BUS827

BUS827

Entrepreneurship and Business

Strategy

Seminar 5: Unique Marketing

Issues

BUS827, 2013 Seminar 5 1

 1. Course Objectives:
1. Apply the entrepreneurial process model to analyse
entrepreneurs’ venture creation.
2. Understand and practise idea generation and screening
including opportunity analysis trends, feasibility and competitive
analysis.
3. Understand the process how to write up feasibility analysis and
business plan to launch the new venture successfully.
4. Understand the basics of entrepreneurial finance: raising funds,
growth financing, financial evaluation of opportunities, and
acquisition financing.
5. Comprehend the issues and tasks involved in setting up a
venture, marketing and financing the venture, and
evaluating venture performance for growth and
sustainability.

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Building a
Guerrilla Marketing Plan
• Marketing
– The process of creating and delivering desired
goods and services to customers.
– Involves all of the activities associated with
winning and retaining loyal customers.
• A solid business plan needs to contain both a
financial plan and a marketing plan.

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Guerrilla marketing strategies:

►Are unconventional, low-cost, and
creative marketing techniques that allow
a small company to realize a greater
return from its marketing investment than
do larger rivals.
►Do not require large amounts of money
to be effective – just creativity.

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1. Pinpoints the specific target markets the

company will serve.
2. Determines customer needs and wants
through market research.
3. Analyzes a firm’s competitive advantages
and creates a marketing strategy to build a
competitive edge.
4. Helps to create a marketing mix that meets
customer needs and wants.

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Pinpointing the
Target Market
• One objective of market research: Pinpoint
the company's target market, the specific
group of customers at whom the company
aims its products or services.
• Marketing strategy must be built on a clear
definition of a company’s target customers.
• Example: Hot Mama

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Pinpointing the
Target Market

• Target customer must permeate the entire

business – merchandise sold, background
music, layout, décor, and other features.
• Without a clear image of its target market,
a small company tries to reach almost
everyone and ends up appealing to few.

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Market Research
• Determining customer needs.
– Demographics
• Market research is the vehicle for gathering the
information that serves as the foundation for the
marketing plan.
– Never assume that a market exists for your
company’s product or service; prove it!
• Market research does not have to be time
consuming, complex, or expensive to be useful.
– Web-based market research – online surveys
– Trend-tracking

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Tracking Trends
• Read many diverse current publications
• Watch the top 10 TV shows
• See the top 10 movies
• Talk to at least 150 customers a year
• Talk with the 10 smartest people you know
• Listen to your children and their friends

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Market Research

How to Conduct Market Research:

1. Define the objective.
2. Collect the data.
– Individualized (one-to-one) marketing
• Primary research
• Secondary research

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Market Research
How to Conduct Market Research:
1. Define the problem.
2. Collect the data.
• Individualized (one-to-one) marketing
• Data mining
3. Analyze and interpret the data.
4. Draw conclusions and act.

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Segmentation – Meredith Corporation

1. Describe the kinds of segmentation used

by Meredith.
2. How does Meredith Corporation
differentiate itself from its competitors

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Segmentation Example: Meredith
Corporation

11-13.
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Segmentation – Meredith Corporation

Source: Pearson Education

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Relationship Marketing
In addition to the text
(Customer Relationship Management)
Involves developing and maintaining long-
term relationships with customers so that
they will keep coming back to make repeat
purchases.

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Relationship Marketing
In addition to the text
(Customer Relationship Management)
Steps:
– Collect meaningful customer information and
compile it in a database.
– Mine the database to identify “best” customers.
– Use the information to develop lasting
relationships with “best” customers.
– Attract more customers who fit the “best”
customer profile.

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The Relationship Marketing Process BUS827
If you have done everything
else correctly, this step is Analyze
relatively easy. Superb
customer service is the
best way to retain Sell,
your most valuable customers.
Service, Conduct detailed customer intelligence to pinpoint
& Satisfy most valuable customers and to learn all you can
about them, including their lifetime value (LTV) to
the company.

