Ideas to Income: An introduction to marketing

Ideas to Income  An Introduction to Marketing  MaRS Entrepreneurship 101 January 14, 2009 Lecture 1 & Workbook Slides Peter Evans  Advisor, MaRS Venture Group pevans@marsdd.com

Peter Evans Advisor, MaRS Venture Group pevans@marsdd.com Peter Evans advises entrepreneurs and high growth companies in a range of technology markets, specializing in strategic planning, research, product management and channel development. He brings to MaRS over 15 years experience working in early-stage venture-backed technology start-ups and publicly traded companies in the software, Internet services, online media and telecommunications sectors. Previously, Peter worked in major accounts sales, product management, research and senior marketing roles with organizations such as Sympatico, FloNetwork (acquired by DoubleClick in 2001) and PlateSpin Inc. In his role as a consultant since 2003 he has worked with over 100 clients throughout North America from early stage ventures to large corporate clients such as TELUS, CNW Group and DoubleClick in the US (just prior to its acquisition by Google). An angel investor in a number of early-stage startups he is has served on a number of boards including Sitebrand (Ottawa), XPLANE Corporation (St. Louis) and the Toronto Venture Group. His community contributions include fundraising and educational work with organizations such as the National Ballet School, Junior Achievement and seven years serving as a Big Brother with Big Brothers of Metropolitan Toronto.   A noted speaker on strategy and marketing he has spoken at major conferences throughout North America and Europe in addition to being a guest lecturer on marketing at UofT and Queen’s. He was educated in cognitive psychology and telecommunications management at the University of Toronto and Ryerson University and holds an MBA from Queen’s University. He is currently completing the Certiﬁcate Program in Strategic Planning & Innovation at the M.I.T. Sloan School of Management. Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 1

What’s on for Tonight Session Learning Objectives   What is Innovation? Goals   What is Marketing?   Learn some key marketing and strategy concepts   Why Marketing Matters?   Be able to apply them  to an invention or idea   The Problem with Ideas:     Have a deeper respect   “The Innovation Paradox” for marketing as a discipline   Step by Step overview of how a     Have Fun marketing as a system of STRATEGIC activities can transform Ideas to Income   Our Approach: –  Key Marketing Principles/Frameworks –  Best Practices (Examples) –  Workbook Sections for Reference) –  Take home exercise (fun for the whole family) Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 2

Innovation is Good Wikipedia Says So INNOVATION [in-uh-vey-shuhn n]  a new way of doing something. It may refer to incremental, radical, and revolutionary changes in -  Thinking -  Products -  Processes -  Organization Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 4

10 Types of Innovation It goes way beyond science & technology 1.  Finance/Business Model 1.  Finance/BusinessModel - -How you make money How you make money 2.  Networks and Alliances How you join forces with other companies for mutual 2.  Networks and alliances - - How you join forces with other companies for mutual beneﬁt beneﬁt 3.  Enabling process - How you support the company's core processes and workers 4.  Core processes - How you create and add value to your offerings 5.  Offerings - Product performance 5.  Offerings - Product performance How you design your core offerings How you design your core offerings 6.  Product System 6.  Product System -- How you link and/or provide aaplatform for multiple How you link and/or provide platform for multiple products. 7.  Service - How you provide value to customers and consumers beyond and around your products 8.  Delivery Channel 8.  Delivery Channel -- How you get your offerings to market How you get your offerings to market 9.  Brand 9.  Brand - How you communicate your offerings 10.  Customer Experience How your customers feel when they interact with your 10.  Customer Experience --How your customers feel when they interact with your company and its offerings Source: Doblin – Division of Monitor Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 5

Marketing Deﬁnitions How the professionals describe marketing “Marketing is the activity, set of institutions and processes for creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners and society at large.” AMA (American Marketing Association) “The management process responsible for identifying, anticipating and satisfying customer requirements proﬁtability” Philip Kotler –Author &  Professor of International Marketing  Kellog School Of Management, Northwestern University Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 9

