MARKET ANALYSIS

CHAPTER 6
 Doing Market Research

Defining Areas of Analysis

 to succeed and make a profit a business must satisfy the
needs of its customers
 You must know who your customers are and what they want

 You must conduct market analysis

 Market Analysis

 Analyze the Industry

 Industry - is a collection of businesses that are
categorized by a specific business activity, such as
transportation, electronics or food services
 Value Chain – within the industry are value
chains/distribution channels that support a common line of
G/S that satisfy market demands.
 Includes: raw material producers, manufacturers, suppliers,
distributors, retailers and anyone else who deals with other
businesses in the industry
 Deliver maximum value for the least possible total cost
 Identify prospective customers and determine their buying
habits
 Industry

Learn what the industry’s current status is and

where it is going.
Ideas for new ventures comes from
understanding and having experience within the
industry
4 broad factors are useful in understanding the
nature of an industry:
 Carry Capacity
 Uncertainty
 Complexity
 Stage of Life Cycle
 Industry

 Carry Capacity: way to understand the industry’s ability to

support new growth. Can the industry support new growth and
expansion?

 Uncertainty: degree of stability or instability in an industry.

An industry that is fast-changing presents a high degree of
uncertainty – more risk and potential for greater rewards.
High-tech ventures
 Industry

 Complexity: number and diversity of contacts with which you

must deal to do business. Complex industries have more
suppliers, customers, and competitors than firms in other
industries. Also often global in nature, are very competitive
and costly to enter.

 Stage of Life Cycle: know the stage your industry in in you

can design a business strategy. Birth, growth, maturity and
then decline if R&D do not produce innovations that spur
growth
 Target Market

A Market is a group of people or

companies who have a demand for G/S
and are willing and able to buy it.
Target Market a group of customers who
will be the focus of your company’s
efforts.
Know as much as you can about your
Target Market.
Customize its product offerings and
marketing strategies to specific groups
of potential customers.
 Target Market

Market Segmentation: the process of grouping a

market into smaller subgroups defined by specific
characteristics.
Market segments or subgroups of buyers with
similar characteristics.
 Geographics
 Demographics
 Psychographics
 Buying Characteristics
 Target Market
Market Segments
 Geographics: where they live; region, state, county, city,
and/or area
 Demographics: personal characteristics of population include
age, gender, family size, family life cycle, income, occupation,
education, religion, race, nationality, and/or social class
 Psychographics: social and psychological characteristics-
personality, values, opinions, beliefs, motivations, attitudes,
and lifestyle activities and interests
 Buying Characteristics: knowledge of and personal experiences
with the actual G/S
 Target Market
Industrial Markets: Products for business use, they
are goods or components produced for sale to
manufacturers and used in the production of other
goods.
These markets are segmented differently.
Variables include:
 Type of business, size, goods or services sold, geographic
location, and products needed.
 Target Market
Target Market: after you identify all market
segments, you select your target market.
Guidelines to use when segmenting the target market
 Market segment should be measurable, you need to know how
many potential buyers are in the market.
 Segment should be large enough to be potentially profitable.
 Segment should be reachable.
 1. get information about your product and its availability to
interested buyers.
 2. be able to reach potential customers physically, deliver product
 Segment should be responsive, do you know that people in
segment are interested and willing to buy your product?
 Conducting Market Research

Once you know the areas of the market you need to

analyze, you can begin investigating them.

MARKET RESEARCH: is the collection and analysis

of information aimed at understanding the behavior
of consumers in a certain market.
 Identify potential markets
 Analyze demand
 Forecast sales
 Make other decisions
 Conducting Market Research

The Market Research process is the same whether you

are doing research for an existing business or a new
venture.
1. 1. Identify the Focus of the Research
2. 2. Select the Type of Market Research
3. 3. Start the Research Process
 Conducting Market Research

1. Identify the Focus of the Research

Focus your research so you do not waste time gathering useless
information.

