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EFFECTUAL MARKETING PLANNING FOR NEW VENTURES

ABSTRACT Current marketing theories largely follow the rational planning school and base marketing planning activities upon a strategic pursuit of an optimal market outcome. While extant theory aligns with the motivations of large corporations in established markets, it offers little benefit to marketers in new ventures. We address this gap directly and propose a new concept of effectual marketing planning which is based on a logic of control and specifically addresses the challenges facing new ventures. We note five key differences between traditional marketing planning and effectual marketing planning and offer propositions as to how effectual marketing planning can increase performance. Keywords: marketing planning, effectuation, new ventures, uncertainty

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Introduction

Marketing planning has long been a central component of marketing

management. For the past four decades, marketing planning has served as a vehicle for

demystifying, teaching, organizing and practicing marketing management. It is a logical

process that encompasses and integrates the many different sub disciplines of marketing

and provides a sequential approach to addressing a firm’s marketing practice (McDonald,

1996). Formality and sophistication may differ (Rue & Ibrahim, 1998), but the process

of marketing planning itself has remained remarkably consistent and unquestioned

(Smith, 2005). Much like business planning (Ames, 1989; Burns, 1990; Kahrs, 1995),

the marketing planning paradigm has become “more deeply rooted in ritual than

efficiency” (Honig and Karlsson, 2004, p. 260). This limits marketing planning’s

general efficacy and applicability, including its relevance to the new venture context

(Kukalis, 1991; Castrogiavanni, 1996). This paper focuses on marketing planning in new

ventures, where the sophistication and complexity of traditional planning are replaced by

action, learning through failure, and a premeditated approach to market experimentation

designed to create unique feedback paths (Honig, 2004; Sarasvathy, 2001).

Recently, scholars have argued for a new entrepreneurial paradigm of marketing

(Hill and Wright, 2000; Martin, 2009; Morris et al, 2002; Read, Dew, Sarasvathy, Song

and Wiltbank, 2009). We follow these scholars and suggest that unless marketing

planning scholars consider planning under the extreme uncertainty new ventures face, we

may never fully understand or inform these important constituents. We employ

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Sarasvathy’s (2001) logic of control, known as effectuation, as a strategic perspective that

allows marketing planning theory to provide value to entrepreneurs managing new

ventures. The effectuation perspective rejects traditional planning tenets that

opportunities are “discovered” through market research (Narver and Slater, 1990) and/or

the failure of incumbent firms (Christensen, 2003). Rather, effectuation suggests new

business opportunities are “created” by entrepreneurs that eschew analyzing existing

markets, investment risk, and expected returns and instead choose between possible

effects they can create with their given means (Sarasvathy, 2001)1. This leads to the

primary thesis considered in this paper: Could the marketing planning needs of new

ventures be better addressed using effectuation as a theoretical foundation?

Buildingfromtherecentadvancementofeffectuationtheory,effectualmarketing

planning(EMP)isanewtheoreticalperspectivethatrepresentsadramatic

departurefromtraditionalmarketingplanning(TMP).WhereasTMPsuggests

entrepreneurs“discover”opportunitiesthroughtheanalysisofmarketconditions,

predictanoptimaloutcome,andthendesignmarketingplanstocapturethat

outcome;researchsuggeststhisprocess–althoughconceptuallyelegantand

pedagogicallyvaluable–isnotwhatmostentrepreneursactuallydowhenfaced

withextremeuncertainty(Readetal,2009).

Underconditionsofhighuncertainty,entrepreneurstakeactionandcreate

1Sarasvathy (2001, p. 245) describes the difference between causation and effectuation as follows: Causation processes take a particular effect as given (an unmet market need in our case), and focus on selected means to create that effect (finding outside investment to exploit the discovered unmet need). Effectuation processes take a set of means as given (What I know, whom I know, and what I can create under these constraints) and focus on a set of possible effects that can be created with that set of means. Parentheses and Italics added by the authors.

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opportunitiesthatbestleveragethemeansattheirdisposal.Overtime,througha

processofmarketexperimentation,suppliercooptation,andserendipity,amarket

opportunityandbusinessmodelco‐evolveandhituponamatch(Hollowayand

Sebastiao,2010).AlvarezandBarney(2007,p.12)warnthattryingtodotoomuch

planningtoosoon(suchasinTMP)“canbe,atbest,awasteofresources,andat

worst,fundamentallymisleading.”EMPchangesthelogicinmarketingplanning

fromalogicbasedonopportunitydiscoverytoalogicbasedonopportunity

creation.

