What is Value Proposition (VP)?

• It is simply states as why a customer should buy a certain product or services. Customer is very
specific when it comes to their needs and their desire benefits so the value proposition should
cater to those particular needs.

• The major driver in customer purchase or service availment.

• Has to be direct in addressing the problem of the customers, should have quantifiable benefits
and should differentiate itself from the competitors.

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 understands 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, partners and
other stakeholders, putting specific assurance elements and social acceptability metric found in
social media or press materials. Several quality management certifications, such as the ISO seal,
add more credibility to the product or service that you are trying to sell.

1. Differentiate your value proposition with your competitors. Examples of value proposition
differentiators are the originally of the product or service, its functionalities, or if the product or
service can be tailor-fitted to the customer’s preferences, among others.

Illustrations:

Prior to the establishment of a sari-sari store Aling Tere notices that there is a convenience store in her
vicinity, where may call centers agents, nurses and contrition workers buy food, beverages, and other
products during odd hours (form 10PM to 6 PM). She discovers that the customers ride either a tricycle
or a jeepney just to reach the convenience store. There are two sari-sari store nearby, but they close at
9PM. Aling Tere believes this is an opportunity for a sari-sari store business with a twist. Aling Tere
realizes she needs to address the needs of the customers to differentiate her business form the
competition. She decides to establish a 24/7 sari-sari store. As an initial investment. Aling Tere hires
three employees who will help her run the sari-sari store in three shifts. During their break, Aling Tere
operates the sari-sari store herself. She design her sari-sari store like a semi-convenience store, where
customers can freely go and choose the product they want. It is also air-conditioned. For security
purpose, she also installs CTV camera. Her task now is to create a worthwhile value proposition for the
potential customers.

Proposed Value Proposition: “Tindahang maasahan, bukas kahit anong oras!”

Why should this be considered an effective value proposition?

Why should this be considered an effective value proposition?

• It is specific and straight to the point

• It describes what the business is by referring to tindahan.

• A Filipino term for a basic retail store.

• Highlights the value to the customers that they can buy their necessities from the store.

• Easily understandable because it is in Filipino language, which can be understood by the

customers, most of whom speak the language.

• There is a compelling assurance from this value proposition because of the phrase “bukas kahit
anong oras” signifies a guarantee that customers will be served anytime of the day and Aling
Tere’s store is the only sari-sari store that is open 24/7, which makes her store from the
competitors.

2.1 What is unique selling proposition (USP)?

• Refers on how you will sell the product or service to your customer.

• It addresses the customers’ wants and desires

The following are some tips for the entrepreneur on how to create an effective unique selling
proposition to the target customers:

1. Identify and rank the uniqueness of the product or services attribute.

This is the most difficult part because you need to choose one or two at the most. That attribute
will be the key to success, as this will compel customers to purchase from you and not from your
competitors. The unique selling proposition, while it presents the best features of your product
or service, should also avoid competition. Put yourself in the customers’ shoes and ask
yourself,” Why should I choose you over the others? Or, “Why should I deal with you at all?”
Identifying the unique selling point is a tough job and requires marketing research. The best way
to identify it is to identify the marketing mix (7Ps) and distinguish which among those displays
the product’s unique features.
 2. Be very specific.

Put details that emphasize the differentiator against the competitors. This differentiator should
be very compelling and should make the customers think that they are usually getting more
value from you than the others. By being specific, make sure that the USP does not rely on
heavy, extravagant promotion. The customers do not want to feel that they are being fooled.

3. KISS (Keep it short and simple).

One challenge that marketers always face is that the customers’ attention span is limited and
very easy to switch. Therefore, think of a very catchy unique selling proposition in the simplest
and shortest way possible. You can compare it with a headline of a newspaper or a Website.
That is the first item that the customer will see.

Proposed value proposition: “Tindahang maaasahan, bukas kahit anong oras!”

PRACTICE 2 - Unique Selling Proposition (USP)

To illustrate use the example from the previous discussion to build a potential unique selling proposition
for Aling Tere’s Sari-Sari Store

The first step is the identification and ranking of the uniqueness of the product or service
attribute using the 7Ps of marketing. Make sure that there is thorough explanation and analysis
about the ranking.

