Market Analysis

Glencoe Entrepreneurship: Building a Business

Doing Market Research

SECTIONSECTION 6.1

Chapter 6 Market Analysis

Defining Areas of 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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Industry – four factors effect the nature of the industry

carrying capacity

the ability of industry to support new growth

uncertainty

the degree of stability or instability in a given industry

complexity

the number and diversity of contacts with which a business must deal

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Birth

Growth

Maturity

Decline

industry life cyclethe current stage of an industry




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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 company’s 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




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Consumer market segmentation is based on geographics, demographics, psychographics, and buying characteristics.A business can select and serve multiple market segments.

market segmentationthe process of grouping a market into smaller subgroups defined by specific characteristics

market segmentssubgroups of buyers with similar characteristics, segmented by geographics, demographics, psychographics, and buying characteristics



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Market Segmentation

demographics

geographics

psychographics

buying characteristics



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geographicsthe study of the market based on where customers live, including region, state, country, city, and/or area

psychographics

the study of consumers based on social and psychological characteristics, including personalities, values, opinions, beliefs, motivations, attitudes, and lifestyle elements

industrial markets

customers who buy goods or services for business use



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The target market for your product or service should be:

Measurable

Large enough to be profitable

Reachable

Responsive

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Select the Type of Market Research

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There are three types of market research

exploratory research

descriptive research

historical research

market research

the collection and analysis of information aimed at understanding the behavior of consumers in a certain market



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Select the Type of Market Research

exploratory researchthe initial collection and analysis of information used when very little is known about a subject; it forms a foundation for later research

focus groupa group of people whose opinions are studied to determine the opinions that can be expected from a larger population

descriptive researchthe collection of information to determine the status of something, such as in developing a customer profile

historical research

the study of the past to explain present circumstances and predict future trends


Identify your information needs.

Start the Research Process

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The Five Steps of an Effective Research Plan

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Obtain secondary resources.

Collect primary data.

Organize the data.

Analyze the data.



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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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The most common methods of gathering primary data about customers are:• observation• interviews• surveys

primary data

information that is collected for the first time, is current, and relates directly to the collector’s study


Time fora break

Look

Researching the Industry

14

Understand

Study

Analyze

Look at trends and patterns of change.

Understand industry forces that affect your business.

Study industry demographics.

Analyze the competition.

Industry Forces That Affect Your Business

15

barriers to entry

threats from substitute products

sources of supply

buyers’ ability to bargain

technology

Industry and Market Analysis


SECTIONSECTION 6.2



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

barriers to entryconditions or circumstances that make it difficult or costly for outside firms to enter a market to compete with established firm or firms




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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




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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




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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




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The Competition

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

nichea small, specialized segment of the market based on customer needs discovered in market research




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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


Create

Evaluate

Forecast

Researching the Target Customer

24

Create a customer profile.

Evaluate customers’ needs.

Conduct research to forecast demand.



SECTIONSECTION 6.2


Creating a Customer Profile

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

customer profilea complete picture of a venture’s 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




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Several methods can be used to forecast demand:

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

Forecasting Demand


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Market Analysis

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