Where Marketing Fits Within the Business Functions of a Company IDEA INCOME R&D MARKETING SALES SERVICE FINANCE Legal HR MARKET STRATEGY PRODUCT MARKET PARTNERSHIPS SALESFORCE RESEARCH MANAGEMENT MANAGEMENT INTEGRATION Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 10

The 4P’s as a Framework A simple linear view of the marketing process PROMOTION Sales promotion strategy, advertising, publicity PRICE Pricing strategy, cost accounting, price setting research PLACE Distribution channel strategy, distribution merchandising PRODUCT Product strategy, “needs” research, development pllan Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 11

Benefits of Marketing What’s in it for start-ups? Customers ✔   Establishes your relevance/credibility with the right first customers  Product ✔   Clearly identifies problems and critical transition points and guides the development of the right prototype and product  Markets ✔   Creates a more predictable and scalable go-to-market process and alignment with the right segments  Investors ✔   Provide a common framework for understanding key areas of the business that affect success. Shows how a company can grow and make money on a sustainable basis Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 12

How an Investor Sees Marketing Investor Presentation: Table of Contents 1.  Company Overview & Vision 8.  Competitive Advantage/ Intellectual Property 2.  Management & Advisors 9.  Category Map - 3.  Customer Problem Where our Solution Fits 10.  Competitive Advantage 4.  Market Opportunity/Size (Value Matrix/Value Curve) 5.  Solution 11.  Business Model 6.  Beneﬁts/Value Proposition 12.  Marketing & Sales (Customer Acquisition/Sales Cycle) 7.  Success to Date (Customers/ 13.  Financial Projections (3-5 Yr.) Partners/Patents) 14.  Financing Requirements Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 14

How an Investor Sees Marketing Marketing is threaded across the venture 1.  Company Overview & Vision 8.  Competitive Advantage/ Intellectual Property 2.  Management & Advisors 9.  Category Map 3.  Customer Problem Where our Solution Fits 10.  Competitive Advantage 4.  Market Opportunity/Size (Value Matrix/Value Curve) 5.  Solution 11.  Business Model 6.  Beneﬁts/Value Proposition 12.  Marketing & Sales (Customer Acquisition/Sales Cycle) 7.  Success to Date   13.  Financial Projections (3-5 Yr.) (Customers/Partners/Patents) 14.  Financing Requirements Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 15

Reasons for Market Failures  The 7 Deadly Sins Failure to clearly identify and focus on: 1.  Market Category – Addressable Market 2.  Target Customers – Problem you solve 3.  Competitors (Current and Future) – Who Else is Working on this Problem? 4.  Product Strategy/Positioning – Your Unique Approach 5.  Pricing structure – What End Customers and Channels will Pay for the Product 6.  Distribution Model - Direct or through Partnerships? 7.  Revenue Model – How you Make Money (Partnerships/Licensing) Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 18

WT* is FCS ? Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 30

Most Sales Don’t Close Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 36

Why Most Sales Don’t Close Here’s where the process breaks down No Pain No Power   No Goal = No prospect   Power buys from power   Critical points of pain or key   While end-users and influencers are fun business issues are necessary to to sell to they have not have the authority initiate a search for a solution to buy   Ultimate decision-makers may have different goals (points of pain) No Solution No Value   Feature/Function discussions are   Goals should be related back to $$$ useless unless put in context of   Tangible value propositions provide a the customer’s pain means of reducing price pressure i.e.   Solutions must be created in the Reduced cost, increased revenues, prospects mind through careful, higher customer satisfaction/lower churn methodical diagnosis etc. Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 37

the problem

Ideas Don’t Have Market Context Even Webster is pessimistic idea (n.) i·de·a*   a form, look or appearance of a thing as opposed to its reality.   a conception existing in the mind   a thought, a mental image, a notion   an opinion, view, or belief   a groundless supposition; a fantasy   a hazy perception   a vague impression, fanciful notion, inkling Source: Random House Webster's Unabridged Dictionary Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 40

