Marketing final review

Sources of credibility for entrepreneurs

Challenge #1: Entrepreneurs Lack Credibility, Name Recognition, and Track Record Startup marketers don't have the entrée that an IBM sales representative have with an MIS department. Also, prospects are likely to ask the question, "How do we know you are going to be around tomorrow?" In short, there is little or no trust. The solution is to earn credibility and establish trust. One historically flawed sales assumption is that people buy from those they like. They don't. People buy from those they trust. To test this, simply look at your own experience. How many overly-friendly salespeople have you found you could trust? To build a customer base over time, a business must establish trust with its customers, who must believe the business will meet or exceed their expectations. If customers' expectations are met or exceeded, the business grows. On the other hand, if customers' expectations are violated, the business dies. Selling experts, Robert Miller and Stephen Heiman, suggest that credibility and trust can be gained by reputation, it can be transferred to you, and it can be earned by you. Establishing credibility by reputation is difficult for entrepreneurs because they have no track record. Temporary credibility can be transferred to you by someone else recommending you, such as an introduction, a phone call, or an email. The person recommending you can be anyone the customer trusts: respected colleagues, business associates, friends, relatives, etc. You can draw on this transferred credibility until you earn your own. Of course, the best way to gain credibility is to earn it yourself. Credibility is earned or lost with every interaction you have with a customer. Here are seven things you can do to earn credibility and trust with customers: Dress and speak the part. An old Scottish proverb counsels, "What e'er thou art, act well thy part." The first step in acting the part is dressing the part. People judge you by your appearance. Learn the business dress of your customers. When in doubt, err on the side of dressing up. Remember, you can always dress down, but you can't dress up. Speak the language of the customer. Speak in terms the customer understands. Often sellers become so enamored with the exciting features of their products that they forget that customers do not buy features, they buy benefits. Think of the times you've suffered through a salesperson's laundry list of features not knowing why these features should be important to you. Theodore Levitt, Harvard Business School professor, said it well: "People don't want to buy a quarter-inch drill. They want a quarter-inch hole." So, speak in terms of the hole (benefits), not the drill (features). If you do mention a feature, make sure you translate it into a benefit. Seek to understand. Your primary task is to understand customers' problems and opportunities so that you can match what you have to offer with their needs and wants. Selling is not about you or about your company. It is about the customer. In the end, you want the customer to sell him/herself. Most people love to buy, but they do not like being sold to. So, help the customer buy. Ask good questions to help the customer uncover problems and opportunities. Listen, listen, listen. Selling is not a standup monologue or a dog-and-pony show. It is a conversation, a dialogue - two people speaking together. And who should speak more, the buyer or the seller? If the seller's objective is to "seek to understand," then the buyer should talk more. The seller can encourage the buyer to talk by asking good questions and by listening attentively. Set correct expectations. Much of selling is managing customers' expectations. Don't promise the moon, unless you are committed to delivering it! It is a good policy to under-promise and over-deliver, but over-eager salespeople often do just the opposite. Think about the times you've waited for a table at a restaurant. When the hostess tells you the wait is 15 minutes and then seats you in 10 minutes, you are thrilled. But when the hostess tells you the wait is 15 minutes and seats you in 20 minutes, you grumble all the way to the table. Manage customers' expectations to fit with what the startup can reasonably deliver. Startups don't often get a second chance to prove their competency. Be responsive. A comparative advantage small startups have over larger Fortune 500 companies is the ability and willingness to respond quickly to customer requests. Tom Peters advocates "shocking levels of responsiveness, doing things in minutes and hours, which people did in weeks and months." Deliver results. In the final analysis, it is all about delivering results. Customers judge the performance of your company and products by how well you deliver on expectations. If you meet or exceed customers' expectations, they are likely to buy from you again and they may tell others good things about you. Conversely, if you don't meet their expectations, they certainly won't buy from you again and they certainly will tell everyone they can about their bad experience.

3 components of brand positioning

Competitive frames of reference Nature of Competition Target market Points of Difference Desirable to consumer Deliverable by the brand Differentiating from competitors Points of parity Negate competitor points-of-difference

Customer acquisition vs. customer retention,

Customer acquisition: Which customers are targeted? How will they be made aware of the product? What is your unique selling proposition? How much will it cost to acquire a customer? Customer retention: Repeat purchases on many brands are only about one in three. Converting a person from trying the product to becoming a loyal product user is no easy task. Some product categories have high customer loyalty, such as cigarettes. Other product categories have low customer loyalty, such as automobile insurance. What is the approach to keeping customers and encouraging customers to recommend the product to others?

What is Marketing? What is branding? What is a brand?

Marketing is exchange—the exchanges that take place between sellers and buyers. Marketing creates, communicates, and delivers value to facilitate exchanges. We add a third component to this definition, often referred to as the marketing concept: By delivering value, marketing satisfies customer needs and wants, at a profit.

Personal relevance bridge

Perfecting the planning and execution of values research can be a study into itself, but eager marketing managers willing to ask the few questions listed above can get surprisingly far on their own. Ultimately, we want to uncover the emotional connection, the "Love Connection," our product makes with people who love our product. That emotional connection, called the "personal relevance bridge" in values research, provides a deep understanding of the "product promise" and the selling proposition that will make the product stand out in consumer's minds.

Product Positioning

The heart of the marketing strategy! The act of designing the company's offering so that it occupies a distinct and valued place in the target customers' minds. Ways to Position How you are just as good as the competition How you beat all the competition How you are loved by popular people How you fit consumers' lifestyles How you deliver what is most valued

secondary research

The starting point for most marketing research is reviewing the relevant secondary data—information that already exists. Although secondary data generally have been collected for other purposes, the information may provide insight and direction for the research at hand. In today's digital world, massive amounts of secondary data are available to marketing managers. Secondary data may be found in the company's internal databases, government agencies, trade and industry associations, business publications, news media, and commercial databases.

Guy Kawasaki

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Marissa Mayer of Yahoo! & Bob Sutton of Stanford

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Types of customer (anchor, swing, etc.)

Anchor customers keep startups going and give it a platform for growing. Finding anchor customers must be a top priority. For a moment, imagine that different kinds of businesses are like different kinds of ships. The big business ship likes to drop anchor in a calm and sunny harbor. The heavy anchor and calm waters make everyone on board the big business ship feel safe and secure. The startup business ship is like a pirate sailing the open sea. The captain of the startup business ship doesn't like to drop anchor. The captain knows the ship only moves once the anchor is on board. Startup businesses must get an anchor on board before they can start sailing. Consider the experience of Omniture, a business that helps other businesses understand and manage their Internet marketing channels. Take a look at their customer list. There is Toyota, Cadillac, Ford, Microsoft, HP, Oracle, VISA, Ameritrade, ADP, Xerox, Siemens, Tyco, HBO, Fox, CBS, Wal-Mart, Mary Kay, eBay, and it goes on. Omniture always had great products and talented employees, but their success story really got started with two anchor customers, Microsoft and eBay. According to their CEO, before landing these anchor customers, the Omniture sales cycle was a long and painful nine months. Prospective clients had lots of questions about Ominiture's financial stability, technology, and service quality. With the anchors on board, however, most of the prospective clients' questions were answered with two words: Microsoft and eBay. The sales cycle shrank to a manageable three months. How To Win An Anchor Omniture won anchor customers by "promising the world and then delivering." Many in the business questioned whether Omniture would make money with such a policy, but the CEO moved forward anyway. Ultimately, eBay and Microsoft did produce profits, but more importantly produced high-margin, quick-turnaround sales opportunities. The need for anchor customers is nothing new. For example, a local bakery got its start by providing low-priced, high-quality bread and other baked goods to area restaurants, cafeterias, and catering services. These businesses were their anchor customers. With the anchors established, the bakery built brick-and-mortar retail stores, charged premium prices for their tried-and-true products, and even added a few new products not offered through other marketing channels. In the manufacturing world, new factories get built by making commodity goods that "fill the factory" with high-volume, low- or no-margin production. Once the factory is rolling, design engineers and marketers start looking for opportunities to swap out the manufacture of low-margin goods with high-margin goods. Not every manufacturer, however, has the good sense to bring anchor customers on board before investing millions of dollars in product development and/or building a new factory. Recall DuPont's cautionary tale of Kevlar. DuPont spent $500 million to develop and commercialize Kevlar as a replacement for nylon as tire cord, but did not lock-up tire manufacturers. The tire manufacturers decided on steel as a better alternative and took a pass on Kevlar. This left DuPont with a very expensive product in search of a market; a market they never found. Startups can't afford this type of misstep. If a company as well-funded as DuPont needs an anchor customer to successfully launch a new product, then entrepreneurs certainly shouldn't try to survive without one. Anchor customers get your startup going and keep paying the operating bills through good times and bad. No one gets rich from what an anchor customer is willing to pay, but these customers will create a foundation from which to grow into profitability. Be Careful When Choosing An Anchor Big anchors don't always suit small startups. An important decision point for a startup is whether the potential anchor is more likely to foster a startup business or let it flounder. Unfortunately, we have seen far too many examples of the latter rather than the former. A startup the size of a dinghy goes down fast when they take on an anchor fit for an ocean liner. Every time an entrepreneur walks into our office to announce they've landed a big account with a national retailer such as Costco, Wal-Mart, or Home Depot, we get nervous. Don't get us wrong; these are wonderful companies that provide tremendous value for customers. However, these companies simply are not geared up to foster most startups. For example, one new business signed a contract with a national retailer but missed the deadline for delivering their product to the appointed distribution center by several hours. The national retailer declined to reschedule a pickup and told the new business to wait another year before trying again. Yet another new business shipped inventory worth hundreds of thousands of dollars to a national retailer notorious for paying vendors slowly. The entrepreneurs, having taken out second mortgages and maxed out credit cards, got nervous and tried to pressure the retailer into paying with aggressive, bordering on rude and unprofessional phone calls and letters. In response, the national retailer returned the entire inventory. The entrepreneurs were then left with lots of debt, lots of inventory, and few prospects for earning any revenue.

