About UCI Applied Innovation:
UCI Applied Innovation is a dynamic, innovative central platform for the UCI campus, entrepreneurs, inventors, the business community and investors to collaborate and move UCI research from lab to market.
About the Cove @ UCI:
To accelerate collaboration by better connecting innovation partners in Orange County, UCI Applied Innovation created the Cove, a physical, state-of-the-art hub for entrepreneurs to gather and navigate the resources available both on and off campus. The Cove is headquarters for UCI Applied Innovation, as well as houses several ecosystem partners including incubators, accelerators, angel investors, venture capitalists, mentors and legal experts.
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Hierarchy of management that covers different levels of management
Entrepreneurial Marketing | Howard Mirowitz | Lunch & Learn
1. Entrepreneurial Marketing
- What distinguishes entrepreneurial marketing from
generic product marketing?
- How to define the market and positioning for sustainable
competitive advantage
- Why is the “probe-and-learn” strategy important?
- Is time-to-market more or less important than “getting it right”?
- Why are early reference accounts and key influencers
important?
4. What an Entrepreneur is Marketing and
Who It Is Marketed To
Customers
Influencers
Investors
Supply Chain and
Channel Partners,
Strategic Allies
Employees
Products &
Services Equity Image
5. What Do Startups Need To Define?
- Who is the target customer
- What is the complete product/service offering
- How the target customer will perceive the offering in relation
to the competition (positioning)
- Why the offering as positioned will meet the customer’s
needs (value proposition)
- How the offering will be priced
- How best to reach the target customer (channel strategy)
7. Defining the Complete Offering
- Concept test or in-market test as early as possible
… Do not assume your instincts are correct
… Use the “probe-and-learn” strategy – leverage your
ability to react quickly (a typical strength of startups)
- What is a complete offering?
… Fully addresses the customer’s needs
… Includes the entire system or experience
… Channel, service, support, app, network, content, etc.
8. Defining the Complete Offering
- Balancing time-to-market vs. “getting it right”
… “Probe-and-learn” strategy – do both at the same time
… “The best is the enemy of the good”
… Startup capital is finite – know your funders’ time horizon
… Know your competition!
- What if there is a need for stealth?
… Non-disclosure agreements
- Above all – do not expend all your resources on the first
market entry; plan for iterations!
9. Implementing the Complete Offering
- What can be outsourced or implemented thru strategic
alliances or channel partnerships?
… Expend resources only on what will build sustainable
competitive advantage and leverage your distinctive
competences
- Distinctive competence = your “secret sauce”
- Foundation for exit
10. Sustainable Competitive Advantage
- Competitive advantage = something unique and
valuable to customers beyond a lower price
- Typical sources
… Value impressions = product features that signify value
… Strong distribution channels
… Excellent product quality
… Excellent service or support
… Brand name or image
- Sustainable competitive advantage = cannot be copied
… Basis for valuation!
11. Repositories of Sustainable Competitive
Advantage
- Patents, copyrights and trade secrets
- Technology
… Product
… Process
- Locations
- Service and support depth
- Organizational culture and know-how
- Exclusive relationships
12. Low
Low High
High
Value for
Establishing
Sustainable
Competitive
Advantage
Degree of Leverage of Distinctive Competence
Core / Leverage
In-source or
find Strategic Partner
and co-develop
Core
In-source –
establish / maintain
Core Competencies
for competitive
advantage
Non-Core
Outsource or obtain
through Channel
Partnerships
Non-Core / Leverage
Consider co-develop-
ment with Strategic
Partner and/or “Open
Source” strategy
Implementing the Complete Offering:
Strategic Analysis
13. Defining Positioning
- Key question: “Why should a member of the target customer
segment buy my product or service vs. the competition’s?”
- Identify unique differentiating characteristics of the complete
offering as perceived by the target segment
… Max 2 or 3 attributes
… Articulate benefits, not just features or functions
- Initially rely on:
… Market research analytics
… Entrepreneurs’ market knowledge
- Hone and test before going public the first time!