We have an Innovation Paradox Not all technologies can spark the creation of a business Science Technology Product Company Business Source: Neoset Ventures Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 41

The Market is Not your Customer People or organizations with needs and budgets are… Market Problem Buyer Budget Source: Neoset Ventures Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 42

Transforming Ideas to Income 4 Key Areas of Focus Science Technology Product Company Business 1 Market Opportunity 2 Value Proposition 3 Distribution Strategy 4 Financial Model Market Problem Buyer Budget Source: Neoset Ventures Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 43

Can we about marketing as as a of activities?

Transforming Ideas to Income Another way to think about marketing in a strategic context 1 1. Markets SCAN (Markets) 2. Customers 2 3. Suppliers, Partners Networks CONFIGURE 3 5 (Internal Capabilities) 4. Competitors 5. Financial Engine 4 Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 45

Looking at Convergent Themes A free search engine + a paid (Cost-per-Click) ad model 3. Sustain 1. Create Search Technology Markets 2. Capture Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 46

Eliminating Unrecoverable Cost Apple focused on what buyers really hated about buying music 3. Sustain 1. Create MP3 Standard Customers 2. Capture Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 47

Leveraging the Ecosystem Salesforce.com went beyond SAAS to Software Syndication 3. Sustain 1. Create CRM Platform Partners & Suppliers 2. Capture Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 48

Delivering Unexpected Value Virgin is opportunistic & aspirational in building its brand 3. Sustain 1. Create Competitors 2. Capture Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 49

Tuning the Financial Engine From simplified logistics to fuel hedging Southwest stays on top 3. Sustain 1. Create Too many to mention ! Financial 2. Capture Too many to mention ! Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 50

1. Scan 1 Category: Market SCAN (Markets) Goal: 2 Look for Convergent Themes to Discover new Markets Key Questions:   What market category are you 5 CONFIGURE 3 (Internal Capabilities) pursuing?   Are you creating a new category?   How big is it?   Do buyers have industry context to 4 make a decision? Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 51

2. Filter 1 Category: Customer SCAN (Markets) Goal: 2 Eliminate Unrecoverable Costs Key Questions:   Who is your customer?   What problem do you solve? 5 CONFIGURE 3 (Internal Capabilities)   How do you know it’s a problem?   How much will customers pay to solve the problem?   How did you decide on pricing? 4 Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 52

3. Synchronize 1 Category: Suppliers, Partners & Networks SCAN (Markets) Goal: 2 Leverage the Ecosystem to help deliver a better, faster, cheaper solution Key Questions: 5 CONFIGURE 3   Who has the power to get you to (Internal Capabilities) your target customer segments?   What degree of inﬂuence do key suppliers have on your ability to produce your solution?   How can you best approach the 4 market opportunity (Direct vs. Channel)   Are there syndicated networks you can use to sell your product? Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 53

4. Amplify 1 Category: Competitors SCAN (Markets) Goal: 2 Deliver Unexpected Value that Competitors Can’t Match Some Focus Areas:   Who is your competition?   CONFIGURE What are their strengths and 5 (Internal Capabilities) 3 weaknesses?   Apply the concepts in Step 2&3 to strip out unrecoverable costs that customers do not value. Can you delight customers on elements of the product/service where 4 quality can be raised or new elements can be created to develop a sustainable advantage?   Can you demonstrate thought leadership in the category and use it to evangelize through industry opinion leaders? Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 54

5. Tune 1 Category: Financial SCAN (Markets) Goal: 2 Optimize revenue and costs Key Questions:   What is your method for capturing revenues (product sales, royalties, licensing advertising 5 CONFIGURE 3 supported) (Internal Capabilities)   What are the total costs? - professional services, sales engineers etc.   Any upfront payments or 4 recurring revenues? (maintenance, upgrade revenue sources)   Do partners need to be paid? - Sales Channel – Direct, Distributors, VARS Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 55