MacDonalddefinedmarketingplanningas,“alogicalsequenceofactivities

thatleadtothesettingofmarketingobjectivesandtheformulationofplansto

achievethem(1991,p.2)"WebuildfromMcDonald’sdefinitionanddefineEMP

accordingtoa“creationperspective.”WethusdefineEMPasfollows:

EMPidentifiesalogicalsequenceofactivitiesthatcreatemarketopportunitiesthroughmarketentryandexperimentationspecificallydesignedtocreateactionablemarketfeedback.

Thisprocessleveragesmarketorientedlearning(insteadofmarketresearch)to

supportinitialsurvivaland,intime,allowsforexpansionbasedoncorresponding

marketexperienceandopportunitycreation. EMP stands in contrast to other rational

planning theories that try to predict an expected future through research and forecasts and

then obtain or create resources to optimize their actions.

It is useful to describe the potential value of EMP through an example. Recently,

an e-commerce site that sells artisan foods reconsidered their marketing planning needs

using an effectually consistent approach. In order to raise investment funds, they had

previously used TMP to describe their market vision and legitimize their understanding

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of conventional business practices. However, operationally, they had no trust in the

marketing plan that was part of their original business plan. Instead of using that plan as

a framework for marketing operations, they found themselves working day to day,

reacting to web analytics, and without any sense of a strategic plan. Upon consultation,

they shifted towards an EMP approach.

In doing so, they first considered their strategic horizon. Instead of arbitrarily

allocating an annual time frame, they looked at the internal and external forces that

dictated how long they could commit to any marketing program. The Christmas holiday

was three months away and represented an obvious and enormous market force. They

budgeted two months time for creating a holiday plan and executing its implementation.

This left them with a month to create and execute a non-holiday marketing plan.

The non-holiday plan (based upon EMP) provided some surprising sales results;

both good and bad. A product bundle created specifically for the first plan seemed to

resonate with an unexpected market segment. The new insight allowed the company to

adjust their messaging efforts for the crucial holiday period. In doing so, they were able

to create a holiday marketing plan that could not have been previously considered, and it

turned out to be a huge success.

The company found itself caught in between the full-scale complexity of TMP

and the instantaneous, results-driven tactics of web analytics. By embracing EMP they

were able to find an entrepreneurially minded method for managing their marketing

process2.

2Basedoninformationgatheredforacasestudy.

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A basic tenant of EMP is that market opportunities are created and not discovered.

Marketing plans are not created ex ante of entrepreneurial action, but ex post. Only after

making the plunge (Dew et al, 2009), creating an opportunity, and learning by doing can

the rigor and precision of most planning investments actively contribute to new venture

success.

Having defined EMP, we proceed with a review of the extant planning literature.

We then introduce the EMP framework and develop research propositions that extend

theory and increase marketing planning efficacy for managers in new ventures. A

discussion that includes the practical implications and future research opportunities

follows.

LITERATURE REVIEW

For decades, a logic of prediction has served as a dominant paradigm of business

research and education. Predictive logic rests on a fundamental belief that through

rational planning, “organizations will work more diligently to analyze and predict more

accurately the changing situation in which they operate (Wiltbank et al., 2006, p. 985).”

The rational planning paradigm incorporates work from many “classics” in planning

literature (Ansoff, 1979; Porter, 1980) and essentially bases the planning process on a

prediction of possible alternatives, evaluation of information surrounding the alternatives,

and a rational selection among alternatives to inform the next calendar cycle (Andrews,

1987; Ansoff, 1991; Frederickson & Mitchell, 1984; Miller & Cardinal, 1994).

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Planning theory recognizes the limitations of bounded rationality; the planner’s

cognitive ability to address a finite amount of information over a given time (Simon,

1982). However, the general consensus is that firms within a given environment would

make the same choice, given the same information. This suggests that firms with

inferior information, like new ventures, ought to try harder to predict better (Wiltbank et

al., 2006) and leaves little room for alternative planning strategies.

