Transcript MG 298 Entrepreneurship Module 2 Marketing The Entrepreneurs

MG 298 Entrepreneurship
Module #2
Marketing: An Entrepreneur’s
Perspective
The Entrepreneurs’ Perspective
• In the field of observation, chance
favors only the prepared minds.
• Louis Pasteur
• Building the better mousetrap is a great
intellectual achievement; but to make it a
great economic achievement, you have to
sell some.
Perspectives on Marketing
• Understanding your offering the way a
customer values it – not as an innovation,
but as a package of innovative services;
• Discerning which kinds of customers are
likely to yield the first sale; and which will
comprise the large, mainstream market;
• Learning what markets are trying to tell
you; and responding appropriately.
Technology as Service
• Transition from technology professional to
technology entrepreneur
• Replace the techno-centric view of the world
with one that is customer-oriented
• Technology is not just a tangible object, but
rather a package of valuable services
• Customers have little use for products as
objects; they have great use for services these
objects provide.
Examples of Technology as
Services
• Light bulb: nobody buys it as a product; rather
for the expectation of illumination at work place,
desk, home, etc.
• Can we look at a service that pays the
customer’s electric bill, and guarantees a
quantity (lumens) and quality of light (colour,
flicker, etc.)
• Similarly, software is not a product residing on
the computer; rather, could be resident on a
remote file server; Can this form of service
delivery provide additional value to customers?
The Dimensions of Performance
• To understand the markets for technology, we
must look at the customer’s perspective of the
offering as a package of services.
• Some of the service features customers would
look for are: speed, convenience, economy,
prestige, etc.
• Taken together, these performance
dimensions define the competitive space
Performance Space
The Dynamics of Performance
• Simple products (pencil, haircut) tend to
compete along one or two dimensions.
• Complex technology products (aircraft) compete
along many more dimensions (e.g. Concorde
competed on speed, range payload, and
prestige)
• The challenge in discerning all dimensions of
customer value is to identify the poorly
articulated or unspoken components of value
Dynamics of Performance
• The principal sources of change in the
performance valued by customers include:
• Customer Limitations: Sometimes, customers
are unable to use further improvements along
some dimensions. E.g. clock speed of PC’s.
Customer value can be built by attention to other
dimensions of performance, such as size, cost,
energy efficiency, heat dissipation, etc.
Dynamics of Performance
• Experience: With experience, customers
discover which performance dimensions have
the greatest value for them; rest are put into the
good enough category.
• External Events/ Trends: Events and trends
outside of the market workings can influence the
desired performance:
• e.g. Oil supply disruption ►► fuel economy
Women in work force ►► convenience in
household products and services
Dynamics of Performance
• Technical Improvements: IT has
improved the safety and reliability of many
systems, e.g. nuclear plants, banks,
insurance, transportation systems, etc.
• Lack of Technical Improvements:
Technology improvement reaches the
limits of physical capabilities, e.g. speed of
land vehicles, space of IC circuits, etc.
Market Planning: First Sale to
Mainstream Market
• Nothing builds credibility like sales: boost
morale, payroll, revenue, profits, investor
confidence.
• Build cash and credibility with sales as early in
the venture’s growth as possible.
• However, these early sales must spring from a
well-conceived market plan that focuses
resources on the mainstream customers most
likely to build the business
Market Planning: First Sale to
Mainstream Market
• Best marketing plans view early sales as having
one overriding purpose: to serve as a point of
departure for the mainstream market that will
become the ultimate source of sustainable
growth for your venture
• Failure to reach the mainstream market leaves
in a state of suspended animation
• Analyze technology as a service offering with
attendant package of performance dimensions
• Discern the tech responsive customers from
those not likely to respond to innovative tech
Market Planning: Model of
Technology Marketing
• Understand why some customers adopt new
tech innovations, and others don’t.
• Can sort potential customers for a new
technology into five categories:
• Innovators
• Early Adopters
• Early Majority
• Late Majority
• Laggards
Market Planning: Model of
Technology Marketing
• Innovators: Actively seek change, sometimes
for its own sake. First to turn to new-technology
solutions. Technology itself is a core interest for
them. Alas, they are a very small minority of your
ultimate customers set
• Early Adopters: Easily relate to the technology,
and comprehend its benefits readily. Less
interested in tech for its own sake, than for its
ability to solve problems. More in number than
Innovators, yet a minority in customer base
Market Planning: Model of
Technology Marketing
• Early Majority: First to make wide-scale use of
your technology (comprise ~1/3rd of customer
population). Appreciate tech, but only so far as
its adoption does not cause undue risk.
