ENTREPRENEURSHIPA PROCESS PERSPECTIVERobert A. BaronScott A. ShaneA. Rebecca ReuberSlides Prepared by:Sandra Malach, University of Calgary

10MARKETING IN A NEW FIRM

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LEARNING OBJECTIVESIdentify a real customer need and explain why an entrepreneur should seek to develop a product or service that meets a real need.Explain why entrepreneurs need marketing information before beginning their ventures, and describe ways they can gather this information.Define perceptual mapping and explain how its results can assist entrepreneurs in designing their products.Explain conjoint analysis and indicate what information it provides for entrepreneurs.

LEARNING OBJECTIVESExplain why entrepreneurs use different techniques to assess customer preferences in new and established markets, and identify those different techniques.Explain how large and growing markets help entrepreneurs.Define the new product S-curve, and explain why it is important for entrepreneurs to understand the relationship between effort and product performance.Describe the typical new product adoption pattern and explain how it influences entrepreneurial action.

LEARNING OBJECTIVESDefine crossing the chasm and explain why and how entrepreneurs cross the chasm.Explain how entrepreneurs should choose the customers on whom to focus their initial efforts.Define a dominant design and a technical standard and explain how they influence the performance of new ventures.Explain why personal selling is a very important part of entrepreneurs marketing strategies.Describe how entrepreneurs price new products.

Try novelties for salesmans bait, for novelty wins everyone.--Goethe, Faust: Part I, 1808

REAL NEEDSuccessful 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.

DETERMINING NEEDLook for a customer problem.Define a true solution.Evaluate economics.Identify alternatives offered by competitors.

ASSESSING CUSTOMER PREFERENCESEvaluate target market.Companies who focus on a market are more successfulDetermine the type of new product or service youre developing.Is your solution to customer needs already understood? Or is it a novel solution?

DIRECT TECNIQUES FOR GATHERING INFORMATIONCustomer SurveysCompare products & attributesPerceptual MappingPotential customers perceptionsFocus GroupsIdentify key dimensionsEvaluation of product based on key dimensions

CONJOINT ANALYSISAsks 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).

PRIMARY & SECONDARY DATAPrimary Data is collected specifically for the entrepreneurs purposeSurveys, Focus Groups, ObservationSecondary data has not been collected by the entrepreneurStatistics Canada, Industry Canada

FOR A KNOWN TARGET MARKET OR SOLUTIONUse traditional market research methods:SurveysFocus groups

FOR NOVEL MARKETS AND SOLUTIONSTalk with industry expertsCreate future scenariosExtrapolate trends to determine product and service features

FOR A NEW MARKET OR SOLUTIONWhen either the target market or solution is known, but the other is not, blend traditional market research with futurist approaches.Anthropological expeditionsIn-depth interviews with early adoptersPartnerships with customers to develop products

THE MARKET DETERMINES RESEARCH TECHNIQUES

THE ENTREPRENEURS DISADVANTAGEWhen markets or new products are known, existing companies have the advantage withAn existing customer baseA large amount of information about customer preferences

THE ENTREPRENEURS ADVANTAGEWhen the market or solution is novel, existing companies face three major disadvantages:Core rigiditiesTyranny of the current marketUser myopia

THE LESSONEntrepreneurs do better when they launch products based on novel solutions to customer needs in new markets.

MARKET DYNAMICSAll markets are not equal. They vary inSizeRate of growthEvolution (stage in life cycle)

MARKET SIZEThe size of the market determines:Ease of recouping start-up costsAbility to go in under the radar

MARKET GROWTHThe rate of market growth determines:Ease of capturing new customersPotential volume of customersBenefits of volume purchasing and scale economies

THE S-CURVEInitially, improvement is slowImprovements come fasterImprovements slow down again

TIMING THE MARKETImplications of the S-Curve:Capital is required to sustain early product development New product development is a function of effort, not timePoint of acceleration is critical for future planning

ADOPTION PATTERNSInnovatorsEarly adoptersEarly majorityLate majorityLaggards

TYPICAL PATTERN OF NEW PRODUCT ADOPTION

TO CROSS THE CHASMBuild a complete customer solution to customer needsFocus on a single nicheCommunicate clearly to customers

CHOOSING TARGET CUSTOMERSCustomers have a compelling reason to buy if the product or serviceImproves their productivityReduces their costsGives them something they couldnt have before

DOMINANT DESIGNAll 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.

SETTING THE TECHNICAL STANDARDDiscount prices when product is introducedBuild relationships with producers of complementary productsGet to the market quickly

PERSONAL SELLINGGenerate customer interestIdentify customer requirementsOvercome customer objectionsClose the sale

PRICING NEW PRODUCTSDetermine fixed and variable costs to set a price that generates a profitAssess market conditions to ensure the price isnt too high or lowUnderstand how customers trade off attributes and priceFactor in hidden costs or discounting