Enes210 Individual Analysis

What makes a winning value proposition?

- Be clear - Be succinct

How will you develop your skills to lead?

- Bring Your Whole Self to Work - Find Time to Reflect - Recognize Leadership Development as an Ongoing Practice

Developing Your Revenue Model

- Choose the Closest Fit - Magnify Your Value - Attract the Right Investors - Focus on the First 1 to 2 Years - Be Flexible

What are the prerequisites for co-founders?

- Complementary skillsets: Find a co-founder with different skills that are valuable for your startup. CEO (business) and CTO (technology) are common starting roles. You might also consider finding someone for CMO (sales and marketing) as well as Director roles. - Shared vision and values: Shared vision is difficult to identify, but crucial for compatibility. Why are you all doing this startup? What are your goals for this startup? How do you measure success for yourselves? Shared goals are critical to compatibility.

What are the steps to creating the value proposition?

- Define the problem to determine whether it's a problem worth solving. - Evaluate whether your solution solves the problem uniquely. - Measure the potential for customer adoption. - Craft the value proposition

What are the key traits of co-founders?

- Eagerness to learn: A good co-founder isn't someone who has life figured out or someone who believes he knows everything already. The people best suited for the startup life are those who want to learn more. - Self-sufficiency: Seek a co-founder who is fully reliable and functions effectively with limited input from you. You should not have to spend time managing your co-founder's activities. - Empathy: You're both working long hours. You're both dealing with problems. Knowing when your co-founder needs a boost is an extremely underrated skill. No one can do it on her own, especially without being able to empathize with those on your team. - Emotional intelligence: Emotional intelligence is the ability to identify and manage your own emotions. Success in life is built upon the ability to effectively manage emotions. Startup life gives you plenty of reasons to lose your cool, fly off the handle, or crumple into a whimpering heap of emotions. Startup success demands that you stay calm and carry on. - Ability to work through disagreement: Be prepared for differences of opinions and disagreements. Can you work through disagreements calmly? If your first few conflicts are more difficult to get through than you'd anticipated, it might be time to take a hard look at the relationship before moving ahead together.

Problem

- Is the problem Urgent? - Is the problem Underserved? - Is the problem Unworkable? - Is fixing the problem Unavoidable?

What people, policies, and practices will you integrate?

- Make it Safe to Fail - Provide Access to Other Strategists - Hire for Transformation - Lastly, be sure to create an operating agreement for your founders.

Typical Startup Activities for the Team to Lead

- Research & Development (R&D) - Production - Marketing - Sales & Customer Services -

Step 2: Identify and profile potential competitors

- The industry enjoys relatively high profit margins. - Entering the market is relatively easy and inexpensive. - The market is growing. The more rapidly it is growing, the greater the risk of competition. - Supply and demand is unbalanced. If supply is low and demand is high, expect competitors to enter the market to serve this unmet demand. - If minimal competition exists, there may be space for new competitors to enter the market

Three key purposes of a value proposition

- To explain how your product solves customers' problems or improves their situations: This addresses the Relevancy of your solution. - To define the specific benefits that your product or service will deliver to the customer: This is the Quantified Value of your solution. - To inform target customers why they should buy your product or service instead of the competition's: This is the Unique Differentiation of your solution.

Step 3: Develop your competitive position

- Who are my current competitors? - Which market do current competitors target? - Are competing businesses growing or scaling back their operations? - How will your company be different from the competition? - What will you do if competitors drop out of the marketplace? - What will you do if new competitors enter the marketplace?

What systems and structures will you develop?

1. Distribute Responsibility 2. Be Honest and Open about Information 3. Create Multiple Paths for Raising and Testing Ideas

value proposition

A value proposition describes the benefits customers can expect from your product or service.

The Angel Round

Accelerators and Incubators. These programs often provide money, office space, and advisors. A typical level of funding is $25,000 for six percent of the startup. Angel Investors. An average angel round may be $100,000 to $500,000. Angels may focus on startups that they value at $2.5 million or more. Now you have to ask if you are worth $2.5 million today. How do you know? It's a negotiation with the angel investors. Let's say it is still early days for you, and your working prototype is not that far along. You find an angel who looks at what you have and thinks that it is worth $1 million. They may agree to invest $200,000.

What are the reasons for partnerships?

Access resources and skills beyond those of the startup, Develop new innovations and new products, Speed time to market, Access new markets, and/or Develop complementary products.

The Family and Friends Round

Accredited Investors. Accredited investors are people who either have $1 million in liquid assets or make $200,000 annually. They are the "sophisticated investors," that is people who the government thinks are smart enough to decide whether to invest in a high-risk investment like a startup. What if you don't know anyone with $1 million? You are in luck, because there is an exception that allows startups to raise funding from people who are not accredited investors. These are friends and family. Friends and Family. Even if your friends and family are not as rich as an accredited investor, you can still accept their money in exchange for equity in your startup. That is what you decide to do, since your co-founder's aunt is interested. You give her five percent of your startup in exchange for $15,000. Now you can afford to build your prototype. Registering the Company. To give the aunt the five percent you registered the company, either through an online service like LegalZoom or through a lawyer. You issued common stock, gave five percent to the aunt, and set aside twenty percent for your future employees as the "option pool."

What is the promotional mix?

