Need Curve is a powerful analytical tool in the Jobs to be Done (JTBD) framework that visualizes and quantifies market opportunities based on customers' willingness to pay to get their jobs done. The Need Curve enables portfolio companies to more accurately size market opportunities, identify high-value customer segments, and develop pricing strategies that maximize growth and equity value.

Definition and Purpose

A Need Curve is a graphical representation that plots the number of customers in a market against their willingness to pay to get a job done. The curve resembles a traditional economic demand curve but differs in a fundamental way: instead of plotting price against quantity demanded for a specific product, it plots willingness to pay against the number of customers for getting a job done, independent of any specific product or solution.

The Need Curve serves several critical purposes:

1. Market Sizing: Provides a more accurate method for calculating the total economic opportunity in a market
   
   
2. Segment Identification: Reveals distinct customer segments based on willingness to pay and struggle patterns
   
   
3. Pricing Strategy: Guides pricing decisions by showing the relationship between price points and addressable market size
   
   
4. Product Positioning: Helps determine whether to target premium, mid-market, or value segments
   
   
5. Growth Strategy Development: Identifies the most attractive segments to target for accelerated growth
   
   

Need Curve vs. Traditional Demand Curve

While the Need Curve bears some resemblance to a traditional economic demand curve, there are important distinctions:

Traditional Demand Curve

• Plots the quantity of a specific product demanded at different price points
• Is based on the price of existing products in the market
• Changes as products evolve or new products enter the market
• Focuses on current market conditions and existing solutions

Need Curve

• Plots the number of customers willing to pay different amounts to get a job done
• Is independent of any specific product or solution
• Remains stable as long as the customer's job remains relevant
• Focuses on fundamental customer needs and willingness to pay

This distinction is crucial because traditional market sizing approaches based on product prices often lead to serious strategic errors. For example, sizing the "MP3 player market" based on iPod prices in 2006 would have entirely missed the much larger opportunity for streaming services to help customers create moods with music.

Constructing a Need Curve

Creating an accurate Need Curve requires rigorous research and analysis. The thrv methodology includes several steps for constructing Need Curves for portfolio companies:

1. Job-to-be-Done Definition

Before constructing a Need Curve, researchers must clearly define the job customers are trying to get done. This job definition establishes the boundaries of the market being analyzed.

For example, the job might be "get to destinations on time," "acquire new customers," or "obtain a blood sample."

2. Willingness-to-Pay Research

Researchers conduct quantitative research to determine customers' willingness to pay to get their job done better. This typically involves:

• Direct Questioning: Asking customers how much they would pay for solutions that get the job done significantly better than current options
  
  
• Conjoint Analysis: Using trade-off analysis to determine the economic value customers place on specific job improvements
  
  
• Price Sensitivity Measurement: Employing techniques like Van Westendorp's Price Sensitivity Meter to establish acceptable price ranges
  
  
• Comparative Value Assessment: Measuring how customers value job improvement relative to other investments
  
  

3. Segmentation Analysis

Researchers analyze patterns in willingness to pay and job execution struggles to identify meaningful customer segments. These segments often exhibit distinct patterns in:

• How much they're willing to pay to get the job done better
• Which needs within the job are most important to them
• Which needs they struggle most to satisfy with current solutions
• How frequently they need to execute the job

4. Curve Construction

Based on research data, the Need Curve is constructed by:

1. Arranging customers from highest willingness to pay to lowest willingness to pay on the vertical axis
2. Plotting the cumulative number of customers at each willingness-to-pay level on the horizontal axis
3. Creating a smooth curve that represents the relationship between these variables

The area under this curve represents the total economic opportunity in the market—what thrv calls the "Securable Market."

The Securable Market

The area under the Need Curve is referred to as the Securable Market because it represents the total revenue potential a portfolio company can secure by helping customers get their job done better at a price they are willing to pay.

The Securable Market is calculated by integrating the willingness to pay across all customers in the market:

Securable Market = ∫(Number of Customers × Willingness to Pay)

This calculation provides a more accurate and stable measure of market opportunity than traditional approaches based on product prices because:

1. It's Solution-Independent: The Securable Market exists regardless of what specific products currently address the job
   
   
2. It's Technology-Agnostic: The Securable Market remains relevant even as technologies change
   
   
3. It Captures Unserved Demand: The Securable Market includes potential customers who currently don't purchase any solution because existing options don't adequately address their needs
   
   
4. It Reveals Premium Opportunities: The Securable Market helps identify segments willing to pay significantly more for better solutions
   
   

Understanding the Securable Market helps portfolio companies make more informed decisions about which markets to enter, which segments to target, and how to position their offerings.

