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.
 Process:
 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
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:

 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

 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 • Distribution

• Product/service • Salesforce
development
• Promotion
• Naming the
• Public relations
company & products
• Recruiting
• Pricing
• 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?
Be sure to assess:
 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
 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.
 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
 Sells “country” clothing, gifts & sporting gear in competition with
L.L. Bean & Eddie Bauer.
 Sells both retail & mail order
 Difference:
 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.”
 Since 1968 when sales were $1M, Orvis has been running fly-
fishing 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.
V. Opportunity Identification

 Customer needs or benefits sought are

largely independent of the product to be
developed
 What does the product have to do?
 Not how will it do it?
 Gather data from potential customers
 Interviews, focus groups, surveys
 Observe similar products in use
Opportunity Identification
 Questions to ask:
 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
 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. Product value (product delivered only)
2. Supplier value (supplier not product)
3. Switching investments (from current to alternate)
Attributes Affecting Perceived
Customer Value
 Immediate Product:  Expected Product:
 Product Performance  Innovation
 Durability  Product Flexibility
 Serviceability  Follow-on products
 Downstream  Long-run risks
Performance
 Current Risks
 Immediate Supplier:  Expected Supplier:
 Supplier Performance  Relationship
(delivery tech, sales,  Tech access
services, etc.)
 Security of supply
 Promotional values
 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

3. What sales volumes can be expected at various

points in this price range

4. What reaction will price produce in

manufacturers and sellers of competition &
displaced substitutes
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:
 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
 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:
 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:
 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:
 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: The right To the right

Right place? perceived target
Right time? offering segment (s)?
Right quantities? bundle?

Alternatives:

Which products? Direct to customer?

Which time period? Indirect?
Exclusive?
Selective?
Intensive?
Distribution Exclusivity
 Exclusive:  Selective:
1. Possible easier sell in  Resellers compete
2. Higher control  Less reseller loyalty
3. Higher margins for all
4. Less competition at
point of sale  Intensive:
5. More push to end 1. High coverage
consumer 2. Convenience
6. Less coverage 3. Lower control
7. More association with 4. Less push to end
channel members’ consumer
attributes
5. More mass pull needed
8. Possible guaranteed
minimum sales 6. More coverage
7. Faster sales cycle
possible
Franchising
 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:
 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
 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
 Family
 Friends
 Colleagues
 Neighbors
 To do something that will benefit relationship
(e.g. easier communication, working together)
 Examples:
 Get Free Email with Hotmail or GMail Accounts
 ICQ (I seek you)
 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. Low product cost
2. Low switching cost
3. Easy distribution
4. Relatively high lifetime customer value
Tactics—Event Marketing
 Excitement of event can:
 Ignite positive emotions about firm & product
 Lead to articles & interviews in media
 Lead to buzz
 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:
 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
 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
 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
 Visionary  Problem Solver
 Creative  Self-disciplined
 Focused  Frugal
 Passionate  Empathetic
 Driven  Socially responsible
 Perseverance  Spiritual
 Opportunistic  Good timer
 Lucky
The Rule of
Opportunity
 Resist the impulse to relax

 Be alert to opportunity, and don’t be

terribly particular about distinguishing
one opportunity from another

 Theopportunities you fail to capitalize

on BECOME THE OPPORTUNITIES – and
properties – OF SOMEONE ELSE,
USUALLY INSTANTLY. Alan Axelrod
Author, “Everything I know about
business I learned from monopoly”
Acknowledgements
 The author wishes to thank the extensive support
of:
 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.