Demonstrate that the tech works as advertised,
so as to reduce their risk perception
• Late Majority: Less able to handle new tech
with skill, tend to await its becoming an industry
standard before adopting; require a lot of
support in adopting new tech (comprise ~ 1/3)
Market Planning: Model of
Technology Marketing
• Laggards: Tend to focus on price, and do
not adopt new technology unless it is so
deeply embedded in a system that it
becomes inevitable and invisible. As an
entrepreneur, you really should not bother
with these customers – life is too short
Early Sales Market
• First sales from innovators and early adopters
• Approach them as the visionaries that they are
• Often recognize the social dimensions of a
product or process, and purchase it for those
values, notwithstanding its economics; e.g. solar
photovoltaic panels
• Penetrating main stream markets is however a
greater challenge, difficulty often being cost
• innovators and early adopters add the psychic
value of pollution abatement to their cost – no
analogous value proposition for mainstream
How to Swim in the Mainstream
• Transition to mainstream markets the most difficult
challenge of high-technology marketing
• Markets cannot be understood entirely in economic
terms: recognizable set of actual or potential customers
with similar needs and values
• Mainstream markets characterized by participants
referencing each other in making buying decisions, risk
tolerance is lower, and the opinions of experienced
peers valued
• Early majority customers do not talk to the innovators
and early adopters; so need an ab initio marketing
strategy for these mainstream customers
Mainstream Marketing
• Operating characteristics of the
Normandy invasion:
• Establish the beachhead;
• Stabilize your foothold; and
• Break out to capture the market
territory
How to Swim in the Mainstream
• Most technology companies begin with a
beachhead in the new market- a niche that is
underserved, but relevant as its customers are
mainstream customers
• Beachhead will command resources entirely out
of proportion to the sales it will generate
• Ignored by the sales-driven business;
important for the market-driven business
How to Swim in the Mainstream
• Basic offering may have to be revised as you
consider how the performance dimensions of
your product appear to these customers,
especially what kind of support services they
will require to adopt the technology
• Establish a critical mass of customers in the
mainstream market, who will serve as
references
• Invest scarce marketing resources in a few
strategic niches in the mainstream market
Some Additional Marketing
Considerations
• Just as the market territory is new to you;
so is your offering new to the market
• In the case of breakthrough products,
customers simply might not understand
the utility of your offering or know-how;
• Beginning marketing plan should
emphasize education over sales – a
notion called concept marketing
Price Considerations
• Price is more than just a number
• Effective pricing strategy helps gain more
customers; also prevents losing the ones you
already have
• Technology is making pricing more difficult than
ever- e.g. Internet shifts control of transactions
for many goods and services to the customers
• As price becomes the determining issue in
purchasing decisions, the tendency towards
commoditization of your product is accelerated
Entrepreneurial Pricing Strategies
• Base your price on the value of your offering to
the customer, rather than on your cost to
produce
• Be willing to assume the risk of novel pricing
strategies, such as offering separate prices for
unbundled services;
• Use these novel strategies proactively, without
waiting for competitors to initiate the pricing
action; and
• Remain flexible in pricing, allowing variances in
both the offering (s) and the price (s), based on
the market segment and the price elasticity
Marketing as Learning
• Marketing wisdom begins with understanding
your offering as a packaging of services
• It ends with understanding the value function of
the customer – the package of services that
people actually want to use in work and living
• Learn to analyze customers and markets from
their own framework and logic, rather than
forcing them to respond to your framework and
logic. This is called organizational learning
Managing the Learning Process
• New ventures launched from a corporate
platform can use the contacts and learning
process (es) of the parent company
• For an independent start-up, systematic contacts
with key constituent groups, not involving
transactions, must be built.
• One way to accomplish this is through a Board
of Advisors. Select persons of independence
and broad knowledge, and offer compensation
through a small equity stake
Marketing as the Key to Successful
Entrepreneurship
• Build your marketing organization around
open-minded people, with a capacity to
shed assumptions, when the evidence of
the market-place requires it.
• Successful entrepreneurship is a marketdriven process. So we must understand
the salient characteristics of the
technology market-place.