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Handout 3 PDF

This document discusses the value proposition in developing a business solution. It notes that the solution must address a problem or need that customers want fulfilled. The value can be quantitative such as lower price or qualitative such as brand. The solution must also be something customers are willing to pay for, as this determines if there is a viable business model. Ways to discover customer willingness to pay include observing current customer behavior, conducting market research, and testing price points. Finally, the document outlines different types of customer markets such as mass, niche, segmented, diversified, and multi-sided.

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Sheikh Golam Zillani
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57 views2 pages

Handout 3 PDF

This document discusses the value proposition in developing a business solution. It notes that the solution must address a problem or need that customers want fulfilled. The value can be quantitative such as lower price or qualitative such as brand. The solution must also be something customers are willing to pay for, as this determines if there is a viable business model. Ways to discover customer willingness to pay include observing current customer behavior, conducting market research, and testing price points. Finally, the document outlines different types of customer markets such as mass, niche, segmented, diversified, and multi-sided.

Uploaded by

Sheikh Golam Zillani
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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BUS 305 Handout 3 Spring 2019

THE VALUE PROPOSITION

1 What is your Solution to the Problem? The Value Proposition


The solution to the problem must contain the value that you are offering to the potential customer. This
value can be quantitative, meaning measurable with numbers, or qualitative, meaning not really
measurable, but something that customers want.

Quantitative Benefit Example Qualitative Benefit Example


Lower Price Xiaomi, LG New need Green technology

Speed Apple Design Toyota Hilux

Cost Savings Skype Getting the job done Rolls Royce

Less Risk Toyota Brand Mercedes

Accessibility NetJets

2 Willingness to Pay (WTP) for your Solution

The solution to the pain or value that you are offering must be one that your customers are willing
to pay for. Otherwise, you will not have a business.

Some problems, such as oxygen, are not something people are willing or accustomed to pay for.
In that case, you will not be able to turn your solution to the pain into a business, because there
will be no revenue or sales.

To generate revenue, the entrepreneur must answer the question: for what value (solution to the
pain) is this customer segment willing to pay (WTP)?

Each customer segment has a different willingness to pay. You cannot sell the same solution to a
problem to a family in Baridhara diplomatic zone, and to a family in Gigatola.

Estimating the customer’s willingness to pay is not easy, especially with a new or innovative
solution, but if you get it wrong, business will likely fail.
How can you discover the willingness to pay? There are several ways.

• One way is by observing existing customer behavior: what are customers buying right
now, and where?
• Another way is by conducting market research, either by means of a survey, or by means
of a focus group interview.
• Yet another way, commonly used by social media companies and IT companies, is by
experimenting: simply offer a product at a certain price, and see if customers will buy it.

1
BUS 305 Handout 3 Spring 2019

3 Customer Market Types


The willingness to pay (WTP) may depend on the structure of the market you are entering.
Specialist or diversified businesses that serve either very specific or differentiated markets will
have distinct customer segments, or markets. Here are 5 types of such differentiated markets.

Market Type Description Example


Mass One very base of customers, all buying Apple, Samsung
the identical product
Niche Selling a product tailored to specific Parts supplier for BMW
customer requirements
Segmented Selling to customers with different HSBC
profiles (esp. income)
Diversified Selling to 2 or more unrelated customer Amazon
groups
Multi-sided Selling to 2 or more interdependent Credit card company
customer groups

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