Demographics

Everybody talks about "demographics" but do they know what demographic variables really are? "Demographics? is a term in the marketing literature that has gotten so generalized as to be bland beyond belief. I blogged about the term "demographics" December 30, 2008, so it's time to do it again.

The term comes from the science of demography a branch of the social sciences with studies the nature of and changes in populations. Demographic analysis focuses on the following variables: the birth rate, the death rate, and net migration. They also incorporate other variables such as age at marriage, socio-economic status, social practices, attitudes and norms, etc., in trying to understand demographic phenomena. But these three variables are the key independent variables in a demographic analysis.

You can go on talking about demographics, which has been taken to mean "personal characteristics," but just be clear about what you mean. But also realize that demographic groups don't buy products. Interconnected individuals in networks buy products.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

Deconstruction

Deconstruction is a term borrowed from construction. It means the selective taking apart of all or part of a building for reuse.

Any business has a consumption chain. In publishing, for example, a writer writes a novel and sells it to an agent. The agent sells it to a publisher and the publisher gets it into the book store. Then the store sells it to the public. Ideally this is the way it's supposed to work.

There's a consumption chain there: writer (novel) - agent - publisher - bookstore - reader.

Today, the computer has deconstructed this chain. The e-publishing model has this consumption chain: writer (novel)- website and/or e-publisher - customer. The consumption chain has been dismantled and the agent and the publisher have been deleted.

You should draw your consumption chain. Just write down each step and draw an arrow between. Then evaluate each step to see how that should be done. Can any be eliminated so that you are linked more closely with the customer? Can you make a business out of any of the links in this chain?

Look at Encyclopedia Britannica. It used to be the product - salesman - consumer. Now it's just a disk that comes with your laptop.

Deconstruction is good defense. If you don't do it and realize the possibilities for you, someone will do it for you and you'll be either out in the cold or behind the 8-ball.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

Meta-analysis

A meta-analysis is a study based on studies. It's often used in medicine or professional services when you are trying to establish patterns in existing data and a large-scale study is not feasible or not appropriate for some other reason. A meta-analysis can be sounder because the researcher can cast a broader net.

The main problem is, you have to have enough studies to analyze. They have to be close enough in terms of objectives and methodology that you can standardize them for analysis. And you have to know enough about each study to be able to include them with confidence. That means you have to know clearly whether a given study fits the parameters of your study so that you can include it.

You also have to be satisfied that all the studies you want to use are independent of each other and not just different version of the same study published by different primary authors under different titles. And remember that academia is just as at risk from informational bubbles as the housing market is to housing bubbles.

Another problem is that many of the scientific studies you might need to analyze are proprietary and cost money or may not be available to you as a poor slobs stuck in the private sector. You can sometimes get access to JStore, the place that grants access to scientific studies, through your local or university library. For example, I am a member of the Free Library of Philadelphia (not totally free) which entitles me to order articles for free.

If conducting meta-analyses is appropriate for what you are doing and you can do one, go ahead. You can get a lot of value out of them for relatively cost and you don't reinvent the wheel. Just make sure you avoid the pitfalls.

Check Wikipedia. There's an entry on it which is generally useful and check the links.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

Entrepreneurial Readiness

I've been thinking about entrepreneurial readiness. What does being "ready" mean. Does it mean you're about to jump like when you're all packed and "ready" to go on a trip and you just have to wait for the cab to take you to the airport. Or does it mean you're "ready" like a car and all somebody has to do is come and start the motor?

A website I found lists five indicators of entrepreneurial "readiness." These indicators are allegedly based on 20 years of research studies and are said to predict "entrepreneurial effectiveness." I guess if a person scores high on these five indicators they're ready to start a business.

The five indicators are:

>Mind-set.
>Dealing with others.
>Business orientation.
>Self-management.
>Life and work orientation.

The website is www.qualifying.org and is run by something called Leadership Performance Systems Inc. They have a report you can buy and you can take a test for $14.95.

This warrants further checking out. For example what is meant by "entrepreneurial readiness" and what is meant by the term "entrepreneurial effectiveness?" Perhaps these are spelled out in the report you have to buy. I hate having to buy a report to find out something.

This approach deals with human capital only. It doesn't deal at all with financial capital or with social capital. In fairness there is an argument to be made that these five behavioral dimensions may be related to financial capital and social capital. And to me a better outcome measure has to do with finally starting and growing a successful business. I'd also have to see what these 20 years of research studies.

This scale has some face validity but it seems only to go part way to the end of the trip.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

Vertical Integration

A vertically integrated company is one where the company owns the raw materials, the means of production, and the entity that brings the product to market. For example a producer of fruit cocktail would be vertically integrated if it owned the orchards that grew the the fruit, the factory that processed the fruit into fruit cocktail, and the outlets that sold the fruit cocktail.

