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The Essential Component of a Business Plan: Products and Services

The products and services section is one of the most important components of your business plan. This is where you explain how people use your product or service, and what makes it different from the other products available in the market. Identify the features and benefits of your product and discuss what problems or needs they solve in the market, and what sets it apart from those of your competitors.
The Essential Component of a Business Plan: Products and Services
The Essential Component of a Business Plan: Products and Services
If your business plan is to be used for a financing proposal, you have to explain in this section how the additional equity can make your business earn more profit.

Value Proposition

A value proposition is a statement that tells your potential customers the benefits that they get by using your product or service. It convinces a customer that the product or service can add more value or can better solve a problem than those products offered by other businesses.

A value proposition must be specific. It does not involve simple description of the capabilities or features of your product or service. It must focus on simplifying the customer’s life, solving a problem, or improving on existing solutions.

Value proposition is what grabs your customers’ attention and says that what you offer is the right one for them.

An offer of a “buy one take 1 free” is a good example of value proposition because customers get two products for the price of one.

Pricing

Price is the value that you put on your product or service which is the result of research, testing, and calculations. A pricing strategy is used by companies who wish to find the price point where they can maximize profits and sales. Companies use several pricing strategies depending on their objectives and goals.

Premium Pricing
This strategy sets a higher price than their competitors. This is used when there is something unique about the product, or when a strong competitive advantage for the company exists.

Penetration Pricing
This is designed to get a share of the market by launching a new product at a low price in order to attract buyers. It may cause a loss for the company but the idea is to create awareness of the product, and when market share objective is achieved, the price may be increased.

Economy Pricing
In this strategy, companies target a huge market share by lowering their overhead so they can set a low price for their products. Marketing and advertising costs are kept low.

Price Skimming
Companies with competitive advantage set a high price for their products to gain maximum revenue before the competition can begin to offer similar products at a lower price. Then the companies also lower their products’ prices.

Psychological Pricing
This strategy is used by marketers to give the perception of a lower price for their products. A $99 seems less that $100 in the minds of customers.

The Essential Component of a Business Plan: Products and Services
Pricing your product or service is a very important marketing decision. You might want to test these strategies to find one which can work for your business.

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