The focus on prediction found in rational planning assumes markets are somewhat

static and unchanging, which limits its applicability in dynamic environments

(Christensen, 2003). Over the years, this has resulted in a number of attempts to assuage

planning paradigms through such theories as mindfulness (Weick and Sutcliffe, 2001),

emergent strategy (Mintzberg 1978), discovery driven planning (McGrath and

MacMillan, 1995), and in some respects, even improvisation (Moorman and Miner

1998).

Mindfulness notes that despite a manager’s clear intention to predict the future as

accurately as possible, new information and surprises can cloud a manager’s ability to

correctly interpret the environment (Weick and Sutcliffe, 2001; 2006). Mindful

organizations develop contingencies to handle new information. Faced with these

contingencies, mindful organizations (Weick and Sutcliffe, 2006, p. 516):

spend (a) more time examining failure as a window on the health of the system, (b) more time resisting the urge to simplify assumptions, (c) more time observing operations and their effects, (d) more time developing resilience to manage unexpected events, and (e) more time locating local expertise and creating a climate of deference to those experts.

The concept of mindfulness shares effectuation’s skepticism about accurately predicting

uncertain markets, however, mindfulness seems to suggest that increased investments in

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time and diligence can overcome planning’s shortcomings. Effectuation is predicated on

the fact that there is not one certain future but perhaps many futures; and therefore, no

amount of planning can accurately predict all that could happen.

Mintzberg and colleagues (Mintzberg 1978; Mintzberg and Waters, 1982;

Mintzberg, Raisinghani, and Theoret, 1976) developed a concept of emergent strategy as

an additional adaptation to the rational planning paradigm. At its core, emergent strategy,

like mindful organizing, is a reaction to new information or surprises from the

environment. Of the many varieties of emergent strategy (Mintzberg and Waters, 1985),

one specific form of emergent strategy, imposed strategy, is the most closely related to

EMP. Imposed strategy occurs “when an environment directly imposes a pattern of

action on an organization” (Mintzberg and Waters, 1985, p. 258). These authors suggest

imposed strategy is deterministic; organizations are resigned to competing a certain way

or to using particular technologies, and so they plan strategies to achieve them.

Mintzberg and Waters (1985, p. 268) give the example of state run Air Canada:

… when the minister who created and controlled the airline in its early years forced it to buy and fly a particular type of aircraft … given its inability to resist, the organization had to resign itself to the pursuit of this strategy…”

Mintzberg and Waters (1985) concede that no strategy is completely deterministic and

that entrepreneurs operate somewhere between determinism and free choice.

McGrath & MacMillan’s (1995) discovery-driven planning (DDP) is an

additional adaptation to the rational planning paradigm that attempts to assuage the

tension between predicting the future and responding to surprises. DDP recognizes the

danger of planning based on assumptions instead of first-hand knowledge through the

development of specific tools for business planning used to convert assumptions into

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knowledge throughout venture implementation. DDP’s contribution allowed

entrepreneurs to respond to wrong assumptions about existing markets, and revise plans

accordingly. DDP’s reliance on market analysis to form initial assumptions links

strongly with traditional marketing planning.

Despite the rich conceptual proposals described in mindfulness, emergent strategy

and DDP, they were all predicated on a traditional platform of predictive logic for

fomenting planning templates. They each fail to describe processes where organizations

actively engage the environment and dictate change on their own terms. This limits their

applicability in the new venture context (Sarasvathy and Dew, 2005; Holloway and

Sebastiao, 2010).

At the other end of the planning spectrum, Moorman and Miner (1998)

investigated improvisational marketing management in the new product development

process. They found a positive effect for firms that create tactical adjustments outside

the confines of planning and manage “in the moment (p. 1).” However, Slotegraf and

Dickson (2004) demonstrated a marketing planning paradox when it comes to

improvisation. Firms with a planning capability improve performance through

improvisation, however, they are less likely to engage in improvisational acts. It seems

that a marketing planning competency reduces the likelihood that firms will act outside

the implementation schedule even though, when they do, they achieve greater success.

While improvisation adds some understanding to managing marketing in uncertain

environments, to date it has largely failed to escape the confines of musical and theatric

metaphors and has not contributed to the meaningful advancements of managerial

processes.