Bottom-up mindset vs. top-down mindset

Because of their smallness, startups must cultivate a bottom-up rather than a top-down mindset. In their book Bottom-up Marketing, Al Ries and Jack Trout suggest letting a pain-point bubble-up from customer and/or employee feedback, addressing it with a differentiating tactic, and then building a business strategy around the tactic. Bottom-up marketing and a bottom-up mindset are exactly opposite from a Big Business mindset. The bottom-up mindset is a must for startups because they lack everything Big Business has, that is, established relationships in the marketplace, a well-known image or position in consumers' minds, a successful track record, and ample financial resources. Ries and Trout use Little Caesar's Pizza as an example of bottom-up mindset. For Little Caesar's, first there was the differentiating tactic, i.e., two pizzas for the price of one. Then the business strategy grew around the tactic. Little Caesar's limits the pizza ingredients and variety, asks customers to pick up their own pizzas, occupies low rent storefronts with limited seating, uses cheesy ads reminding viewers of the two-for-one pricing tactic, markets to customers wanting a quick meal not a gourmet meal, etc. From the bottom-up, Little Caesar's is designed to make a profit by selling two pizzas for the price of one. With startup marketing, we stress bottom-up, tactic-driven marketing and product development. The key to thinking "bottom-up" is first, identifying a differentiating tactic, and then marshaling all of your resources around it. In comparison, a top-down approach slows product development down to a snail's pace. Ries and Trout tell the story of a 3M chemist who was developing a super-strong adhesive, but instead accidentally creates a "low-tack", reusable, pressure-sensitive adhesive. For years, the chemist promoted his invention within 3M, both informally and through seminars, but without much success. Six years after the discovery, a colleague who had attended one of the product seminars came up with the idea of using the adhesive to anchor his bookmark in his hymnbook. He then made efforts to develop the idea by taking advantage of 3M's bootlegging policy. 3M launched the product in stores in four cities under the name "Press 'n Peel", but sales were poor. Potential customers must have been confused. Just exactly would a "Press 'n Peel" be used for? 3M went back to the drawing board, got more consumer feedback, and renamed the product "Post-It Notes." By-the-way, the yellow color used for Post-it Notes was chosen by accident; a lab next-door to the development team just happened to have yellow paper. Twelve years after its discovery, the "low tack" adhesive finally was launched in stores throughout the US creating a competitive distinction for Post-It Notes. One year later, it was launched in Canada and Europe. Post-It Notes now generate over $1 billion in annual sales and dominate the self-stick note market. A great success, but startups rarely have the funding to wait twelve years before they start earning. Startups must find ways to accelerate time-to-money. A bottom-up mindset (1) focuses on making the most of what you have, (2) goes where the money is and quickly adjusts the competitive angle in a way that makes the competition irrelevant, and (3) transitions a winning marketing tactic into a long-term successful business strategy. Consider another example of a bottom-up mindset described by Ries and Trout. Researchers at Procter & Gamble discovered a new liquid cold remedy that soothed and cured scratchy throats and runny eyes, with one "negative" side effect; it also put people to sleep. Rather than call the project a failure and start over, the team featured the "negative" side effect and launched NyQuil, "The Nighttime, Sniffling, Sneezing, Coughing, Aching, Stuffyhead, Fever, So-You-Can-Rest Medicine." A bottom-up mindset says, "If you can't fix it, feature it." Nyquil is a good example of building an entire strategy around a marketing tactic, a cold medicine that puts people to sleep. The "negative" side effect gave NyQuil an element of differentness that solved a problem and sparked a personal connection. That is, it helped people with colds sleep and recover which in turn quickly transformed them back into the productive, happy people.

Entrepreneurial Marketing

Big business strategies simply don't work for shoestring-funded entrepreneurs. Big business has millions to spend on R&D and sophisticated messaging and promotional campaigns to buy market share. Entrepreneurs can't afford to buy success, they must do it the old fashion way--they earn it through creative, low-cost tactics.

Connectors vs. mavens vs. salespeople

Connectors Are People Specialists They have an extraordinary ability to make friends across a variety of business, social, and cultural words. They have the capacity - mental, social, and physical - to maintain a myriad of casual acquaintances. Because of their winning personality, self confidence, curiosity, and other intrinsic traits, they have a knack for knowing lots of people from many different walks of life, vocations, avocations, and locations. A connector's Rolodex can be as good as gold for new businesses. Rely on them to gain access to worlds of people that you need to part of. Mavens Are Information Specialists Connectors connect new businesses to new worlds of people. Mavens connect new businesses to new worlds of ideas and technologies. You can spot a maven because they seem compelled to collect information about products, prices, and places. Moreover, they seem compelled to share what they know with anyone who will listen. According to Gladwell, and we agree, "mavens have the knowledge and the social skills to start word-of-mouth epidemics." Salespeople Are Natural Persuaders They have the power to persuade people to take action. Some are pushy. Some are charming. But without them, new businesses are sunk. With all the perceived disadvantages of a new business, consumers may never act, may never purchase, without the encouragement of a talented salesperson. Indeed, a Harvard Business School study, The Road Well Traveled by Amar Bhide, identified face-to-face selling as a leading determinant of success for new ventures. A company can't think big and act big without great ideas. Nolan Bushnell, the father of the video game industry, founder of Atari and the Chuck E. Cheese Pizza-Time Theaters franchise, believes that having a great idea isn't necessarily the same thing as having a new idea. He says, "Everyone who's ever taken a shower has an idea. It's the person who gets out of the shower, dries off, and does something about it who makes a difference." Do something about your great ideas. Find effective ways to communicate them to customers. In the early days of Covey Leadership, Steven Covey and a small group of consultants began teaching principles they had collected and developed over the previous 20 years. It started as a small organization with seminars and consulting projects in only five cities. The group muddled along for years until they found a big way to communicate their great ideas. The best thing the group did, according to Covey, was write Seven Habits of Highly Effective People, which became a national bestseller. The book became a real "Trojan Horse," said Covey. "It opened up doors in unbelievable ways. It had legs of its own." The success of the great ideas in the book created buzz disproportionate to the size of the company and generated awareness the small company could never had paid for on their own. Startups need reliable partners with respected track records. Whom you associate with makes a big statement to potential customers. Everyone has heard about guilt by association. Learn to earn respect by association. Working with good companies and business partners will imbue your new business with respect and credibility. But here is a caveat. This sort of credibility can be temporary. A well-respected business partner is like a Fairy Godmother that takes you to the Ball to meet Prince Charming. Once you meet Prince Charming, you are on your own to make a positive and lasting impression. You have to deliver on promises. In their book, Conceptual Selling, authors Heiman, Sanchez, and Tucja remind us, "Customers, like banks, will take a first chance on you if you come backed by the best. But they will not do so a second time, no matter how glowing your references, unless you prove your own personal reliability with results."

Export, importuning, joint venture, licensing

Exporting Exporting can be as straightforward as shipping goods produced in the home country to a distributor and/or retailer in the foreign market. Financial risk is relatively low because the distributor or retailer takes on the risk of selling the product. Once shipped, however, the exporting company has little control over the product. The exporting company may complement product distribution with a communications message to teach new customers to love the product. Corning Glass exported Pyrex cookware to France with the message that clear glass cookware makes everyone a better cook because the consumer can see the food as it is cooking. In the US, the same cookware was promoted for its durability. The ad showed a metal pan in the Corning cookware being melted into metal blob; same product, but with different reasons to love it depending upon cultural differences. As another example, Weetabix is a global brand of ready-to-eat cereal with sales in over 80 countries around the world. Weetabix chief executive Giles Turrell believes that there is no need to change the core product when entering a new country. Weetabix goes about teaching consumers how to consume cereal and why they should love it. Krispy Kreme doughnuts found success in Britain by studying how doughnuts might fit with British culture and ways-of-doing things. What they discovered is that British wouldn't consider eating doughnuts for breakfast, a breakfast food that Americans fully embrace. On the other hand, there is a British tradition of bringing in sweet snacks to the workplace. Building on the insight, Krispy Kreme launched an "office heroes" campaign encouraging workers to impress the boss and bosses to reward exceptional performers with a dozen Krispy Kreme doughnuts. Krispy Kreme highlighted the impress/reward positioning by distributing through prestige retailers Harrods and Selfridges. The British know that doughnuts are not healthy, but can't resist the addictive taste and impress/reward at the office positioning. Licensing With licensing, a firm in one country agrees to permit a company in another country to use the manufacturing, processing, trademark, know-how, patent or some other skill or value. Licensing affords a measure of control to the licensor when writing a contract. It also puts the burden of risk for developing the product on the back of the licensee. The downside is that in most cases the licensor only receives a sales royalty, i.e., a small portion of the sales revenue. In addition, the licensor does not have close control over manufacturing quality or marketing, and may quickly lose control of technological know-how. Novell has found global success through licensing their software products. In the case of Novell, its software products and the technological know-how of writing "computer code" remain closely controlled by Novell. Joint Ventures Joint ventures share expenses and risk across companies located in the home country and in other countries. General Motors is famous for their joint venture with Toyota that brought compact Japanese cars into the General Motors line up. General Motors decided that it was more profitable to rebrand Japanese compact cars than to learn how to manufacture small reliable cars on their own. While Detroit autoworkers disliked the business plan, Toyota much appreciated the broader access to the lucrative American market, General Motors much appreciated the Japanese know-how, and American car buyers much appreciated the affordability and reliability of compacts such as the popular GEO Prism, manufactured in California. Joint ventures do not always work out as well as the General Motors and Toyota experience. An American chemical manufacturer signed a joint venture with a Chinese firm to manufacture chemicals intended for the Japanese market. Compared to manufacturing the chemical in Japan or shipping the chemical from the US, manufacturing in China was the low cost solution. Trouble is, Japanese buyers wanted to pay much lower prices for the China-produced, US-branded chemical. The Japanese reasoned that manufacturing quality would be much lower in China than in Japan or the US. All the public relations the US chemical manufacture could muster could not convince Japanese customers otherwise. So what looked very profitable on paper did not turn out so profitable in practice. Foreign Direct Investment In some case, companies will decide to make direct investments in building up wholly owned operations in other countries. Toyota owns and operates more car factories outside than inside of Japan with six car factories in the US. With foreign direct investment, companies have complete control, but costs and risks are high. Among the risks is the difficulty of expat managers understanding and appreciating cultural factors when marketing products. In Japan, an American herbicide manufacturer had a runaway success for a product that killed weeds in rice crops. It was advertised as a small addition with great strength to remove large, powerful weeds. To reinforce the brand positioning, the herbicide brand was named "Wolf" by Japanese marketers after a popular grand champion Sumo wrestler who was noted for his relatively small size and great strength. After the brand was launched and selling successfully the American manager asked his Japanese employees how they came up with the brand name. The manager's last name happened to be Wolfe, so the Japanese employees said the product was so successful because they named it after him.