I used this example because I was part of a team that proposed research to a Milwaukee, WI, area producer of fruit cocktail. It was the country's largest producer of fruit cocktail at the time though its products were often sold under different labels. This happens a lot. Sargento Cheese used to sell cheese to Kraft and got marketed as a Kraft Cheese product where it really was made by Sargento Cheese. Sears uses different providers.

Anyway, this fruit cocktail producing company was at the time unique in the industry because it owned the fruit orchards that produced the fruit. All their competitors bought their fruit from privately owned orchards.

Whether you want your company to be vertically integrated or not is a decision you have to make. To help you make it sketch out the consumption chain and see if it would be better for you do handle each step or whether you should subcontract. The latter option is winning in a lot of companies because it's simpler, easier, and cheaper to use other companies. Look at Coase's Law.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

Characteristics of Data

Entrepreneurs need to know data. Knowing data is key to an entrepreneur. We need to be able to tell how much cash we have on hand, what our profit is, the average number of days it takes to get paid, what our average revenue is, and on and on. We need to be able to analyze data on our market, data on our company, and so on and so forth.

Two characteristics describe any set of data, whether it is a listing of batting averages in major league baseball, the amount of rainfall per day in the Amazon, or the height and weight of some group of people.

These two characteristics are dispersion and central tendency. Dispersion refers to data's tendency to spread out along some continuum. Height in humans runs from 3+ feet or so to 8+ feet. Yearly batting averages in baseball run from 000 to 1000. Temperatures measured in degrees F run from -100 or so to over 200. Measurements vary, but data tends to spread out within some range.

Central tendency refers to data's tendency to clump around some figure, often called an "average." A baseball player's batting average is really the average of all the averages he compiles in all the games he plays in. A hitter can hit from 000 to 1000 in a game. If he gets 5 hits in 5 at bats, he gets to "bat a thousand" or 1000. If he's hitless he bats 000. Average those and you get some figure usually between 200 and 300 though good hitters usually average in the 300 to 350 range. Terrible hitters can average under 100. Average temperatures are available on the weather in exhausting detail but are probably 75 degrees or so F on a pleasant day in the summer.

You can look in any statistics book or on line and you'll get lots of detail about measures of central tendency and dispersion. Sufficient for now to realize that an entrepreneur needs to know about this stuff and be comfortable talking about it and using it. If you don't know what I'm talking about, you should get education.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

Mission Statement

A mission statement is simply a statement of the purpose of your company or business or organization. What do you want to do for people? Do you want to make things more convenient in some way? Do you want to make some need met more cheaply or easily? Do you want to make something work better? Just what is it you're up to.

Some mission statements are deficient in the framing of them which undermines their impact. I was in a presentation when a team of several young MBA students at Drexel University here in Philadelphia presented their idea for making aging more "fun." They had studied the needs of older people and noticed that some of the things they had to do could be made easier by having larger print that would be easier to read. They said their product would make aging more fun.

Fun? Ask a person in his or her 80s how much fun aging is. Maybe aging could be made less daunting. But more fun--good luck with that. The students team's hearts were in the right places but their framing needs some reworking.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

Concept Paper

The third thing you should do before starting a business is write a business concept paper. This is a short, 3-4 "proposal" or statement of the idea behind the business. Some things you might include would be these: who, what, where, how, why, how, and how much.

That is:

>Who your customer will be. Who your competitors are.

>What your product is. What your customer will really be buying. What needs you are meeting. What market you are serving.

>When you envision getting your product to market.

>Where you will be in business. Where you envision finding the resources you will need.

>Why you are starting this particular business.

>How you are going to get your product to the customer. How the customer is going to find out about your product. How are you going to compete.

>How much capital you will need start and operate it. How much you will charge. How much it will cost to make your product. How you will monitize your business.

Once you have this on paper you can get down to work. Until you have something in writing you're pretty much blowing smoke.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

Research

From a recent conversation with a Temple University advertising professor here in Philadelphia I learned that many people are scared by the term "research." As a life-long researcher and market research professional I'm not scared by it at all.

Research is merely the systematic asking and answering of questions. The important concept here is "systematic." It's not random. For example, if it was cloudy out and looked like rain you wanted to know if you should carry an umbrella during the day's activity. You might wish to look out the window and see if (1) others are carrying umbrellas and (2) cars are driving around with their window wipers on. If one of these conditions are met, you might conclude that it is raining.

This is something I would do but it's not research. It's simply a practical way of reducing my risk of getting wet. If more people looked out the window the better off the world would be.

