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ENTREPRENEURSHIP

A PROCESS PERSPECTIVE
A PROCESS PERSPECTIVE
ENTREPRENEURSHIP A PROCESS PERSPECTIVE Robert A. Baron Scott A. Shane A. Rebecca Reuber Slides Prepared by:

Robert A. Baron

Scott A. Shane A. Rebecca Reuber

Slides Prepared by:

Sandra Malach, University of Calgary

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MARKETING IN A NEW FIRM

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LEARNING OBJECTIVES
LEARNING OBJECTIVES
  • 1. Identify a real customer need and explain why an entrepreneur should seek to develop a product or service that meets a real need.

  • 2. Explain why entrepreneurs need marketing information before beginning their ventures, and describe ways they

can gather this information.

  • 3. Define perceptual mapping and explain how its results can assist entrepreneurs in designing their products.

  • 4. Explain conjoint analysis and indicate what information it provides for entrepreneurs.

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LEARNING OBJECTIVES
LEARNING OBJECTIVES
  • 5. Explain why entrepreneurs use different techniques to

assess customer preferences in new and established

markets, and identify those different techniques.

  • 6. Explain how large and growing markets help

entrepreneurs.

  • 7. Define the new product S-curve, and explain why it is important for entrepreneurs to understand the relationship between effort and product performance.

  • 8. Describe the typical new product adoption pattern

and explain how it influences entrepreneurial action.

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LEARNING OBJECTIVES
LEARNING OBJECTIVES
  • 9. Define “crossing the chasm” and explain why and how entrepreneurs “cross the chasm.”

    • 10. Explain how entrepreneurs should choose the customers on whom to focus their initial efforts.

    • 11. Define a “dominant design” and a “technical standard” and explain how they influence the performance of new ventures.

    • 12. Explain why personal selling is a very important part of entrepreneurs’ marketing strategies.

    • 13. Describe how entrepreneurs price new products.

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“Try novelties for salesman’s bait, for novelty wins everyone.” --Goethe, Faust: Part I, 1808 Copyright ©

“Try novelties for salesman’s bait, for

novelty wins everyone.”

--Goethe, Faust: Part I, 1808

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REAL NEED
REAL NEED
  • Successful products and services are based on real customer needs.

  • A real need exists when customers have a problem that needs to be solved and no existing products or services can do this.

    • Truly solving unsolved customer problems or offering products or serves that are significantly better than existing ones.

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DETERMINING NEED
DETERMINING NEED
  • Look for a customer problem.

  • Define a true solution.

  • Evaluate economics.

  • Identify alternatives offered by competitors.

DETERMINING NEED  Look for a customer problem.  Define a true solution.  Evaluate economics.

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ASSESSING CUSTOMER

PREFERENCES
PREFERENCES
  • Evaluate target market.

    • Companies who focus on a market are more successful

  • Determine the type of new product or

service you’re developing.

  • Is your solution to customer needs already understood? Or is it a novel solution?

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DIRECT TECNIQUES FOR

GATHERING INFORMATION
GATHERING INFORMATION
  • Customer Surveys

    • Compare products & attributes

  • Perceptual Mapping

    • Potential customers perceptions

  • Focus Groups

    • Identify key dimensions

    • Evaluation of product based on key dimensions

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CONJOINT ANALYSIS
CONJOINT ANALYSIS
  • Asks individuals to express preferences for various products that are specially chosen to offer a systematic array of features.

  • Statistical analysis to indicate the relative importance of each variable (features).

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PRIMARY & SECONDARY

DATA
DATA
  • Primary Data is collected specifically for

the entrepreneur’s purpose

  • Surveys, Focus Groups, Observation

  • Secondary data has not been collected by the entrepreneur

    • Statistics Canada, Industry Canada

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FOR A KNOWN TARGET

MARKET OR SOLUTION
MARKET OR SOLUTION

Use traditional market research methods:

FOR A KNOWN TARGET MARKET OR SOLUTION Use traditional market research methods:  Surveys  Focus
  • Surveys

  • Focus groups

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FOR NOVEL MARKETS

AND SOLUTIONS
AND SOLUTIONS
  • Talk with industry experts

  • Create future scenarios

  • Extrapolate trends to determine product

and service features

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FOR A NEW MARKET OR

SOLUTION
SOLUTION

When either the target market or solution is known, but the other is not, blend traditional market research with

futurist approaches.

