Final Entrepreneurship

Market

a group of consumers who have purchasing power and unsatisfied needs

market research

the gathering of information about a particular market, followed by an analysis of that information

What are the main questions answered with market research?

• who buys

• when do they buy

• why do they buy

• where do they buy

• what do they buy

• how do they buy

why don’t all companies do market research?

• cost

• complexity

• strategic decisions

• irrelevancy

secondary data in market research

information has already been compiled

pros and cons of secondary data in market research

pros:

• less expensive

• available

cons:

• outdated

• lack specificity

• questionable validity

primary data

information that is gathered specifically for the research at hand

ways to gather primary data

• online surveys

• focus groups

• personal interviews

• observation

• field trials

when to conduct market research

traditional product development has used market research at the end of the process to validate a new design or process

why entrepreneurs look for money from external sources

• cash flow challenges

• capital investments

• lengthy product development cycles

• marketing

different sources of funding available to entrepreneurs

• debt financing

• crowdfunding

• equity financing

pros and cons of debt financing

pros:

• no relinquishment of ownership required

• more borrowing = greater potential return on equity

• in periods of low interest rates OC is low because of low borrowing costs

cons:

• regular interest payments are required

• cash flow problems can intensify because of payback responsibilities

• heavy use of debt can inhibit growth and development

• collateral needs

pros and cons of crowdfunding

pros:

• social proof and demand validation

• earns loyalty and following

• enables pre-selling

• helps to refine ideas and get authentic feedback

cons:

• higher investment in startup costs

• establishes a promise with market that is a real rigid commitment

equity financing

money invested in the venture with no legal obligation for entrepreneurs to repay the principal amount or pay interest on it

examples of equity financing

• public offering

• venture capitalists

• angel investors

pros and cons of public offerings

pros:

• size of capital amount

• liquidity

• value

• image

cons:

• costs

• disclosures

• requirements

• shareholder pressure

• volatility

pros and cons of venture capitalists

pros:

• access to considerable expertise

• large amounts of equity

• connections of the VCs can be very valuable

• free reign on day-to-day operations

cons:

• not very interested in startups

• major role in determining strategic direction of the firm

• lengthy process of evaluation to acceptance

• very selective

• pressure to harvest

primary differences between angels and venture capitalists

• angles are interested in startups/ VCs are not

• angles are very hands on

• angles have high ownership percentages (co-owners)

market segmentation

dividing a market into smaller group of buyers with distinct needs, characteristics, and behaviors

why do businesses segment their markets

• to identify attractive segments

• to prioritizing marketing to particular groups

• to better reach a specified target market

• to select different marketing mixes and strategies for disparate segments

• 85% of new product launches fail, in part, because of segments

primary characteristics of by which entrepreneurs segment markets

• Demographic

• psychographic

• behavioral

• geographic

3 types of market segmentation

1. Undifferentiated segmentation

2. concentrated strategy

3. multi-segment strategy

pros and cons of undifferentiated segmentation

pros:

• reach largest audience possible

• widespread mainstream advertising

• makes sense for widely consumed staples

• single simple marketing strategy, low market research costs

cons:

• not precise

• can be super expensive

pros and cons of concentrated strategy

pros:

• focuses marketing strategies on one market

• good for small businesses with tight budgets

cons:

• all eggs put into one basket

pros and cons of multi-segment strategy

pros:

• potential for higher sales

• canvas more of the market

cons:

• higher costs to managing multiple marketing strategies

• market blur

beachhead market

the initial customer segment you target with your venture

characteristics that make and attractive beachhead market

• highly motivated

• can pay

• limited or vulnerable competition

• high market consistency

• strong word of mouth references

4 Ps of marketing

• Product

• Price

• Promotion

• placement

what we need to determine relative to the product

• brand name

• functionality

• styling

• quality

• safety

• packaging

• repairs and support

• warranty

• accessories and services

influences to price

• demand for the product/ service

• value delivered to the customer

• prices set by competing firms

• business strategy and product placement

what we need to determine relative to the price

• pricing strategy

• suggested retail price

• volume discounts

• cash and early payment discounts

• seasonal pricing

• bundling

• price flexibility

promotion need communication relative to the product which includes:

• promotional strategy

• advertising

• personal selling and sales force

• sales promotions

• public relations and publicity

• marketing communications budget

what is included in the placement of products

• channels of distribution

• outlet locations

• sales territories

• warehousing systems

• actual distribution mechanism

entrepreneurial marketing

an orientation towards a marketing that employs innovativeness, creativity, selling, market immersion, networking, and flexibility

how is entrepreneurial marketing different from traditional marketing?