… Extremely difficult to change once out in the market
15. 10
20
30
40
50
60
70
80
$98 $127 $141 $160
Relative
Number
of ABLE
Faucets
Preferred
ABLE Price
Results of Second ABLE Faucets
Concept Test
= Benefits
= Features
16. Defining Why the Offering Will Meet the
Customer’s Needs: The Value Proposition
- “Does the customer want the perceived value that positioning
is trying to deliver?”
- Customers value benefits, not features or functions
- Look for variations in how customers use the product/service
(or the alternatives)
… Heavy users
… Different uses
… Criticality of uses
17. Pricing
- Price according to value
- Integrate pricing with concept testing and in-market
testing
… Don’t leave pricing decisions to the end just before launch
- Understand the price sensitivity of the customer
Less sensitive More sensitive
Significant savings Cost = big % of total expense
3rd
party bears cost Customer bears cost
High switching cost Low switching cost
Easy comparison shopping Difficult comparison shopping
Service/support important Service/support unimportant
18. Low
Low High
High
Value Derived by Customer
Price
Sensitivity
of
Customer
Avoid –
Reposition
product
Re-segment –
Attempt to focus
on customers
where relationship
is important, etc.
Sweet Spot –
Focus on channel
strategy and on
sustainable
comp. advantage
Re-segment –
Attempt to focus
on customers
with critical or
“stickier” usage
Implementing the Value Pricing and Market
Positioning Strategy: Analysis
19. Channels
- Align channel strategy with positioning
… What aspects of complete offering should channel provide?
- Investigate during concept testing!
- Main categories of channel strategies
… Direct: Sell to end customer with no intermediary
… Indirect: Resellers exist between you and end customer
* Exclusive: One or a few carefully selected channel
partners have territories where only they have sales rights
* Selective: Multiple authorized non-exclusive resellers
* Intensive: Blow out everywhere possible
… Franchising: License resellers as independent startups
in return for contract payments; resellers invest capital
20. Characteristics of Channels
Indirect Direct
Cost to startup Variable Fixed
Focus on Product Shared w/others Exclusive
Efficiency per Higher Lower
Account
Control per Lower Higher
Account
Account Coverage Broad coverage Targeted coverage
Account Less customized More customized
Customization
Risk Lower Higher
21. Channel Strategy –
Value Added Resellers (VARs)
- A form of selective distribution
… Perform more functions than distributors
… Typically want higher margins or other compensation
… Understand VARs’ needs, provide more perceived value
to them than competitors
… VARs may become almost like a form of customer
22. Multiple Channel Strategies and Managing
Channel Conflict
- If there are different target segments and a different channel
is used for each segment, the potential conflict among the
channels must be managed
… High-end, high-service channels do not want the same
products they carry to be in low-end, low-service channels
… Low-end, low-service channels do want the same products
they carry to be in high-end, high-service channels
- Most startups should avoid multiple channel strategies initially
23. Managing Market Entry – Initial Reference
Accounts
- Often nothing in the market launch is more important
… Credibility
… Press spokespeople
… Examples for ads and PR
… Help debug the product (beta testing)
… Help define the complete offering
- Especially for products/services that are highly priced, mission
critical or perceived as risky
… Examples: Enterprise software, medtech
- Selecting the right initial reference accounts is critical
… Leaders in field, representative of segment, willing to take risk
… Must see great value in your complete product offering
24. Managing Market Entry – Initial Reference
Accounts
- Markets have hierarchical structures of reputation/influence
… Target top of hierarchy
- Once identified, get introduced to the accounts, and make a
compelling offer
… Sources of introductions: Law firms, VCs, CPAs, bankers,
personal networking
25. Managing Market Entry - Initial Reference
Accounts
- What is a compelling offer?
