Download Ch. 11: Unique Marketing Issues Confronting New Ventures (PDF, 299 KB)

A primer in Entrepreneurship
Prof. Dr. Ulrich Kaiser
Institute for Strategy and Business Economics
Institute for
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
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
2
I.
Selecting a Market and Establishing a Position
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 pp
g
g
g
p g
within a target market, and establishing a unique position in the target market.
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
3
I.
Selecting a Market and Establishing a Position
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
4
I.
Selecting a Market and Establishing a Position
A. Segmenting the Market
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 a
new 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:
ƒ product type
ƒ price point
price point
ƒ customers served
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
5
I.
Selecting a Market and Establishing a Position
A. Segmenting the Market
4. 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 small 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 identified
easily 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 moves forward.
f
d
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
6
I.
Selecting a Market and Establishing a Position
B. Selecting a Target Market
1. Once a firm has segmented the market, the next step is to select a target market
target 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 to
segment of a market because many market segments are too large to target successfully. University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
7
I.
Selecting a Market and Establishing a Position
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 an
focusing 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.
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
8
I.
Selecting a Market and Establishing a Position
C. Establishing a Unique Position
1. After selecting a target market, the firm’s next step is to establish a “position”
position within it that differentiates it from its competitors. 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 part
is 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.
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
9
I.
Selecting a Market and Establishing a Position
C. Establishing a Unique Position
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”.
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
10
I.
Selecting a Market and Establishing a Position
C. Establishing a Unique Position
Match the Company to Its Tagline
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
11
II.
Key Marketing Issues for New Ventures
y
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 benefits
products 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.
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
12
II.
Key Marketing Issues for New Ventures
y
g
A. Selling Benefits Rather Than Features
Two different approaches to promoting a cell phone
Approach
Selling Features
Selling Benefits
Conclusion
Illustration
“Our cell phones are equipped with sufficient memory to store 100 phone numbers.” “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 product. 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
sufficient memory to store 100 phone number is important, and how buying the product will enhance his or her life.
A primer in Entrepreneurship
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
Spring semester 2008
13
II.
Key Marketing Issues for New Ventures
y
g
B. Establishing a Brand
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’ss brand in consumers
organization
brand in consumers’ minds. 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
is this: the brand is all about the attributes and promises that people d
i
th t
l
associate with a company, and the position is all about the details.
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
14
II.
Key Marketing Issues for New Ventures
y
g
B. 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 market.
market
a. So how does a new firm develop a brand? On a philosophical level, a firm must have meaning in its customers’ lives. It must create fi
h
i i i
’ li
I
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
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
15
II.
Key Marketing Issues for New Ventures
y
g
B. Establishing a Brand
c. Ultimately, a strong brand can be a very powerful asset for a firm. 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 a
liabilities that are linked to a brand and enables it to raise a firm’s valuation.
ii C
ii.
Co‐branding refers to a relationship between two or more b di
f t
l ti hi b t
t
firms where the firms’ brands promote each other.
Examples: AT&T Universal Master Card
Citibank/American Airlines/Visa Card
Healthy Choice Cereal by Kellogg’s
Coach edition of the Lexus ES series
Eddie Bauer edition of the Ford Explorer
∙ Braun/Oral‐B Plaque Remover
/
q
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
16
II.
Key Marketing Issues for New Ventures
y
g
B. Establishing a Brand
Wh t’ B d? Diff
What’s a Brand? Different Ways of Thinking About the Meaning of a Brand
tW
f Thi ki Ab t th M
i
f B d
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
17
Key Marketing Issues for New Ventures
y
g
B. Establishing a Brand
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
http://ww
ww.millwardbro
own.com/Sitess/optimor/Med
dia/Pdfs/en/BrandZ/BrandZ‐‐2007‐RankinggReport.pdf
II.
A primer in Entrepreneurship
Spring semester 2008
18
Key Marketing Issues for New Ventures
y
g
B. Establishing a Brand
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
http://ww
ww.millwardbro
own.com/Sitess/optimor/Med
dia/Pdfs/en/BrandZ/BrandZ‐‐2007‐RankinggReport.pdf
II.
A primer in Entrepreneurship
Spring semester 2008
19
III
III.
The Four Ps of Marketing For New Ventures
The Four Ps of Marketing For New Ventures
1. Once a company decides on its target market, establishes a position within that market, and establishes a brand, it is ready to begin
within that market, and establishes a brand, it is ready to begin planning the details of its marketing mix. 2 A
2.
A firm
firm’ss marketing mix is the set of controllable, tactical marketing tools 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
3.
Most marketers organize their marketing mix into four categories: t
k t
i th i
k ti
i i t f
t
i
product, price, promotion, and place (or distribution).
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
20
III
III.
