CH-3-4 Positioning Yourself as an Entrepreneur for Market Opportunities – Small Business: An Entrepreneurs Plan : Book Guide

This Document Contains Chapters 3 to 4 Chapter 3: Positioning Yourself as an Entrepreneur for Market Opportunities I. Business Plan Building Block (SLIDE 3-2) This chapter will help you align your personal vision and values with your business mission, goals and objectives, and guide you toward developing a strategy. The chapter will also help you collect data that will allow you to focus on the most promising unmet needs and identify the industry or market trends—the “big picture”—for you and your business. II. CHAPTER LEARNING OUTCOMES (SLIDE 3-3, and SLIDE 3-4) After completing this chapter, students should be able to: • Connect your personal and business values with market opportunities. • Mesh your personal business objectives with one of the many opportunities in the marketplace. • Understand that your business objectives provide a positive and unique thrust to your business. • Narrow your industry research until viable gaps appear. • Gain insight into hidden pockets of the life cycle by using an industry chronology. • Understand how problems can be turned into opportunities. • Combine demographic (population) data with psychographic (picture of a lifestyle) data to produce a customer profile. • Identify heavy users of your product or service. • Brainstorm creatively. • Develop a strategy for your business using a SWOT analysis. • Use a matrix grid for blending your objectives with your research findings to produce a portrait of a business. • Create a mission statement for your business. III. LECTURE OUTLINE 1. Your Values (SLIDE 3-5, SLIDE 3-6, SLIDE 3-7, and SLIDE 3-8) Successful business leaders like Michael Egan of InSystems and Alex Tilley, owner and chairman of Tilley Endurables, constantly remind us that a business reflects the values and personality of the people that own and operate it. For example, in the InSystems case, page 61, we learned that the culture of a company and the way its employees behave is a reflection of the owner’s (Michael Egan) personality and values. Encourage your students that before they begin their business, they need to ask themselves what intrinsic values guides their day-to-day activities, behaviour, and decision-making. Values—the things in life that are important to them—serve as guideposts for their actions. They help your students deal with problems they have never seen before. Values, once crystallized, become the basis of their mission statement, goals, and strategy (see Box 3.1, page 60, and Figure 3.2, page 61). Encourage your students to complete Action Step 16, page 62, where they are encouraged to begin clarifying their values. 2. Welcome to Opportunity Selection (SLIDE 3-9, SLIDE 3-10, and SLIDE 3-11) The opportunity selection process is a method that helps them find market segments that match their personal vision and goals. Tell your students to Think of this process as a huge funnel equipped with a series of idea filters (see Figure 3.2, page 63). The opportunity selection process contains seven steps (SLIDE 3-9): Step 1: Identify your business goals. Define your business goals (e.g., security, money, and independence) in relation to your values. Remember that eventually your broad business goals will have to be refined to form specific objectives (Box 3.3, page 64). You are encouraged to complete Action Step 17, page 64—List your business goals for the next three years. Step 2: Learn more about your favourite industry. Explore in more depth an industry that interests you and one about which you have some knowledge or familiarity. Organize your search around such categories as life cycles, competition, recent industry breakthroughs, or target customers. Research your favourite industry. Complete Action Step 18, page 66. Steps 3 and 4: Identify promising industry segments and problems that need solutions. Select promising industry segments or market gaps—an area of the market where needs are not being met. The secret to focusing on market gaps is to find a target customera person or business that needs a particular product or service that you could provide. Next, list problems that need solutions within the selected market segment. Focus on the segments within your industry and find the right opportunity for you. Complete Action Steps 19 and 20, page 68. Step 5: Brainstorm for solutions. We first introduced brainstorming to you in Chapter 2. Brainstorming is a process used to generate fresh ideas (see Box 3.6, page 69). The goal here is to use brainstorming to generate creative solutions to the problems that are unique to the industry segment you have identified. Brainstorm for solutions for your business. Complete Action Step 21, page 69. Step 6: Mesh possible solutions with opportunities in the marketplace. A matrix grid is a screen through which ideas are passed in order to find solutions (see, for example, Figure 3.4, page 70). This technique can provide a structure to help mesh possible solutions with your goals and objectives. On the left side of your matrix or table, list your goals or objectives. Along the top list the possible solutions. Select a rating system to use for evaluating the match for each possible solution with each of your goals. The totals in each column of your matrix will indicate your best prospects. Action Step 22, page 70, will help you mesh possible solutions with your goals and objectives using a matrix grid. Step 7: Take stock and focus. It’s now time to take stock. What is your industry? What is your market gap? What are some opportunities for you? (SLIDE 3-10 and SLIDE 3-11) 3. Mission Statement and Your Mission (SLIDE 3-12 and SLIDE 3-13) A business mission is a concise statement of a company's purpose and aims. Mission statements are normally connected to the values and vision of the business owner. A mission statement expresses the nature and raison d’être or purpose of the business. According to Industry Canada, it usually covers the major functions and operations of the organization and answers the following six questions: • What are the products and services? • Who is the expected or target customer? • What industry is it in? • Which markets does it serve? • What is its major driving force? • Why will this business be successful? In some cases, the mission statement is embedded or followed up with a set of guiding principles or personal beliefs of the company/owner. (See, for example, the Vivienne Jones statement on page 72.) Encourage your students to complete Action Step 23, page 72, and begin drafting their mission statement. 4. Your Strategy (SLIDE 3-14 & SLIDE 3-15) A strategy is a broad program for achieving an organization’s objectives and thus implementing its vision. It creates a unified direction for the organization in terms of its many objectives. It also guides those choices that determine the nature and direction of an organization. Stress the importance of developing a strategy for your student’s business, it is helpful to have a context or framework in which competitive strategy is formulated. There are a number of business models that will help them begin to formulate their strategy. An excellent positioning tool is the SWOT approach. SWOT is an abbreviation, which refers to an analysis of internal strengths and weaknesses; and external threats and opportunities (see SLIDE 3-14). It is worth noting that an underlying weakness of the SWOT approach is its subjectivity. There is a tendency for an enthusiastic entrepreneur to overvalue the strengths and opportunities and undervalue the weaknesses and threats. Once your students have done their SWOT, encourage them to integrate it into the kind of strategic model suggested by Michael E. Porter of Harvard Business School. This framework (Figure 3.5, page 74) can be very helpful in building a sound strategy for their business (SLIDE 3-15). 5. Think Points for Success Review the following think points with your students: √ Your business must reflect your personal values. They provide you with guidance and direction in the conduct of your business and life. √ Select an opportunity by using the seven-step opportunity selection process as a guide. √ Align your mission statement with your personal values. The statement must state the purpose and aim of your firm. √ Establish a strategy that attains your vision. 