Build
Connect
Relationships
&
Collect
Based on what you have
learned, contact customers with
an offer designed for them. Make contact with most valuable customers and
Make customers feel special and
Learn begin building a customer database using data
valued. mining and data warehousing techniques.

Learn from your customers by encouraging feedback

from them; develop a thorough customer profile and
constantly refine it. In addition to the text
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In addition to the text

Steps in CRM
• Collect meaningful information on existing
customers and compile it in a database.
• Mine the database to identify the company’s
best and most profitable customers and their
buying habits.
• Use the information to establish lasting
relationships with these customers.
• Attract more customers who fit the profile of the
company’s best customers.
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Four Levels of Customer Sensitivity
BUS827
In addition to the text

Level 4: Customer Partnership

Level 3: Customer Alignment

Level 2: Customer Sensitivity

Level 1: Customer Awareness

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Factors which drive Relationship

Marketing Outcomes
The KMV Model of Relationship Marketing

Relationship Acquiescence
Termination
Costs
H1+ H7+

H2+ Relationship
H8- Propensity
Commitment to leave
Relationship
Benefits
H3+ H9+
Shared
H10+ Co-operation
Values H4+ H11+
H5+
Communication
Trust H12+ Functional
Conflict
H6- H13-
Opportunistic
Behaviour Uncertainty

Source: Morgan and Hunt 1994 Journal of Marketing

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Guerrilla Marketing Principles

• Find a niche and fill it.
• Use the power of publicity
• Don’t just sell; entertain!
– “Entertailing”
• Strive to be unique.

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Guerrilla Marketing Principles

• Connect with customers on an emotional
level.
– Build trust
– Define a unique selling proposition (USP)

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Unique Selling Proposition

• A key customer benefit of a product or
service that sets it apart from its
competition.
• Answers key customer question: “What’s in
it for me?”
• Consider intangible or psychological
benefits as well as tangible ones.
• Communicate your USP to your
customers often.
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Branding and a USP

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 Establishing a Unique Position – Blue Ocean

In the red ocean, differentiation costs because

firms compete with the same best-practice
principle. Here, the strategic choices for firms
are to pursue either differentiation or low cost
(Porters’ Generic Strategies)

In the BOS reconstructionist world, the strategic

aim is to create new best-practice
rules by breaking the existing value-cost
trade-off and thereby creating blue ocean.

Source: Kim and Mauborgne (2005)

Blue Ocean Strategy
 Establishing a Unique Position – Blue Ocean

BLUE OCEAN STRATEGY METHODOLOGIES & TOOLS

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Uniqueness Drivers

Hooley et al. (2012) Figure 11.5

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Uniqueness Drivers

Hooley et al. (2012) Figure 11.5

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Uniqueness Drivers – Honest Tea

1. Describe the competitive positioning of

Honest Tea.
2. How does Honest Tea differentiate itself
from its competitors
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Uniqueness Drivers – Honest Tea Video

Source: Pearson Education

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Guerrilla Marketing Principles

 Create an identity for your business through
branding.
 Embrace social networking.
 Start a blog.
 Create online videos.
 Host a special event.
 Focus on customer satisfaction.
 Retain existing customers
 Be devoted to quality.
 Pay attention to convenience.
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What’s a Brand?

.
 Building a Brand BUS827
In addition to the text
High
“Antes” “Drivers”
Features that are important to Features that are both important
customers but all competitors to customers and are highly
provide them differentiated from those of
competitors
Every company in the market
must “ante up” on these These are the attributes on which
Relevance

features. a company must focus to build its

brand.1

“Neutrals” “Fool’s Gold”

Features that are irrelevant to Features that are unique to your
customers company but do not drive
customers’ loyalty to your
These features are useless product and services
when it comes to branding.
Don’t make the mistake of trying
to build a brand on these
Low features!

