Entrepreneurial Mind

Chap. 10. The Marketing Aspects of

New Ventures
 Chapter Objectives
1. To review the importance of marketing research for new
ventures
2. To identify the key elements of a proper survey
3. To present factors that inhibit the use of marketing
4. To present the emerging use of Internet marketing for
entrepreneurial firms
5. To examine the marketing concept: philosophy,
segmentation, and consumer orientation
6. To establish the areas vital to a marketing plan
7. To discuss the key features of a pricing strategy
8. To present a pricing strategy checklist
The Marketing Concept for
Entrepreneurs
Market
Knowledge

Marketing Marketing Concept Market

Plan for Entrepreneurs Research

Pricing Strategy
Approach
 Table 10.1: Common Elements in the
Marketing Skills of Great Entrepreneurs

1. They possess unique environmental insight, which they use to

spot opportunities that others overlook or view as problems.
2. They develop new marketing strategies that draw on their
unique insights. They view the status quo and conventional
wisdom as something to be challenged.
3. They take risks that others, lacking their vision, consider foolish.
4. They live in fear of being preempted in the market.
5. They are fiercely competitive.
6. They think through the implications of any proposed strategy,
screening it against their knowledge of how the marketplace
functions. They identify and solve problems that others do not
even recognize.
 Table 10.1: Common Elements in the Marketing
Skills of Great Entrepreneurs (cont’d)

7. They are meticulous about details and are always in search of

new competitive advantages in quality and cost reduction,
however small.
8. They lead from the front, executing their management
strategies enthusiastically and autocratically. They maintain
close information control when they delegate.
9. They drive themselves and their subordinates.
10. They are prepared to adapt their strategies quickly and to keep
adapting them until they work. They persevere long after
others have given up.
11. They have clear visions of what they want to achieve next.
They can see further down the road than the average manager
can see.
 Marketing Terms
n Market
n A group of consumers (potential customers)
who have purchasing power and unsatisfied
needs.
n A new venture will survive only if a market
exists for its product or service.
n Marketing Research
n The gathering of information about a particular
market, followed by analysis of that information.
 Defining the Research
Purpose and Objectives
n Where do potential customers go to purchase the
good or service in question?
n Why do they choose to go there?
n What is the size of the market? How much of it can
the business capture?
n How does the business compare with competitors?
n What impact does the business’s promotion have
on customers?
n What types of products or services are desired by
potential customers?
 Gathering Information
n Secondary Data
n Information that has already been compiled.
• Advantage: Less expensive and available
• Disadvantages: outdated, lacks specificity,
questionable validity
• Sources: internal and/or external sources
n Primary Data
n Information that is gathered specifically for the
research at hand.
• Surveys
• Experimentation
 Table 10.2: Comparison of Major Survey Research
Techniques
Direct/Cold Personal In-
Criteria Mail Panels Telephone Mall Intercept
Mailing Home
Complexit Not much Not much Substantial, but Highly flexible Most flexible
y and complex or
versatility lengthy scales
difficult to use
Quantity Substantial Substantial Short, lasting Greatest quantity Limited,25
of data typically minutes or less
between15 and
30 minutes
Sample Little Substantial, but Good, but In theory, Can be
control representativen nonlisted provides greatest problematic;
ess may be a households can control sample
question be a problem representativenes
s may be
questionable
Quality of Better for sensitive Positive side, There is the Unnatural testing
data or embarrassing interview can chance of environment can
questions; clear up any cheating lead to bias
however, no ambiguities;
interviewer is negative side,
present to clarify may lead to
what is being socially accepted
asked answers
 Table 10.2: Comparison of Major Survey Research
Techniques
Direct/Cold Personal In-
Criteria Mail Panels Telephone Mall Intercept
Mailing Home
Response In general, low; 70–80% 60–80% Greater than 80% As high as 80%
as low as 10% rates

Speed Several weeks; Several weeks Large studies can Faster than mail Large studies can
completion time with no follow- up be completed in 3 but typically be completed in a
will increase with mailings, longer to 4 weeks slower than few days
follow-up mailings with follow-up telephone
mailings surveys

