Market Types & Determining Your Venture Market Type Week 2 Entrepreneurship II 26 January 2016

Plan for Today 1.Feedback on pitches 5min 2.Market types 40 min 3.In-class activity on market types by team 20min 4.Peer sharing on market type chosen 10min 5.Break 20 mins 6.Launching your company, product/ service: Mr. Spio

Objectives To understand and identify the different market types Be able to understand the pros and cons of each market type Be able to apply the market type analysis to your business model Be able to decide which market type to use Develop objectives for first year of operations

Market Types ExistingNew Re- segmented Clone

1. Existing Market Well established Large number of customers Has Competitors Your product is improving on existing service/ product through its features, performance

2. Re-segmented- Niche Market Existing market willing to buy product/ service for specific need Customers willing to pay more Customers willing to forfeit other features as long as the specific need is addressed

3. Re-Segmented Market- Low cost Strategy Customers in existing market At low end of the market Customer willing to have a similar product but of less quality/ features at lower price Product/ service need to be ‘good enough’ for them

4. New Market No competitors No well defined market No existing customers No competitors Product new in the world

5. Clone Market Existing product/ business model in another market Introduce it to new market Adapt to fit new market needs and peculiarities E.g. MacDonalds in India; GPS software for local locations

Pros & Cons of Market Type Existing Market Re-segmented Market New MarketClone Market CustomerExisting New/ new usage New Customer Needs Performance Lower cost or perceived need/ problem Simplicity? & convenience New idea proved abroad Product Performance Better/ faster Good enough for low end/ niche Low in traditional attributes; improved new customer metrics Good enough for local market Competition Existing incumbents Other start-ups None or foreign originators RisksExisting incumbents niche strategy fails Market adoptionCultural adoption

Market Concentration & Cost of Entry Market Share of Leader Cost of Entry vs Leader’s Sales/& Marketing Budget Entry StrategyEase of Entry Monopoly>75%3x Re-segment/ new difficult Duopoly >75% & 1.7 of next 3x Re-segment/ new difficult Market Leader >41% & 1.7 of next 3x Re-segment/ new difficult Unstable Market >26%1.7X Existing/ Re- segment easier Open Market>26%1.7 XExisting/ Re- segment easiest Source: The Start-up Owner’s Manual, Blank & Dorf, 2012

Strategies for Existing Markets Company Positioning Product Positioning Company Launch Product Launch Demand Creation Activities Year One Objectives Existing Market Differentiate and Credibility Product Differentiation Credibility and Delivery Existing basis of competition Create drive demand into the sales channel Market Share New Market Vision and Innovation in the new market Defining the new market, the need and the solution Credibility and Innovation Market Education, standards setting and early adapters Customer Education drive early adopters into sales channel Market Adoption Re- Segmenting Innovation DifferentiationInnovationCompetition Sales Channel Share Source: Steve Blank,( 2013), Four Steps to the Epiphany, p167

New Market What are the markets adjacent to the new one being created? What markets will potential customers come from? What’s the company’s vision and why will lots of people care? How will the company educate the market? How will it create demand? Given that no customers yet exist, what are realistic sales forecasts for the first three years?

Existing Markets 1.Who are the incumbents and which ones drive the market? 2.How do the competitors define the market? 3.What share of this market does the company want to capture in the first three years? 4.What will the cost of entry be against incumbent competitors? 5.What performance attributes have customers said are important? How do competitors define performance?

Re-Segmentation 1.What existing markets are customers coming from? 2.What are the unique characteristics of those customers? 3.What compelling needs of those customers are unmet by existing suppliers? 4.How will the company educate the market and create demand? 5.Why couldn’t existing incumbants offer the same thing?

Recap: Objectives by Market Type Educate customers about market Drive early & niche adopters to sales channel New Market Create qualified(sales) demand Drive demand into sales channel Existing Educate customers about benefits Drive demand into sales channel Re- segmented

Setting Year One Objectives Year One Customer Creation Objective Year One sales Objectives Budget

In class Activity 1.In your team, discuss and determine your market type 2.Determine your total available & serviceable market 3.Determine how many/ much you can sell in first year depending on your market type 20min 4.Half of your team share your decisions with another team 5min each