6. Checklist Questions and Actions to Develop Your Business Plan (SLIDE 3-17 & SLIDE 18) Review the following think points with your students: √ How is your product or service addressing the needs of the target market and offering benefits? √ What are your business and personal values? √ Define your market niche. √ Define the idea filters you used to establish the business viability for your product or service. √ Complete your mission statement. √ Revisit and update your business goals and objectives under Checklist Questions and Actions on page 76 of Chapter 2. √ Identify market segments that have market potential. √ List industry problems that your business may face, and describe how you would address them. IV. SUGGESTIONS FOR GUEST SPEAKERS Some guest speakers to consider include: 1. A small business team. Since most small businesses are team efforts (two partners or one owner with a few employees), it would be interesting to invite a team of entrepreneurs who would arouse entrepreneurial energy in the class. Ask each team member to list business objectives, check for any disagreements or discrepancies, and point out later to your class the importance of making sure that all team members agree on objectives and goals. Though the topic of team building is not dealt with until Chapter 12, you could use this opportunity to get students thinking about it. 2. The smartest small business owner you know. Bona fide entrepreneurs have an uncanny marketing instinct. These entrepreneurs are everywhere. You can spot them by the glint in their eyes. Have this entrepreneur talk about how he or she found and took advantage of gaps in the market. 3. A professional marketer. You can find them in advertising agencies under “Advertising” in the Yellow Pages. Invite this person to talk about how market research can uncover opportunities. Encourage students to ask questions about how standard marketing research, which could be very costly, can help small businesses. V. CLASS PROJECTS 1. Have students set business or personal objectives. Show them how to make these objectives SMART (Box 3.3, page 64). 2. Ask the class to suggest possible idea filters—return on investment, return on time invested, growth for the next few years, number of people required (with proper skills), physical facilities required, etc. 3. An industry chronology is one of the most important pieces of research your students can do. It gets them in touch with the past. It grounds them for the future. You can use the strategy of contrast here. For example, Team A develops a chronology for lasers or biotechnology; Team B develops a chronology for printing; Team C develops one for surgical equipment; and so on. 4. Brainstorm business ideas in class. Uncover some hidden gaps. To carry the project further, develop a matrix grid so objectives are matched with a certain business idea. 5. Have students clip articles on businesses or industries they are interested in from The Globe and Mail, Profit Magazine, The Financial Post, or a local paper. Use some of these articles to begin each class. Students then become resource persons. VI. INTERNET EXERCISES 1. Mind Tools Students can familiarize themselves with and practice creative thinking techniques by visiting the Mind Tools’ Web site: http://www.mindtools.com/page2.html. Click on the “Practical Creativity” page. The section describes the following techniques: • Improving a product or service — Reversal and SCAMPER • Creating new products, services, & strategies: Attribute Listing, Morphological Analysis & Matrix Analysis • Generating many radical ideas — Brainstorming • Making creative leaps — Random Input • Widening the search for solutions — Concept Fan • Looking at problems from different perspectives — Reframing Matrix • Carrying out thought experiments — Provocation • A simple process for creativity — DO IT • A powerful integrated problem solving process — Simplex 2. Test Your Business Idea (Box 3.7, page 70) Visit the “From Ideas to Business Opportunities” page on the ACOA website: www.acoa.ca/e/business/entrepreneurship/ideas/appendixa.shtml Test your business idea by exploring these four themes. 1. Personal considerations. Does your business idea satisfy your personal goals and objectives? 2. Marketing considerations. Is there a market need for your product or service? 3. Production considerations. Will you be able to produce the required volume and quality of products and services? 4. Financial considerations. Can your operation satisfy the required financial goals? 3. SWOT Yourself and Others In order to understand your competitors, you’re going to have to snoop. As we will learn in our Chapter 12 case study, page 337, Mike McCarron is a founding partner of MSN—an award-winning trucking company. Link on to his Streets Smarts article “I’ve got a Secret”: http://www.shipmsm.com/Articles/SS200210%20-%20I%27ve%20Got%20a%20Secret.pdf What SWOT advice does McCarron give us on how to learn more about our competition? VII. SUGGESTIONS LESSON PLAN VIII. SUGGESTED ACTIVITIES ACTIVITY 1: Review and Overview 1. Review Chapter 2 and answer any questions. (Show SLIDE 2-2, SLIDE 2-3 and SLIDE 2-4, if necessary.) 2. Introduce Chapter 3 and show and briefly explain SLIDE 3-2, SLIDE 3-3, SLIDE 3-4, and SLIDE 3-5. Activity 2: Your Values Show and briefly explain SLIDE 3-6, SLIDE 3-7, SLIDE 3-8, and SLIDE 3-9. Optional mind mapping/values activity (30–45 minutes) 1. Encourage each student to take 15 minutes and mind map those values that are important to him or her. You might want to suggest they consult the list of possible values shown on page 61. 2. Have some of the students present their results to the class (15 minutes). The point here is that we all have different values and beliefs. 3. Encourage each student to use their mind maps to draw up a list of the most important values. 4. Show SLIDE 3-6 and SLIDE 3-7 and explain that their new business should embody their values. 5. Show SLIDE 3-8 and explain that the “right” business opportunity means that one’s business vision and goals must be in alignment. As examples, you may want to refer to Abebooks or the Kinnikinnick Foods cases in the opening vignette, pages 57. 6. Explain that a successful business opportunity is most likely to occur when a personal vision, based on values, connects with a business mission and matches with an unmet need in the marketplace. Show SLIDE 3-9 (based on Figure 3.1, page 59). Values: Optional Case study question (30–40 minutes) 1. Divide your students into groups of 4–7 students. 2. Ask them to review the Crazy Plates case study (pages 77). 3. Ask each group to answer the following case study question (Case Study Question 1 (b)) In the section entitled “Your Values” (page 60), you were provided with a possible list of personal and business values. Based on this list, state four key values that the Crazy Plates team exhibited. For each value, give an example of how the team displayed or acted on this value. 4. Have each group review their results. 5. Possible answers to this question are provided below in Section IX. Activity 3: Opportunity Selection See NETA Lesson Plan #1 Activity 4: Networking Break Encourage students to network and learn more about each other during the break. Activity 5: Test Your Business Idea (Box 3.7, page 70) For another method or approach to opportunity selection, encourage students to visit the “From Ideas to Business Opportunities” page on the Atlantic Canada Opportunities Agency (ACOA) Web site: http://www.acoa.ca/e/business/entrepreneurship/ideas/appendixa.shtml Show SLIDE 3-12 (E-Exercise, Box 3.7, page 74) and encourage students to test their business ideas by exploring the four themes. Activity 6: Mission Statement See NETA Lesson Plan #2 Activity 7: Your Strategy Show and explain SLIDE 3-15 and SLIDE 3-16 by using the discussion in the textbook, pages 73 and 74. You may also want to refer back to SLIDE 3-10 as an alternative method of formulating a strategy. Activity 8: Summary, Q&A, and Preparing for Chapter 4 1. Recap the key points for each objective (using SLIDE 3-2, SLIDE 3-3, SLIDE 3-4, SLIDE 3-5 if necessary). 2. Encourage students to complete the Business Plan Building Block on page 75. 3. Show SLIDE 3-17 and SLIDE 18 and encourage students to complete the Checklist Questions and Actions to Develop Your Business Plan (page 76). You may also want to briefly review the Think Points for Success (page 75). 4. Show SLIDE 3-19 and encourage students to complete the case study questions. Answers to the case study questions are contained in Section IX below. 5. Respond to any questions that students may have. 6. Encourage students to go to the Nelson Small Business site: www.knowlescastillo6e.nelson.com. Click on to the Test Yourself link and complete the true or false/multiple choice, short answer, and matching exercise for Chapter 3. 