Cost Inexpensive; as Lowest Not as low as Can be relatively Less expensive

low as $2.50 per mail; depends on expensive, but than in-home, but
completed incidence rate considerable higher than
interview and length of variability telephone; again,
questionnaire length and
incidence rate will
determine cost

Uses Executive, All areas of Particularly Still prevalent in Pervasive-

industrial, marketing effective in product testing concept tests,
medical, and research, studies that and other studies name tests,
readership particularly useful require national that require visual package tests,
studies in low-incidence samples cues or product copy test
categories prototypes
 Developing an Information-
Gathering Instrument
n Make sure each question pertains to a specific
objective in line with the purpose of the study.
n Place simple questions first and difficult-to-answer
questions later in the questionnaire.
n Ask: “How could this question be misinterpreted?”
Reword questions avoid misunderstanding.
n Avoid leading and biased questions.
n Give concise but not complete directions in the
questionnaire.
n Use scaled questions rather than simple yes/no
questions.
 Interpreting and Reporting
the Information
n Data organized and interpreted is
information.
n Tables, charts, graphs
n Descriptive statistics—mean, mode, median
n Market research subject areas:
n Sales
n Distribution
n Markets
n Advertising
n Products
 Inhibitors to Market Research
and Reporting
n Mistaken beliefs that inhibit the use of marketing
research:
n Cost: research is too expensive.
n Complexity: research techniques rely on
overly complex sampling, surveying, and
statistical analysis.
n Strategic Decisions: only major strategic
decisions need to be supported through
marketing research.
n Irrelevancy: research data will contain either
information that merely supports what is
already known or irrelevant information.
 Internet Marketing
n The Internet:
n Allows the firm to increase its presence and brand
equity in the marketplace.
n Allows the company to cultivate new customers.
n Can improve customer service and lower costs by
allowing customers to serve themselves.
n Provides a mechanism for information sharing and
collection at a fraction of prior costs.
n Is a direct-sales distribution channel where the seller-
buyer relationship is immediate, and the waiting period
that follows a traditional marketing campaign is almost
eliminated.
 Marketing on the Internet

Step 1 : Co-Marketing and Step 2: Become a Popular

Banner Ads Link

Internet
Marketing

Step 3: Sponsor Contests, Specials, and

Other Interactive Features
 Table 10.3: Web Design Tips
Things to Do Things to Avoid

Provide a description of the firm Scrolling

Ensure fast loading times Large graphic files

Create consistent navigation pathways Reliance on one browser

Make the site interactive Broken links

Register with search engines Excessive use of plug-ins

Register the domain name Obscure URLs

Use trademarks appropriately Copycatting other sites

Market the site in other materials Allowing the website to grow stale
 Developing the Marketing
Concept
n Marketing Philosophies
n Production-driven philosophy
n Sales-driven philosophy
n Consumer-driven philosophy
n Factorsin Choosing a Marketing
Philosophy
n Competitive pressure
n Entrepreneur’s background
n Short-term focus
 Developing the Marketing
Concept (cont’d)
n Market Segmentation
n The process of identifying a specific set
of characteristics that differentiate one
group of consumers from the rest.
n Demographic variables
• Age, marital status, sex, occupation, income,
location
n Benefit variables
• Convenience, cost, style, trends (depending
on the nature of the particular new venture)
 Table 10.4: Consumer
Characteristics
Personal Innovators Early Early Late Laggards
Characteri (2–3%) Adopters Majority Majority (12–15%)
stics (12–15%) (33%) (34%)

1. Social class Lower upper Upper middle Lower middle Upper lower Lower lower

2. Income High income High income Above-average Average Below-average

(inherited) (earned from income (earned) income income
salary and
investment)

3. Occupation Highest Middle Owners of small Skilled labor Unskilled labor

professionals management and businesses
Merchants owners of Nonmanagerial
Financiers businesses office and union
medium-sized managers