Advertising: This mode of promotion is usually monetary, with little or no personal message. Mass media such as television, radio, newspapers, and magazines are most often the carriers of these messages. Apart from these, billboards, posters, web pages, brochures, and direct mail also fall within this category. While this method has traditionally been one-sided, online advertising may allow for interactive engagement with prospective customers. Public Relations & Sponsorship: Public relations (PR) or publicity departments try to increase positive mention of the company, brand, or product in influential media outlets. These could include newspapers, magazines, talk shows, and new media such as social networks and blogs. This could also mean allowing super users, or influencers, to test the product and speak positively about it to their peers. This type of advertisement may or may not be paid. For example, sponsoring a major event and increasing brand visibility is a paid action. Sending free samples to a blogger then depends on his discretion and opinion and is not usually swayed by payment. Personal Selling: Opposite of one-directional promotional methods, direct selling connects company representatives with the consumer. These interactions can be in person, over the phone, over email, or through chat. This personal contact aims to create a personal relationship between the client and the company, brand, or product. Direct Marketing: This channel targets specific influential potential customers through telemarketing, customized letters, emails, and text messages. Sales Promotions: These are usually short-term strategic activities which aim to encourage a surge in sales. These could be "buy one, get one free" options, seasonal discounts, contests, samples or special coupons with expiration dates.

How to compensate advisers

Advisers typically do not work for free. And if they do, it's probably only for a few weeks. Expect to pay them by sharing equity (i.e. ownership) in your company. Alternatively, advisers may work on an hourly pay basis.

What is an intermediary?

Agents: The agent is an independent entity who acts as an extension of the producer by representing the company to the user. An agent never actually gains ownership of the product and usually make money from commissions and fees paid for their services. Wholesalers: Wholesalers are also independent entities. But they actually purchase goods from a producer in bulk and store them in warehouses. These goods are then resold in smaller amounts at a profit. Wholesalers seldom sell directly to an end user. Their customers are usually another intermediary such as a retailer. Distributors: Similar to wholesalers, distributors differ from them in in that wholesalers generally carry a variety of competition brands and product types, whereas a distributor will only carry products from a single brand or company. A distributor may have a close relationship with the producer. Retailers: Wholesalers and distributors will sell the products that they have acquired to the retailer at a profit. Retailers will then stock the goods and sell them to the ultimate end user at a profit.

How do you make channel decisions?

Analyze the customer and understand his or her needs, Discuss and finalize channel objectives, and Work out distribution tasks and processes.

Co-Founder Stage

As you start to explore the idea and its commercialization potential, you realize that it is taking you longer to make progress than initially expected. You know that you could really use another person's skills. Thus, you look for a co-founder. You find someone who is both enthusiastic and smart. You work together for a short time on your idea, and you see that she is adding a lot of value. You offer her a position as co-founder. You can't pay her any money (and if you could, she would become an employee, not a co-founder), so you offer equity in exchange for work (also known as sweat equity). How much equity should you offer? Ten percent? Twenty-five percent? After all, it is your idea. But then you realize that your startup is worth practically nothing at this point since there are no customers or even a real product, and your co-founder is risking her time as well. You decide that since she will do half of the work, she should receive the same as you, fifty percent. Otherwise, she might be less motivated than you. A true partnership is based on respect. Respect is based on fairness. Anything less than fairness will fall apart eventually. And you want this venture to last. You give your co-founder fifty percent of the startup.

How to manage advisers

Ask. Be timely with payment. Exercise mutual respect.

How do companies generate revenue streams?

Asset sale: This kind of sale refers to the transfer of ownership rights of a physical product from the seller to the buyer. At amazon.com, ownership rights of a myriad of products such as books, music and electronics are sold to the buyers. Similarly, Honda sells the ownership rights of the cars it manufactures to buyers, after which the buyer has complete freedom to rent out, use, or even total the car. Usage fee: This kind of fee is usually charged by service providers to customers for the use of the service. Hence, an internet provider will probably charge a customer for using their line for a certain number of minutes during the day or month. A beautician may charge a customer according to the number and nature of treatments the customer receives. Subscription fees: When a user requires long-term or continuous access to the products of a company, they pay a subscription fee. Hence, a gym may sell a yearly membership subscription to its customers. Cable providers may charge a subscription fee to its users for which they will pay up front. Lending/ renting/ leasing: Some organizations provide their customers with exclusive rights to their product for a limited amount of time for a set fee. At the end of this period, the organization regains ownership of the product. This kind of revenue model presents a number of advantages, both for the company and the customer. The company enjoys recurring revenue from the customer for the mentioned period. On the other end of the coin, the customer has exclusive access to the product for the time she requires it without having to make a hefty investment. Hence, zipcar.com a popular car renting service in North America allows customers to rent their cars for a specified time period. This has become a very popular service in the cities in which it is available because it provides customers with the advantage of a car without their having to invest in buying one. Licensing: Licensing is generally useful for products, services, or ideas that fall under the category of intellectual property. This opens up a revenue stream for rights holders, who would otherwise have had to invest in manufacturing as well. It is common in the technology industry for patent holders to license the use of patents to other companies and to charge a licensing fee for it. Brokerage fee: When a company acts as an intermediary to ease the communication and transaction between two or more parties, they charge a brokerage fee. An example of this is when a headhunting firm matches a candidate to an organization looking for a particular skill set. The firm usually charges a percentage of the gross salary from the organization, the candidate, or both. Advertising: Companies that earn a fee through promoting another organization, product, or service charge an advertising fee for their service. Traditionally this kind of revenue was common only in the advertising industry. Recently however, with the boom of the internet and e-commerce, many websites are also using this as a main revenue stream.

