1. Entrepreneurial Marketing
Marketing Research
Need for Marketing Research
• Entrepreneurs do not have sufficient information when they start their businesses.
• They need to be able to update plans over time.
• They need to gather missing information.
What is Marketing Research?
• The systematic and objective search for and analysis of information relevant to the identification
and solution of any problem in the field of marketing
– Systematic approach:
• A clear and concise statement of the problem
• Data collection
• Analysis
– Objectivity
– Problem orientation: related to a marketing decision
Myths of Marketing Research
1.“Research is only for big decisions”
- Many start-up feel that they cannot justify the level of expenditures they think any serious
marketing research undertaking will require.
- But:
- Strategic mistakes may cost a lot in the future.
- Relatively trivial decisions can be significantly improved by a small amount of marketing research
2. “Market research is too expensive”
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Most people think that “market research is survey research”
Survey based sampling is expensive, but, there are many alternatives to conduct research
that can adequately meet information needs at low cost.
Further, there are many ways in which the cost of survey research itself can be significantly
reduced.
What Kind of Marketing Research Do Entrepreneurs need?
Cheap but Good Marketing Research!!!
1. Low-Cost Experiment
2. Cheap Survey Methods
PART 1: Low-Cost Experiment
In Experiment,

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We want to make a causal inference between treatment and outcome.
In order to make valid causal inference,
1. There must be a control group that did not receive the treatment or received a different
treatment.
- To rule-out out competing explanation
- To cancel-out uncontrollable events external to the experiment
2. There must be random assignment of treatments to groups.
3. The experimental treatment must precede the outcomes.
PART 2: Low-Cost Surveys
Low-Cost Survey Design
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A survey with probabilistic sampling is expensive. However, it is possible to design low cost
surveys.
Survey methods include:
– One-to-one interviews
– Mail surveys
– Telephone surveys
– Internet surveys
The sampling cost is the most expensive cost component.
Low-Cost Sampling
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Focus groups
Mall intercepts
Quota sampling
Convenience sampling
Judgment sampling
Snowball and network sampling
How many respondent do we need? Several thousand?
No – 200 at most

3. Guideline for Survey Questions
•“If you do not ask, you cannot get an answer”
– You need an explicit set of hypothesis that you want to test in advance
– Design your analysis in advance as this will determine the sample size.
• “If there is something wrong in the questionnaire, the survey data is just a waste”
– Use a focus group interview to understand important variables (e.g. product
attributes) before writing about questions.
– Conduct a pre-test of the questionnaire (N=30)
• “Open to other possibilities”
– Think about multiple possible answers for a problem
• e.g. three hypothesis on possible segmentation variable
• “Actionability”
• Avoid questions that make respondents infer the answer you expect to get
– e.g. Don’t you agree...? Wouldn’t you say...?
• Minimize the number of open-ended questions. Choice from a list of multiple responses is better
than open-ended questions.
• Use simple, direct and familiar vocabulary to all respondents

4. • Avoid vague or ambiguous meanings
– e.g. How long have you lived here?
• Avoid “double-barreled” questions
– e.g. Are you satisfied with the cost and convenience of this service?
• Start with easy questions and put lengthy and difficult questions at the end.
• General questions first and specific questions later.
• Sensitive questions dealing with income status, skill level, and so forth should not be placed at the
beginning.
Measurement Scale
• Ordinal
– Rank order among brands in terms of preferences
• Categorical
– Yes/No choice
– Single or multiple choice(s) from a list of responses
• Interval
– Likert scale

5. Competitive Market Structure
How to Define the Market Structure? (cont’d)
Two approaches
– Firm-oriented
– Customer-oriented
•Urban, Johnson, and Hauser (1984), “Testing Competitive Market
Structures,” Marketing Science, Vol. 3, No. 2, 83-112.
Question
What are the problems of firm-oriented definition on market structure?
Customer-Oriented Market Structure Analysi

7. Focus vs Diversification
Focus Strategy (cont’d)
•Although the payoff of a small niche may be less than that of a large growing market, the
competition may often also be less intense.
•However, a focus strategy naturally limits the potential business. Therefore, profitable sales may be
missed.
•It is crucial whether a focus strategy involves meaningful Sustainable Competitive Advantages.
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Two Growth Strategies
Focus
– Keep a focus on present markets
Diversification
– Explore new markets with new products
1. Related
2. Unrelated
Variations of Focus Strategies
• Focusing the product line in order to enhance technicasuperiority
• Targeting a niche
• Focusing limited geographic area

