Dollinger index

Marketing the New Venture 217

is widely used in the construction industry, by professional partnerships (lawyers, con-

sultants, accountants), and by government contractors. To demonstrate, let’s assume

that our entrepreneur is starting a one-person consulting firm. She estimates that her

variable cost per hour (primarily her hourly wage) is $50. Her fixed costs are estimated

at $100,000 per year and she expects to bill 2000 hours for the year.

• Variable cost $50


• Fixed costs $100,000


• Expected unit sales 2,000 hours


• Cost per unit $100/hour
  Now suppose our entrepreneur wants to earn a 50 percent markup on sales. The
  equation looks like this:
  Markup price = (Unit cost/1-desired return on sales) = ($100/1-.5) = $200/hour
  This is also the equivalent of a 100 percent markup on cost. From this data we can cal-
  culate the break-even volume:

TABLE 6.2 Bases for Market Segmentation: Usage and Effectiveness

By geographic areas: such as state, county,

census tract

By demographics: such as age, income,

gender.

By social class: high, middle, low.

By lifestyle and opinions: such as hobbies,

job type, political view.

By personality traits: such as masculinity,

femininity, assertiveness.

By purchasing decisions: based on when

customers get ideas.

By purchasing timing: based on when buyers

buy.

By time of use: based on when customers

use products.

By benefits sought: based on what

customers want.

By extent of usage: such as high users, ex-

users.

By buyer loyalty status: such as very loyal,

ready switcher.

By buyer readiness: based on degree of

awareness and intent.

By buyer attitudes: such as enthusiasm,

hostility.

By marketing attribute: product

characteristic, price sensitivity.

Usagea Effectivenessb

aIndicates primary method. bIndicates satisfaction with technique on a scale of 1 to 5. Mean for all

dimensions is 3.6. Satisfaction will vary by type of business but this bias was not reported in the data.

13.6

15.5

4.9

4.4

4.1

2.4

3.1

6.3

11.8

6.9

5.2

3.8

5.6

8.0

SOURCE: Adapted from R. Peterson, “Small Business Usage of Target Marketing,” Journal of Small Business Management,

October 1991: 79-85.

3.9

3.6

3.8

2.7

2.6

3.7

4.2

4.3

4.6

3.1

2.7

3.9

4.1

2.5

Basis

%