Class 5: Customer Pain Marketing 101

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MBA 848ALaunching the Venture
Go or No-Go?

• Class 5 Customer Pain Marketing 101

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LTV II Applications

• Online applications due yesterday
• 35 applications (non-MBA)
• Youll hear something by Wednesday
• Next Monday Presenting your Research 10-minute
  PPT
• Thursday OTD Innovation Seminar 530pm

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10-Minute Presentation

• 2-4 minutes Value Proposition
• Problem
• Solution
• Description of offerings
• 6-8 minutes research binder findings Competition
  / Comps / Customers/ Partners / Advisors / Other
  Market Data
• Other findings?

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STRICT 10-Minutes

• Please rehearse your presentation
• Use rehearse timings
• Start with too many slides and cut back, put
  extras in back for QA
• Over 10 minutes F

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Go or No-Go?
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Go or No-Go?
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Razor

1. Value Proposition
2. Market Potential
3. Return
4. Team
5. Competitive Advantage
6. Business Model
7. Customer Pain

Defining Opportunity
Analyzing Risk
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Razor

1. What is my value proposition?
2. How big could this get?
3. Whats in it for me?
4. Why me?
5. Can I compete?
6. Can this thing make money?
7. How bad do they want it?

Defining Opportunity
Analyzing Risk
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Customer Pain

• Will the dogs eat the dog food?
• Will the fish bite?
• Validation
• Strategy

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Brook Byers, KPCB

• If you dont have any customers yet, you need to
  show that you know who your customer is going to
  be and that you have gone out and talked to
  them.
• Acid test for early entrepreneurs resonance
  with customers

Video Byers know your customers
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Validation

• Customers
• Competition
• Letters of Intent (LOIs)
• Surveys / focus groups
• Others

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Customers

• 1 Paying customers!
• Non-paying (beta) customers
• Early development partners
• Strategy implication get customers early!
• Ensure feedback system

Customers Competition LOIs Surveys
Others
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Competition

• Sales of other solutions to the same problem
• Proves the market
• Second mouse advantage

Customers Competition LOIs Surveys
Others
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LOIs

• Letters of Intent
• Rare that they are appropriate, but can be very
  valuable
• Usually for large ticket items or long contracts
• Not legally binding

Customers Competition LOIs Surveys
Others
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Surveys

• Primary research surveys or focus groups
• Objective data to corroborate value proposition
• Appropriate sample target and size
• Looking for dramatic trends middle of the road
  results dont help

Customers Competition LOIs Surveys
Others
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Others

• Grant funding
• Distribution agreement
• Expert testimonial
• Credible publications
• Team or advisors

Customers Competition LOIs Surveys
Others
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Strategy

• First pin customer
• Purchase process
• Product attributes

Kawasaki adoption evangelist
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First Pin Customer

• Bowling 1st pin helps knock down the rest
• Exactly who is the first target?
• Who are future targets?
• Is there a roadmap for getting there?

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Purchase Process

• Who in the Value Network makes purchase
  decisions?
• Is that person aligned with who gets the Value?
• Are we making it as easy as possible?
• Is pain aligned with purchasing timing?

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Product Attributes

• Match customer needs
• Feedback needed
• Validation needed
• Tables

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Product Attributes
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Marketing 101
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Purpose of Marketing

• Design products and services according to
  customer needs.
• Communicate (both ways) with customer.
• Set prices fairly with knowledge of customers,
  competition and company strengths.
• Ensure that goods and services are delivered at a
  profit.

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Traditional Marketing
4 Ps
Product features, quality, service, support, product line, etc.
Place channel of distribution, exclusive vs. intensive, etc.
Promotion advertising, sales force, brochures, coupons, etc.
Price list price, discount, deals, both end-user and channel
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Product Place Promotion Price

• Understand customer needs and design products
  and services accordingly
• Differentiation (of products)
• Segmentation (of market)
• Product mix

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Product Segmentation
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Segmentation
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Product Place Promotion Price

• Distribution channels
• Direct
• We directly contact customers
• Indirect
• A partner, reseller or distributor contacts
  customers

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Place Channels

• Direct using salesforce, web, direct mail or
  telephone
• Agent sells direct on behalf of the producer
• Distributor/wholesaler sells to retailers
• Retailer/dealer/reseller sells to end customers

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Place Channels

• Direct
• Can be very expensive to build a salesforce
• We own the relationship with customers
• Indirect
• The cheaper/organizationally flatter choice (akin
  to outsourcing sales)
• We cannot directly interact with customers

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Place Channels
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Channel Conflicts

• Incentives
• Inventory
• Brand control
• Customer relationships
• Margins

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Channel Examples

• Why cant you ever find the item number that is
  reviewed in Consumer Reports?
• Why cant you find the same size diaper box in
  two stores?
• Is it always cheaper to buy at a double-coupon
  store?

