Chapter 11: Unique Marketing Issues
224
CHAPTER 11
UNIQUE MARKETING ISSUES
LEARNING OBJECTIVES
1.
Explain the three steps (segmenting the market, selecting a target market, and
establishing a unique market position) entrepreneurial firms use to identify their
customers.
2.
Define a brand and explain why it is important to an entrepreneurial firm’s
marketing efforts.
3.
Identify and explain the 4Ps of marketing activities (product, price, promotion, and
place) used by entrepreneurial firms.
4.
Describe the seven-step sales process an entrepreneurial firm uses to identify
prospects and close sales.
CHAPTER OVERVIEW
This chapter focuses on the marketing issues facing entrepreneurial firms. The chapter
begins by discussing how firms define and select their target markets. Next, we discuss
an issue that is particularly important for new firms: establishing a brand.
The chapter transitions to discuss the four key facets of marketing as they relate to young
entrepreneurial firms. The four facets, commonly referred to as the “four Ps” of
marketing, are product, price, promotion, and place (or distribution). The chapter
concludes with a discussion of the sales process.
CHAPTER OUTLINE
I. Selecting a Market and Establishing a Position
A. Segmenting the Market
B. Selecting a Target Market
C. Crafting a Unique Market Position
II. Branding
III. The 4 Ps of Marketing for New Ventures
A. Product
B. Price
C. Promotion
D. Place (or Distribution)
IV. Sales Process and Related Issues
Chapter 11: Unique Marketing Issues
225
CHAPTER NOTES
I. Selecting a Market and Establishing a Position
• In order to succeed, a new firm must address this important question: Who are the
customers and how will we appeal to them?
• A well-managed start-up approaches this query by following a three-step process:
segmenting the market, selecting or developing a niche within a target market, and
establishing a unique position in the target market.
A. Segmenting the Market
1. The first step in selecting a target market is to study the industry in which the
2. This process is called market segmentation and is important because a new
3. Markets can be segmented in a number of different ways, including product
type, price point, and customers served.
4. There are several important objectives a new firm should try to accomplish as
part of its market segmentation process.
a. The process should identify one or more relatively homogeneous groups
of prospective buyers within the industry the firm plans to enter in regard
to their wants and needs.
b. Differences within the segment the firm chooses should be small
forward.
B. Selecting a Target Market
1. Once a firm has segmented the market, the next step is to select a target
market.
226
2. Typically, a firm (especially a start–up venture) doesn’t target an entire
3. Instead, most firms target a niche within the segment.
a. A niche market is a place within a market segment that represents a
narrower group of customers with similar interests.
b. In most cases, the secret to appealing to a niche market is to understand
the market and meet its customers’ needs. By focusing on a clearly
defined target market, a firm can become an expert in that market and then
be able to provide its customers with high levels of value and service.
C. Crafting a Unique Market Position
1. After selecting a target market, the firm’s next step is to establish a “position”
within it that differentiates it from its competitors.
2. As we discussed in Chapter 5, position is concerned with how the firm is
3. Once a company has identified its position and primary points of
4. A firm establishes a unique position in its customers’ minds by consistently
drawing attention to two or three of its product’s attributes that define the
essence of what the product is and what separates it from its competitors.
a. Firms often develop a tagline to reinforce the position they have staked out
in their market, or a phrase that is used consistently in a company’s
literature, advertisements, promotions, stationery, and even invoices and
thus becomes associated with the company. An example is Nike’s familiar
tagline, “Just do it.”
II. Branding
A. Establishing a Brand
1. A brand is the set of attributes—positive or negative—that people associate
with a company.
227
2. Some companies monitor the integrity of their brands through a program of
brand management, or protecting the image and value of an organization’s
brand in consumers’ minds.
4. The difference between a company’s brand and its positioning strategy is this:
5. Start-ups must build a brand from scratch. One of the keys is to create a strong
personality for the firm that appeals to the chosen target market.
a. So how does a new firm develop a brand? On a philosophical level, a firm
must have meaning in its customers’ lives. It must create value.
b. On a more practical level, brands are built through a number of
techniques, including advertising, public relations, sponsorships, support
of social causes, and good performance.
c. Ultimately, a strong brand can be a very powerful asset for a firm.
III. The 4 Ps of Marketing for New Ventures
• Once a company decides on its target market, establishes a position within that
market, and establishes a brand, it is ready to begin planning the details of its
marketing mix.
• A firm’s marketing mix is the set of controllable, tactical marketing tools that it
uses to produce the response it wants in the target market.
• Most marketers organize their marketing mix into four categories: product, price,
promotion, and place (or distribution).
A. Product
1. A firm’s product, in the context of its marketing mix, is the good or service it
offers to its target market.
228
2. Determining the product or products to be sold is central to the firm’s entire
marketing effort.
3. As the firm prepares to sell its product, an important distinction should be
made between the core product and the actual product.
