Entrepreneurial Marketing Course Introduction College of Engineering University of California, Berkeley

Scope of Marketing Course Marketing Modules Module 1Market Definition, Customer Segmentation & Competition (5C’s) Module 2Product Development, Positioning & Pricing (PRODUCT) (PRICE) Module 3Marketing Communications (PROMOTION) Module 4Distribution & Sales Channel Development (PLACE) ConclusionPutting it All Together

Module 1: Market Selection, Customer Segmentation & Competition Entrepreneurial Marketing

Marketing is an Exchange Process CompanyCustomer

Understanding the Customer 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

Context Model for Marketing Decision-Making: 5 C’s & 4 P’s Company Core Competencies Customer Unmet Needs Competition Competitive Advantage Collaborators Shared Interests Target Market Assess the Situation

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  Segmentation = cluster of (nearly) similar customers 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

Positioning Positioning = Managing the product and its presentation to fit a predetermined place in the mind of the customer Positioning = Market + Competitive Segmentation Differentiation

Positioning Statement For target market, COMPANY/PRODUCT is, among competitive set, single most important claim, because single most important support.

Elements of a “Great” Positioning Company  Fit with company strategy  Fit with company capabilities  Fit with corporate culture  Fit with product strategy  Fit with physical product  Fit with brand personality / brand essence Customer  Credible  Relevant  Unique  Durable  Emotionally appealing Context  Fit with trends  Unique vs. Competition

Customer Decision-Making Multiple players & roles (DMU) Motivations, power, perceptions of each? InitiatorInfluencerDecider UserGatekeeperPurchaser

Customer Decision-Making Process Initiator Gatekeeper Influencer Decider Purchaser Users Identify Need Create Biz Case Case Approval RFI Vendor Review …. Time DMU Decision-making Process

Key Themes: The 5 C’s & 4 P’s of marketing -- All Customer behavior – Microfridge, Wildfire, CardioThoracic Customer segmentation – Wildfire, Sealed Air, Documentum, Biopure Positioning – Wildfire, Sealed Air Decision making unit (DMU) and decision making process (DMP) – Microfridge, Wildfire, CardioThoracic Competitive landscape – All

Module 2: Product Policy, Positioning & Pricing Entrepreneurial Marketing

Assess the Situation (5 C’s) Model for Marketing Decision-Making: 5 C’s & 4 P’s Target Market Select Target Market Define Marketing Mix (4P’s) Product PricePromotion Place

Techies “Try it” Visionaries Move ahead of the herd Pragmatists Stick with the herd Conservatives Move only when necessary Skeptics No way The Chasm Product Adoption Lifecycle

The Chasm Lifecycle Stages Early Adopters Product innovation Build primary demand Market education Price skimming to fund growth Early Majority Product proliferation Stake out dominant market share Channel development Product line extensions Achieve economic scale Late Majority Market Maturity Survive industry shakeout Superior distribution / availability Strong trade promotions Penetration pricing Low-cost producer

Horizontal vs. Vertical Strategies Horizontal Platform or toolkit for wide range of business problems Pursue full array of market opportunities Need technology partners to fill product gaps Sell to IT Sell to visionaries Each sale is starting from scratch (until cross the chasm) Vertical Solutions to specific business problems Decline deals outside of vertical Need system integrators to customize & integrate Sell to business person directly affected Sell to pragmatists Easier follow-on sales in vertical due to references

Whole Product “The Whole Product” = Physical Product + All Associated Factors (services, partners, warranties, guarantees, image, training, etc.) required to fulfill customer buying criteria

Input into Pricing Strategy Pricing Concepts Our Product / Service Capabilities Value of “Perfect Substitute” Customer Perceived Value Gap Competitor Product / Service Capabilities Marketing & Sales Efforts Marketing & Sales Efforts Gap

Pricing: Internal & External Factors Internal Factors Objectives of the Firm Marketing Mix strategy Costs External Factors Nature of the market Demand Competition Channel pressures Pricing Decisions

Pricing Strategies Market Skimming Image/brand supports high price Solving high-value need with limited substitutes Small/limited initial buyer set Competition cannot get in and undercut Limited manufacturing capacity High fixed cost at low volumes Market Penetration Costs go down with volume (economies of scale) Market is price sensitive High chance of competition entering quickly Have sufficient manufacturing capacity Large immediate demand

Bonoma’s Vegematic Pricing Model Company’s Variable Costs Customer’s Perceived Value Penetration Pricing Skim Pricing Competitors Prices Feasible Price Range

Key Themes: Product innovation & development process – CardioThoracic Whole Product – Microfrige, Documentum, CardioThoracic Horizontal vs. Vertical markets – Documentum Multi-product line management – Wildfire, Sealed Air, Biopure Pricing economics & math – Sealed Air, Biopure Go-to-Market considerations – All Technology adoption lifecycle -- All

Assess the Situation (5 C’s) Modules 3 & 4: Promotion & Place Target Market Select Target Market Define Marketing Mix (4P’s) Product PricePromotion Place

Assignment 3: Product, Positioning & Pricing Plans Company  Why are you in business and how do you make money?  Core competencies (people, know-how, etc.) Customer  Customer problem / pain points  Value proposition to solve pain points  Target market segment(s)  Positioning statement(s) for those segments Competition  Direct competitors  Alternates / Substitutes Product  Features/Advantages/Benefits Pricing  Pricing approach – skim, penetration, other  Pricing stucture/level