7Ps Product or Place Price Promotion People Packaging Process

Service

USP Retail Near a call Competitive Signage Three shifts Semi-

DESCRIPTION Products center; a of Aling convenience The only
public Tere’s store sari-sari
hospital; and (6 am-2pm) store that
a (2pm- operations
construction 10pm)
site (10pm-
6pm)

UNIQUE? No No No No Yes Yes Yes

 RANKING OF 3 2 1
USPs

Ranked 7P’s Reason

1st Process Aling Tere wants to solve a compelling problem of the customers-
availability of a retail store near their workplace in odd hours based on
her marketing research about her environment.
2nd Packaging It is the only semi-convenience store in the area, a hybrid of a
convenience store and a sari-sari store.
3rd People It is the only sari-sari store that has three persons who work in shifts. It
is common that the owner or an assistant attends to the store with a
predetermined schedule, and not the entire day.

Proposed unique selling proposition: “Tindahang maasahan, bukas kahit anong oras!”

Notice that the proposed value proposition and unique selling proposition are the same. Why?

Because the most compelling differentiating factor is positioning, considering all the factors
enumerated below were all met:

• Defined unique attributes

• Specific

• Short/Simple

Common communication Channels in how both Value Proposition and Unique Selling
Proposition be clearly communicated

• Signage

• Websites

• Social Media

• Print Ads

• Television

• Radio Commercials

• Mobile Advertisement

EVALUATION:

Group Activity
1. Look around your barangay or your subdivision and choose a business that you very interested with.
Cite the reasons why you are very interested with this business.

2. Ask the business owner or the business manager if he or she is familiar with the concepts of value
proposition and unique selling proposition. If yes, ask where he or she learned these concepts. If no, ask
the following:

• Does your business offer value to the customers? What value is this?

• Does your business offer a standout product/service or a product feature that

other competitor do not offer?

 If the entrepreneur has already devised a value proposition and unique selling proposition, do
you agree with it? Why? If you don’t agree with it devise a new one. Explain why these should
be the appropriate value proposition or unique selling proposition following the exercise done
in our discussion.

Know your Customers:

After the general scan and research performed during the course of preparation for the
value proposition and the unique selling proposition. it is now time to dig deep and
understand the target customers through Marketing Research.

Marketing Research

• Is a comprehensive process of understanding the customer’s intricacies and the industry

they revolve in?
• Is one of the most critical tasks of an entrepreneur?
• Therefore, no budding entrepreneur should establish a business without undergoing the
marketing research process or else the business will surely fail.
• The result of marketing research is he entrepreneur’s major investment in a business, as
it will lead him or her to the most effective strategies to employ.
• Marketing research aims to scrutinize the target market, their specific requirements and
the market size where the business operates.

MARKET RESEARCH
Entrepreneur; know thy market well! This simple reminder must keep the entrepreneur alert all
the time.
Basic Questions in Market Research:
Why Purpose and Objective for conducting the market research.
What Determines the scope and the limitations of the market research to
 be conducted.
Which Determines which segment of the market must be studied; this must
be the market segment that the entrepreneur is eyeing.
Who Identifies who among the members of the selected market segment
will participate in the market research.
When Determines the time and timing of the research.
Where Pinpoints the relevant location of the market research.
How Determines the methodology to be used in the market (e.g., survey,
focus group discussion, observation, etc.,)

Market Research Methodologies

Important market information can only be obtained by conducting a good market research. The more
the entrepreneur knows about his or her relevant market, the more 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.

Market Size
 Simply the size the arena where the entrepreneur’s business will play.
 It is the approximation of the number of buyers and sellers in a particular market.
 The entrepreneur is required to determine the market size first to gauge the vastness to
tininess of the market where he or she intends to join.

Conducting a Strategic Marketing Research from reliable sources using dependable methods:

1st Step – Estimate the potential market

The approximate number of customers that will buy

the product or avail the service. It is also called as
market space or market universe because this is the
total market.