Research would be asking the following question--"To what extent does umbrella carrying predict that it is actually raining?"--then carrying out a carefully designed research study to measure the extent to which umbrella carrying behavior predicts "rainyness." The study would have a design, data collection, data analysis, and report with recommendation phases.

A somewhat simplistic and silly example but I think you get the point. When I lived in another city the late news used to pose a questions to their listeners and then ask them to call one number with a "yes" response and another number with a "no" answer. Then at the end of the newscast they would give the tallies. The killer was the disclaimer: "This is not scientific, just a way of find out what you think." Well, I hate to tell them, if it's not scientific, it's not a way to find out what people think. Oh well.

Anyway, we entrepreneurs need to know about research for at least two reasons. We will need to conduct some research ourselves some day and (2) we'll need to be able to read and evaluate research studies others do.

But don't be scared by the term. It's really an important field of endeavor. It won't do everything and often it is relied on to do too much. And the new economy has changed the way research has to be done. But that's the subject of a later post.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

Viral Marketing

I haven't posted anything on viral marketing for a couple of years now, so I'm going to do a rerun.

Dr. Ralph F. Wilson from "The Six Simple Principles of Viral Marketing defines viral marketing as "Any strategy that encourages individuals to pass on a marketing message to others, creating the potential for exponential growth in the message's exposure and influence."

Dr. Wilson's six steps are:

1. Give away valuable products or services.
2. Provide for effortless transfer to others.
3. Scale easily from small to very large.
4. Exploit common motivations and behaviors.
5. Utilize existing communication networks.
6. Take advantage of others' resources.

Dr. Wilson regards the term "viral marketing" offensive. I don't see it. It just means the ideas spread the same way that viruses spread, person to person. Not all viruses spread easily and not all ideas spread easily.

Not everyone has a message that can spread virally. So before you go further look at your message and see what you can do to it to get it to spread.

Check out this website at www.wilsonweb.com5/viral-principles.htm.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

Market

A market is a set of buyers and sellers. That's it. Point, set, match. There may be other actors involved in a transaction. Attorneys, Agents, Loan Officers, Family members, Construction guys, Title officers, etc.

Bottom line is it's buyers and sellers.

If you have things for sale and a qualified, willing buyer who wants to buy it, market. If you have either nothing for sale or no qualified, willing buyer, no market. It's as simple as that.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

Intellectual Property

Intellectual property refers to things created by the brain: inventions, designs, novels, poetry, non-fiction, plays, music, plans, etc., used in commerce. In today's legal system any time you create something it is yours. If you write a book the minute you put the first word down on paper it's yours. You invent something, you own it. You design a logo for your business it's yours.

Certain legal devices have been created to offer increased protections to those who create things. Trademarks protect logos. Copyright protects written work. Patents protect rights to products under certain circumstances.

To see if you're particular creation needs a patent or copyright, you can go to the government office of patents and trademarks to read their policies. If you want a person you can consult an attorney. If you need a patent, I would advise going to a patent attorney rather than doing it yourself.

For most things IP protection sounds good on the surface but isn't practical. It's a long, expensive, and involved process, and unless you have something that is truly unique and non-obvious you may not be successful Go talk to a good attorney. He or she will advise you what you should do and generally don't charge for just a first meeting.

Face it, an attorney doesn't want to spend a big bunch of time on IP work when it's not appropriate, you don't have enough money, or it's not likely to be successful. Usually getting a patent takes 7-8 years and you'd better have at least $100K to cover the initial patent work and all the suits and other legal crap that get's thrown at you. Not counting the time you're going to dump into it.

So, my advice Sirs and Ma'ams (as Radar on M*A*S*H* used to say) invest your ego, time, limited funds, and attention on getting your product ready and to market as soon as you can. Don't worry about people stealing your ideas. Most other people don't want them. And those that do want them can find a way to steal them anyway. Make your product good so that if it does get copied, the copies will not be as good. Make it cheaper, better, more accessible, and easier to use than your competitors' market it correctly and the field of battle will be yours for as long as the window of opportunity is open.

Bill Gates is supposed to have said that he realized that his stuff would be stolen. But he wanted to make sure that if there were people out there stealing stuff his stuff got stolen not that of his competitors'.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

Marketing

Marketing is everything you do to bring your product to your public at a profit. It involves the traditional 4 P's which you can look up as well as the social media and virtual reality marketing.

A couple of generations ago used to call shopping marketing as in "I'm going to do the marketing" which was meaning "Go to the market and buy food."

That was when women stayed at home all day and kept house and did all the shopping and cooking and all the men took the train into the city and came home late at night after trading their time for a salary.

