Marketing for Entrepreneurs A Practical Approach to Segmentation, Targeting and Positioning Gregory P. Pogue, Ph.D.
Workshop Topics • Introduction to Marketing Strategy • Marketing • 5C’s – only the highlights • Segmentation, Targeting, and Positioning – the Focus today! • 4C’s – (for another presentation…) • Developing a Persuasive Proposal • Conclusions
Entrepreneurship According to the “Big Bang Theory” Sheldon: Theoretical Ph.D. physicist who is highly socially inept Raj: Indian Ph.D. physicist who cannot speak to women Penny: Aspiring actress who works at the Cheese Cake Factory Leonard: Ph.D. physicist in love with Penny; roommate of Sheldon Howard: M.S. Engineer who desires women, but can’t interest one
Marketing in the Context of a Company’s Functions • Research and Development • Innovates and develops technologies and products • Operations • Produces the products/services that meet customer need • Finance • Accesses capital and allocates scare resources across functions • Marketing • Provides direction for R&D and generates case through acquisition and retention of customers
So What is Marketing Anyway? • Sales campaigns for your product? • Delivering a consistent message about your product? • A defined strategic and financial plan for profiting from your product?
Marketing is… • A defined strategic and financial plan for profiting from your product. • Defines: • The available market: scope for selling • The segmentation of the market: not all prospects are of equal proximity and value • The targeting to customers: defines who we can realistically sell to and at what stage • The positioning of your product: focuses product features, benefits and messaging to your target
Officially, Marketing is… • “Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational goals.” Bennett, 1995
The Value of Marketing • Pro-forma financials are based on: • Who you will sell to; • How much will they purchase; • At what price; and • What will it cost you to deliver the product and benefit from the revenue • Marketing is a plan to make a profit.
MARKETING BASICS Marketing Wheel of Fortune
THE CIRCUS EXAMPLE • Advertising. Marketing. Sales. Promotions. What are the differences? • If the circus is coming to town and you paint a sign saying “Circus Coming to the Fairground Saturday,” that’s advertising. • If you put the sign on the back of an elephant and walk it into town, that’s promotion. • If the elephant walks through the mayor’s flowerbed, that’s publicity. • And if you get the mayor to laugh about it, that’s public relations.
THE CIRCUS EXAMPLE • If, before painting the sign that says “Circus Coming to the Fairground Saturday,” you check community calendar to see whether conflicting events are scheduled, study who typically attends the circus, and figure out how much they’re willing to pay and what kinds of services and activities they prefer, that’s market research. • If you invent elephant ear-shaped candy for people to eat while they’re waiting for elephant rides, that’s product development.
THE CIRCUS EXAMPLE • If you create an elephant package offering a combination of a circus ticket, an elephant ear candy, an elephant ride, and a memory-book elephant photo, that’s packaging. • Assigning a price that is both profitable and attractive to clients is pricing. • If you get a restaurant name Elephants to sell your elephant package, that’s distribution. • If you ask everyone who took an elephant ride to participate in a survey to gather their opinion, that’s customer research and feedback.
THE CIRCUS EXAMPLE • If you follow-up by sending each survey participant a thank-you note along with a two-for-one coupon for next year’s circus, that’s customer service. • And if you use the survey responses to develop new products, revise pricing, and enhance distribution, then you’ve started the marketing process all over again.
Model Product • A device that will enhance the solubility of sugar in coffee. • Some examples:
Discussion • Who is the product user? • What do you predict they will value in the product? • Are all users the same? What differences have you observed in users of this product? • Who is your real customer? Does the end user pay for this product? • Who will “sell” or convey your product to an end user? • What are the different types of conveying organizations for your product? How do these correlate with different types of end users? • What do you think each of these “types” value in your product? How does this differ between types?
Discussion • What are the features of each product example? • How do these features fit with benefits to potential end users? • How do these benefits translate to value for your real customer (end user or market channel)? • Which benefits may be most attractive to customers? • Which products are most “market ready”? Which require more development?