Analyzing the Need Curve

The shape of the Need Curve reveals important insights about market structure and opportunities:

Steep Curve

A steep Need Curve indicates:

• A significant premium segment willing to pay substantially more than the average customer
• Major differences in how customers value getting the job done
• Opportunity for a differentiated premium offering targeting the high-willingness-to-pay segment

Flat Curve

A flat Need Curve indicates:

• Relatively uniform willingness to pay across most customers
• Less opportunity for premium pricing strategies
• Potential for broad market approaches with standardized offerings

S-Shaped Curve

An S-shaped Need Curve suggests:

• Distinct market segments with different value perceptions
• Potential "sweet spots" at inflection points where small price changes affect large numbers of customers
• Opportunity for multi-tier offerings targeting different segments

Discontinuous Curve

A discontinuous Need Curve with clear "steps" indicates:

• Very distinct market segments with significant differences in willingness to pay
• Natural price discrimination opportunities
• Potential for segment-specific offerings with distinct value propositions

These patterns guide portfolio companies in developing targeted growth strategies that address specific segments of the Need Curve.

Need Curve and Market Segmentation

One of the most valuable applications of the Need Curve is in market segmentation:

Traditional vs. Needs-Based Segmentation

Traditional segmentation approaches often rely on demographic, firmographic, or psychographic characteristics that may have little relationship to purchasing behavior.

In contrast, the Need Curve enables segmentation based on two critical factors:

1. Willingness to Pay: How much different customer groups value getting the job done better
2. Struggle Intensity: How much difficulty different groups experience in getting their job done

By combining these factors, portfolio companies can identify high-value segments that are both willing to pay for better solutions and currently struggling with existing options.

Premium Opportunity Segments

Of particular interest are segments with both:

• High willingness to pay (upper portion of the Need Curve)
• High struggle intensity (underserved needs within the job)

These segments represent premium opportunity segments—groups of customers who are both willing to pay more for better solutions and currently underserved by existing offerings.

For example, in the job of "getting to destinations on time," a premium opportunity segment might be business travelers who make frequent, unfamiliar stops. They have high willingness to pay because their time is valuable and getting to meetings on time directly impacts their professional success. They also struggle significantly with current navigation solutions, which don't effectively help them plan optimal routes with multiple stops.

By identifying these premium opportunity segments, portfolio companies can develop targeted solutions that command higher prices while addressing specific unmet needs.

Need Curve and Pricing Strategy

The Need Curve provides a powerful foundation for developing pricing strategies:

1. Price Point Optimization

By analyzing the relationship between price points and addressable market size, companies can identify optimal pricing that balances revenue per customer with total market reach.

For example, if the Need Curve shows a significant "knee" at a particular price point (where the slope changes dramatically), this often indicates a natural price point that maximizes total revenue.

2. Price Discrimination Opportunities

The Need Curve reveals opportunities for price discrimination strategies, where companies offer different pricing tiers to capture more of the area under the curve.

For instance, companies might offer:

• Premium offerings for high-willingness-to-pay segments
• Standard offerings for mid-range segments
• Value offerings for price-sensitive segments

3. Value-Based Pricing

The Need Curve shifts pricing discussions from cost-plus or competitive reference approaches to value-based pricing, where prices reflect what different segments are willing to pay based on the value they receive.

This typically leads to higher margins and more sustainable pricing power.

4. Market Expansion Strategies

For segments with lower willingness to pay but significant market size, the Need Curve helps companies develop targeted cost-reduction strategies that can profitably address these segments.

By understanding exactly how much these segments are willing to pay, companies can design streamlined offerings that meet essential needs at acceptable price points.

Need Curve and Product Strategy

The Need Curve fundamentally influences how portfolio companies develop their product strategies:

1. Target Segment Selection

The Need Curve helps companies determine which segments to target based on size, willingness to pay, current satisfaction levels, and competitive positioning.

This ensures product development resources focus on the most valuable market opportunities.

2. Feature Prioritization

Understanding which segments the company is targeting on the Need Curve helps prioritize features that address the specific needs of those segments.

For premium segments, this typically means focusing on features that address high-value unmet needs, even if these features are costly to develop or implement.

3. Product Line Development

The Need Curve guides decisions about product line breadth and tiering, helping companies determine whether to offer:

• A single product targeting a specific segment
• Good-better-best tiers addressing different segments
• Distinct products for fundamentally different segments

4. Platform Strategy

For platform businesses, the Need Curve helps identify which side of the platform should pay versus which side might be subsidized based on willingness to pay and network effects.

5. Competitive Positioning

The Need Curve reveals underserved segments that competitors may be overlooking, helping companies identify distinctive market positions even in crowded markets.