• new ventures are smaller

• have fewer resources

• less widely known

buzz marketing

a method of selling a product by getting people to talk about it to other people, especially over the internet

guerilla marketing

using low-cost, unconventional means to convey or promote a product or an idea

example of buzz marketing

• dollar shave club

example of guerilla marketing

• goldie blox

• warby parker at home try on

how did tesla break conventional marketing strategies

• cars are built to order and customizable

• sold directly to consumers to reduce costs

variable costs

change in direct proportion to your units of analysis (includes DL, DM, commissions, packaging, and unit transportation)

fixed costs

remain the same over a given range of volume (includes rent, salaries, advertising, insurance, write off of equipment)

contribution margin

amount of profit left after subtracting variable costs from revenue

how to find CM

CM= Sales price - VC

how to find break-even point

BE= total fixed costs / CM

pros and cons of high volume / low margins

pros:

• makes it hard for others to compete

• enables companies to achieve economies of scale

• attract customers who are price-oriented

• attract most generous venture funding

• existing customer base to whom other things can be sold

• high market share

• can imitate disruption of newcomers with existing clients

cons:

• vulnerable to cost inflation

• risk never achieving necessary volume

• limited adaptive response

• limited competitive advantages (price)

low volume / high margins pros and cons

pros:

• greater cushion against cost variance

• more profits to reinvest into growth

• less capital intense

• can change more quickly to demand

• more brand loyalty

cons:

• invite competition by creating margin space

• spend more on marketing

• lots of cash tied to working capital

• need protection to keep competition out

revenue model

a framework by which you extract from your customers some of the value you’ve created for them

types of revenue models

• one-time up-front charges plus maintenance

• cost plus

• hourly rates

• subscription/ leasing model

• licenses

• consumables

• advertising

• transaction fee

• usage-based

• franchising

what is the valley of death

place where most new ventures fail because they are no longer able to grow to gain business stability

why do entrepreneurs struggle to grow past a certain size

• lack of management skills

• can’t delegate tasks

• can’t shift mindset to a managerial one

• growing complexity

differences between the entrepreneurial mindset and the managerial mindset

• past becomes a predictor instead of focusing on just the new ideas

• best decisions are based on analysis instead of life experiences

• law of large numbers vs law of small numbers

• problems are an unfortunate financial turn instead of an opportunity for new business opportunity

innovator’s dilemma

old innovators strive to serve current customers with incremental innovation as opposed to investments in radical innovation

what is entrepreneurial orientation?

a company establishing themselves as constant innovators and wanting to hop onto the next trend and grow their business

Components of EO

• innovativeness

• risk-taking

• proactiveness

how a company grows internally

• new product development

• improve existing product/ services

• expand product lines

• expand market penetration and seek new markets

• global growth

• innovative business practices

how a company grows externally

• mergers & acquisitions

• licensing and franchising

• strategic alliances / joint ventures

why do many people choose a lifestyle model for their startup

• high risk in high growth

• many growth startups turn into back 6am to 8pm jobs

• limited overhead means you turn profits more quickly

• flexibility in time/location

• stress is minimized

• solopreneur ship becomes a jack of all trades

craigslist

industry/ competitor analysis

Ipotty

market research

peanut butter slices

tech in search of market

Wink

challenge of growth

space X/ world view

market segmentation

tesla

new venture marketing

kickstarter

financing the venture

sprig

economics of business

farmer John’s paintball battlefield

economic model analysis

casper

new venture growth

kodak/ Fuji

innovators dilemma