Wednesday, July 28, 2010
Understanding your position in the market goes a long ways to determining the rest of the marketing decisions you must make. The five Ps in marketing are
If you’re going to be the low-cost provider in a niche market, then that will dictate the product must provide the basic value and not much more. Promotion will focus on low-cost and good-value functions. The price must be the lowest and the place will be those marketing channels that cost little or nothing. The place or channel to promote/sell the product must be trafficked by bargain hunters.
On the other hand if you’re going to pursue a product differentiation strategy and you want to position your product as a highly differentiated one, then the product must have additional features, the price can be set at the upper end of the range that customers will pay for it and the promotion will focus on the unique features offered. The place or channel must be trafficked by premium buyers.
By determining your position in the market, the other decisions become clearer.
Monday, July 26, 2010
After you validate the market, the next step in the process of starting a company is to identify the business model. The business model in short answers the question: how do you make money? The following site outlines the nine business models:
Brokerage Model—bringing buyers/sellers together.
Advertising Model—promoting products/services to an audience
Infomediary Model—gathering information about an audience and monetizing it
Merchant Model—selling goods/service either wholesale or retail
Manufacturer (Direct) Model – selling goods/services directly to the user without an intermediary
Affiliate Model – providing purchase opportunities wherever people may be
Community Model – selling ancillary products/services in a community
Subscription Model – charging for ongoing usage of a product/service
Utility Model – charging based on how much of a product/service is used.
In today’s web-based world, it’s common to use two or more of these models in the same business. Before fund raising, it’s important to identify the business model. The business doesn’t have to generate a great deal of revenue but it needs to have a clearly defined business model that is scalable.