Low Differentiation High

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Source: Adapted from “What Really Matters in Building a Brand,” The McKinsey Quarterly, May 2004, www.mckinseyquarterly.com/newsletters/chartfocus/2004_05.htm
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Social Media Used as Marketing Tools

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Embrace Social Marketing

• Social networks sites, such as Facebook,

LinkedIn, and Twitter, allow entrepreneurs
to connect with potential and existing
customers at little or no cost.
• 44% of entrepreneurs use social media to
connect with existing and potential
customers.

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Benefits of Social Media Marketing

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Google AdWords and AdSense Program

• AdWords
– Allows advertisers to buy keywords on the Google home
page.
– Triggers text-based ads to the side of (and sometimes
above) search results when the keyword is used.
– The program includes local, national, and international
distribution.
– Advertisers pay a certain amount per click.
– Advertisers benefit because they are able to place their ads
in front of people who are already searching for
information about their product.

.
Google AdWords and AdSense Program

Source: http://www.youtube.com/watch?v=tx2L6EGa9DY
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Blogging
• Nearly 134 million people in the U.S. read
blogs and 39% of companies use blogs as
part of their marketing strategies.
– Economical and effective online
communication.
• Blog Guidelines:
►Be honest, balanced, and interesting.
►Post blog entries consistently so that
readers have a reason to return.
►Ask customers for feedback.
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Blogging
►Strive to cultivate the image of an expert
or a trusted friend on a topic that is
important.
►Use services such as Google Alerts that
scan the Web for a company’s name and
send e-mail alerts when they find posts.
►Promote the blog via e-mail and
promotional Web Sites.

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Guerrilla Marketing Principles

 Create an identity for your business

through branding.
 Embrace social networking.
 Start a blog.
 Create online videos.

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Online Videos

• YouTube reports that visitors view 3 billion

videos per day.
• Online video guidelines:
► Think “edutainment.”
► Be funny.
► Post videos on multiple social media sites.
► Involve customers.
► Keep it short.
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Guerrilla Marketing Principles

 Create an identity for your business

through branding.
 Embrace social networking.
 Start a blog.
 Create online videos.
 Host a special event.
 Focus on customer satisfaction.
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Focus on Customer Satisfaction

Surveys show 79% of unhappy customers tell
others about their experiences.
• 48% of shoppers say they won’t patronize stores
where they know others have had negative
experiences.
• For every complaint a company receives, 17
other complaints go unspoken.
• Disgruntled customers often post their
experiences online.
• 80% of shoppers have changed their
minds about a purchase after reading
negative information online.
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Focus on Customer Satisfaction

To achieve stellar customer service and customer
satisfaction:
►Examine your company’s service cycle
►Set standards and measure performance
►See customer complaints as a mechanism for
improving customer service
►Listen to customers
►Define superior service
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Focus on Customer Satisfaction

►When you create a negative customer
experience, apologize and fix it – fast
►Empower employees to offer superior service
►Train employees to deliver superior service
►Hire the right employees
►Get top managers’ support

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Focus on Customer Satisfaction

►Treat employees with respect and show them how

valuable they are
►Use technology to provide improved experience
►View customer service as an investment, not an
expense
►Reward superior service
►Give customers an unexpected
surprise
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In addition to the text
Every customer interaction should be:
• Intimate
• Personal
• Consistent, courteous, and professional
• Responsive
Satisfied,
loyal,
• Helpful information and advice
repeat
• Involvement of caring, well-trained people
(and profitable)
• Long-term relationship view customers
• Emphasis on sustaining an ongoing
relationship
• Nurturing the company/customer relationship
Source: Adapted from “Wake-Up Call: To Fix CRM, Fix
the Customer Experience Now!, BearingPoint White
Paper (www.bearingpoint.com, Fall 2005, p. 5.