7. Have students read Chapter 4 in preparation for the next lesson. Some instructors may want to encourage students to also prepare a mind map of key points contained in Chapter 4. IX. CASE STUDY Note: This case study will help students put to practice their knowledge of the learning opportunities of Chapter 3. Some instructors may wish to use this case for a one-hour tutorial type seminar. Others may wish to use it as a case assignment. Case Background “Loser.” With a small grin curling up on her face, Janet Podleski savoured and stretched out the first syllable. In the late 1990s, we found Janet playfully teasing her sister and business partner, Greta—and not in private. Despite Greta’s renowned gourmet abilities in the kitchen, at that time she was without a man in her life and was the subject of her sister’s public jibes. It was part of their promotional shtick. And although “loser” was hardly a moniker most people would use to promote themselves, Greta and Janet are not most people, as we will soon learn. The Podleski sisters burst onto the business scene in the mid-1990s. They had joined forces with David Chilton, well-known author of The Wealthy Barber, and formed their own publishing company—Granet Publishing Incorporated. Each partner had his or her own role and responsibilities. David, the president, would manage the company, Janet would do the marketing, and Greta was the culinary expert. Their first cookbook, Looneyspoons, and its follow-up, Crazy Plates, were fun to read and hugely successful (over a million copies sold!). The books, peppered with cartoons and puns, contained healthy recipes with light-humoured names like “Jurassic Pork” and “Yabba Dabba Stew.” By the late 1990s, after their bestselling Crazy Plates cookbook hit the market, Greta and Janet felt the entrepreneurial itch and began to hunger for a new challenge. They didn’t want to write a third cookbook—at least not for the time being. They also rejected a line of sauces and turned down several book and TV proposals—including a very lucrative U.S. offer. “We didn’t care about being household celebrities,” recalled Greta. Then, after thorough market research and much soul searching, the trio decided to make the leap from the business of publishing and cookbooks into the highly competitive business of frozen food. Chilton and the Podleskis planned to target a growing trend of busy, “time-strapped” Canadians living in small family units, who wanted to quickly prepare healthy, delicious meals at reasonable prices. Cookbook buyers had been telling the team that they loved the recipes but didn’t have enough time every night to cook from scratch. According to Chilton, “Even the big food companies had told us that fast, prepared and healthy dinners was the direction the industry was heading.” The Podleskis and Chilton decided to establish a new company called Crazy Plates Incorporated. The compelling business vision for Crazy Plates was to put fun back into the kitchen and help time-strapped adults to prepare and eat healthy meals. The team’s business goal was to combine their entrepreneurial, culinary, and marketing skills and launch a line of healthy, reasonably priced frozen dinners. But the trio knew from the get-go that the frozen food business was highly competitive and filled with pitfalls—any one of which could put them under. They would have to overcome a litany of issues, such as creating meal kits with mass appeal; establishing and maintaining a pipeline for top-quality ingredients; packaging the food; transporting frozen items; making deals with grocers to get space on store shelves, preferably at eye level; projecting the correct volumes, so the supermarkets would have neither too much nor not enough food; and catching the attention of busy, already bombarded consumers. The team knew that anywhere along the line, a miss could mean a disaster—and all this in a business where even the large, multinational food companies worked on tight margins. Given all these road bumps, nobody had quite figured out how to make money on this emerging trend. So the Podleskis and Chilton knew they had a tough nut to crack. Still, recalls Greta, as they had with the cookbooks, “we wanted to do something that had never been done before and we wanted to be the best.” The entrepreneurial spirit beckoned the trio. But how would the market respond? After 15 months of “unpaid” work—developing recipes, testing the products, designing the packages, and finding suppliers and vendors—the first Crazy Plates Meal Kits went on the shelves of selected stores owned by Loblaw Companies Limited in the spring of 2001. Within two months, the market responded—with a thud. “We were on the wrong track,” Chilton lamented. The “seminal moment” came in June, following, of all things, a golf tournament. At 1:00 in the morning, Chilton phoned Greta and Janet. “We have to start over,” he told them. According to Chilton, there were two major problems with the initial launch. The packages were unattractive, and, more significant, the meal kits, originally designed to serve families of four or five, were too big and, at $13.95, too expensive. “We needed a new size, a new price point, and new packaging,” said Chilton. “It was awful,” Greta painfully remembers. There were 50,000 dinners in the freezers at the stores and at the warehouse. Chilton ended up paying $600,000 to the grocers to buy the food back. Over the summer months, at supermarkets across Ontario, Greta and Janet could be found handing out the Crazy Plates dinners, one by one, along with a letter admitting they’d goofed and asking customers to check out their new product line that fall. It was a costly exercise, but it was critical to maintain goodwill with both their customers and suppliers. They could have given up, but they didn’t. This first disaster actually propelled the team into a higher entrepreneurial gear. In the evenings, Greta, the team’s “Chief Culinary Advisor” (CCA), scrambled to rework the kits. Janet, the marketer and self-declared kitchen klutz, created the Web site and planned a new promotional strategy. David renegotiated with suppliers and grocers, and began looking for investors. Chilton found his answer to the money issues at the first door he knocked on. William Holland, a long-time Chilton fan and the chief executive of CI Mutual Funds Incorporated, drove an hour and a half from Toronto to Kitchener to have dinner at Greta’s 1860s farmhouse home and test kitchen. “He didn’t ask us many business questions,” Chilton said, thinking back. Greta had worried that “maybe we hadn’t sold him hard enough.” But the next day, Holland told Chilton, “Tell me when you want your cheque.” Although Holland considered the food business “outrageously competitive,” he was swayed by the quality of the food and by Chilton’s impressive track record. “I didn’t even know I was eating the frozen food,” Holland recalled. He personally invested $1 million into the Crazy Plates venture, contributing most of the outside capital Chilton had been seeking. A second private investor put up the remaining $250,000. That, with $1 million directly from Chilton, was the company’s financial food. Today, with Chilton and the Podleskis at the helm of Crazy Plates, their Meal Kits have no resemblance to a loser. Crazy Plates Meal Kits take 20 minutes or less to cook but require the consumer to have a hand in their making. Each one is designed to feed two to three people; they are easy to prepare and priced competitively, retailing at stores like A&P for $7.95 and sometimes even a little less. As for quality and taste? Their Meal Kits are an award-winning delight and healthy to boot. According to Greta, “our Meal Kits taste great and they’re simple to make. That’s my responsibility, and that’s one of the reasons I am proud to say our Meal Kits have been voted Best New Grocery Product of the Year by the Canadian Grocery Industry.” Since the speed bumps—some resembling rather large potholes—of the early 2000s, the team has gradually expanded its retail distributorship. In addition to A&P, for example, the Meal Kits are now available at additional Ontario stores like Food Basics, Dominion, Loeb, and The Barn. In the summer of 2005, they added to their product mix, launching a line of multigrain thin-crust pizzas into the market. These were the first multigrain pizzas in the Canadian marketplace. They now sell more pizzas than meal kits! In the fall of 2006, they introduced an exciting new addition to their distribution channel. The Crazy Plates team entered the U.S. market, selling their pizzas in select southeastern states. As for the Podleskis, in early 2003 they committed to writing another cookbook. According to Greta, “After two years of long days and sleepless nights, we have now released our best book to date.” Eat, Shrink, and Be Merry! hit the shelves in September 2005. It’s another bestseller—of course. The sisters are also working on a TV show and a line of cooking tools and gadgets. Today, Greta and Janet have become almost as much the product as the food itself. With their sexy appeal and overflowing enthusiasm, the Podleskis still present themselves as a wacky, struggling pair up against the giants. Last time we saw them, they had again plunked themselves in a large retail food outlet, joking, poking fun at each other, and finishing each other’s sentences. On their display table were tasty product samples and stacks of Eat, Shrink & Be Merry!