ENTREP EXAM REVIEWER

 S2 Screening the opportunity

> Entrepreneurs should start with the big picture, this is the best way in ensuing that the
entrepreneur has scanned the best potential business to venture into.

> Opportunity screening- is the process of cautiously selecting the best opportunity.

-depends on the entrepreneurs internal intent (the main objective that the business will
accomplish)

-external intent (address the compelling needs of the target market)

> Risk appetite- refers to the entrepreneurs tolerance of business risks

> Time- must be considered by the entrepreneur in screening the opportunities at hand, as it is
considered one of the most critical resources of an entrepreneur.

> The entrepreneur should say no to an opportunity if it doesn’t contain any of these business
opportunity elements:

1. Has superior value to customers

2. Solves a compelling problem, issue, a need or want

3. Is a potential cash cow

4. Matches with the entrepreneurs skills, resources, and risk appetite

> The opportunity attractiveness test- aims to assist entrepreneurs in ensuring that the
opportunity that they will venture is an attractive and feasible prospect.

- This is not the “be all” but a “framework”

 The concept and the strategy- should think of the reason for the business existence.
- Vision statement- is simply defined as what the business should do in the future
- Value creation proposition- value that the product or service will offer
 Opportunity metrics- considered as the opportunity’s critical success factors
  S3 seizing the opportunity

> Opportunity seizing- is the last step in opportunity spotting and assessment, this is the
“pushing through”

> Innovation- process of positively improving an existing product or service. This is inevitable as
the world constantly changes

> Three types of innovations:

1. Breakthrough innovation- which may also include inventions, occurs infrequently

2. Technological innovation- occur more frequently than breakthrough innovations

3. Ordinary innovation- occur ordinarily as the name implies. Commonly originating from
market analysis and technology pull instead of a technology push

> The “newness” is also independent on the eyes of the market and the company

 Product or Service planning and Development process

> product or service planning and development process- is called the refining process

> It has five key stages:

1. Idea stage- entrepreneur determines what are the feasible products

2. Concept stage- once the acceptable product or service has already been identified it will go
through this stage

- the developed idea will undergo a consumer acceptance test, this test includes getting the
“initial” reactions of the primary target market

- Conversational interviews- are conducted to understand consumer preference on physical

characteristics and attributes of a product

3. Product development stage- entrepreneur leverages on the information generated from the
prospective customers via the concept stage.

- Actual reactions- from prospective customers are determined

4. Test marketing stage- validates the work done from the first three stages to measure success in
the commercialization

5. Commercialization stage- this stage is also called as the launch stage, ensures the goals of the
product/service development process

 The Marketing plan

> Business plan- is a comprehensive paper that details the situation, analysis, objectives,
strategies, and tactics, and how to monitor and control the enterprise

> Marketing process- starts with identifying the customers’ needs where you are tasked to create
a meaningful value proposition.

> Value proposition- simply states “why” a customer should buy a certain product or service.
Major driver in customer purchase or service availment, should be specific and straight to the
point

> Unique selling proposition- refers to how you will sell the product or service to your
customers. It addresses the customers wants and desires

> Tips for the entrepreneur on how to create an effective unique selling proposition to the target
customers:

1. Identify and rank the uniqueness of the product or service attribute- this is the most difficult
part because you only need to choose one or two at the most. That attribute will be your key to
success, as this will compel customers to the purchase from you and not from your competitors .

2. Be very specific- put details that emphasize the differentiator against the competitors. The
differentiator should be very compelling and should make the customers think that they are really
getting more value from you than the others.

3. KISS (Keep it short and simple)- one challenge that marketers always face is that the
customers attention span is limited and very easy to switch . Therefore, think of a very catchy
unique selling proposition in the simplest and shortest way possible.

> Know your customers

- Marketing research- is a comprehensive process of understanding the customers intricacies and
the industry they revolve in. One of the most critical tasks of an entrepreneur. Aims to scrutinize
the target market, their specific requirements, and the market size where the business operates

> Market size

- Market size- is simply the size of the arena where the entrepreneurs business will play. It is the
approximation of the number of buyers and sellers in a particular market.

- Market space or Market universe- the approximate number of customers that will buy the
product or avail the service

- Market share- which is the plotting and calculation of the competitors market share to
determine the remaining portion for the new venture.

