The Emergence of Entrepreneurial Marketing: Nature and Meaning

Michael H. Morris, Ph.D. Harold and Sandy Noborikawa Distinguished Professor of

Entrepreneurship and Marketing Department of Marketing

College of Business Administration University of Hawaii

Honolulu, Hawaii 96822 E-mail: morris@cba.hawaii.edu

Telephone : (808) 956-6692

Minet Schindehutte, Ph.D. Assistant Professor of Entrepreneurship

Page Center for Entrepreneurship Miami University

Oxford, Ohio 45056 E-mail: schindm@muohio.edu

Telephone : (513) 529-1221

Raymond W. LaForge, Ph.D. Brown-Forman Professor of Marketing

College of Business Administration University of Louisville

Louisville, Kentucky 40292 E-mail: buddy.laforge@louisville.edu

Telephone : (502) 852-4849

Submitted July 2001

The Emergence of Entrepreneurial Marketing: Nature and Meaning

Abstract

The purpose of this paper is to critically examine the concept of entrepreneurial marketing. This term is used as an umbrella to capture conceptualizations of marketing as an innovative, risk-taking, proactive area of managerial responsibility. Such conceptualizations include guerrilla marketing, radical marketing, expeditionary marketing, subversive marketing and others. Six core dimensions of entrepreneurial marketing are identified and explored. The advantages of an entrepreneurial perspective on marketing are identified. Insights are synthesized from various literatures, including the work on corporate entrepreneurship, innovation and new product development, creative leadership, and change management. Linkages are established between entrepreneurial marketing and resource advantage theory. An integrative model is proposed that includes a number of key factors surrounding the phenomenon of entrepreneurial marketing. Conclusions are drawn regarding the intellectual substance or legitimacy of entrepreneurial marketing. Priorities are proposed for continuing research, and implications are drawn for theory development, teaching, and managerial practice.

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Introduction Companies find themselves operating in a new competitive landscape. The contemporary business environment can be characterized in terms of increased risk, decreased ability to forecast, fluid firm and industry boundaries, a managerial mindset that must unlearn traditional management principles, and new structural forms that not only allow for change but also help create it. This new landscape has been characterized in terms of four overriding forces: change, complexity, chaos, and contradiction (Bettis and Hitt, 1995; Hitt and Reed, 2000). What are the implications of the new competitive landscape for marketing? Do the roles and responsibilities of the marketing function within the firm change under such circumstances? On the one hand, it might be argued that the fundamental precepts of marketing remain unchanged but more attention must be given in the contemporary environment to customization and one-to-one approaches, relationships, networking, strategic alliances, globalization, and technology (Day and Montgomery, 1999). On the other hand, it may be that marketing itself should be reconceptualized. Srivastava, Shervani and Fahey (1998, p. 168) note: “Extending existing theoretical frameworks may no longer be sufficient to reflect marketplace shifts and guide marketing practice in the fundamentally new competitive context and conditions that will characterize the new millennium.” It is this latter alternative, the idea that there is a need to fundamentally rethink the marketing function itself, that is the focus of this white paper. Recent years have witnessed the application of a number of adjectives to describe new approaches to the marketing function, including “guerrilla marketing”, “proactive marketing”, “subversive marketing”, “expeditionary marketing”, and “disruptive marketing”. At the same time, marketing courses and curricula are increasingly embracing modules or courses on creativity and innovation. Interest in the marketing/entrepreneurship interface has never been higher. The purpose of this white paper is to systematically assess these developments, and, more specifically, to critically examine the concept of “entrepreneurial marketing”. This term will be used as an umbrella to capture conceptualizations of marketing as an innovative, risk-taking, proactive area of managerial responsibility. Underlying dimensions of this perspective on marketing will be specified. The advantages of an entrepreneurial perspective on marketing will be identified. Insights will be drawn from various literatures, including the work on corporate entrepreneurship, innovation and new product development, creative leadership, and change management. The theoretical underpinnings of entrepreneurial marketing will be discussed within the context of resource advantage theory. A preliminary model will be proposed to facilitate our understanding of entrepreneurial marketing. The model will include a number of key factors surrounding the phenomenon of entrepreneurial marketing, including drivers and outcomes of this way of thinking and acting.

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The paper will help to clarify both the definition and the meaning of entrepreneurial marketing. Moreover, conclusions will be drawn regarding the intellectual substance or legitimacy of this concept. Shortcomings in the conceptualization of entrepreneurial marketing will also be identified, and priorities will be proposed for continuing research. Implications will be drawn for mainstream or conventional marketing and for ongoing efforts at theory development. In addition, implications will be drawn for managerial practice. Contemporary Definitions of Marketing and Entrepreneurship To understand entrepreneurial marketing, we need first to establish the meaning of the terms “marketing” and “entrepreneurship”. Prevalent conceptualizations of marketing center on a set of activities that facilitate exchange relationships. Consider a commonly accepted definition promulgated by the American Marketing Association: “Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational goals” (See Bennet, 1988). In a related vein, Pride and Ferrell (2000, p. 14) define marketing management as “the process of planning, organizing, implementing and controlling marketing activities to facilitate exchanges effectively and efficiently.” Zikmund and D’amico (2001) indicate that any definition of marketing must include five components: two or more parties, something that is given up by each party, something that is received by each party, some level of communication between the parties, and some mechanism to perform the exchange. The marketing activities alluded to in most definitions are generally organized into four interrelated categories: product, price, promotion, and distribution. Virtually any controllable mechanism for facilitating transactions will fall into one of these categories. Further, if it is assumed that exchange occurs when a buyer perceives that value is being created by a seller, then all of the available mechanisms for creating customer value can be classified into these categories. When combined, the myriad decisions that comprise these four categories of activities are referred to as the “marketing mix”. The challenge of strategic marketing is to blend the elements of the marketing mix in a fashion that reflects the needs of key target customer audiences, while also enabling the firm to differentiate itself from competitors on a sustainable basis. Moreover, the marketing mix elements are adapted over time to reflect changing market dynamics as products evolve through their life cycles. Marketing is predicated on an underlying philosophy commonly referred to as the “marketing concept”. It is a customer-oriented philosophy built around three elements:

• All activities of the firm should be based on customer needs, • A customer focus should be integrated throughout the firm, • Customer satisfaction is viewed as the means to long-term profitability.

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This philosophy guides the firm’s marketing strategy, including its selection of target audiences, design of the marketing mix, allocation of marketing resources, and activities for monitoring marketing performance. Let us now turn to entrepreneurship. Entrepreneurship can be conceptualized as a process that occurs in organizations of all sizes and types (Bygrave, 1989; Cornwall and Perlman, 1990; Morris and Kuratko, 2001; Pinchot, 2000). Stevenson, Roberts, and Grousbeck (1989) define it as “the process of creating value by bringing together a unique package of resources to exploit an opportunity.” The process itself includes the set of activities necessary to identify an opportunity, define a business concept, assess the needed resources, acquire those resources, and manage and harvest the venture. Two key ingredients are necessary for accomplishing these activities: an entrepreneurial event and an entrepreneurial agent. The event involves the development and implementation of a new concept (i.e., a new product, service, or process); the agent is a person or group that takes responsibility for bringing the event to fruition. The concept of entrepreneurship has three underlying dimensions: innovativeness, risk-taking, and proactiveness (Covin and Slevin, 1994; Ginsberg, 1985; Miller and Friesen, 1983; Morris and Paul, 1987). Innovativeness refers to the seeking of creative, unusual, or novel solutions to problems and needs. It includes the development of new products and services, as well as new processes and technologies for performing organizational functions (e.g., production, packaging, delivery, sales, promotion, and administration). Risk-taking involves the willingness of managers to commit significant resources to opportunities that have a reasonable chance of costly failure. The risks are not extreme and uncontrollable but instead are moderate, calculated, and manageable. Proactiveness is concerned with implementation and making events happen through whatever means are necessary. It frequently entails breaking with established ways of accomplishing a task and requires a hands-on management style. It usually implies considerable perseverance, adaptability, and a willingness to assume some responsibility for failure. To the extent that an undertaking demonstrates some amount of innovativeness, risk-taking, and proactiveness, it can be considered an entrepreneurial event and the person behind it an entrepreneur. Further, any number of entrepreneurial events can be produced by a person or organization in a given time period. Accordingly, entrepreneurship is not an either-or determination but a question of “degree” and “frequency”. The variable nature of entrepreneurship is illustrated in Figure 1. Here, the term “entrepreneurial intensity” is used to capture the combined effects of the degree and frequency of entrepreneurial behavior demonstrated by a given individual, organization, or society.