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To better inform the needs of new ventures, marketing planning must embrace

entrepreneurial thought and action (Read et al., 2011) as antecedents to marketing plans.

EMP still fits with MacDonald’s (1989) definition of marketing planning, since EMP

“presents a logical sequence of activities that lead to the setting of marketing objectives

and the formulation of plans to achieve them.” Further, EMP is not simply a method of

improvisation. Rather, it is a strategic process that eschews determinism and actively

engages external markets. Through market experimentation, EMP instigates disruptive

tactical events for the purpose of creating new information. This action-oriented

marketing process creates new market information versus simply recognizing and then

reacting to newly obtained information. In this way, EMP premeditates improvisational

opportunities. By embracing effectuation (Sarasvathy, 2001) and formulating plans that

involve entrepreneurial action (Read et al., 2011), EMP provides a theoretical foundation

to adapt marketing planning for new ventures.

CONCEPTUAL MODEL OF EFFECTUAL MARKETING PLANNING

We position EMP as a means to address both risk and uncertainty, joining an

emerging conversation that cuts across the theoretical domains of marketing, strategic

management, and entrepreneurship (Folta, 2007; Read et al., 2009; Shepherd, et al.

2007). EMP, in contrast to TMP, is based on a fundamental belief that uncertainty can

be a source of new opportunities (Folta, 2007). Whereas traditional planning cycles treat

uncertainty as something to be avoided in the discovery process, EMP embraces

uncertainty as a potential source of new strategic opportunities. We align our thinking

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with Taleb (2007), who describes how uncertainty can actually produce new

opportunities (as seen in Folta, 2007, p. 99):

He argues … that the way discovery really works is when you search for something you know (for example, in the case of Columbus – a new way to India), and find something you did not know was there (i.e., America).

EMP extends the planning literature by beginning to explain how entrepreneurs can plan

for both market risks as well as uncertainties. In this way, EMP replaces goal-driven

strategy with means-driven strategy. By also considering the path dependent effects of

prior resource commitments (sunk costs) and how these commitments affect the means

available to pursue an uncertain future, EMP allows firms to address risk and uncertainty

simultaneously.

Next, we explicate the EMP construct to elucidate how a means-driven strategy

alters marketing planning for new ventures.

Clarifying the EMP Construct

EMP includes some of the basic structures found in TMP but differs in five

important ways. A summary of the differences between EMP and TMP is offered in

Table 1.

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Insert Table 1 about here

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As seen in Table 1, the first three differences have to the with plan complexity. First,

EMP’s initial forecasts and respective planning cycles are relatively short. Most likely

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because of planning’s corporate origin; plans have historically assumed an annual cycle.

For new ventures, the likelihood of accurately predicting the market and then committing

to a year’s worth of strategic direction is further compounded by their lack of experience

and respective knowledge stores. They cannot realistically plan for a coming year’s

worth of market discovery. This does not completely limit new ventures from

considering its long-term strategic direction. Instead it should limit the duration of their

operational, marketing planning.

Because new ventures range in their level of experience and operate under

varying levels of market stability, the appropriate length for the planning cycle will differ

among new ventures. Large, established organizations might be suited for year long

planning cycles, however new ventures, like the artisan food startup discussed earlier can

benefit from month long plans or even shorter. The length of EMP based plans should be

constructed based on then external market or internal events that are likely to produce

pivotal information. Examples of such events include industry purchasing cycles, media

buying opportunities or internal board meetings. In addition, the new venture must

consider its limited capacity for focus and commitment to the planned marketing

activities. If expected events or capacity timelines do not match, the shorter of the two

forecasts should be adopted.

The second difference between EMP and TMP is also related to plan complexity

and has to do with the number of interrelated plan components. TMP based plans usually

aim for full-scale complexity that incorporate the entire marketing mix (Borden, 1991),

EMP based plans contain fewer interrelated components. By definition, the least

complex plan would be a single marketing tactic that is unrelated to any other aspect of

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the organization’s marketing process. However, given the interrelated nature of the

marketing mix, completely singular efforts are unlikely. Perhaps the best a new venture

can do is to strive for a state of antonymous complexity, or simplicity. New ventures

should focus on simple, straightforward marketing activities that are easy to expand or

eliminate based on market feedback (Greiner, 1972).