> Customer Requirements

- Customer requirements- are specific features and characteristics that the customers need from a
product or a service

- Customers- are said to be the lifeblood of the business. These are the people who buy the
products or avail the services of the entrepreneur.

> Primary and Secondary Target Market

- Market Intelligence- includes customer profiling, drives the entrepreneur on what correct
strategies and tactics to employ

- Market Segmentation- is the process of grouping similar or homogenous customers according

to demographic, psychographic, geographic (location), and behavior

- Secondary target market- necessary to spread out the capital expenditure and the risks well

> Demographic

- Demographic segmentation- also called socioeconomic segmentation, is the process of

grouping customers according to relevant socioeconomic variables for the business venture.

- Demographic data- can usually be derived from public documents or the Internet, thereby
giving the entrepreneur an easier task of collecting data
- Income range and the social class of the customers- are very important factors for the
entrepreneur to consider because these represent the purchasing power of the market.

- Occupation- should also be considered not just to determine the customers income but also
their daily routine where goods and services can be properly positioned.

- Gender and age group- are data that must be mined because the life cycle of customers and
their gender influence their buying behavior

- Religion and ethnicity- also should be taken to account because these affect the way they buy
products or avail of services

> Psychographic

- Psychographic segmentation- is a process of grouping customers according to their

perceptions, way of life, motivations, and inclinations

- Perceptions- is a process wherein an individual receives external stimuli using the five senses
of hearing, touching, smelling, seeing and tasting.

- Product or service- can be perceived differently by different people

- Physiological motivation- involve the needs of the person (ex: food, clothing, shelter), they
seek to avoid pain and give pleasure

- Psychological motivation- involve customers preferences (what the customer likes or dislikes)

- Motivations- are also affected by their aspirations and deprivations.

- Aspirations- are what the customer wants to achieve (ex: inner peace, financial stability, work
life balance)

- Deprivation- involves the customers recognition of certain voids to fill (ex: lack of financial
security, lack of love)

- Customers inclinations- involve preferring one product over another as result of gaining a
refreshing experience when using the product

- Inclinations- also encompass the customers personal preferences

> Geographic

- Geographic segmentation- is simply grouping customers according to their location. This is

critical in the analysis of the target market as this encompasses the cultures, beliefs, preferences,
politics. This can be small as a street, a village, or a barangay.

> Behavioral

- Behavioral segmentation- is the process of grouping the customers according to their actions.
These behaviors are instigated by occasions, desired benefits, loyalty

- Occasions- drastically affect the customers buying behavior. The Christmas season entices the
people to buy gifts.

- Desired benefits- in behavioral segmentation is efficient because the entrepreneur determines

the exact needs of the customers and offer the most suited product or service for them.

- Loyalty- is the result of maintaining satisfied customers. The goal of every entrepreneur is to
inform, persuade, and remind customers to buy the product or avail of the service consistently.

- Usage of products or availment of service- is also a behavior segmentation factor that describes
to the entrepreneur how often a product is being used or service is being availed.

- Market aggregation- happens when an entrepreneur wants to target a broader market as possible
because the product or service that the business offers is suited for an undifferentiated market
such as fruits, vegetables.

> Talking to you customers

- Qualitative research- includes identifying the written or spoken opinions of customers. Focuses
on the “why” rather than the “what” of social phenomena

- Quantitative research- involves analyzing the customers preferences by a target audiences range
of behavior and the perceptions that drive it with reference to specific topics or issues.
Emphasize object measurements and the statiscal, mathematical, or numeric analysis

> The Interview

- Interview- is one of the most reliable and credible ways of getting relevant information from
the target customers. It is a face to face contact between the researcher/entrepreneur and a
respondent where the researcher asks pertinent questions

- Two types of Interviews:

1. Unstructured interview- informal type of interview and does not follow a specific set of
questions.

2. Structured- employs a specific set of questions and produces quantitative data.

> The Focus Group Discussion

- Focus group discussion (FGD)- is commonly used by market researchers to capture qualitative
results from target customers. Process of mining customer and noncustomer experience and
insights about a specific product or service. The researcher will be able to generate relevant
concerns and issues of customers such as their views

- Moderator- will direct the discussion in the right path, ensuring all angles are covered and the
discussion doesn’t go too far from the topic

> Observation

- Observation- is one of the preferred and practical methods of generating ideas because the
researcher documents the behavioral patterns of people or of objects or events without
necessarily requiring them to participate in the research process.

