Market Analysis

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Chapter 6
Market Analysis
Doing Market Research
6.1
Industry and Market Analysis
6.2
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6.1

• Define areas of analysis for industry and market
  research.
• Discuss how to conduct effective market research.

Section 6.1 Doing Market Research
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6.1

• To ensure success, the entrepreneur needs to
  understand the industry and the market.
•  
• He or she should define areas of analysis and
  conduct effective industry and market research.

Section 6.1 Doing Market Research
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6.1

• industry
• carrying capacity
• complexity
• market
• target market
• market segmentation
• market segments
• geographics
• psychographics

industrial markets market research exploratory
research focus group descriptive
research historical research secondary
data primary data
Section 6.1 Doing Market Research
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Defining Areas of Analysis

• In order to satisfy current customers or attract
  new ones, an entrepreneur must conduct market
  analysis.
•  
• The entrepreneur will want to understand the
  nature of the industry he or she is analyzing.

industry a collection of businesses with a
common line of products or services
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Defining Areas of Analysis

• Thorough market analysis requires

• Identifying prospective customers and determining
  their buying habits
• Analyzing your industry and assessing your
  chances for success within it

Section 6.1 Doing Market Research
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Industry

• There are four factors that are useful in
  understanding the nature of an industry

• carrying capacity
• uncertainty
• complexity
• stage of life cycle

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Industry

• You will want to find an industry that has
  carrying capacity so that your new business can
  expand and prosper.

carrying capacity the ability of industry to
support new growth
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Uncertainty

• Uncertainty is the degree of stability or
  instability in an industry.
•  
• Many high-tech ventures are in industries with
  uncertain climates.

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Complexity

• Some businesses must learn to deal with
  complexity in many industries.

complexity the number and diversity of contacts
with which a business must deal.
Firms that operate in complex industries have
more suppliers, customers, and competitors than
firms in other industries.
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There are four stages to the life cycle of an
industry.
Stage of Life Cycle
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Birth
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Growth
3
Maturity
4
Decline
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Target Market and Customer

• After first identifying your market, you will
  then need to select a target market to be the
  focus of your companys efforts.

market a group of people or companies who have
a demand for a product or service and are willing
and able to buy it
target market a specific group of customers
whom a business wishes to reach
Section 6.1 Doing Market Research
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Target Market and Customer

• Consumer market segmentation is based on
  geographics, demographics, psychographics, and
  buying characteristics.

market segmentation the process of grouping a
market into smaller subgroups defined by specific
characteristics
market segments subgroups of buyers with
similar characteristics, segmented by
geographics, demographics, psychographics, and
buying characteristics
A business can select and serve multiple market
segments.
Section 6.1 Doing Market Research
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Target Market and Customer
Market Segmentation

Section 6.1 Doing Market Research
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Target Market and Customer

• Information about the geographics of the target
  market can help an entrepreneur decide on a
  geographic area to focus marketing efforts.

geographics the study of the market based on
where customers live, including region, state,
country, city, and/or area
Section 6.1 Doing Market Research
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Target Market and Customer

• An entrepreneur can study psychographics to learn
  about target customers feeling.

psychographics the study of consumers based on
social and psychological characteristics,
including personality, values, opinions, beliefs,
motivations, attitudes, and lifestyle elements
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Target Market and Customer

• Businesses that cater to industrial markets must
  consider customers individual situations.

industrial markets customers who buy goods or
services for business use
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Target Market and Customer
The target market for your product or service
should be
Measurable
1
Large enough to be profitable
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Reachable
3
Responsive
4
Section 6.1 Doing Market Research
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Conducting Market Research

• Once you know the areas of the market you need to
  analyze, you are ready to begin market research.

market research the collection and analysis of
information aimed at understanding the behavior
of consumers in a certain market
The marketing research process can be used to
identify potential markets, analyze demand, and
forecast sales.
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Select the Type of Market Research
There are three types of market research
exploratory research

descriptive research
historical research
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Select the Type of Market Research

• A good way to start exploratory research is to
  read government or industry publications.

exploratory research the initial collection and
analysis of information used when very little is
known about a subject it forms a foundation for
later research
Section 6.1 Doing Market Research
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Select the Type of Market Research

• Another way to gather information is to form a
  focus group.

focus group a group of people whose opinions
are studied to determine the opinions that can be
expected from a larger population
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Select the Type of Market Research

• Descriptive research can be gathered through
  questionnaires, interviews, or observation.

descriptive research the collection of
information to determine the status of something,
such as in developing a customer profile
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Select the Type of Market Research

• You can use historical research to forecast your
  businesss future potential.

historical research the study of the past to
explain present circumstances and predict future
trends
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Start the Research Process
The Five Steps of an Effective Research Plan
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Analyze the data
4
Organize the data
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Collect primary data
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Obtain secondary resources
Identify your information needs
1
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Start the Research Process

• Research secondary data before researching
  primary sources because it is easily obtained and
  inexpensive.

secondary data information that has already
been collected by someone else
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Start the Research Process

• The most common methods of gathering primary data
  about customers are

primary data information that is collected for
the first time, is current, and relates directly
to the collectors study

• observation
• interviews
• surveys

Section 6.1 Doing Market Research
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6.1

1. Define areas of analysis for industry and
   market research.

Areas of analysis for industry research include
carrying capacity, uncertainty, complexity, and
stage of life cycle. Areas of analysis for market
research include identifying the target market
through market segmentation and conducting target
marketing.
Section 6.1 Doing Market Research
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6.1

1. Discuss how to conduct effective market
   research.

First, identify the focus of the research. Next,
select the type of market researchexploratory,
descriptive, or historical. Finally, start the
research process by identifying your information
needs, obtaining secondary resources, collecting
primary data, organizing the data, and analyzing
the data.
Section 6.1 Doing Market Research
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6.2

• Explain how to research an industry
• Describe a customer profile and customer needs
  analysis.

