Market and costs (vers. 2014)

Market and value analysis IED

Lesson 4/2014

Frieda Brioschi / Emma Tracanella [email protected] / [email protected]

mailto:[email protected]

mailto:[email protected]

4. Market and Value Analysis

Course program

1. Italian Startups

2. Set up a startup in Italy

3. I've got an idea. And now?

4. Market and value analysis

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Today's table of content

1. Target Market

2. Direct and Indirect Costs

3. Cash and Accrual Basis Accounting

4. Perceived Value

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I've got an idea. And now?

Past slides available on Slideshare @ubifrieda:

https://www.slideshare.net/ubifrieda/

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I've got an idea. And now?: quick recap

During last lesson we discussed:

• Intellectual property

• General design principles (no ToDo list available..)

• Definition of a project (clear goal that must be reached in a fixed time using available resources)

• Product life cycle (planning, analysis, design, implementation, maintenance... maturity and decline or evolutionary maintenance and a new cycle)

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I've got an idea. And now?: quick recap

We detailed:

• Some basics useful from concept to company

• How to formalize and write my project

• Who can help me (Kublai, business incubators, seed accelerators)

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Target market

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4. Market and Value Analysis 4. Market and Value Analysis

http://sbinfocanada.about.com/cs/marketing/a/targetmarket.htm

Target market

• Who are your customers? Who will buy your product?

• People purchase products or services for three basic reasons:

• To satisfy basic needs.

• To solve problems.

• To make themselves feel good.

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http://www.successdesigns.net/articles/entry/how-to-define-your-target-market/

Definition

1. Look at your current customer base

2. Check out your competition

3. Analyze your product/service

4. Choose specific demographics to target

5. Consider the psychographics of your target

6. Evaluate your decision

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4. Market and Value Analysis 4. Market and Value Analysishttp://sbinfocanada.about.com/cs/marketing/a/targetmarket_2.htm

Segmentation by demographics

• Age: children, teens, young, middle, elderly

• Location

• Gender: male, female

• Education: high school, college, university

• Income: low, medium, high

• Marital status: single, married, divorced

• Ethnic and/or religious background

• Occupation

• Family life cycle: newly married, married for 10 – 20 years, with or without children.

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4. Market and Value Analysis 4. Market and Value Analysishttp://sbinfocanada.about.com/cs/marketing/a/targetmarket_2.htm

Segmentation by psychographics

• Personality

• Values

• Lifestyle: conservative, exciting, trendy, economical

• Social class: lower, middle, upper

• Opinion: easily led or opinionated

• Activities and interests: sports, physical fitness, shopping, books

• Attitudes and beliefs: environmentalist, security conscious.

• Behaviour

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Challenges to exporting• import barriers

• import quotas and currency restrictions

• taxation

• health regulations

• 'CE marking' for exports to most European nations

• safety regulations

• environmental standards

• accreditation issues

• how you will be paid for your exported products or services

• legal agreements.

12http://www.nzte.govt.nz/en/export/starting-to-export/identify-your-target-market/


Country specific constraints• tariffs or duties

• industry regulations

• political instability

• business laws

• intellectual property protection

• product to market logistics

• quarantine and regulatory requirements.

13http://www.nzte.govt.nz/en/export/starting-to-export/identify-your-target-market/


Research and analysis• target audience

• SWOT

• marketing goals

• positioning

• pricing

• distribution

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• marketing strategies

• communication strategy

• media plan

• schedule

• budget

• tracking and evaluation


SWOT/1Strengths could include:

• personal and flexible customer service

• special features or benefits that your product offers

• specialist knowledge or skills

!

Weaknesses could include:

• limited financial resources

• lack of an established reputation

• inefficient accounting systems

15http://www.infoentrepreneurs.org/en/guides/create-your-marketing-strategy/


SWOT/2Opportunities could include:

• increased demand from a particular market sector

• using the Internet to reach new markets

• new technologies that allow you to improve product quality

!