$1,000,000,000 $100,000,000 10x reduction every 7.5 years $10,000,000 $1,000,000 $100,000 10x reduction every Dollars per MIP $10,000 4.25 years $1,000 $100 $10.00 $1.00 $0.10 $0.01 1959 1969 1979 1989 1999 2009 Source: Hans P. Moravec 1998-2003] Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 60

Total economic value created by VCs. Total amount of money raised by VCs. SOURCE: NVCA / Thompson Reuters Exit Poll SOURCE: NVCA / Thompson Reuters VC Fundraising Q3 Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 62

B2B Tech. Then Today Corporate Goals   Revenue Growth   Cashﬂow Technology Buyer Focus   Competing against time   Competing against inefficiency Technology Positioning   Revolutionary Technology   Evolutionary Technology Market Segmentation Focus   Horizontal Market Expansion (for Breadth)   Vertical Expertise (for Depth) Sales Approach   Transaction-Oriented Sales     Consultative Selling Approach  (Buy what I have) Salespeople   Tin-Men (Horizontal Orientation)   Sales Strategists (Vertical Expertise) Lead Generation Strategy   Volume Oriented: Telesales/Cold-Calling   Exec. Referrals (3-Degrees of Separation)  Marketing Dept. Role   Poorly Deﬁned – Non-Integrated Island    Accountable & Aligned with Sales  Product Management Focus   Features Development    Focus on Relevance…not just Differentiation  MarCom Focus   Info. Overload   Less is More (Contextual/Diagnostic Sales  Tools), Thought Leadership through Research Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 63

What We Can Learn from the Movies The power of convergent metaphors Emerging Technology Emerging Category Who Cares? Visual Recognition Digital Signage Systems GPS Location-Based Pay as You Drive Services Technologies Insurance Social media (blogger) Reputation Management performance monitoring) for UGC Public Opinion Brand Reputation Measurement Software Management Gesture Based   “Edutainment Software” User Interfaces Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 65

Market Sizing This is NOT a Believable Revenue Forecast Market Total Revenues Expected Projected Company Market Revenues Share Automotive $60 billion X 0.1% $60 million Aerospace $40 billion X 0.1% $40 million Healthcare $30 billion X 0.1% $30 million Food Service $30 billion X 0.1% $30 million Total $160 million Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 67

Technology Creates Market Disruption Some of the Golden Rules Clayton Christensen sets out 4 rules that govern disruptive innovations:   Technology keeps getting better. In every market, technology advances and improves and is driven by a set of behavioural, economic, regulatory and institutional factors. Companies take advantage of this by offering better products at higher prices, and by listening to and targeting mainstream and high-end users.   Customers will use a technology, up to a point. Technological progress inevitably reaches a point where it's far above what customers actually need and can use.   Overshooting customer needs enables disruption. When the level of technological progress is far above what customers actually need and can use, the phenomena of overshooting creates the opportunity for an upstart to come in with something that's cheaper, simpler and good enough for a set of customers who don't need the advanced technology.   It's not really about technology—it's about the business model. Small, nimble, disruptive ﬁrms can succeed with business models that are unattractive to incumbents. Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 69

Critically Assessing your Idea  To drive customer relevance   What are you best at that no one else is?   How does that “translate” to proposed customer beneﬁt? –  Underlying Innovation – product – solution   Why should a customer care? –  How much better than current technology/product/solutions   Which markets desperately need you? –  Urgency over “nice-to-haves”   What buyers must have your solution? –  This is a realistic forecast number   What problems do you solve? –  How do customers talk about the problem? What is their point of view?   What is the real (loaded) customer cost to buy the solution? –  Time & resources to deliver and implement etc. Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 70