—each copy ready to be signed with a frilly pen and a thank you. Understandably, we did not hear the word “loser” this time. These are two hard-working entrepreneurs and very shrewd “cookies” who are passionate about healthy food. Case resources Special thanks to Greta Podleski for her input, updates, persistence, wonderful sense of humour, and infectious enthusiasm. • Katherine MacKlem, “Crazy Like Foxes, The Looneyspoons Team is Putting Its Money Where Your Mouth Is,” Maclean’s, March 4, 2002: http://www.macleans.ca/topstories/business/article.jsp?content=64411 (accessed July 2006). • Crazy Plates home page: http://www.crazyplates.com/dave.html (accessed July 2006). • Professional Speakers’ Bureau Inc.: www.prospeakers.com/topic/?load=chilton (accessed July 2006). Case Study Questions and Answers 1. Values In this chapter, you learned the importance of aligning your personal vision and values with the market opportunities. This “alignment” was a major factor contributing to the success of Cathy Waters of Abebooks and Ted Wolff von Selzam of Kinnikinnick Foods, featured in the opening vignettes. a. Briefly describe what is meant by the term values. Answer: Values are the things in life that are important to us. They serve as guideposts for our actions. They help us deal with problems we have never seen before. Values refer to the fundamental beliefs and principles that guide an individual's or organization's behavior and decision-making. They represent what is considered important and meaningful, shaping how goals are pursued and how challenges are addressed. Aligning values with market opportunities helps ensure consistency and authenticity in business endeavors. b. In the section entitled “Your Values” (page 61), we provided you with a possible list of personal and business values. Based on this list, state four key values that the Crazy Plates team exhibited. For each value, give an example of how the team displayed or acted on this value. Answer: 1. Innovation: The Crazy Plates team consistently developed creative solutions for customizable plates, such as unique designs and features. 2. Customer Focus: They actively engaged with customers to understand their needs, leading to personalized and satisfying products. 3. Integrity: The team maintained high ethical standards in sourcing materials and ensuring product quality. 4. Teamwork: They collaborated effectively, leveraging each member's strengths to drive the project forward and achieve shared goals. Note: This question could provide the students with an opportunity to practise brainstorming. Get students into groups. Have them brainstorm all possible values. Have them mind map their group results. Then have students choose from their mind maps those values which the Crazy Plates team exhibited. Possible values exhibited by the Crazy Plates team: 1. Continuous improvement The Podleskis and Chilton consistently showed the desire to improve their product. • Example 1. According to their Web site, Greta never stops “tinkering.” She does not stop until she is unable tell the difference between the Crazy Plates Meal Kit and the cooked-from-scratch version. Even then the Crazy Plates team is not satisfied. They further test the product by giving out hundreds of samples to Canadian families. (The Meal Concept: http://www.crazyplates.com/who.html) • Example 2. Just after the 2002 launch, Chilton was busy trying to find ways to further improve through the reduction in costs and increase of sales. “We can’t be a cute success story,” he says. 2. Creativity and innovation Creativity and innovation are key values shown by the team. • Example 1. After completing their second book, the Podleskis had several offers for a new business venture—TV cooking shows, for example. But they refused. They wanted a new challenge. They valued creativity and innovation and this is a major reason why they entered the risky business of pre-prepared meals. “Like our cookbooks,” says Greta, we wanted to do something that had never been done before. • Example 2. Chilton was a successful author, publisher, and public speaker. He too craved for a new challenge. 3. Concern for others (customer delight) Chilton and the Podleskis paid special attention to the needs of the customer. They valued their customer needs. • Example 1. Greta created the recipes and then tested them rigorously in consumer taste trials. Their goal was to please the customer. • Example 2. “We do it for them” says Janet Podleski. “They come to us with trust and we’re leveraging that relationship with Crazy Plates.” 4. Loyalty Loyalty to the team, customers, and suppliers was an important value of the Crazy Plates team. • Example 1 (loyalty to vendors). When their first product failed to meet customer expectations, Chilton paid $600,000 to buy the food back from the grocers. • Example 2 (loyalty to customers). Over the summer the Podleskis gave away the first meal kits one-by-one to customers with a note of apology and asking customers to check out the new product line in the fall. 5. Teamwork Throughout this whole case, the Podleskis and Chilton worked together as a team. • Example 1. When their first product failed, they worked together as a team, drawing on their particular strengths, to correct the problems. • Example 2. Chilton used his finance skills to find new funding. Greta used her culinary skills to re-work the meal kits and Janet focused on her marketing strengths on the Web site development. 6. Work ethic Hard work and a strong work ethic is a key value of many successful entrepreneurs—as shown in almost all the cases that we highlight in this text. This case is no exception. • Example 1. The Podleskis, spent 15 months developing recipes, finding suppliers, and designing packages. They had a passion for food and were willing to work long hours to please their customers. • Example 2. When their first product launch failed, Chilton was ready to start over and spend the next 12 months finding the investment and managing the team in preparation for a second launch. 7. Concern for society Both the Podleskis and Chilton showed a concern for society and helping others. • Example 1. The Podleskis were passionate about healthy food and good eating. Their cookbooks had a healthy eating “low fat” philosophy. The Crazy Plates meal kits reflected this value. The meals were developed to help customers to quickly whip up a homemade, great tasting, and healthy meal. • Example 2. Chilton’s book, The Wealthy Barber showed his concern for helping others. For example, according to Maclean’s magazine, he inspired thousands of Canadians to “save their way to prosperity.” 2. Passion and vision According to David Chilton and this chapter (see Box 3.2 and http://www.prospeakers.com/topic/?load=chilton) passion and a clear business vision are critical to the success of a new venture. These are two major reasons why Chilton teamed up with the Podleskis. Briefly describe Janet and Greta Podleskis’ passion and corresponding business vision for Crazy Plates. Answer: Janet and Greta were passionate about healthy food. To a large extent, their first business adventure into cookbooks was successful because of this personal vision to help Canadians eat healthy food. From day one, their compelling business vision for Crazy Plates was to put fun back into the kitchen and help time-strapped adults to prepare and eat healthy meals. 3. Market segmentation Chilton and the Podleskis found a market segment or niche that was consistent with their visions and values. What was the Crazy Plates market segment/ niche? Answer: The Meal Kits product tapped into a growing (psychographic) trend of consumers wanting healthy dinners, and needing them fast. Within this market trend, the Crazy Plates primary market niche or segment was: Busy “time-strapped” Canadians, living in small family units, who wanted to quickly prepare healthy, delicious meals at reasonable prices. 4. Mission statements Note: An alternative question (provided by one of our reviewers) could relate to the “elevator pitch” from Chapter 2, page 50. 