  • Anthropological expeditions

  • In-depth interviews with early adopters

  • Partnerships with customers to develop products

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THE MARKET DETERMINES

RESEARCH TECHNIQUES
RESEARCH TECHNIQUES
 

EXISTING

NEW MARKET

MARKET

Philosophy of market research

Deductive data analysis

Intuition

Techniques for gathering customer

Focus groups, surveys, mall studies

Industry experts, trend extrapolation,

information

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future scenarios

THE ENTREPRENEUR’S

DISADVANTAGE
DISADVANTAGE

When markets or new products are known, existing companies have the advantage with

  • An existing customer base

  • A large amount of information about customer preferences

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THE ENTREPRENEUR’S

ADVANTAGE
ADVANTAGE

When the market or solution is novel, existing companies face three major disadvantages:

  • Core rigidities

  • Tyranny of the current market

  • User myopia

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THE LESSON
THE LESSON

Entrepreneurs do better when they

launch products based on novel solutions to customer needs in new

markets.

THE LESSON Entrepreneurs do better when they launch products based on novel solutions to customer needs

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MARKET DYNAMICS
MARKET DYNAMICS

All markets are not equal. They vary in

  • Size

  • Rate of growth

  • Evolution (stage in life cycle)

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MARKET SIZE
MARKET SIZE

The size of the market determines:

  • Ease of recouping start-up costs

  • Ability to go in “under the radar”

MARKET SIZE The size of the market determines:  Ease of recouping start-up costs  Ability

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MARKET GROWTH
MARKET GROWTH

The rate of market growth determines:

  • Ease of capturing new customers

  • Potential volume of customers

  • Benefits of volume purchasing and scale

economies

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THE S-CURVE Improvements slow down again Improvements come faster Initially, improvement is slow
THE S-CURVE
Improvements
slow down
again
Improvements
come faster
Initially,
improvement
is slow

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TIMING THE MARKET
TIMING THE MARKET

Implications of the S-Curve:

  • Capital is required to sustain early product development

  • New product development is a function

of effort, not time

  • Point of acceleration is critical for future planning

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ADOPTION PATTERNS
ADOPTION PATTERNS
  • Innovators

  • Early adopters

  • Early majority

  • Late majority

  • Laggards

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TYPICAL PATTERN OF NEW

PRODUCT ADOPTION
PRODUCT ADOPTION
TYPICAL PATTERN OF NEW PRODUCT ADOPTION Copyright © 2008 by Nelson, a division of Thomson Canada

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TO CROSS THE CHASM
TO CROSS THE CHASM
  • Build a complete customer solution to customer needs

  • Focus on a single niche

  • Communicate clearly to customers

TO CROSS THE CHASM  Build a complete customer solution to customer needs  Focus on

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CHOOSING TARGET CUSTOMERS Customers have a compelling reason to buy if the product or service 

CHOOSING TARGET CUSTOMERS

Customers have a compelling reason to buy if the product or service

  • Improves their productivity

  • Reduces their costs

  • Gives them something they couldn’t

have before

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DOMINANT DESIGN
DOMINANT DESIGN
  • All companies producing a product choose a common way of bringing together the different parts of a product or service.

  • New firms have an advantage in periods of radical breakthrough.

DOMINANT DESIGN  All companies producing a product choose a common way of bringing together the

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SETTING THE TECHNICAL

STANDARD
STANDARD
  • Discount prices when product is introduced

  • Build relationships with producers of

complementary products

  • Get to the market quickly

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PERSONAL SELLING
PERSONAL SELLING
  • Generate customer interest

  • Identify customer requirements

  • Overcome customer objections

  • Close the sale

PERSONAL SELLING  Generate customer interest  Identify customer requirements  Overcome customer objections  Close

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PRICING NEW PRODUCTS
PRICING NEW PRODUCTS
  • Determine fixed and variable costs to set a price that generates a profit

  • Assess market conditions to ensure the

price isn’t too high or low

  • Understand how customers trade off attributes and price

  • Factor in hidden costs or discounting

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