-Figure 1 About Here- Based on the discussion above, at least three elements are common to the definitions of marketing and entrepreneurship. First, in both instances, emphasis is placed on a managerial process. Second, both definitions emphasize unique combinations, in one case of the marketing mix elements and in the other case of resources. Third, underlying

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both definitions is the concept of value creation, or the notion that elements are combined in a manner that results in the provision of value to a user. Attention to the Marketing and Entrepreneurship Interface An examination of the marketing-entrepreneurship interface suggests two major subject areas for investigation. The first of these areas can be termed the role of marketing in entrepreneurship. This dimension of the interface is concerned with the application of marketing tools, concepts, and theory in supporting new venture development. A fair amount of attention has been devoted to this area over the past decade. A notable example is the annual research symposium sponsored by the University of Illinois at Chicago. In addition, the Summer and Winter Educators’ Conferences sponsored by the American Marketing Association have devoted tracks to issues at the marketing and entrepreneurship interface for the past few years. Also, a new periodical, entitled the Journal of Research in Marketing and Entrepreneurship, appeared in 1999. Most of the research presented in these forums explores effective marketing practice in a small business context. Fundamental differences between marketing in larger, established organizations and in earlier stage ventures are often highlighted (e.g., Stokes, 2000). Even though much of this work devotes little effort to the establishment of theoretical underpinnings or to theory development, there has been steady improvement in the empirical rigor found in the research. The second dimension of the interface can be termed the role of entrepreneurship in marketing. This dimension is the principal focus of the current white paper. It represents an exploration of ways in which entrepreneurial attitudes and behaviors can be applied to the development of marketing programs. An example of a relevant issue in this area is a stream of articles exploring the relationship between the marketing orientation and the entrepreneurial orientation of a firm. Slater and Narver (1995, p. 68) suggest: “Coupling a market orientation with entrepreneurial values provides the necessary focus for the firm’s information processing efforts, while it also encourages frame breaking action, thus greatly increasing the prospects for generative learning.” Empirical work has consistently demonstrated a significant positive correlation between these two orientations, and between each of these orientations and company performance (e.g., Davis, Morris, and Allen, 1991; Jaworski and Kohli, 1993; Miles and Arnold, 1991; Morris and Paul, 1987). One interpretation of these findings is that the two orientations might not only be related, but may be part of a single, overriding organizational philosophy. Thus, integrating a customer focus throughout the firm, continuous innovation, and leading rather than following the market are interdependent components that must work hand in hand (See Deshpande, Farley and Webster, 1993). Beyond these examinations of overall company orientation, however, the marketing discipline has largely ignored any role for entrepreneurship. Notably lacking from the definition of marketing endorsed by the American Marketing Association (Bennet, 1988) is any responsibility for entrepreneurial or innovative behavior. Similarly, the three

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dichotomies model of Hunt (1976), which delineates the nature and scope of the marketing discipline, ignores issues of innovation, risk-taking, and proactiveness. An illustration of the lack of attention to entrepreneurial thinking in marketing can be found by examining the Research Priorities published annually by the Marketing Science Institute (Deshpande, 1999). An examination of the top-ranked research questions over a 10-year period suggests that issues of innovativeness, risk-taking, and proactiveness are largely ignored. The exception is an emphasis on “successfully introducing really new products” in the mid-1990s. Such issues as “marketing as innovation”, “marketing as passion”, and “marketing as agent of change” are not mentioned. Academic research is not the only area in which an entrepreneurial role for marketing receives little attention. Morris and Hills (1992) conducted a comprehensive review not only of journals but also of leading textbooks in the field. Their content analysis revealed a striking lack of material devoted to issues of innovativeness, risk-taking and proactive behavior. Innovativeness was addressed only in terms of marketing’s fairly tangential role in new product development processes; risk-taking was examined only as a consumer behavior variable; and proactiveness either received no attention or the downside of proactive behavior was noted. An examination of books published in the last three years indicates that the findings of Morris and Hills continue to apply a decade later. While extensive treatment of E-commerce and the Internet can be found, even here the discussions do not reflect an entrepreneurial theme. One exception to this tendency is Marketing: Principles and Perspectives by Bearden, Ingram and LaForge (2001). These authors explicitly design entrepreneurship into each chapter of the text. Historically, Alderson (1965) was one of the few scholars to stress innovation as an integral component of the marketing function. His ideas on this issue were largely ignored, however, and the more prevalent tendency was to explicitly separate marketing from innovation (e.g., Drucker, 1954; Levitt, 1962). It is our position that this separation, whether implicit or explicit, has hindered the ongoing advancement of the discipline. The Trouble with Marketing: Prevalent Criticisms Marketing is a discipline in which it is not clear whether managerial practice lags behind academic work or academic research follows developments within markets and organizations. The third possibility is that academic work moves in directions largely irrelevant to the concerns of managers. Most likely, all three of these scenarios apply to the current relationship between theory and practice. Along the way, marketing has evolved to become a fairly non-entrepreneurial pursuit. In recent years, marketing practitioners have been subject to a variety of criticisms. Examples of concerns include an over-reliance on established rules of thumb, encouragement of formula-based thinking, lack of accountability (especially in a time of diminishing returns on conventional marketing expenditures), emphasis on the so-called supporting elements of the marketing mix (price, distribution, and, especially, promotion)

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over product value, a focus on the superficial and transitory whims of customers, a tendency to imitate instead of innovate, concentration on selling products instead of creating markets, and the pursuit of short-term, low-risk payoffs (Davis, Morris and Allen, 1991; Hamel and Prahalad, 1992; McKenna, 1991; Moorman and Rust, 1999; Morris and Davis, 1988; Webster, 1997). Table 1 summarizes a number of the criticisms leveled at marketers. Moreover, these concerns are not new. As early as 1981, Webster’s survey of senior managers found that marketers were perceived to be “not sufficiently innovative and entrepreneurial in their thinking and decision-making” (p.11) (See also Bennett and Cooper, 1981; Hayes and Abernathy, 1980; Odioso, 1987; Tauber, 1974).

-Table 1 About Here- For their part, academics have been criticized for research that contributes little to marketing practice. As firms find themselves operating in increasingly turbulent environments, the relevancy of theoretical, conceptual, and empirical research in marketing appears less consequential and more problematic. In his examination of research priorities within the discipline over time, Deshpande (1999) suggests that scholars are addressing quite mundane issues, frequently of a tactical sort, with an increasing focus on narrower and narrower definitions of problems (See also Webster, 1997). Srivastava, Shervani, and Fahey (1999) conclude that marketing theory (and practice) fail to connect marketing to cross-functional business practices and to the cash flow consequences of marketing actions. It remains unclear, according to them, how marketing contributes to the direction and integration of core business practices. As a result, some worry that the marketing discipline is being marginalized, losing control of the important research agendas, and becoming responsible only for tactical implementation of the marketing mix elements (Day and Montgomery, 1999; Lehmann, 1997). Criticisms such as these, combined with an awareness of fundamental changes in the strategic challenges confronting most contemporary organizations, have led a number of observers to conclude that the marketing discipline must move in significant new directions (e.g, Day and Montgomery, 1999; Webster, 1992). Specific calls are made for marketing to embrace a far more cross-functional, cross-border, and cross-disciplinary orientation (Deshpande, 1999; Kinnear, 1999). Perhaps the most recurrent theme among those reflecting on future directions for the marketing discipline concerns the need to embrace strategic relationships, alliances, and networks as opposed to simple buyer-seller exchanges. Achrol and Kotler (1999) represent an excellent case in point. They maintain that a knowledge-driven economy produces structural upheaval in firms, ultimately resulting in the creation of network organizations. Companies increasingly must operate within three levels of networks: internal, vertical, and intermarket. Changes in marketing’s role at each level will be radical and pervasive. Within internal networks, marketing will be responsible for facilitation of speed, relationships with customers that permit in-depth information sharing on an ongoing basis, new knowledge generation, organizational education, integration of processes, and mediation of network relationships. In vertical networks, marketing becomes a coordinator and integrator of vertical relationships, a conductor of proactive rather than adaptive market research, and

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a measurer of network member performance. At the intermarket network level, marketing brokers deals among different countries and markets, drives the direction of technology development, and integrates financial and marketing strategy. Other scholars have argued not simply for new directions or responsibilities, but for a more basic redefinition of the discipline itself. For instance, Zeithaml and Zeithaml (1984) have suggested the marketer’s task is to “continually strive to redefine the product and market context within which the organization operates.” Simmonds (1986) posits that a process of continual change is inherent to the task of marketing. He proposes that marketers be engaged in an ongoing process not only of identifying change opportunities but also of inducing continual change in their organizations and, by extension, in the marketplace. The basic role of the marketer becomes “organized rational innovation.” Bonoma (1986) notes that marketing is a boundary function, responsible for interacting with key components of the environment on a regular basis. He suggests that, as those components become more dynamic and complex, boundary functions are forced to become more flexible and opportunity driven. Murray (1981) concluded that marketing has a unique perspective on customers, competitors, and products and that it must become the natural “home” for the entrepreneurial process in established firms, translating its observations into the redesign of the corporate resource base and product/market mix. More recently, Moorman and Rust (1999) indicate that marketing should take the lead in defining new market opportunities and rallying the entire firm to pursue these opportunities. Why Entrepreneurship Matters Ronstadt (1985, p 27) argues that “there can be no significant wealth nor major increase in the level of wealth without entrepreneurship.” He and other scholars have provided evidence that entrepreneurial ventures account for a disproportionate share of new jobs and innovations, as well as a high percentage of the exports and tax revenue produced in the United States (e.g., Birch, 1981; Timmons, 2000). Entrepreneurship is the chief agent of change operating from within the economic system. This change comes in the form of new combinations of resources, or innovations, which eventually make existing products and processes obsolete. Schumpeter (1950) used the term “creative destruction” to describe the continual disruption of economic equilibrium brought on by entrepreneurial activity. This concept is reflected in the stated philosophy of Sony founder Akio Morito: “The nature of business is to make your own product obsolete” (See Foster, 1986). A growing body of evidence suggests the most successful firms are the ones that engage in more entrepreneurial activity. In their landmark study on excellence in American industry, Peters and Waterman (1982) identified an entrepreneurial orientation as one of the key distinguishing characteristics of the best-run companies. A relationship between entrepreneurial orientation and a number of measures of organizational performance has been substantiated in the work of Covin and Slevin (1994), Rothwell (1980), Miller and