> Examples of human observation:

1. Customer purchase patterns- this human observation technique uses the researcher to
understand the buying behavior of the customers such as determining their pain points, buying
patterns

2. Mystery shopping- this is a common practice of service businesses today where the researcher
pretends he or she is a customer of his or her own business

> Examples of machine observation:

1. Video cameras or closed circuit television (CCTV)- these are positioned within the business
premises

2. Traffic counters- these are very common machine observers used by researchers to determine
foot traffic or vehicular traffic in a particular location.

3. Web analytics- this is an online tool that tracks the performance of a Web site as to the number
of its visitors, the contents they usually access, and other information relevant to the Web site
owner

4. Barcode scanners- these machines help researchers understand the purchase behavior of the
customers by reading the product codes and generate relevant sales information

5. GPS technology- this technology allows tracking of vehicles and pedestrians exposed to out of
home advertisements

> Observations only becomes a relevant research tool if it meets the following conditions:

1. If the person, object, or event is indeed observable- there are instances when observation is not
applicable or not practical to use

2. If the person does the activity regularly or the event happens on a regular basis- observation is
useful for a street food business if the entrepreneur notes that his or her customers always buy his
or her products

3. If doing an interview or FGD is becoming intrusive of the privacy of the person- instead of
asking customers how many times in a day they brush their teeth, it may be better if the
entrepreneur just observes how many times in a week do they brush their teeth

4. If the subject of observation foes not take too long to produce relevant information- it would
be practical to observe how a customer decides and orders a beverage rather than a customer
buying a car because the former requires little time because he will drink anyway

> Traditional and Online surveys

- Surveys- process of getting answers from a sample of respondents derived from a particular
population. Very simple and practical to run because it requires preparation of predetermined
questions answerable by definite responses using equitable scales.

> Sampling techniques

1. Sampling techniques- a “sample” is a percentage of a specific population carefully chosen by

the researcher to generally represent the whole population. Includes probability and
nonprobability sampling.

- Probability sampling- is a technique herein samples are given equitable chances or nonzero
chances of being selected from a population. The researcher needs to apply randomization

- Non probability sampling- does not give samples equal chances of being selected, because
samples are instead selected according to their accessibility or personal choice of the researcher.

2. Sample size- the researcher must be able to calculate first the appropriate sample size in
conducting the survey

3. Questionnaire blueprint- be specific and direct with the questions and the answers required.
Ensure that each question is necessary and not repetitive

 Marketing mix: 7ps of Marketing

> Marketing mix- Is a widely accepted strategic marketing tool that combines the original 4Ps
(product, place, price, promotion) with the additional 3Ps- people, packaging, and process-in
formulating marketing tactics for a product or service.

- The 7Ps are controllable by the entrepreneur and therefore must be well thought of to be
successful. Prior to the 7Ps, the 4Ps were used in marketing products or physical goods only.
However, these are not completely applicable in marketing products, were introduced. Only very
few products are pure products and only few services are pure services. Therefore, the marketing
mix will be able to address marketing components of both goods and services and even the
hybrids.

> 7Ps of Marketing

> A challenge to a budding entrepreneur is to ask the following key questions at the onset:

● Product- What product or service is the most appropriate for the opportunity, and why
will customers buy or avail them?

● Place- What location is the best suited for the business where there are more potential
customers? Can they conveniently transact on-site or online? How is the process of
distribution of products or performances of services?

● Price- What is the most appropriate price, and what pricing strategies will be used for the
target customers?

● Promotion- What is the most effective advertisement or combination of advertisements

and which advertising tool should be used to drive awareness and increase sales?

● People- What type of people need to be hired? What are the basic skills needed for the
job? What leadership style will be applied by the entrepreneur?

● Packaging- What is the best packaging for the product that is attractive enough to
customers and cost-efficient at the same time? What physical evidence does the
entrepreneur need to set up so as to sell the service?

● Processing- What is the most compelling feature of the product or the business that will
make difference in the lives of the customers? What sets the product or service from the
rest?

1. Product- A product is any physical good, service, or idea that is created by an entrepreneur or
an innovator in serving the needs of the customers and addressing their existing problem.

> The three-level concept of product or services:

> Level 1: Core Benefits of the Product or Service- The core benefits of a product or service are
the major factors why a customer buys a product or avails of a service. For example, a customer
buys coffee because he or she wants to feel energetic and alert the whole day

Level 2:Physical Characteristics of the Product or Service- Customers tendency is to look for the
second layer of selection, ie., which has a better packaging for products or a better physical
evidence or customer experience for services. In the previous example, the customer can choose
a coffee with a more appealing packaging or a more aromatic smell.