The third difference in plan complexity between EMP and TMP de-emphasizes

brand building and increases the importance of closing transactions. TMP suggests brand

building and relationships are crucial to a firm’s long-term success. We agree with this,

but new ventures are more focused on short-term survival than long-term branding

activities (Sarasvathy and Dew, 2005; Holloway and Sebastiao, 2010). Brands

emphasize relationships and such full-scale marketing programs often take time to

manifest themselves. Further, the results of branding can be difficult to interpret. By

focusing on sales, EMP promotes a more tactical approach that will provide quicker and

more easily interpreted market feedback We agree with Covin et al (2006) that new

ventures should prioritize the pursuit of transaction over relationships (Covin et al., 2006)

at the very early stages of venture development. EMP encourages the repetition of

transactions in order to expose and understand the full potential of otherwise

indeterminable opportunities.

The fourth difference between EMP and TMP involves resource acquisition.

EMP is based upon effectuation, which emphasizes opportunity creation and encourages

entrepreneurs to leverage existing resources. These include current networks and

tangible assets, which Sarasvathy (2001) frames as the ‘means’ at an entrepreneurs

immediate disposal. Effectual approaches are analogous to a chef planning their next

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meal (Sarasvathy, 2001). A traditional chef creates a menu and then goes to the market

to acquire the necessary ingredients. The effectual chef goes to the pantry, surveys its

contents and then designs a menu that optimizes the ingredients on hand.

The final difference between EMP and TMP is related to market oriented

learning. EMP based plans are action oriented with specific and intentional designs

towards future learning opportunities. EMP accentuates experiential learning (Gavetti &

Levinthal, 2000) through short, simple plans that allow the firm to quickly and

confidently incorporate market feedback. . Perhaps most critical to planning efficacy,

EMP allows managers to seek both positive and negative feedback. Whereas negative

feedback often results in catastrophic failure for TMP based plans, managers enacting

EMP based plans expect to turn smaller negative outcomes into future successes.

Proposition development

Our first proposition links a shortened planning cycle duration with

entrepreneurial outcomes. EMP’s short-term, simple tactical activities allow a new

venture to remain innovative, while simultaneously lowering risk and increasing

proactiveness. From the entrepreneurship literature, the proactive accumulation and

assimilation of new knowledge facilitates learning and strategic change to better match

firm strategy with market conditions (Anderson et al., 2009; Covin & Slevin, 1989).

Miller (1983) described proactiveness as the proclivity of a firm to preempt its

competitors by introducing new products, entering new markets or aggressively changing

competitive tactics. Gonzalez-Benito and colleagues frame proactiveness as a pioneering

behavior that allows firms to adapt better when considering future contingencies

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(Gonzalez-Benito et al., 2009). These pioneers, if successful, will have access to

premium market segments, price control, distribution advantages and industry standards

(Zahra and Covin, 1995).

EMP will improve the new venture’s proactiveness in two ways. First, operating

in shorter cycles will provide the knowledge resources in a timely way that increases

flexibility and allows for opportunistically contingent behavior. Second, incorporating

the cyclical process demands of a planning framework forces the new venture to digest its

newly acquired market knowledge more frequently and allows the firm to become more

proactive. An additional outcome of proactiveness is the development of contingencies

that help an entrepreneur handle extreme uncertainty (Sarasvathy, 2001) and plan what to

do next (Wiltbank, et al. 2006)

The entrepreneurship literature suggests the leveraging of contingencies is best

exploited through an effectuation approach to strategic decisions (Sarasvathy et al.,

2003). Effectuation scholars frame this strategic leveraging of contingencies as a

proactive process of opportunity creation that is created by entrepreneurial interventions

in the marketplace. A distinguishing feature of this view of contingent market

experimentation is that entrepreneurs have a causal role in establishing opportunities

(Dew et al., 2009). This ongoing learning and recursive cycle allow new ventures to

increase strategic complexity of their market plans according to actual market

information instead of predicted market conditions. However, given the limited

capabilities of new ventures described earlier (experience, knowledge stores, personnel,

etc.), efforts designed to create market knowledge should remain relatively simple. The

degree of simplicity is related to the duration of the plan (short versus long) and the

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emphasis of the activities (transaction versus relationships). This provides the logic for

our first proposition:

P1a: When compared with TMP, EMP will better position new ventures to proactively respond to actual market information.

