Know your costumers

After the general scan and research performed during the course of the preparation for the
value proposition and the unique selling proposition, it is now time to dig deep and understand the
target customers through marketing research. Marketing research is a comprehensive process of
understanding the customers’ intricacies and the industry they revolve in. Marketing research is one of
the most critical tasks of an entrepreneur. Therefore, no budding entrepreneur should establish a
business without undergoing the marketing research process or else the business will surely fail. The
result of marketing research is the entrepreneur’s major investment in a business, as it will lead
him/her to most effective strategies to employ. Marketing research aims to scrutinize the target
market, their specific requirements, and the market size where the business operates.
Market Size simply the size the arena where the entrepreneur’s business will play. It is the
approximation of the number of buyers and sellers in a particular market. The entrepreneur is required
to determine the market size first to gauge the vastness or tininess of the market where he/she intends
to join.
*The first step is to estimate the potential market-the approximate number of customers that
will buy the product or avail the service. Usually, this is what you call the market space or the market
universe because this is the total market.
*The second step is to eliminate the customers who are probably unlikely to buy the product
or avail the service.
*The last step is for entrepreneur to estimate the market share, which is the plotting and
calculation of the competitors’ market share to determine the remaining portion for the new venture.
The entrepreneur should first assess the market situation via surveys, customer reviews, or any other
data-gathering methods.
Market share computation illustration: Mr. Alvin Antonio, a budding entrepreneur, wants to
establish a rice retailing business in his area in Barangay San Isidro.
How big is the market size and what could be the potential market share of Alvin’s rice retail
business?
Market size of rice business in San Isidro= Number of families who eat rice x average
consumption per annum
Market size = 475 families x 1 kilo per day x 365 days
= 173 375 kilos of rice
Market size profit = 173 375 kilos x ₱ 10

=₱1 733 750 per annum

The objective of Mr. Antonio in the first year is to capture the 20% of the market by
implementing marketing strategies in pricing (reduced markup of ₱2) and promotion (free delivery of
rice for 5 kilos up ) through text message or phone call. None of the competitors have thought of or
done these strategies yet. In the example, the four rice retailers are considered direct competitors
because they offer exactly the same product and are structured similarly with Mr. Antonio’s proposed
business. On the other hand, the groceries and convenience stores are considered indirect competitors
because they don’t offer exactly the same product type ( i.e., rice sold in sacks instead of by kilo ) and
are not similarly structured but still compete with Mr. Antonio’s business indirectly.
Potential market share = market size x estimated market share
 = ₱1 733 750 x 20%
= ₱346 750
However, because Mr. Antonio will reduce the markup by ₱2, the net profit per kilo will only become
₱8.
Potential market share = 173 375 kilos x 20% x ₱8
Potential market share = ₱277 400
This market share for startup business is an attractive venture. Mr. Antonio also has a bigger
chance of capturing the market share of competitors if he implements relevant and enticing marketing
strategies.