save you from making costly mistakes.

Market research helps you to:

• Communicate effectively to your target markets through advertising and promotions. By researching your customers and their spending and buying habits, you can create marketing campaigns to meet their specific interests and needs.
• Identify and understand opportunities that exist in the marketplace. For example, through preliminary market research, you might find an opportunity to start your business in a geographic location you had not considered before, where little or no competition exists for your product or service.
• Pinpoint potential obstacles or problems with your business concept. Through research, you may uncover direct or indirect competitors you had not considered before who may inhibit your ability to gain a competitive advantage in the market. You might also discover future development plans that could include big-box retailers in your target market location. This information is important to discover because it can help to minimize your short-term and long-term financial risks.
• Benchmark and evaluate your success. By knowing the size of your market, how your competitors are doing and who their customers are, you can set goals to reach your market, grow your customer base, and track how you are doing in relation to the competition.

Consider this example of how research can lead you to a market opportunity: The idea for PROTEC® came to founder Michael Matthews while he was a police officer attending law school. Researching a paper in employment law, he learned about the high cost to employers of employee liability lawsuits and rapid changes in employment law. Thinking there might be a demand for employee screening services, he spent seven months interviewing employers, studying competitors, and researching public record and law databases. Today, his firm keeps clients abreast of their employee obligations and verifies prospective employees’ Social Security number, criminal history, motor vehicle records, civil record, and much more. Because he took the time to research the market, competitors, and relevant legal issues, Matthews was able to develop a feasible idea into a successful business.

Whether you are buying an existing business and looking to expand into new markets or introducing a new product or service, primary and secondary market research will provide you with valuable information to help you develop a strong Marketing Plan.

Market research can provide you with information about your industry-its current size, growth potential, and general operational patterns. Market research can also tell you about customer characteristics in a particular market segment and about how your target market spends money. It can reveal motivational patterns and other psychological aspects of your target market, including customer perceptions, values, and opinions. Market research also provides you with information about your competitors and how economic, political, or environmental trends in the marketplace could affect your business.

Whichever style of market research you opt for-and you should consider a blend of several approaches-you need to focus on the value of the information, its accuracy, and relevance to your business concept. Many key business decisions will be based on the information you gather.

© 2007 Ewing Marion Kauffman Foundation. All rights reserved.

Changes in tastes, lifestyles, and habits are constant and volatile. By anticipating and responding quickly to such changes, you greatly increase your chances of having a successful business. Demographic and lifestyle changes are constantly evolving, but often their consequences are not readily apparent. You will be able to anticipate many potential opportunities years in advance by studying changes, such as the aging baby boom population, ethnic shifts, and movements of populations to different geographic areas.

Consider these ways to find market information:

Monitor demographic changes – Population statistics change more rapidly today than in the past. For example, Peter Francese of American Demographics, Inc.®, points out that the fastest-growing age group in America is people eighty-five years or older. For this market, assisted-living centers, recreational activities, and delivery services are fertile ground for new opportunities.

Engage in people watching – Watching people’s behavior and listening to conversations provide ideas on needs and desires in the marketplace. Successful entrepreneurs are excellent people watchers. For example, at social functions entrepreneurs do more than make small talk. They use the occasion as an informal focus group, asking questions and listening to others. These questions help identify opportunities.

Travel the information superhighway – Online information provides a great source for the latest information in various industries. Spot new trends on the Internet, exchange information on electronic bulletin boards, and shop various e-commerce sites.

Keeping an eye on lifestyles and consumer habits can lead you to a good idea or help you refine one you already have. The activities and action steps in this module are designed to show you how to monitor the market for opportunities.

Reverse Marketing

Sally Smith and a business partner in Iowa used a research process called reverse marketing to identify their business opportunity. Instead of developing a product or service and then determining its distribution and audience, Smith scrutinized the marketplace first. “The idea was to identify what people wanted to buy and work backward from the delivery point,” Smith explains. “I started with the consumer group I knew best-baby boomers-because I was one of them.”

She began reading voraciously-everything from newspapers and trade publications to trend books like The Popcorn Report. She interviewed successful CEOs of large companies and talked to members of trade associations, economic development agencies, and chambers of commerce.

As she researched, certain facts grabbed Smith’s attention. For example, the mail-order industry was experiencing significantly higher growth than traditional bricks-and-mortar retailing. Drilling down deeper, Smith discovered that food was the best-selling category for catalogers. Then she looked at large, privately held companies selling through direct mail, which included Omaha Steaks®, Harry and David®, and The Honey Baked Ham Co.® “The dots began to connect,” Smith says. “They were shipping meat, and here I was, sitting in a state known for its pork.”