2. Select the Type of Market Research

 Once you have research question you select a research
approach.
 Ways to structure research are called Research Designs
 The information you require will determine the design you
use.
 Conducting Market Research

2. Select the Type of Market Research

1. Exploratory Research: used when you know very little about
the subject. It forms foundation for later research when you
are more focused. A good place to start is government or
industry publications. You can also talk to people who are
knowledgeable about your field.
You can organize Focus Groups – a group of people whose
opinions studied
 Conducting Market Research

2. Select the Type of Market Research

2. Descriptive Research:
 When you want to determine status.
 Collect data through questionnaires,
interviews, or observations

3. Historical Research:
 Involves studying the past
 Patterns from the past can then be used to explain present
circumstances and predict future trends.
 Trade associations and trade publications are 2 sources of
useful historical information. And owners in similar business.
 Start the Research Process

An effective plan includes five steps:

1. Identify Your Information Needs
2. Obtain Secondary Resources

3. Collect Primary Data

4. Organize the Data

5. Analyze the Data

 Start the Research Process

An effective plan includes five steps:

1. Identify Your Information Needs: what kind of
information do you need to know about your customer,
industry….
2. Obtain Secondary Resources: information that has
already been collected by someone else. It is easily
obtained and inexpensive. A good source is on the Internet.
Government and community organizations are good sources.
U.S. Census Bureau’s – source for demographics. Chamber
of Commerce keeps statistics on local trends and economic
issues.
 Start the Research Process

3. Collect Primary Data: Information you collect yourself.

Its current and relates directly to your objectives.
Common methods are observation, interview, and surveys.
Surveys may be by telephone, through the
mail or online.

In-person surveys will achieve the highest level of

success, and high response rate than other
methods. Focus Groups are more
efficient than one-on-one interviews.
 Start the Research Process

4. Organize the Data:

 Categorize the 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.
 Create charts and graphs to depict your findings and record your
results in report form.
5. Analyze the Data: ask some basic questions
 Is there a market for the product/service?
 How big is the market?
 Will the industry support such a business?
 What do substitute products reveal about demand for the
product?
 What do customers, end users, and intermediaries predict the
demand will be?
 Industry and Market Analysis

Researching the Industry

Trends and Patterns of Change: find
opportunities in an industry by looking at trends
and patterns of change.
 Is it difficult or easy for new companies to enter the industry?
 Has the rate of sales growth slowed?
 How volitile is the industry?
 Industry and Market Analysis

Researching the Industry

Industry Forces that Affect Your Business
 Barriers to Entry: conditions or circumstances that make it difficult
or costly for outside firms to enter a market or compete with the
established firm or firms.
 Economies of Scale: the cost of producing one unit of a good or
service decreases as the volume of production increases. Established
businesses have achieved economies of scale in production, marketing
and distribution.
 Brand Loyalty: customers who are brand loyal do not easily switch to a
new company that enters the industry.
 Government regulates many industries and this results in higher costs.
 Industry and Market Analysis

Researching the Industry

Industry Forces that Affect Your Business
 Sources of Supply: need access to affordable sources of inventory,
raw materials, and goods.
Also consider where your suppliers are located, the trade discounts
they offer, and the availability of alternate sources.
These can affect your costs, pricing, and sales.
 Buyer’s Ability to Bargain: when existing businesses have bargaining
power, a new business may have difficulty gaining a foothold. Large
discount buyers (WalMart) have enormous bargaining power
 Technology: enables companies to improve their business processes,
operate effectively and efficiently are more likely to stay competitive
 Industry and Market Analysis

Researching the Industry

Industry Demographics-Industry characteristics
 The number of companies, annual revenues, and average size of the
companies by number of employees
 Is industry growing, shrinking, or remaining stable
 Industry and Market Analysis

Researching the Industry

The Competition – to succeed you must capture market
share by differentiating your business.
 Market Share - portion of total sales generated by all competing
companies in a given market
 Study the competition to define an unserved niche in the market.
 Niche – a small, specialized segment of the market based on customer
needs discovered in market research
 Market Positioning – is the act of identifying a specific market niche
for a product or service
 Create a Competitive Matrix - do a thorough analysis of the competition.
Identify what is unique about your business and define your Competitive
Advantage, a feature that makes a product more desirable than it
competitor’s products.
 Industry and Market Analysis

Researching the Target Customer

 You must know your customer and have a market penetration strategy.
 Market Penetration Strategy - is a plan to reach initial customers and
grow.
 Creating a Customer Profile: prospective customer’s market
segments.
 Who are my customers?
 What do they generally buy, and how do they hear about the product?
 How often do they buy?
 How can my product meet their needs, or what value can I provide?
 Industry and Market Analysis

Researching the Target Customer

 Evaluating Customer’s Needs – a customer needs analysis
pinpoints the features and benefits of your goods or services that
customers value.
 Forecasting Demand – need to know how much of your product will
they buy and how often they will buy it.
 Difficult to forecast with any degree of certainty
 Various methods to forecast:

 Project: use analogous products, base demand for your product

based on demand for another one.
 Interview prospective customers and intermediaries. Talking with
people who work in industry- customers, distributors, wholesalers,
and retailers can give you a good estimate of demand
 Limited production to test the market. Use a kiosk gauge demand