Exam 1
What does Effactuation do?
(ISD) Ideas- Effactuation advances ideas toward sellable products and services with proven customers Stakeholder Commitments - using effactuation, the entrepreneur interacts in search of self-selecting partners to co-create the venture with Decisions- Expert entrepreneurs use a set of techniques that serve as the foundation for making decisions about what to do next
Principles of Effectuation
1) Bird-in-Hand 2) Affordable Loss 3) Lemonade 4) Patchwork Quilt 5) Pilot-in-the plane
The 9x Effect
1) Consumers overweight the incumbent products benefits by a factor of 3 2) Companies overweight the new product's benefits by a factor of 3
How to capture value from customers
1) Creating customer loyalty and retention 2) Growing share of customer 3) Building customer equity
3 types of start-up risk
1) Customer risk- no one wants the product/service (Biggest Risk) 2) Market risk- external factors (competitors, economy, regulatory) doom you to failure 3) Technology risk- underlying technology needed to deliver value envisioned isn't going to work
Developer's Curse
1) Developers tend to overvalue gains relative to the general population 2) Developers tend to view gains as status quo 3) Developers tend to systematically underestimate the extent to which their perspective differs from would-be adopters
Evidence-Based Entrepreneurship: Basic Philosophy
1) Evidence over intuition 2) Facts exist outside the building 3) Biggest risk: building a product no one wants 4) Build-measure-learn 5) Fail fast and cheap 6) Raise customers first 7) Show, don't tell
Types of value created by marketing
1) Functional 2) Symbolic 3) Hedonic 4) Time, place, and form value
Ways to minimize and manage consumer restistance
1) Make behaviorally compatible products 2) Target consumers who aren't yet using entrenched products 3) Change consumers' reference point by allowing them to try the new product risk-free 4) Find believers 5) Brace for the long haul 6) Offer benefits at least 10x greater than existing products
The Effectual Cycle
1) Means 2) Goals 3) Interactions 4) Commitments
Five core customer and marketplace concepts
1) Needs, wants, and demands 2) Market offerings 3) Value and satisfaction 4) Exchanges and relationship 5) Markets
Entrepreneurial Process
1) Opportunity recognition 2) Ideation 3) Customer delivery and validation (evidence gathering) 4) Strategic / business planning 5) Launch (& Scale)
Psychology of gains & losses
1) People evaluate new projects based on perceived value, not on objective value 2) People evaluate new products relative to a reference point 3) People view improvements relative to this reference point as gains and treat all shortcomings as losses 4) People are loss averse
5 alternative concepts under which organizations design and carry out their marketing strategies
1) Production concept 2) Product concept 3) Selling concept 4) Marketing concept 5) Societal Marketing concept
Entrepreneurial Mindset
1) Questioning of, and dissatisfied by , the status quo 2) Perceptive and reflective 3) Growth / Learning oriented 4) Predisposed to solving problems 5) Perceive the world as full of abundance 6) Optimistic and persistent
Marketing process Model
1) Understand the marketplace and customer needs and wants 2) Design a customer driven marketing strategy 3) Construct an integrated marketing program that delivers superior value 4) Build profitable relationships and create customer delight 5) Capture value from customers to create profits and customer equity
What 2 questions need to be answered to design a winning marketing strategy?
1) What customers will we serve? (Target Market?) 2) How can we serve these customers best? (Value proposition)
Effectual vs Casual Reasoning
Effectual is a process of thinking whereby goals are determined based on available resources and means where causal reasoning determines its goals prior to seeking needed resources
What Is effectuation?
