Needs vs Wants - Explained
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Should Entrepreneurs attempt to address a Need or Want?
A business idea comes about through the identification of a need or want for a potential customer or client. Needs and wants are two dramatically different concepts for the entrepreneur. Most people have heard of Maslows Hierarchy of needs. Each individual has need prioritization of needs that corresponds to their physical, emotional, and financial state. At bottom or base of Maslows scale is the need for basic essential, such as food and shelter. These are needs that must be met at any cost. At the top or far end of the scale are self-actualization needs. These are the needs that make us happy or feel content with ourselves. These needs most closely related to a customers wants. That is, these needs arise not from physical necessity, but from an emotional reaction in the individual.
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Where is the Problem or Hurt?
The need/want construct is often framed in terms of, there is a problem to solve. Defining a business idea as solving a problem is far too restrictive of a definition. A problem begets that the customer or client has some sort of issue that needs resolution. Such a scenario is not always the case for new products and services. Often customers and clients are unaware that they need or desire a product or service until they become aware of it and its value proposition. An unfulfilled need or want may include the failure of available products or services to adequately meet the needs or wants of the client or customer due to the attributes of the product or service or the amount of value (price) required in the exchange. In any case, focusing on the customers needs and wants allows one to think more broadly of how create any sort of value to any diverse type(s) of person.
Is it Better to Fill a Need or Meet a Want?
This discussion of need vs. want begs the question, which is better for an entrepreneurial idea, a need or a want? Most people respond that the need is better. A personal cannot go on without the need; therefore, you are assured of a customer base and sales. The only problem with this logic is that new needs do not arise as often as wants. That is, most of needs of humans (food, shelter, etc.) have been met for centuries. This has given rise to many businesses that fulfill those needs. Consistent with the law of supply and demand, the high level of demand and supply has pushed down the price on most needs. Competition to meet those needs going forward is often fierce and the margins are low. This gives a distinct advantage to established, larger businesses that can take advantage of name recognition and economies of scale in producing the product or service.
Wants, on the other hand, arise every day. People are constantly searching for new ways of doing things or ways to make their lives easier or more entertaining. This emotional drive has given rise to most of the industries that have shaped the world, such a books, radio, television, the Internet, etc. While the market to meet new needs can be competitive, there is far more room for new entrants to fulfill a customer want, or in some case, generate a new want the customer did not previously have. Each years fashion trend is a type of want that previously didnt exist, or existed to a much lesser extent. In any case, wants tend to have less competition and higher profit margins as a result of that lesser competition. Wants tend to be ideas with greater potential for growth and scale.