© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Chapter 5Chapter 5

Start-up: making it happenStart-up: making it happen

Entrepreneurship and Small Entrepreneurship and Small BusinessBusiness

Paul BurnsPaul Burns

Back to Contents

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Customers buy BENEFITS…not features

MarketingMarketing

Standard benefitsOur shop accepts all leading credit cards…which means you can budget for your purchases to suit your pocket.

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Customers buy BENEFITS…not features

MarketingMarketing

Standard benefitsOur shop accepts all leading credit cards…which means you can budget for your purchases to suit your pocket.

Company benefitsOur shop is a family business…which means that you get individual, personal attention from somebody who cares.

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Customers buy BENEFITS…not features

MarketingMarketing

Standard benefitsOur shop accepts all leading credit cards…which means you can budget for your purchases to suit your pocket.

Company benefitsOur shop is a family business…which means that you get individual, personal attention from somebody who cares.

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Customers buy BENEFITS…not features

MarketingMarketing

Standard benefitsOur shop accepts all leading credit cards…which means you can budget for your purchases to suit your pocket.

Company benefitsOur shop is a family business…which means that you get individual, personal attention from somebody who cares.

Differential benefitsWe are sole agents for that product…which means you can’t get it anywhere else.

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

The marketing mixThe marketing mixPRODUCTDesign/sizes coloursMaterialsSpecificationQualityPackagingAfter-sales service

PRICEList priceDiscountsPayment termsService/spares prices

PLACELocationRetail/wholesaleMail/telephone orderDelivery methods

PROMOTIONAdvertisingBrochures/data sheetsPublic relationsPersonal selling and networksExhibitionsGift/sales aid

PEOPLE

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Generic market strategiesGeneric market strategies

COMMODITY SUPPLIER

NICHE PLAYER

OUTSTANDINGSUCCESS

MARKET TRADER

Broad market

Focused market

Low cost/price

Low differentiation

High cost/price

High differentiation

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Costs, volume and revenueCosts, volume and revenue

Fixed costs

Output volume

Cost or revenue

£

Total revenue

Total costs

BA

C

M

Break-even point

Target profit

X Y

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Contribution analysisContribution analysis

1. Break-even point (£ sales)=

  Fixed costs  Contribution margin (%)

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Sales £1000Variable costs 600Contribution £ 40040%Fixed costs 400Profit £ 0

Break-even exampleBreak-even example

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Sales £1000Variable costs 600Contribution £ 40040%Fixed costs 400Profit £ 0

Break-even point = 400 = £1000

0.40

Break-even exampleBreak-even example

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Contribution marginContribution marginPercentage change in sales volume needed to achieve the same profit after a price change

PRICE

CHANGE

CONTRIBUTION MARGIN

20%20% 30%30% 40%40%

+33%+33% +20%+20% +14%+14%

+100%+100% +50%+50% +33%+33%

+300%+300%

––5%5%

––10%10%

––15%15% +100%+100% +60%+60%

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Contribution marginContribution marginPercentage change in sales volume needed to achieve the same profit after a price change

PRICE

CHANGE

CONTRIBUTION MARGIN

20%20% 30%30% 40%40%

+5%+5% ––20%20%

––25%25%

––11%11%

+15%+15%

+10%+10% ––33%33% ––20%20%

––43%43% ––33%33% ––27%27%

––14%14%+33%+33% +20%+20% +14%+14%

+100%+100% +50%+50% +33%+33%

+300%+300%

––5%5%

––10%10%

––15%15% +100%+100% +60%+60%

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

The pricing rangeThe pricing range

Variable Average Value tocost per cost per customer unit unit

‘Too low’ Going rate ‘Too high’ price price price

Pricing range

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

PricingPricing

Skimming

Penetration

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Generic market strategiesGeneric market strategies

COMMODITY SUPPLIER

NICHE PLAYER

OUTSTANDINGSUCCESS

MARKET TRADER

Broad market

Focused market

Low cost/price

Low differentiation

High cost/price

High differentiation

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Customer loyalty ladderCustomer loyalty ladder

Prospect

Customer

Regular customer

Supporter

AdvocateIN

CR

EA

SIN

G

LO

YA

LT

Y

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Generic market strategiesGeneric market strategies

COMMODITY SUPPLIER

NICHE PLAYER

OUTSTANDINGSUCCESS

MARKET TRADER

Broad market

Focused market

Low cost/price

Low differentiation

High cost/price

High differentiation

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

SegmentationSegmentation

Industrial

Type of business

Size of business

Quantity of purchase

Credit worthiness

After-sales service

Usage rate

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

SegmentationSegmentation

Industrial

Type of business

Size of business

Quantity of purchase

Credit worthiness

After-sales service

Usage rate

Consumer

Socio-economic group

Age

Sex

Home location

Occupation

Stage in family life-cycle

Benefit required

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Relationship v transactional Relationship v transactional marketingmarketing

Relationship marketing

• Encourages close, frequent contact

• Encourages repeat sales

• Focus on service• Focus on value• Focus on quality of

total offering• Focus on long term

Transactional marketing• Limited contact• Orientated toward single

purchase• Limited customer service• Focus on product/service

benefits• Focus on product quality• Focus on short term

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Entrepreneurial marketing Entrepreneurial marketing planningplanning

Determine future organisational performance objectives

Review conventional influences on performance

Can marketing conventions deliver performance goals?

CONVENTIONAL PLAN ENTREPRENERIAL PLAN

Yes No

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Entrepreneurial marketing Entrepreneurial marketing planningplanning

Map sector conventions

Assess scale of entrepreneurial activity

Assess entrepreneurial opportunity

Assess entrepreneurial capability

Define performance objectives

Define strategy

Develop detailed plan

Specify control systems

Lau

nch

early

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Market researchMarket research

Field research• Reflects your needs• You control quality• Up to date

• Expensive• Takes time• Can tell competitors

what you are up to

Desk research• Cheap• Quick• Good for background

• Not specific• Can be out of date• Can be incomplete or

inaccurate

Ad

van

tag

esD

isad

van

tag

es

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Market researchMarket research

Personal Telephone Postalinterview interview

questionnaire

Quality of data

Quantity of data

Speed

Response rate

Cost high fair fair

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

The selling potential matrixThe selling potential matrix

Business potential of buyer

Att

itu

de

of

bu

yer

Indifferent

Low

Friendly

Unfriendly

High Medium

1 2 3

2 3 4

3 4 5

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Selling skillsSelling skills

• Know what customers want

• Know how to match this to the product/service you have to sell

• Know how to build up argument that it does indeed meet their requirements

• Know how to close the sale

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Closing the saleClosing the sale

• Trial close

• Alternative close

• Summary close

• Concession close

• Quotation close

• Direct close

© Paul Burns, Entrepreneurship and Small Business, Palgrave,

2001

Forms of businessForms of business

• Sole trader

• Partnerships

• Limited companies

• Franchises