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Friesen, (1983), Morris and Sexton (1996), Zahra and Garvin (2000), and others. Further, it appears that this relationship is strongest where firms are experiencing conditions of dynamic, hostility and complexity in their external environments. Stevenson and Gumpert (1985) argue that the need for entrepreneurship is greatest when firms face diminishing opportunity streams, as well as rapid changes in technology, consumer needs, social values, and political roles. The same is true when firms are confronted with short decision windows, unpredictable resource needs, lack of long-term control over the environment, increased resource specialization, rapid resource obsolescence, and employee demands for independence. To the extent that pressures such as these increasingly characterize the contemporary business environment, entrepreneurship appears to have a significant and growing role in corporate management. Toward Entrepreneurial Marketing: The Emergence of Alternative Conceptualizations A variety of perspectives have emerged in both the trade and academic literatures concerning an entrepreneurial role for marketing in leading edge firms. Six of these perspectives are summarized in Table 2. Let us briefly consider each of them.

-Table 2 About Here-

Perhaps the most widely known of these efforts is the work of Levinson (1998). He introduces the term “guerrilla marketing” to refer to an approach to marketing that relies on bootstrapping, creative use of available resources, and a highly targeted mix of innovative communications techniques. He makes a point to distinguish guerrilla from traditional marketing. The larger implications for the marketing discipline of Levinson’s work are limited by the fact that his grassroots approach is more tactical than strategic, concentrates more on promotional tools than other marketing variables, and is intended for those starting and running small businesses. A genre of similar books have appeared in recent years with such titles as Marketing on a Shoestring (Davidson, 1994) and Off-the-Wall Marketing Ideas (Michaels, Karpowicz, and Stemberg 2000). These writings are filled with examples of guerrilla ideas, such as clever ways to create news stories about one’s business or inventive ways to use the Yellow Pages (See also Table 3). Even so, guerrilla approaches have experienced widespread adoption by both small and larger companies (Neff and Thompson, 2000), and have been integrated into the mainstream marketing curriculum in many universities. More recently, a variation on the guerrilla theme termed “buzz marketing” or “viral marketing” has received significant attention not only from large firms but also from major advertising agencies and consulting houses (Business Week, 2001; Rosen, 2000; Fortune, 2000; Gladwell, 2000). The buzz and viral approaches build on innovation diffusion principles and the concept of lateral rather than vertical communication (See Table 4 for an elaboration on characteristics of these two approaches). They were employed in the successful marketing efforts of Hotmail.com, Ebay.com, Vespa Scooters, and the movies Blair Witch Project and Artificial

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Intelligence. And yet, academic researchers have largely ignored the concepts of guerrilla and buzz marketing, perhaps questioning both the intellectual substance and the potentially faddish nature of a concept rooted in a set of popularized trade books.

-Table 3 About Here- Hill and Rifkin (1999) use the term “radical marketing” to describe a set of approaches that they argue challenge the status quo, or immutable laws, of marketing. The authors seek to find commonalities among the seemingly unconventional but highly successful marketing methods of such companies as Snap-on Tools, Harley Davidson, and Providian. Examples of such commonalities include establishing strong visceral ties with one’s target audience so that a “community” of customers is created and managed, centering the promotional mix around one-to-one customer communication, and rejecting the prevalent industry logic regarding the salient product attributes, pricing methods, or distribution philosophy. A point of distinction relative to the work of Levinson (1998) is the focus by Hill and Rifkin on mid-sized and larger companies, or more established organizations. They focus on initiatives within companies that tend to be more strategic in nature, while providing examples of tactical moves through which the strategies were manifested. Another distinguishing aspect of the approach of Hill and Rifkin is that it transcends strategic or tactical moves and incorporates aspects of company philosophy and orientation. Thus, they stress the roles of passion and core values in the successful efforts of those labeled as radical marketers. However, like Levinson, Hill and Rifkin are concerned with lean marketing budgets and resource constraints as a source of innovation.

-Table 4 About Here- Hamel and Prahalad (1992) suggest the term “expeditionary marketing” to describe the role of marketers in creating markets ahead of competitors. In this conceptualization, marketing serves to identify unarticulated needs of customers and new potential functionalities of products, extending the firm’s “opportunity horizon”. Consistent with the notion of rejecting the conventional ideology in an industry, the authors stress the need to reject prevailing assumptions regarding price/performance trade-offs. Further, marketers must lead customers while also managing the risks inherent in innovative activity. Of note is their argument that risks can be reduced if marketers are able to increase rates of new product introduction for a portfolio of innovations (See also Sanchez, 1999). Even more than Hill and Rifkin (1999), Hamel and Prahalad are concerned with larger, established companies and focus more on a strategic than tactical level. In discussing what he labels “subversive marketing”, Bonoma (1986) refers to the need for marketers to undermine company structure and process in order to implement innovative marketing practices. The essence of his argument is that organizations come to rely on well-tested guidelines, rules of thumb, and fixed assumptions that work well under a given set of environmental conditions. Reasonably stable conditions allow marketers to build structures that reinforce useful habits and routines and help ensure

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consistency in quality, costs, and service levels. However, management tends to remain loyal to these guidelines and assumptions even as fundamental changes occur in the external environment. With the onset of such change marketing routines actually become hurdles that obstruct appropriate adaptation on the part of the firm. Serious damage is done to the firm’s competitive position unless marketers are willing to bend or break rules, work around the official budget, leverage resources from inside and outside the firm, and develop inventive approaches to obtaining key performance data that is otherwise unavailable, among other practices. Environmental change is also a theme in the work of Zeithaml and Zeithaml (1984). These authors suggest that marketing as conventionally construed is fairly deterministic. Specifically, an organization seeks to establish what customers want and then structures company goals, operations and activities to provide the desired product better than competitors can. In effect, marketing begins with a set of environmental constraints that are pre-defined for the company, including customer needs, competitive conditions, technological factors, social conditions, and so forth. The purpose of marketing intelligence is to provide inputs that allow the marketer to analyze forces in the environment and then implement changes that enable the firm to adapt to these forces. Zeithaml and Zeithaml refer to the need for “environmental marketing management”, where marketing theory explicitly adopts a proactive, entrepreneurial orientation to the management of environmental conditions. Like Hamel and Prahalad (1992), they emphasize the need to lead customers and markets, and to redefine critical aspects of the external operating environment. They provide a taxonomy of environmental management strategies, and link these strategies to financial analysis and stages in the product life cycle. A final perspective can be found in the work of Davis, Morris and Allen (1991), who provide empirical support for a contingency view of the role of marketing within a firm. Under placid environmental conditions, the authors suggest firms can concentrate on incremental improvements to their methods of satisfying existing customer needs. Alternatively, when the environment can be characterized in terms of stronger interdependencies among firms, marketers should focus more attention on anticipating and quickly responding to the moves of competitors. However, to the extent that environments become fairly turbulent, marketing managers must take responsibility for introducing greater levels of entrepreneurship into all aspects of the firm’s marketing efforts. Davis, Morris and Allen refer to this as “proactive marketing”, and indicate that it includes ongoing responsibility for redefining the product and market context within which the firm operates, identifying novel sources of customer value, and emphasizing unproven wants, new market segments, new technologies, and continuous innovation in all areas of the marketing mix. An assessment of the information presented in Table 2 suggests some commonalities among the various perspectives. For instance, fairly consistent emphasis is given to (a) efficiency in marketing budgets, so that a considerable amount is accomplished with a relatively limited set of resources; (b) leveraging of resources, where the marketer is able to employ resources he/she does not own or control; (c) rejection of conventional