Closing techniques in selling

For startup marketers, selling and closing are must-have skills. Experiment with different selling tactics and find the closer. Ralph Waldo Emerson said, "Build a better mousetrap and the world will beat a path to your door." This statement is true if the world knows that you sell mousetraps, if the world knows where to find your door, if the world understands the unique benefits of your mousetraps, and if the world knows how your mousetraps solve their mice problems better than alternative solutions and at a price they are willing to pay. Without this information, knowledge, and understanding, the beaten path will miss your door completely. Unfortunately, some entrepreneurs become so focused on "building the better mousetrap" that they do not spend enough effort or resources on selling it. Selling answers the above "if" statements. Don't ignore this important function along your way to building the better mousetrap. If you are to cash in on the rewards for developing a fantastic product, you must learn to close sales! An interesting study sponsored by the Harvard Business School examined the determinants of success for entrepreneurs. The sample included 87 Harvard Business School entrepreneurs and 100 entrepreneurs from the list of "Inc. 500" companies. One of the key findings from the study and recommendations to entrepreneurs is learn to sell! "The data suggest that face-to-face selling is a crucial skill: for most ventures to have any chance of success the entrepreneur has to be able to call on a customer and secure an order for a product or service." Calling on a customer and securing an order means selling. It means asking the right questions and listening to customers to understand their needs and wants. It means matching the benefits of your product offering to the needs and wants of the customer. It means getting commitment from the customer for the order; that is, closing the deal. It means delivering on the commitments you make. It means meeting, even exceeding, customer expectations. Successful entrepreneurs know how to sell; and most importantly, they know how to close. To emphasize the point, they don't give "no" a chance and do whatever is necessary to close a deal. But can-do attitude aside, selling for entrepreneurs is not without challenges. The Harvard research uncovered a number of selling challenges worth noting. Here are the top three challenges along with our recommended solutions: Challenge #1: Entrepreneurs Lack Credibility, Name Recognition, and Track Record Startup marketers don't have the entrée that an IBM sales representative have with an MIS department. Also, prospects are likely to ask the question, "How do we know you are going to be around tomorrow?" In short, there is little or no trust. The solution is to earn credibility and establish trust. One historically flawed sales assumption is that people buy from those they like. They don't. People buy from those they trust. To test this, simply look at your own experience. How many overly-friendly salespeople have you found you could trust? To build a customer base over time, a business must establish trust with its customers, who must believe the business will meet or exceed their expectations. If customers' expectations are met or exceeded, the business grows. On the other hand, if customers' expectations are violated, the business dies. Selling experts, Robert Miller and Stephen Heiman, suggest that credibility and trust can be gained by reputation, it can be transferred to you, and it can be earned by you. Establishing credibility by reputation is difficult for entrepreneurs because they have no track record. Temporary credibility can be transferred to you by someone else recommending you, such as an introduction, a phone call, or an email. The person recommending you can be anyone the customer trusts: respected colleagues, business associates, friends, relatives, etc. You can draw on this transferred credibility until you earn your own. Of course, the best way to gain credibility is to earn it yourself. Credibility is earned or lost with every interaction you have with a customer. Here are seven things you can do to earn credibility and trust with customers: Dress and speak the part. An old Scottish proverb counsels, "What e'er thou art, act well thy part." The first step in acting the part is dressing the part. People judge you by your appearance. Learn the business dress of your customers. When in doubt, err on the side of dressing up. Remember, you can always dress down, but you can't dress up. Speak the language of the customer. Speak in terms the customer understands. Often sellers become so enamored with the exciting features of their products that they forget that customers do not buy features, they buy benefits. Think of the times you've suffered through a salesperson's laundry list of features not knowing why these features should be important to you. Theodore Levitt, Harvard Business School professor, said it well: "People don't want to buy a quarter-inch drill. They want a quarter-inch hole." So, speak in terms of the hole (benefits), not the drill (features). If you do mention a feature, make sure you translate it into a benefit. Seek to understand. Your primary task is to understand customers' problems and opportunities so that you can match what you have to offer with their needs and wants. Selling is not about you or about your company. It is about the customer. In the end, you want the customer to sell him/herself. Most people love to buy, but they do not like being sold to. So, help the customer buy. Ask good questions to help the customer uncover problems and opportunities. Listen, listen, listen. Selling is not a standup monologue or a dog-and-pony show. It is a conversation, a dialogue - two people speaking together. And who should speak more, the buyer or the seller? If the seller's objective is to "seek to understand," then the buyer should talk more. The seller can encourage the buyer to talk by asking good questions and by listening attentively. Set correct expectations. Much of selling is managing customers' expectations. Don't promise the moon, unless you are committed to delivering it! It is a good policy to under-promise and over-deliver, but over-eager salespeople often do just the opposite. Think about the times you've waited for a table at a restaurant. When the hostess tells you the wait is 15 minutes and then seats you in 10 minutes, you are thrilled. But when the hostess tells you the wait is 15 minutes and seats you in 20 minutes, you grumble all the way to the table. Manage customers' expectations to fit with what the startup can reasonably deliver. Startups don't often get a second chance to prove their competency. Be responsive. A comparative advantage small startups have over larger Fortune 500 companies is the ability and willingness to respond quickly to customer requests. Tom Peters advocates "shocking levels of responsiveness, doing things in minutes and hours, which people did in weeks and months." Deliver results. In the final analysis, it is all about delivering results. Customers judge the performance of your company and products by how well you deliver on expectations. If you meet or exceed customers' expectations, they are likely to buy from you again and they may tell others good things about you. Conversely, if you don't meet their expectations, they certainly won't buy from you again and they certainly will tell everyone they can about their bad experience. Challenge #2: Power Is With The Buyer Startups are in a weak selling position, particularly when their products represent discretionary purchases and their offerings lack distinctiveness. The solution is to sharpen and then sell your competitive angle. Your product and/or service must stand for something different that is important to the customers. The Harvard study is correct. If your product offering lacks distinctiveness, customers have no reason to try it. Use the "so what" test to assess the importance and value customers place on your product. First, list each distinctive benefit of your product. How is it different from the competition? Then put yourself in the customers' shoes and ask, "So what?" "So what does this mean to me and my company?" "How does this relate to my problem?" "More importantly, how does this provide a solution to my problem?" Finally, provide a concrete reason for customers to believe you can deliver on your promises. If you can't answer the "so what?" question or provide a reason to believe you can deliver, customers will pass on your product. Challenge #3: Entrepreneurs Often Have Big Egos They must learn to subjugate their egos and deal with frequent rejection. The solution is to check your ego at the customer's door. This is not the time to win debating points. Sure, you could win the battle of words, but you will lose the sale. This is a real test for many startup marketers who want to show how smart they are and who want to defend their product. Remember, the focus is not on you. The focus is on the customer. A few years ago we conducted focus group interviews for a new product. Regrettably, we invited the entrepreneur to sit in on the first focus group interview. This was a big mistake, because each time a member of the focus group questioned the product or made a negative comment about the product, the entrepreneur jumped to the product's defense. He was in "fight mode." He could not bear to hear a disparaging word about his new product without providing a counter-punch. Needless to say, we did not invite him to the next set of interviews. Rejection is part of an entrepreneur's life. Not all customers will fall in love with your products. A big part of being a successful entrepreneur is learning how to cope with rejection. Our experience suggests that successful entrepreneurs use rejection as an opportunity to learn. They think hard about what steps to take to overcome future problems. Do-It-Yourself Or Outsource The Selling To Others A major decision you must make is whether to sell the product yourself or look for partners to sell for you. Of course, if you cannot sell, if you are not willing to learn, and if you cannot find someone to teach you, then you should consider an outsource partner. Moreover, there are other strategic and cost reasons to consider. First, let's consider the advantages of partners. Partners can provide instant access to customers. Dentrix Dental Systems found a group of salespeople that already knew the industry and had a presence in dental offices. By partnering with industry insiders, Dentrix received instant access to hundreds of dentists. More importantly, the salespeople transferred credibility and trust to Dentrix. By using partners, entrepreneurs save the cost of building and maintaining their own sales force. We have a friend in Eugene, Oregon who makes wood kits, such as clocks, birdhouses, home decorations, etc. for craft stores. He did not have the resources to build and maintain his own sales force, so he attended trade shows seeking partners to sell for him. He found a number of independent salespeople who sell to craft stores. They were eager to carry his line of wood kits. The good news for our entrepreneur friend is that he received instant access to hundreds of craft stores and he pays these independent salespeople only when they sell. On the other hand, the major disadvantages of outsourcing the sales function are loss of control and loss of power. When you outsource, you don't control the selling activity. You have little power over the salespeople who are selling your product. In addition, the selling partner develops and owns customer relationships. The sales force will know and understand the customer better than you will. And for startups, very little is more important than knowing and understanding the customer. So, evaluate the strategic and cost considerations of do it yourself versus outsourcing sales. Which option can better sell, get the business, and close the deal for you? Remember What Works Then Close Customers buy your products and services for their own reasons. Take careful notes. Learn their hot buttons. What works for one customer may work for another customer. Remember the pitches that work in certain selling situations to close the deal. Then use this knowledge in similar selling situations. In addition, too many people think closing the sale is about using gimmicks and trick questions to get the customer to buy. This may work once, and only once. Remember the adage, "Fool me once, shame on you; fool me twice, shame on me." In our experience, closing the sale is not about gimmickry or trickery. Closing the sale is about helping the customer make a decision to solve a problem or capitalize on an opportunity. We have found the best way to do this is to summarize the benefits your product offers the customer and then ask for the order. In summarizing the benefits, you should match your product's benefits to the customer's most pressing needs. Of course, this assumes you know the customer's most pressing needs. And you do know them because you have asked good questions to identify the needs and you have listened well. With the Summary-of-Benefits Close, list each need and then show or describe how the benefits of your product address each need. Then ask for the order. A soft, non-threatening way to ask for the order is to simply say, "Based on what we have talked about today, do you feel comfortable purchasing our product?" Robert Lewis Stevenson said, "We all live by selling something." This is especially true for startup marketers. Sell, sell, sell, and then close the deal! If you can't close the deal always ask the following question, "What do I need to do to get a yes?" Write down the answer because you just got an incremental commitment to buy. Just come back after meeting the necessary conditions for a yes. Entrepreneurs always keep the door open for future opportunities. 18.7 Feed A Frenzy Learning to create a frenzy around your new business idea is a key skill in finding investors and signing up new customers. The fear of being at a competitive disadvantage or losing a business opportunity provides a strong incentive for people to get involved. If you want to get distributors, partners, investors, and key customers to sell, champion, invest in, or buy into your competitive angle, create a feeding frenzy by following the Rule of Three. Sharks have the same senses people have, including taste, touch, eyesight, hearing, and smell. However, a shark's primary sense is smell. It can detect one drop of blood in a million drops of water and can smell blood a quarter of a mile away. When sharks smell blood in the water and see others circling their food, they go crazy biting everything around them. In short, seeing the opportunity to feed and watching other sharks circle the food gets them excited about the feeding opportunity and creates an insatiable appetite. When sharks get into a feeding frenzy, they close their eyes and go for it! You don't have to scuba dive to experience a feeding frenzy. People exhibit the same pattern as sharks. Each year, especially around Thanksgiving and Christmas, shoppers put on their shark-face when presented with the opportunity for a bargain. When the loudspeakers in a store trumpet, "Bargain in aisle five," watch shoppers run to the location, snapping up products they hadn't planned on with an insatiable appetite. When Christmas sales are advertised in the newspaper, watch people line up the night before just to be first in line to run through the store like blood-crazy sharks, circling every bargain and attacking everything and anything around them. While we know what drives a feeding frenzy in sharks, why do people exhibit the same primitive pattern? Answer: because of the FUG factor. (F) Fear of losing out on an opportunity; people don't like others getting an inside deal on the hot new product idea before they do. (U) Uncertainty if the opportunity will come their way again; people don't want to miss out on the opportunity of a lifetime. (G) Greed for fame and fortune; people want an opportunity to hit the jackpot with a "WOW! product. Thus, instead of blood in the water, it is fear, uncertainty, and greed that spark the feeding frenzy in distributors, retailers, partners, and customers. But don't just allow one shark to circle your competitive angle. With one shark in the water, the only thing that will get bitten is your company. Never, never, never allow one key stakeholder to hold your company hostage. Great competitive angles will attract the attention of many other sharks. Allow other sharks to see, smell, or even taste your competitive angle. With startup companies, we find it is human nature for people to take action only when they are motivated to do so by the FUG factor. As entrepreneurs, we don't have the time to wait for distributors, partners, and investors to eventually wake up and then make up their minds. Time is money and startup companies have a limited amount of time to survive. Startup marketers must accelerate time to money. Don't just limit the possibilities and slow the time line by only pitching to a "special few." Go ahead and show as many people as possible your idea. Create a frenzy. You will be glad you did. Rule Of Three The Rule of Three is based on the idea that it takes a minimum of three people swimming around your product idea to get someone to take immediate action. Many entrepreneurs are so excited about finally finding a willing partner, investor, or distributor that they usually "give in" to unreasonable demands or "give up" future opportunities to make money in order to complete a deal. You don't have to do that. If you are going to survive and thrive as a company, you must pitch to a minimum of three organizations. To do otherwise is success-a-cide. Unfortunately, it is all too common for us to hear the following statements by entrepreneurs: "To start our company, we want to work closely with just your group." "We are not talking with anyone else except you because we value your relationship." "We want to give you exclusive rights so that you will have a competitive position in the marketplace." These entrepreneurs are noble, but they also may be a bit naïve. Their approach to the problem reflects commonly-held, wrong-minded tactics tried by inexperienced startups. Unfortunately, such tactics are doomed to fail and kill any feeding frenzy to propel a new company towards success. When you don't allow others to look over, greedily consider, and fiercely compete for your product idea, you do not motivate partners or buyers to take immediate action. Hence, no FUG factor, no contracts, no urgency, and limited sales. Key investors, distributors, and customers need a compelling reason to take action. We have seen deals that drag on for years turn on a dime and change in a minute when other distributors, partners, and investors are brought into the picture. The level of excitement and appetite for a deal increases as others look at, sample, and negotiate. Using the FUG factor is an important way to accelerate funding and initial sales and they are a key to the all-important accelerate-time-to-money life blood for new companies. Don't Get In The Way Of A Feeding Frenzy In 2007, no product received more press than the launch of the Apple iPhone. Unlike other Apple products, the iPhone was the result of an exclusive partnership between Apple and AT&T. In order to purchase an Apple iPhone, consumers must commit to being an AT&T customer for two years. Many analysts wonder why Apple made exclusive arrangements with AT&T and limited their opportunity to sell the phone on all wireless platforms. It is very frustrating to consumers when they can see, hear, and touch an iPhone but not buy it because they already carry a two-year contract with T-Mobile or Sprint. Perhaps it is unwise to restrict a potential feeding frenzy. All that snapping energy has to go somewhere. Within a year of the product launch, a class-action lawsuit was filed in federal court targeting Apple and AT&T. The lawsuit accused the companies of illegally conspiring to tie iPhone customers to the telecommunications company's wireless network. The suit seeks around $2 billion in damages. According to lawyers for Paul A. Holman in Washington State, Apple and AT&T conspired to block all modifications of Apple's iPhone to stymie any attempt by users or competitors to diminish or tap into the Apple-AT&T revenue stream. When a great new product idea attracts national attention, it is probably unwise to get in the way of the feeding frenzy. When people circle a product they like and want, but can't get, someone is going to get bitten. In this case, it may be the hand that feeds it.