1. Start by reminding students that an elevator pitch is a clear, concise description of your business idea that can hook your listener (in this case, a venture capitalist) into responding “tell me more.” 2. Form groups in class. Each group develops their elevator pitch. A “pitcher” is appointed to present the group results. A student vote could select the “pitcher of the week” award, or whatever. Mission statements help successful entrepreneurs focus on their market niche. a. What is a mission statement? Answer: A mission statement is a statement of the company’s purpose and aims. A mission statement is a brief, clear declaration of an organization's core purpose and focus. It outlines the primary goals and values that guide its activities and decisions. A well-crafted mission statement helps align the team and communicate the organization's purpose to stakeholders and customers. Note: You might want to explain to students that mission statements are normally connected to the values and vision of the business owner(s). In small business, a mission statement is concise (about 25 words or fewer); and briefly describes the product or service, who the target customer is, and the specific niche or segment. b. Draft a mission statement for Crazy Plates. Answer: A possible mission statement for Crazy Plates could be: We are in the frozen food industry. We provide healthy, delicious, pre-prepared meal kits for small, family units who are “time starved” and don’t have the time to cook from scratch. Note: This is a concise mission statement and it is one option. As we noted in the text, pg. 71, some students may want to draft a mission statement using the following criteria: • What are the products and services? • Who is the expected or target customer? • What industry is it in? • Which markets does it serve? • What is its major driving force? • Why will this business be successful? Some students may also want to expand this statement by including a core set of values and beliefs, concern for stakeholders and the environment, or concern for employee well-being. c. Crazy Plates first product launch was not successful. Briefly explain why. Answer: According to Chilton, the Crazy Plates first product launch was unsuccessful for two reasons. First, and most important, their first product did not satisfy the needs of their target market. A well thought out mission statement may have prevented this mistake. The meal kits were too big (designed to serve larger families of four or five) and the price was too expensive ($13.95). According to Chilton, the second reason was that the packaging was unattractive. Their product needed to get “shelf space attention” in a crowded market. 5. Trends can create opportunities In both this chapter and Chapter 2, we learned that trends can create opportunities. a. Briefly explain how four market trends have contributed, so far, to the success of Crazy Plates? (To refresh your memory on trends, you may want to link on to: http://www.acoa.ca/e/business/entrepreneurship/ideas/sectioniv.shtml) Answer: Possible trends include: • Healthy lifestyle. There is a growing trend for Canadians to be more concerned with their health. This concern can be seen in the significant changes in eating and exercise habits. • Changing role of women. Women are a growing percentage of the workforce. The changing role of women means that they have less time for healthy food preparation. • Smaller families with dual income earners. This trend means that there is less time for Canadian wage earners to prepare healthy meals. • Small indulgences. There is a trend for more Canadians to feel they deserve to pamper themselves with small, high quality indulgences. • Cocooning. The desire of more Canadians to stay at home, safe and secure with close family and friends • Poverty of time. Increasingly, people are finding it harder to do it all. Crazy Plates reduces the time it takes to prepare healthy food. • Aging. Canadians aged 50+ represent 40 percent of all Canadian households, and the fastest growing group in the country. According to Chilton, "The products ended up being much better suited to that demographic than we imagined. Seniors want to eat healthy food, they don't want to cook, and they do not like to microwave dinner." (http://www.strategymag.com/articles/magazine/20040126/seniors.html?print=yes ) • Quality. As we learned in Chapter 2, Canadians consumers have become more informed, individualistic, and demanding. They want quality products, especially when it comes to food • Internet. The development of the Crazy Plates Web site reflects, to some extent, the fact that the team is taking advantage of the Internet to help market and sell their products. 1. Customization Trend: Crazy Plates capitalized on the growing desire for personalized products by offering custom designs. 2. Eco-Friendly Products: They tapped into the market demand for sustainable and environmentally friendly products. 3. E-Commerce Growth: Leveraging online sales platforms allowed them to reach a broader audience and streamline distribution. 4. Health and Wellness: Emphasizing safe, BPA-free materials aligned with increasing consumer awareness about health and safety. b. What is a SWOT? If you were to do a SWOT analysis of Crazy Plates, in what sections of your SWOT would you be discussing trends? Answer: A SWOT is an abbreviation for internal strengths and weaknesses and external opportunities and threats. Talk about positive trends in your discussion of external opportunities and negative trends in your section on external threats. 6. Problems create opportunities The first Crazy Plates product launch was a “disaster.” But as we learned in these first three chapters, successful entrepreneurs are those who continually look for opportunities. Chilton and the Podleskis attacked this problem in a positive fashion. They used this “time to start over” as a learning experience and a time to create new opportunities. Briefly describe three opportunities that the Crazy Plates team created as a result of this first product launch. Answer: Here you might want to introduce students to the “7/11 principle—every problem (seven letters) is an opportunity (eleven letters) in disguise. Several opportunities evolved as a result of this first major failure: • Chilton paid $600,000 to buy the food back. In this way, Crazy Plates created an opportunity to improve goodwill and loyalty with their major vendor (Loblaws). Crazy Plates new product launch, was strengthened through an exclusive distribution contract with Loblaws. • The Podleskis handed out some 50,000 free meal kits to their customers with a note of apology. This created an opportunity for the Podleskis to meet with and learn from their target customers. They also used the occasion to develop a renewed awareness and trust with their customer. • They created an opportunity to improve the financial side of their business. As a result of the failure of the first product launch they were able to get a million dollars from William Holland and a further $250,000 from another private investor. They were then able to re-enter the market with strong financial partners. • This gave them an opportunity to improve their Web site and marketing strategy. • With their renewed focus and strategy, the Crazy Plates team found a new demographic target customer—the seniors’ market. According to Chilton, this demographic wants to eat healthy food, doesn’t want to cook, and does not like microwave dinners. Chapter 4: Profiling Your Target Customer I. Business Plan Building Block (SLIDE 4-2) This chapter will help you to collect information to understand, develop a profile of, and connect with the target customer. Chapter 4 will also help you to begin to formulate their market strategy. II. CHAPTER LEARNING OUTCOMES (SLIDE 4-3 and SLIDE 4-4) After completing this chapter, your students should be able to: • Understand that your key to survival in small business is the target customer. • Recognize three kinds of customer groups. • Use primary and secondary research to profile your target customer. • Simplify the messages you communicate through your business. • Discover how popular magazines aim at the target customer. • Match your target customer with what he or she reads, watches, and listens to. • Become more aware of, and start being on the lookout for, potential partnerships, alliances, and associations. • Recognize the market and the target customers who are about to surface. • Research your prospective target customers and refine your mission statement. • Visualize your business and target customer. III. LECTURE OUTLINE 1. The Power of Profiling (SLIDES 4-5 to 4-11) An important trend in marketing centres on the concept of customer relationship marketing—the development of long-term, mutually beneficial, and cost-effective relationships with your customers (SLIDE 4-5). Customer relationship marketing emphasizes a market-pull approach. The key to getting your student’s product or service to the marketplace is to design their business according to what the customer wants (market pull) rather than trying to make the customer purchase what they want to produce (product push). A market-pull strategy will require them to: • profile their target customer (TC); • determine what their TC wants; and • adapt or create a product or service to satisfy this want or need. Customer relationship marketing and the market-pull approach explained, to a large degree, the success of My Virtual Model and Critical Mass in the opening vignettes and Box 4.1, page 83. These thriving companies knew who their target customers were and what they wanted. They were also prepared to work with their customers over the long haul. Their goal was to help other businesses implement a one-to-one marketing (one-2-one) strategy—the process of identifying the specific needs of each customer, repeatedly satisfying those needs, and creating a long-term value-added relationship. These two firms have jumped on to the mass customization trend discussed in Chapter 2, page 40, by helping their clients identify the specific needs of each customer (consumer); repeatedly satisfying those needs, and creating a long-term relationship. Other examples of one-2-one marketing are provided in Box 4.2, page 84. An understanding of the needs of your student’s customer is their key to survival in small business. For that reason, your students will have to do a profile of their customer. Profiling is about describing both needs and behaviour. Entrepreneurs should be on the lookout for three types of customers (SLIDE 4-6): 1. Primary. The primary customer is most likely to use your product or service and could be a heavy user. 2. Secondary. The secondary customer is not a heavy user and may not be apparent at first. Sometimes this TC leads to the third type of customer. 