Idea Stage

At first it is just you: you are the one with the idea. The moment you started working, you started creating value for the startup. That value will later translate into equity (the percentage of the ownership of the startup), but since you own one hundred percent of it now and since you are the only person in your still-unregistered company, you are not even thinking about equity yet.

What are the objectives of promotion?

Building Awareness: In the beginning, startups typically need to create an identity within the market. This applies to a new company, a new brand, or a new product. Often, this identity will also be important in times of rebranding or building up a failing product. The aim then is to select those promotional activities that help inform the customer about the company, the brand, and/or the product. Creating Interest: If the customer is already aware of the product or has been made aware through other activities, it becomes necessary to move them along to actual purchasing behavior. The aim is to identify a need that the product fulfills and make sure that the customer recognizes this need as unfulfilled for them. Providing Information: A startup may need to provide necessary information regarding the product, its benefits, features, or usage to the customer. This may be the case if a new product is introduced into the market. Unique features or benefits may need to be explained. In other cases, a new feature on an existing product may need to be highlighted. In some cases, such as in instances when environmental impact or health scares may be in play, information about a change in business practices and company policy may need to be communicated. Stimulating Demand: A startup may seek to start or enhance its sales through promotion. At the start of the company, initial sales are the priority. Later, if sales have been lower than usual, then the aim may be to get them back up to target level by re-engaging old customers and encouraging new ones to try a product. In other instances, the aim may be to increase sales further at certain times of the year such as near a major holiday. Free demonstrations or special deals may be used to reach these ends. Differentiating the Product: In situations in which there are many competitors in the market, a startup may seek to use promotional activities to differentiate its product from others in the market and make it stand out from the crowd. The focus remains on those features, functionalities, or benefits that may not be offered by a competitor or may not be offered well. Reinforcing the Brand: One basic aim of a promotional activity may be to further strengthen the brand and its place in the market. This helps turn a first time purchaser into a lifetime purchaser. This can also create advocates for the product from within the customer base.

What are the keys to managing distribution channels?

Channel management is an essential activity for startups. Intermediaries need to be kept motivated and offered incentives to ensure timely and efficient delivery of products and services. Clear messages regarding products and their functionalities need to be passed on to attempt to keep clear communication regarding a product or brand all the way to the end user.

How much should you charge for a new product?

Charge too much, and it won't sell. This problem can be fixed relatively easily by reducing the price. Charging too little is far more dangerous. A startup not only forgoes significant revenues and profits, but also fixes the product's market value position at a low level.. Once a price is promoted in the market, it is difficult to raise because customers will be resistant to increasing prices.

What are the risks of outsourcing?

Cost savings that don't materialize as planned since it's difficult to calculate true cost in advance Quality concerns due to suppliers not understanding customers' needs and/or not delivering as planned, Over-dependence on outsourced vendor can harm a business if the vendor's operations are disrupted, Dilution of competitive advantage due to less differentiation from competitors that may use the same or similar vendors Risk of fostering new competition due to loss of differentiation and/or loss of trade secrets Public backlash that can result in political issues or other public relations problems

What are the types of businesses based on cost structure?

Cost-driven businesses Value-driven businesses

The Floor

Cost-plus pricing is often derided as a weak pricing strategy, but it plays an essential role in setting the floor for a startup's pricing options.

What is customer discovery?

Customer discovery is the process used to identify your target customer segment. The goals of customer discovery are to first validate the problem and later validate the fit of your solution to that problem. Alternatively, you may invalidate the problem and/or solution early in the startup's lifetime, saving you the time and money of pursuing a fruitless startup idea.

Who are the audiences for promotional activities?

Customers: These are the current customers of the product as well as former customers and any potential new customers. The activity is created for these people specifically. Influencers: People or organizations that may have their own sphere of influence over the target audience make up this category. If a positive impact is made on these people, they may then use this influence to encourage sales. Members of the media, opinion leaders, trade associations, and special interest groups are examples of influencers. Distribution Channel Members: The product is handled and provided to the customer through this channel making them an important category of targets. A retailer may choose to display a certain product in a more prominent position than the others if she believes in the product and its benefits. Other Companies: Communicating with other companies may open up opportunities to collaborate.

Lean Process

Determine your target customer Identify underserved customer needs Define your value proposition Specify your Minimum Viable Product (MVP) feature set Create your MVP prototype Test your MVP with customers Final Step: Iterate to Improve Product-Market Fit

How do you price a new product or service?

Develop the Marketing Strategy: A market analysis is a starting point for pricing decisions. Then, divide the market into segments with distinct requirements and needs. After this, determine which segment to target. The product and brand positioning is then based on these identified segments. Make Marketing Mix Decisions on 4Ps (Excluding Price): Once the segments and positioning are in place, focus on the product, placement, and promotional decisions. Estimate the Demand Curve: Another market analysis needs to be conducted at this point. In this one, there needs to be specific information gathered about how the price affects sales volume. Calculate Costs: A company can now get an accurate assessment of the total fixed and variable costs associated with the product. These are a necessary inputs for pricing decisions, as the final price needs to at least cover these costs. Assess the Environment: Another vital element that influences pricing is the environment. This demands an understanding of the competitor's strategies, their product, and its value, as well as an understanding of any industry or legal constraints. Set Pricing Objectives: As detailed above, there are several objectives that a startup can have in terms of its pricing strategy. This is the point in the process that those objectives need to be discussed and agreed upon. Determine Price: Using all of the information collected and analyzed until this point, a startup is now in a good position to set the best price for its products. A pricing method and structure can be formulated along with any possible sales promotions or discounts.

