THE POSSIBLE PRODUCT/S
OR SERVICE/S BASED ON
VIABILITY, PROFITABILITY
AND CUSTOMER
REQUIREMENTS
LEARNING COMPETENCIES:
Define viability, profitability and customer
requirements
analyze the viability, profitability and customer
requirements of the possible product/s or
services offered
VIABILITY
•refers to the ability to survive or persist. in a
business sense, that ability to survive is
ultimately linked to financial performance and
position.
A business is viable if:
• it is gaining a profit that is sufficient to provide a
return to the business owner while also meeting
its commitments to business creditors.
• It has sufficient cash resources to sustain itself
through a period when it is not returning a profit.
PROFITABILITY
• Determines whether a business stays in business
• It also refers to the ability of a company to use its
resources to generate revenues in excess of its
expenses.
• It is a company’s capability of generating profits from
its operations
PROFIT
• Refers to the revenue a business generates after it
pays all expenses directly related to the
generation of the revenue, such as producing a
product, and other expenses related to the
conduct of the business activities.
CUSTOMER REQUIREMENTS
• Are those characteristics that determine whether
or not the customer is happy
•Example: a requirement is that the ipad is
user-friendly, has to be fast in data storage
and retrieval, etc
STARTING POINT OF CONCEIVING THE
IDEA OF THE TYPE OF BUSINESS
1. Conceiving a new product is a process of innovation and when this comes into
a reality, the product must be different from an existing product.
2. New product needs customer evaluation and this process needs exposure to
the target market as to its economic value.
3. The entrepreneur must find a new approach to win customer on his side if the
product or service is similar to what is existing in the community.
4. He must know the strengths and weakness of his competitor and thereby
devise a new system of promotion and advertising such as product discounts,
cash discounts, raffles and other package of prizes.
THINGS TO CONSIDER DURING A
PRODUCT VIABILITY ANALYSIS
Some serious strategic questions about the product’s
viability:
is the product idea practical?
What obstacles or challenges lie ahead?
Will it need support services of some kind to ensure customer
satisfaction?
Tactical aspects of a product and its impact to business model:
1. PRODUCT SIZE AND WEIGHT
Product size if the product is large or heavy it may have
high shipping costs.
If customers are provided with free and fast shipping, it
will significantly increase the chances of winning their
loyalty.
If the product is small or light, it can minimize shipping
costs and satisfy customers’ desire for quick and easy
delivery.
2. PRODUCT FRAGILITY
Fragile products are products that can be easily
broken or damaged.
It needs extra attention when shipping to ensure they
arrive in perfect condition.
Fragile goods will increase costs for shipping,
inventory and customer service.
3. STOCK KEEPING UNIT CONSIDER
SKU refers to color, size and other variations of a
single product.
The more SKUs, the more attention, time and
money it will need to spend in tracking and
maintaining inventory, adding a level of complexity,
and to manage and distribute the product.
4. PRODUCT LIFESPAN
• product lifespan is the time interval from when a product is
sold to when it is discarded. having a consumable or
disposable product is often perceived as a great choice from a
business perspective because it improves customers’ loyalty
and, ultimately, builds repeat sales.
• the challenge of selling perishable products like ice cream,
frozen yogurt, fruits, etc. are storages, shipping and
production.
5. SEASONALITY
Seasonality means that there are different levels of demand
for a product throughout the year.
Consider the location of your target customers (if you’re
selling internationally or locally)
In managing a seasonal product, there is a need to
determine the business downtime, and work to off-set
expectations and costs during those periods.
6. PRICE POINT
Selling a product with a higher price tag doesn’t prevent
firms from finding success. Example, firms offering fashion
brands or luxury items are able to find success through their
product quality and service to their customers.
Make sure that prices are still attainable for the target
customer.
To determine the market viability, maintain functionality at
the forefront of quality and luxury.
7. COMPETITION
The more niche products are, the lesser the
competition, thus, the more leverage a firm has
to win a large share of the market.