3. Invisible. The invisible customer appears after you open the doors. There are two types of customer profiles (SLIDE 4-7): 1. Consumer or End-User Profile. If the TC is the consumer or end-user, your student’s profile will likely require demographic and psychographic profiling. Demographics (SLIDE 4-8) includes characteristics such as age, sex, income, and where the TC lives. A good source of demographic information is primary research such as surveying and interviewing. The Census (Box 4.3, page 87) and other Statistics Canada information (such as the Market Research Handbook) are good sources of secondary research. Detailed information by postal code is also available from Canada Post (see Action Step 24, page 88, for example) Census information is comprehensive and detailed but a major disadvantage is timeliness. Psychographics (SLIDE 4-8 and SLIDE 4-9) explores the whys and wants of consumer purchases. It is a process of segmenting the population by lifestyles and values, recognizing that people in each segment or slice have different reasons for making a purchase. Psychographic analysis groups (or segments) individuals into specific categories based on attitudes, needs, values, and “mental postures.” It helps marketers, researchers and business owners understand why people buy specific products and services. What are their motivators? Why does one product appeal more than another? There are a number of “proprietary” psychographic models in use in North America. Two of the most prominent are the VALS (value and lifestyle model) from SRI International and the Goldfarb model. In Action Step 24, page 88, encourage your students to become more comfortable with psychographics by profiling themselves using the VALS psychographic model. Several “for profit” companies can also provide them with a psychographic or lifestyle profile for a specific area. Media sources (SLIDE 4-10 and SLIDE 4-11) are a good way to learn about the psychographic profile of your TC. The Mina Cohen case, page 90, provides one example. Encourage your students to complete Action Step 25, page 92—Research Specific Magazines in Your Business Area. This will help them get started on conducting research on their target customer at little or no cost to them. 2. Business-to-Business (B2B) Profile. Many small businesses do not deal directly with the consumer or end-user. They are part of the supply chain because they offer their services or products, often on a contract basis, to other businesses and not to the end-user. As exemplified by Critical Mass and My Virtual Model, in the opening vignettes, the outsourcing trend of the 1990s has been a major reason for the growth in these business-to-business companies. Supply chain or B2B firms need a business profile of their TC. This profile would contain such information as products or services that the TC produces and sells, its exports, technologies, contracts, and so on (SLIDE 4-12, which is based on Box 4.5, page 92). Action Step 26, page 93, will assist your students to get started in doing a B2B profile. A major goal of supply chain companies is to create partnerships, ventures, alliances, or associations with their TC (SLIDE 4-13, which is based on Box 4.6, page 93). 2. B2B or B2C, Which One Will It “B”? (SLIDE 4-14) Encourage your students to think about the opportunity to sell a product or service to businesses as well as consumers. As discussed in Arbour Environmental Shoppe, page 94, they can benefit from both worlds. For example, your students can start a small gift store. Why not prepare corporate gift packages? Those busy executives with oodles of money and poverty of time can have their special gifts sent out to their loved ones or business associates with a quick telephone call or at the click of a button—if your students have a Web site. 3. Primary Research Can Help Too (SLIDE 4-15 & SLIDE 4-16) Field interviewing and surveys are two important primary research tools that can help them get a more accurate profile of their target customer (SLIDE 4-15). 1. Field interviewing target customers: Suggest to students how Julia Gonzales used interviewing to help her locate her new store, page 95. • Test their TC profile, which they have developed from their secondary research, against reality. • Ask questions of their potential customers. • Encourage them to complete Action Step 27, page 96, to refine their mission statement and understand their target customer through interviewing. 2. Surveying: • Elizabeth Wood used the survey technique to get her started on her own business, page 96. • Encourage your students to develop a questionnaire and identify a location at which to conduct the survey. • Suggest that they get permission from the owner of the location. As a bargaining tactic, suggest to your students to tell the owner that the information they will discover may also be useful to him or her. Other sources of primary research (mentoring, experiential, networking and competitive research) are provided in SLIDE 4-16. These “other sources” were not specifically addressed in this chapter. 4. Visualize Your New Business and Target Customer (SLIDE 4-17) A business vision is a mental picture of a business, product, or service at some time in the future. Suggest to students that they may not get there, but this vision provides them with guidance and direction, and in many cases it’s the raison d’être for their persistence and passion. It’s the driving force. Many e-types like Louise Guay of My Virtual Model and Adrienne Armstrong of Arbour Environmental Shoppe are dreamers. Their best ideas come in the form of visions. Suggest to your students that if they can identify with this e-type, then we encourage them to have the courage to follow their dreams. Encourage them to record their dreams in their 24/7 Adventure Notebook. Suggest that they visualize their customer—primary, secondary and even invisible customers and type of business they want. 5. Think Points for Success Review the following think points with your students: √ Psychographics is derived from psyche and graphos, Greek words for “life” or “soul” and for “written,” respectively. Thus, psychographics is the charting of your customer’s life, mind, soul, or spirit. √ Profiling draws a “magic” circle around your target customer. Placing the customer in the centre of that circle transforms the whole arena into a bull’s-eye. √ Segmenting is like slicing pie; it allows you to help yourself to a piece of the pie. √ You can be both a B2C and a B2B business √ You can save a lot of steps by using market research that has been done by others. √ Contact major media sources like magazines and newspapers. They employ market researchers. √ Visualize your new business and target customer. √ Be sure to use the Internet. 6. Checklist Questions and Actions to Develop Your Business Plan (SLIDE 4-19) Review the following Checklist Questions and Actions to Develop Your Business: √ Profile your target market in terms of primary, secondary, and invisible customers. √ What do the results of your primary research questionnaire tell you about your target market? √ What information have you developed about your target customer from your secondary research? √ What characteristics are unique or clearly definable about your target customer? √ What is the best way to reach your target market? IV. SUGGESTIONS FOR GUEST SPEAKERS Some guest speakers to consider include: 1. An advertising manager for a newspaper or magazine. Ask the manager to talk about selling advertising space, how he or she does it, and how he or she gathers data to convince customers. 2. A market researcher for an advertising agency or a mail-order firm. Have this speaker talk about mailing lists, demographics, psychographics, selling, gathering data, and interviewing. 