What is a distribution channel?

Direct: The manufacturer directly provides the product to the consumer. In this instance, the company owns all elements of its distribution channel or sell through a specific retail location. Internet sales and one-on-one meetings are also ways to sell directly to the consumer. One benefit of this method is that the company has complete control over the product, its image at all stages, and the user experience. Indirect: A company will use an intermediary to sell a product to the consumer. The company may sell to a wholesaler who further distributes to retail outlets. This may raise product costs since each intermediary will get a percentage of the profits. This channel may become necessary for large producers who sell through hundreds of small retailers. Dual Distribution: A company may use a combination of direct and indirect selling. The product may be sold directly to a consumer in some cases, while in other cases it may be sold through intermediaries. This type of channel may help reach more consumers, but there may be the danger of channel conflict. The user experience may vary, and an inconsistent image for the product and a related service may begin to take hold. Reverse Channels: The last, most non-traditional channel allows for the consumer to send a product to the producer. This reverse flow is what distinguishes this method from the others. An example of this is when a consumer recycles and makes money from this activity.

How to select advisers

Excitement for Your Idea: You want someone who is as excited about your startup as you are. That's what gets people motivated to help you beyond what's necessary. A Passion for Something Other Than Making Money: Increased revenue and profitability are byproducts of honesty, hard work, thought leadership, and authentic passion for your trade. Find someone who's not willing to sacrifice those most scalable attributes while they advise. Experience: Seek experience in the trenches of business. If you have someone who's been where you want to go and can help you avoid pitfalls, you're saving yourself a lot of headaches. Deep Industry Knowledge: At least one adviser should have strong industry expertise. A large professional network and deep industry knowledge will help you to avoid making major mistakes. Commitment: Many people can be initially excited by a concept. You need to find people whose backgrounds demonstrate that they maintain commitments. An Action-Oriented Personality: Be certain that the adviser translate their advice into action and that they are interested in being actively engaged in your startup. Communication Skills: Communication skills are essential. If they can't communicate advice or communicate it badly, that advice won't help you succeed. Networking Skills: Appreciate how important it is to have a strategic adviser who can connect you with the right people and resources to help expand your company smarter and faster. Culture Fit: If the advisers of the company don't understand the personality, passion, and purpose of the startup they're helping, their advice is likely to miss the mark. The Ability to Tell the CEO That She Is Wrong: It is not only important to have contrasting views, it's important to tell the executive team that they feel they are headed in the wrong direction.

Venture Capital Round

Finally, you have built your first version product, started selling, and you have traction with customers. You approach the venture capitalists (VCs). How much money can VCs invest in you? They typically invest at least $500,000, and often over $1,000,000 in a first round. Let's say the VC values your startup at $4 million. Again, that is your pre-money valuation. She says she wants to invest $2 Million. The math is the same as in the angel round. If you agree to this valuation and the amount of money invested, the VC gets 33.3% of your startup.

What are the characteristics of cost structures?

Fixed Costs Variable Costs Economies of Scale Economies of Scope

Value Proposition Framework

For (target customers) Who are dissatisfied with (the current alternative), Our product is a (new product) That provides (key problem-solving capability) Unlike (the product alternative).

What is your range of pricing options?

For products that closely replicate competitors or offer small improvements, the room to maneuver with pricing is relatively narrow. Incremental approaches may come close to the optimal price. Charging just one percent less than the optimal price for a product can mean forfeiting eight percent of its potential operating profit. The more novel a product is, the more important it is for startups to take a broader view of the pricing possibilities.

Brand

can be clustered with Design because the appeal is quite similar. Customers may show loyalty to a brand because of its design or because of the perceived status the brand name itself lends to the owner or user. While a Rolex is a watch, it is a statement that the wearer has money and status. Ultimately, a brand-intensive product aims to help the customer look and feel in control, important, and part of a desirable group.

Who is your Minimum Viable Team?

Hacker: An engineer and developer who can build the functional prototype and alpha. Hipster: A person with design and user experience (UX) know-how to improve UX and conversion. Hustler: The business/sales/marketing person who can find a way to sell the product or service, scale customer acquisition, and distribute the product or service.

What are the types of partnerships?

Horizontal Partnerships are formed between partners operating in the same business arena. The company partners with a competitive company to improve its position against other competitors. Horizontal partnerships may be seen as anti-competitive; hence, anti-trust laws should be taken into account before entering into this type of relationship. One type of productive partnership may be a shared research and development program between two firms, one which can result in the selling of a similar product to distinct geographic markets with each partner entering into a non-compete agreement. Vertical Partnerships are partnerships between firms and their suppliers or distributors. Some firms utilize vertical alliances to produce their products and services. Vertical alliances deepen the relationship between the firm and suppliers through the exchange of know-how and commercial intelligence. They extend the firm's network and benefit customers by lowering prices. Suppliers become actively involved in product design and distribution arrangements. The close bond between an automotive manufacturer and its suppliers is an example. A complementary vertical alliance is formed when the supplier agrees to work exclusively for the firm.

