A primer in Entrepreneurship - UZH00000000-505f-0781-ffff-ffffd2d7d489… · Chapter 11: Unique...

A primer in Entrepreneurship

Prof. Dr. Ulrich Kaiser

Institute for Strategy and Business EconomicsInstitute for Strategy and Business Economics

University of Zurich

Spring semester 2008

Chapter 11: Unique Marketing Issues Confronting New Ventures

Table of Contents

I. Selecting a Market and Establishing a Position

II. Key Marketing Issues for New Ventures

III. The Four Ps for New Ventures


ISU – Institute for Strategy and Business Economics

Ulrich Kaiser



2


1. In order to succeed, a new firm must address this important question: Who are the customers, and how will we appeal to them?

2. A well‐managed start‐up approaches this query by following a three‐step process: segmenting the market, selecting or developing a niche p p g g g p gwithin a target market, and establishing a unique position in the target market.



Ulrich Kaiser



3




Ulrich Kaiser



4

I. Selecting a Market and Establishing a

A. Segmenting the MarketPosition

1. The first step in selecting a target market is to study the industry in which the firm intends to compete, and determine the different potential target markets in that industry.

2. This process is called market segmentation, and is important because a s p ocess s ca ed a e seg e a o , a d s po a because anew firm typically only has enough resources to target one market segment, at least initially.

3. Markets can be segmented in a number of different ways:product typeprice pointprice pointcustomers served



Ulrich Kaiser



5


A. Segmenting the Market4. There are several important objectives a new firm should try to

accomplish as part of its market segmentation process:a. The process should identify one or more relatively homogeneous p y y g

groups of prospective buyers within the industry the firm plans to enter in regard to their wants and needs.

b. Differences within the segment the firm chooses should be smallb. Differences within the segment the firm chooses should be small compared to differences across segments.

c. The segment should be distinct enough so that its members can be easily identifiedeasily identified.

d. It should be possible to determine the size of the segment so that a firm knows how large its potential market is before it aggressively

f dmoves forward.



Ulrich Kaiser



6


B. Selecting a Target MarketPosition

1. Once a firm has segmented the market, the next step is to select a target markettarget market.

2. Typically, a firm (especially a start‐up venture) doesn’t target an entire segment of a market because many market segments are too large tosegment of a market because many market segments are too large to target successfully.



Ulrich Kaiser



7


B. Selecting a Target Market

3. Instead, most firms target a niche with the segment.

a. A niche market is a place within a market segment that represents a narrower group of customers with similar interests.

b. In most cases, the secret to appealing to a niche market is to understand the market and meet its customers’ needs. By focusing on a clearly defined target market a firm can become anfocusing on a clearly defined target market, a firm can become an expert in that market and then provide its customers with high levels of value and service.



Ulrich Kaiser



8


C. Establishing a Unique Position

Position

1. After selecting a target market, the firm’s next step is to establish a “position” within it that differentiates it from its competitorsposition within it that differentiates it from its competitors.

2. As we discussed in Chapter 5, position is concerned with how the firm is situated relative to its competitors In a sense a position is the partis situated relative to its competitors. In a sense, a position is the part of a market or of a segment of the market the firm is claiming as its own.



Ulrich Kaiser



9



3. A firm establishes a unique position in its customers’ minds by consistently drawing attention to two or three of its product’s attributes that define the essence of what the product is and what separates it from its competitors.

Firms often develop a tagline to reinforce the position they have staked out in their market, or a phrase that is used consistently in a company’s literature, advertisements, promotions, stationery, p y , , p , y,and even invoices, and thus becomes associated with the company. An example is Nike’s familiar tagline, “Just do it”.



Ulrich Kaiser



10



Match the Company to Its Tagline



Ulrich Kaiser



11

II. Key Marketing Issues for New Venturesy g

A. Selling Benefits Rather Than Features

1. Many entrepreneurs make the mistake of positioning their company’s prod cts or ser ices based on feat res rather than benefitsproducts or services based on features rather than benefits.