Minding your P’s & Q’s What’s YOUR Strategy for Adding Value for Customers? Higher Average Value Inferior Customer Value for (Over-priced or Over-specified) Quality Buyers Relative Average Value - Superior Value Parity Price “Stuck in the via Middle” Higher Quality Average Value Superior Value Maximum Lower for via Buyer Price Buyers Lower Prices Value Lower Parity Higher Relative Quality Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 72 KW-025

Customer Segmentation  The Most Important Research You Can Undertake   A Segment is a Sub-Set of Buyers: –  Within a market who share similar needs –  Demonstrate similar buyer behaviour    Emphasis is on identifying clusters of buyers who are: –  Attractive –  Unattractive –  Non-addressable     Good Segmentation Reveals Clusters that satisfy the following criteria: –  Identiﬁable - The differentiating attributes of the segments must be measurable so that   they can be identiﬁed –  Accessible - The segments must be reachable through communication and distribution channels. –  Substantial - The segments should be sufficiently large in order to justify the resources required to target them –  Unique Needs - To justify separate offerings, the segments must respond differently to   the different elements of the marketing mix –  Durable - The segments should be relatively stable to minimize the cost of frequent product changes Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 74

Where are you in the Buying Cycle? There are rules to how markets adopt technology Source: Moore (2002), Crossing the Chasm: Wiefels (2002), The Chasm Companion Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 75

Getting Caught in the Chasm Pragmatists don’t trust visionaries as references Visionaries vs. Pragmatists   Adventurous   Prudent   Early buy-in attitude   Wait-and-see   Think “big”   Manage expectations   Independent of the “herd”   Part of the “herd”   Spend ﬁrst   Spend next   First use capability   Staying power   Think Pragmatists are    Think Visionaries are pedestrian  reckless Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 76

Marketing to Buyers in Organizations Parinelli’s Influence & Authority Network Functions Users What to ask:   Salesperson What are you using for a system now?   Clerical Staff How are you using it?   Database Admin. Any serious problems?   Call Center Sales/Support Who’s who in the org.? Features Seymours What to ask:   IT Manager What are the technical criteria?   Marketing Manager How much? How long?   Director How big? How would you design the perfect solution to this problem? Benefits VITO’s What to ask:   CEO/President What are the specific goals for your organization over the next (quarter, year?)   Executive Director (Assoc.) What new markets is your organization   Executive VP (Industry) looking to grow in?   COO/CFO/CMO What are the criteria for establishing a business relationship? Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 77

Analyzing Customers Use this guide to better understanding buyer orientation Vertical Horizontal Spatial Pharma C-Level HR . Ops. Marketing Finance Robotics X X . VP-Level Medical Academic X Devices Director Photonics Manager Government User Key Questions to Ask… 1.  What Experience do they have? 3.  What are their Responsibilites? 2.  Who do they Report to?  4.  What Motivates them?  Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 78

Is this a Reasonable Request? The Innovators are working on it…sort of Taylor Aerocar: 1949 General Motors: Early Prototype? Moller Skycar: 2008 Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 82

Bonus Round Q2. If we were to ask the right questions to PROFITABLY REDEFINE the category of “personal aviation” what would they be? Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 87

Establishing Worksheets Target Markets

Identifying/Sizing your Target Market  Target Market Criteria Size   The estimated size of the market to determine whether or not it is worth going after. Beware of “top-down” sizing Expected Growth   The size of the market may be small, but if it is an emerging market that is growing signiﬁcantly it may be worth going after Competitive position   The less competition the more attractive the market Cost of reaching the market   Is the market accessible to you? Compatibility   Is it aligned with your objectives competencies & resources Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 92

Creating a Category Map  How do you stack up on key factors that drive value High Competitor 3 Competitor 2 You? Performance Competitor 4 Competitor 1 Low Low High Ease-of-Use Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 93