What is the impact of the marketing mix on placement?

Impact of Product Issues: The type of product being manufactured is often the deciding factor in distribution decisions. A delicate or perishable product will need special arrangements, while sturdy or durable products will not require such delicate handling. Impact of Pricing Issues: An assessment of the right price for a product is made by the startup team. This is the price at which the customer will be willing to make the purchase. This price will often help decide the type of distribution channel. If this price does not allow a high margin, then a company may choose to use fewer intermediaries in its channel to ensure that everyone gets her share at a reasonable cost to the manufacturer. Impact of Promotion Issues: The nature of the product also has an impact on the type of promotions required to sell it. These promotion decisions will, in turn, directly affect the distribution decisions. Disposable goods or those of everyday use do not require too many special channels. If the product or service is complex to use or understand, a specialist channel may be needed.

What business are you in?

In building your minimum viable team and your overall organizational structure of employees and partners, it's important to establish what business you are in. What activities will be your focus, and what activities will you achieve through partners?

Distribution stratagies

Intensive Distribution: This strategy may be used to distribute low-priced products that may be impulse purchases. Items are stocked at a large number of retailers as is the case with mints, gum, or candy, as well as basic supplies and necessities. Selective Distribution: In this strategy, a product may be sold at a select number or outlets. These may include items such as computers or appliances that are costly, but need to be widely available to allow consumers to compare choices. Exclusive Distribution: A higher priced item may be sold at a single outlet. This is exclusive distribution. New automobiles may be an example of this type of strategy.

How can success be realized?

Interdependence: Shared mutual dependencies provide motivation for partnership success. Asymmetrical dependence leads to vulnerability and possible exploitation. Caution is warranted when working with partners of unequal size. Low levels of interdependence provide less shared motivation for the partnership to succeed. Governance Structure: Terms, conditions, systems, and processes are important. A unilateral structure means that one party has the authority to make decisions. In a bilateral structure, governance is based on mutual expectations regarding behaviors and activities. Commitment: Consider the desires of each partner to cultivate and continue the relationship. Committed members are less likely to take advantage and make decisions that sabotage the future viability of relationship. Effective Communication: Frequent sharing improves credibility and reliability. Sharing of this sort may include proprietary information. Develop a process for effective conflict resolution, and be judicious in the use of legal contracts. While contracts might seem to violate the spirit of cooperation, contracts can also clarify obligations and expectations. Trust: Ideally, each partner's decisions will serve the best interest of the partnership. Partners should act honestly and benevolently. Trust in the partner's motives and intents is crucial. Trust contributes to effective information sharing and elevates the sharing of ideas and resources.

Key Features of the Marketing Mix

Interdependent Variables: The marketing mix is made up of four unique variables. These four variables are interdependent and need to be planned in conjunction with one another to ensure that the action plans within all four are complimentary and aligned. Specific Marketing Targets: Through the use of the interdependent set of variables, the company aims to achieve specific marketing targets (i.e., awareness, adoption, revenues, profits, etc.). Flexible Concept: The marketing mix is a fluid and flexible concept. The focus on any one variable may be increased or decreased given unique marketing conditions and customer requirements. Constant Monitoring: It is vital to keep an eye on changing trends and requirements, within the company as well as in the market, to ensure that the elements in the marketing mix stay relevant and current. Role of Marketing Manager: A mature, intelligent, and innovative marketing manager needs to be at the helm of the marketing mix. This pivotal role means that this manager is responsible for achieving the desired results through the skill manipulation of these four main variables. Customer as the Focal Point: A vital feature of the marketing mix is that the customer is the focal point of the activities. The value of the product is determined by customer perceptions. The goal is to achieve a satisfied and loyal customer.

What factors affect pricing?

Internal Factors - Fixed and variable costs, - Company objectives and strategies, and - Market segments, targeting, and positioning decisions. External Factors - Competitors, - Target market behavior and willingness to pay, - Industry trends, and - Industry or legal constraints.

How do you manage promotions through the product life cycle?

Introduction: At this stage, major promotional campaigns and activities will be designed and executed. A comprehensive promotional mix will be designed, fully integrated the rest of the marketing mix. The aim here is to provide detailed information about the product, its features and benefits. Special offers and sales promotions may also be used to attract customers, while in select markets, push strategies may be simultaneously employed. Growth: Once the product is established and accepted, there will be a shift in strategy from information to the more emotional aspects of sales. The aim is to increase brand awareness, create strong brand equity, and foster long-term customer loyalty. Maturity: By now the market may have matured, and there may be stiff competition and similar products available. Promotional activities will now turn more persuasive. There may be an attempt to create product differentiation by highlighting specific benefits and features that fulfill needs and wants. Decline: At this point, promotional activities may wind down to the occasional reminder that the product exists in an attempt to forestall the product's eventual decline.

Convenience

is characterized by ease of use. One example of this type of value proposition is Apple's iconic iPod, which provided consumers with a convenient way to listen to music. By pairing it with iTunes, Apple increased the convenience of finding and listening to music significantly; enabling users to search for, download, and play songs easily.

Why are distribution channels important?

It may seem simpler and smarter for a startup to directly distribute its own products without the help of a channel and intermediaries. This is especially true because the internet allows sellers and buyers to interact in real time. In practice, it may not make business sense for a startup to set up its own distribution operation.

What are the risks of partnering?