Creating buzz for your business

Inject energy into your startup by tapping into the brash in your face mojo afforded to new competitors. Apple Computer explodes Big Blue with an oversized hammer in its legendary product-introduction television ad 1984. Bartles & Jaymes uses two actors playing roles as old hayseed farmers poking fun at big business wineries when introducing their new wine cooler even though its parent company is Ernest & Julio Gallo, the world's largest winery. Wendy's taunts mainstay burger chains with "Where's the beef?" Each of these businesses are getting their swagger on. That is, showing great confidence in their ability to follow their passion, take on the status quo, and then crush it. What new businesses don't have in size or raw popularity, they can make up for in attitude. Allegiance, Inc. has swagger. It has an attitude. It doesn't back down from much bigger competitors. The enterprise feedback software company was put together by an unlikely alliance between a 50-something business school professor and a 20-something accounting student. Allegiance hired an aggressive sales team, relentlessly makes cold calls, makes a big splash at the key trade shows, and routinely takes on business that stretches their capabilities. Allegiance marketers don't hesitate to kick sand in the face of much better known and stronger competitors. They frame small size as an advantage rather than a disadvantage. They point out that their competition can take months to provide the analysis and feedback that their software can provide in minutes. "By the time the competition gives you their results," the founders say, "The freight train will have already run over your business." According to the Gartner Group analysts, Allegiance products are superior to those offered by much bigger and much pricier competitors. New ventures with swagger can turn heads and generate buzz by doing things that would go unnoticed or even raise eyebrows if coming from bigger, more established businesses. To be a David, all a new business needs to do is find a Goliath and throw some rocks. David Klein approached the Herman Goelitz Candy Company and asked them to make him a mini-gourmet jelly bean which he called Jelly Belly, and to make this jelly bean using natural flavors if possible. David Klein became Mr. Jelly Belly. David Klein knows how to create positive buzz. He earned Jelly Belly a lot of exposure through a nationwide publicity campaign including an article in People magazine which featured a full page photo of a nude Klein taking a bath in Jelly Bellies. Mr. Klein also made several appearances on national television programs in which he persuaded celebrities to taste and react to Jelly Bellies. David Klein sold the first Jelly Belly jelly beans in an ice cream parlor in California. The first flavors were Very Cherry, Tangerine, Lemon, Green Apple, Grape Jelly, Licorice, Root Beer, and Cream Soda. Total Jelly Belly sales in the first seven days were only $44. David Klein promoted Jelly Bellies with real swagger. He made sure a jar of Jelly Bellies was on President Reagan's Oval Office desk in the White House and on Air Force One. He also made Jelly Bellies the first jelly beans in outer space, sending them on the Challenger shuttle as a surprise for the astronauts. He envisioned that people would be willing to pay 10 or 20 times more for jelly beans if they simply tasted better, came in scores of natural flavors and had a clever name. Jelly Belly's chairman, Herman Rowland, smiles when he remembers the startup years for Jelly Belly and the promotional schemes David Klein would come up with. He concedes it was Klein's idea to call the candy Jelly Belly, a name Rowland admits that he didn't think very much of. He thought even less of Klein's idea to be photographed naked in a bathtub full of Jelly Bellies. "When I saw that thing, I went, `Oh my God, this is the end of Jelly Belly. No one will ever want to eat one." "Well, I was wrong." David was on his last few dollars when he called a writer from the Associated Press to come see the "hottest new candy in California." The writer arrived at the ice cream shop where Jelly Belly rented space and saw customers come in and buy bag after bag of candy; like they were addicted to Jelly Bellies. David knew when the writer was coming to the store so he made sure all of his friends and neighbors had money to buy pounds and pounds of Jelly Bellies. The writer was so impressed with what he witnessed that he wrote an article about this fast selling candy and the rest is history. Twenty-three thousand orders started flowing in and Jelly Belly became one of the best selling candies of the century.

Product item/line/mix/extension (what's that?)

Item: A specific version of a product Line: a group of closely related product items Mix: All products an organization sells