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approaches to the management of marketing variables; (d) ongoing product/service innovation; and (e) leadership of customers and an ability to affect change in the environment. It is our contention that these various perspectives represent the foundation for an alternative concept of marketing. Specifying the Concept of Entrepreneurial Marketing The term “entrepreneurial marketing” is proposed as an integrative concept for conceptualizing marketing in an era of information intensity and ongoing change in the environmental context within which firms operate. It can be defined as “a proactive, innovative, risk-taking approach to the identification and exploitation of opportunities for attracting and retaining profitable customers”. Defined in this manner, entrepreneurial marketing (EM) represents an opportunistic perspective, with the marketer not simply responsible for communication activities, but also for continually discovering new sources of value for customers and new markets for the firm. Value is created through new approaches to the elements of the marketing mix that challenge prevailing industry assumptions. Importantly, EM represents a different approach to envisioning the business itself, its relationship with the marketplace, and the role of the marketing function within the firm. Thus, the business is viewed as an “innovation factory”, where all departments and functions are defined in terms of an internal value chain and have an ongoing responsibility for identifying new sources of customer value. With regard to the marketplace, the firm seeks to lead customers as opposed to reacting to or following them, and attention is devoted to the creation of new markets rather than better serving existing markets. Most important, as illustrated in Figure 1, marketing’s role within the firm is designed around six key dimensions:

1) Customer Intensity: Largely ignored in marketing theory and empirical research is an emotional aspect to the successful market positioning of such companies as Harley Davidson, Southwest Airlines and Snap-On Tools. Southwest is a case in point. The company uses the concept of “spirituality” to capture profound convictions regarding the role of the employee, the nature of the customer experience, and how the two are inter-related. As Hamel and Prahalad (1994, p. 128) note, “Getting to the future first is more a function of resourcefulness than resources…Resourcefulness stems not from an elegantly structured strategic architecture, but from a deeply felt sense of purpose, a broadly shared dream, a truly seductive view of tomorrow’s opportunity”.

We propose that the term “customer intensity” be used to capture a sense of conviction, passion, zeal, enthusiasm and belief in where marketing is attempting to take the firm and the way in which it plans to get there. Beyond bringing technical competence to the marketing task, entrepreneurial marketers bring intensity; they reinforce the need for all employees to identify at a very

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fundamental level with the firm’s products and brands and what they stand for and, ultimately, with the firm’s customer value proposition.

-Figure 2 About here-

2) Sustainable Innovation: Consistent with the work of Runser-Spanjol (2001),

sustained innovation involves the ability at an organizational level to maintain a flow of internally and externally motivated new ideas that are translatable into new products, services, processes, technology applications, and/or markets. It is a property or trait of an organization that emerges from a complex set of interrelationships.

A range, or continuum, of innovation possibilities exists. In terms of products and services, marketers can champion or play an active role in efforts involving innovations that are new- to-the-world, new-to-the-country or the market, new lines for the company, additions to lines, product/service revisions, new applications of existing items, and repositioning of existing items. In the area of process innovation, a wide range of possibilities exist, from new administrative systems and service delivery systems to alternative distribution approaches and new organization forms or structures. Marketing plays an integral part in sustainable innovation, with roles ranging from opportunity identification and concept generation to technical support and creative augmentation of the firm’s resource base to support innovation. Within marketing operations, process innovation becomes a cornerstone. Thus, managers continually champion new approaches to segmentation, pricing, use of the brand, packaging, customer relationship management, customer credit, logistics, customer communication, and service levels, among other operational activities.

3) Strategic Flexibility: Firms must strike a balance in their innovation activities

between pioneering initiatives that lead the market and quick, creative adaptation to changes in market circumstances. Strategic flexibility involves a willingness to continuously rethink and make adjustments to the firm’s strategies, action plans, and resource allocations, as well as to company structure, culture, and managerial systems. How quickly and adroitly can marketers adapt to changes in the competitive set or in competitor strategies, to a shift in the power or change in the structure within the value chain, or to changes in the availability or cost of components and raw materials? Such adjustments allow for the fact that management knows where the firm wants to go and how it wants to be positioned, but that there are different ways to get there. Flexibility demands keen insights into the organization’s resources, capabilities, and competencies.

By definition, opportunities are fluid and move in new directions. Marketing must guide the firm’s efforts in anticipating how the elements that define an opportunity will evolve over time, and how the firm can adjust in novel ways. The marketing function contributes to the firm’s strategic flexibility, and hence its

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ability to adapt. Flexibility can be enhanced through: adroit approaches to human capital and resource leveraging; strategic partnerships and alliances combined with a global market presence; limited levels of commitment to particular products, markets and technologies; effective incorporation of new and emerging technologies (i.e., technologies that enable the firm to quickly recognize changing market needs or conditions, customize products, and serve different markets in different ways); and intelligence gathering and process activities that facilitate organizational learning (See Hitt and Reed, 2000).

4) Calculated Risk-taking: Risk-taking involves a willingness to pursue opportunities that have a reasonable chance of producing losses or significant performance discrepancies (See also Venkatraman,1989, who uses the term “riskiness”). Our emphasis is not on high or completely uncontrollable risks but instead on risks that are moderate and calculated. Entrepreneurial marketing does not entail reckless decision-making but rather, a reasonable awareness of the risks involved (e.g., financial, technical, market-related, and personal) and an attempt to manage such risk factors. These risks are reflected in the various resource allocation decisions made by an organization, as well as in the choice of products, services, and markets to be emphasized.

Every firm has a risk profile, although for most companies it is not explicitly formulated. This risk profile evolves over time. Marketing has a responsibility for developing a keen grasp on this risk profile and then for managing risks in a way that reflects the profile. Risk management is accomplished with a wide range of devices, including intelligence gathering efforts, test markets, working with lead customers, staged product launches, outsourcing of various activities tied to a new product or service, borrowing or sharing resources, and partnerships with suppliers, distributors and competitors. In their discussion of “expeditionary marketing”, Hamel and Prahalad (1992) use a baseball analogy in suggesting that successful hits (new products, services, processes) are a function of the company’s hit rate (or batting average) times the number of times the firm comes to bat. Arguing that firms are preoccupied with their batting average, these authors highlight the need to place far more focus on frequency of times at bat. The conclusion is that by innovating more, with lots of lower risk market incursions that involve exploring multiple market niches, a firm actually reduces its risk profile to a more manageable level. A key to this approach is a systematic approach to organizational learning. Properly designed marketing intelligence systems can allow companies to determine quickly what works and does not work in a given entrepreneurial endeavor and then translate the lessons to other endeavors.

A different perspective is provided by Dickson and Giglierano (1986), who have provided one of the only articles to appear in the Journal of Marketing that explicitly address entrepreneurial risk-taking. The authors propose that marketers must consider two sides of the risk equation. The typical concern is with pursuing

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an entrepreneurial idea that does not work out, or “sinking the boat” risk. It is reflected in such factors as a poorly conceptualized product, bad timing, an already well-satisfied market, inadequate distribution, and inappropriate price levels. The other side of the risk equation is concerned with “missing the boat”, or the risk in not pursuing a course of action that would have proven profitable. It occurs when the firm delays action on a concept for too long and is preempted by competitors or changing market requirements. The firm misses the window of opportunity by being too cautious or conservative and often seeks more security in the form of additional market research, financial data, or inputs from consultants.

5) Environmental Proactiveness: The entrepreneurial marketer does not take the

external environment as a given or as a set of circumstances to which the firm can only react or adjust. The environment is defined as an opportunity horizon. While acknowledging areas where the firm is more dependent on various external parties or vulnerable to external phenomena, marketing efforts are proactively directed toward affecting change in the environment. More specifically, the marketer attempts to redefine elements of the external environment in ways that reduce environmental uncertainty, lessen the firm’s dependency and vulnerability, and/or modify the task environment in which the firm operates. In essence, the marketer is enhancing the firm’s level of control over its own destiny.

Zeithaml and Zeithaml (1984) provide a typology of environmental management strategies consisting of three general categories (independent, cooperative and strategic maneuvering) and 16 individual strategies. Most of these clearly fall within marketing’s domain, while others are supported in their implementation by marketing activities. Further, particular environmental management approaches can be linked to the current competitive position of the firm and to stages of the product life cycle.

Michael Dell, with Dell Computer, provides an illustration of environmental proactiveness. Dell effectively redefined the competitive rules of the computer industry through his Dell Direct Method, which permits high volumes of customized computers to be sold directly to customers at competitive prices. His volumes made him less vulnerable to the pressures of various suppliers, while his distribution approach removed the power of retailers over company operations. Moreover, by overturning assumptions regarding price/performance trade-offs, Dell established a sustainable and highly profitable strategic position. Another example can be found in the Grateful Dead rock band (See Hill and Rifkin, 1999). By establishing strong visceral ties with their customer base, inverting the conventional business model in terms of the relationship between album sales and concert tours, and employing a host of innovative tactics in merchandising, relationship management, and concert operations, the band created entry barriers and a level of differentiation that discouraged direct competitors and gave it significant leverage with organizations comprising the value chain in the music industry.