3. A magazine editor. Invite him or her to talk about how editorial copy is dovetailed with advertising. Ask him or her to bring in a media kit. V. CLASS PROJECTS 1. Have students bring their favourite magazine to class. Using the techniques in the section, “What We Can Learn from Media Sources” (page 89), analyze the ads and then profile the target readers of some of the magazines. Start by considering age, sex, income, occupation, education, residence, etc. 2. Discuss with students the magazines or periodicals they read or buy regularly and then try to discover which companies regard them (the students) as target customers. 3. What products do your students buy regularly? Have them bring lists to class with numbers to indicate the amount they use. Try to identify the heavy users among the group. Let students compare their likes and dislikes with the “Nexus Generation” profile (see Box 4.4, page 88). 4. Have students make up TC interview questions they would ask if they were in retail, service, or manufacturing. Write these on the board and rework them until they are simple enough to be understood by a wide market. Have students test these questions by interviewing each other in class and then interviewing friends and relatives. Keep refining the list until you have a set of market research questions that could be sold to a marketer. After your class has established a list of practical market research questions, send your students out to a shopping centre to probe target customers. It is often better to put students in teams on these projects. VI. INTERNET EXERCISES 1. E-Retailer Profiles (Box 4.2, page 84) Link on to Ebiz.Enable. http://strategis.ic.gc.ca/epic/internet/inee-ef.nsf/en/h_ee00199e.html. Here you will find profiles and assessments of a number of Canadian e-retailers, service and technology cases. Learn from their successes, and their mistakes. Click on to at least one of the profiled links: • How is the Internet helping this company provide a one-on-one marketing strategy? • How does this company build a relationship with its customer? • What were the lessons learned? • What were the successes and challenges? 2. One-to-one marketing Click on to the “Managing change” site: http://www.managingchange.com/onetoone/overview.htm. What are the benefits of one-to-one marketing? 3. Canadian Company Capabilities Have students profile three firms using the “Canadian Company Capabilities” database: http://strategis.ic.gc.ca/sc_coinf/ccc/engdoc/homepage.html. Use Action Step 26, page 93, as a guide. 4. My Virtual Model Have students click on to My Virtual Model Web site and go shopping (http://www.myvirtualmodel.com/en/index.htm). What was their experience? What did they like about e-shopping? What did they dislike? What improvements would they suggest? VII. SUGGESTED LESSON PLAN VIII. SUGGESTED ACTIVITIES ACTIVITY 1: Review and Overview 1. Introduce Chapter 4, show and explain SLIDE 4-2, SLIDE 4-3 & SLIDE 4-4. Activity 2: The Power of Profiling 1. Show and briefly explain SLIDE 4-5. 2. Show and review SLIDE 4-6 and explain that the main purpose of this chapter is to help students profile the “heavy” customer (i.e., the primary and secondary groups). However, once they get into business, a new customer may arrive on the scene—one that was not apparent earlier. This is the “invisible” customer. Businesses must always be ready to change and take advantage of this new opportunity. As a result, customer profiling must become a reflex. You may wish to review the Ross Angus case, page 85, and what he found out about his invisible customer. Activity 3: Two Types of Customer Profiles See NETA Lesson Plan #1 Activity 4: Networking Break Encourage students to network and learn more about each other during the break. Activity 5: Demographics and Psychographics Show and explain SLIDE 4-8 and SLIDE 4-9. Optional group activity (20–30 minutes) 1. Show and briefly explain SLIDE 4-7 and SLIDE 4-8. Explain that the key to consumer profiling in today's market is psychographics. 2. Put students into groups and get them to read about the Nexus Generation (Box 4.4, page 88). According to D-Code, there are seven key psychographic likes and dislikes of the Nexus generation. Ask each group to evaluate the extent to which the members reflect the Nexus Generation? What about the parents of the students? 3. After the group discussion (15 minutes), have each group summarize the results. Activity 6: Media Sources Can Help Show and briefly explain SLIDE 4-10 and SLIDE 4-11. Activity 7: Business-to-Business Profile 1. Show and explain SLIDE 4-12. You may want to refer to Critical Mass and My Virtual Model cases as examples of B2B companies, pages 91. Action Step 26, page 93, will help students started in doing a B2B profile. 2. Show SLIDE 4-13 and emphasize that a major goal of supply chain companies is to create partnerships, ventures, alliances, or associations with their target customers. Activity 8: B2B or B2C (20–30 minutes) Show and briefly explain SLIDE 4-14. Optional Group Activity 1. Put your students into groups of 4–7 students. 2. Ask them to recall the experience of Adrienne Armstrong, page 94. 3. Ask each group to choose a business and suggest ways that this business can be both a B2B and B2C business. 4. Have each group summarize their results. Activity 9: Primary Research See NETA Lesson Plan #2 Optional class activities (30–40 minutes) 1. Ask each student to take 15 minutes and mind-map primary and secondary sources of information that might help them identify and describe their target customer. Remind students that they might want to consult their 24/7 Adventure Notebooks. 2. Draw a circle on the blackboard and ask students to help you map out or record all the potential sources of information based on their individual mind maps. 3. You could also refer students to Action Step 26, page 93 and Action Step 27, page 96. Note: As an alternative activity, you may wish to invite a guest speaker or conduct a class project. Refer to the list of suggested guest speakers (Section IV) or class projects (Section V) in this chapter of the Instructor’s Manual. Activity 10: Business Vision Show and briefly explain SLIDE 4-17. You may want to explain that their best ideas come in the form of visions. You may want to refer to notes contained on SLIDE 4-17. Activity 11: Summary, Q&A, and Preparing for Chapter 5 1. Recap the key points for each objective (using SLIDE 4-2, SLIDE 4-3, and SLIDE 4-5 if necessary). 2. Encourage students to complete the Business Plan Building Block on page 99. 3. Show SLIDE 4-19 and encourage students to complete the Checklist Questions and Actions to Develop Your Business Plan, page 100. You may also want to briefly review the Think Points for Success, page 99. 4. Show SLIDE 4-20 and encourage students to complete the case study questions. Answers to the case study questions are contained below in Section IX. 5. Respond to any questions that students may have. 6. Encourage students to go to the Nelson Small Business site: www.knowlescastillo6e.nelson.com. Click on to the Test Yourself link and complete the true or false/multiple choice, short answer, and matching exercise for Chapter 4. 7. Have students read Chapter 5 in preparation for the next lesson. Some instructors may want to encourage students to also prepare a mind map of key points contained in Chapter 5. IX. CASE STUDY Case Background In the opening vignette, we highlighted My Virtual Model Inc. (MVM), a successful company headed up by two Canadian entrepreneurs, Louise Guay, and Jean-François St-Arnaud. Now we want you to link on the sites provided below and learn more about this innovative company. Our case study questions will help you put to practice what you have learned from this chapter and improve your customer-profiling skills. Case Resources The following online sites will help you answer the case study questions. We suggest that you begin with the two case study Webcasts: Innovation in Canada, The Practice of Innovation: http://innovation.ic.gc.ca/gol/innovation/site.nsf/en/in04697.html. Be sure to view both Webcasts. • Innovation in Canada, The Practice of Innovation, My Virtual Model, Case Profile (text version): http://innovation.ic.gc.ca/gol/innovation/site.nsf/en/in04706.html • Innovation in Canada, The Practice of Innovation, My Virtual Model, Case Profile (text version): http://innovation.ic.gc.ca/gol/innovation/site.nsf/en/in04712.html • Innovation in Canada, “Case 6, My Virtual Model Inc.” http://innovation.ic.gc.ca/gol/innovation/site.nsf/en/in04211.html • My Virtual Model Home page: http://www.myvirtualmodel.com/en/index.htm • Lands’ End, About Lands’ End: http://www.landsend.com then click on “About Us” Lands’ End, Direct Merchants: http://www.prnewswire.com/mnr/landsend/11847/ Case Study Questions 1. Customer relationship marketing In this chapter, we discussed an important marketing strategy called customer relationship marketing, which emphasizes a market-pull approach and one-to-one marketing. a. What is customer relationship marketing? Briefly explain how My Virtual Model made use of this strategy. Answer: Customer relationship marketing is the development of long-term, mutually beneficial, and cost-effective