Threats could include:

• the emergence of a new competitor

• more sophisticated, attractive or cheaper versions of your product or service

• new legislation increasing your costs

• a downturn in the economy, reducing overall demand

16http://www.infoentrepreneurs.org/en/guides/create-your-marketing-strategy/


Here’s the problem with target markets: They’re too big.

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http://www.inc.com/guides/201104/how-to-narrow-your-target-market.html

Narrowing your target market

"Companies that try to be all things to all customers are sure to fail.”

• The Dangers of Being Unfocused

• Become an Expert in one Area (Starbucks!)

• Do the Market Research

• Tweak your Marketing

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4. Market and Value Analysis http://www.educationbusinessblog.com/2007/07/target_market_selection_1.html?p=42

Matter of balancing

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KindsB2B B2C

http://plantostart.com/how-to-define-target-market-product/20


B2B

Your business model is to make a product or service and charge other companies for using it. The advantage of this model is that companies have money and they are willing to spend it on a product/service, which improves their daily operations, helps them sell more or communicate better. Google, Cisco, MySQL and others are using this model.

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http://thelaukaitis.wordpress.com/2013/04/18/starting-your-business-2-business-model-and-target-market/


B2C

Your business model is to make a product or service and charge consumers for using it. Even though most people think this is a very profitable model, most often companies need to have at least hundreds of thousands of users in order to earn enough money to maintain and expand the business. This model is being used by Starbucks, McDonald’s, Amazon and others.

22http://thelaukaitis.wordpress.com/2013/04/18/starting-your-business-2-business-model-and-target-market/


All you need to know about costs

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Costs

In production, research, retail, and accounting, a cost is the value of money that has been used up to produce something, and hence is not available for use anymore.

Two kind of costs:

• Direct costs

• Indirect costs

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Direct costsCosts that can be identified specifically with a particular project or activity, or that can be directly assigned to them with a high degree of accuracy.

Direct costs generally includes:

• Salary and wages

• Material, supplies and equipment purchased directly for the specific project

• Communication and travels costs

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Indirect costsCosts that are not classified as direct

Indirect costs generally includes:

• Salary of administrative staff providing normal support activities

• Office supplies, computers

• Local telephone calls

• Memberships

=> Overhead

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BykesDirect costs:

• Metals

• Wages for assembly

!

Indirect costs:

• Abrasive, glue, pink

• Rent

• Insurance

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Actual cost of doing business

Before you can price a product or a service, you need to know your cost to produce it.

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Photographer!

• How much charge a photo?

• Minimum fee?

• No costs?

!

A useful tool: the Cost of Business calculator. It list annual expenses, but it depends on your inputs which can be hard to estimate.

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Cost of doing business calculator/1

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Expenses

• Office and/or studio (rent, mortgage payments, taxes, insurances, home maintenance, …)

• Phone (cell and/or landline and faxes) – remember to include also the cost of the phone itself

• Photo/Video/Audio Equipment and Accessories

• Equipment services and Repairs

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https://nppa.org/calculator



• Computer(s) (harware and software)

• Broadband internet

• Web hosting/Portal services

• Vehicle Expenses (Lease, Insurance, Maintenance)

• Office supplies and Furnitures

• Postage and Shipping

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• Professional Development

• Advertising and Promotion

• Subsciption and Dues

• Equipment and Business Insurance

• Health Insurance/Deductibles/Copays

• Legal and Accounting Services

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• Taxes and Licenses (Business and Self-Employment)

• Office Assistance (Payroll, Answering Service, Intern, etc.)

• Utilities

• Travel and Entertainment

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• Income factors

• Desired Annual Salary

• Non-assigment Income

• Number of Days You Can Bill Per Year

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Cost of doing business calculator /6

https://nppa.org/calculator35


Accounting

• The difference between cash and accrual basis accounting has to do with the time frame in which revenues and expenses are recorded and reported.

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• Cash basis accounting will suffice if your business is a simple one. However, the accrual basis will give a more accurate picture of the results of business operations.

