SESSION 8: ENTREPRENEURIAL MARKETING

At the end of this session, learners should be able:

1. Explain the purpose of market segmentation.

2. Discuss the importance of selecting a target market.
3. Discuss the importance of a start-up to establish a unique position in its target market.
4. Describe the four components of the marketing mix
5. Distinguish between advertising and public relations
6. Explain how firms can use social media to strengthen their brand and promote their
products.
7. Describe the seven-step sales process
Marketing is a broad subject; in this session we focus on marketing challenges that
entrepreneurs running young ventures encounter. Marketing is an essential component to the
success of a start-up firm. A new firm should know who its customers are and how to reach
them. The entrepreneur uses a three-step process to determine who the customers are. These
are: segmenting the market, selecting a target market and crafting a unique positioning strategy.

A. Segmenting the market

The entrepreneur will study the industry in which the firm intends to compete and determine
the different potential target markets in that industry. This process is known as market
segmentation. The requirements for successful market segmentation are; homogeneity of needs
and wants appears within the segment, heterogeneity of needs and wants exists between the
segments, differences within the segments should be small compared to differences across
segments, the segment should be distinct enough so that its members can be easily identified,
it should be possible to determine the size of the segment and the segment should be large
enough to be profitable. The entrepreneur should enter the business with a realistic assessment
of the size of its market.

B. Selecting a target market

After an entrepreneur has segmented the market, the next step is to select a target market. The
market must be attractive and the firm must be able to serve it well. Most start-up firms target
a niche market within the segment. A niche market is a place within a market segment that
represents a narrow group of customers with similar interests.

The entrepreneur finds answers to the following questions;

• What niche in the market will we occupy?

• How large is this market segment?
• How fast is it growing?
• What is the basis for differentiating our product or service from competition? Dow we
have a superior business model that will be difficult for competitors to reproduce?
Benefits of a niche strategy

1. Niche strategy is a good way for new business to enter the market.
 2. Takes fewer resources for start-up due to low marketing costs and ability to start on a
smaller scale.
3. Success rates tend to be higher due to less direct competition.
4. They are able to charge higher prices hence higher profit margins.
Demerits of niche strategy:

1. Adaptability in initial plan and ability to change in order to cope with customer
demands.
2. Niche markets change drastically over time and adapt to market changes.
3. Niches can also dry up adaptation is also required.
4. Niches can grow and attract very large competitors, they need to adapt to business
strategies that meet the competitive market. Prices may go downwards while the costs
of business may go up due to increased marketing costs, greater expectations from
customers and higher labor costs due to competition for qualified employees.
C. Establishing a unique position within the target market
After selecting a target market, the entrepreneur’s next step is to establish a position within it
that differentiates it from its competitors. It is concerned with how the firm is situated relative
to competitors. After identifying the firm’s position and its primary points of differentiation,
then an entrepreneur can develop a product attribute map illustrating a firm’s positioning
strategy relative to its major rivals. To support the firm’s positioning strategy, it develops a
tagline. A tagline is catchy phrase that is used consistently in a firm’s literature, advertisements,
stationery, invoices and it becomes associated with that firm.

Branding
A brand is the set of attributes that people associate with a company. These attributes can be
positive such as trustworthy, innovative, and dependable or they can be negative such as cheap,
unreliable, arrogant, and difficult to deal with. Through branding a company is able to gain
customer loyalty. A company can monitor the integrity of its brand through brand management.
This is a program that is used to protect the image and value of an organization’s brand in
consumer’s minds. Start-ups must build a brand from scratch and endeavor to create a strong
personality for a firm.

An entrepreneur may think of a brand as;

• A promise to serve stakeholders’ interest.

• A firm’s guarantee of a level of performance.
• It indicates the promise a firm makes to those it serves
• It expresses a firm’s reputation
• It presents a firm credentials, its and indicator of trust and reduced risk.
• It describes the firm’s nature.
A strong brand can be a very powerful asset for a firm and can increase the market value of a
company. This increased valuation is important to affirm if it is acquired, merges with another
firm or launches an initial public offering. Brand equity is the term that indicates the set of
assets and liabilities that are linked to a brand and enable it to raise a firm’s valuation. A firms’
brand equity can be grouped into:
 • Brand loyalty
• Name recognition
• Perceived quality of a firm’s products and services
• Brand association in addition to quality, e.g. good service
• Other proprietary assets such as patents, trademarks and high quality partnerships.
How does a company develop a brand?

