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Entrepreneurial Marketing
Prof. Marco ProtanoUniversity of Edinburgh
Spring, 2005
Responsiveness to change is the key to survival
“It’s not the strongest of the species that survives, nor the most intelligent but rather the one most responsive to change.”
Darwin
I. Practice of Entrepreneurial Marketing Both a mindset & a process
Mindset: Entrepreneur’s relentless pursuit of both opportunity &
resources required to seize it. Process:
Combines a guiding vision of what customer will want in future with measured, iterative experiments designed to test vision
Stages investments that reveal option values to entrepreneur and proofs by supportive people & partners
II. Definition of Entrepreneurial Marketing
Entrepreneurial Marketing is about gathering the evidence that convinces individuals* surrounding venture to act & react by exploiting breakthroughs & overcoming setbacks
*=People, Partners, Customers & End Users
III. Importance of Marketing for Entrepreneurs 14 Venture Capitalists who backed more
than 200 ventures rated marketing the highest in importance @ 6.7 on a 7.0 scale
Same VC’s concluded that venture failure can be reduced by 60% using pre-venture marketing analysis
CEO’s of the Fortune 500 in 1997 cited as their greatest strength
Marketing Value Helps product be perceived by target as more
valuable vs. competitors
Marketing strategies & tactics guide: Development of products that market wants, Helps target firm’s offering to right customers Gets product to customer Helps insure the customers perceive the incremental
and superior value as well as will pay
Recruiting best talent
Raising capital
IV: What am I selling to whom?
• Distinctive Competence
• Sustainable Competitive Advantage (ideal if unfair)
How should I be positioned?
To which target market(s)?
• Screening ideas
• Product/service development
• Naming the company & products
• Pricing
• Distribution
• Salesforce
• Promotion
• Public relations
• Recruiting
• Raising capital
Important Targeting Questions: Does the target segment want the perceived
value that my positioning is trying to deliver more than other segments?
How efficiently can the segment be reached? How quickly? How big is the demand? Is their growth potential?
What is the competitive SWOT? How will competitors react? What are the environmental conditions? What are the virtual community opportunities?
Be sure to assess: Current size of segment (s) Potential size Benefits sought (needs & goals) Attitudes formed (salient beliefs based) Psychographics Product sales cycle, usage & repeat potential Competitive perceptual positioning & value map Profitability per customer transaction Lifetime value of a customer
Positioning Answers the question:
Why should a member of the target segment buy my product rather than my competitors’?
What are the unique differentiating characteristics of my product as perceived by members of the target segment (s)?
How have the target segment (s) perceived the relative differentiation?
Keys to Positioning Focus differentiators
Few in number Relatively valued Memorable Sustainable
Test bundle of attributes (sum to benefit) with target
Big mistake entrepreneurs make is to position based on features of product vs. competitors. Customers don’t buy features—they buy benefits. Customers buy perceived benefits.
Examples Apple: easiest, most fun to use and
stylishly hip (adding innovative)
Orvis Company Sells “country” clothing, gifts & sporting gear in competition with
L.L. Bean & Eddie Bauer. Sells both retail & mail order Difference:
Perceived as the place to go for all areas of fly-fishing expertise. Perceived as making a very difficult sport “very accessible to a new
generation of anglers.” Since 1968 when sales were $1M, Orvis has been running fly-
fishing schools near retail stores. Annual sales now $350M. Fly-fishing products contribute only a small fraction of sales but
heritage adds cachet to all products offered. Beginner fly fishermen who attend school overwhelmingly become
loyal customers and purchase more profitable clothing & gift lines. CEO says, “Without our fly-fishing heritage, we’d be just another
rag vendor.” Margins are higher at Orvis because of unique positioning. Positioning is defensible because of consistent perception that all
of their operations reinforced since 1968. Differentiation has added $1Billion to Orvis’ brand value.
V. Opportunity Identification
Customer needs or benefits sought are largely independent of the product to be developed What does the product have to do? Not how will it do it?
Gather data from potential customers Interviews, focus groups, surveys Observe similar products in use
Opportunity Identification
Questions to ask: When and why do you use this type of product? Walk us through a typical session using product What do you like/dislike about existing products? What factors were important in purchasing this product? What improvements would you make to this product?