Segment Scoring Try to rank various market segments using this scoring model Segment G Segment D Segment C Segment A Segment B Segment E Segment F Market Size [$] $.6 B $1.2B $5.0 B $.16 B $1.5B $0.3B $0.2B Value Chain Ownership 1 5 8 6 3 2 1 Market Potential $ $0.2B $75M $10M $35M $80M $15M $10M Time to Market [years] 4 2 1 3 2 4 7 Barriers to entry [#] 6 2 2 5 4 3 9 Differentiation [#] 7 4 5 4 3 5 9 Competitive Threats [#] 2 2 2 4 7 4 2 Investment required [#] 6 5 3 7 9 5 9 Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 94

Market Worksheets Research Methods

Secondary Marketing Research A Starting Point Secondary Research  Sources   Information provided by third-party sources   Consulting firm research (may be syndicated “shared” content) Reports   Government reports and   Information has been gathered from previous statistics market research   Newspaper articles   Web-based articles, reports, etc. Advantages   Census reports –  Ease of access   Trade magazines Scientific and trade journals –  Lower Cost     Libraries and resource centers –  Less time consuming   Books on the industry   Published reports and studies Disadvantages –  Information may not be exactly what is required to assess new markets –  Results may be out-of-date –  Research design may be poorly constructed Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 96

Primary Marketing Research  4 Types of Research Design 1 Qualitative (Focus groups, In-Depth interviews)   Used for explorative purposes   Small number of respondents   Not generalizable to the whole population - statistical significance and confidence not calculated 2 Quantitative (Surveys and Questionnaires)   Generally used to draw more conclusions and tests a specific hypothesis   Uses random sampling techniques   Infers from the sample to the population - involves a large number of respondents 3 Observational (Product in-use Analysis, Empathic Design)   Observational research that employs a process of watching—without interfering   Concentrates on viewing the customer doing everyday activities in their own environment  4 Experimental (Purchase Labs, Test Markets)   Researcher creates an artificial environment to try to control spurious factors, then manipulates at least one of the variables Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 97

Getting Customer/Market Data A Qualitative & Quantitative Research Checklist Online SME Surveys Interviews Telephone News Scanning Focus Patents Surveys Services Groups Customers SME Competitors Interviews Demos. Advertising Websites Clinical Trials & Speaking Employee Custom Panels Blogs Trade Assoc. Statistics Government Reports Trade Shows Market Media Syndicated Monitoring Economic Research Reports Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 98

Evaluating Worksheets Customer Requirements

Where are you in the Buying Cycle? Can you identify what group of buyers you are addressing? Source: Moore (2002), Crossing the Chasm: Wiefels (2002), The Chasm Companion Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 100

Segmentation Variables  How does your market cluster on these key segment breaks Consumer Characteristics (Partial Buying Situations (Partial List): List):   Outlet type: In-store, catalogue   Geographic: Region, city size, metropolitan area, density   Beneﬁts sought: Product features, primary motivation   Demographic: Gender, age, race, life stage, birth era, residence   Product Usage: Usage rate, tenure, marital status awareness and product knowledge   Socioeconomic: Income, education, homeowner,   Behaviour: Involvement in purchase decision   Psychographic: Personality, values, lifestyle, status Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 101

Qualifying your Sales Prospects Have you addressed these key areas in the sales process? Customer’s Pain Qualified Buyer Has Authority to Proceed   No Goal = No prospect   Power buys from power   Critical points of pain or key   While end-users and influencers are fun to business issues are necessary to sell to they have not have the authority to buy initiate a search for a solution   Ultimate decision-makers may have different goals (points of pain) Solution is Understood Value has been quantified   Feature/Function discussions are   Goals should be related back to $$$ useless unless put in context of   Tangible value propositions provide a the customer’s pain means of reducing price pressure i.e.   Solutions must be created in the Reduced cost, increased revenues, prospects mind through careful, higher customer satisfaction/lower churn methodical diagnosis etc. Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 102