1. Price is the amount of money consumers pay to buy a product. It is the only
element of the marketing mix that produces revenue; all other elements
represent costs.
2. Most entrepreneurs use one of two methods to set the price for their products:
cost-based pricing or value-based pricing.
3. Regardless of the method of pricing, a company can’t charge a premium price
without delivering on its positioning and branding promises and unless
circumstances are right.
4. To charge a premium price, one or more of the following circumstances must
be present:
a. Demand for the product is strong relative to supply.
1. Promotion refers to the activities the firm takes on to communicate the merits
of its product to its target market. Ultimately, the goal of these activities is to
persuade people to buy the product.
229
2. Three common activities entrepreneurs use to promote their firms are
advertising, public relations, and social media.
a. Advertising is making people aware of a product or service in hopes of
persuading them to buy it. Advertising major goals are to do the
following:
i. Raise customer awareness of a product.
b. Public relations refers to efforts to establish and maintain a company’s
image with the public. There are a number of techniques that fit the
definition of public relations. These include:
i. Press releases
ii. Traditional media coverage
iii. Social media coverage
c. Social media consists primarily of blogging and establishing a presence
and connecting with customers and others through social networking sites
such as Facebook or Twitter.
d. Other product-related activities.
i. Viral marketing facilitates and encourages people to pass along a
marketing message about a particular product.
D. Place (or Distribution)
1. Place, or distribution, encompasses all the activities that move a firm’s
product from its place of origin to the consumer. A distribution channel is the
route a product takes from the place it is made to the customer who is the end
user.
2. The first choice a firm has to make regarding distribution is whether to sell its
products directly to consumers or through intermediaries (such as wholesalers
and retailers).
Chapter 11: Unique Marketing Issues
230
a. Selling Direct. Many firms sell direct to customers. Being able to control
the process of moving their products from their place of origin to the end
user instead of relying on third parties is a major advantage of selling
direct. The disadvantage of selling direct is that a firm has more of its
capital tied up in fixed assets because it must own or rent retail outlets or
must field a sales force to sell its products.
b. Selling Through Intermediaries. Firms that sell through intermediaries
typically pass off their products to wholesalers who place them in retail
IV. Sales Process and Related Issues
A. A firm’s sales process (or sales funnel) depicts the steps it goes through to
identify prospects and close sales.
1. Some companies just wing it when it comes to sales, which isn’t
2. A formal sales process involves a number of identifiable steps. Although the
process varies by firm (and industry), it generally includes seven steps. The
seven steps are as follows:
a. Step 1: Prospect for (or gather) sales leads.
b. Step 2: Make the initial contact.
c. Step 3: Qualify the lead.
BOXED FEATURES: QUESTIONS FOR CRITICAL THINKING
What Went Wrong?
1.
How does a start-up establish a “brand”? What do we learn from JCPenney’s
miscues about the importance of branding?
Chapter 11: Unique Marketing Issues
Answer: A start-up establishes a brand two ways. First, on a philosophical level, a
firm must have meaning in its customers’ lives. It must create value—something
for which customers are willing to pay. Second, on a more practical level, brands
are built through a number of techniques, including advertising, public relations,
sponsorships, support of social causes, social media, and good performance.
What we learn from JCPenney’s miscues is that there is a high price to pay if a
new management team misreads a company’s brand. Instead of building upon
JCPenney’s current brand and strengthening it, Johnson essentially ignored it and
plowed ahead with initiatives that were inconsistent with the brand. It didn’t work.
2.
Although the concept of selecting a target market and establishing a unique
position is not specifically mentioned in the feature, what do we learn about these
two topics from JCPenney’s miscues?
Answer: Prior to Johnson’s arrival, JCPenney had a well-established target market
and a unique position in the department store industry. Its target market and unique
position was bargain-minded shoppers who brought impatient kids into the store to
buy school clothes and moved through the store quickly. Johnson tried to change
the target market and position to people who weren’t particularly bargain–minded
and wanted to linger in the stores rather than move through them quickly. What we
learn is that the change was too abrupt. The current target market was a completely
different type of shopper than the new target market. As a result, Johnson started
losing the current target market without attracting the new target market (a net–net
loss).
3.
What type of testing should a start-up do to ensure that its initial customers see its
brand in the way that the company intended?
Answer: A complete feasibility analysis should have been conducted to test the
new ideas, with an emphasis on product/service feasibility analysis and talking to
customers.
4.
Do a little Internet or gumshoe research on JCPenney today. Where does the
company stand in terms of how it prices its products? What does the company’s
brand mean to consumers today?
Answer: This is a good question for an individual or a group assignment.