1. It must create value – something for which customers are willing to pay.
2. Use techniques such as advertising, public relations, sponsorships, support for social
causes, social media and good performance.
3. A firm’s logo, website, name, facebook page, letterheads are important aspects of firm
brand.
4. Newspapers, magazines, blogs and trade journals can give a firm a favorable review of
its products.
A strong brand is a powerful asset for a firm. Over 50% of consumers say that a known brand
is a reason to buy a product. A brand allows a company to charge a price for its products that
is consistent with its image. A successful brand can increase the market value of a company by
50 to 75%.

The 4Ps of marketing for new ventures

A firm’s marketing mix is the set of controllable, tactical marketing tools that it uses to produce
the response it wants in the target market. They are organized in four categories:

1. Product: the good or service a firm offers to its target market. An important distinction
is made between the core product and the actual product. The initial roll out of a new
product can be very challenging; some firms consider using reference accounts (an
early user of a product who is willing to give testimonial regarding his /her experience
with a product. To obtain reference accounts, the firm may offer their product to an
initial group of customers for free or at a reduced price in exchange for their willingness
to try their product and for their feedback.
2. Price: this is the amount of money consumers pay to buy a product. It’s the only
element in the marketing mix that produces revenue and ultimately determines how
much money a firm earns, all other elements represent costs. Most entrepreneurs use
either of the following methods to set the price for their products; cost – based pricing
or value-based pricing. Cost – based pricing the list price is determined by adding a
mark-up percentage to a product’s cost. The mark up percentage may be the industry
standard or determined by the entrepreneur. Value based pricing the list price is
determined by estimating what consumers are willing to pay for a product and then
backing off a bit to provide a cushion. What a customer is willing to pay is determined
by perceived value of the product and by the number of choices available in the market
place. A firm influences its customer perception of value through positioning, branding
and other elements of marketing mix.
 3. Promotion: refers to the activities the firm takes to communicate the merits of the
products or services to its target market. The goal is to persuade people to buy the
products. Entrepreneurs use the following methods to promote their products:
• Advertising: its major goal is to raise customer awareness of a product, explain a
product’s comparative features and benefits, and creates associations between a
product and a certain lifestyle. These goals can be accomplished through, direct
mail, magazines, newspapers, radio, internet, television and billboard advertising.
Effective advertisements are those that are memorable and support a product’s
brand.
• Public relations: refers to efforts to establish and maintain a company’s image with
the public. Public relations are not paid for directly while advertising is paid for
directly. The cost of public relations to a firm is the effort it makes to network with
journalists, blog authors, press, civic, social and community involvement and trade
shows.
• Social media involves establishing a presence and connecting with consumers
Other people through social networking sites like facebook or Twitter.

• Social plugs are tools that websites can use to provide its users with personalized and
social experiences.
• Viral marketing which facilitates and encourages people to pass along a marketing
message about a particular product.
• Guerrilla marketing is a low budget approach to marketing that relies on cleverness and
surprise rather than traditional techniques. It is suitable for entrepreneurial firms which
are on tight budget but have creativity, enthusiasm and passion to draw from.
4. Place (Distribution), this involves all the activities that move a firm’s product from its
place of origin to the consumer. A distribution channel is the route a product takes from
the place it is made to the consumer who is the end user. Selling direct to customers
enables the firm to control the process of moving products from their place of origin to
the end user. The process of eliminating layers of middlemen is called
disintermediation. Selling through intermediaries such as distributors and wholesalers
who place the products in retail outlets to be sold. Exclusive distribution arrangement
gives a retailer or any other intermediary rights to sell a company’s products.
Entrepreneurs are confronted with choice of how many channels to sell through. The more the
channels to sell through, the faster the firm can grow. However selling through many channels
makes a firm loses control of how its products are being sold.

Seven step sales process

A firm’s sales process shows the steps it goes through to identify prospects and close sales.
The seven steps are:

1. Prospect for (or gather sales leads)

2. Make the initial contact

3. Qualify the lead

4. Make the sales presentation

5. Meet objections and concerns

6. Close the sale

7. Follow up

Review Questions

1. Explain the importance of a firm to choose its target market early in the process of launching
its venture.

2. Discuss the importance of market segmentation. Explain ways in which markets can be
segmented.

3. Describe the four elements of a firm’s marketing mix.

4. Analyze the difference between cost-based pricing and value-based pricing.

5. Explain the term niche market and give examples of niche markets in the women’s clothing
industry.