Exercise: Product Attributes Each Team should use its technology/product description to identify at least six attributes of your product and rate these according to your understanding of customer value and importance. Adapted from Cliff Zintgraff. – IC2 Institute – July, 2011
Start with Highlights from the 5Cs Marketing Framework
Model for Marketing Decision-Making:5 C’s Context Competition Competitive Advantage Collaborators Shared Interests Company Core Competencies Customer Unmet Needs Target Market Assess the Situation
Who are They? Personal characteristics Product usage patterns Why do They Buy? Needs Purchase Motivations How do They Buy? Decision-making unit (DMU) Decision-making process What do They Buy? “Whole” Product or Service Set of product and non-product capabilities that meet buying objective Set apart from competition Where do They Buy? Appropriate channel design Understanding the Customer
Discussion • Who are the customers for our devices that assist the solubilization of sugar into coffee? • Tell me about them? • Primary habits • Places they frequent • Potential interest in the product
Sources of Information About Markets and Customers • Secondary information • Coupled with knack or intuitive prediction • Objective information • Coupled with data-driven prediction
The Average American Consumer Quiz % of consumers agreeing Sample questions % Male % Female 1. A nationally advertised brand is usually better than ________ _________ a generic brand 2. I went fishing at least once in the past year ________ _________ 3. I am a homebody ________ _________ 5. The government should exercise more control over ________ _________ what is shown on television 6. Information from advertising helps me make better ________ _________ buying decisions 7. I like to pay cash for everything I buy ________ _________ 9. I am interested in spices and seasoning ________ _________ (Note: not all questions included) ©Kate Mackie, Ph.D. – IC2 Institute – July, 2011 Hoch (1988) Journal of Consumer Research
Predicting the Interests and Opinions of the American Consumer: Hoch (1988) Journal of Consumer Research ©Kate Mackie, Ph.D. – IC2 Institute – July, 2011
Direct Data is Essential!!!! • Who can you call right now??? • Customers • Channels • Enablers • Product and Technology Experts • Provide examples for our model product
Start with Primary Data • One primary tool of the IC2 Institute is the Quicklook • Helps define the “exchange” between company and customer • Methodology: • Apply fundamental marketing concepts • Apply fundamental networking concepts (degrees of separation) • Conduct primary research to interrogate the market • Outcomes: • Uncovers the “voice of the market” • Measures technology market proximity • Identifies value proposition within a value chain • Basis for roadmapping a marketing strategy Adapted from Cliff Zintgraff. – IC2 Institute – July, 2011
Researching Markets • Direct Approaches for Market Research • Interviews • Probe and learn • Lead users research • Empathic design • Expert judgment • Trend analysis
Orienting Your Technology/Product in the Language of the Customer • What are the key needs of your customers in light of this discussion? • If you seek link to a business and not a final customer, what business drivers will make them decide for you? • Profit margin? • Product differentiation? • Increased customer base? • Penetration a new geographic region? • Other?
Example • For a resume building service: • Feature: “professionally designed templates” • Benefit: “eye-catching resume that stands out among the competitors” • Customer-oriented benefit: “improved tool to land your dream job quickly” Adapted from Lean Canvas 2011
Exercise: Customer-Framed Benefits Each Team should pick one of its model products and identify at least four attributes of your product, trace these to defined customer need and restate attribute to be a customer-framed benefit.
Discussion • How would you market your model product directly to end users – those who drink coffee? • How would you market your model product to your real customers - who sell coffee to end users? • Apply the principals below to increase your sales:
Implications and Discussion • What could you do to stimulate the recognition of need in a potential stakeholder/customer? • How might you be of service in helping a potential stakeholder/customer to define the type of product/service they might need, or to help them in defining their specifications? • What actions could you take to make sure that you, or your organization, or your technology, comes to mind when the stakeholder/customer/ starts a search for qualified suppliers?
5’C’s (continued) • Competitors • Who makes a close substitute for your product? • Who are the competitors we must consider? • Comparative value propositions? • What are their likely actions and reactions?
Brand competition - Similar products/services for same customers at similar prices (e.g., for Palm Pilot, competition is other personal digital assistants) Functional competition - Products/services that fill the same need or serve the same function; substitutes (e.g., electronic calendars, day-timers, paper calendars) Competition …but we don’t have ANY competition…Really??? • Sugar producers - high fructose corn syrup • Security guards – electronic alarm systems ©Kate Mackie, Ph.D. – IC2 Institute – July, 2011
Competitive Advantage • Cost Advantage • Differentiation Advantage • Marketing Advantage Best, 2000, Ch. 11 ©Kate Mackie, Ph.D. – IC2 Institute – July, 2011
Competitive Advantage • Cost Advantage • Unit Cost • Transaction Cost • Marketing Expenses • Overhead Expenses Best, 2000, Ch. 11 ©Kate Mackie, Ph.D. – IC2 Institute – July, 2011
Competitive Advantage • Differentiation Advantage • Product Quality • Service Quality • Brand Image • Relative Price Best, 2000, Ch. 11 ©Kate Mackie, Ph.D. – IC2 Institute – July, 2011
Competitive Advantage • Marketing Advantage • Market Share • Brand Awareness • Distribution • Sales Coverage Best, 2000, Ch. 11 ©Kate Mackie, Ph.D. – IC2 Institute – July, 2011
Discussion • Review your model product and two others near you. • What are your competitive advantages? • List two • What are your disadvantages? • List two
Exercise: Competition Each Team should use the same six attributes already identified earlier, and rate the fit of your product and your chief competitors based on how well each meets customer needs.
Marketing Framework Proceed to Strategic Marketing Planning with STP
The Product Life Cycle Decline Maturity Growth Introduction Time
Early Stage Steps… Growth Introduction Product Development Technology Development Time
Critical Focus – V2 • Value • Define your differentiation • Find the initial Target • Get your message to them • Velocity • Reach them quickly • Provide the right product, at the right price, through the right channel • Remember – the most expensive thing you do as a young company is exist! Monthly bills with low revenue are killer.
Segmentation • Concept • Customers differ in the benefit they expect to receive from a product/service • While not all customers are heterogeneous, there are often CLUSTERS of customers that are • What characteristics relate to common need, receptivity to your product/service and ability to purchase? • Segmentation = cluster of (nearly) similar customers
Segmentation • Goal: Identify factors that separate CLUSTERS • Geographic – country, urban/rural, region, etc. • Demographic – age, sex, income, education, industry, size of organization • Psychographic – personality traits, perceptual style, attitudes, reference group, social role • Product Benefits/Usage – needs, frequency of use, loyalty, performance requirements • Decision Process – shopping patterns, info search, media habits, price sensitivity