Entrepreneurship Unit 2.1

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EntrepreneurshipUnit 2.1

• Analyzing a businesss customers

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Students will analyze their markets customers.

• Students will be able to
• Define target market
• Define market segmentation by demographics,
  psychographics, geographics, and buying
  characteristics
• Distinguish the difference between primary and
  secondary research
• Describe a focus group
• Identify the steps of market research

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Why Market Analysis?

• Market analysis presents research findings about
  target markets.
• Market analysis includes a target market profile
  that explains the traits of the companys
  potential customers.
• Market analysis provides potential investors with
  a realistic forecast of the growth potential for
  the market in which your company will operate.

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What is a Target Market?

• A target market is a particular group of
  customers of interest to an entrepreneur.
• Understanding the characteristics of the desired
  market segment allows a company to tailor its
  marketing effort to reach and appeal to the
  market segment.

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What is Market Segmentation?

• Market segmentation is the process of grouping a
  market into smaller subgroups defined by specific
  characteristics.
• Market segments are subgroups of buyers with
  similar characteristics.

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What are the four types of market segmentation?

• Geographics
• Demographics
• Psychographics
• Buying Characteristics

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4 Types of Market Segmentation

• Geographics the study of the market based on
  where customers live by region, state, city,
  and/or area.
• Demographics the personal characteristics of a
  population age, gender, family size, income,
  occupation, family life cycle, education,
  religion, race, nationality, or social class.

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4 Types of Market Segmentation(contd.)

• Psychographics the study of consumers based on
  social and psychological characteristics
  personality, values, opinions, beliefs,
  motivations, attitudes, and lifestyle elements,
  including activities and interests
• Buying characteristics
• knowledge of and personal experiences with the
  actual goods or services.

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Guidelines to Segmentthe Target Market

• The target market should be measurable.
• How many potential buyers are in the market?
• The segment should be large enough to be
  profitableto recover costs and make a profit.
• The segment should be reachable.
• Product information and product availability
  must be considered.
• The target segment should be responsive
• i.e., that people are interested in the
• product.

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Market Segment Profile (Example)

• Situation Clothing boutique specializes in
  trendy fashions for teenagers. Located in a
  fast-growing metropolitan area with several high
  schools and a college.
• Profile Girls 13-18 years old reside within
  city, nearby suburbs, or rural areas part-time
  annual income of 1500 rarely buy expensive
  items aware of current trends and attitude
  toward
• where to buy influenced by peers.

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3 Types of Market Research

• 1. Exploratory Research is used when you know
  little about a subject. ?Check with industry
  government publications.
• You can organize a focus group of people whose
  opinions are studied to determine the opinions
  that can be expected from a larger population.

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3 Types of Market Research (contd.)

• 2. Descriptive Research
• Develop a customer profile. Learn the age,
  gender, occupation, income, and buying habits of
  potential customers. Such information can be
  collected through questionnaires, interviews, or
  observation.

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3 Types of Market Research (contd.)

• 3. Historical Research involves studying the
  past. Trade associations and trade publications
  are two sources of useful historical data.
  Historical research might be useful to learn why
  a type of business has been successful or
  unsuccessful.

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What is Primary Data?

• Research collected for the first time and relates
  directly to the collectors study.
• How do I collect primary data?
• Observation
• Interviews in person, by phone, through mail
• Surveys
• Observe buyers at competitors site
• Focus groups

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What is Secondary Data?

• Information collected by someone else for their
  own purposes.
• Where do I find Secondary Data?
• Internet
• Government and community organizations
• Website of the U.S. Census Bureau
• Chamber of Commerce
• Trade associations
• Trade publications
• Commercial research agencies

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Five Steps of Market Research

• Step 1 Identify your Information Needs.
• What data needs to be collected?
• What methods of analysis will be used?
• How will the data be used?
• Example Before opening a hobby store, you need
  to know who your first customers will be and what
  they want? Also, you must gather information
  about the competition.

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Five Steps of Market Research (contd.)

• Step 2 Obtain Secondary Resources. Information
  that has been collected by someone else is called
  secondary data.
• What are the demographics of the customer?
• What are the psychographics of the customer?
• How large is the market?
• Is the market growing?
• Is the market affected by geography?
• How can you reach your market?
• How do your competitors reach the market?
• What market strategies have been successful with
  these customers?

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Five Steps of Market Research (Contd.)

• Step 3 Collect Primary Data
• 1. What are the demographics of your customer?
• 2. Would potential customers purchase your
  product or service? Why or why not?
• How much would customers purchase?
• When would customers purchase?
• Who would customers like to find the product or
  service?
• What do customers like about your competitors
  products and services?

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Five Steps of Market Research (contd.)

• Step Four Organize the Data
• Categorize data based on the research question
  it answers. Working on each question, note how
  many of your sources supported a particular
  conclusion and how many did not. This data can
  help you refine your market analysis.

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How may Data be Represented?

• Bar graphs
• Pie charts
• Line graphs

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Five Steps of Market Research (contd.)

• Step Five Analyze the Data.
• Now that your information has been organized,
  ask yourself these questions
• Is there a market for the product or service?
• How big is the market?
• Will the industry support such a business?
• What do substitute products/service reveal about
  demand for the product/service?
• What do customers, end users, and intermediaries
  predict the demand will be?

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Lets Review

• Define target market
• Define market segmentation by demographics,
  psychographics, geographics, and buying
  characteristics
• Distinguish the difference between primary and
  secondary research
• Describe a focus group
• Identify the steps of market
• research

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Sources

• Allen, Kathleen R., Meyer, Earl (2006).
  Entrepreneurship and small business management.
  New York Glencoe.
• Green, Cynthia L. Entrepreneurship ideas in
  action. Boston Thompson/
• South-Western.

Created by JJ Abernathy Snow Canyon High
School 2006