Business Definitions – F

Features, Advantages and Benefits Analysis (FAB) – A FAB analysis explores the features, advantages, and benefits of a product or service offering. Marketing plans need to understand these concepts in order to develop effective marketing programs. People often confuse features and benefits. For example, in an automobile, air bags are a the feature that produce the benefit of greater safety. Advantages fall in between, features become advantages that offer benefits to the end user.

failure rule, common causes – Entrepreneurial ventures most often fail due to one or more of these four issues: 1) Inadequate sales (39%) 2) Competitive weaknesses (21%) 3) Excessive operating expenses (11%) 4) Uncollected receivables (9%).

failure rule, exceptions to the rule – Exceptions to the failure rule include: 1) High potential ventures 2) Threshold concept 3) Promise of growth 4) Venture Capital backing.

fatal 2% rule – The concept that if a venture can just get “2%” of total market share it will be successful. This percentage can be unattainable based on the approach, limited resources, and/or structure of the industry.

fighting brand strategy – Adding a new brand to confront competitive brands in an established product category.

first mover – A company that attempts to gain an unchallengeable, privileged market position by being the first to establish itself in a given market.

first mover advantage – Key first mover advantages include: 1) Reputation effect 2) Experience curve 3) Customer commitment and loyalty.

first mover disadvantage – These factors can turn first-mover advantages into weaknesses. They include: 1) Resolution of technological uncertainty 2) Resolution of strategic uncertainty 3) Free-rider effect – others duplicate based on the leader’s success 4) Complementary assets to exploit core technological expertise.

fiscal year – Standard accounting practice allows the accounting year to begin in any month. Fiscal years are numbered according to the year in which they end. For example, a fiscal year ending in February of 1992 is Fiscal 1992, even though most of the year takes place in 1991.

five forces model – Porter’s model that considers these forces as they impact and industry and the overall competitive climate: 1) Risk of entry by potential competitors 2) Bargaining power of suppliers 3) Bargaining power of buyers 4) Threat of substitute products 5) Rivalry among established firms.

fixed cost – Running costs that take time to wind down: usually rent, overhead, some salaries. Technically, fixed costs are those that the business would continue to pay even if it went bankrupt. In practice, fixed costs are usually considered the running costs. These are static expenses that do not fluctuate with output volume and become progressively smaller per unit of output as volume increases. Fixed costs are an important assumption for developing a break-even analysis. The standard break-even formula estimates a break-even point of sales based on per-unit price or revenue, per-unit variable costs, and fixed costs. For more on this, see the discussion on break-even analysis in the free online book Hurdle: the Book on Business Planning

fixed liabilities – Debts; money that must be paid. Usually, debt on terms of longer than five years are fixed liabilities. (Also called Long-term Liabilities.) Fixed Liabilities, in contrast to Floating Liabilities, are secured by assets with a stable value, such as a building or a piece of equipment.

floating liabilities – Debts; money that must be paid. Floating Liabilities, in contrast to Fixed Liabilities, are secured by assets with a constantly changing value, such as a company’s Accounts Receivable (debtors). These are usually short-term loans.

focus group – Small groups of people, usually between 9 and 12 in number, representing target audiences, that are brought together to discuss a topic that will offer insight for product development and/or marketing efforts.

forms of market research – Market research can be casual, affordable, and effective for the entrepreneur. Jay Conrad Levinson provides examples of this form of market research approach in “Guerrilla Marketing Attack.”

frequency marketing – Activities which encourage repeat purchasing through a formal program enrollment process to develop loyalty and commitment from the customer base. Frequency marketing is also referred to as loyalty programs.

front end (websites) – Front end and back end describe program interfaces relative to the user. The front end, here, is the appearance of your website. It is the graphic design and HTML portion — some people call this the user interface or UI. In contrast, the portion of the application you or your developers work with is the back-end. The back end handles the dynamic parts of the site, such as a newsletter, an administration page, a registration database, a contact page or more complicated Web applications. Your back end interfaces with your UI and makes your website work.

full-cost price strategies – Costs that consider variable and fixed cost (total cost) in the pricing of a product of service.

future value projections – The process of projecting the future value of a venture and/or an investment in the venture. It typically considers an expected rate of return, inflation, and the period of time to assess future value.

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