Loss of intellectual property, particularly trade secrets, Loss of autonomy and control, Lack of attention in managing the relationship, and/or Incompatible cultures.

What are the consequences of distribution channels?

Lost Revenue: Because intermediaries need to be either paid for their services or allowed to resell at a higher price, the startup may lose out on revenue. Pricing needs to stay consistent, so the startup will have to reduce its profit margin to give a share to the intermediary. Lost Communication Control: Along with revenue, the message being received by the consumer is also in the hands of the intermediary. There is a danger of the intermediary communicating inaccurate information to the customer regarding product features and benefits, and this can lead to consumer dissatisfaction. Lost Product Importance: When a product is handed over to an intermediary, how much importance is accorded to it is now out of the startup's hand. The intermediary may have incentives to push another product first at the expense of yours.

What are the models for outsourcing?

Offshoring: Performing functions outside of client's home country Captive Offshoring: Company-owned facilities in another country Nearshore Outsourcing: Outsource provider near company's own boundaries in the same time zone Home Shoring: Domestic outsourcing, hiring domestic workers in a person's own home Farm Shoring: Outsourcing to domestic, rural areas Reverse Outsourcing: An outsourced company opens an office in the original country.

Who is involved in creating and selling your first products?

One to three co-founders with complementary skills and a common interest in the startup's mission, Membership in an incubator environment, such as a university-based entrepreneurship program or a local co-working space, Several active advisers that bring experience, wisdom, and relationships to the team, Multiple startup peers that you can learn from and share with, and Minimal investment of $0 to $100,000.

Partnerships and outsourcing present a valuable avenue for startups to develop and launch products and services

Partnerships and outsourcing exist in many types and forms. Risk of partnerships and outsourcing can be mitigated through best practices in selecting and managing the relationships.

What is outsourcing?

Partnerships and outsourcing have different traits that result in different consequential benefits and risks. Contract Manufacturing: Production of Products Business Process Outsourcing: Call Centers Information Technology Outsourcing: Software Development Innovation Outsourcing: R&D or Product Design

What are the types of pricing strategies?

Penetration Pricing: A low price is set by the startup to grow sales and market share. This may be done to establish position in a market with preexisting similar products available. Once an initial position is created by the startup, the prices can be raised. Skimming Pricing: The initial price is set high and is gradually reduced over time. This will allow the startup to introduce the product slowly to different layers of the market. Each part of the market may be willing to pay a different amount for the product. Consumer electronics often start at a very high price that is subsequently lowered with the lowest point reached right before a new model is launched. Competition Pricing: When trying to go head to head with competitors offering similar benefits, a company may decide to: (1) Price higher to create a higher quality perception or target a niche market, (2) Price the same to show more benefits for the same price, or (3) Price lower to try to gain a wider customer base. Product Line Pricing: Different products in the same range may be set at different prices. Television sets are priced variously depending on the features of the television. Bundle Pricing: A group of products may be bundled together and sold at a reduced price. Retailers use this method through "buy one, get one free" offers. Psychological Pricing: A company will make small changes to prices to make a customer think the item is priced lower than it is. This is often observed when prices end in ninety-nine. For example, an item priced at 199 may be perceived as closer in price to 100 than 200. Or a monthly price may be charged for an annual subscription instead of the full annual price being charged initially. Premium Pricing: A high price is set to establish that the product is exclusive and of high quality. Exotic cars and luxury watches are examples of this type of pricing. Optional Pricing: A company may add optional extra items within the price to increase a product's attractiveness. Cost Based Pricing: A company may determine the exact cost of producing and selling a product, add a markup that may be desirable for profits, and price accordingly. This method may be used in a changing industry where even costs of production are unpredictable. Cost Plus Pricing: A percentage is added to the costs as a profit margin to determine the final price.

Placement

Placement has to do with how the product will be delivered to the customer. Distribution is a key element of placement. The placement strategy will help assess what channel is the most suited to a product. How a product is accessed by the end-user also needs to complement the rest of the product strategy.

What pricing issues are difficult?

Price Fixing: In a competitive market, prices are often lowered to the benefit of the consumer. If these competitors were to communicate and decide to sell at a common price, it would likely result in more expensive products for the user and more benefits for the companies. It is therefore a good idea for a startup to study the competition and the market, but not to enter non-compete agreements that harm the consumer. Price Discrimination: When the same product is sold at different prices to different sets of consumers, it is called price discrimination. This is a challenging category, as special offers for seniors and children are acceptable, while presenting only high cost options to higher-income consumers might not be well received. Price Skimming: When a product is priced high initially and then eventually sold at a lower price, it is called price skimming. The company aims to gather higher profits from premium users first and then slowly move down the chain to access all levels of consumer groups. Usually employed in the technology industry, if this technique is not managed well, it can create a negative impression in the consumer's mind. Eventually, customers may catch on to the pattern and stop buying until a lower price is introduced. Opportunistic Pricing: At times, the value attached to a product may be much higher than its cost. This allows a startup to charge a premium price for their products for a limited time period. The gray area here is whether the startup should follow this practice in all instances. If there is a shortage of a necessary good or a special situation such as a natural disaster, then this opportunistic pricing may be unethical and perhaps illegal. However, software and other select products that may be less expensive to produce, but offer great benefit might be able to charge higher prices with less criticism.. It is a good idea for a startup to assess whether its premium pricing policy limits a consumer's access to a necessary item such as food or medicine.