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6) Resource Leveraging: At its most basic level, leveraging refers to doing more

with less. Consider the base word “lever”. Acting as a lever, a metal rod enables an individual to dislodge an object that could not otherwise be moved. In a similar vein, entrepreneurial marketers are brilliant leveragers of resources. In their companies, ambition forever outpaces resources. The implication is that entrepreneurial marketers are not constrained by the resources they currently control or have at their disposal. They are able to leverage resources in a number of different ways. Stated differently, the concept of resource leveraging has a number of aspects:

• Stretching resources much farther than others have done in the past; • Getting uses out of resources that others are unable to realize; • Using other people’s (or firm’s) resources to accomplish one’s own purpose; • Complementing one resource with another to create higher combined value; • Using certain resources to obtain other resources.

Leveraging is not something one simply decides to do. It is a creative rather than mechanical process. Marketers develop a capacity for resource leveraging. Some are more creative, others less so. The ability to recognize a resource that is not being used completely, to see how the resource could be used in a non-conventional way, and to convince those that control the resource to let the marketer use it requires insight, experience, and skill. The same can be said for the ability to get team members to work extra hours, convince departments to perform activities they normally do not perform, or put together unique sets of resources that, when blended, are synergistic.

Of all the types of leveraging approaches mentioned, perhaps the most critical one concerns the ability to use other people’s resources to accomplish the marketer’s purpose. Examples of the ways in which this is done include bartering, borrowing, renting, leasing, sharing, recycling, contracting, and outsourcing. These efforts can be directed at other departments and units within the firm or at suppliers, distributors, customers and other external organizations. The efforts frequently entail both informal initiatives such as the exchange of favors and the use of networks, and formal initiatives, such as strategic alliances and joint ventures.

Discussions of resource productivity can also be misconstrued, at least in some companies. The leveraging philosophy is not about cutting resources or squeezing them as much as possible in an attempt to increase productivity. Managers seeking to create a “lean and mean” enterprise often find the end result is more “mean” than “lean”. The long-term outcome is frequently less productivity and more inefficiency. Rather, leveraging is about finding and using resources more intelligently, more creatively, and in a more focused manner.

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It is important to note that the six dimensions that comprise entrepreneurial marketing are not independent. Thus, risks may be mitigated through resource leveraging in the form of outsourcing, which in turn results in greater strategic flexibility. Innovation may be facilitated through resource leveraging in the form of a strategic partnership, but this might increase the firm’s dependency on an outside party. In addition, not all of the dimensions need to be operating at once for entrepreneurial marketing to occur. The marketer could engage in significant innovation that redefines environmental conditions, involves high levels of customer intensity, and includes numerous risks some of which the marketer can mitigate, but resources are not being leveraged, and the required approach may produce little strategic flexibility. Stated differently, EM is a matter of degree, and various combinations of the underlying dimensions will result in marketing that is more, or less, entrepreneurial. When considered collectively, these six dimensions produce a type of marketing that differs significantly from conventional marketing practice. Table 5 summarizes 13 key differences. Underlying these differences are the three entrepreneurial dimensions of innovativeness, risk-taking, and proactiveness. EM is fundamentally an opportunity-driven and opportunity-seeking way of thinking and acting. Moreover, entrepreneurial marketing differs in that it returns the discipline to its roots as creative pursuit and as art. Thus, the imagination, vision, cleverness, and originality associated with entrepreneurial behavior lies at the core of this conceptualization of marketing, and these attributes are applied to the full range of marketing activities, from market research and segmentation to the management of the marketing mix. This is not to suggest that science, established theory, systematic processes, and sophisticated insights are not vital aspects of EM. These elements must play an instrumental role if this school of marketing is to have sustainable impact. The problem is that the extant body of theory and many of the frameworks and tools of marketing do not, for the most part, accommodate or facilitate our understanding of entrepreneurial activity.

-Table 5 About Here- Entrepreneurial Marketing at Different Levels Webster (1992) notes that marketing has three distinct dimensions: as culture, as strategy and as tactics. As culture, marketing is a basic set of values and beliefs regarding the central importance of the customer in guiding the organization. Here, marketing’s traditional role is to assess market attractiveness by analyzing customer needs, promoting a customer orientation throughout the firm, and developing the firm’s overall value proposition and articulating it to the marketplace. As strategy, marketing is concerned with how the firm will compete in its chosen businesses. Some of the key decision areas include market segmentation, targeting, positioning, and deciding when to partner. As tactics, marketing is responsible for the design and implementation of the marketing mix variables for the purposes of creating and sustaining customer relationships. Tools of optimization and management science apply at this level, as do concepts of dyadic interaction, customization, and real-time production and consumption.

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Overlaying entrepreneurship on this conceptualization of marketing is fairly straightforward. Table 6 illustrates the overlay of each element of EM on the three dimensions of marketing.

-Table 6 About Here- Culture is concerned with an organization’s basic beliefs and assumptions concerning what the company is about, how its members should behave, and how it defines itself in relation to its external environment (Cornwall and Perlman, 1990). In a synthesis of various perspectives on company cultures that are consistent with entrepreneurial behavior, Morris and Kuratko (2001) found such cultures focus on people and empowerment, attention to basics, hands-on management, doing the right thing, freedom to grow and to fail, and a sense of commitment and personal responsibility. These cultures place strong emphasis on value creation through innovation and change. They also tend to stress the future and the importance of a sense of urgency. As culture, EM fosters values of innovativeness, risk-taking and proactiveness throughout the firm, and ties these values to a customer-driven orientation. The earlier-cited customer intensity dimension becomes most relevant at the cultural level. Marketers become sources of conviction, passion and zeal for novel product concepts, new approaches to the customer interface, and ultimately for both leading the customer and integrating the customer into company operations. They reinforce entrepreneurial values by developing rules of conduct, vocabulary, methodologies, rituals, and myths/stories that encourage customer-centric innovation. Now let us turn to marketing as strategy. The dynamic organizations of tomorrow will be ones that are capable of merging strategic action with entrepreneurial action on an ongoing basis. Strategic management focuses on achieving competitive advantage within a particular industry and market context. Entrepreneurship seeks to exploit opportunities others have missed or ones that have not been completely exploited. Thus, strategic actions represent advantage-seeking behavior, and entrepreneurial actions represent opportunity-seeking behavior (Ireland et al., 2001). Strategic actions provide the context within which entrepreneurial actions are pursued. Entrepreneurial marketing represents a bridge between strategic action and entrepreneurial action. Where marketing conventionally helps identify and communicate the firm’s relative advantages in targeted market segments, EM guides the creation of new advantages within current and newly created markets. More specifically, EM helps the firm to build, at lower cost and more speedily than competitors, the core competencies that spawn unanticipated products, alternative communication and distribution capabilities, and unique types of customer relationships (Hamel and Prahalad, 1994). The marketer leads customers to new solutions, different buying behaviors, and novel consumption patterns.

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At the tactical level, Levinson’s (1998) concept of guerrilla activities (together with the “buzz marketing” and “viral marketing” techniques) has the most applicability. Entrepreneurial marketing results in “guerrilla” approaches to the individual elements of the marketing mix, creative methods of resource leveraging, and a variety of techniques for managing or mitigating risks. A large number of implementation issues also come into play at this level. Marketers must develop a personal approach to the identification and pursuit of entrepreneurial opportunity. The approach must reflect skills in obtaining sponsors, building a flexible team structure, insulating projects, building project momentum, obtaining resources that have not been formally assigned to a project, developing internal support networks, and managing expectations. Bonoma (1986) emphasizes the need for “back-of-the-envelope skills”, where marketers are able to generate measures of product, segment, and marketing performance that are not readily available through the firm’s normal financial reporting system. Applications of Entrepreneurial Marketing In spite of the earlier cited criticisms of contemporary marketing practice, there are a number of firms whose operations reflect fairly high degrees of EM. Table 7 summarizes the efforts of three such companies, highlighting linkages between the approaches of these firms and the six underlying dimensions of entrepreneurial marketing.

