Market Analysis

SECTION
6.1
Doing Market
Research
The Main Idea
SECTION
6.1
Doing Market
Research
D fi i Areas
Defining
A
off A
Analysis
l i
To ensure success, entrepreneurs need to
understand
d t d th
the iindustry
d t and
d th
the market.
k t
They should define areas of analysis and conduct
effective industry and market research.
In order to satisfy current
customers or attract new
ones, an entrepreneur must
conduct
d t market
k t analysis.
l i
The entrepreneur will want
to understand the nature of
the industry he or she is
analyzing.
l i
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Chapter 6 Market Analysis
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SECTION
6.1
Doing Market
Research
Defining
f
Areas off Analysis
Thorough market analysis requires:
SECTION
6.1
industry
a collection of
businesses with a
common line of products
or services
Doing Market
Research
Industry
There are four factors that are useful in
understanding the nature of an industry:
Identifying
y gp
prospective
p
customers and
determining their buying habits
Analyzing
y g yyour industry
y and assessing
g yyour
chances for success within it
carrying capacity
uncertainty
complexity
stage
g of life cycle
y
Chapter 6 Market Analysis
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
Glencoe Entrepreneurship: Building a Business
SECTION
6.1
Doing Market
Research
Industry
y
You will want to find an
industryy that has carrying
y g
capacity so that your new
business can expand and
prosper
prosper.
carrying capacity
the ability of industry to
support new growth
Uncertainty is the degree of stability or instability in an
industry.
y
Many high-tech ventures are in industries with uncertain
climates.
SECTION
6.1
Doing Market
Research
Complexity
Some businesses must
learn to deal with
complexity in many
industries
industries.
Firms that operate in
complex
p
industries have
more suppliers, customers,
and competitors than firms
in other industries
industries.
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Chapter 6 Market Analysis
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Glencoe Entrepreneurship: Building a Business
complexity
the number and diversity
of contacts with which a
business must deal
SECTION
6.1
Doing Market
Research
Stage of Life Cycle
There are four
Th
f
stages
t
to
t the
th life
lif cycle
l off
an industry.
1
Target Market and Customer
C
Birth
2
Growth
3
Maturity
4
Decline
After first identifying
yyour market,, you
y
will then need to
select a target
market to be the
focus of your
company’s
company
s efforts.
efforts
market
target
market
a group of people or companies
ahspecific
group
ofa product
who
h
have a d
demand
d ffor
d t
or
service and are
willingaand able
customers
whom
to buy it
business wishes to reach
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SECTION
6.1
Doing Market
Research
Target Market and Customer
T
Target
t Market
M k t and
d Customer
C t
Consumer market
segmentation is based on
geographics,
d
demographics,
hi
psychographics, and
buying
y g characteristics.
A business can select and
serve multiple market
segments
segments.
M k tS
Market
Segmentation
t ti
market
marketsegmentation
segments
geographics
the
process
a market
subgroups
g p of
of grouping
buyers
y
with
into smaller subgroups defined
by
similar characteristics, f
specific characteristics
segmented by geographics,
demographics,
psychographics, and
buying characteristics
buying
characteristics
demographics
psychographics
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SECTION
6.1
Doing Market
Research
T
Target
t Market
M k t and
d Customer
C t
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
T
Target
t Market
M k t and
d Customer
C t
An entrepreneur can
study psychographics
to learn about target
customers’ feelings.
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Glencoe Entrepreneurship: Building a Business
psychographics
the study
y of consumers based
on social and psychological
characteristics, including
personalities, values,
opinions, beliefs, motivations,
attitudes, and lifestyle
elements
SECTION
6.1
Doing Market
Research
Target Market and Customer
T
Target
t Market
M k t and
d Customer
C t
Businesses that cater
to industrial markets
must consider
customers’ individual
situations.
The target
Th
t
t market
k t for
f your product
d t
or service should be:
industrial markets
customers who buy goods or
services for business use
1
Measurable
2
L
Large
enough
h tto b
be profitable
fit bl
3
Reachable
4
Responsive
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SECTION
6.1
Doing Market
Research
Select the Type of Market Research
C d ti
Conducting
Market
M k tR
Research
h
Once you know the areas of
the market that you need to
analyze, you are ready to
begin market research
research.
The marketing research
process can be used to
p
identify potential markets,
analyze demand, and
forecast sales.
sales
There are three types of market research
exploratory research
market research
the collection and analysis
y
of
information aimed at
understanding the behavior of
consumers in a certain market
descriptive research
historical research
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SECTION
6.1
Doing Market
Research
S l t the
Select
th Type
T
off Market
M k t Research
R
h
A good way to start
exploratory research
is to read government
or industry
publications.