Our next proposition relates to plan complexity, and how the interrelated

components of a plan increase following proactive market interventions. Sull (2007)

modeled the dynamics of strategic change as a series of strategic loops. Based on

Eisenhardt and Sull’s (2000) strategic complexity continuum, Sull (2007) suggests that as

more information becomes available, the complexity of a firm’s strategic loop will

increase to capitalize on this information. Linking the concept of strategy loops with

effectuation and purposeful market interventions suggests that an effectuation approach

to marketing planning will increase the size of a new venture’s strategic loop (Sull, 2007)

over time. In our language, an increase in the number of interrelated marketing plan

components corresponds to an increase in a firm’s strategic loop. Figure 1 shows the

diameter of a strategic loop in a TMP sense versus the EMP sense. From the EMP

perspective, the increasing diameter of progressive loops model how a new venture’s

strategy loop increases through a process of market intervention, learning through

experimentation, and a reevaluation of marketing activities over time. Through this

process, the contingent business model and developing market opportunity unfold.

Collectively, these arguments support our next proposition:

P1b: EMP will iteratively increase the complexity of a new venture’s strategic marketing plan, which increases the size of a firm’s strategy loop over time.

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Figure 1 also shows how much larger the strategic loop is for a TMP-based plan. The

EMP graphic consists of multiple loops over the same total period of time as the single

loop presented in the TMP graphic. This depicts Proposition 1b’s assertion that the initial

length and complexity of the planning loops can expand over time as the organization

gains experience and closes successive transactions.

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Insert Figure 1 about here

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Our next proposition addresses how resource acquisition differs in EMP versus

TMP: TMP is goal-driven and EMP is means-driven. The effectuation literature

characterizes means-driven strategic decisions as a creative process where the

entrepreneur considers new opportunities and resource commitments in terms of what

they are willing to lose (i.e. their affordable loss) in order to make that commitment (Dew

et al., 2009). Particularly within the context of new ventures, expectations about the

future are frequently flawed because market conditions, competitors, and product

offerings are ambiguous and indeterminate as an overall system (Christensen, 2003; Dew

et al., 2009). Under these conditions of extreme uncertainty, risk is better managed by

making a series of small affordable losses instead of trying to predict a single optimal

outcome and commit larger resources to a sole objective (Sarasvathy, 2001).

In terms of marketing planning, EMP promotes an affordable loss approach to

strategy development. New ventures live perilously close to the edge of existence. This

vulnerability places survival as the paramount consideration. They must manage risk

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through a series of smaller resource commitments (Dew et al., 2009). This supports our

next proposition:

P2: EMP will direct new ventures towards a series of smaller resource commitments (affordable losses) that decrease the likelihood of catastrophic losses; as compared to the singular, larger resource commitments of TMP.

Figure 1 shows the difference in corresponding resource commitment for TMP and EMP

(not to scale). The larger and more complex plan associated with TMP requires a larger

resource commitment than any of the cycles for EMP and therefore puts the new venture

at greater risk of catastrophic failure.

Our final proposition suggests how market-oriented learning differs between

EMP and TMP. While both approaches suggest learning from the market can create

strategic competitive advantages (Weerawardena, 2003), TMP promotes passive learning

and EMP promotes active learning. Learning organizations that actively manage learning

for the purpose of improving their strategic position will improve performance (Anderson

et al., 2009; Sinkula, 1994). EMP considers the contextual and contingent learning needs

and abilities of new ventures as they relate to market-oriented learning. Through the

creation of simpler and more concise plans, EMP increases the new venture’s frequency

of learning opportunities generated via plan experimentation and reconciliation. We

model this in Figure 1 as “P3”, which shows how feedback from a market allows new

ventures to more systematically engage in market-oriented learning. This provides the

logic for our final proposition.

P3: EMP will increase market-oriented learning in new ventures.

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Empirical testing of propositions

Because of its lack of entrepreneurial consideration, TMP is usually unsuccessful

in meeting the needs of entrepreneurs. In the void that exists outside of TMP,

entrepreneurs still plan, market and use effectual logic. EMP formally connects those

three activities in a conceptual model. The organic development of EMP among

organizations makes traditional, empirical testing difficult. EMP is not something that

has been previously formalized and communicated. Therefore, while forms of EMP are

currently in practice, evidence of EMP would not be found in existing databases or easily

captured in survey-based research.