-Table 7 About Here- Insights can also be gained into the practice of EM by considering its application to a particular element of the marketing mix, the price variable. Schindehutte and Morris (2001) have defined entrepreneurial pricing in terms of approaches that are more market based, risk assumptive, proactive, and flexible. They apply these elements to the formulation of price objectives, strategies, structure, levels, and price promotions. For example, in terms of price objectives, price can be used for much more than generating an acceptable, or even a relatively high, rate of return. Objectives that focus on the use of price to encourage a particular behavior on the part of buyers, establish a foothold in a new market, speed the exit of marginal competitors, take advantage of the learning curve, discourage certain groups of customers, or use one product line in the firm’s portfolio to generate sales of another line reflect a more entrepreneurial perspective. Similarly, entrepreneurial pricing is reflected in strategies that are value-based, capturing the total value proposition as perceived by individual segments and customers. Firms may need to develop multiple strategies, depending on the market context. Both premium and parity pricing strategies might be used by the same firm operating in different markets, and the firm may serve as price leader and price taker depending on the product context. Price structure is the decision area that invites the greatest amount of innovation and creativity. Structure is concerned first with which aspects of each product or service have a price attached. Sample pricing approaches might include bundling (a bank charges one

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price, for which a customer receives check-writing privileges, a savings account, use of an ATM for deposits/withdrawals/transfers/inquiries, a statement each month, returned checks, and traveler’s checks at no additional charge) and unbundling (the same bank charges individual prices for each of these services). It could entail value-added services that are provided to the customer without raising the price. Alternatively, the marketer could sell its basic offering at a very low price and then make money on higher margin consumables or add-ons. Selling the same product under different brand names for different prices is a further variation. Time-period pricing, where the product (or aspects of it) is priced differently at particular times, such as peak or low capacity utilization periods, also represents a structural option. Two other variations might be unlimited use of a given product or service for a set fee or an initial base price followed by a variable charge once usage exceeds some threshold. The price might also be tied to the performance of the product or service, where customers pay in direct proportion to the benefits they receive. A second aspect of structure concerns how prices will vary for different customers and usage situations. The principal focus in this regard is charging price differentials based on the market segment or individual account. This is arguably the most significant trend in pricing today, where segments having different price elasticities are charged accordingly, although many firms remain fairly naive in the way they implement segment differentials (e.g., senior citizen discounts). Other alternatives in this area include loyalty schemes for repeat or heavy users and establishing price differences for users who can only consume at certain time periods. Tying price to some variable aspect of customers, such as the size of their feet if operating a shoe store or the size of their car if operating a car wash, is another possibility. Current technology allows firms to take price differentials even farther, making one-to-one pricing a practical reality. Price structure is also concerned with the conditions, time, and form of payment. The chief consideration is the formal discount structure, including cash or early payment discounts, volume discounts (cumulative or non-cumulative), and functional or trade discounts (e.g., for distribution of logistical services or cooperative advertising). Also included here are various time payment schemes and trade-in allowances. In a similar vein, price levels and tactics lend themselves to a more entrepreneurial approach. Price levels, or the actual amounts charged for each product or service, and the actual level of any discounts given, require creativity in deciding on such issues as the use of odd prices ($9.95 instead of $10.00), the use of price to convey a level of quality in a product, and the amount of a gap to allow between items in a given line (e.g., the low- end, middle-of-the-road, and high-end versions of the same product). Finally, the use of short-term tactics, such as rebates, coupons, cents-off deals, and price promotions represent an ongoing means for achieving market-oriented flexibility and proactiveness in pricing. Such tactics can be quick, precisely targeted, and relatively inexpensive. Further, any number of guerrilla tactics are possible, such as a reusable coupon that increases in value with each use or a price promotion that is done jointly with another firm.

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Schindehutte and Morris (2001) suggest that there is ample room for experimentation in each of these areas, including the challenging of conventional rules. Thus, a restaurant might charge different amounts for a meal depending on the table at which one is seated, a college might charge higher prices depending on how many credit hours a student has completed, and an industrial manufacturer might price based on the accuracy of the industrial buyer’s demand forecasts over the last 18 months. The challenge is to identify and find inventive ways to capitalize on the creative variables that can have important profit impact over time, and that contribute to the customer value equation. The authors suggest that answering this challenge requires not only an intimate understanding of the customer, but also a willingness to lead rather than to follow customers. Theoretical Foundation for Entrepreneurial Marketing Hunt (1976) provided a theoretical schema consisting of eight cells to characterize and guide the scientific development of marketing as a discipline. EM is consistent with this schema and can be applied to all combinations of the profit/nonprofit, micro/macro, and positive normative dichotomies. Entrepreneurial marketing can be applied by both profit and nonprofit organizations, with considerable attention given in recent years to the concepts of social entrepreneurship and public sector entrepreneurship (e.g., Dees et al., 2001; Morris and Jones, 1999). Morris and Joyce (1998) have explored linkages between social marketing and social entrepreneurship. Similarly, EM applies at a micro level when employed by individual organizations and at a macro level when pursued jointly by members of a value-added chain, industry group, or strategic alliance of organizations from different industries. Positive dimensions are reflected in attempts to describe, explain, predict and understand how individuals, firms, collectives, or society as whole create value for customers through innovative, risk-taking, proactive behaviors. Normative insights derive from attempts to define appropriate levels of entrepreneurial behavior in marketing, determine how organizations should be designed to facilitate greater levels of entrepreneurship through marketing, and create public policies that would facilitate more innovative market behavior, and many other such prescriptive undertakings. It is also important to provide a theoretical foundation or home for entrepreneurial marketing. Although EM fits with a number of theoretical frameworks, it is especially consistent with resource-advantage (R-A) theory (Hunt, 2000). Replacing the assumptions underlying the economic theory of perfect competition with a much more realistic set of conditions (e.g., demand is assumed to be heterogeneous and dynamic; resources are heterogeneous and imperfectly mobile; information is imperfect and costly), R-A theory is “an evolutionary, process theory of competition in which each firm in an industry is a unique entity in time and space as a result of its history” (Hunt and Morgan, 1997, p. 78). Competition is an ongoing struggle among firms to achieve a comparative advantage in resources that will ultimately produce a sustainable competitive advantage in the marketplace. The source of advantage derives from innovation, which is viewed as endogenous to competition. Specifically, superior financial returns flow to

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those firms that are able either to create value more efficiently or to efficiently create more value for customers; this represents the link to entrepreneurial behavior. Entrepreneurship is the means by which firms discover, create or assemble resource assortments that allow them to produce valued market offerings. Competition is also defined in R-A theory as a knowledge discovery process. The competitive interplay of firms results in marketplace positions that reflect the relative efficiency and effectiveness of each entrant, which in turn allows firms in disadvantaged positions to learn where they need to acquire additional resources or to use existing resources more efficiently/effectively. The firms therefore are motivated to “neutralize and/or leapfrog advantaged competitors by better managing existing resources and/or by acquisition, imitation, substitution, or major innovation” (Hunt and Morgan, 1997, p. 78). R-A theory defines resources broadly to include such phenomena as organizational culture, knowledge, and competencies, and argues that many of these non-economic resources are replicable rather than scarce. Hunt and Morgan (p. 79) note: “Therefore, a comparative advantage in an intangible resource, such as a new organizational form or competency, can yield a marketplace position of competitive advantage….Thus, rewards flow to firms that successfully create new resources (e.g., competencies), which provides them with a powerful motivation to innovate.” Readers interested in more detail regarding R-A theory and its underpinnings are referred to the seminal work of Hunt (2000). It is a theory that clearly allows both for conventional approaches to marketing and for entrepreneurial marketing. Consistent with the dynamics of competition under R-A theory, marketing can facilitate the ability of firms to create new resources and greatly enhance the productivity of current resources (a) through the various leveraging approaches mentioned earlier and (b) by championing innovation in the form of new combinations of resources. Sustainable innovation lies as the heart of the R-A theory of competition, and this implies a role for marketing in providing both leadership and support for an innovation portfolio within the firm. Such a portfolio includes an array of product, service and process innovations reflecting different degrees of innovativeness and risk. Further, the ongoing seeking of new markets in which the firm’s resources provide comparative advantage would be a core role for marketing in the context of R-A theory. Moreover, under R-A theory, firms must learn and then adjust when their resource portfolios result in positions of competitive disadvantage. It would seem that, in such circumstances, a firm must be able to exhibit strategic flexibility, again justifying marketing role as a conduit for enhancing such flexibility. We have also discussed EM’s role in the development of culture (i.e., customer intensity) and organizational competencies. R-A theory accommodates such a role, arguing that such development is instrumental in the creation of comparative advantage. An Integrative Model of Entrepreneurial Marketing A conceptual model delineating the linkages between EM and its drivers and outcomes is presented in Figure 3. Factors giving rise to the need for and practice of entrepreneurial

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marketing are grouped into environmental drivers and organizational drivers. At the environmental level, a wide range of variables become relevant, from demand and supply heterogeneity, high bargaining power of suppliers and buyers, and the availability of attractive substitutes to the presence of aggressive competitors, high rates of technological change, volatility in economic conditions and proactive government regulatory policies. For simplicity, we have attempted to capture such variables with the degree to which the external environment is (a) experiencing rapid rates of change, (b) becoming relatively hostile or threatening, and (c) growing in heterogeneity and complexity.

