Entrepreneurial Marketing: An Effectual Approach Prof. Dr. E.J. Nijssen, Eindhoven University of Technology Available from Routledge at: https://www.routledge.com/Entrepreneurial-Marketing-An-Effectual-Approach/Nijssen/p/book/9781138712911 Session 2: Identifying an application and market

Objectives Difference between market and business opportunity Learn from experienced entrepreneurs Introduce bowling alley concept to identify the first application that can open up the market for you Closer look at customer value; introduce the means- end chain

Lessons from experienced entrepreneurs Entrepreneurship requires identification of at least one market opportunity and application Question: How many opportunities do entrepreneurs identify on average? What do you think? You need to make a careful initial assessment of the opportunity. Which criteria would you use? Novices focus on newness; experts focus on customer demand and quick cash flow There are many new ideas… but not that many that can be turned into a profitable business…

Number of opportunities and technical experience Number of market opportunities identified Level of technical experience of the entrepreneur 4 3 2 1 Low Medium High Experienced or serial entrepreneur Inexperienced entrepreneur Adapted from Gruber, MacMillan and Thompson (2008)

Explanation: Close versus distant search New technology Close search Search scope Most obvious applications Distant search Least obvious applications

Impact of marketing experience Number of market opportunities identified Experienced or serial entrepreneur No or very limited effect of marketing was found for novices in the case of new technology and its applications. 4 Flexible, effectual marketing approach 3 Static, traditional marketing approach 2 1 Low Medium High Level of marketing experience of the entrepreneur Gruber, MacMillan and Thompson (2008)

Evaluation criteria used Novice entrepreneurs Experienced entrepreneurs How novel the idea is Extent to which idea is based on new technology Superiority of product or service Potential to change the industry Intuition or gut feel Solving a customer’s problems Ability to generate postitive cash flow Speed of revenu generation Manageable risk Others in their network with whom to develop the venture So, experienced entrepreneurs immediately check whether the market opportunity is also a business opportunity; whether it addresses a viable customer segment and can make money Adapted from Baron and Ensley (2006)

Considering the future Moore (2004), in his book Inside the Tornado, adds another check: choose the application that can open up future markets It draws attention to the need to have an idea about how your firm may develop over time Getting established is key, but considering long term effects of your decisions is important too

Vision of future: Bowling alley p/m p/m p/m p/m p/m p/m p/m p/m p/m 1st pin p/m Entrepreneur’s initial focus Adapted from Moore (2006) p/m: refers to combination of product application and market segment or niche

Products versus solution focus But… does it take good pictures? And, is the product simple to operate? CANON OES 400 D (From advertisement of Canon NL website) 10,1 Megapixel CMOS sensor EOS Integrated Cleaning System 2,5" LCD 9-points AF Picture Styles DIGIC II 3bps for serial pictures up to 27 pictures DPP RAW software for image processing Compact and light Compatible with EF/EF-S lenses and EX Speedlite flash

Perceived customer value (based on means-end chain) Desired customer value Customer satisfaction with this value Goals-based satisfaction Consequence-based satisfaction Attribute-based satisfaction Goals (end) Customers’ goals and purposes Desired consequences in use situation Benefits Desired product attributes and attribute peformance Attributes (means) Adapted from Woodruff (1997)

What is ‘value’? “Value is low price” “Value is whatever I want in a product” compare: ‘utility’ “Value is the quality I get for the price I pay” tradeoff (single ‘get’ and ‘give’ components) “Value is what I get for what I give” tradeoff (multiple ‘get’ and ‘give’ components) Zeithaml (1988)

Tradeoff ‘get’ and ‘give’ components Perceived benefits -/- costs: Benefits received (product, brand, service) Customer value Price paid Costs incurred Bundle of benefits Costs

Discrepancy Customers are usually… Companies are often… Skeptical about the new product’s performance Unable to see the need for it Satisfied with the existing product Quickly see what they already own as the status quo Convinced the innovation work Likely to see a need for the product Dissatisfied with the existing substitute Set on viewing the innovation as benchmark Gourville (2006)

Typology Low High Easy sells Smash hits Degree of behavioral change required Sure failures Long hauls Low High Degree of product change Adapted from Gourville (2006) Many new products require behavioral change on the part of the customer. This implies a long haul rather than smash hit…

The way serial entrepreneurs work Convergence Users Technology Time

Lessons Identify multiple opportunities before you decide/select Focus on customer value and quick generation of cash flow, not on novelty; have this reflected in your evaluation criteria Experienced entrepreneurs benefit from marketing experience, while novice entrepreneurs do not. The explanation is that experts revert to the effectual mode of marketing

Lessons Value concerns perceived value by the customer It is an economic notion referring to the difference between benefits and costs Serious added-value is required to make a difference, but all too often entrepreneurs Neglect the costs (behavioral change; switching cost) involved for the customer of their innovation; be sure to account for all trade-offs Pay too little attention to fact that customers may value their current alternative and resist change Experienced entrepreneurs actively navigating between customer needs and technology, looking for the best application