Inductive methodologies allow future researchers to follow with deductive, causal

research based on more traditional marketing theories. Ethnographers have successfully

untangled complex marketing phenomena, (McAlexander and Schouten, 1995) including

entrepreneurial marketing (Martin, 2009) and might be useful researchers for

understanding the marketing planning practices of successful entrepreneurs. Other

exploratory, qualitative research methods could also be employed to expose existing

forms of EMP and document the observed phenomena in the form of an introductory

taxonomy.

Research examining entrepreneurial creation (versus discovery) often relies upon

field research. For example, interviews were conducted with expert entrepreneurs on

how they make decisions in the face of extreme uncertainty (Dew et al., 2009; Read et al.,

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2009). Thus, testing the propositions of EMP may require field research and methods

that engage subjects directly. One such methodology that may be particularly salient to

testing the EMP propositions is marketing action research (Perry and Gummeson, 2004).

This method of case research allows the researcher to actively participate with clients that

are the “problem owners,” and, “have experience-based knowledge from their actual

context (Perry and Gummerson, 2004, p. 311).” Through action research, practitioners

and researchers openly collaborate on joint cycles of planning/acting/observing/reflecting

(see Figure 2 in appendix).

A study of EMP using action research would require scholars to recruit new

ventures to develop marketing plans based on EMP principles. Collectively, the planning

team (including the scholar) would make strategic choices with full and open

consideration of the TMP alternatives. Implementation of the marketing plans would be

documented and controls would be set in place to capture the efficacy of marketing plan

design. For example, the research team would consider whether the shortened duration

of the planning cycle impeded or improved the new venture’s ability to perform? Did the

simplicity of the plan allow for full exploitation of the opportunities at hand? Did the

pursuit of transactions over relationships result in vital cash generation or did it prevent

the firm from more meaningful investments? The research team would continue to

create new EMP based plans and revise the concept of EMP until the results of the

planning effort matched expectations.

Implications and Future Research

Implications for theory development

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This paper follows Read et al. (2009) and advocates a stronger connection

between effectuation and marketing theories. Buoyed by research advocating an

entrepreneurial interpretation of marketing (Hill and Wright, 2000; Martin, 2009; Morris

et al, 2002; Read, Dew, Sarasvathy, Song and Wiltbank, 2009), we add effectuation and

reinterpret marketing planning theory. Moving effectuation’s level of analysis from

individual decision-making (Sarasvathy, 2001) to firm-level action is also a contribution

of this paper. This contribution is similar to Daft and Weick’s (1984) discussion of how

organizations enact their environment. When individual managers interpret new

information, enactment suggests their organizations take action to change the

environment in their favor. While enactment is positioned as a strategy for incumbent

firms, we position EMP as a strategy for new ventures. In sum, extending effectuation

to the firm level opens a new segment for theoretical consideration.

This study also contributes to our understanding of affordable loss. The ‘risk

little, fail cheap’ (Read et al., 2011) mentality of affordable loss stands in stark contrast to

traditional business planning (Honig and Karlsson, 2004) and predictive logics

(Wiltbank, et al. 2006). The affordable loss concept more accurately represents what

most entrepreneurs actually do (Sarasvathy, 2001) and has been used to describe whether

an individual enters into entrepreneurship (Dew at al., 2009), the differences in decision

making between expert and novice entrepreneurs (Read et al., 2009), and even how

entrepreneurs coopt stakeholders into co-creating business models in uncertain markets

(Sarasvathy and Dew, 2005; Holloway and Sebastiao, 2010). We build on these scholars’

work by extending affordable loss into marketing planning. EMP provides marketing

planners with a strategic perspective to proceed with marketing planning under extreme

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uncertainty and, like the artisan food company, to discover opportunities that TMP could

not have predicted.

The conceptual consideration of TMP and EMP led to a crucial insight, that

perhaps EMP could be a tool for premeditating improvisation. Until now, improvisation

has remained a romantic and celebrated concept but has not evolved into practical advice

for improving firm performance. Future research should consider the role and EMP and

improvisation together and gather evidence that might further elucidate the impact that

EMP has on the success and frequency of improvisational acts. Perhaps EMP might help

solve the marketing planning paradox (Slotegraff and Dickson, 2004).