Next, Smith visited the National Pork Producers’ Association to find out why no one was selling pork through catalogs. “They gave me a long list of reasons why it couldn’t be done, but they also told me something else,” Smith says. “The industry was about to kick off a $10 million advertising campaign, ‘The Other White Meat,’ to boost the image of pork.” More dots connected as Smith saw how she could benefit from those marketing dollars.

The Iowa Pork Producers Association® had trademarked a specific cut of pork known as the “Iowa Chop,” which gave Smith the signature product she needed for an exclusive mail-order meat business. It also sparked the company’s name, Chops of Iowa.

Launched in 1989 in Des Moines, Chops of Iowa was so successful that it acquired its own USDA plant at the end of its second year. Four years after starting the business, Smith and her partner were ready to deploy their exit strategy and sold Chops of Iowa to a regional corporation-one that Smith had identified during her initial research process.

“Quantify and qualify everything you can through research,” Smith says. You may have a gut instinct about something, but validate that hunch through research. And conversely, validate research findings through your feelings. When you are looking for opportunities, “Head and heart go hand in hand,” Smith stresses. “They complement and support each other.”

© 2007 Ewing Marion Kauffman Foundation. All rights reserved.

Primary research is data collected specifically for your business. It is obtained by observing or communicating with customers or competitors. Primary research data could be collected through surveys, interviews, focus groups, or direct observation of potential and existing customers, and similar businesses in the industry. The information can provide insights into customers’ needs or perceptions, the benefits of a product or service, packaging or delivery options, or other information you need.

Some entrepreneurs hire market research firms to conduct this research. Since primary research involves watching or talking with a number of people, tabulating results, and then determining insights, outsourcing the task might be costly. You might prefer firsthand knowledge of the data as it is collected. You can conduct primary research yourself. Instead of paying someone else for the time and know-how, you can develop your own research tools, initiate contact with potential participants, and perform research tasks.

Here are some primary research techniques you may want to use:

Surveys – A common, inexpensive, and effective way to collect primary research data is by using customer surveys. They give feedback about a product or service through questions people answer in person, over the telephone, by mail, by fax, or via the Internet. You can survey customers to learn about their needs, problems, and opinions regarding your proposed product or service. The information you gather using this technique is current and helpful for determining whether a market for a new product or service exists. Also, surveys can result in future sales by giving potential customers a preview of the product or service.

Interviews – Conducting interviews is similar to using customer surveys and is usually done over the phone or in person. Individual interviews are usually no longer than thirty minutes, although they may be longer if participants are willing. Because interviews involve more dialogue between the researcher and participants, this research technique will provide you with in-depth responses and the most relevant information.

Focus groups – Focus groups can provide marketing insights while identifying the hidden needs of potential customers. This popular research technique is used to collect information from a group of people instead of using a one-to-one approach. Focus groups allow you to collect more information in the same amount of time at a fairly reasonable cost. You also get different data due to the interaction among participants than through individual approaches.

You can benefit from using this research technique, especially when identifying niche markets and learning more about a specific group of customers. You can also gain valuable insights to forecast future markets. Keep in mind, however, that the viewpoints of a small number of people in a focus group may not always reflect attitudes of the market as a whole. Be sure you include a large enough cross section of your market in the focus group.

Observation– The observation research technique is used to collect customers’ reactions and behaviors without actually talking with them. This technique is most valuable when you want to learn how customers approach products or services without the potential bias of a researcher. Customers react normally because they think no one else is watching. For example, if customers in a restaurant were given a complimentary slice of cheesecake to try out a new brand, research observers could record initial reactions when customers taste the cheesecake that indicate whether or not they seem to enjoy it. Observation was the basis for the popular television show, Candid Camera, in which customers were exposed to a pre-determined scenario or situation while being videotaped.

© 2007 Ewing Marion Kauffman Foundation. All rights reserved.

The more you know about the marketplace and industry in which you operate, the better able you are to identify gaps, needs, and unfulfilled wants. You will gain an edge over the competition by developing many of these habits:

Look for growth industries– Growth industries experience rapidly expanding customer demand. One advantage in a growth industry is that in many cases not enough time has elapsed for a lot of competition to develop. Position yourself in an industry that is going to grow rapidly in the next decade or so.