Establish relative importance of customers’ needs
VI. Pricing in B2B Must understand perceived customer value
“Customers spend more effort to know supplier’s costs than suppliers spend to know customers’ values.” Irwin Goss Penn State
Typical components that make up perceived customer value:
1. Product value (product delivered only)2. Supplier value (supplier not product)3. Switching investments (from current to alternate)
Attributes Affecting Perceived Customer Value Immediate Product:
Product Performance Durability Serviceability Downstream
Performance Current Risks
Immediate Supplier: Supplier Performance
(delivery tech, sales, services, etc.)
Promotional values
Expected Product: Innovation Product Flexibility Follow-on products Long-run risks
Expected Supplier: Relationship Tech access Security of supply Strategic value Supplier Power
VII. Estimating demand for a product can be broken into:1. Whether product will have demand (assuming
price is in competitive range)a) Exploration of preferences & educability of consumers
in light of technical feasibility
2. What range of price will make the product economically attractive to buyers
3. What sales volumes can be expected at various points in this price range
4. What reaction will price produce in manufacturers and sellers of competition & displaced substitutes
VIII. Communications
Names & Slogans Many entrepreneurs miss positioning opportunities when
name products
Without mega marketing resources, name is important contributor to positioning
Assists in deepening the awareness & interest in the mind
1-800-FLOWERS, 1-800-MATTRESS, Netflix, Blockbuster Slogans add to the mindshare potential:
BMW: The Ultimate Driving Machine At Avis, we are #2 so we have to try harder.
Key is brevity, simplicity, relevancy, memorability, consistency
Public Relations & Publicity Unpaid publicity for your product
Get public especially target (s) to hear about your firm and product
Can be extremely valuable because can be perceived as more credible than advertising
Creation of “buzz” that you are a winner
Gaining the Perception of Leadership Target the information gatekeepers
Trusted sources of information in the data gathering process prior to judging & deciding
Newsletters, media reports, celebrity recognition
Eventually you need to reach those gatekeepers who have access to:
Gurus in industry Key trade & business press, respected experts, innovators,
experienced users Decision makers Naysayers Mass buyers
Spokesperson/Evangelists Have at least 1 or 2 (e.g. CEO) who are
charismatic and passionate to: Woo and Develop relationships with influencers
Press tours, working with beta testers, public speaking at conferences, talk show circuit, white papers
Linkage with Financing Raising debt & capital also helps the
product be perceived and perform as a winner
Publicize financing when commitment received
PR Agencies Caveat emptor Instead hire staff to work within company Key skills:
Creative Execution Networking Dedicated Perseverance
PR Timing Need to be in advance of market (a/l/a
Hollywood movie premiere marketing) But beware of not being able to deliver
(e.g. www.Boo.com) Also beware: Loose lips sink ships.
IX: Entrepreneurial Distribution Channel Decisions Technology has had a mega impact on
access to the customer/consumer
Includes all activities that need to be performed so that product’s offering bundle is transferred to the customer
Entrepreneurial Distribution Channel Decisions
Logistics: Right place? Right time? Right quantities?
The right perceived offering bundle?
To the right target segment (s)?
Customer Impact:
Which products?
Which time period?
Alternatives:
Direct to customer?
Indirect? Exclusive? Selective? Intensive?
Distribution Exclusivity Exclusive:
1. Possible easier sell in2. Higher control3. Higher margins for all4. Less competition at
point of sale5. More push to end
consumer6. Less coverage7. More association with
channel members’ attributes
8. Possible guaranteed minimum sales
Selective: Resellers compete Less reseller loyalty
Intensive:1. High coverage2. Convenience3. Lower control4. Less push to end consumer5. More mass pull needed6. More coverage7. Faster sales cycle possible
Franchising Accelerate revenue growth Enables rapid expansion without large
investments by entrepreneur Lease a portion of the business and receives the
franchisee’s capital, energy and entrepreneurship Take advantage of scale economies Local entrepreneur recruits, trains & develops HR
which is a challenge in a tight job market Need controls to guarantee consistency of brand
experience
Channel Conflict Need to define roles for each channel member
that are understood and not conflicting
Benefits added by different channel partners will not be valued the same by all of target segments.
