Stages of New Business Idea development and validation Product/Service development Launch Build out business

Ramping up -- Main Ideas Early marketing is usually “Market Development” –Understanding markets and segments –Looking for first customers –“Business Development” – making partnerships Need to transition to 4Ps processes Product launch is not “establishment of marketing process” in itself

More Main Ideas Ryan – “sucking the air out of the room” –Lock up sales channels –Lock up customer perceptions Mullins – importance of connectedness –Upstream and downstream in value chain –Across the value chain, as well Also, the importance of experimentation and learning Also, the importance of an entrepreneurial orientation

Channel design: start w/ customer decision process Problem Recognition Information Search Alternative Evaluation Choice and Purchase Post-purchase Experience

Value through the channel manufacturer wholesaler retailer or distributor customers Channels provide value through time, place, form, possession, and assortment

What distribution does Alternatives Functions Customer Impacts Which items? What time period? Direct? Indirect? Exclusive Selective Intensive Assortment/ Sorting Routinizing transactions Facilitating Search Logistics: Right place Right time Right quantities Right perceived offering bundle To the right segment

Channel “watch list” for startups Channels tend to be conservative – it’s how they manage risk and uncertainty Don’t mistake the channel as a substitute for “real” customers – the end-use buyers Pay attention to power dynamics –Power derives from dependency and value to customers –Create value and demonstrate this to offset dependency Support takes a lot of hard work

Channel Management Choose Channels for stage in TALC that –Reach customers –Provide required value –Have OK power position Choose partners that are managed well Support Channels

Channel Support Help them provide value Provide desired incentives Provide expected allowances Use expected relationship practices Negotiate with their interests in mind Build relationship, but keep in perspective

Manage the Relationship Written contracts so they know what to expect, both positive and negative Communicate intentions; follow through on promises Keep perspective: temporary, limited partnerships; not life-long marriages Communicate extensively

Pricing -- Basic Idea Maximum price = what customers will pay –Key is perceived value Minimum price must cover relevant costs Main Idea: Set Price at value level or below; you have to cover costs

Pricing Parameters max min Com. To Value Relevant Costs $ 0

Marginal Incremental Avoidable e.g. R&D costs, when are they relevant?

Other Main Pricing Ideas Keep objectives in mind: –Profit maximization? –Maximize market share? –Build good will? –Build barriers to entry? Keep price consistent with positioning Format prices consistent with customer expectations: e.g. Bundled?

Pricing below maximum Build goodwill Induce trial Expand customer base –Soak up market share –Keep competition out –Run down experience curve Don’t know value-based price Use of cost-based approach

Pricing problem early in TALC Customers don’t understand value; reference prices can be way off mark, either high or low Still running development costs, which are still fairly uncertain

Solution to pricing problem Careful targeting to those who have perceived need and tangible budget Careful attention to costs – “cost plus” pricing with development customers Later, value-based / competitive pricing Target using value/cost model

Guerrilla Marketing Marketing without many resources Small numbers; high leverage Take some chances Maintain consistency over time to create familiarity Very creative

Examples Launch new restaurant: free dinners-for-two to hair salon operators -- generated word-of-mouth Homemade cookies: give away free sample of small cookie; big cookie price is $1 Jeweler: diamond-encrusted gifts to draw holiday traffic Waterbed store: helium-filled waterbed tethered above store Dentist’s promotion: exam and cleaning for “whatever price you think it’s worth”

Can you come up with some guerrilla marketing for… Bug-Bots

Does your guerrilla marketing idea meet these criteria… Get customer’s attention Move the customer further in the buying or decision process Get the customer excited about the value proposition Give the customer a chance to experience the product’s value Get the customer to remember the product or brand (favorably)