4. Education Private schooling College High school Trade Grammar Very little—
school school, some some grammar
high school school
 Table 10.4: Consumer
Characteristics
Personal Innovator Early Early Late Laggard
Character s Adopters Majority Majority s
istics (2–3%) (12–15%) (33%) (34%) (12–15%)
5. Housing Inherited Large homes— Small houses Low-income Slum
property good suburbs Multiple-family housing in apartments
Fine mansions or best dwellings urban-
apartments renewal
projects

6. Family Not family Children’s Child centered Children Children

influence oriented social and home taken for expected to
Children in advancement centered granted raise
private school important themselves
or grown Education
important

7. Time Present Future oriented Present Present Tradition

orientation oriented, but oriented (security) oriented, live
worried about oriented in the past
impact of time
 Table 10.4: Consumer
Characteristics (cont’d)
Psychological Innovators Early Early Majority Late Majority (34%) Laggards
Characteristics (2–3%) Adopters (33%) (12–15%)
(12–15%)

1. Nature of Self- Esteem Belonging needs Safety needs Survival

needs actualizatio needs (for (with others and (freedom from fear) needs
n needs status and groups) (basic
(realization recognition needs)
of by others)
potential)

2. Cosmopolit Prestige Local aspirations Home and product Live from

Perceptions an in Status and local social centered day to day
outlook conscious acceptance
Aspire to
upper class

3. Self- Elite Social Respectability Security, home Fatalistic,

concept strivers, peer from own centered, live from
group reference aggressive, day to day
leaders, groups and apathetic, no hope
venturesome home
 Table 10.4: Consumer
Characteristics (cont’d)
Psychological Innovators Early Early Majority Late Majority (34%) Laggards
Characteristics (2–3%) Adopters (33%) (12–15%)
(12–15%)

4. British Innovator In own social Others in this Don’t

Aspiration upper class strata, classification and aspire
groups class dissociated in early majority,
from upper dissociated from
lower lower lower

5. Sports, Dominate Social groups Family, labor Ethnic

Reference social, industry and of this strata: unions group
groups and travel community chambers of oriented
groups organization commerce,
s Golf, labor unions,
college, and family, church,
fraternity P.T.A.,
auxiliaries
 Consumer Behavior
n Consumer Behavior
n The types and patterns of consumer characteristics.
• Personal characteristics
• Psychological characteristics

n Major Consumer Classifications:

1. Convenience goods
2. Shopping goods
3. Specialty goods
4. Unsought goods
5. New products
Table 10.5: Changing Priorities and Purchases
in the Family Life Cycle

Stage Priorities Major Purchases

Fledgling: teens and Self; socializing; Appearance products, clothing, automobiles,
early 20s education recreation, hobbies, travel

Courting: 20s Self and other; pair Furniture and furnishings, entertainment and
bonding; career entertaining, savings

Nest building: 20s Babies and career Home, garden, do-it-yourself and items, baby-
early 30s care products, insurance

Full nest: 30–50s Children and others; Children’s food, clothing, education,
career; midlife crisis transportation, orthodontics; career and life
counseling

Empty nest: 50–75 Self and others; Furniture and furnishings, entertainment, travel,
relaxation hobbies, luxury automobiles, boats, investments

Sole survivor: 70–90 Self; health; loneliness Health care services, diet, security and comfort
products, TV and books, long-distance
telephone services
 Developing a Marketing Plan
n Marketing Planning
n The process of determining a clear,
comprehensive approach to the creation of
customers.
n Elements of Marketing Planning
n Current marketing research
n Current sales analysis

n Marketing information system

n Sales forecasting
n Evaluation
 Marketing Planning (cont’d)
n Current Marketing Research
n The purpose of marketing research is to identify
customers—target markets—and to fulfill their desires.
n Areas of Market Research
n The company’s major strengths and weaknesses