Pricing Strategies

Price Skimming. With price skimming, marketers set a relatively high price to obtain high margins at the expense of sales quantity. Generally, high prices limit the number of potential buyers and thus, demand is low. The objective of price skimming is to capture consumer surplus from the market—those customers willing to pay the relatively high price. As demand for the first group of customers is satisfied, price is lowered to capture consumer surplus from the next group of customers, and so on until the last group of thriftier customers is reached with a price they are willing to pay. For example, many consumer electronics companies use price skimming. Sony may launch a new state-of-the-art TV with an initial high price, capitalizing on those customers willing to a premium for new technology. Then the company progressively lowers the price, skimming each layer of the market. Price Penetration. With price penetration, marketers set a relatively low entry price to capture market share quickly. Lower prices discourage the entry of competitors. Increased market share can lead to cost reduction per unit. The disadvantage of price penetration is that it does not capture consumer surplus. For example, to capture a portion of the U.S. auto market, Hyundai used a price penetration strategy—setting prices well below competitors Honda and Toyota. Coca-Cola sets their price to be competitive with other premium-branded carbonated soda drinks, offers a variety of temporary price promotions, and then they're done. Many pricing decisions are not so easy. Arriving at an appropriate pricing policy requires that we understand three things particularly well: our costs, our competitors, and our customers as depicted in Figure 10-5. The less we know about costs, competitors, and customers, the less success we may have with pricing. Figure 10-5: Four Pricing Approaches Cost-Plus Pricing Most companies are pretty good at figuring out their costs and use an accounting approach to pricing. Accountants calculate the cost and then marketing managers add on the margin needed to make the return demanded by upper management or investors. Eureka, they've found their price! This is called cost-plus pricing. The trouble with cost-plus, accounting-based pricing is that product costs are irrelevant to buyers. People don't care about how much it costs to manufacture and distribute a product. That is the marketing manager's problem and not the consumer's concern! It is very easy to price a product too high using cost-plus pricing. For new products, the cost-plus price may be significantly higher than the reference prices for comparable products that people see day-to-day in the marketplace. In which case, our brilliant product idea better be unique or it won't sell at all. Before making the claim of uniqueness, please start by looking around for functional competitors, and then benchmark their prices. When it comes to paying out more money for one product versus another, people tend to base judgments of similarity by making comparisons of function and not form. Competitive Pricing Coca-Cola uses competitive pricing. That is, they take their price from branded soda drinks that offer similar value. Competitive pricing is a better approach than cost-plus pricing because in addition to cost, it also takes into account what competitors are charging and what people are paying in specific buying situations. The key step in applying a competitive pricing approach is tackling the question of reference prices. To illustrate how reference prices work when making purchasing decisions, a noted economist, Richard Thaler, administered two versions of a questionnaire to a large group of consumers. One version of the questionnaire uses the phrases shown below in parentheses. The other version uses the phrases shown below in brackets. "You are lying on the beach on a hot day. All you have to drink is ice water. For the last hour you have been thinking about how much you would enjoy a nice cold bottle of your favorite soft drink. A friend gets up to go make a phone call and offers to bring back a soft drink from the only nearby place where soft drinks are sold (a fancy resort hotel) [a small, run-down grocery store]. He says that he will buy the soft drink if it costs as much or less than the price you state. But if it costs more than the price you state he will not buy it. You trust your friend, and there is no possibility of bargaining with the (resort clerk) [store clerk]. What price do you tell him?" In 1984 dollars, the median response for the resort was $2.50, whereas the median response for the small grocery store was $1.50. The economist points out common sense result. In general, people are willing to pay more at the resort because the reference price in that context is higher. People are just used to seeing higher prices at fancy resort hotels than they are at small mom-and-pop grocery stores. A $2.50 soft drink at the resort is acceptable. A $2.50 soft drink at a small grocery store is gouging. When we look for reference prices, we want to identify similar functionality of products as well as similar buying situations. Once we identify the relevant reference prices, we can set our own competitive price at a discount or a premium, depending on the extra risk and/or extra value that potential buyers see in our product. When thinking about perceived risk, there are three types of buying risks that people consider: (1) financial, that is, will this purchase end up in a financial loss, (2) physical, that is, will this purchase end up physically harming me or my family, and (3) psychological, that is, will this purchase make me look bad to my community and/or peer group. High risk sets a low threshold on acceptable price. When thinking about perceived value, there are three types of value that people consider: (1) functional, that is, will this purchase give me more features and functionality than I now have, (2) economic, that is, will this purchase save me money compared to what I have now, and (3) emotional, that is, will this product make me feel more accepted, admired, assured, accomplished, and/or delighted with life than I am now. High value sets a high threshold on acceptable price. Golden Goose Pricing In Aesop's fable a poor farmer and his wife discover a goose that can lay golden eggs. They sell the golden eggs and become prosperous, but also become impatient and greedy. Not content with slowly harvesting the eggs, the couple kills and cuts open the goose to get all of the gold inside. Of course, there is no gold to be found and the couple soon sinks back into poverty. The more businesses understand about creating functional, economic, and particularly emotional value, the higher potential there is for making extraordinary profits. However, the potential for this type of financial success doesn't come without danger. Every business that finds a "golden goose" is in danger of charging too high a price, which in turn attracts competitors willing to deliver similar products for less money. Businesses using golden goose pricing understand how to create customer value, but underestimate the ability of and resourcefulness of competitors. Experienced marketers have a sense how to run value well ahead of price. Dave Wilson, founder of Wilson Audio, started selling audio loudspeakers more than 20 years ago. From the beginning, his speakers and marketing approach had a knack for creating tremendous customer value. Today his range of audiophile loudspeakers sells for between $25,000 and $125,000. That is right. A pair of audio speakers weighing in at over 2,000 pounds, called the Alexandria X-2 in case you are in the market, sells for around $125,000. In a product review, one audiophile remarks, "That's a ridiculous amount of money, but somehow, as I was helping set up these speakers in my living room, I was not at all bothered by the price." Dave Wilson has a long waiting list of people wanting to buy his speakers, even though many comparably priced products as well as less costly alternatives are readily available. He knows how to create value and run value well ahead of price. He has the patience to slowly harvest those golden eggs! Dave recently met with a group of business consultants and entrepreneurs who harangued him about his pricing policy. They reasoned, "There is a long waiting list; therefore the price must be too low. There is more money to be made." What the panel of experts did not realize, however, is that a long waiting list is a big part of the value in the strange world of audiophile one-upmanship. Dave Wilson was polite and respectful, but declined to raise his prices. He was happy with the waiting list and happy with his profit. Sidestepping greed is a key success factor in pricing that not every marketer appreciates. Several audio equipment manufacturers have sold electrical power cords for upwards of $1000 per foot. Many have gone out of business as a swarm of competitors have been happy to sell their power cords for the bargain price of $500 per foot! Value Pricing Value pricing doesn't necessarily mean charging a low price. Dave Wilson is value pricing his line of premium audio speakers. Value pricing simply means charging a price that is high enough to capture a lot of customer value, but not so high as to encourage business-crushing competition. DuPont's pricing approach for their titanium dioxide business is a classic example of value pricing. Titanium dioxide is all around us. It is the most-used white pigment in the world. It is added to paint, plastic, paper, food, toothpaste, cosmetics, pills, sunscreen, and numerous other everyday products. There are two ways to manufacture titanium dioxide. With the first method, called the sulfate process, titanium dioxide is bathed in sulfuric acid. With the second method, called the chloride process, titanium dioxide is bathed in chlorine. The sulfate process fixed costs are low, but the variable costs are high. The chloride process is just the opposite. Its fixed costs are high, but the variable costs are low. To make the story just a bit more complex, the product quality yielded by the chloride process is much better than that from the sulfate process. DuPont uses the chloride process, and when entering the market as the world's largest titanium dioxide manufacturer, had a tough pricing decision. Should they set the price low because their production costs were the lowest in the industry? Should they set the price high because their product quality was the best in the industry? If they choose a high price, how high should they go? Ultimately, DuPont decided more profit is better than less profit and consequently set a high price, but they were careful not to set it so high as to encourage business-crushing competitors using the sulfate process to build new chloride-process factories. DuPont did their homework to uncover competitive cost structures and their financial resources before deciding on a price. They wanted to make sure DuPont profitability wasn't so large as to attract direct chloride-process competition. Pricing high enough to capture significant customer value without "killing the golden goose" takes thorough research into every facet of the marketplace equation: own costs, customer value, competitor prices, and competitor costs.

6 Thinking Hats/WOW Factor

The WOW! Group questions we ask to increase our odds of success fit into a framework proposed by Edward de Bono which he calls the Six Thinking Hats. Each thinking hat addresses a different activity carried out in a WOW! Group. Briefly, the six thinking hats are: White Hat- facts about the product, service, or people that might use it Red Hat- emotional, gut feel reaction to the product or service Black Hat- perceived shortcomings or objections to the product or service Yellow Hat- perceived benefits or positive support for the product or service Green Hat- ideas for improving the product or service Blue Hat - summarizing the process or lessons learned and takeaways We always use one of de Bono's thinking protocols when applying the six thinking hats in a WOW! Group. For generating ideas, use blue-white-green-blue. For comparing alternatives, proceed with blue-white-yellow-black-red-blue. For general problem solving, try blue-white-green-red-yellow-black-green-blue. For quick feedback, use blue-black-green-blue. For exploring a single product idea without comparing it to others, use blue-white-red-black-yellow-green-blue. WOW! Groups work best when comparing your Big Idea to several not-so-big alternatives. In this way, WOW! Group participants can only guess at which idea is the Big Idea and consequently provide unbiased feedback on ALL of the concepts. Let's face it, any respondent in a focus group will try to be as positive as possible about someone's Big Idea when getting paid or at least fed some pizza pie. To get fair and honest feedback, your favorite idea must be embedded along with several other ideas. A WOW! Group is one of the best tools to determine when you've found a killer idea. A number of years ago Ken Hakuta, aka Dr. Fad, was asked how he knew that the Wacky Wallwalker was going to be a hit. He answered, "It's really pretty easy, I show people the new product and look to see if they tilt their head slightly to the left and say WOW!" He continued, "If they do, I've got another hit." At first glance, the WOW! Factor seems too simplistic to be a real indicator of future success. With leading firms spending millions of R&D dollars each year developing and testing their products, how can the evaluation process be reduced to a tilt-of-the-head and a single word? But from what we've seen over the past twenty years, we believe that Dr. Fad is absolutely right. Products and services with the WOW! Factor each have something special that is unique and remarkable. They have stopping power! They shock, surprise, delight, and in particular, fire-up the imagination. Measuring the WOW! Factor is direct and easy. When you meet someone you feel is in the target audience for the product, start by asking "How would you rate this product from 0-to-10, where 0 means the product is just okay and 10 means WOW! Here is my credit card!" If the average rating is more than 7, congratulations you may have a winner. Go for it, you've got the WOW! Factor and a potential hit if the market opportunity is large enough. If the average rating is between 5 and 7, then there is still hope. Keep pitching, listening, and adapting! If the average rating is below 5, then people are just being nice to you when rating your idea and don't want to hurt your feelings. There is no WOW! Factor, little or no hope for the concept and you need to go back to the drawing board and redouble your R&D effort. Along with measuring the WOW! Factor, also test whether you've found a core group that truly loves your new idea. Ask the core group additional questions such as, "Who would be interested in this type of product and how would they use it?" Then listen and watch. Do you hear some excitement in their voices and see it on their faces? If you don't hear or see anything out of the ordinary, then the new idea, your description of it, or your target audience is off the mark. Continue to work on the description and refining the audience, but don't invest a lot of time, energy, or money until you've hit the WOW! Factor. If you go forward at this point, you will commit the first common mistake of startup businesses, that is, developing products without validating a customer pain-point.