relationships with your customers, page 79. My Virtual Model worked with Lands’ End over a long period of time to develop a product that met its customer’s needs. Its marketing approach was to establish a long-term working relationship with Lands’ End to improve its customer conversion rate and average order value in addition to reducing its return rate. Lands’ End also believed in the benefits of relationship marketing. Senior executives at Lands’ End knew it would take time to perfect the model and they were prepared to partner with My Virtual Model over the long haul. b. Briefly explain the market-pull approach to marketing. How did My Virtual Inc. use this approach to get their first customer, Lands’ End? Answer: In a market-pull approach to marketing you design your business around what the customer wants rather than try to make the customer purchase what you want to produce. You determine what the customer wants through a customer profile and then adapt or create a product or service to satisfy this want or need, page 79. Lands’ End, an online and catalogue retailer, had a large problem with returns—due mainly to the fact that people could not see themselves online. My Virtual Model (MVM) had an idea for a product—a virtual model that that did not exist yet—which could theoretically resolve this problem. MVM had found a market need. It then worked with Lands’ End to design a product that would satisfy this particular need. The virtual model was designed to resolve Lands’ End specific customer (market) need. c. Explain the term one-to-one marketing. How did My Virtual Model Inc. help Lands’ End to take advantage of this strategy? Answer: One-to-one marketing is the process of identifying the specific needs of each customer, repeatedly satisfying those needs, and creating a long-term value-added relationship, page 83. The My Virtual Model technology makes it much easier for the Lands’ End customers to satisfy their specific and individualized needs. Each customer becomes his/her own virtual tailor. The goal is to provide each customer with exactly what he or she wants in the privacy of their own virtual change room. With a virtual model, the customer becomes the centre of the attention, and the world revolves around the customer. 2. Three types of customer groups We discussed three types of customer groups. Briefly, describe these three groups, and give an example of each based on the My Virtual Model case. Answer: Primary or target customer (TC). The person, type of person, or business that has the highest probability of buying your product or service (page 84). During the start-up phase, Lands’ End, was MVM’s first target customer. Secondary customer (SC). A person, type of person, or business that needs to be convinced to buy your product or service. Louise Guay of MVM called this kind of customer the “follower” (page 85). Once MVM had found Lands’ End, their TC, then other secondary customers followed, such as Sears, L.L. Bean, and Adidas. Invisible customer. A person, type of person, or business you don’t anticipate but has a need for your product or service. This customer appears after you open the doors, after you have the courage to go ahead and start your business (page 85). Invisible customers for MVM could be film producers (an animated cartoon; for example—the life of a virtual model). How about advertising firms? How about video games or plastic surgery? 3. Profiling your target customer In this chapter, we broadly distinguished between two types of companies—business-to-business (B2B) and business-to-consumer (B2C). a. What type of company is MVM? If you were asked to profile MVM’s target customer, what major variables or factors would you consider? Answer: My Virtual Model is a B2B player whose major business clients include Lands’ End, Sears, and L.L. Bean. A customer profile for MVM would include company-profile factors (such as size, type of business, and credit risk); end-user factors (such as end-use application and ability to reach decision-maker); and industry factors (such as economic trends, competing firms, and exporting). b. What type of company is Lands’ End? If you were asked to profile Lands’ End target customer, what major variables or factors would you consider? Answer: Lands’ End is a business-to-consumer (B2C) company. Its customer is the end-user or consumer. A customer profile for Lands’ End would normally include demographic factors (such as: age, sex, income, education, location) and psychographic factors (such as: lifestyle, buying habits, patterns of consumption, and attitudes). 4. Visualize and research your business and target customer As we noted in this chapter, a major reason for the success of MVM was the compelling vision of its co-founder Louise Guay. a. What was Louise Guay’s visualization of her business and target customer? Answer: A local merchant in Montreal had challenged her to come up with an idea that would prove that technology would help women buy on the Internet. She responded with a visual picture of her new business product—the Virtual Model (page 97). “I thought, wow, I can come back to my passion because I love fashion, art and creativity, stage, to invent things, and I thought, isn't it the right time to start, to come with a neat idea, to solve these problems. So I thought, I have seen this little CDROM called Barbie Fashion Designer. [Mattel’s] Barbie was walking in 3-D on the runway and that was very well done. Very impressive. So I thought, it would be fantastic if we could create an experience where the user would fill a questionnaire about her measurements, the shape of her face, the colour of her eyes, her hair, and suddenly, a 3-D silhouette would appear and say: "Hi! I'm your virtual model, and I was born to look like you." (The Practice of Innovation: http://innovation.ic.gc.ca/gol/innovation/site.nsf/en/in04712.html ) b. What is a business vision? What was MVM’s business vision? Answer: Business vision. A business vision is mental picture of your business, product or service at some time in the future, page 97. MVM’s focus was on the online apparel shopping market. According to Louise Guay, the MVM business vision was “to create the ultimate online shopping experience. One where your 3D model helps you find, match, and even size fashions in a way no real world dressing room can match.” (http://www.myvirtualmodel.com/media/releases/en/MVMTrade_LE_070104.pdf ) c. You’ll need to test your idea against reality. Field interviewing and surveying are two important primary research tools. Louise Guay had a vision for her new business and her target customer, but she also knew she had to do some primary research. What is primary research and what primary research did Louise do before starting MVM? Answer: As defined in Chapter 1, page 19, primary research is interacting with the world directly by talking to people. Louise Guay interviewed Paul Roberge, president and CEO of Les Ailes de la Mode. Then she visited Nordstrom (a US apparel store famous for its quality service). She interviewed a Nordstrom personal shopper and surveyed a store. She honed her idea and learned about customer profiling by walking the store and asking lots of questions. 5. Key success factors Market trends and partnerships were two key factors contributing to the success of MVM. a. List five market trends contributing to the success of MVM. Answer: Several market trends contributed to the success of MVM. Eight trends were: • International and exporting • Outsourcing • Mass customization • Internet • Business-to-business • Digital and technology • Cocooning • Poverty of time b. As we explained in this chapter, alliances and partnerships are key success factors of fast-growth companies. Give two examples of how partnerships contributed to the success of MVM. Answer: Three examples are: Example 1: As a B2B company, a major goal of MVM was to create a strong working partnership with its primary customer Lands’ End. Lands’ End benefited from this association through: • Reduced costs • Increased sales • Improved profit. • Improved customer service • Improved customer satisfaction Example 2: In the early 1990s the two entrepreneurs joined forces to build one of Canada's leading multimedia agencies, Public Technologies Multimedia Inc. (PTM). Two major customers were la Caisse de Dépôt et Placement du Québec and Télé-systèmes. When Jean François and Louise Guay needed financing for My Virtual Model these two clients then became their business investment partners. Example 3: The partnership theme was also important in the formation of the company. Jean François had the technical, business, and financial abilities; and Louise Guay had the required communication, creative, and marketing abilities. According to Louise Guay, “They complemented each other, while not challenging each other.” Solution Manual for Small Business: An Entrepreneurs Plan Ron Knowles, Chris Castillo 9780176501808, 9780176252403