A Vision Statement is a forward looking image of exactly where you want your business to be in the future. It motivates and inspires your employees to achieve more. The best ones are memorable, succinct and inspirational. Vision statements answer questions like:
- What problems are we trying to solve?
- What is the company’s direction?
- How will the organization look 5 years from now?
Here are some examples:
- “To become the world’s most loved, most flown, and most profitable airline.” – Southwest Air
- “Our vision is to create a better every-day life for many people.” – IKEA
- “Capture and share the world’s moments.” – Instagram
- “A world where everyone has a decent place to live.” – Habitat for Humanity
Forbes researched over 50,000 employees and observed a Vision Statement’s strong impact on employee engagement. Engagement levels increased to 68% for employees who found the company’s visions statement meaningful.
A company’s Target Customer is a precise description of the person most likely to purchase your product. It requires the owner to narrow down beyond ranges but to precise demographic data points reflecting your customer. Some questions you might want to research:
- Specific age, gender, education level, income and race
- Favorite hobbies, values, and activities
- Most used Social Media Platforms
For example, suppose you wanted to market a healthy pre-workout like “Vegan Shredded*.” A potential target customer description could be:
- 30-year-old white college-educated female making $40,000 a year.
- Enjoys running, social activism, recycling and yoga
- Primarily uses Facebook and Instagram
The goal of a target customer is not to limit your marketing, but help you understand who really wants to buy your product or service. Then, you can develop your target market which provides ranges and develops groups of people who want your product or service. By understanding everything about your customer, you can create highly relevant advertisements and products services catering to their wants and desires.
*Not a real product but feel free to invent it;)
The Target Market is a group of people with identifiable commonalities making them the most likely to buy your product or service. The target customer, on the other hand, simply belongs to this larger group. Identifying your target market requires truly understanding the demand or problem you are solving and then determining the group of people most affected. Your target market could include descriptions such as:
- Demographics – age range, income, location description, education levels
- Activities, hobbies and other behavioral patterns
- Psychographics like values, attitudes, beliefs
For example, a target market for the “Vegan Shredded” could be defined as:
- Women aged 25 – 35 earning $30,000 to $60,000 living in urban areas with at least some college education
- They enjoy an active healthy lifestyle, like being outdoors and fighting for social justice
- Believe in equality, taking care of the environment and helping the less fortunate
Once you define a target market, you can begin to develop and positing your advertisements to cater to their needs. Your website should also be appealing to your target market both in terms of messaging and visual factors such as color and font.
The Demand for your product or service is a function of the problem it solves or need/want it satisfies. Many business owners confuse this concept with what their product or service does which is not relevant yet. Defining the demand for your product requires you to completely separate yourself from your product/service, remove all your bias and think strictly from the consumer’s point of view – define the problem or need of the consumer.
- Does something take too long?
- Is the problem or need not properly addressed by current solutions?
- Do customers have psychological pains?
- Are the existing products or service good but too expensive?
These are just a few example questions you might ask. Ultimately, your product should either solve a problem that is not addressed by the market or be a combination of “better”, “faster”, and/or “cheaper” than the current competition.
The VeganShredder product addressed the problems of being overweight and too tired for the gym. It can offer a “better” solution because it solves the psychological needs of being environmentally healthy and catering to a specific lifestyle. People who are vegan need products that meet their lifestyle choice. Ultimately, identifying this need helps create a relevant product and service in conjunction with a website to express the solution.
A true measure of demand is Willingness to Pay – meaning are consumers actually willing to buy your product? Oftentimes, people express a desire or interest in your product or service that does not translate into revenue. When doing market testing, the only test that truly matters is one demonstrating people actually spending money on your product or service. Willingness to pay not only corresponds to developing your product or service, but needs to dictate all changes. Anytime you make an improvement, new feature or change t0 your product or services as yourself this questions related to willingness to pay
- Will customers pay more money for the product or service?
- Will they buy or consumer more of the product or service?
- Will my product or service now cater to a larger market leading to more sales?
- Will my business costs decrease as a direct result of this change?
If the answer to all these questions is no, then why are you spending money or effort to change your product or service? Ultimately, every business decision should filter through these questions to maximize profit. Naturally, a few exceptions exist, such as a change that benefits employees or creates an immeasurable improvement such as increased brand value.
One of the challenges of business is identifying which activities in the value chain to do yourself and which to outsource. Ultimately, this decision requires you to identify Your Source of Value. Specifically, at what stage in the value chain or what activity do you do that adds value to the product or service? For an example, let’s look at the “Vegan Shredded” product. The value chain would be:
It is often impractical to do all parts of the value chain. Suppose your primary purpose for inventing this product was to satisfy the psychological needs mentioned in the demand for the Vegan Shredded product. Then, it might be best to focus on the marketing aspect of the chain and allow other companies to source, manufacture, distribute and sell the product. This could be accomplished by creating a strong brand positioning, selling on the website and then working on convincing retail stores to carry your product.
A Competitive Advantage is the ability to provide a comparable product or service at a cheaper price, or a charge a higher price by offering more value. Companies creating it by matching their core competencies (resources and capabilities) to opportunities in the market. The ultimate goal is to create a sustainable competitive advantage leading to long-term profitability. A VRIO analysis can determine the type of advantage generated by a resource or capability.
Let’s analyze our product “Vegan Shredded”. We can claim it is valuable because it satisfies the target customer’s need for energy at the gym while catering to their lifestyle choice. In terms of rarity, a simple Google search shows a few but not many competing products so it is moderately rare. It is not inimitable because it can easily be copied as evidenced by existing similar products. But, the company could organize around the product by creating a brand focused exclusively towards vegans and environmental health.
Creating a sustainable competitive advantage is very difficult and often requires patents or extremely rare resources. However, understanding this framework helps businesses identify how they can compete and where to improve to increase willingness to pay.