Pricing Research  Work through these areas before you set your price   What’s your fundamental strategic model? –  Premium Price (Product Leadership) –  Lowest Price (Operational Excellence) –  Blended Model (Customer Intimacy)   What is the Method for Capturing Revenues –  Product sales –  Royalties –  Licensing –  Advertising supported   Some other Factors Need to be Considered –  What are the total costs? - professional services, sales engineers etc. –  Upfront payments or recurring revenues? (maintenance, upgrade revenue sources) –  Do partners need to be paid? - Sales Channel – Direct, Distributors, VARS Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 103

Some General Pointers   Beware of OVERESTIMATING your market forecast - Especially if you are not in an established market category   Ironically, it can be much harder to compete in a market where there are no existing competitors - Why? You are competing against “non-consumption” - Customers lack points of reference that can serve to validate their need for your technology   When assessing market opportunity don’t overlook the beneﬁts of market research   Good market research mitigates risk. Besides interviews with current and prospective customers, make sure to review reports or interview key technology analysts and other Key Opinion Leaders covering your space.   Remember…Differentiated Technology is NOT Enough   Market relevance is more important than ever in identifying a target market. Look for “necessary“ product/service requirements that have not been satisﬁed by competitors.   Look for Areas where you can deliver UNEXPECTED value   Design your product and service on key attributes of value that amplify the impact you make with reference customers. The trick to building market share is to over-deliver in areas that matter most ….and leaving the things that don’t matter to competitors. Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 104

Here’s More…   Understand your VALUE DISCIPLINE: How you can best create value in a market vs. your competitors   Clearly understand how your competitors create value - Is their product best in class? Do they lead with low- price? Or are they customer intimate with a highly specialized product for niche segments? What room have they left you to exploit the market through a different approach?   Draw a category MAP to better articulates how you fit vs. competitors and other product/service substitutes   A category map that defines your product/service and competitors across key criteria is critical to providing much needed context to potential buyers   Identify how you add to the “Customer’s UNDERSTANDING of the Problem at Hand”   Do you have a diagnostic process that guides prospects through a method of determining and quantifying the impacts on their organization? Does this also translate tangibly into financial measures? Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 105

And More   Remember Points of Pain for Customers VARY greatly within the Same Company –  Understanding the prospect’s Vertical (C- Level, Director, Manager, User) and Horizontal (Functional - Finance, Operations, IT, HR) Orientation is critical to mapping out points of pain correctly.   Identify the optimum point of entry - It’s often NOT the VITO on the ﬁrst call –  While it’s important to get to the VITO (Very Important Top Officer) don’t overlook the need to research their agenda with subject-matter-experts who are lower in the organization (often a best point-of-entry is the sales dept.)   TRIANGULATE with your Competitors to Float the category ! –  Gaining an understanding of the marketplace by just checking out competitors’ websites is an inexpensive but myopic approach to benchmarking who you are up against. Supplement your research with regular competitor meetings where your share a little about what you know about other competitors - and get a lot in return. Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 106

Getting Started Guide  If you want to get going keep these steps in mind Market Dynamics   Why is this a good opportunity now? Look at customer trends, regulations, technological advances Market Sizing   Market Prioritization and Rationale Look at analyst reports and do “bottom-   Review your total market and industry up” analysis…not top down dynamics Customer Insights Conduct customer interviews,   Select segmentation criteria focus groups, discussions with experts, etc…   Divide relevant market into customer segments Run some estimates of potential market Target Market share, sales volumes, revenues, and profit (under various funding /resource /   Describe each customer target group partner scenarios) Competitors Develop a meaningful category map   Evaluate competitors for partnering that spatially compares competitors on options or exit possibilities key factors for creating value. Copyright 2008 – Peter Evans - www.linkedin.com/pub/0/192/665 pg 107