Price

Price encompasses the actual amount that the buyer is expected to pay for a product. How a product is priced will directly affect how it sells. This is linked to what the perceived value of the product is to the customer. If a product is priced higher or lower than its perceived value, then it will not sell optimally. This is why it is imperative to understand how a customer sees perceives your product or service. If there is a positive customer value, then a product may be successfully priced higher than its objective monetary value. Conversely, if a product has little value in the eyes of the consumer, then it may need to be underpriced to sell. Price may also be affected by distribution plans, value chain costs and markups, and the way that competitors price a rival product.

Why is pricing important?

Pricing is a flexible variable. Define the right pricing. Pricing is a trigger for first impressions. Pricing is key to sales promotions.

A startup can achieve one of more of the following benefits through proper channel segmentation:

Product Management: Relevant products can be provided to the right channel, a process which can help reduce the cost of irrelevant inventory as well as unnecessary logistical arrangements. Price Management: Local price differentiation may be possible. Promotion Management: Targeted and relevant promotional activities may be improved with clear and consistent marketing messages. Efficiency in Operations: Time and resource wastage in the channel can be reduced. The development needs of every channel segment can be addressed separately, in a more targeted manner.

The Four Ps of Marketing

Product, Price, Place, Promotion

What are your pricing objectives?

Profit Maximization: Keeping in mind revenue and costs, a startup may want to maximize profits. Profit maximization objectives should be long-term and not focus only on the short-term. Revenue Maximization: With less focus on profits, a startup may focus on increasing revenues in order to increase market share and lower costs in the long-term. Maximize Quantity: A startup may want to sell a specific number of items to decrease long-term costs. Maximize Profit Margin: Another objective may be to increase the profit margin for each unit and not focus on the total number of units sold. Quality Leader: A startup may want to use price to signal high quality and establish itself as the quality leader. Partial Cost Recovery: If a startup has multiple revenue streams, it may not be too focused on recovering a hundred percent of its costs. Survival: At times, the best a startup can do is to cover costs and remain in the market. If the market is in decline or there are too many competitors, survival may take temporary priority over profit. Status Quo: There may be a need to avoid price wars with competitors. A startup might maintain a stable price to continue a stable profit level later.

Cost Reduction

focuses on reducing the initial and/or ongoing cost that a customer pays for owning and/or operating a product or service. Technology has played a great role in helping consumers reduce costs. One such example is Salesforce.com which allows customers to use a customer relationship management software for a fee, voiding the need for the customer to buy the software, hardware and install and run it, each action associated with a significant cost.

What are the typical types of promotional strategies?

Push Strategies: As the name indicates, this is when the product is taken to the customer by the startup. This is typically used when the product is an impulse purchase, or if the company has an established relationship with the customer base. Startups may sell directly from their showrooms or at trade shows. Essentially, there is less need to create an advertising buzz and more focus on making the product readily available at retail outlets and showrooms. Push marketing will often focus primarily on short term sales. Pull Strategies: In the opposite approach, there is an attempt to pull customers towards the brand or product. Through mass media campaigns to sales promotions and personal references, a company attempts to create brand loyalty and attractiveness. Pull strategies may attempt to focus primarily first on long-term brand loyalty, then high sales in the short term. A lot of media hype and mass campaigns are required to create sufficient interest in the product and encourage customers to seek out the product on their own.

What are the reasons for outsourcing?

Reduce expenses through contract manufacturing, economies of scale, volume discounts, and/or supply chain efficiencies, Hone core competencies by outsourcing non-essential tasks and focusing on essential tasks, Access the capabilities of outsource providers, which might have access to a skilled, lower-cost labor pool, and Mitigate human resource costs and management issues

Performance

has been a hallmark of many product offerings for decades, with most industries surviving due to improved versions of the same products. Intel doubled the speed of its chip every year, resulting in faster computers.

The Highest Price

Since incremental approaches tend to focus on the lower end of the price range, startups should start by defining the opposite end of the spectrum, the highest price at which a product can be sold, a concept called a price ceiling.

What are the benefits of distribution channels?

Specialists: Since intermediaries are experts at what they do, they can perform the task better and more cost effectively than a startup itself. Quick Exchange Time: Being specialists and using established processes, intermediaries are able to ensure deliveries faster and on time. Variety for the Consumers: By selling through retailers, consumers are able to choose between varieties of products without having to visit multiple stores belonging to each individual producer. Small Quantities: Intermediaries allow the cost of transportation to be divided, and this situation will, in turn, allow consumers to buy small quantities of a product rather than having to make bulk purchases. This is possible when a wholesaler buys in bulk, stores the product in a warehouse, and then provides the product to retailers located close by at lower transportation costs. Sales Creation: Since retailers and wholesalers have their own stakes in the product, they may have their own advertising or promotion efforts that help generate sales. Payment Options: Retailers may create payment plans and options for customers, thus allowing for easier purchasing. Information: The distribution channel can provide valuable information on the product and its acceptability, allowing product development as well as an idea of emerging consumer trends and behaviors.