Section 6.2 Industry and Market Analysis
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6.2

• Studying a companys industry and market helps an
  entrepreneur create a product or service that
  people want.
•  
• It also helps the entrepreneur develop a customer
  profile, estimate demand, and increase his or her
  chances for success.

Section 6.2 Industry and Market Analysis
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6.2

• barriers to entry
• economies of scale
• brand loyalty
• mass marketing
• market share

niche market positioning competitive
advantage customer profile customer needs
analysis
Section 6.2 Industry and Market Analysis
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Researching the Industry
Look
Look at trends and patterns of change.
Understand
Understand industry forces that affect your
business.
Study
Study industry demographics.
Analyze
Analyze the competition.
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Industry Forces That Affect Your Business
barriers to entry
threats from substitute products
sources of supply
buyers ability to bargain
technology
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Industry Forces That Affect Your Business

• In established businesses, the dominant
  businesses have advantages that are barriers to
  entry to smaller, new ventures.

barriers to entry conditions or circumstances
that make it difficult or costly for outside
firms to enter a market to compete with
established firm or firms
Section 6.2 Industry and Market Analysis
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Industry Forces That Affect Your Business

• Established businesses have achieved economies of
  scale in production, marketing, and distribution.

economies of scale situations where the cost of
producing one unit of a good or service decreases
as the volume of production increases the
decrease of production costs relative to the
price of goods and services
Section 6.2 Industry and Market Analysis
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Industry Forces That Affect Your Business

• Customers with brand loyalty do not easily switch
  to a new company that enters the industry.

brand loyalty the tendency to buy a particular
brand of a product
Section 6.2 Industry and Market Analysis
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Issues in Entrepreneurship

• In the past, businesses used mass marketing to
  sell products with universal appeal and few
  features to differentiate them from competitors
  products.

mass marketing the attempt to reach all
customers with a single marketing plan
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The Competition

• Usually, competing products are already
  established in the market.
•  
• To succeed, you must be able to capture market
  share by differentiating your business.

market share a portion of the total sales
generated by all competing companies in a given
market
Section 6.2 Industry and Market Analysis
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The Competition

• Many entrepreneurial companies succeed by
  studying the competition to define a niche in the
  market.

niche a small, specialized segment of the
market based on customer needs discovered in
market research
Section 6.2 Industry and Market Analysis
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The Competition

• An entrepreneur who wishes to capture market
  share can use market positioning.

market positioning the act of identifying a
specific market niche for a product
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The Competition

• You can create a competitive grid to help define
  your competitive advantage.

competitive advantage a feature that makes a
product more desirable than its competitors
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Researching the Target Customer
Create
Create a customer profile.
Evaluate
Evaluate customers needs.
Forecast
Conduct research to forecast demand.
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Creating a Customer Profile

• Creating a customer profile is the first step in
  targeting your marketing efforts.

customer profile a complete picture of a
ventures prospective customers, including
geographic, demographic, and psychographic data
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Evaluating Customers Needs

• In order to provide what the customer wants, you
  should prepare a customer needs analysis.

customer needs analysis a study that pinpoints
the features and benefits of goods or services
that customers value
Section 6.2 Industry and Market Analysis
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Forecasting Demand

• Several methods can be used to forecast demand

• Use historical analogy.
• Interview prospective customers and
  intermediaries.
• Go into limited production.

Section 6.2 Industry and Market Analysis
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6.2

1. Explain how to research an industry

To research an industry, look at trends and
patterns of change, industry forces that affect
your business, industry demographics, and the
competition.
Section 6.2 Industry and Market Analysis
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6.2

1. Describe a customer profile and customer needs
   analysis.

A customer profile is a complete picture of a
ventures prospective customers. It includes
geographic, demographic, and psychographic data.
A customer needs analysis pinpoints the features
and benefits of your goods or services that
customers value so you can provide them with what
they want.
Section 6.2 Industry and Market Analysis
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Domain Names

• A companys domain name is much more than the way
  customers can get to its Web site.
•  
• Domain names have become a crucial component of
  companies marketing and branding plans.

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Tech Terms
country code top-level domain (ccTLD) the part
of the TLD that indicates the country of the
Internet address, such as .us for United States
and .fr for France   generic top-level domain
(gTLD) the part of a TLD that indicates the type
of Web site on the Internet address, such as .com
for commercial, .edu for educational, .org for
organization, .gov for government, .mil for
military, and .biz for business   Internet
Corporation for Assigned Names and Numbers
(ICANN) a nonprofit regulatory body that
oversees domain name registration
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Tech Terms
registrar a company that registers and sells Web
site domains   top-level domain (TLD) the most
general part of a domain name in an Internet
address
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