2. A positioning or marketing strategy that focuses on the features of a product, such as its technical merits, is usually much less effective than a campaign focusing on the merits of the product.



Ulrich Kaiser



12

II. Key Marketing Issues for New Venturesy g

A. Selling Benefits Rather Than Features

Two different approaches to promoting a cell phone

Approach IllustrationApproach Illustration

Selling Features“Our cell phones are equipped with sufficient memory to

store 100 phone numbers.”

Selling Benefits“Our cell phones lets you store up to 100 phone numbers, giving you the phone numbers of your family and your

friends at your fingertips.”

While features are nice, they typically don’t entice someone to buy a

Conclusionproduct. The first statement tells a prospect how many phone

numbers the cell phone will hold, but doesn’t tell the prospect why that’s important. The second statement tells a prospect why having sufficient memory to store 100 phone number is important, and how



Ulrich Kaiser



13

sufficient memory to store 100 phone number is important, and how buying the product will enhance his or her life.

II. Key Marketing Issues for New VenturesB. Establishing a Brand

y g

1. A brand is the set of attributes – positive or negative – that people associate with a company.

2. Some companies monitor the integrity of their brands through a program of brand management, or protecting the image and value of an organization’s brand in consumers’ mindsorganization s brand in consumers minds.

3. The difference between a company’s brand and its positioning strategy i thi th b d i ll b t th tt ib t d i th t lis this: the brand is all about the attributes and promises that people associate with a company, and the position is all about the details.



Ulrich Kaiser



14

II. Key Marketing Issues for New Venturesy gB. Establishing a Brand

4. Start‐ups must build a brand from scratch. One of the keys is to create a strong personality for the firm that appeals to the chosen target marketmarket.

a. So how does a new firm develop a brand? On a philosophical level, fi h i i i ’ li Ia firm must have meaning in its customers’ lives. It must create

value.

b. On a more practical level, brands are built through a number of techniques, including advertising, public relations, sponsorships, support of social causes, and good performance.pp g p



Ulrich Kaiser



15

II. Key Marketing Issues for New Ventures

c. Ultimately, a strong brand can be a very powerful asset for a firm.

y gB. Establishing a Brand

c. Ultimately, a strong brand can be a very powerful asset for a firm.

i. Brand equity is the term that denotes the set of attributes and liabilities that are linked to a brand and enables it to raise aliabilities that are linked to a brand and enables it to raise a firm’s valuation.

ii C b di f t l ti hi b t tii. Co‐branding refers to a relationship between two or more firms where the firms’ brands promote each other.Examples: AT&T Universal Master CardCitibank/American Airlines/Visa CardHealthy Choice Cereal by Kellogg’sCoach edition of the Lexus ES seriesEddie Bauer edition of the Ford Explorer∙ Braun/Oral‐B Plaque Remover



Ulrich Kaiser



16

/ q

II. Key Marketing Issues for New Venturesy gB. Establishing a Brand

Wh t’ B d? Diff t W f Thi ki Ab t th M i f B dWhat’s a Brand? Different Ways of Thinking About the Meaning of a Brand



Ulrich Kaiser



17

II. Key Marketing Issues for New Ventures gRep

ort.pd

f


‐2007‐Ra

nking

rand

Z/BrandZ

‐dia/Pd

fs/en/B

s/op

timor/M

edow

n.com/Site

sww.m

illwardb

ro



Ulrich Kaiser



18

http://w

w

II. Key Marketing Issues for New Ventures gRep

ort.pd

f


‐2007‐Ra

nking

rand

Z/BrandZ

‐dia/Pd

fs/en/B

s/op

timor/M

edow

n.com/Site

sww.m

illwardb

ro



Ulrich Kaiser



19

http://w

w

III The Four Ps of Marketing For New VenturesIII. The Four Ps of Marketing For New Ventures1. Once a company decides on its target market, establishes a position

within that market, and establishes a brand, it is ready to beginwithin that market, and establishes a brand, it is ready to begin planning the details of its marketing mix.

