This section consists of a single paragraph that succinctly describes the product/service you intend to develop, the target market for the product, the benefit the product provides to that target market, the competitors for the product, and how the product is different from competitive solutions in the market. Anything you have on the market size, populations serviced, etc would go here. This is the most detailed because you are explaining what the market conditions are that your organization will operate within.
PayPal is a web-based payment service that allows buyers and sellers to transfer funds instantaneously while protecting against fraud and identity theft. Unlike credit cards, PayPal allows any merchant to accept funds, and allows customers to pay for goods without disclosing sensitive banking or personal information.
This section consists of either a short story or a handful of bullet points that concisely identifies the problems the product is designed to solve. This section should educate the reader and tell them: what is the current state of the world, why is this a problem, and for whom is it a problem? It should inspire the reader to imagine: what a customer could achieve with your product/service that currently isn’t possible? Use declarative sentences with simple words to communicate each point. Less is more.
Small web-based merchants are currently unable to sell their goods online due to their inability to process credit cards. Processing credit cards requires a merchant to acquire a merchant account from their bank, something that is currently prohibitively expensive for small online merchants. At the same time, customers are currently hesitant to disclose their credit card number to merchants on the Internet, due to the risk of fraud. As a result, many merchants are unable to capitalize on the World Wide Web to reach and sell to new customers.
This section consists of either a short paragraph or a handful of bullet points that concisely describe the product and how it addresses the problem outlined in the previous section. It is best to describe the product in terms of the benefits to the customer, instead of focusing on the features of the technology. Why would this be better for the customer? What could they achieve that they couldn’t before? Include intellectual property, if any.
PayPal provides an easy-to-integrate web-based payment service that can be used by any merchant to accept payments over the Internet. Users create a PayPal account linked to their bank account, and use it to pay for goods without revealing their credit card or banking information. PayPal transfers money between customers and merchants, and protects both parties from fraudulent transactions. Merchants get access to paying customers they are currently unable to access without a merchant accounts, and customers gain the ability to make risk-free online purchases.
This section consists of one or two short paragraphs, or a handful of bullet points that define the market opportunity that the product is designed to capture. It’s important to cover the estimated size of the market, the estimated growth of the market, and the characteristics of the target customer.
Online retail sales in 1999 reached $X dollars, a growth of X% over the previous year. By 2005, Jupiter Research estimates that online commerce will comprise $X dollars annually, or X% of all retail sales. Currently, only X% of the X small merchants making less than $X annually are currently exploiting the Internet to reach customers online. In a recent poll, X% of these merchants indicated their inability to secure a merchant account as the major barrier to them selling online. A web-based payment processing system would remove this barrier, and permit an estimated $X in additional online transactions to occur annually.
This section consists of one or two short paragraphs, or a handful of bullet points that define the merits of the product over similar products, alternatives and substitutes that exist in the market. Compare competing products in terms of market share, quality, price, and other relevant aspects. What is it about your product that will make it sale-able? What are the major strengths and weaknesses, financial position, and profitability of your competitors? Why are competitors not meeting customer needs? Why are they vulnerable?
PayPal’s competitive advantage over competitors is twofold:
• Ease of integration: Any merchant can use PayPal’s tools to quickly add payments to an existing web site in minutes, allowing it to address markets not served by traditional merchant accounts and entrench itself in the market
• Fraud detection: PayPal’s patent-pending fraud system allows it to detect and prevent unauthorized payments, reducing the cost and risk of making purchases online versus traditional credit cards
This section consists of one or two short paragraphs, or a handful of bullet points that describe how the product will make money. How does the customer purchase the product? Is the product sold directly to the customer or provided as a subscription-based service? Is there some other way that the business makes money from providing the product? How much money does the company make on each sale? Over the lifetime of a customer? How does this compare to the competitors’ products?
PayPal derives revenue from each payment transaction it processes. Customers pay nothing to transfer funds to a merchant using the service, but merchants pay between 1.9% and 2.9%, depending on the dollar value of the transaction, to receive funds from a customer. Each transaction is subject to a minimum transaction fee of $0.30. This is a comparable transaction cost to that of a merchant account, without the up-front costs of establishing the merchant account. Based on these charges, PayPal expects to drive between $X and $Y based on an estimated volume of Z million transactions in 2000.
In this section, you need to demonstrate that you have thoroughly analyzed the target market and that there is enough demand for your product or service to make your business viable. The competitive analysis includes an assessment of your competition and how your business will compete in the sector.
Describe any helpful barriers to entry that may protect your business from competition, such as access to capital, technology, regulations, employee skill sets, location, etc.Estimate the volume and value of your sales in comparison with any existing competitors. It helps to summarize the results in table form as in the following example which demonstrates that there is a gap in the high-quality sector of the market that your business intends to target.