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Principles of Customer Experience Management (CEM)
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Retain Existing Customers

• A company must land 12 to 20 new
customers to offset the impact of one lost
loyal customer!
• Research shows that repeat customers
spend 67% more than new customers.
• Attracting new customers costs the
typical business seven to nine times
as much as keeping existing customers.
• Practice customer experience management.

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Retain Existing Customers

Companies that are successful at
retaining their customers constantly ask
themselves (and their customers) four
questions:
1. What are we doing right?
2. How can we do that even better?
3. What have we done wrong?
4. What can we do in the future?

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Devotion to Quality
• World-class companies treat quality as a
strategic objective, an integral part of company
culture.
• The philosophy of Total Quality Management
(TQM):
►Quality in the product or service itself.
►Quality in every aspect of the business and
its relationship with the customer.
►Continuous improvement in quality.

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How Do YOU Define Quality in

a Product?
• Reliability (average time between
breakdowns)
• Durability (how long an item lasts)
• Ease of use
• Known or trusted brand name
• Low price

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How Do YOU Define Quality in

a Service?
• Tangibles - equipment, facilities, people
• Reliability - doing what you say you will do
• Responsiveness - promptness
in helping customers
• Assurance and empathy -
conveying a caring attitude

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Attention to Convenience
Successful companies go out of their way to make
sure it’s easy for customers to do business with them.

Questions to ask:
►Is your business conveniently located near
customers?
►Are your business hours suitable to your
customers?
►Would customers appreciate pickup and delivery
services?
►Do you make it easy for customers to buy on credit
or with credit cards?
►Do your employees treat customers with courtesy?
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Attention to Convenience
►Are your employees trained to handle business
transactions quickly, efficiently, and politely?
►Does your company offer “extras” that would
make customers’ lives easier?
►Can you bundle existing products to make it
easier for customers to use them?
►Can you adapt existing products to make them
more convenient for customers?
►Does your company handle telephone calls
quickly and efficiently?
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Concentration on Innovation
• Innovation
– The key to future success.
– One of the greatest strengths of
entrepreneurs. It shows up in the new
products, techniques, and unusual
approaches they introduce.
• Entrepreneurs often create new products
and services by focusing their efforts on
one area and by using their size and
flexibility to their advantage.

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Emphasis on Speed
• Use principles of time compression
management (TCM):
►Speed new products to market
►Shorten customer response time in
manufacturing and delivery
►Reduce the administrative time required to fill
an order.
• Study: Most businesses waste
85 to 99% of the time required
to produce products or services!

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Emphasis on Speed
• Re-engineer the process rather than try to
do the same thing - only faster.
• Create cross-functional teams of workers
and empower them to attack and solve
problems.
• Set aggressive goals for
production and stick to
the schedule.

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Emphasis on Speed
• Rethink the supply chain.
• Instill speed in the company culture.
• Use technology to find shortcuts wherever
possible.
• Put the Internet to work for you.

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Pricing
• Is governed both by art and science.
• Requires balancing a multitude of
complex forces.
• Influences every aspect of a small
company.
• Is an important signal of a product’s or
service’s value to customers.
• Involves both math and psychology.
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Business Challenges That Drive Pricing

Decisions

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Price Conveys Image

• Price sends important signals to customers:
Quality, prestige, uniqueness, and others.
• Common small business mistake:
Charging prices that are too low and failing to
recognize extra value, service, quality, and other
benefits they offer.
• Understand the target market and identify how
much customers are willing to pay rather than
how much to charge.

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Competition and Pricing

• Must take into account competitors’ prices,
but it is not always necessary to match or
beat them.
• Key is to differentiate a company’s products
and services.
• Price wars often eradicate companies’ profits
and scar an industry for years.
• Best strategy: Stay out of a price war!

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Focus on Value
• The “right” price for a product or service
depends on the value it provides for a
customer.
• Two aspects of price:
– Objective value
– Perceived value – determines the price
customers are willing to pay.
• Value is not synonymous with low price.