2 A firm’s marketing mix is the set of controllable tactical marketing tools2. A firm s marketing mix is the set of controllable, tactical marketing tools that it uses to produce the response it wants in the target market.

3 M t k t i th i k ti i i t f t i3. Most marketers organize their marketing mix into four categories: product, price, promotion, and place (or distribution).



Ulrich Kaiser



20

III The Four Ps of Marketing For New VenturesIII. The Four Ps of Marketing For New Ventures

Product Price

Marketing Mix

Promotion Place (or distribution)



Ulrich Kaiser



21

III The Four Ps of Marketing For New VenturesA. Product

III. The Four Ps of Marketing For New Ventures

1. A firm’s product, in the context of its marketing mix, is the good or service it offers to its target market.

2. Determining the product or products to be sold is central to the firm’s entire marketing effort.

3. As the firm prepares to sell its product, an important distinction should be made between the core product and the actual product.

While the core product may be a CD that contains an antivirus software program, the actual product, which is what the

t b h fi h t i ticustomer buys, may have as many as five characteristics: a quality level, features, design, a brand name, and packaging.



Ulrich Kaiser



22

III The Four Ps of Marketing For New VenturesB. Price


1. Price is the amount of money consumers pay to buy a product. It is the only element of the marketing mix that produces revenue; all other elements represent costs.p

2. Most entrepreneurs use one of two methods to set the price for their products: cost‐based pricing or value‐based pricing.products: cost based pricing or value based pricing.

a. In cost‐based pricing, the list price is determined by adding a markup percentage to a product’s costpercentage to a product s cost.

b. In value‐based pricing, the list price is determined by estimating what illi t f d t d th b ki ff bitconsumers are willing to pay for a product, and then backing off a bit

to provide a cushion.



Ulrich Kaiser



23

III The Four Ps of Marketing For New VenturesB. Price


Two Approaches to PricingTwo Approaches to Pricing

Approach to Pricing

DescriptionPricing

Cost‐Based

In cost‐based pricing, the list price is determined by adding a markup percentage to a product’s cost. The advantage of this Cost Based

Pricing method is that it is straightforward, and it is relatively easy to justify the price of a good or service. The disadvantage is that it is not always easy to estimate what the cost of a product will be.

Value‐Based

In value‐based pricing, the list price is determined by estimating what consumers are willing to pay for a product and then backing off a bit to provide a cushion. What a consumer is willing to pay is

Pricing determined by his or her perceived value of the product and by the number of choices available in the marketplace. Most experts

recommend value‐based pricing because it hinges on the consumer’s perception of what a product or service is worth



Ulrich Kaiser



24

consumer s perception of what a product or service is worth.

III The Four Ps of Marketing For New Ventures

3 Regardless of the method of pricing a company can’t charge a premium

III. The Four Ps of Marketing For New VenturesB. Price3. Regardless of the method of pricing, a company can t charge a premium

price without delivering on its positioning and branding promises, and unless circumstances are right.

4. To charge a premium price, one or more of the following circumstances must be present:

Demand for the product is strong relative to supply;Demand for the product is inelastic;The product is patent protected and has a clearly defined target market;The product offers additional features that are valued;A new technology is being introduced;gy g ;The product is positioned as a luxury product.



Ulrich Kaiser



25


1 Promotion refers to the activities the firm takes to communicate the

C. PromotionIII. The Four Ps of Marketing For New Ventures

1. Promotion refers to the activities the firm takes to communicate the merits of its product to its target market. Ultimately, the goal of these activities is to persuade people to buy the product.

2. The two most common activities entrepreneurs use to promote their firms are advertising and public relations.

a. Advertising makes people aware of a product or service in hopes of persuading them to buy it. Advertising’s major goals are to do the following:

Raise customer awareness of a product;p ;Explain a product’s comparative benefits;Create associations between a product and a certain lifestyle.



