Entrepreneurial Marketing

Prof. Marco Protano University 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. 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

Process:

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:
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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

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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?

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Be sure to assess:
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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
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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.
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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
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Sells “country” clothing, gifts & sporting gear in competition with L.L. Bean & Eddie Bauer. Sells both retail & mail order Difference:
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Since 1968 when sales were $1M, Orvis has been running flyfishing 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.

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.”

V. Opportunity Identification

Customer needs or benefits sought are largely independent of the product to be developed
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What does the product have to do? Not how will it do it? Interviews, focus groups, surveys Observe similar products in use

Gather data from potential customers
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Opportunity Identification

Questions to ask:
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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
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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. 2. 3.

Product value (product delivered only) Supplier value (supplier not product) Switching investments (from current to alternate)

Attributes Affecting Perceived Customer Value

Immediate Product:
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Expected Product:
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Product Performance Durability Serviceability Downstream Performance Current Risks

Innovation Product Flexibility Follow-on products Long-run risks

Immediate Supplier:

Supplier Performance (delivery tech, sales, services, etc.) Promotional values

Expected Supplier:
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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)

Exploration of preferences & educability of consumers in light of technical feasibility

2.

What range of price will make the product economically attractive to buyers What sales volumes can be expected at various points in this price range What reaction will price produce in manufacturers and sellers of competition & displaced substitutes

3.

4.

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:
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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
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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:
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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:
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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:

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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
Customer Impact: Logistics: Right place? Right time? Right quantities? The right perceived offering bundle? To the right target segment (s)?

Alternatives: Which products? Which time period? Direct to customer? Indirect? Exclusive? Selective? Intensive?

Distribution Exclusivity

Exclusive:
1. 2. 3. 4. 5. 6. 7.

Selective:
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8.

Possible easier sell in Higher control Higher margins for all Less competition at point of sale More push to end consumer Less coverage More association with channel members’ attributes Possible guaranteed minimum sales

Resellers compete Less reseller loyalty

Intensive:
1. 2. 3. 4. 5. 6. 7.

High coverage Convenience Lower control Less push to end consumer More mass pull needed More coverage Faster sales cycle possible

Franchising
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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:
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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
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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
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 

To do something that will benefit relationship (e.g. easier communication, working together) Examples:
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Family Friends Colleagues Neighbors

Get Free Email with Hotmail or GMail Accounts ICQ (I seek you)
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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. 2. 3. 4.

Low product cost Low switching cost Easy distribution Relatively high lifetime customer value

Tactics—Event Marketing

Excitement of event can:
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Ignite positive emotions about firm & product Lead to articles & interviews in media Lead to buzz

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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:
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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
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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 Questions
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Budget: How much should I spend? Media Planning: Where and when should I place the advertising? Copy: What should I say? 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
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Visionary Creative Focused Passionate Driven Perseverance Opportunistic

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Problem Solver Self-disciplined Frugal Empathetic Socially responsible Spiritual Good timer Lucky

The Rule of Opportunity
 Resist  Be

the impulse to relax

alert to opportunity, and don’t be terribly particular about distinguishing one opportunity from another opportunities you fail to capitalize on BECOME THE OPPORTUNITIES – and properties – OF SOMEONE ELSE, Alan Axelrod USUALLY INSTANTLY. Author, “Everything I know about
business I learned from monopoly”

 The

Acknowledgements

The author wishes to thank the extensive support of:

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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.

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