Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Chapter 5 Start-up: making it happen Back to Contents

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Marketing Customers buy BENEFITS… not features Standard benefits Our shop accepts all leading credit cards… which means you can budget for your purchases to suit your pocket.

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Marketing Customers buy BENEFITS… not features Standard benefits Our shop accepts all leading credit cards… which means you can budget for your purchases to suit your pocket. Company benefits Our shop is a family business… which means that you get individual, personal attention from somebody who cares.

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Marketing Customers buy BENEFITS… not features Standard benefits Our shop accepts all leading credit cards… which means you can budget for your purchases to suit your pocket. Company benefits Our shop is a family business… which means that you get individual, personal attention from somebody who cares.

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Marketing Customers buy BENEFITS… not features Standard benefits Our shop accepts all leading credit cards… which means you can budget for your purchases to suit your pocket. Company benefits Our shop is a family business… which means that you get individual, personal attention from somebody who cares. Differential benefits We are sole agents for that product… which means you can’t get it anywhere else.

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 The marketing mix PRODUCT Design/sizes colours Materials Specification Quality Packaging After-sales service PRICE List price Discounts Payment terms Service/spares prices PLACE Location Retail/wholesale Mail/telephone order Delivery methods PROMOTION Advertising Brochures/data sheets Public relations Personal selling and networks Exhibitions Gift/sales aid PEOPLE

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Generic market strategies Broad market COMMODITY SUPPLIER OUTSTANDING SUCCESS Low cost/price High cost/price Low differentiation High differentiation MARKET TRADER NICHE PLAYER Focused market

Costs, volume and revenue Total revenue Cost or revenue £ C Target profit Total costs Break-even point A B Fixed costs X Y Output volume

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Contribution analysis Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 1. Break-even point (£ sales) =   Fixed costs   Contribution margin (%)

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Break-even example Sales £1000 Variable costs 600 Contribution £ 400 40% Fixed costs 400 Profit £ 0

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Break-even example Sales £1000 Variable costs 600 Contribution £ 400 40% Fixed costs 400 Profit £ 0 Break-even point = 400 = £1000 0.40

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Contribution margin Percentage change in sales volume needed to achieve the same profit after a price change PRICE CHANGE CONTRIBUTION MARGIN 20% 30% 40% +33% +20% +14% +100% +50% +300% –5% –10% –15% +60%

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Contribution margin Percentage change in sales volume needed to achieve the same profit after a price change PRICE CHANGE CONTRIBUTION MARGIN 20% 30% 40% +5% –20% –25% –11% +15% +10% –33% –43% –27% –14% +33% +20% +14% +100% +50% +300% –5% –10% –15% +60%

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 The pricing range Variable Average Value to cost per cost per customer unit unit ‘Too low’ Going rate ‘Too high’ price price price Pricing range

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Pricing Skimming Penetration

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Generic market strategies Broad market COMMODITY SUPPLIER OUTSTANDING SUCCESS Low cost/price High cost/price Low differentiation High differentiation MARKET TRADER NICHE PLAYER Focused market

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Customer loyalty ladder Prospect Customer Regular customer Supporter Advocate INCREASING LOYALTY

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Generic market strategies Broad market COMMODITY SUPPLIER OUTSTANDING SUCCESS Low cost/price High cost/price Low differentiation High differentiation MARKET TRADER NICHE PLAYER Focused market

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Segmentation Industrial Type of business Size of business Quantity of purchase Credit worthiness After-sales service Usage rate

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Segmentation Industrial Type of business Size of business Quantity of purchase Credit worthiness After-sales service Usage rate Consumer Socio-economic group Age Sex Home location Occupation Stage in family life-cycle Benefit required

Relationship v transactional marketing Relationship marketing Encourages close, frequent contact Encourages repeat sales Focus on service Focus on value Focus on quality of total offering Focus on long term Transactional marketing Limited contact Orientated toward single purchase Limited customer service Focus on product/service benefits Focus on product quality Focus on short term

Entrepreneurial marketing planning Determine future organisational performance objectives Review conventional influences on performance Can marketing conventions deliver performance goals? Yes No CONVENTIONAL PLAN ENTREPRENERIAL PLAN

Entrepreneurial marketing planning Map sector conventions Assess scale of entrepreneurial activity Assess entrepreneurial opportunity Launch early Assess entrepreneurial capability Define performance objectives Define strategy Develop detailed plan Specify control systems

Market research Field research Reflects your needs You control quality Up to date Expensive Takes time Can tell competitors what you are up to Desk research Cheap Quick Good for background Not specific Can be out of date Can be incomplete or inaccurate Advantages Disadvantages

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Market research Personal Telephone Postal interview interview questionnaire Quality of data        Quantity of data      Speed       Response rate      Cost high fair fair

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 The selling potential matrix Business potential of buyer High Medium Low Friendly 1 2 3 Attitude of buyer Indifferent 2 3 4 3 4 5 Unfriendly

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Selling skills Know what customers want Know how to match this to the product/service you have to sell Know how to build up argument that it does indeed meet their requirements Know how to close the sale

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Closing the sale Trial close Alternative close Summary close Concession close Quotation close Direct close

Paul Burns, Entrepreneurship and Small Business, Palgrave, 2001 Forms of business Sole trader Partnerships Limited companies Franchises