One still encounters that conception of it. I used to do cold calls for my marketing research firm and often I would be steered to the purchasing department. Marketing=purchasing i.e. shopping.

Many people equate marketing with selling. It is but it's more than that. Many people equate marketing with public relations. It's that too but it's more than that too.

Marketing is really everything you do. So you can't not market. You can only do it intelligently and well or unintelligently or not well.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

Proximity Bias

Proximity bias is a "birds of a feather" phenomenon. It's the tendency for people to overestimate the prevalence of social phenomena because they "flock" with those that are like us. My favorite illustration is smoking prevalence. Ask a smoker what proportion of Americans smoke and smokers will give a high estimate. Smokers have smokers as friends so they think the world is like them.

As a non-smoker the same question and you get a very low estimate because non-smokers tend to hang out with non-smokers.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

Matrix--Not the Movie Franchise

A matrix is an important concept for entrepreneurs to know about. A matrix is simply a table or n rows by n columns. Mathematicians like them because they can be used for lots of interesting stuff most of which is beyond our ken.

A 2 x 2 table is a matrix. A spreadsheet of daily expenses and categories is a matrix. A chart comparing your company with your competitors across eight different criteria is a matrix. You can read more about them in any math book or on line.

Matrices are very helpful analytical tools even if we don't want to, or can't, do algebra or higher level math with them.

So when somebody says let's make a matrix don't panic. It just means he wants to make a table with more than one row and more than one column. You can deal with that. And see what he has in mind. It could be pretty interesting.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

Mass Customization

Mass customization means you can produce a product for the mass market yet customize every order to the precise specifications of the customer. Sounds like an oxymoron--it's not.

Sometimes it's called market customization.

People want things made especially for them but don't want to pay what it would take to make one thing. A man may want a tailored suit for off the rack prices. Now he can have it.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

New Product Development

The phrase "new product development" refers to the whole process of creating, developing, marketing, and servicing a new product, whether a product product like an automobile or a service like serving meals to home-bound seniors.

Product products and service products can be treated the same from an NPD perspective. They're both products.

New products include completely new products or variations on existing products, but a variation on an existing product needs to be treated like a brand new product when managing its development and marketing. More and more it's getting harder and harder to think up a brand new product. Things are changing so fast products are more often than not variations on a theme.

Developing products is not like it used to be. In the past, company A developed a product and sold it to customers B. Now a product is a cooperative venture of the company A and customers B. The dividing line between producer and consumer has been all blown to bits. If you're smart, you'll invite the users of your products to help you redesign them. They might actually have ideas for you you had thought of and they might act as your marketing agents. The walls of Jericho have come tumbling down.

A lot of companies don't understand this. They think it's the same old same old. Not true and it will be less true going forward. The people who see this will be far ahead.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

Market Opportunity

A market opportunity us something that causes us to bet that we can do something for somebody that is less expensive or easier to use or more accessible or better than what is currently being offered in the market. If what we want to offer is worse or more expensive or less accessible or less convenient that what is out there, there's no opportunity.

Just being able to do something to somebody is only a good start. What we want to offer has to promise to generate enough cash to cover the cost of investing in the business that takes advantage of this opportunity, adds value to society, and allows us to live at a level where we can be a productive member of society. If it doesn't promise to do this we have to look around for other opportunities.

But doing something for somebody is a good first step. It's certainly better than not being able to do anything for anybody.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.

Financing a start-up

Financing a start-up is tough these days. It's tough any days but these are particularly challenging. That doesn't mean it can't be done but it's harder.

In many ways the market is doing you a favor by being daunting. It makes you work harder and be better than you would have to be if you could get money just getting out of bed in the morning. Things coming too easy is often a curse described as a gift.

There are two sources of money: you and somebody else. The best source of funds is you. Maybe you have savings or an inheritance or an asset you can liquidate. Frances Lear funded Lear's, a woman's magazine, with money from a divorce settlement.

Many people don't have a lot of money of their own so they must seek it from other sources. Best of these is friends or family. This is not without risk, I think I have blogged about this before.

Sometimes you can find a partner who's willing to underwrite your venture. Be wary of this, but this can be a good source.

The worst thing to do is borrow money from a credit card company. Do not do this unless you have to. And if you do, borrow as little as possible and on the best terms you can. And get your credit score up there so you can prove to potential partners you're a worthy person to do business with. The last thing you want to do is start out in business with a big bunch of debt. It's like trying to row a boat with an anchor dragging out behind.

If you have to borrow money to start a business, consider not starting the business.

Entrepreneurship is the life's blood of all my professional activities. It makes them go. And go read my mystery for free at wwww.kearneymusicschoolmurders.blogspot.com or buy it from Amazon.com more cheaply than you can print it out.