Different types of market research

The starting point for most marketing research is reviewing the relevant secondary data—information that already exists. Although secondary data generally have been collected for other purposes, the information may provide insight and direction for the research at hand. In today's digital world, massive amounts of secondary data are available to marketing managers. Secondary data may be found in the company's internal databases, government agencies, trade and industry associations, business publications, news media, and commercial databases. The U.S. Census Bureau collects data about the American people and about the American economy. The 2010 Census is the most recent count of the U.S. population. As mandated by the U.S. Constitution, this count occurs every ten years. The primary purpose for this data collection is to determine the distribution of Congressional seats to states. In addition, the U.S. Census database contains detailed information that may be of value to marketers such as number of households in the U.S., people per household, age, sex, race, income, occupation, and education. The U.S. Census Bureau also collects economic information (capital expenditures, manufacturing, sales), and information about state and local governments (employees, payrolls, revenues, and expenditures). Major advantages of secondary data are the time and money savings. Secondary data are available almost immediately. Much of the information is relatively inexpensive or free. Although primary data collection can be expensive and time consuming, the research targets a specific problem, where as secondary data my not provide sufficient information or may not be on target with the research problem. Once secondary data sources have been explored, researchers must decide if primary research is needed. If the secondary data provide answers to the research question, then primary data collection is not needed. If questions remain, then primary research is the next step in the process. We have listed a sampling of primary research methods, literally from A-to-Z. The list provides a good idea of the types of decisions that marketing managers are faced with and the studies they use for helping in those decisions. Ad tracking: Determining whether an ad is being seen and remembered. Usually we want to know how fast awareness is building for the media dollars being spent, if advertising is making positive impressions and if key benefits are cutting through. Advertising research: Research designed to determine brand positioning and advertising strategy. We want to carve out a unique selling proposition that makes a brand stand out and sparks an emotional connection with consumers. Brand association research: Identifying the attitudes, opinions, images, and other elements that may be associated with a brand and the brand personality. Brand attribute research: Identifying the attributes that define product categories and the positioning of competitive brands within the category. Usually the research is set in the context of a "gap analysis" in which brand attributes are shown on a two-by-two grid according to consumer perceptions of attribute importance and attribute performance. Brand name testing: Brand names help establish brand personality and can be significant factors in building brand awareness. Brand names are tested for meaning, distinctiveness, and ability to be remembered. Buyer decision process: Marketing managers want to manage as much of the buying decision process as possible. In particular, we are concerned with how potential customers gather product information, how packaging and point of sale materials influence purchases, and post-purchase product evaluations. Concept testing: Marketing managers must sort through multiple concepts when trying to identify promising brand extensions, line extensions, and messaging. Concept test, usually in the form of focused group discussions, allows researchers to quickly filter out poor concepts and enhance strong concepts. Cool-hunting: Marketing managers often scan for successful products in one region of the country to introduce their own version of the product in another region of the country. For years, a successful frozen Mexican food company identified new food ideas in California border towns. It is also common to look for popular products in other countries and then launch one's own versions of these products the home country. Copy testing: Using the right words in marketing communications is challenging. It is easy to use words, portray images, and tell stories that hurt the brand more than help it. Copy testing helps marketing managers keep the messaging on strategy and building positive impressions of the brand. Customer satisfaction research: Often customers purchasing our products provide valuable feedback for improving the product, introducing complementary products, or keeping the product on strategy. Customer satisfaction research provides insight regarding brand growth and regarding the spillover from employee attitudes to customer attitudes. Demand estimation: The number one rule of marketing is to "go where the money is." Demand estimation is important for determining whether the potential financial return is worth the marketing investment. Distribution channel research: Understanding the balance of power in the distribution is crucial for marketplace profitability. Marketing managers need to know which channels best fit with their brand personality, support their marketing strategy, and will bring them the best return. Eye tracking: Some researchers believe they can make advertising and sales materials more effective by tracking how the eye moves across advertising copy and images. Eye tracking studies are designed to optimize sales content, image selection, and image placement. Image study: Every product, service, and brand projects an image in the marketplace. Perceptual mapping studies are often done to identify brand image and compare it with other competing brands. Internet competitive intelligence: Social media provides a wealth of information about competitors, their current success, and future plans. Competitive intelligence mines the Internet for information that can give companies a leg-up on their competitors by tapping into online conversations in which competitors say too much. Marketing effectiveness and analytics: These studies aim to measure the dollar-by-dollar effectiveness of marketing expenditures. Measuring effectiveness is particularly doable with direct marketing campaigns, online marketing campaigns, and sales promotions in which sales leads and sales can be traced back to dollars invested. Mystery shopping: Customer service representatives always seem to be at their best when they know they are being watched and evaluated. Mystery shoppers evaluate the customer service experience, store cleanliness, product merchandising, and other shopping factors when the customer service representatives don't know they are being evaluated. Positioning research: When refreshing a brand or finding a competitive angle for a new brand it is helpful to understand the positioning of current products. Positioning research also gives marketing managers a chance to try out the viability of several different positioning approaches. Price elasticity testing: Determining the profit-maximizing price is difficult. The price elasticity of demand usually is not linear, depends on where the product is sold, and depends on the severity of the pain-point being addressed. It is easy to price a product too low and leave money on the table or price a product too high and not make any sales. Product development testing: Products are a bundle of features. Product ideas often are tested to find the right mix of features, pricing, and competitive context to improve the chances of getting a reasonable return of the marketing investment. Sales forecasting: Marketing budgets and production schedules are usually based on a sales forecast. Sales forecasting has many complications, such as competitive reactions, seasonality, and external factors like economic conditions and social fads or trends. Segmentation research: Dividing a market into segments may help marketing managers identify new opportunities. There are many different ways to divide markets into groups. We can use demographic factors, consumer attitudes, benefits sought and many other "bases" of segmentation. Store audit: Store audits give marketing managers a sense of the competitive environment and how well their product is being merchandised. Sometimes retail stores disadvantage brands by shelving them away from eye-level, locating them away from other product category competitors, or not using point-of-sale displays. Test marketing: Sometimes marketing managers do not trust survey data to determine the potential success of a new product. In this case, test markets are selected around the country to determine the potential success of a new product, work out any issues, and optimize a marketing mix before making a national launch. Competitors have been known to run sales promotions and extra advertising in test markets to confound test results. Weight levels test: Measuring the different levels of market responsiveness to spending different levels of advertising dollars, i.e., media weight. The results depend on region of the country, communications message, and media channel. ZMET research: Zaltman Metaphor Elicitation Technique is a research method developed and patented by Gerald Zaltman which uses imagery and other sensory information to understand brands, the buying process, and consumption experience. Researchers rely on two general methods for collecting data— asking people questions and observing/watching people. Personal interviews: One-on-one interviews, with current or potential customers, provide a means for finding consumer insights not available from impersonal quantitative studies. Web and email interviews: As Internet access continues to grow around the world, so will online survey research. Qualtrics, a leading supplier of online data collection tools and analysis, enables researchers to access people connected to the Internet. Laddering and/or ZMET interviews: One-to-one personal interviews structured around the purchase decision, as in Laddering Interviews; product imagery, as in ZMET Interviews; or a combination of the two. Ethnographic interviews: Structured interviews looking for themes underpinning decisions. Ethnographic interviews aim to see the world through the customer's unique perspective rather than imposing the researcher's point of view. Focus group interviews: Bringing together 8-12 people of similar backgrounds enables researchers to discuss marketing issues. Usually several focus groups are conducted across regions and across differing demographic groups. Participant observation: With the same goals as ethnographic interviews, participant observation looks for themes by living with and making observations about consumers. For example, if one wants to understand how frozen burritos are used in a household, one observes the freezer, how they are prepared, and how they are eaten. From this exercise, one food manufacturer learned that many of their burritos were being discarded because they were frozen together and would not cook properly. In response the packaging was changed so the burritos were individually wrapped. Their sales increased. Sreening questions: We've frequently testified as expert witness at trials involving marketing research data. In the majority of cases we are asked to explain why research results are invalid. Nine times out of ten our job is easy. The data sample is irrelevant because the screener and/or screening process is inappropriate. For example, we testified in a case concerning advertising for a regional chain of funeral homes. The plaintiff, a local funeral home, was suing over what they thought was misleading advertising. To support their claim the local funeral home hired a local marketing research company to field a survey. The local marketing research company wrote a questionnaire then sent out employees with clipboards to local malls to stop people and have them complete the questionnaire. The questionnaire did not have a screener. Were these people even in the age group concerned with purchasing funeral plans? The sample was a convenience sample and not representative, that is, the sample consisted of friendly people walking by in a mall that looked likely to cooperate in filling out a questionnaire for a young man or a young woman holding a clipboard. The sample did not represent men and women making a decision about which funeral plan to purchase. The result was the local funeral home lost and the regional chain of funeral homes won. The local funeral home may have had a valid claim, but that didn't matter to the judge because the local marketing research company did not use a valid screener or work hard enough to find a representative sample. Of course, good marketing companies train their marketing managers to be careful and only consider research results from properly screened, representative samples. Below is an example of questions that might be used to qualify or screen respondents for a study about frequently purchased food products: In which of the following age groups do you belong? When was the last time you or anyone in your household participated in a marketing research study? Sometimes we are looking for people who work in certain industries. Just for the record, are you or any member of your household, relatives, or any close friends employed by...? Do you have any children under 18 living in your household? Did you ever have children under 18 living in your household? How much of the grocery shopping do you do for your household? Which of the following food products have you purchased in the last six months? At which of the following stores do you typically shop for groceries? Noise and information: Marketing researchers draw conclusions and make recommendations from samples of much larger populations. If researchers had the time and money, then they could make recommendations after talking to everyone in the population. They would take a census. With a census there would still be differences in opinion, which we call variance, but we would know that the average was the actual average and the variability was the actual variability. Erroneously, some of our colleagues want to slap a sampling error on student ratings when 99 out of 100 students evaluate them and their class. With 99 out of 100 students responding, essentially we have a census. We can be pretty certain the reported average student evaluation is the true average. It is difficult, however, to separate noise from information. To help in the effort, we look for several different types of noise and try our best to eliminate or at least take into consideration several different types of error. Sampling error: Sampling error is caused when drawing small samples from large populations. If we draw small samples from a large population over and over again we would get slightly different answers each time. When we report sampling error, we are saying how different the answers can be from one sample to the next. For the most part, sampling error is the only type of error people talk about. Sampling error, however, is easily solved. Just increase the sample size until the sampling error is negligible. National samples of 2000 respondents have very small sampling errors even though the US has about 100 million households and more than 300 million people. Measurement error: We define measurement error as asking questions which don't measure what we hope to measure. Measurement error is a much more difficult problem than sampling error. Measurement error asks us if the questions we ask really get us the answers we are looking for. Referring back to the student evaluation example, university administrators want to measure the teaching competency and content quality of courses taught at their universities. Trouble is, simply asking how much students like the professor and the course on a scale for 1-to-7 doesn't measure what the administrators want to measure. The same can be said when measuring the performance of liked and disliked brands with respect to a set of brand attributes. People tend to give high ratings to every brand attribute for brands they like and low ratings to every brand attribute of brands they dislike. This is called the halo effect. Marketing managers trying to uncover which two or three brand attributes differentiate their brand from competing brands need to be careful about the set of questions they ask. The wrong question set will not identify the brand attributes that make their brand stand out. In other words, the noise from measurement error will make it very difficult to write a unique selling proposition that rings true with customers and potential customers. Coverage error: If samples do not represent the appropriate decision-makers, users, and/or influencers, then the samples are not relevant. The study will not give marketing managers decision-making information. Needless to say, the sample must hit the target population perfectly. There are many hazards to watch for. Does the sample include respondents that are not part of the target? That is, does the mall-intercept convenience sample give us only the decision-makers we are looking for or include irrelevant non-decision-makers along with the respondents we really need to hear from? Does the sample exclude respondents that should be part of the target? That is, does the Internet cover all the target audience that shops at our national chain of stores or do the economics of Internet use exclude important customer groups? Non-response error: Every sample consists of people choosing to answer our questions. What about the people that refuse to answer or abandon a questionnaire without completing it? We assume the people that refuse to answer or abandon before completion are the same as those that do cooperate. Research, however, shows that people answering questionnaires are much more conscientious, cooperative, and outgoing than the Average Joe. Non-response error creates bias in results. Survey respondents pay more careful attention to the world around them, feel more obligated to thoroughly answer questions, and want to please others more than typical consumers. As a result, survey respondents really need to go crazy over marketing ideas if the ideas are to have a good chance of success in what in reality is a much more skeptical and difficult marketplace than research would indicate.