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Cash Accounting

• Revenues are reported on the income statement in the period in which the cash is received from customers.

• Expenses are reported on the income statement when the cash is paid out.

• Focus on the amount of cash in bank and on making sure all bills are paid.

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Cash Accounting

https://www.youtube.com/watch?v=FfdpupKByiU

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https://www.youtube.com/watch?v=FfdpupKByiU


Accrual Basis Accounting

• Revenues are reported on the income statement when they are earned - which often occurs before the cash is received from the customers.

• Expenses are reported on the income statement in the period when they occur or when they expire - which is often in a period different from when the payment is made.

• Provides more information about the business and gives meaningfull financial reports.

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Accrual Basis Accounting

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https://www.youtube.com/watch?v=NNhyZFHAzaA

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https://www.youtube.com/watch?v=NNhyZFHAzaA


Cash vs Accrual Basis Accounting

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!

https://www.youtube.com/watch?v=LU_6amWC6H8

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https://www.youtube.com/watch?v=LU_6amWC6H8


Value

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Value

• The extent to which a good or service is perceived by its customer to meet his or her needs or wants, measured by the customer’s willingness to pay for it

• It depends more on the customer’s perception of the worth of the product than on its intrinsict value.

• How do we create the perception of value when we talk to our customers?

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Gillette Fusion

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• Amazon’s price: 19.25$

• 8 cartridges

• Cost/cartridge: 2.41$

• You need the razor (11.49$)

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Gillette Custum Plus Disposable

!

• Amazon’s price: 20.97$

• 30 razors

• Cost/razor: 0.70$

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Gillette Fusion vs. Custom Plus

• Prices

• 19.25$ vs. 20.97$

• 8 cartridge vs. 30 razors

• Cost in use

• 2.41$ vs. 0.70$

• Additional perceived values justify the additional cost in use

• Durability of blade

• Comfort

• Less irritation

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Gillette Idea

By providing something at below the market price (the razor), you can create a market for a secondary product (the blade) upon which you make ongoing profits.

The mark-up on the secondary products is disproportionate relative to their cost so were highly profitable for the manufacturer.

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3M Scotch® Tape

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• Amazon’s price: $1.70

• Lenght 650 inches

• Cost/inch: $0.003

• Cost to hang a poster: $0.01

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3M Scotch® Command Strips

!

• Amazon’s price: $2.70

• 12 strips

• Cost/strip: $0.08$

• Cost to hang a poster: $0.32

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3M Scotch® Tape vs. Strips• Prices

• $1.70 vs. $2.70

• Using Scotch Tape, the user can hang 75 posters vs. 3 for the command strips

• Cost in use

• $0.01 vs. $0.32 to hang 1 poster

• Additional perceived values justify the additional cost in use

• Less damage to wall

• Simplicity to remove

• Durability

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A-Style• Logo

• 1989 stikers on the walls of Milano and Roma

• Patented by Italian designer Marco Bruns

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• Clothing Brand

• Italian brand founded in 1999

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• A-style has used street-level buzz marketing to grow to international prominence

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Lacoste!

• Founded in 1933 by the tennis man Rene Lacoste

• At the end of 1990 the company change its strategy: marketing, retails outlets, product range, …

• Sale of t-shirts in limited series

• Re-establishing Lacoste as “a distinctive premium brand”

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Models

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FreemiumGiving away a product that people want for free and selling premium products.

Skype:

• A free quality product

• Selling cheap calls to ordinary phones

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Only 8% buy something

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https://www.freemium.org


4 Freemium Models

• Time-limited

• Feature-limited (Dropbox – Flickr)

• Seat-limited

• Customer-type limited

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Advertising Model

• Became popular with the growth of radio and TV.

• Indirect revenue from people looking to promote services

• Increasingly difficult

• Youtube, Facebook

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Low-Cost Model

• Significant volumes of customers (at a low customer acquisition cost) and by charging a very low price

• Revenue from a whole host of ancillary sources

• Ryanair

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Next week

Business model.

!

!

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