Savvy Entrepreneurial Firm
How Retail Start-ups Compete Against Walmart and Other Big Box Retailers
Chapter 11: Unique Marketing Issues
Answer: The big-box stores have an unbeatable advantage in price and product
line breadth. As the case points out, the typical Walmart carries around 125,000
items! There is no way a start-up is going to be able to compete with the big-box
stores on these dimensions. This means that in order to succeed, the retail
entrepreneurial venture has to craft a distinct market position. This market
position must be able to convey some tangible value to the customer. As the
TrackShack example in the case points out, one can buy running shoes at a big-
box store, but at TrackShack you get an employee who is knowledgable about
running and who can help you make the right choice.
2.
Spend some time looking at TrackShack’s website at www.trackshack.com.
Make a list of the reasons that someone interested in running shoes might shop at
TrackShack instead of Academy, even if the shoes the consumer buys at
TrackShack may be more expensive than comparable shoes at Academy.
Answer: The TrackShack website suggests a community of like-minded people –
both the sellers and the buyers are interested in running and want products that
will improve their ability. There is a tremendous selection of running shoes and
each shoe comes with a detailed description of its features. The website also tells
you about running events in the local area. In addition, there are a number of
training programs that they offer, such as the 10-week “Zero to Fit” program that
combines walking and running. One may be able to buy the same pair of shoes
for a lower price at Academy, but at TrackShack you may also get better running
advice and conection to a community of runners.
3.
Suggest a fourth strategy that small retailers can employ to compete against big–
box stores.
Answer: Customization and speed of delivery can be a fourth strategy for small
retailers to compete against big-box stores. Students should be encouraged to
visit the TrackShack website (or store, if they live in the Orlando area) to see
what else the store can do to compete better.
4.
Identify a locally owned business in the city or community in which you live.
Describe how the business is competing against big-box stores.
Answer: This is a good question for an individual or a group assignment.
Partnering for Success
Two Examples of Successful Co-Branding Partnerships
1.
Make a list of the potential pluses and minuses of the co-branding relationship
between GoPro and Red Bull. Indicate whether you believe the potential pluses
Chapter 11: Unique Marketing Issues
Answer: This is a good question for an individual or a group assignment.
Positives of the Red Bull/GoPro co-branding relationship include:
The companies benefit from the brand appeal of each other. People who
come into one of the co-branded events sponsored by Red Bull may get to
use a GoPro camera for the first time and vice versa (when one is alerted of
a Red Bull event when buying a GoPro camera).
The two companies sell complementary products.
The co-branded products have an important source of differentiation in that
they both promote an active lifestyle.
A negative of the Red Bull/GoPro co-branded relationship is:
If a customer patronizes a Red Bull event and has a bad experience with a
GoPro, the customer may also associate the bad experience with Red Bull.
It is likely that the three pluses outweigh the one minus if the co-branding is
carefully managed.
2.
To what degree do you believe brand management is more difficult in a co-
branding relationship?
Answer: Brand management is a practice that companies employ to protect the
image and value of their brand. It’s harder in a co-branded setting. As mentioned
above, if someone comes to a Red Bull co-branded event and has a bad experience
with a GoPro camera, the bad experience rubs off on Red Bull and erodes Red
Bull’s brand.
3.
Do some research so you can identify and be able to discuss two additional
examples of co-branding. Describe the rationale behind each co-branding
relationship you found through your research.
Answer: This is a good question for an individual or group assignment. As
mentioned in the case, simply type co-branding into the Google search engine and
select images, and you’ll see many examples of co-branding relationships.
An athletic footwear company such as TrackShack because the two
products complement each other.
A health club chain (to augment the workout with a healthy snack)
Chapter 11: Unique Marketing Issues
A sports league that is kid oriented – such as Little League – to promote
healthy eating along with exercise.
REVIEW QUESTIONS
11-1.
What is a target market? Why is it important for a firm to choose its target
market early in the process of launching its venture?
Answer: A target market is the limited group of individuals or businesses that a
firm goes after or tries to appeal to. It is important that a firm first choose its
target market and position itself within its target market because virtually all its
marketing decisions hinge on these critical initial choices.
11-2.
Explain the importance of market segmentation. What are several ways in
which markets can be segmented?
MyLab Question.
11-3.
How should a firm go about constructing a product attribute map?
Answer: A product attribute map, like the map shown for Curves International
in the chapter, illustrates a firm’s positioning strategy relative to its major rivals.
The map is based on the two primary attributes that are the most important for a
firm and its major competitors. A firm plots itself and its competitors on the
map to see how it compares to its competitors. See Figure 11.2 in the chapter
for an example.
11-4.
What is a niche market?
Answer: A niche market is a place within a market segment that represents a
narrower group of customers with similar interests. Niche markets in the
women’s clothing industry include clothing for petite women and plus-sized
women.
11-5.
What is meant by a firm’s positioning strategy?
Answer: After selecting a target market, the firm’s next step is to establish a
“position” within the market that differentiates it from its competitors. A firm’s
position is concerned with how it is situated relative to its competitors. A firm’s
position is the part of the market or the segment of the market it is claiming as
its own.