n Market profile

n Current and best customers

n Potential customers

n Competition

n Outside factors

n Legal changes
 Current Sales Analysis
n Sales Research Questions:
n Do salespeople call on their most qualified prospects on a proper
priority and time-allocation basis?
n Does the sales force contact decision makers?
n Are territories aligned according to sales potential and
salespeople’s abilities?
n Are sales calls coordinated with other selling efforts, such as trade
publication advertising, trade shows, and direct mail?
n Do salespeople ask the right questions on sales calls? Do sales
reports contain appropriate information? Does the sales force
understand potential customers’ needs?
n How does the growth or decline of a customer’s or a prospect’s
business affect the company’s own sales?
Marketing Information System
n Marketing Information System
n Compiles and organizes data relating to cost, revenue,
and profit from the customer base for monitoring the
strategies, decisions, and programs concerned with
marketing.
n Factors affecting the value of a system:
n Data reliability
n Data usefulness or understandability
n Reporting system timeliness
n Data relevancy
n System cost
 Market Planning
n Sales Forecasting
n The process of projecting future sales
through historical sales figures and the
application of statistical techniques.
n Evaluation
n Evaluatingmarketing plan performance is
important so that flexibility and
adjustment can be incorporated into
marketing planning.
 The Market Plan: A Structured
Approach
1. Appraise marketing strengths and weaknesses,
emphasizing “competitive edge” factors.
2. Develop marketing objectives, along with short-
and intermediate-range sales goals.
3. Develop product/service strategies.
4. Develop marketing strategies to achieve
intermediate- and long-range sales goals and
long-term marketing objectives.
5. Determine a pricing structure.
 Pricing Strategies
n Factors affecting the pricing decision:
n The degree of competitive pressure
n The availability of sufficient supply
n Seasonal or cyclical changes in demand
n Distribution costs
n The product’s life-cycle stage
n Changes in production costs
n Prevailing economic conditions
n Customer services provided by the seller
n The amount of promotion
n The market’s buying power
 Pricing Strategies (cont’d)
n Psychological factors affecting the pricing decision:
n The quality of a product is interpreted by customers
according to the level of the item’s price.
n Customer groups shy away from purchasing a product
where no printed price schedule is available.
n Emphasis on the monthly cost of purchasing an
expensive item results in greater sales than an
emphasis on total selling price.
n Buyers expect to pay even-numbered prices for
prestigious items and odd-numbered prices for
commonly available goods.
n The greater the number of customer benefits the seller
can convey about a product, the less will be the price
 Table 10.6: Pricing for the
Product Life Cycle
Product Life Cycle Pricing Strategy Reasons/Effects
Stage

Introductory Stage
Unique product Skimming—deliberately setting Initial price set high to establish a
a high price to maximize short- quality image, to provide capital to
term profits offset development costs, and to
allow for future price reductions to
handle competition
Nonunique product Penetration—setting prices at Allows quick gains in market share
such a low level that products are by setting a price below
sold at a loss competitors’ prices

Growth Stage Consumer pricing—combining Depends on the number of

penetration and competitive potential competitors, size of total
pricing to gain market share; market, and distribution of that
depends on consumer’s market
perceived value of product
 Table 10.6: Pricing for the
Product Life Cycle
Product Life Cycle Pricing Strategy Reasons/Effects
Stage

Maturity Stage Demand-oriented Sales growth declines;

pricing—following a customers are very price-
flexible strategy that sensitive demand level
bases pricing decisions for the product
on the level of
consumer demand
Decline Stage Loss leader pricing— Product possesses little
pricing the product or no attraction to
below cost in an attempt customers; the idea is to
to attract customers to have low prices bring
other products customers to newer
product lines
Table 10.7: Pricing Strategy
Checklist
Table 10.7: Pricing Strategy
Checklist (cont’d)
 Key Terms and Concepts

n consumer-driven n market segmentation

philosophy n penetration
n consumer pricing n primary data
n demand-oriented pricing n production-driven
n experimentation philosophy
n Internet marketing n sales-driven philosophy
n loss leader pricing n secondary data
n market n skimming
n marketing research n surveys