The Eight Steps of the Sales Process

Step #1: Prospecting Step #2: Pre-approach - Planning of the sale Step #3: Cross questioning and identification Step #4: Assessing the needs Step #5: Presenting the sales pitch Step #6: Addressing concerns Step #7: Closing the sales Step #8: Following up

Developing Your Marketing Mix

Step 1: Defining the Unique Selling Proposition Step 2: Understanding the Consumer Step 3: Understanding the Competition Step 4: Evaluating Placement Options Step 5: Developing Communication / Promotion Strategy Step 6: Cross-check of the Marketing Mix

Competition

Step 1: Profile current competitors Step 2: Identify and profile potential competitors Step 3: Develop your competitive position

Promotion

The marketing communication strategies and techniques all fall under the promotion category. These strategies can include advertising, sales promotions, special offers, and public relations. Whatever the channel used, it is necessary for it to be suitable for the product, the price, and the end-user that it is being marketed to. It is important to differentiate between marketing and it's sub-category of promotion. Promotion is the communication aspect of the entire marketing function.

The Marketing Mix Concept and Terminology

The marketing mix concept gained popularity following an article titled "The Concept of the Marketing Mix" by Neil Borden published in 1964.

Poduct

The product is either a tangible good or an intangible service that is seen to meet a specific customer need or demand. All products follow a logical product life cycle. It is vital for startups to understand and plan for these various stages and their unique challenges. Focus on understanding those problems that the product is attempting to solve. The benefits offered by the product and all of its features need to be understood. The unique selling proposition of the product needs to be studied. In addition, the potential buyers of the product need to be identified and understood.

Developing the Founder-Adviser Agreement

To help entrepreneurs compensate their mentors for the time they dedicate to helping their businesses grow, the Founder Institute has developed a solution to this long-standing challenge that all startups experience. The Founder Adviser Standard Template was designed to provide founders and advisers with a simple legal framework to formalize their relationship without all of the legal chaos.

Types of Revenue Streams

Transaction Revenue: These revenues are earned from the customer making a one-time payment for the product or the rendering of a service. Recurring Revenue: The recurring revenues are earned from consistent ongoing payments rendered to the company for either the delivery of the value proposition or after sales care for the customer.

Step 1: Profile current competitors

What are their strengths? Price, service, convenience, and brand are all areas where you may be vulnerable. What are their weaknesses? Weaknesses are opportunities you may be able to take advantage of. What are their basic objectives? Do they seek to gain market share? Do they attempt to capture premium clients? What are they trying to achieve? What are their marketing strategies? What is evident in their advertising, public relations, and the like.? How can you capture market share from them? How will they respond when you enter the market?

Key Revenue Model Questions

What benefits are customers currently paying for? Are there unrealized benefits that customers would pay more for? How are customers paying for these benefits today? What type and frequency of payment would be preferable to the status quo? What percentage of the total revenue does each revenue stream represent?

Preparing for advisers

What do you need right now? Do they care about your space? Are you prepared to answer tough questions? What are you hoping to gain? How will you compensate the adviser?

Is the problem worth solving?

Who is your customer? What are their needs & wants? Are there enough customers?

Customer Discovery Interview

Whom do you want to learn about (i.e., who do you think your customer is)? What do you want to learn? How will you get to the interview? How can you ensure an effective session? How do you make sense of what you learn?

IPO

Why do companies go public? There are two basic reasons. Technically, an IPO is just another way to raise money, but this time from millions of regular people that buy stock in Apple, IBM, Netflix, and other publicly traded companies. Through an IPO, a company can sell stock on the stock market, and anyone can buy the stock. Since anyone can buy, you can likely sell a lot of stock right away, rather than go to individual investors and ask them to invest. This can be an effective and efficient way to raise a significant amount of funding for your company.

Price

is one of the most common value proposition elements. There are many companies that enter into the market with the premise that they are providing a product or service which is cheaper than their competitors. However, organizations competing on price or offering free services may have complex business models to sustain the organization and generate revenues through other channels. Walmart and Southwest Airlines are two longtime, high-performing companies with low price as a core value proposition.

Design

is, historically speaking, important for clothing labels that demand higher prices because of the superior design. Prada can charge hundreds of dollars for a t-shirt because of the strength of its design and brand. The value of design is increasingly extending into consumer electronics and many other product lines. Brand can be clustered with Design because the appeal is quite similar. Customers may show loyalty to a brand because of its design or because of the perceived status the brand name itself lends to the owner or user. While a Rolex is a watch, it is a statement that the wearer has money and status. Ultimately, a brand-intensive product aims to help the customer look and feel in control, important, and part of a desirable group.

Accessibility

makes a previously inaccessible product or service available to a consumer segment. Innovative technologies and variations in business models have both led to improving accessibility for serviced customers. NetJets is an example of a company which provides accessibility to transportation. The company allows individuals and corporations to have access to private jets, access which has traditionally been cost prohibitive and therefore unavailable to many who did not have the money to afford this luxury.

Customization

supports the modern consumer's interest in self-expression and individualism. Consumers expect products that they use to be an extension of their personalities and a medium through which they can communicate their values and priorities to the world. The option to tailor the product to the consumer's preferences adds value for the customer. While customization has traditionally resulted in prohibitively expensive products, today this option provides the opportunity for customers to put their personal stamps on products more affordably. Nike lets its customers customize their shoes through NikeID on their website. Consumers can go online and create completely original designs with their preferred color palettes and preferred placement, color, and size of the swooshes for their shoes. The customer can see what the end product will look like visually, try different permutations until the result suits their tastes, and then order the final product.

newness

usually influences technology-intensive products. The market for cellphones was initially very small, but once the technology became mainstream and affordable, the product became ubiquitous.