Hello, this is Dr. Jim Watson from growth strategies International. Welcome to How to develop a new product and take it to market. We're going to talk about section three today customer acquisition developing your value proposition. So, a value proposition must be unique. And the way you develop a value proposition is looking at this slide, you fill in the blanks. Now you've already done your market research.

So we talked about in the last lesson, so you should have identified who is your target customer, by demographics by region by likes by dislikes, you should be able to have a profile of what that customer looks like. So you can say our product or service is for blank target customer insert your target customer is a is the consumer is the a defense contractor who's going to buy your part and why they're going to buy your product. So you say our product or service is for insert target customer who are unhappy with the current situation, they're unhappy with a situation or alternative. So define what the alternative is that they're unhappy with. You shouldn't you should have answered that through your market research. And now the zinger you put you say, Our product is and you name your products, remember your product has to have a name, so you can brand it and people identify with it that provides insert a solution What is your solution, that you're providing this different from the alternative, unlike and describe the kernel alternatives and what they do.

Okay, so a value prop proposition is our product or service is for the target customers who On happy with the current situation, our product is a new product that provides a solution. Unlike current alternatives, the value proposition is must be unique in that it provides greater perceived value to the customer at a lower perceived cost than the alternatives. And that'll be a winning value proposition. We talked about a market Testing, testing your value proposition, testing your minimal viable product out there seeing how much traction you get with the acceptances. there's a there's a good Stanford YouTube here and there's a link that you can look at that provide you with some techniques to use for quick and frequent market testing. I want to change gears a little bit and talk about Blue Ocean Strategy Blue Ocean Strategy is the best example I have seen of developing a value proposition.

It what it does is it creates an uncontested market share and makes the competition irrelevant. Now how does it do that? I encourage you to read the book Blue Ocean Strategy. And by Chan Kim, and what it talks about here is that companies that have engaged in head to head competition in search sustained profitable growth. They're battling over market share that they're struggling for differentiation. They're fighting in a red ocean of rivals fighting for a shrinking profit pool.

What this book talks about, is creating a value innovation something completely different. Tomorrow's leading companies will seed not by battling competitors, but by creating blue oceans of uncontested market space. Value innovation creates powerful leaps of value for both the firm and its buyers rendering rivals obsolete and unleashing new demand. It gives many examples in here. Southwest Airlines comes comes to mind. They have they talking about in this book is southwest of value profile is they emphasize friendly service speed and frequent point to point.

Departures. They were the ones that pioneer Point to Point travel between midsize cities were previously the airline industry operated through a hub and spoke system. They de emphasized meals, lounges, seating class choices and hub connectivity. So what they did was they found out what the customers really value and emphasize that when the rivals didn't, and they de emphasize things Customers didn't really care about. So I encourage you to take a look at the slideshow of Blue Ocean Strategy and there's a YouTube video here also. That's a great example of how to create a unique value proposition.

So moving on, I wanted to talk about cost customer adoption. So when you bring a constantly you bring a product first first to market, like we did with our GPS golf course system. We had to create a customer awareness and because nothing like that existed at the time, GPS was only being used for military applications. And it was being experimented with for automotive and marine applications. So there was there was a new technology we had a brand customer awareness, and we had to get those innovators and early adopters to come to come on board. Once we get through the awareness and we get them to have some interest.

They get to evaluate the product. conduct some trial runs. And finally they adopt the part they have to go through. That's the customer stages of adoption, awareness, interest, evaluation, trial and adoption. What they're looking for, they're looking for what's the relative advantage? What value does this bring?

What's? What's the compatibility, the flexibility? How do we use this? How's it create value for us. And if you're able to communicate that you're able to grow your grow your market, grow your sales, pretty soon you get you get the early majority that that comes on. Now you've got brand brand awareness.

And then you just stress marketing the brand to get the late majority on to capture the rest of the market share. Along with this bell curve showing customer adoption. There's also another curve called the product lifecycle curve. So every product has a life cycle on it. When you're starting to develop your product. You're in was called the embryonic stage or launching a new business or establishing a competitive position.

Maybe you're the first one to market, which is great because you can command the largest market share. That's where the early adopters Come, come on. As you start to grow the company, people become aware of your product and you're making some traction and you attract competition. So you're growing the business you want to prove your competitive position. Here is where you want to reduce the cost of developing a route of producing your product and distributing and you want to improve features extend the range of products to expand the target market breath as you grow your business and and continue to gain or at least protect your market share this when you're when you're connecting with and you're getting the early majority going back to the previous bell curve, when the Product becomes more mature in the marketplace, the competition has settled out. What happens there is the sales are starting to level off.

Okay, the excitement is gone, maybe something new has come out another solution to replace a solution that that you have. And finally you enter the aging or the decline period in the product lifecycle. And there you either have to renew it with a different solution, a more improved solution, or just abandon the product all all together. So in that mature and aging, you're really looking at cost cost reduction, you're more in in the red ocean, they're so important things to remember about adoption cycles and product life cycles. And there's a great YouTube video here that you can watch it that goes through that in more detail on the product lifecycle. I want to talk a little bit about pricing.

When you Get your product out there initially, you will, what price should I sell it for? Well, you have to take a look at what is your cost of goods sold. So that is cost of goods sold is is the cost of the raw materials to make the product and, and the service the product plus the labor to manufacture it and distributed. So what does it cost you to put that product from a raw material onto the shelf into the customers hands. Once you've covered all your costs, you want to you want to have some profit potential so you can use the profit back in and grow, they grow they grow the company, but you also have that match the competition if there's competition out there. So if you have a product that really differentiates the features and what you provide from the competition, maybe you can charge a premium.

But if you don't, you're going to be matching with the competitors prices, but you want to cover your costs. Have a profit margin in there. So once you have the product out there, then you start monitoring the customer demand there'll be at there'll be a knee on the demand where, where you, you'll be able to increase the price to so much in demand will drop off. So you want to be able to experiment with your price to find out where that knee on the curve, and the knee on the curve will move over over time as we go through the product lifecycle. We have to compare that to the competition, we have to make sure we're continuing to ensure value to the to the customer with new product features. And we want to reduce the cost before we increased the prices.

We want to keep that profit margin in there. If we set our price too low, to disrupt the marketplace, we'll start a price war. And if you're a new company that's going to hurt hurt you because you may not have the volumes out there. For the economies of scale to absorb that cost. You may be selling the product at a loss which you can't do for very long without going out of business. So So that's what I recommend as far as pricing strategies go.

And to wrap up here with a summary of some key points, a unique value proposition. Remember, it solves a customer's problems better than any other alternative. So you have to work on your unique value proposition, fill in those blanks on that chart. And for promotional, and pricing. Those strategies vary depending on the stage of the product lifecycle. So you have to be agile, you have to be able to adapt to the marketplace to the competition.

I look forward to joining us. In Section four. We'll talk about scaling your business now that you have launched your product. You're ready to scale, you're ready to commercialize. You're ready to go gung ho. You're ready for Section four.

I'll see you for Section four. Have a great day.