-Figure 3 About Here- When confronting conditions of dynamism, hostility, and complexity, firms are forced to demonstrate more adaptability and flexibility, as well as higher levels of innovation and entrepreneurship. Under these conditions, conservative, reactive, risk-aversive management proves to be a competitive liability. For their part, marketing activities become especially critical under such circumstances. Turbulence in the environment elicits fear, uncertainty and doubt among sellers and buyers alike, but also forces firms to make faster decisions and opens up a whole range of new product and market opportunities. Marketing efforts have to become more customized and unique, with more customer choice in the form of a variety of values packages for different market segments. Finding creative ways to foster customer relationships while discovering new market segments becomes paramount. The extent to which the marketing efforts of companies become more entrepreneurial in response to environmental turbulence is affected by a host of organizational variables. That is, environmental turbulence forces firms to become more entrepreneurial in their marketing approaches, but the extent to which they actually do so is hindered or facilitated depending on how the larger overall organization adapts to such turbulence. Specifically, EM is more likely in companies that develop: flatter and decentralized structures; cultures that value innovation and change; tolerance of failure and empowerment of the individual; control systems designed around principles of slack and trust; strategies emphasizing high frequency and degree of entrepreneurship and technology leadership; and the design of human resource management systems that encourage creative behavior, flexibility to change, employee discretion, independent behavior combined with a spirit of cooperation, tolerance of ambiguity, and a results-orientation. There is also likely to be a bi-directional relationship, with entrepreneurial marketing being affected by these organization variables but also affecting them. Outcomes from entrepreneurial marketing efforts can be categorized into financial and non-financial, intermediate and final, and short- versus long-term. For the current discussion, the focus is on financial and non-financial outcomes. In terms of the latter, EM should produce higher rates of new product, service, and process introduction (enhanced innovation competencies); a more customer-centric culture; customers who are more desirable, loyal, and satisfied; greater generation of new and value-enhanced resources; creation of new organizational forms; and more productive external alliances

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and networks. Financial outcomes should include the realization of higher proportions of the lifetime value of customers, higher rates of revenue and asset growth, and enhanced profitability.

Conclusions The growing amount of attention to the marketing and entrepreneurship interface has made important contributions to our understanding of the role of marketing in entrepreneurial ventures but has under-emphasized the ways in which the precepts of entrepreneurship can enhance the study and practice of marketing. Nonetheless, the inadequacies of conventional marketing approaches for addressing the needs of companies operating in contemporary environments are becoming increasingly evident. Although a number of observers have proposed alternative approaches such as guerrilla marketing, radical marketing, expeditionary marketing and disruptive marketing, there has been no attempt to integrate these various perspectives under a single banner. This white paper has employed the term “entrepreneurial marketing” to capture a school of marketing thought that epitomizes entrepreneurial thinking and acting. More specifically, marketing becomes responsible and accountable for passion, innovation, risk management, resource leveraging, enhanced organizational flexibility and adaptability, and environmental proactiveness. Moreover, we believe that entrepreneurial marketing becomes a higher order conceptualization that captures both entrepreneurship in marketing and marketing in entrepreneurship. Much work remains to be done in the development of entrepreneurial marketing. For instance, richer insights are needed into the six dimensions of EM, including research on the inter-relationships among these dimensions. Clarification of potential conflicts and their implications is important, such as the extent to which certain resource leveraging approaches make the firm more vulnerable to external forces. Obstacles to entrepreneurial marketing in organizations warrant further research, together with approaches to overcoming such obstacles. A priority should be the obstacles originating from within marketing departments or among those having marketing responsibilities. In addition, research is needed to more formally specify hypotheses regarding the linkages proposed in Figure 3. Another issue is whether there are optimal levels of entrepreneurial marketing in a given firm. If so, how is such a level defined and what are the external and internal variables that determine the appropriate level of EM? Progress in these areas will help to solidify entrepreneurial marketing’s stature as more than a passing fad. In the final analysis, entrepreneurial marketing holds much potential for not only for reversing the potential marginalization of marketing but also for making it a driving force within firms in the achievement of competitive advantage on a sustainable basis.

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Table 1: Ten Criticisms Directed at Contemporary Marketing Practice

Static approach to marketing planning: A deterministic and reactive approach

where the external environment is analyzed and then objectives, strategies, and tactics are developed to adapt the firm to the extant environmental conditions.

The great black hole: Significant amounts of money are spent on marketing in a

relatively short period of time with relatively little to nothing to show for it. Marketing accountability: Marketers fail to create and systematically apply metrics

for assessing the productivity or performance of the marketing function in general, marketing budgets, and specific marketing initiatives.

A functional silo: Many in marketing are too narrowly focused, fail to consider the

implications of financial, production, technical, and other considerations on marketing decision-making, and frequently have difficulty effectively communicating with those in other functional areas of the firm.

All things to all people and efforts aimed at the center of a mass market: A

tendency to view everyone as a customer, to blur the brand and market focus of the firm, and to fail to set clear priorities in terms of resource allocation to product and market segments.

Formula-based thinking and established rules of thumb: Marketers base actions

on simple formulas and decision rules that are often over-generalized, have not been validated, and were derived under a set of environmental conditions that differs from those currently confronting the firm.

Followership and an over-reliance on conventional approaches to marketing

research: Customer needs are assumed, as is the customer’s knowledge or awareness of those needs; simplistic approaches are employed to obtain customer feedback and then adjust the product/service offering to reflect customer inputs.

Marketing as promotion: An exclusive focus on creative promotional approaches

rather than considering potential sources of value creation in all areas of the marketing mix.

Imitation over innovation: A tendency to mimic the moves of competitors

regardless of differences in resources, competencies, or the firm’s opportunity horizon; in product/service development, a preference to incremental improvements to existing offerings over bold new products and services.

Preoccupation with tactical moves and gimmicks: A lack of integrative strategies

to guide marketing actions over time, with too much emphasis on clever tactics that are not part of a larger, well-conceived plan of attack.

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Table 2: Six Perspectives on the Emerging Nature of Marketing Guerrilla Marketing (Levinson 1998)

Radical Marketing (Hill and Rifkin, 1999)

• Low cost but effective communications • Doing more with less • Cooperative efforts • Leveraging resources • Tapping under-utilized resources • Using alternative channels • Using alternative media • Networking • Less use of money, more investment of

time, energy, imagination • Acute focus in terms of products and

services

• Strong visceral ties with target audience • Focus on growth and expansion rather than

profit-taking • Maximal exploitation of very limited

marketing budget • Small, flat marketing department • Redefine the competitive rules; challenge

the conventional wisdom of the industry • CEO owns the marketing function • Cautious use of marketing research • Passion drives the firm’s marketing

approach

Expeditionary Marketing (Hamel and Prahalad, 1992)

Subversive Marketing (Bonoma, 1986)

• Escape tyranny of served market • Continuous search for innovative product

concepts • Overturning price/performance

assumptions • Leading rather than following customers • More new product innovations introduced

faster and targeting an array of niches • Tolerance of failure

• Undermining company structures to implement new marketing practices

• Individual behavior that is aggressive and action-oriented

• Working around the official budget • Rewards and resources based on merit • Leveraging resources from inside and

outside the firm • Use of entrepreneurial role models • Creative use of resource slack • Reliance on informal networks • Inventive approaches to obtaining key data

and monitoring performance

Environmental Marketing Management (Zeithaml and Zeithaml, 1984)

Proactive Marketing (Davis, Morris, and Allen, 1991)

• Reduce dependency on key external entities

• Marketing’s role is to manage and lessen environmental uncertainties

• Proactive, opportunistic management rather than a reactive and adaptive role for marketing

• Efforts to initiate change and redefine operating conditions in the firm’s external environment

• Removal of constraints on marketing function and limits on organization

• Marketing’s role is to effect and manage change

• Marketer’s strive to redefine the product and market context within which the firm operates

• An emphasis on unproven wants, new market segments, new technologies, and continuous innovation in all areas of the marketing mix

• Responsibility for ongoing identification of novel sources of customer value

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Table 3: Sample Guerrilla Marketing Techniques

Products are advertised on the ceiling of a retail store. A new restaurant invites local hairdressers for free meal just after opening to

capitalize on their word of mouth. A business identifies “champions” (key clients) and invests more heavily in them;

customers provide resources to growing ventures. News is created so that it will be covered in a local newspaper: a computer store does

computer training for underprivileged kids, the owner makes bold predictions, or does something unusual.

An entrepreneur becomes actively involved in community groups.

Reciprocal advertising: two businesses mention each other in their advertisements.

A firm barters for unutilized space (windows, table tents, bulletin boards, dressing

room mirrors). Articles are written for newspapers.

A store offers discount card/coupon that appreciates in value each time it is used.

A theatre places speakers outside front of facility with movie soundtracks playing; a

bakery purposely lets smells waft into customer passageway of mall. A firm takes advertisements in local company newsletters.

A bicycle retailer puts promotional tags on bike racks around town.

Bowling alley charges are based on how many bowling pins a patron knocks down.

An events management company employs timely use of broadcast fax.

A firm makes creative use of website links.