The Four Ps of Marketing For New Ventures
The Four Ps of Marketing For New Ventures
Product
Price
Marketing Mix
Promotion
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
Place (or distribution)
A primer in Entrepreneurship
Spring semester 2008
21
III
III.
The Four Ps of Marketing For New Ventures
The Four Ps of Marketing For New Ventures
A. Product
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 customer buys, may have as many as five characteristics: a t
b
h
fi
h
t i ti
quality level, features, design, a brand name, and packaging. University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
22
III
III.
The Four Ps of Marketing For New Ventures
The Four Ps of Marketing For New Ventures
B. 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
products: cost
based pricing or value
pricing or value‐based
based pricing.
pricing.
a. In cost‐based pricing, the list price is determined by adding a markup percentage to a product’ss cost. percentage to a product
cost
b. 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 illi t
f
d t d th b ki
ff bit
to provide a cushion.
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
23
III
III.
The Four Ps of Marketing For New Ventures
The Four Ps of Marketing For New Ventures
B. Price
Two Approaches to Pricing
Two Approaches to Pricing
Approach to Pricing
Cost Based Cost‐Based
Pricing
Value‐Based Pricing
Description
In cost‐based pricing, the list price is determined by adding a markup percentage to a product’s cost. The advantage of this 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.
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 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’ss perception of what a product or service is worth.
consumer
perception of what a product or service is worth
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
24
III
III.
The Four Ps of Marketing For New Ventures
The Four Ps of Marketing For New Ventures
B. Price
3 Regardless
3.
Regardless of the method of pricing, a company can
of the method of pricing a company can’tt charge a premium 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:
ƒ Demand for the product is strong relative to supply;
ƒ Demand for the product is inelastic;
ƒ The product is patent protected and has a clearly defined target market;
ƒ The product offers additional features that are valued;
ƒ A new technology is being introduced;
gy
g
;
ƒ The product is positioned as a luxury product.
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
25
III
III.
The Four Ps of Marketing For New Ventures
The Four Ps of Marketing For New Ventures
C. Promotion
1 Promotion
1.
Promotion refers to the activities the firm takes to communicate the 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:
ƒ Raise customer awareness of a product;
p
;
ƒ Explain a product’s comparative benefits;
ƒ Create associations between a product and a certain lifestyle.
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
26
III
III.
The Four Ps of Marketing For New Ventures
The Four Ps of Marketing For New Ventures
C. Promotion
b Public
b.
Public relations refers to efforts to establish and maintain a 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:
ƒ Press releases;
ƒ New conferences;
ƒ Media coverage;
ƒ Articles in the industry press and periodicals;
ƒ Civic, social, and community involvement.
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
27
III
III.
The Four Ps of Marketing For New Ventures
The Four Ps of Marketing For New Ventures
C. Promotion
Steps Involved in Putting Together an Advertisement
Steps Involved in Putting Together an Advertisement
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
28
III
III.
The Four Ps of Marketing For New Ventures
The Four Ps of Marketing For New Ventures
C. Promotion
Public Relations Techniques
Public Relations Techniques
Press release
Media coverage
Articles in industry
press and periodicals
Blogging
Monthly newsletter
News conference
Civic, social, and community
involvement
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
29
III
III.
The Four Ps of Marketing For New Ventures
The Four Ps of Marketing For New Ventures
D. Place (or Distribution)
1 Place
1.
Place, or distribution, encompasses all the activities that move a firm
or distribution encompasses all the activities that move a firm’ss 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 who is the end user.
h i th
d
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). University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
30
III
III.
The Four Ps of Marketing For New Ventures
The Four Ps of Marketing For New Ventures
D. Place (or Distribution)
aa. Selling Direct. Many firms sell direct to customers. Being able to Se g ec
a y
s se d ec o cus o e s e g ab e o
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
advantage 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 products.
products
b. Selling Through Intermediaries. Firms that sell through intermediaries typically pass off their products to wholesalers who place them in retail outlets to be sold. An advantage of this l
h
l
l
b
ld
d
f h
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.
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
31
III
III.
The Four Ps of Marketing For New Ventures
The Four Ps of Marketing For New Ventures
D. Place (or Distribution)
Selling direct versus selling through intermediaries
Selling direct versus selling through intermediaries
Approach to Distribution
Selling Direct
Selling Through Intermediaries
Description
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 has
selling 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. 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 much of the distribution channel. The disadvantage of selling h f h di ib i
h
l Th di d
f lli
through intermediaries is that a firm loses control of its product. University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
32
III
III.
The Four Ps of Marketing For New Ventures
The Four Ps of Marketing For New Ventures
D. Place (or Distribution)
Selling direct versus selling through intermediaries
Selling direct versus selling through intermediaries
University of Zurich
ISU – Institute for Strategy and Business Economics
Ulrich Kaiser
A primer in Entrepreneurship
Spring semester 2008
33