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Dealing with Rising Costs

• Add a surcharge
• Explain the reasons behind price increases
• Focus on improving efficiency
• Consider absorbing cost increases
• Modify the product or service to lower
its cost
• Eliminate discounts, coupons, and freebies
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Dealing with Rising Costs

• Diversify your product line
• Anticipate rising costs and try to lock in
prices of raw materials early
• Emphasize the value of your company’s
product or service to customers
• Differentiate your product or service
• Use cheaper raw materials
• Raise prices incrementally and consistently
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Price Ceiling - What will the market bear?

?
? ? ? ?
?
Acceptable Final Price -
Price What is the company's ?
Range
? desired "image?" ?

? ? ?
? ?
? ? ?
Price Floor - What are the company's costs?
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What Determines Price?
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Introducing A New Product

Three Goals:
1. Getting the product accepted
► Revolutionary products
► Evolutionary products
► Me-too products
2. Maintaining market share as competition
grows
3. Earning a profit
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Introducing A New Product

3 Basic Strategies:
– Market penetration
– Skimming
– Life Cycle Pricing

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Pricing Techniques

• Odd pricing
• Price lining
• Leader pricing
• Discounts (Markdowns)
• Bundling
• Geographic pricing
• Dynamic pricing
Ch. 10: Pricing Strategies 10 - 70
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Customized or
Dynamic Pricing
A pricing technique in which a
company sets different prices on the
same products and services for
different customers using the
information that it collects
about its customers.

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Pricing Techniques

• Optional-product pricing
• Captive product pricing
• Byproduct pricing
• Suggested retail prices
• Follow-the-leader pricing

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Follow the Leader Pricing

• Match competitor prices.

• A “me too” pricing policy.
• Robs a company of the opportunity
to create a distinctive
image in its customers’ eyes.

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Pricing for Retailers: Markup

Dollar Markup = Retail Price - Cost of Merchandise
Dollar Markup
Percentage (of Retail Price) Markup = Retail Price

Percentage (of Cost) Markup = Dollar Markup

Cost of Unit
Example:
Dollar Markup = $30 - $14 = $16
$16
Percentage (of Retail Price) Markup = = 53.3%
$30

Percentage (of Cost) Markup = $16 = 114.3%

$14
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Below-Market Pricing
• Attract a sufficient level of volume to
offset the lower profit margins.
• Trim operating costs by eliminating
extra services such as:
– Delivery
– Installation
– Credit granting
– Sales assistance
• Risky!
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Pricing for Manufacturers

 Direct costing and pricing
 Absorption costing
 Variable or direct costing
 Breakeven

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Pricing for Manufacturers: Breakeven

Selling Price
Total
Breakeven { Variable cost Quantity } fixed
Selling Profit + { per unit x produced } + costs
=
Price Quantity produced

Example:
Breakeven
Selling $0 + { 6.98/unit x 50,000 unit } + $110,000
=
Price 50,000 units
= $9.18 per unit

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Pricing for Service Firms:

Price per Hour
Price per Hour = Total cost per x 1
productive hour (1 - net profit target
as a % of sales)

Example: Ned’s TV Repair Shop

Price per Hour = $18.59 per hour x 1

(1 - .18)

= $22.68 per hour

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YOU BE THE CONSULTANT - Learnvest: Giving Women
Control of their Financial Lives (Text 292-293)
I. Title Slide
II. Problem
III. Solution
IV. The Business Model – How does the firm make money. Critical
evaluation
V. Opportunity and Target Market
VI. Technology
VII. Competition and Industry Environment
VIII. Marketing and Sales Strategies
IX. Current Status of the firm
X. Q&A Based on your assessment of the case material, what
questions would you ask the firm’s founders before making your
funding decision. What answers would satisfy you
XI. If you had to make your decision on just the information provided
in the pitch and on the company’s web site, would you fund this
company
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