❑Development of Marketing Concept for
Entrepreneurial Ventures
The marketing concept involves identifying consumer needs and wants and then producing products
(which can be goods, services, or ideas) that will satisfy them while making a profit. Effective
marketing concept is based on three key elements. A new venture must integrate all three elements
when developing its marketing concept and its approach to the market. This approach helps set the
stage for how the firm will seek to market its goods and service.
1. Formulation of Marketing Philosophy
2. Market Segmentation
3. Understanding of Consumer Behavior
1. Marketing Philosophy
▪ The entrepreneur’s values and the market conditions will help determine the required marketing philosophy.
▪ Three distinct types of marketing philosophies exist among new ventures: production driven, sales driven and
consumer driven.
1. The production-driven philosophy is based on the belief ‘produce efficiently and worry about sales
later’. New ventures that produce high-tech, state-of-the-art output sometimes use a production-driven
philosophy – and likely will suffer from it.
2. A sales-driven philosophy focuses on personal selling and advertising to persuade customers to buy the
company’s output. When an over-abundance of supply occurs in the market, this philosophy often surfaces.
New car dealers, for example, rely heavily on a sales-driven philosophy.
3. A consumer-driven philosophy relies on research to discover consumer preferences, desires and needs
before production actually begins. This philosophy stresses the need for marketing research in order to
better understand where or who a market is and to develop a strategy targeted towards that group.
2. Market Segmentation
▪ Market segmentation is the process of identifying a specific set of characteristics (subgroups) that
differentiate one group of consumers from the rest. The total market is often made up of submarkets (called
segments).
▪ Market segmentation allows a company to allocate the appropriate resources to each individual segment,
resulting in more accurate targeting across a variety of marketing campaigns.
Types of Market Segmentation
The four major types of market segmentation include :
1. Geographical segmentation involves tailoring products or marketing activity by customer location.
2. Demographic segmentation focuses on basic customer demographics, such as age, gender, occupation,
income, or ethnicity.
3. Psychographic segmentation focuses on things like lifestyle, values, hobbies, or interests.
4. Behavioral segmentation includes buying behavior, spending habits, social media interactions, or
previous customer feedback.
3. Understanding of Consumer Behavior
▪ To be successful in business, it is essential to understand consumer
behavior. This involves understanding what motivates people to make
purchasing decisions and how companies can influence those motivations.
▪ When customers make a purchase, several factors or considerations
influence their decision-making process such as last paid price, market and
online survey, expected future price of the same product, adopted marketing
strategies of the company etc.
▪ Through consumer behavior insights, businesses can develop marketing
strategies that drive sales, enhance customer satisfaction, and build brand
loyalty.
❑Development of Pricing Strategies for
Entrepreneurial Venture
▪ Price is an indicator of your quality as well as revenue.
▪ Pricing strategies require an entrepreneur to have a deep understanding of marketing competitiveness,
consumer demand, life cycle of the goods or services being sold, costs and prevailing economic conditions.
This not only helps them to optimize revenue but also build a sustainable and competitive position in their
respective industries.
Types of Pricing Strategies
1. Value-based pricing- Prices are set primarily according to the perceived value a product or service
delivers to the customer, rather than based on production costs or market prices.
2. Cost-based pricing- Company first design a good product then determine the total cost and finally
convince the buyer to purchase their product.
3. Competition based pricing- Pricing products lower than competitors' prices to increase the sales.
❑Financial Management of Entrepreneurial
Ventures
Financial management of entrepreneurial ventures involve the assessment of
venture’s financial strength and viability. It typically deals with two things:
1. Raising money
2. Managing a company’s finances in a way that achieves the highest rate of return.
Financial Objectives of a Firm
1. Profitability
It is the firm’s ability to earn a profit. Many start-ups are not profitable during
their first one to three years while they are training employees and building their
brands. However, a firm must become profitable to remain viable and provide a
return to its owners.
▪ Firms may conduct market research to establish competitive pricing that
attracts customers while providing a profit margin.
2. Liquidity
Its a firm’s ability to meet its short-term financial obligations. Even if a firm is
profitable, it is often a challenge to keep enough money in the bank to meet its
routine obligations in a timely manner.
▪ Firms may monitor cash flows to identify potential cash shortages and manage
expenses accordingly.
Financial Objectives of a Firm
3. Efficiency
Efficiency is how productively a firm utilizing its assets to minimize costs and
maximize productivity. It is vital for reducing costs in the early stages when
capital is limited.
▪ Firms may use software tools to plan efficient delivery routes, reducing fuel
and labor costs while increasing delivery capacity.
4. Stability
Its the strength and vigor of the firm’s overall financial posture. For a firm to be
stable, it must not only earn a profit and remain liquid but also keep its debt in
check.
▪ Firms may set aside a small percentage of revenue in a reserve fund as a buffer
for unexpected expenses, ensuring continuity.
Financial Performance Management
Financial performance is a complete evaluation of a company’s overall standing in
categories such as assets, liabilities, equity, expenses, revenue, and overall
profitability. It is measured through various business-related techniques that allow
users to calculate exact details regarding a company’s potential effectiveness.
▪ Forecasting
▪ Ratio Analysis
▪ Breakeven Analysis
1. Forecasting
▪ Forecasts are predictions of a firm’s future sales, expenses, income, and
capital expenditures.
▪ A firm’s forecasts provide the basis for its pro forma financial statements. It
is made on the basis of assumptions.
▪ A well-developed set of projected financial statements helps entrepreneurs
assess whether their business is on track to meet targets. It aids in setting
benchmarks and adjusting strategies based on expected revenues, costs, and
market trends.
Forecasts
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2. Ratio Analysis
▪ Financial ratios (like profitability, liquidity, and debt ratios) allow
entrepreneurs to evaluate their business's financial performance
relative to industry standards.
▪ Comparing a firm’s financial results to industry norms helps a firm
determine how it stacks up against its competitors and if there are any
financial “red flags” requiring attention.
Ratio Analysis
3. Break-Even Analysis
▪ Break-even analysis is a useful technique for determining how
many units must be sold or how much sales volume must be
achieved to break even.
▪ Breakeven is the volume of sales where the venture neither makes
a profit nor incurs a loss. (Total Revenue=Total Cost)
▪ Break-even analysis helps businesses determine pricing
strategies by covering fixed and variable costs to ensure
profitability. It aids decision-making by analyzing profit against
sales volume for new products or expansions, supports cost
reduction by pinpointing areas to cut expenses, and acts as a
performance metric to track progress toward financial goals.
The three components of Break-Even
Analysis are as follows:
[Link] Costs: These are the costs that
the company must bear even when there
is no production of units.
[Link] Costs: Variable Costs are the
costs that change with the change in
output.
[Link] Price: Selling price is the amount
that the seller/company charges the
customers in exchange for their product or
services.
Break-Even Analysis
Example
❑Beth has dreams of opening a gourmet cupcake
store. She does a break-even analysis to
determine how many cupcakes she’ll have to
sell to break even on her investment. She’s done
the math, so she knows her fixed costs for one
year are $10,000 and her variable cost per unit
is $.50. She’s done a competitor study and some
other calculations and determined her unit
price to be $6.00.
• $10,000 / ($6 – $0.50) = 1,819 cupcakes that
Beth must sell in one year to break even.