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Channel Strategies

• Push making product available and present
  through distribution. Placement on shelves helps
  push demand from store to customer.
• Pull creating customer demand for the product
  (often through advertising), so that the customer
  comes to store looking for product.

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Product Place Promotion Price
Advertising Sales PR
Print ads Broadcast ads Packaging Inserts Product placement Brochures Posters Billboards Display signs Point of purchase Logos Symbols Trademarks Premiums Gifts Sampling Fairs Trade shows Exhibits Demonstration Coupons Rebates Trade-ins Tie-in Loyalty Bundling Press kits Speeches Seminars Annual reports Charity Sponsorships Publications Community relations Lobbying In-house magazine Events
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PR guerrilla?

• Contest
• Art exhibitions
• Event sponsorship
• Arrange a speech or talk
• Make an analysis or prediction
• Conduct a poll or survey
• Issue a report
• Take a stand on a controversial subject
• Arrange for a testimonial
• Announce an appointment
• Invent then present an award
• Stage a debate
• Organize a tour of your business or projects
• Issue a commendation

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PR

• Advantages
• Low cost
• Credibility
• Disadvantages
• High labor
• Lack of control

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Product Place Promotion Price

• Positioning
• Value vs. quality
• Rational vs. emotional

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Pricing Strategies
Cost Plus Going Rate Premium
Set prices to cover variable costs and a portion of fixed costs. Create pricing wars between competitors who offer the same or similar. Price to match customers enhanced perception.
Penetration Opportunistic Predatory
Price at a loss to gain market share. Set premium prices for products/ services in high demand with short supplies. Price-cutting prevents others from entering the market.
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Pricing Questions

• What is the competition charging?
• What is our market position (i.e., lower quality
  and prices, or the best with premium prices)?
• What will the market bear?
• What is supply-and-demand ratio?
• What is our reputation?

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Pricing Consumer Reaction

• Rational
• Expected value in use (EVIU)
• Cost to customer without product minus cost to
  customer with product
•  Emotional
• Framing
• Fairness

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Examples Perceived Value

• Because so much is riding on your tires
• Member since 1982
• When you care enough to send the very best

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Pricing Framing Example

• Its not often you get good news instead of a
  bill, but weve got some for you. If youve heard
  all those rumors about your basic cable rate
  going up 10 or more a month, you can relax its
  not going to happen! The great news is the rate
  for basic cable in increasing only 2 a month.
• Russo and Shoemaker

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4 Ps Marketing Mix
Product Highest quality Full features PlaceHigh-end retail Premium catalogue
PromotionAdvertising Spokesperson PricePremium
Premium Product Example
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Marketing and the Razor

• Value proposition
• Market size
• Return potential
• Customer pain
• Business model
• Competitive advantage
• Team

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Getting Started

• Concept Testing
• Market Research
• Beta Customers Reaction
• Positioning the Product
• Decision on Competitive Advantage
• Name
• Message Benefits and Description

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Appendices

• 5 Cs Situation Analysis
• Hierarchy of Effects
• Lens Model
• Adoption
• Benchmarking
• Porters Five Forces

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5 Cs Situation Analysis
Customer customer needs, segments, consumer behavior
Company Skills brand name, image, production capability, financial strengths, organization, etc.
Competition actions are interrelated, market environment
Collaborators downstream wholesalers or retailers, upstream suppliers
Context culture, politics, regulations, social norms
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Hierarchy of Effects
Exposure Choose media, budget
Awareness Effective copy to get through the clutter.
Knowledge Effective content, relevant to customer
Preference Fulfill perceived needs better than competition
Trial Available, low trial costs
Repurchase Reinforce quality, reminders
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Lens Model
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Adoption

• Innovators
• Technical enthusiasts
• Influencers with no money
• Free samples or giveaways
• Early Adopters
• Economic buyers with vision
• Product modification/competitive advantage
• Benefits with value/discount pricing

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Adoption (contd)

• Early Majority
• Pragmatists with herd mentality
• Product reputation/customer service
• Skimming and penetration pricing

Geoffrey Moores Crossing the Chasm