… Demonstrates enough value to overcome risk aversion
… Reduced or even zero pricing (at least for initial period)
… More training, support and service than later customers get
- Personally engage even if an indirect channel strategy is used
… Feedback is critical; keeping the accounts happy is essential
… Escalation process
26. Managing Market Entry - Initial Reference
Accounts
- Commit initial reference accounts to:
… Joint press release
… Use of the account’s name
… Participation in a case study highlighting benefits of the
product
… Reasonable participation in trade shows, seminars, etc.
… Take calls from press and other prospective customers
27. Managing Market Entry – Key Influencers
- Examples: Walter Mossberg of The Wall Street Journal in
personal electronics products; the Gartner Group in IT
- Industry conferences and trade shows
… Example: CES in consumer electronics
- Introduce your offering while still in development
(under non-disclosure if necessary) to get launch coverage
28. Summary
- Entrepreneurial marketing is a 3-D chess game
- Rigorously focus on what will build enterprise value
… Strategic partners are exit strategy candidates
- Probe-and-learn strategy solves the issue of time-to-market
vs. “doing it right”
… Plan for iteration – don’t expend all resources on initial entry
- Proper attention to concept testing and marketing analysis
should enable pricing according to value
- Research channel strategy during concept testing
- Initial reference accounts are key
29.
30. Resource Leveraging
- Stretching resources further than originally thought possible
- Using others’ resources for one’s own purposes
… Strategic alliances
… Channel partnerships
… Key early customers
- Complementing one resource with another to create
greater value
- Using some resources to obtain others (hopefully larger)
31. Defining How To Reach the Customer
- Investigate channel strategy during concept testing
… Where or how purchased can affect the perceived
value of the complete offering
… Exclusive or selective distribution strategies become
important if value is sensitive to channel choice
32. Characteristics of Channels –
Indirect Distribution
Exclusive Selective Intensive
Resellers don’t compete Resellers may compete Resellers compete
Coverage limited Coverage varies Broadest possible
coverage
Higher control Control varies Lower control
Higher margins for all Intermediate margins Lower margins for all
More reseller loyalty Less reseller loyalty “No” reseller loyalty
More push in channel Less push in channel “No” push in channel
Less mass pull needed More mass pull needed Mass pull essential
More possibility of Some possibility of All segments buy from
incorporating channel incorporating channel everywhere
members’ attributes as members’ attributes Possibility of faster
part of complete product as part of complete sales cycle
offering product offering
Possibility of guaranteed Possibility of multiple
minimum sales channels for different
segments
33. Concept Testing and Channel Strategy
- Concept testing with selected channel partners is very
important
… Expose channel to offering concept as early as practicable
… Test concept as realistically as with end users – similar
stimuli (drawings, mockups, simulations, etc.)
… Describe functions to be performed by you and channel
… Show tentative pricing and channel mark-ups
… Early customer concept testing results may be shared
- Will channel work with you with given pricing and functions?
34. Multiple Channel Strategies and Managing
Channel Conflict
- Providing channels with differential services or elements
of value outside the product itself can also mitigate conflict
… Idea is to compensate channels differentially for carrying
the product
… Must beware of arbitrage – members of one channel
dumping overstock into another channel at a profit
- Example: VAR plans in the computer electronics industry
… VARs carry the same products that are on sale in Fry’s
… VARs get extra “market development funds” (MDF), co-op
ad funds, etc. from vendors in addition to product margins
35. Multiple Channel Strategies and Managing
Channel Conflict
- Creating different products for different channels can help
to minimize conflict
… Requires active product development program to keep
channels refreshed with constant stream of products
- Example: Consumer electronics
… High-end channel: Specialty audio/video stores catering
to “prosumers,” hobbyists, audio/videophiles
… Low-end channels: Fry’s, Costco, Best Buy, etc.
… Existing products moved from high-end to low-end
channels when new products introduced into high-end
channels