Launching techniques for products

Use Marketing events Create a catch phrase and/or jingle Select the channel Feed a frenzy Close the deal

Golden Rule of market domination

a specialist always beats a generalist. When you go after everyone, you end up selling no one.

How to do the multi attribute model

find a video

What makes an effective ad, and how can we evaluate it?

remember company, item, call to action, etc.

What incites customers to act

value

At bare minimum, at least cover

variable costs (survival mode)

Customer types

love, swing, hate, anchor....BASTA!!!!

4P's

Product Place, distribution Promotion Price

"Big Secret" for entrepreneurs

SELL SELL SELL

four step ideation process

Select a problem area Explore a specific problem Propose and test alternative product ideas Perfect the top product idea

Segmentation

The process of grouping customers into relativelyhomogeneous sets such that customers within a segment are similar to one another in the way they respond to the marketing effort directed at them. Geographic Region, city or metro size, density, climate Demographic Age, gender, family size and life cycle, race, occupation, income Psychographic Lifestyle, personality, attitudes, values • Behavioral Usage situations, benefits •

Fairness of transaction

???? Embrace ethical values.−building relationships and enhancing consumer confidence in the integrity of marketing by affirming these core values: honesty, responsibility, fairness, respect, transparency and citizenship. In addition, the American Marketing Association proclaims, "As marketers, we recognize that we not only service our organizations but also act as stewards of society in creating, facilitating and executing the transactions that are part of the greater economy. In this role, marketers are expected to embrace the highest professional ethical norms and the ethical values implied by our responsibility toward multiple stake holders (e.g., customers, employees, investors, peers, channel members, regulators and the host community)." Self-policing aside, there are laws, regulations, and government agencies in the U.S. that that protect consumers from fraud, deception, and unfair business practices in the market place.

Potential customer touch points

Court important customers and investors by identifying and creating touch points. Every interaction, transaction, and engagement is an opportunity to build relationships and strong commitment. The more touch points you make, the better. How many ways can you make positive interactions with customers and potential investors? The possibilities today are numerous and can influence people before, during, and after a purchase. Every touch point with a customer is an opportunity to improve the customer experience, ramp-up value for the customer, and increase customer commitment. Some of us still remember the AT&T advertising campaign, "Reach out and touch someone." The message is simple: reach out and connect with a loved one, a family member, or a friend through AT&T long-distance telephone calls. One way to think about customer touch points is to consider the customer's experience in buying and using a product borrowed from the study of consumer behavior. The process starts with the customer (1) recognizing a problem, need, or opportunity. Then the customer (2) searches for information about products that can solve the problem, address the need, or capitalize on the opportunity. The customer (3) evaluates the alternative solutions and then (4) makes a purchase decision. Finally, the customer (5) uses the product with an expectation that the product will deliver value by solving the problem, addressing the need, or capitalizing on the opportunity. Think about how you can connect with customers during each stage of product search, purchase, and usage. As an example, car manufacturers learned years ago that more people went to their websites after purchasing one of their cars than before purchasing one of their cars. Smart manufacturers managed the touch point by highlighting testimonials from happy customers and spotlighting awards for initial purchase satisfaction and long-term quality.

Why intermediaries? Understanding Channels

Creating and communicating value to customers is important for the success of any marketing strategy, but it is not enough. Value must also be delivered. Marketing managers deliver value when the right product is provided to the right customer, at the right time and in the right place. Distribution strategy is about selecting marketing channels to get products to customers (deliver value) in a way that maximizes sales and profits. Manufacturers use intermediaries (marketing channels) to distribute goods when the intermediary can do it more efficiently than they can because the intermediary can (1) transport the goods to consumers less expensively, (2) sell the goods to retailers more easily, and/or (3) sell the goods to a large group of consumers that already purchase from them. Marketing channels can be kiosks in shopping malls, wholesale distributors, brick and mortar retail stores, the Internet, and many, many other buying outlets. Channel members add value by increasing customer benefits (product, service, and image), by reducing costs (price and non-price costs), or by both as shown in Figure 13-1.

Types of analytical methods

Cross tabulations. Cross tabulations are based on frequency counts. Researchers are looking for specific attitudes or behaviors that occur more often than we would expect. Analysis of variance. Analysis of variance is based on averages and variability around an average. Researchers are looking for averages that differ well beyond what their variability would suggest. Regression. Regression divides variables into predictors and outcomes. The method estimates how the changes in a predictor variable impact changes in an outcome variable. Factor analysis. Factor analysis groups together highly correlated variables. Researchers use factor analysis to simplify a data set by indentifying highly correlated variables and grouping them into factors. Cluster analysis. Cluster analysis groups together respondents that answer survey questions in similar ways, have similar demographic profiles, or have similar behaviors. Researchers use cluster analysis to divide markets into segments. Discriminant analysis. Discriminant analysis combines traits of factor analysis and cluster analysis. It groups together highly correlated variables. For example, discriminant analysis can be used to group together similar brands or in some instances similar people. Researchers use discriminant analysis to generate perceptual maps depicting the relationships between brands and brand attributes. MaxDiff analysis. MaxDiff analysis presents a set of attributes or alternatives for which respondents indicate most/least important or most/least appealing. Researchers use the analysis to determine choice preferences. MaxDiff also may be used for TURF analysis—Total Unduplicated Reach and Frequency. TURF analysis provides information for allocating media spending for optimal reach and frequency. Conjoint analysis. Conjoint analysis is an analysis system that first deconstructs products into component attributes, next estimates the value of each component attribute, and then reconstructs existing and potential products in a way that allows researcher to estimate the value of each product. Researchers use conjoint analysis to aid product development and pricing choices as well as build market simulations to measure the impact of those choices.

What do benefactors do?

Early on ask the question, "Who will benefit most if I succeed?" Think through the question carefully, because the answer will help you find initial investors, key strategic partners, and perhaps anchor customers. Learning to ask the right questions is fundamental to startup success! If you were in dire straits, who would you turn to for help? Would you try to tap parents, friends, or the local bank? If you were thinking like an entrepreneur, you would look for a benefactor that stands to benefit a lot from your growth and long-term success. The movie The Wizard of Oz is a classic story about finding benefactors. If you remember the story, Dorothy Gale has been caught up in a tornado and carried to the mythical Land of Oz far away from her home in Kansas. Unfortunately for Dorothy, she accidentally kills the Wicked Witch of the East upon her arrival in Oz. Consequently, Dorothy makes quite an enemy out of the Wicked Witch of the West. Dorothy desperately wants to return to her home in Kansas and decides to travel to the Emerald City to enlist the help of the Great Wizard. Dorothy knows that she cannot make it to the Emerald City on her own because the Wicked Witch will try to slow her down, stop her, or maybe even kill her along the way. Dorothy needs some benefactors and she keeps an eye open for anyone that will also greatly benefit from a trip to the Emerald City. At the journey's outset, Dorothy runs across a scarecrow at a crossroads. She removes a nail to take the scarecrow down from his post and finds out the scarecrow desperately wants a brain. Dorothy suggests that the scarecrow can get a brain from the Wizard in the Emerald City. The scarecrow joins Team Dorothy. Next, the two stumble on a rusted tin man. Dorothy liberally applies some oil from an old oil can and finds out the tin man desperately wants a heart. Dorothy suggests that the tin man can get a heart from the Wizard in the Emerald City. The tin man is now part of the crew. Not long afterwards, the little group is startled by a lion who attacks the travelers and tries to bite Dorothy's little dog Toto. Dorothy, heedless of the danger, swats the lion on the nose to protect her dog. Dorothy then has to comfort the lion as he whimpers about his nose, and finds out the lion is cowardly and desperately wants courage. Dorothy suggests that the cowardly lion can get courage from the Wizard in the Emerald City. The lion completes the team, and then the three benefactors successfully get Dorothy to the Emerald City. But the story does not all go in Dorothy's favor. Turns out, the Wizard also needs a few benefactors. He needs someone to kill the Wicked Witch of the West. When Dorothy and her team arrive, the Wizard gives everyone the royal treatment. He then gives Team Dorothy an audience and finds out Dorothy desperately wants to return home, the scarecrow desperately wants a brain, the tin man desperately wants a heart, and the lion desperately wants courage. The Wizard promises to give each benefactor what they want most if and when Dorothy brings him the broomstick of the Wicked Witch of the West. The Wizard is a born entrepreneur. Like Dorothy, he really understands how to spot benefactors. It is an unwritten law of the universe, mysteriously hidden from the majority of humankind, that when you give people what they want most, then they happily give you what you need.

First moment of truth, Cognitive, affective, and behavioral

Generally, advertising campaigns seek to achieve one or more of the following objectives: (1) cognitive—build awareness, (2) affective—gain interest and liking, and (3) behavioral—stimulate action. These objectives follow stages in the consumer's decision-making process. Hierarchy of effects models, such as AIDA (attention, interest, desire, and action), delineate these stages. In the cognitive stage, advertising attempts to gain consumers' attention by making consumers aware of the product and by building knowledge in the minds of consumers. In the affective stage, advertising seeks to move consumers along from interest in the product to desiring the product. The behavioral stage stimulates action—a purchase or a response to a request.

What's the best channel system?

In many ways, e-commerce can be the best choice for a marketing channel. E-tailing is the antithesis of big retailing. Payment comes when the product is purchased, not when the retailer decides to pay. There is no need to deliver huge quantities of product on a tight delivery schedule. The company only needs enough products to meet current demand. In addition, a company can set its own return policy, control pricing, and be more creative with sales promotion and merchandising than the big retailer. All of these e-tailer advantages, however, come at a cost. With e-commerce, good alternatives are only a click away. Forget about success, if you are selling a product that can easily be found on other websites at a lower price. Online marketing requires a unique product backed up with an engaging sales pitch. The three challenges of e-commerce sites are (1) no traffic, (2) lots of traffic, but few interested buyers, and (3) abandoned shopping carts, which can run as high as 80% on some sites. Internet buyers come with a purpose. If they don't see a reason to be at a site or stay, they will pass you by in a matter of seconds. Internet buyers are restless. If the information they want is hidden, they won't hunt for it. Internet buyers are skeptical. Forget pushy tactics and hyperbole. The facts better speak loudly. It is up to you to provide real proof and a clear reason to buy now. Also, when selecting an online marketing channel, the website design must get out of the way of the purchase. For example, the site visitor must immediately see what is being sold, have answers to their questions about the product at their fingertips so that they can get excited about its distinctive benefits and have a reason to buy now via limited time offers promising free or upgraded shipping, temporary price reductions, free accessories, etc. Make the site easy to navigate by eliminating page scrolling, reducing the number of clicks to get key information, having a one-click buying option, and minimizing distractions like unneeded pictures, disorganized text, or too many icons. Be upfront with the costs, shipping policies, return policies, and guarantees. Surprises at the shopping cart or after the sale not only hurt your chances to make a sale, but also may create a lot of ill will that can quickly spread throughout the online community.