Level 3: Augmented Benefits of a Product or Service- Entrepreneurs must provide customers

with augmented benefits that distinguish them from the competitors. In the previous example, the
customer can choose a coffee product that comes with a loyalty card.

> Place- The place refers to a location or the medium of transaction. A strategic location depends
on the nature of the business and the primary target market. In physical location, the entrepreneur
must research about the area’s population, the traffic, the people’s common paths, their buying
behavior, and their preferences for the location(e.g., Wi-Fi access, spacious area for parking).

> Price- is the peso value that the entrepreneur assigns to a certain product or service after
considering its costs, competition, objectives, positioning, and target market. It is the only P in
the 7Ps that generates revenue for the business.

> Here are the most common pricing strategies

1. Bundling- This refers to two or more products or services in one reduced price (e.g., 3 in1 coffee for
Php. 8.00, manicure pedicure for Php. 150).

2. Penetration pricing- This refers to setting low prices to increase market share, but the
entrepreneur will eventually increase the price once the desired market share is achieved.

3. Skimming- This is the opposite of penetration pricing where prices are initially high and then
lowered to offer the product or service to a wider market.

4. Competitive pricing- This refers to benchmarking prices with the competitors.

5. Product line pricing- This refers to pricing different products or services within a parallel
product array using varying points.

6. Psychological pricing- This considers the psychology and positioning of price in the market

7. Premium pricing- This refers to setting a very high price to reflect elitism and superiority.

8. Optional Pricing- This refers to adding an extra product or service on top of the original to
generate more revenue.
9. Cost based pricing- the basis of markup is the cost of sales. For example the entrepreneur will
compute the cost of coconut juice by adding the cost of the coconut

> Two classifications of costs

1. Variable costs or controllable costs – These costs are directly proportional to the number
of products manufactured or to the number of services performed. For example, one of
the variable costs involved in a car wash business is the cost of cleaning materials. The
business will incur higher cost only when more customers avail of the service, or it will
incur lower costs when there are few customers.

2. Fixed costs or uncontrollable cost – These are costs not directly proportional to the
manufacturing of a product or to the performance of the service. These are usually the
cost of equipment, employee remuneration, rental cost, and utilities. These are considered
fixed costs because the business will still incur these costs whether or not they provide
more or less. Therefore, if the entrepreneur produces more products and performs more
services, his or her costs per unit will be lower because the fixed cost will be allocated to
the number of units produced or number of services performed

> Promotion- involves presenting the products or services to the public and how these can
address the public needs, wants, problems, or desires.

> The entrepreneur can choose one or combination of the following promotion tools:

1. Advertising – This is a type of communication that influences the behavior of a customer to

choose product or service of the entrepreneur over the competitors.

> The objectives of advertising include the following:

1. Informing, educating, and familiarizing the public with the product and

service offerings.

2. Building a trustworthy image

3. Increasing sales

> The entrepreneur can choose to advertise through television, radio, internet, mobile phones,
print and out-of-home.
2. Selling – This is the act of a trading a product or service for a price or a fee.

3. Sales promotion – These are short-term promotional gimmicks wherein practical incentives
and appealing activities are incorporated to entice the customers to buy the product or avail the
service.

> Here are common examples of sales promotion in the Philippines: Sales discounts or discount
coupons, Raffles, Contest and games, Promo items, product or service bundles, Trade fairs or
exhibits, Free trials, premiums and rewards.

4. Public relations – These are image building initiatives of the entrepreneur to make the name of
the business reputable to stakeholders, such as the target customers, government agencies,
business partners, media and the public.

> Examples of PR strategies are as follows: Press conferences, launching events, strong media
relations through press kits, social responsibility events, lobbying and web public relations.

> People- is one of the three additional Ps in the marketing mix. In today’s marketing arena,
people play a vital role in servicing customers even though the entrepreneur sells only physical
goods.

> Packaging- Packaging is how the product or service is presented to the customers. It is the
overall identification (look and feel) of the product or service.

> Process- Process is defined as a step-by-step procedure or activity workflow that the
entrepreneur or employees follow to effectively and efficiently serve customers. Its components
include input, throughput and output.