Ulrich Kaiser



26


b Public relations refers to efforts to establish and maintain a

III. The Four Ps of Marketing For New VenturesC. Promotion

b. Public relations refers to efforts to establish and maintain a company’s image with the public. There are a number of techniques that fit the definition of public relations. These include:

Press releases;New conferences;Media coverage;Articles in the industry press and periodicals;Civic, social, and community involvement.



Ulrich Kaiser



27

III The Four Ps of Marketing For New VenturesIII. The Four Ps of Marketing For New VenturesC. Promotion

Steps Involved in Putting Together an AdvertisementSteps Involved in Putting Together an Advertisement



Ulrich Kaiser



28

III The Four Ps of Marketing For New VenturesIII. The Four Ps of Marketing For New VenturesC. Promotion

Public Relations TechniquesPublic Relations Techniques

Press release Media coverage

Articles in industryBlogging

press and periodicalsBlogging

Monthly newsletter News conference

Civic, social, and communityinvolvement



Ulrich Kaiser



29


1 Place or distribution encompasses all the activities that move a firm’s

D. Place (or Distribution)III. The Four Ps of Marketing For New Ventures

1. Place, or distribution, encompasses all the activities that move a firm s product from its place of origin to the consumer. A distribution channel is the route a product takes from the place it is made to the customer h i th dwho is the end user.

2. The first choice a firm has to make regarding distribution is whether to sell its products directly to consumers or through intermediaries (such as wholesalers and retailers).



Ulrich Kaiser



30


a. Selling Direct. Many firms sell direct to customers. Being able to

III. The Four Ps of Marketing For New VenturesD. Place (or Distribution)

a Se g ec a y s se d ec o cus o e s e g ab e ocontrol the process of moving their products from their place of origin to the end user instead of relying on third parties is a major advantage of selling direct The disadvantage of selling direct is thatadvantage of selling direct. The disadvantage of selling direct is that a firm has more of its capital tied up in fixed assets, because it must own or rent retail outlets or must field a sales force to sell its productsproducts.

b. Selling Through Intermediaries. Firms that sell through intermediaries typically pass off their products to wholesalers who l h l l b ld d f hplace them in retail outlets to be sold. An advantage of this

approach is that the firm does not need to own as much of the distribution channel. The disadvantage of selling through intermediaries is that a firm loses control of its product. There is no guarantee that Best Buy or Circuit City will talk up the firm’s product as much as the manufacturer would if it had its own stores.



Ulrich Kaiser



31

III The Four Ps of Marketing For New VenturesIII. The Four Ps of Marketing For New VenturesD. Place (or Distribution)Selling direct versus selling through intermediariesSelling direct versus selling through intermediaries

Approach to Distribution

Description

Selling Direct

Many firms sell direct to customers. Being able to control the process of moving their products from their place of origin to the end user instead of relying on third parties is a major advantage of selling direct The disadvantage of selling direct is that a firm hasselling direct. The disadvantage of selling direct is that a firm has

more of its capital tied up because it must own or rent retail outlets and must field a sales force.

Selling Through Intermediaries

Firms who sell through intermediaries pass off their products to wholesalers who place them in retail outlets to be sold. An

advantage of this approach is that the firm does not need to own as h f h di ib i h l Th di d f llimuch of the distribution channel. The disadvantage of selling

through intermediaries is that a firm loses control of its product.



Ulrich Kaiser



32

III The Four Ps of Marketing For New VenturesIII. The Four Ps of Marketing For New VenturesD. Place (or Distribution)Selling direct versus selling through intermediariesSelling direct versus selling through intermediaries



Ulrich Kaiser



33

A primer in Entrepreneurship - UZH00000000-505f-0781-ffff-ffffd2d7d489… · Chapter 11: Unique...

Documents

Transcript of A primer in Entrepreneurship - UZH00000000-505f-0781-ffff-ffffd2d7d489… · Chapter 11: Unique...