Distribution tools, and types of distributions

Intensive Intensive distribution is defined as selling through as many retailers as possible. Marketers seek to make the product available in every outlet where customers might want to by it. Convenience goods like packaged candy or soda pop are generally good candidates for intensive distribution. Because every retailer has the product, one expects strong price competition among retailers either to increase product-turns or increase store traffic by using the popular product as a loss-leader. Manufactures may be tempted to use intensive distribution, but they also need to be prepared to offer generous trade promotions to get their product on shelves that can cut deep into manufacturer profits. Selective Selective distribution is defined as selling through a limited number of qualified retailers. Selective distribution requires companies take an active role in vetting and deciding on appropriate retailers. Selective distribution, in general, supports higher prices than does intensive distribution. DuPont marketing managers positioned Stainmaster as a premium carpet. They knew that selective distribution would make price premiums possible, encourage the use of marketing support tools such as carpet-comparison in-store kiosks, and still provide adequate national coverage so that every household wanting the carpet would have it available to purchase. Shopping and specialty goods like Stainmaster carpet, home appliances and perfume use selective distribution. Exclusive Exclusive distribution is defined as selling through only a few retailers. The retailer has the exclusive right to distribute the product in their geographic area. Exclusive distribution limits the total sales units of a product, but provides the setting, service, and exclusivity needed to support super-premium prices. Exclusive distributors create selling environments that complement and potentially enhance the personalities of the brands they sell. Ferrari, Aston Martin, and Lamborghini, Tiffany & Company, and Bulgari don't need massive unit sales in order to earn massive profits. However, their lack of availability and luxurious retail settings makes their high prices at least seem more justified than if one could purchase them anywhere.

primary data

Major advantages of secondary data are the time and money savings. Secondary data are available almost immediately. Much of the information is relatively inexpensive or free. Although primary data collection can be expensive and time consuming, the research targets a specific problem, where as secondary data my not provide sufficient information or may not be on target with the research problem. Once secondary data sources have been explored, researchers must decide if primary research is needed. If the secondary data provide answers to the research question, then primary data collection is not needed. If questions remain, then primary research is the next step in the process. We have listed a sampling of primary research methods, literally from A-to-Z. The list provides a good idea of the types of decisions that marketing managers are faced with and the studies they use for helping in those decisions.

Sale per customer, margins

Margin: Margin is the difference between price and cost. Sounds simple, but it is really a bit complicated. Retail price is not the same price a manufacturer gets paid for a product. Depending on the retail margin, the manufacture's price to the retailer can be significantly less than the price paid by consumers. Also costs include variable costs to manufacture and distribute the product, costs to build the machinery to build the product, and overhead costs to pay for managers or rent machinery, building space, etc. Margin is the critical element in a successful revenue model. Going back to the example of the Frisbee, Walter and Lucille knew there was potential for a good business when they learned they could sell a flying cake pan for a quarter and buy it for only a nickel. Even in today's world of infomercials, successful direct-sales marketers know they must sell a product for five times what they pay for it.

Quantifiable support

Mark Twain is quoted as saying, "there are liars, damn liars, and statisticians." Support product claims in product demonstrations with facts and figures, but make sure the facts and figures are accurate and really do support your claims. Recently we listened to a team pitching the idea of a Renaissance Fair complete with medieval village, jousting knights, wandering minstrels, tart-selling wenches, newly-planted forest, and manmade lake. The entrepreneurs were asking for millions of investment dollars. To show their idea had merit, they presented some quantifiable support in the form of a marketing research study. Unfortunately, the quantifiable support fell short and undermined any credibility the business team might have had. Their research study concluded that a majority of families in the local area favored more family entertainment options and pointed out that the area is one of the few in the geographic region without a Renaissance Fair. Missing from the study, however, were any facts and figures to show that families in the area had a keen interest in Renaissance Fairs, hard numbers to show how many people needed to attend each day for the enterprise to break even, estimates for the costs associated with attracting new and repeat customers, or a plan to start small and grow into a bigger operation as the number of patrons expanded. Quantifiable facts and figures are easy to think up and some well-known companies do a very good job at it. McDonalds is popular - Over a billion served. Baskin Robbins has great-tasting variety - 31 flavors. Ivory Soap is the epitome of clean - 99.44% pure. Juicy Juice is good for kids - 100% juice for 100% kids. Products MUST deliver on claims. Trumped-up promises and fabricated sales pitches and demonstrations won't fly in an info-tech world of instant information access, online reviews, social media, and special interest blogs.

Customization vs. standardization

Once the firm decides to market abroad, the next decision focuses on standardization versus customization. With standardization, the firm uses the same standardized marketing mix in the foreign market as it uses in the domestic market. Product, price, promotion, and distribution are standardized across countries. Global brands such as Coca Cola, Pepsi, McDonald's, Gillette, and Colgagate make only minor modifications to the product. The advantages of standardization are the cost reductions gained by economies of scale. Considerable savings are gained in product (lower production costs) and promotion (lower costs in media advertising and sales literature). The disadvantages, however, are that the standardized products may not fit the needs of the local market. Conversely, firms using a customization approach adapt or modify the marketing mix to suit the local market. When Procter & Gamble first entered Eastern Europe in the early 1990s, the company made significant changes to product packaging and pricing to fit local needs. Procter & Gamble discovered that consumers in these emerging markets prefer smaller package sizes because smaller sizes are less expensive, easier to transport (walking, bicycle, or bus), and easier to store in smaller sized apartments or homes. The tension, then, is between the cost savings of standardization and the customer satisfaction advantage of customization. Coca Cola manufactured in Mexico is believed to be a tad sweeter than Coca Cola made in the U.S. Ice Cream flavored Pepsi is sold only in Russia. Some McDonald's products offered in China, like Green Tea and Red Bean Ice Cream Sundaes, are not available in America. Many brands, however, will at least want to consider a brand name change. Brand names should convey personality and give consumers a reason to "join" the brand. There are many missteps by large and famous companies. General Motors sold Nova automobiles in Mexico and noval in Spanish means no-go. DuPont translated its brand into Chinese as "Du Bang" which is a homonym for "gang of poison." Of course, it is not just Americans that make these sorts of mistakes. It is reported that Mercedes Benz initially translated its brand into Chinese as "Ben Si" which is a homonym for "rush to death." We are big fans of customizing products and marketing messages to fit the needs of people in specific situations. Yes, customization costs more than standardizing, but millions of products prove that companies can make a profit by following the "marketing concept." Customization provides products and services that fit culture-specific and context-specific needs, but at higher cost. When entering a foreign market companies have a choice of adapting the product, adapting the marketing communications, both or neither.

Push vs. Pull strategies

Push vs. Pull marketing Push: go directly to consumer, advertising Pull: go through doctors, pharmaceutical!!! When designing promotion strategy and allocating promotion resources, marketing managers make decisions regarding two options—push promotion or pull promotion. A push strategy pushes products through the channel of distribution. Producers direct their marketing activities toward channel members (wholesalers and retailers) to encourage them to order and stock the product. Personal selling and trade promotions play important roles in this process. Channel members then use marketing activities to push the products to final consumers. The objective is to push products from producer to channel member and then from channel member to final consumers. For example, Pfizer, a multinational pharmaceutical company, uses a push strategy by deploying pharmaceutical representatives to call on physicians (channel members). The objective is to encourage physicians to prescribe Pfizer products for patients (final consumer). With a pull strategy, producers direct their marketing activities toward the final consumer to encourage them to ask retailers (channel members) for the product. Demand from final consumers cause retailers to order the product from producers or manufacturers. Thus, the product is pulled through the channel of distribution. Pfizer uses both push and pull strategies. Pfizer advertises products to the final user to encourage them to ask their doctors for the product by name. Frito-Lay promotes Doritos brand tortilla chips to final consumers to increase demand at retail.

What makes social media important (Relevant content)

Relevant content is a key driver in engaging and converting potential customers. Once the customer lands on the company's screen, relevant content determines time on site, pages per visit, and number of visits. Sticky screens have relevant content, that is, visitors tend to stick on screens that connect with them. Conversely, visitors lose interest and leave or bounce when the content is not relevant to them. Images, descriptions, reviews, rich media (interactive), and A+ content (unique information, authoritative information) all contribute to engaging visitors and converting them into customers.

SWOT

The SWOT analysis provides the firm actionable direction for competing in the marketplace. Play to strength. Moderate weakness. Make the most of opportunities. Manage or better yet eliminate threats. Play to Strength Strength refers to the firm's core competencies, abilities, and capacities that provide an advantage when meeting the needs of target customers. For example, production costs, marketing skills, brand image, technology, design, and financial resources represent potential strengths for a firm. Strengths are meaningful, but only through the eyes of customers. Strengths that create value for the firm's chosen customers provide competitive advantage for the firm. Nike, for example, creates value for target customers by playing to strengths of image and product performance. Moderate Weakness Weaknesses refer to the limitations a firm faces when seeking to deliver value to customers. Like strengths, weaknesses are only meaningful when viewed through the eyes of customers. In this case, marketers must moderate the weakness. In 2008, Dominos Pizza struggled to stay relevant among customers. Although the company dominated price and convenience, it performed poorly in taste. Loyal customers were leaving Dominos for competitor products. In a major effort to win back customers, Dominos moderated this weakness by pursuing an extensive reinvention initiative. Make the Most of Opportunities Favorable conditions and trends in the external environment represent opportunities for marketers. For the company to benefit, these opportunities must be exploited. Skull Candy recognized an opportunity with the trend of digital audio, commonly referred to as MP3 players. The company exploited this opportunity with a unique line of headphones, ear buds, and docks. Manage or Eliminate Threats Conditions, trends and barriers in the external environment that hinder firm performance represent threats. Marketers manage threats by acting upon them or avoiding them. For example, Walmart, the world's largest retailer, faces the threat of consumer perceptions that the big company is not sensitive to environmental issues. To counter this threat, Walmart launched aggressive sustainability initiatives by seeking to use 100 percent renewable energy, creating zero waste, and selling products that help people and the environment.