Need Curve in thrv's Methodology

In thrv's proprietary Jobs to be Done methodology, the Need Curve serves as a fundamental tool for creating growth strategies for portfolio companies:

1. Market Opportunity Assessment

The thrv platform includes tools for constructing and analyzing Need Curves to assess the total economic opportunity in different markets.

2. Segment Identification

The methodology uses Need Curves combined with need satisfaction data to identify the most attractive customer segments for portfolio companies to target.

3. Growth Strategy Development

Based on Need Curve analysis, thrv helps portfolio companies develop targeted growth strategies that focus on specific high-value segments of the curve.

4. Pricing Optimization

The methodology includes frameworks for using Need Curve insights to develop value-based pricing strategies that maximize revenue and profit.

5. Product Roadmap Development

thrv helps portfolio companies create and prioritize product roadmaps that address the specific needs of their target segments on the Need Curve.

This comprehensive approach ensures that all aspects of a portfolio company's strategy align around targeting the most valuable segments of the Need Curve.

Case Study Examples of Need Curve Application

The Need Curve has been successfully applied across various industries to identify high-value market opportunities:

Navigation Market

In the job of "getting to destinations on time," a Need Curve analysis revealed a significant premium segment of business travelers willing to pay substantially more than average consumers for better solutions.

This segment's high willingness to pay was driven by the direct impact of timely arrival on professional success and the high opportunity cost of their time. Their struggles with planning optimal routes with multiple stops represented a specific unmet need that competitors like Apple and Google Maps did not adequately address.

Understanding this premium segment enabled the development of specialized navigation solutions that commanded premium prices while addressing specific unmet needs.

Healthcare Diagnostics Market

In the job of "obtaining a blood sample," a Need Curve analysis identified distinct segments among healthcare providers based on willingness to pay for improvements in this job.

Emergency departments and critical care units showed extremely high willingness to pay for solutions that could provide faster results with smaller sample volumes. In contrast, routine preventive care settings had much lower willingness to pay for these improvements.

This segmentation guided the development of tiered diagnostic solutions, with premium offerings targeting high-acuity settings and value offerings addressing routine care environments.

CRM Software Market

In the job of "acquiring new customers," a Need Curve analysis revealed that small businesses and large enterprises had significantly different willingness to pay for improvements in this job.

While large enterprises were willing to pay substantially for comprehensive solutions that addressed every aspect of the job, small businesses showed much lower willingness to pay but represented a much larger total market.

This insight guided the development of tiered CRM offerings, with premium enterprise solutions commanding high prices from a smaller customer base, while streamlined small business offerings addressed a larger market at lower price points.

The Strategic Value of Need Curve Analysis

For portfolio companies, the Need Curve delivers several strategic benefits:

1. More Accurate Market Sizing

By focusing on customers' willingness to pay to get jobs done rather than current product prices, the Need Curve provides a more accurate assessment of market opportunities.

This helps companies avoid both overestimating opportunities in dying product categories and underestimating opportunities in emerging solution areas.

2. Better Investment Decisions

Understanding the Securable Market helps companies make more informed decisions about which markets to enter, which segments to target, and how much to invest in product development.

This reduces the risk of either under-investing in attractive opportunities or over-investing in limited markets.

3. More Effective Growth Strategies

By identifying specific segments with both high willingness to pay and significant unmet needs, the Need Curve helps companies develop targeted growth strategies with higher probabilities of success.

This is particularly valuable for portfolio companies seeking to accelerate growth in competitive markets.

4. Optimized Pricing

The Need Curve shifts pricing from cost-plus or competitive reference approaches to value-based strategies that capture more of the economic value created.

This typically leads to higher margins and more sustainable pricing power.

5. Enhanced Competitive Differentiation

By revealing underserved segments that competitors may be overlooking, the Need Curve helps companies identify distinctive market positions even in crowded markets.

This is especially important for portfolio companies competing against larger incumbents.

Conclusion

The Need Curve represents a fundamental shift in how companies assess market opportunities and develop growth strategies. By focusing on customers' willingness to pay to get their jobs done rather than current product prices, the Need Curve provides a more accurate and stable foundation for strategic decision-making.

The thrv methodology provides portfolio companies with sophisticated tools for constructing and analyzing Need Curves in their markets. This Need Curve-based approach to market assessment leads to more accurate sizing, better segment targeting, optimized pricing, and ultimately accelerated growth and enhanced equity value.

By understanding not just what customers currently pay for existing solutions but what they would be willing to pay for solutions that help them get their jobs done better, portfolio companies can identify high-value opportunities even in mature markets and develop strategies that create sustainable competitive advantage.