Assessing the Market when Writing the Business Plan

A KEY TO SUCCESS

February 15, 2012

Assessing the Market when Writing the Business Plan

DEFINITIONS

MARKETING: Determining what the customer wants and how to get it to him

SALES: Selling what is in the warehouse.

Importance of Market Dynamics

• The single biggest reason for new product introduction failure is a lack of market understanding

• You need to do market research to understand the dynamics of the market and how you are going to win.

Importance of Market DynamicsEconomics—where do you want to market

your product?Size of the market within each region

(quantity and revenue)Overall growth rate within each regionSize and growth of product segmentsSize of functionally available market

Importance of Market DynamicsFunctionally available market

Defined as the size of the market that your new product can participant in

Factors include price, performance, service required, segment

Need to consider how much market share you can capture—replacement of current products versus capture of growth potential

Global Pigment Market by Region (billion $)

% annual growth

Region 2007 2009 2007 to 2009

Total Pigments 11.9 13.0 5.2

United States 2.4 2.6 3.4

Western Europe 2.1 2.3 4.6

China 1.9 2.1 7.8

Japan 1.1 1.2 2.2

Asia/Pacific 2.5 2.7 7.0

Rest of World 1.9 2.1 6.1

Functionally Growth Growth

U. S. Markets Total, % Total, billion $Available, million $ Rate, % mil$/Year

Printing Inks 30 0.8 78.0 3.4 2.7*Paints & Coatings 26 0.7 67.6 3.4 2.3

Textiles 5 0.1 13.0 3.4 0.4

Plastics 15 0.4 78.0 3.4 2.7

Other 24 0.6 31.2 3.4 1.1

100 2.6 267.8 3.4 9.1*=78 x 0.034 (new market available)

FUNCTIONALLY AVAILABLE MARKET

Importance of Market DynamicsWhat changes market conditions?

New technologyChanges in government regulationsChange in economyChange in industryHealth considerations

Importance of Market DynamicsWhat benefits do your products and services provide?

Market pull? Technology push? Price Availability Delivery, warranty, refund policy DO THEY SOLVE AN UNMET NEED? What is the value proposition? Are they differentiated?

A. Technology-Push

B. Market-Pull

C. Product/Markets (Hybrid of A & B)

R&D defines the technical

solutionManufacturing Sales

Market defines the needs

R&D Fit? Manufacturing

Marketing and R&D define the needs, fit, and

solutions

R&D Manufacturing

Sales

Sales

Market need?

What are the barriers to entry?High capital costs?High production costs?Consumer acceptance and brand

recognition?Unique technology and patents?Labor costs?Just-in-time delivery?

Who are your competitors?What companies and products compete

with you?How will they

compete—price/service/etc.?How important are indirect competitors?

(video store versus movie theatre)What are strengths and weaknesses of

your products and services?

Who are your customers?DemographicsGeographic locationsIncome levelIndustry (for business customers)Size of firm (for business customers)

How will your customers know about your product?

Promotion—advertising; imagePromotional Budget?Pricing?

How will you sell your products and/or services?

Distribution channels—direct sales, internet, distributor, sales representatives, catalog, mail order

How much will you sell?

Sales forecasts—base case; upside; downside

Marketing Research Overview1. Define the problem—market, customers, products,

competitors2. Determine the research design

Primary data (info collected directly from respondents)

Secondary data Guideline.com (industry and trend reports) Dialog.com (sorts firms by location, size, industry) Lexisnexis.com (information database) Business Source Complete (EBSCO)

Marketing Research Overview, continuedChoose the method for collecting primary data

Survey methods to interview respondentsQuestionnaires (loosely, moderately, or

completely structured)Observational research methods—focus

groupsOnline research

Marketing Problem #1You have just come up with a brand new pill dispenser

that has unique properties. What information do you need to assess the size of the market?

Marketing Problem #2You have just come up with a brand new energy saving

device for use with a refrigerated air conditioning unit. What information do you need to assess the size of the market?

Assessing the Market when Writing the Business Plan

A KEY TO SUCCESS

February 15, 2012