Channel members make most money if they are matched with segments that value the channel member’s benefits the highest.
e.g virtualvineyards.com sold direct to consumers and its vineyard suppliers ran afoul of local wine merchants in states with distributorships
X. Entrepreneurial Salesforce Issues
Positioning (Segmentation + Differentiation)
Role of Salesforce in Marketing Mix
Rep vs. Direct => Experimentation?
Personal vs. Telemarketing => Experimentation
Size
Deployment
Compensation
Recruiting
Training
XI. Promotion & Viral Marketing Promotion gets product in front of:
Customers Channel intermediaries COI’s & press
Provides temporary incentive to act (e.g. try or buy)
Paid activities or events that provide incentive to do something Direct Marketing Push & Pull Promotions Viral Marketing Event Marketing Guerilla Marketing
Tactics--Free Beware of giving away product as
diminishes perceived value
However, some good models of free usage:
Adobe Viewer Google Yahoo Internet Explorer
Tactics--Viral Marketing Each user tells his/her
Family Friends Colleagues Neighbors
To do something that will benefit relationship (e.g. easier communication, working together)
Examples: Get Free Email with Hotmail or GMail Accounts ICQ (I seek you)
1 million users downloaded & used product in Year 1 15 million by Year 3 AOL purchased parent for $300M
“Infects” contacts with product and exponential growth achieved
When Viral Marketing Works Best
1. Low product cost2. Low switching cost3. Easy distribution4. Relatively high lifetime customer value
Tactics—Event Marketing Excitement of event can:
Ignite positive emotions about firm & product Lead to articles & interviews in media Lead to buzz
Needs to be well-planned & executed flawlessly Goal is to have press use media space to promote product
vs. paid advertising Helps convince skeptical consumers to consider & try Examples:
Virgin’s Richie Branson piloting a tank down Broadway in New York launching Virgin Cola;
Macy’s Thanksgiving Parade; Volvo’s Tennis Classic Industry Conferences & Conventions (CES in Las Vegas, MAC
World)
Tactics—Small Giveaways Small giveaways to impart a frequent
memory booster Aflac stuffed duck toy Starbucks coffee mug T-shirts, key chains, sports bottles, desk pads,
pens, bags, frisbees, logoed Swiss Army knife
Goal is to remind target of brand name, tag line, superior value derived at strategic inflection points (e.g. mouse pads when online)
XI. Entrepreneurial Advertising Decisions Most misused and misunderstood marketing
tactic by entrepreneurs
Can be one of the most efficient buys if allocate scarce capital resources to maximize value to venture
Need to compare returns for targeted reach and incremental pull (sales response)
If creative and media used effective, pull can be on average of 18% increase in sales volume for over 2 years and fast (within 6 hours to 6 months depending on product sales cycle).
Advertising Questions1. Budget: How much should I spend?2. Media Planning: Where and when should
I place the advertising?3. Copy: What should I say?4. Payback: What will my incremental
return be?
Example: Priceline uses overlooked and cheap radio with hasbeen star—William Shatner who took options.
XIII: Mindset of an Entrepreneurial Marketer by Buskirk & Lavik
Visionary Creative Focused Passionate Driven Perseverance Opportunistic
Problem Solver Self-disciplined Frugal Empathetic Socially responsible Spiritual Good timer Lucky
The Rule of Opportunity
Resist the impulse to relax
Be alert to opportunity, and don’t be terribly particular about distinguishing one opportunity from another
The opportunities you fail to capitalize on BECOME THE OPPORTUNITIES – and properties – OF SOMEONE ELSE, USUALLY INSTANTLY. Alan Axelrod
Author, “Everything I know about business I learned from monopoly”
Acknowledgements The author wishes to thank the extensive support
of: Lodish, Morgan & Kallianpur, Entrepreneurial Marketing,
John Wiley Publishers, 2001. Tellis & Golder, Will and Vision, McGraw Hill, 2002. Lassiter, “Entrepreneurial Marketing,” Harvard Business
School Publishing, October 2002. Tyebjee, Bruno & McIntyre, “Growing Ventures can
Anticipate Marketing Stages,” HBSP, January, 1983. Dean, “Pricing Policies for New Products,” HBSP, 1976. Czepiel, Competitive Marketing Strategy, Pearson, 1988.