Effectuation IS: -A thinking framework -A set of heuristics -Doing the do-able -How to get the sellable products and services established
Define PATCHWORK QUILT
Expert entrepreneurs build partnerships with self-selecting stakeholders. (Form Partnerships)
Individual needs
Knowledge and self affection
Additional factors relating to gains & losses
Timing: Losses are immediate; gains are often delayed Certainty: Losses are certain; benefits are relatively uncertain Quantifiability: Costs are quantifiable; benefits are qualitative
Define EFFACTUATION
a logic of thinking that uniquely serves entrepreneurs in starting businesses
Wants
are the form human needs take as they are shaped by culture and individual personality
Social needs
belonging and affection
Consumer-generated marketing
brand exchanges created by consumers themselves - both invited and uninvited - by which consumers are playing an increasing role in shaping their own brand experiences and those of other consumers
Define PILOT-IN-THE PLANE
by focusing on activities within their control, expert entrepreneurs know their actions will result in the desired outcomes (Control vs Predict)
Positioning
creating a clear, distinctive, and desirable place in the minds of target customers (relative to competing market offerings)
Marketing by attraction
creating market offerings and messages that involve consumers rather than interrupt them
Differentiation
creating superior customer value by actually differentiating the market offering
Market segmentation
divides the market into segments of customers
Define LEMONADE
expert entrepreneurs invite the surprise factor. Instead of making "what-if" scenarios to deal with worst case scenarios, experts interpret "bad" news and surprises as potential clues to create new markets (Leverage contingencies)
Define AFFORDABLE LOSS
expert entrepreneurs limit risk by understanding what they can afford to lose at each step, instead of seeking large all-or-nothing opportunities. (Focus on the downside risk)
Customer satisfaction
extent to which a product's perceived performance matches a buyer's expectation (sometimes it is necessary to cut-off relationships with un-profitable customers)
Physical needs
food, warmth, clothing, and safety
Societal Marketing concept
holds that a company's marketing decisions should consider consumers' wants, the company's requirements, consumers long-run interests, and society's long-run interests
Marketing concept
holds that achieving organizations goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions better than competitor's do (Market - customer needs - integrated marketing - profits through customer satisfaction)
Production concept
holds that consumers will favor products that are available and highly affordable (Organization should focus on improving production and distribution efficiency)
Product concept
holds that consumers will favor products that offer the most in quality, and innovative features (Organization focus on making continuous improvements to the product)
Selling concept
holds that consumers will not buy enough of the firm's products unless it undertakes a large-scale selling and promotion effort (Factory - existing products - selling and promoting - profits through sales volume)
Customer-managed-relationships
marketing relationships in which customers, empowered by today's new digital technologies interact with companies and with each other to shape their relationships with brands
Horn Definition Entrepreneurship
pursuing the creation, delivery and capture of value from new ideas
Customer value and satisfaction
satisfied customers buy again and tell others about their good experience while dissatisfied customers often switch to competitors and disparage the product to others
Target marketing
selecting which segments it will go after
Market offerings
some combination of products, services, information, or experiences offered to a market to satisfy a need or want
Human needs
states of felt deprivation
Marketing Management
the art and science of choosing target markets and building profitable relationships with them
Dictionary Definition ENTREPRENEURSHIP
the capacity and willingness to develop, organize and manage a business venture along with any of its risks in order to make a profit
Customer-perceived-value
the customer's evaluation of the difference between all the benefits and all the costs of a marketing offer relative to those of competing offers
Marketing myopia
the mistake of paying more attention to the specific products a company than to the benefits and experiences produced by these products
Customer relationship management
the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction
Marketing
the process by which companies create value for customers and build strong customer relationships in order to capture value from customers in return
Market
the set of all actual and potential buyers of a product or service
Value proposition
the set of benefits or values it promises to deliver to consumers to satisfy their needs
Marketing mix
the set of marketing tools the firm uses to implement its marketing strategy: 1) Product 2) Price 3) Place 4) Promotion
Define BIRD-IN-HAND
when expert entrepreneurs set out to build a new venture, they start with their means and then the entrepreneur imagines possibilities that originate from their means (Start with your means)
endowment effect
when ownership increases the value of an item
Demands
when wants are backed by buying power
Partner relationship management
working closely with partners in other company departments and outside the company to jointly bring greater value to customers