Competition can be a good thing—just be sure
to continue market viability research.
8. YOURSELF
On top of choosing a product that’s viable in the
market, entrepreneurs should select one that they
actually enjoy or one that solves a problem they have
personally experienced.
PROFITABILITY ANALYSIS
1. Revenue without profit is pointless.
2. Gross sales are all smoke and mirrors.
3. Profit is what matters.
4. Profit is what’s left in your pocket after you breakeven.
5. Break-even is a point at which cost and income are
equal and there is neither profit nor loss.
4 KEYS TO ANALYZE THE
PROFITABILITY OF YOUR PRODUCT
1. Determine the true cost of
production
It involves the cost in getting the product into
the hands of the customer.
How much does it cost to bring a product into
existence
Running a business comes with many potential costs, including, but not
limited to:
property and equipment leases
loan repayments
utilities
salaries/wages/commissions of employees
the inventory itself
Freight costs—it is the amount you pay to transport goods from one
place to another, whether by land, sea, or air. Shipping of the product
from point A to point B
2. TEST THE MARKET
It might begin as simply as drawing upon your own
experience as a customer, putting yourself in the shoes of
someone who might be interested in the product you intends
to sell. Consulting with family, friends and acquaintances
who have prior familiarity with the product is also a good
course of action
testing the market by conducting research on a wider scale.
Visit stores that sell the same product in the locality.
Take note of what is being stocked on the shelves
and the associated prices. Compare with online
prices for the same or similar products in via internet
research.
3. FIND THE “SWEET SPOT”
It is about striking an attitude that will make customers who
want to choose you over their other options.
Offer relevant business insights in the form of blogs or social
media posts that analyze trends or aggregate data from other
sources.
The right prices, the right attitude, the right understanding of
customer psychology—all inform each other and cohere into a
profitable whole.
4. UNDERSTAND MARGINS
Margin is the difference between total sales and the cost of those
sales.
Reducing business expenses can increase earnings, key to higher
margin.
Figure out new or improved ways to reduce costs in areas like labor
and shipping.
Turn to the services of “sourcify” and other similar tools, which
connect budding entrepreneurs with the manufacturers that are right
WHAT IS CUSTOMER REQUIREMENTS?
Determining the specific requirements of
the customers will contribute to the success
of the proposed desired products.
CUSTOMER REQUIREMENTS
characteristics or specifications that should
be present in a product for it to be deemed
desirable by the consumer.
TWO TYPES OF CUSTOMER
REQUIREMENTS
1.Service requirements:
Intangible aspects of purchasing a product that
a customer expects to be fulfilled.
Examples: on-time delivery, service with a
smile, easy-payment etc.
2. Output requirements: tangible characteristics,
features or specifications that a consumer expects
to be fulfilled in the product. If a consumer is
availing a service as a product, then various
service requirements can take the form of output
requirements. Examples: on-time arrival of a grab
taxi, loudness and clarity of a pair of speakers, etc.
3 LEVELS OF CUSTOMER
REQUIREMENTS
1. Must haves: these are the bare minimum requirements
expected by the customers; if fulfilled, customers will
not be showing any exceptional appreciation but if not
fulfilled, the customer will show dissatisfaction.
Example: A clean and decent washroom provided by the
restaurant as part of their facility.
2. Satisfiers: these are the requirements that customers
can express their desire for, explicitly. If you offer
better or more of these satisfiers, then the customers
will appreciate it more and will be more satisfied.
Example: the assortment of desserts in a buffet; the
customers might feel that they’re entitled to at least
two as they’ve paid heavily for the buffet and will be
happier if they get four.
3.Delighters: these are the extras or the add-ons.
Absence of these will not leave the customer
dissatisfied; but adding these would increase the
customer’s satisfaction greatly and will leave
them delighted. Example: you order a-la-carte in
a restaurant and get complimentary wine