Another way to gather
information is to form a
focus group.
group
SECTION
6.1
Doing Market
Research
S l t the
Select
th Type
T
off Market
M k t Research
R
h
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
f
focus
group
a group of people whose opinions are
studied to determine the opinions that can
be expected from a larger population
Descriptive research
can be gathered
through
questionnaires,
interviews, or
observation.
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Glencoe Entrepreneurship: Building a Business
descriptive research
the collection of information to
determine the status of
something, such as in
developing a customer profile
SECTION
6.1
Doing Market
Research
Start the Research Process
S l t the
Select
th Type
T
off Market
M k t Research
R
h
The Five Steps of an Effective Research Plan
5
You can use historical
research to forecast
your business’s future
potential.
Analyze the data
data.
historical research
4
y of the past to explain
the study
present circumstances and
predict future trends
3
2
1
Organize the data.
Collect primary data.
Obtain secondary resources.
Identify your information needs.
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SECTION
6.1
Doing Market
Research
St t th
Start
the Research
R
h Process
P
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
SECTION
6.1
Doing Market
Research
St t th
Start
the Research
R
h Process
P
The most common
methods of gathering
primary data about
customers are:
• observation
• interviews
• surveys
y
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Glencoe Entrepreneurship: Building a Business
SECTION
6.2
Industry and
Market Analysis
primary data
information that is collected for
the first time, is current, and
relates directly to the
collector’s study
Researching the Industry
The Main Idea
Studying a company’s industry and market helps
an entrepreneur
t
create
t a product
d t or service
i that
th t
people want.
It also helps the entrepreneur develop a customer
profile estimate demand
profile,
demand, and increase the
chances for success.
Look at trends and patterns of change.
Understand industry forces that affect your business.
Study industry demographics.
Analyze the competition.
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SECTION
6.2
Industry Forces That Affect Your Business
Industry and
Market Analysis
I d t Forces
Industry
F
That
Th t Affect
Aff t Your
Y
Business
barriers to entry
threats from substitute products
In established
businesses, the
dominant businesses
have advantages that
are barriers to entry
to smaller, new
ventures.
sources of supply
buyers’
y
ability
y to bargain
g
technology
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
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SECTION
6.2
Industry and
Market Analysis
IIndustry
d t Forces
F
That
Th t Affect
Aff t Your
Y
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
i
SECTION
6.2
Industry and
Market Analysis
IIndustry
d t Forces
F
That
Th t Affect
Aff t Your
Y
Business
Customers with brand
loyalty do not easily
switch to a new
company that enters
the industry.
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Glencoe Entrepreneurship: Building a Business
SECTION
6.2
Industry and
Market Analysis
I
Issues
in
i Entrepreneurship
E t
hi
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
SECTION
6.2
brand loyalty
the tendency to buy a
particular brand of a product
Industry and
Market Analysis
Th Competition
The
C
titi
Usually, competing products
are already established in
the market.
To succeed, you must be
able to capture market
share by differentiating your
business.
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Chapter 6 Market Analysis
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Glencoe Entrepreneurship: Building a Business
market share
ap
portion of the total sales
generated by all competing
companies in a given market
SECTION
6.2
Industry and
Market Analysis
SECTION
Th Competition
The
C
titi
6.2
Industry and
Market Analysis
Th Competition
The
C
titi
Many entrepreneurial
companies succeed by
studying the
competition to define a
niche
i h in
i the
h market.
k
niche
An entrepreneur who
wishes to capture
market share can use
market positioning
positioning.
market
a et pos
positioning
to g
a small, specialized segment of
the market based on customer
needs discovered in market
research
h
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
the act of identifying a specific
market niche for a product
Chapter 6 Market Analysis
Chapter 6 Market Analysis
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SECTION
6.2
Researching the Target Customer
Industry and
Market Analysis
C
Creating
ti a C
Customer
t
P
Profile
fil
Create a customer p
profile.
Creating a customer
profile is the first step
in targeting your
marketing efforts.
Evaluate customers
customers’ needs.
needs
Conduct research to forecast demand
Forecast
demand.
customer profile
a complete
p
p
picture of a
venture’s prospective
customers, including
geographic, demographic,
and psychographic data
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SECTION
6.2
Industry and
Market Analysis
E l ti Customers’
Evaluating
C t
’ Needs
N d
SECTION
6.2
Industry and
Market Analysis
F
Forecasting
ti Demand
D
d
S
th d can b
d tto fforecastt d
d
Severall methods
be used
demand:
In order to provide
what the customer
wants, you should
prepare a customer
needs analysis.
customer needs analysis
a study
y that p
pinpoints
p
the
features and benefits of goods
or services that customers
value
Use historical analogy.
Interview prospective customers and intermediaries.
Go into limited production.
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Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
Glencoe Entrepreneurship: Building a Business

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