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Table 4: Comparison Between Viral Marketing and Buzz Marketing Viral marketing Buzz marketing Definition

Approach that encourages individuals to pass on a marketing message to others, creating the potential for exponential growth in the message’s exposure and influence

Buzz is the aggregate of all communication about a certain product that is propelled through grassroots activities among people at any given time

Principles

Process whereby an idea spreads like a virus, catching strength, multiplying and mutating as like-minded people market to one another

Consumer-generated information dispersal through individual network hubs, i.e., friends/colleagues or mega-hubs like Oprah Winfrey and Rosie O’Donnell

Strategy

Self-replicating promotion, fanning out across community webs

Creating and leveraging a “buzz” by generating excitement, infatuation, and missionary zeal

Advantages

Cheap, easy, and powerful Transmit ideas quickly and easily

Credibility of source Effective and efficient

Medium

Internet strategy, i.e., use e-mail website, software download

Network marketing, i.e., use face-to-face interaction with personal networks

Objective

Create a message, send it via e-mail, and make it so compelling that recipients want to pass it on to everyone in their address book

Sustain excitement Generate demand Create customer loyalty

Tools

Use exponential power of “word of mouse” Use virtuous cycle of “word of mouth”

Risks/ Disadvantages

Annoying e-mails More clutter Potential for backlash

Challenge of translating “buzz” into sales Loss of control (message, timing, audience, etc.) Difficult to measure

Tactics

Give away product/service (e.g., free e-mail) Utilizes existing communication networks Exploits common motivations and behavior

Cross-promotions (e.g., movie product placement) Place-based promotions Sponsorships (association with desirable event)

Examples Hotmail.com, Ebay, Napster, Yahoo, Blue Mountain Arts, Geocities, Google

PalmPilot, iMac, Blairwitch Project, Fedex, BMW Z3 Roadster

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Table 5: Contrasting Conventional Marketing and Entrepreneurial Marketing

Conventional Marketing Entrepreneurial Marketing • An essentially reactive stance with respect to

the external environment • Marketing strives to follow customers • Serving existing markets • Focal point is efficient management of the

marketing mix • Risk is to be minimized • Marketing as an objective, dispassionate

science • Reliance on proven formulas and established

rules of thumb • Marketing supports the innovation efforts of

other functional areas of the firm, most notably R&D

• Marketing as a functional silo • Promotion and customer communication

receive the greatest amount of attention from marketers

• Scarcity mentality, zero-sum game

perspective on resources • Heavy dependency on survey research • Marketing facilitates transactions and control

• The firm attempts to influence or redefine aspects

of the external environment • Marketing strives to lead customers • Creating new markets • Focal point is new value creation for the

customer through relationships, alliances, resource management approaches, and the marketing mix

• Risk is necessary and marketing’s job is to

manage the firm’s risk profile in a calculated fashion

• While acknowledging value of science and

learning, recognition is given to the roles of passion, zeal, and commitment in successful marketing programs

• Psychology of challenging commonly shared

assumptions • Marketing is the home of the entrepreneurial

process in the organization • Marketing as a cross-disciplinary and inter-

functional pursuit • The relative investment or resources in different

areas of the marketing mix is context specific • Opportunity is pursued regardless or resource

controlled; philosophy of resource leveraging is paramount

• Skeptical use of conventional research;

employment of alternative methods (e.g., lead user research, ‘backward’ research)

• Marketing facilitates speed, change, adaptability,

agility

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Table 6: Applying Entrepreneurial Marketing at Three Different Levels

Level at Which Marketing Is Applied Element of Entrepreneurial Marketing

Marketing as Culture

Marketing as Strategy

Marketing as Tactics

Customer Intensity

Reinforces passion for the customer and employee identification with products and services as core values of the firm

Strategic customer-centric interaction

Customization via segmentation and niche marketing; relationship management

Innovation

Philosophy that promotes creativity and recreation

Create change by continuously redefining the product and market context

Highly inventive approaches to each element of the marketing mix

Strategic Flexibility

Dynamic realignment to match opportunities

Emergent strategic action that is fluid and adaptable

Use experimental products and market-alliances to maximize alternatives ; real-time, proactive organizational intelligence

Calculated Risk-Taking

Comfort level with random variance ambiguity

Managed risk through higher levels of innovation and more rapid organizational learning

Employment of initiatives to mitigate innovation risks through alliances, test markets, trial launches, lead user research

Environmental Proactiveness

Organization as agent of change, redefining industry practices and challenging assumptions

Defining new market positions; leadership of customer; realignment of firm’s offering based on market opportunities

Database management to customize, provide variety, or reduce costs

Resource Leveraging

Resourceful use of a network organization of non-imitable competencies

Drives strategic decisions regarding core processes, outsourcing, strategic alliances

Exploit pipeline of resources and skills to maintain sustainable competitive advantage; creative methods for contracting, bartering, sharing, borrowing, renting

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Table 7: Entrepreneurial Marketing in Practice Prince Manufacturing Company A classic example of EM in action is the success of Howard Head with the oversized Prince tennis racquet. Head moved the Prince Manufacturing Company from its former position as a small maker of tennis ball machines to international prominence as a major player in the tennis racquet business. He brought dramatic vision, aggressiveness and an innovative, problem-solving mindset to the tennis industry. While somewhat disdainful of conventional marketing practice and market research, Head demonstrated an innate understanding of customers and their needs. As a result, Prince led the marketplace and the customer, rather than following them. Management of the environment is evidenced in Prince’s creative interpretation of the rules of tennis, and their approach to patenting something seemingly non-patentable. Following the initial product breakthrough, sustained innovation took the form of a series of racquets tailored to individual market segments, continuous enhancements of materials used in the frame, and new approaches to the stringing of racquets. Resources were leveraged and risks managed in the firm’s novel relationships with suppliers and its approach to distributors. Marketing budgets were extremely lean, while marketing objectives were nothing short of audacious. Yet, the company not only penetrated a market in which it had no presence, but also subsequently was able to reposition the racquets away from an image as a “crutch” for older or inexperienced players into a far more “professional” image. eBay eBay created the world’s largest on-line auction-style marketplace consisting of a passionate virtual community of individuals and businesses using traditional auction and fixed-price trading to buy products across thousands of categories. A true innovator, eBay has revolutionized the way Web surfers spend their time and money. The company has eschewed traditional marketing, and, apart from a handful of banner ads and print placements in niche magazines, eBay used grassroots marketing fueled by word-of-mouth. Early users became the company’s greatest evangelists, posting information on collecting newsgroups and via e-mail chains. The company has chosen to participate in collector trade shows to demonstrate commitment to its core user base, resulting in a “pop-culture touchstone”. The pioneer of person-to-person online auctions is one of the most powerful economic forces on the Internet. Benefiting from strong networks effects, eBay recently integrated all its item listings and categories into the largest global Internet network of Lycos Auctions. In another move, eBay launched local newspaper classified advertisements and intends to use the existing networks of its partners to drive more buyers to sellers’ listings. Virgin Group Virgin Group, the growing fleet of companies, has carefully cultivated an image of irreverence and value, eager to take on the establishment and dedicated to service. The self-anointed “Consumers’ Champion” differentiates itself by offering “old” products in new ways and does this with entrepreneurial flair in a spirit of rebellious adventure, leaving complacent competition behind. Virgin continually monitors customer feedback to improve the customer’s experience through innovation that sets new industry standards. The company’s formula for success is the Virgin name, Richard Branson’s personal reputation, his unrivalled network of friends, contacts, and partners, price competitiveness, and innovation. The powerful Virgin brand relies on the iconoclastic Richard Branson and smart public relations instead of traditional advertising. An anachronism in the world of international business magnates, the media savvy Branson is a born cross-promoter who knows how to exploit the power of hype. Whether it is dressing as a Zulu warrior for Virgin Airlines’ inaugural flight to South Africa or donning a wedding dress for the launch of Virgin Brides, Branson uses personal publicity to transfer the brand. Virgin builds a business in an industry by forming partnerships with existing operators/companies and leverages respective skills, knowledge, market presence and competencies. Branson’s “branded venture capital” strategy allows him to launch a hodgepodge of businesses with minimal investment and expand his brand around the world. He manages the venture and puts the Virgin name on it, usually in exchange for a controlling interest, while his wealthy partners put up most of the cash. Despite critics’ continued predictions that the famous brand cannot survive Branson’s quixotic and disparate business quests, Virgin maintains that the eclectic empire is neither random nor reckless, but an appropriate trade-off between risk and reward.

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y

Frequency of Entrepreneurship

HIGH

DegreEntrepren

Figure 1: The Variable Nature of Entrepreneu

Source: Morris, M.H. (1998), Entrepreneurial Intensity

LOW

LOW e of eurship

rship

, Westport, CT: Quoru

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HIGH

Entrepreneurial Intensit

m Publishing.

Sustainable Innovation

Customer Intensity

ENTREPRENEURIAL MARKETING

Environmental Proactiveness

Calculated Risk

Taking

Strategic

Flexibility

Resource

Leveraging Figure 2: Five Elements Comprising the Conceptualization of Entrepreneurial Marketing

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dynamismm hostility complexity

Internal Organizational Environment

culture

hrm policies

leadership

structure

customerintimacy/passivity

strategic inflexibility/

flexibility

Organizational Approachto Marketing

fixed/ leveragedresources

risk avoidance/ acceptance

environmental

reactiveness/proactiveness

status quo/innovation

financialnon-financial

Outcomes

External Environmental Conditions

controls and processes

strategy

Figure 3: A Model of Antecedents and Outcomes of Entrepreneurial Marketing

40