Additionally, this paper suggests field research, particularly action research, is a

underused methodology to bridge the gap between marketing and entrepreneurship.

Perry and Gummeson (2004) argued that marketing action research could provide an

additional perspective that will greatly increase scholarly reach. If the use of action

research increases, “practicing marketing managers will begin to read reports of

business school research, and marketing students and researchers will master

management action competencies as well as academic ones (p. 319).” Further, as we

have shown in our presentation of EMP, passive research methodologies miss the essence

of what entrepreneurs actually do. Entrepreneurs prefer to take action and learn on the

fly through feedback paths (Honig, 2004). Our research methods need to mirror this if

we expect observable phenomena to inform theory.

Managerial implications

23

Recent economic conditions have resulted in a renewed focus on supporting

entrepreneurial development. Certainly, marketing management is a vital component to

the growth of new ventures. However, previous marketing planning research has failed

to focus on their specific needs. This has resulted in marketing planning tools that are ill-

equipped to handle the high levels of uncertainty faced by entrepreneurs managing new

ventures. By empowering managers with a marketing planning tool that reflects the way

they think, the attention and value of marketing is more likely to be accepted earlier in a

venture’s existence. This could lead to overall improvements in new venture survival,

value creation and profitability.

Our paper on EMP also closes the gap between theory and practice. By offering

entrepreneurs tactical advice to deal with extreme uncertainty, EMP bridges the divide

between academics and practitioners. As Little (1970, p. B466) wrote: “The big problem

with management science models is that managers practically never use them …” Lilien

(2011) agreed, stating that while some marketing models have had a dramatic impact on

practice, “orders of magnitude more” have received minimal use by practitioners. Our

transparent, five key differences between EMP and TMP give entrepreneurs simple rules

to get more operational value out of their marketing plans. Rather than collect dust once

a funding round is closed, EMP-based plans can actually help managers create market

opportunities within the means at their immediate disposal.

Future research may include extending EMP into corporate entrepreneurship. In

other words, would EMP benefit large corporations starting new ventures of their own?

EMP would likely enhance corporate entrepreneurship because it is vitally important for

any new venture to capture and respond to market feedback early in its development.

24

Resource considerations might not require a corporately sponsored new venture to

employ EMP but the shorter, less complex aspects of EMP would still promote its most

important outcome – market oriented learning.

Conclusion

Two factors may have contributed to a lack of understanding of the role

marketing planning plays in new venture strategy and growth. First, the bulk of

marketing theory has focused on opportunity discovery instead of opportunity creation

(Alvarez and Barney, 2007). Opportunity discovery is a causal process, where marketers

analyze existing market conditions, predict an optimal market opportunity, and design

plans to capture that opportunity. This limits marketing planning efficacy to large

corporations and incumbent firms operating in stable markets (e.g. Christensen, 2003).

Because of this, traditional marketing planning offers little value to marketers in new

ventures.

Second, traditional marketing planning has a passive, historical perspective for

market-oriented learning. TMP positions learning as a way to reconcile the past year’s

successes and failures, or as a means to understand competitive conditions through

market research. Under TMP’s use for learning, marketing planning is reduced to a

component of a pre-launch start-up plan; once a venture launches, the value derived from

traditional planning is trivial. New ventures should not be passive in their learning, they

should actively use learning to inform strategic decisions (Anderson et al., 2009), respond

to new means and surprises (Sarasvathy and Dew, 2005; Holloway and Sebastiao, 2010),

and iteratively implement what they learned into new strategies (Sull, 2007). These

25

action-based plans, which we term effectual marketing plans, use the marketing function

to actively learn from a market and inform operations. The needs of new ventures for

this type of plan have not been previously considered and we hope our paper adds to the

conversation based upon the interaction of effectuation and marketing (Read et al, 2009).

EMP better matches the marketing management needs of new ventures with the

unique challenges caused by greater market uncertainty. EMP improves new venture

performance by leveraging contingencies, means-driven risk management, and increased

market oriented learning. EMP makes an important contribution by logically mapping

effectuation theory to a strategic outline of marketing planning for new ventures. In so

doing, it begins to bridge the gaps between marketing, management and entrepreneurship.

26

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