8. Growth Strategies under a Focus
Keep a Focus on present markets
1. With present products
- increase market share
- Increase product usage
2. With new products
- add product features
- Develop a new-generation product for the same market
Diversification
• Approach new markets with new products
•Two types
– Related diversification
• The new business area has meaningful commonalities with the core business.
– Unrelated diversification
• Unrelated diversification lacks enough commonalities.
• The objectives are therefore mainly financial, to generate profit streams that are
either larger, less uncertain, or more stable that they would be otherwise.
Motivation for Diversification
Related Diversification
Unrelated Diversification
Exchange or share assets or competencies by
exploiting
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- Strong brand name
- Strong marketing skills
- Strong distribution capacity
- Manufacturing skills
- R&D capability
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Manage and allocate cash flow
Enter business areas with high ROI
prospects
Refocus a firm
Reduce risk by operating in multiple
product markets
Vertical integration
Risk of Unrelated Diversification
• Unrelated diversification, if unsuccessful, may actuallydamage the original core business by
diverting attention and resources from it.
•Managing the new business may be difficult because it requires different assets and resources.
Issues in Diversification
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The important issue in diversification is how to achieve synergy. In unrelated
diversifications, there is nopossibility of synergy.
Successful diversification requires a common core orunity represented by common markets,
technology, orproduction processes. Without such unity,diversification is unlikely to work.

9. Positioning
•Consumers generally use a small number of evaluation dimensions (two to four) when they think
about a particular product or product class
•Placing a product in consumer’s minds (relative to competing products)
Comparison of Physical and Perceptual Analysis
Physical Positioning
Perceptual Positioning
- Technical orientation
- Physical characteristics
- Objective measures
- Data readily available
- Direct R&D implications
- Large number of dimensions
-Customer orientation
- Perceptual attributes
- Subjective measures
- Needs marketing research
- Indirect R&D implications
- Limited number of dimensions
•Why Is Positioning Important?
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Learning about novel products is a very difficult and complex problem for customers.
Knowledge about a new product category is initially minimal and customers are exposed to
products sequentially-first the pioneers and subsequently later entrants.
As a result, customer preferences are likely to evolve over time.
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Three stages of a customer’s learning about an innovative product or service.
1. Prior to trial
2. Through trial of the pioneer product/service
3. After the advent of latent entrants
Preferences Prior to Trial
•Preferences prior to trial are likely to be weakly formed since:
– the category is novel and buyers know little
– the knowledge on the most important attribute or the best combination of attributes are not
obvious even though potential customers have objective information on product attributes.
•Therefore, potential customers are likely to be largely indifferent between possible offerings in the
new product category.
– Uniformly distributed ideal points across potential buyers
Preference Formation Through Trial of the Pioneer
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Buyers update their preferences through trial of the pioneer product.
Buyers try the pioneer product and if the product works, attribute the successful outcome to
the attribute combination of the pioneer product.
Buyers learn through trial of the pioneer how to value attribute combinations. Because their
experience is limited to a single product, they learn the pioneer’s attribute combination and
update their preferencesaccordingly.

10. Preference Change After the Advent of Late Entrants
When latent entrants are “me-too” products,
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Through learning process, customers perceive the pioneer as a prototypical product in the
product/service category.
As late entrants position closer to the pioneer, they become less distinct and the pioneer
more distinct, increasing the relative perceptual prominence of the pioneer.
Being closer to the pioneer, the me-too products are less distinct than the pioneer, so any
price reduction of the me-too products have a small impact.
Therefore, the more similar the pioneer and me-too products, the greater the relative
advantage of the pioneer.
Late entrants had better move away from the pioneer.
The differentiated late entrants can:
– Diminish the impact of the pioneer’s distinctiveness
– Become more distinct relatively to the pioneer
– Develop recognition for a market segment
– Increase their relative prominence in the chosen segment
If the late entrants succeed in differentiation, they can effectively increase their market share and
steal markeshare from the pioneer.
Therefore, for late entrants, it is very important to find a dimension to differentiate them from the
pioneer through careful decision on positioning.
What should pioneer do?
– To minimize the loss of market share produced by the advent of differentiated late
entrants, the pioneer should:
• Target the most profitable segment
• Carefully position it to attract the target market
– By doing this, the late entrants will have a great difficulty in finding profitable segments.
– By pre-occupying the most profitable market position, the impact of differentiated late
entrants will be diminished significantly.
Positioning Map (Perceptual Map)
•Consumers generally use a small number of evaluation dimensions (two to four) when they think
about a particular product or product class
•Objective of a positioning map To identify the relevant evaluation dimensions and to locate the
positions of existing and potential new products along these dimensions