Sample:

Rice, the staple food of Filipinos, virtually covers the whole country in terms of
market size because majority of Filipinos eat rice.
 2nd Step – Eliminate the customers who are probably unlikely to buy the product or avail
the service.

Same sample:

Using the rice retailing business again, the entrepreneur can already eliminate socioeconomic
classes A, B, C because most of these customers buy rice in bulk (sacks) or are given freely by
some employers. They are not also the major consumers of rice.

3rd Step – Estimate the market share

 The plotting and calculation of the competitors’ market share to determine the
remaining portion for the new venture.
 The entrepreneur should first assess the market situation via surveys, customer reviews
or any other data-gathering methods

Same Sample:

Continuing with the rice business because the entrepreneur already identified socioeconomic
classes D and E to be the market size, he or she should plot the number of rice retail business
within the vicinity and calculate he market share of each. The remaining portion can be the
potential market share of the rice retailer and can be increased by those who will switch
depending on the effects of the entrepreneur’s marketing strategies.

Market Share Computation illustration:

Mr Alvin Antonio, a budding entrepreneur, wants to establish a rice retailing business in his
area in Barangay San Isidro. He wants to know if this business is worth his capital and effort. He
dug deep and found that there are approximately 500 families in Barangay San Isidro with an
average of five members per family. He did a survey and found out that only 475 families eat
rice; they consume an average of 1 kilo of rice per day. Four rice retailers in the area have been
there for 10 years already and hey have equal market share of 20% each. The other 20% of the
market is buying in bulk (per pack) from groceries or convenience store. The average net profit
per kilo of rice is Php 10.00

How big is the market

size and what could
be the potential
market share of Alvin’s

Market size of rice business in San Isidro = Number of families who eat rice x average
consumption per annum

Market Size = 475 families x 1 kilo per day x 365 days

= 173,375 kilos of rice

Market Size Profit = 173,375 kilos x Php10

= Php1,733,750 per annum

The objective of Mr. Antonio in the first year is to capture the 20% of the market by
implementing marketing strategies in pricing (reduced markup of Php 2.00) and promotion
(free delivery of rice for five kilos and up) through text message or phone call. None of the
competitors have thought of or done these strategies yet. In the example, the four retailers
are considered direct competitors because they offer exactly the same product and are
structured similarly with Mr. Antonio proposed business. On the other hand, the groceries
and convenience stores are considered indirect competitors because they do not offer
exactly the same product type (i.e. rice sold in sacks instead of by kilo) and are not similarly
structured but still compete with Mr. Antonio business indirectly.
 Potential market share =market size x estimated market share

= Php1, 733,750 x 20%

= Php346,750

However, because Mr. Antonio will reduce the markup Php2, the net profit per kilo will only
become Php8.

Potential market share = 173,375 x 20% x Php8

= Php277,400

Customer Requirements
Customer are said to be the lifeblood of the business:

 These are the people who buy the products or avail the services of the entrepreneur.
 Their thoughts, feelings and experience shape the decisions of the business.
 Thus, the phrase “the customer is always right” is a mantra that most successful entrepreneurs
follow.

Customer Requirements

 Are specific features and characteristics that the customers need from a product or service.
 Opportunities originate that business.
 Entrepreneurs must be aware of all these requirements for them to come up with features that
best suit their needs.
 They must know who buys, and what, when, where, how and most importantly, why they buy.
 These requirements can be used to formulate the VP and USP, as addressing the requirements
would increase the competitive edge of the business.
 Entrepreneurs should be vigilant with the constant change in customer requirement.

For example:

Cellphone repair service five years ago are way different now because of the proliferation of
smartphones today as compare with the regular mobile phones before.

In the restaurant business, some customers will prefer cheaper prices or bundled menu; some will
prefer a cozy ambiance, some will prefer a place with relaxing music, some will prefer to have food
served fast and some will prefer to pay using credit card and not cash. In short customer requirement
vary from person to person. Thus, the entrepreneur must group them together, calculate the size and
come up with product and services that suit them.

2.2.1 Primary & Secondary Target Market

Most entrepreneurs believe in the misconception that they can serve all types of customers or if
not, a wide range of customers. Little do they know that this thinking may lead to failure?
Entrepreneurs must focus only on customers whom they can serve beneficially because they will be
wasting resources if they will target all or worse, target none.

Primary Target Market- is the segment of a marketplace a business believes will give it the best chance
to sell

Secondary Target Market -is that portion of a business' total potential customers second most likely to
purchase its product.

Market Intelligence

It includes customer profiling, drives the entrepreneur on what

correct strategies and tactics to employ. This can only be
obtained through a meticulous market segmentation process.

Market Segmentation
The process of grouping similar or homogenous
customers according to demographic, psychographic,
geographic (location) and behavior.
 Methods of Customer Profiling

Demographic Segmentation

 Also called socioeconomic segmentation.

 It is a process of grouping customers according to relevant socioeconomic variables for the

Income range and social class of the customers are very important for the entrepreneur to consider
because it represent the purchasing power of the market. From here, the entrepreneur will be able to
determine the extent to which the customer can buy or avail the services; therefore, he or she will have
an idea on how the profitability will look.
Based on SWS (Social Weather Stations)-2011

Class D-60% with an income of P191,000 per year

Class E-30% with an income of P62,000 per year

Class C-9% with an income of P603,000 per year

Class AB-1% with an income of P1,857,000 per year

From the picture shown above, you can determine the dominant socioeconomic class even by looking at
several shops in a certain store. For example, high- end shops in the Philippines such as Banana Republic
and Mango appeal to the middle and high classes. While class D & E for department store.
 Occupation:
Occupations
Should be considered to determine the
customer’s income but also their daily routine
where goods and services can be properly
positioned.

Gender and age

Data that must be mined because the lifestyle
cycle of customers and gender influence their
buying behavior.

Religion and ethnicity

It should be taken to account because these
affect the way they buy products or avail of
services

Psychographics Segmentation
A process of grouping customers according to their perception, way of life, motivations, and
inclinations

Perception

It is a process wherein an individual receives external

stimuli using the five senses of hearing, touching,
smelling, seeing and tasting. A product or services can
be perceived differently by different people.
 Customer way of life
Give an entrepreneur an overview of what products or services
can best suit the problems of the customers that happening on a
daily basis.

Motivation
The force or energy associated with an internal state
that propels a person to engage in behavior to satisfy a
need or desire.

Physiological motivations
It involves the needs of the
person (example: food, clothing,
shelter and they seek to avoid
pain and give pleasure).

Psychological motivations
It involves customer’s preferences (what
the customer likes or dislikes).

Aspiration
What the customer wants
to achieve (inner peace,
financial stability, and
work-life balance).

Deprivation
It involves the customer’s
recognition of certain voids to
fill (lack of financial security, lack
of love, lack of knowledge)
 Customers’ inclinations
It involves preferring one product over another as a
result of gaining a refreshing experience when using
the product, possibly due to the product’s unique
features or due to it giving more value than other
products

Geographic Segmentation
Simply grouping customers according to their location.

Behavioral Segmentation
The process of grouping the customers according to their actions. These behaviors are instigated by
occasions, desired benefits, loyalty and usage products or availment of services.
 Occasions – drastically affect the customers’ buying behavior.

Customers’ desired benefits

It is efficient because the entrepreneur determines the exact needs of the customers and offer the most
suited product or services for them.

Loyalty
Result of maintaining satisfied customers. The goal of every entrepreneur is to inform, persuade and remind
customers to buy product or avail of the services consistently.

Usage of products or availment of service

Describes to the entrepreneur how often a product is being used or the service is being availed.

There are women who are occasional users

of make-up, and there are girls who wear
make-up every day. There are men who are
occasional users of hair products, and there
are men who apply wax or gel on a daily
basis.
 Market Aggregation
Happens when an entrepreneur wants to target a broader market as possible because the product or
service that the business offers is suited for an undifferentiated market

Public Market and transportation

terminals are example of businesses that
have market aggregation because of the
wide range of customers that avail of the
product or services.