Market Analysis
A Six-Step Approach to Understanding
the Nature of Competitive Markets
 Define the Relevant Market
 Analyze Primary Demand for the Relevant
Market
 Analyze Selective Demand for the Relevant
Market
 Define Market Segments
 Assess the Competition
 Identify Potential Target Markets
Defining the Relevant Market
 A set of products and/or services that
management considers to be strategically
important.
• For example, a brand of herbal tea may have a
large share of that market but a very small
share of the total tea market
Defining the Relevant Market
 Describe the Structure of the Relevant
Market
 Classify competing product market
alternatives at three levels.
a . Competing brands within a product form
b . Competing product forms within a product class
c . Competing product classes within a generic need
Defining the Relevant Market
 Define the Boundaries Within the Market.
 Important for determining “Market Share”
Market Structure for Soft Drinks
Noncola
Cola
Diet
Regular
Diet
Regular
Caffeine Caffeine Caffeine Caffeine Caffeine Caffeine
Caffeine
Free
Free
Free
BRANDS
Caffeine
Free
Defining the Relevant Market
Describe Product Market Structure
•Identify potential competitors
•Classify competitors in terms of similarity
Define Relevant Market Boundaries
Broad Relevant
Market Boundary
Primary Demand
Narrow Relevant
Market Boundary
Secondary Demand
Analyzing Primary and Secondary Demand
Define Relevant Market Boundaries
Primary Demand
Selective Demand
•Identity of buyers of
product form/class
•Factors impacting
willingness and ability
to buy the product
form/class
•Type of buyer
decision process
•Identification of
determinant attributes
Questions on Buyer Identification

Characteristics of Buyers or Users
Can buyers of this product category be
classified by location, demographics, or
lifestyle and psychographic factors?
If so, how?
Questions on Buyer Identification
 The Buying Centre
Who is involved in the buying process:
Reference groups
Colleagues
Family members?
Questions on Buyer Identification
 Customer Turnover
Is there a high degree of customer turnover
because of mobility or because purchase is
tied to age or other demographic factors?
If so, why?
Questions on Willingness and
Ability to Buy
 Willingness to Buy
 Would new or improved related products and
services increase utilization?
 What usage problems exist or are perceived
to exist?
 Is the product or service compatible with the
values and experiences of the buyer?
 What types of perceived risks are significant
in the purchase of the product form?
Questions on Willingness and
Ability to Buy

Ability to Buy
 To what extent do purchase prices and other
acquisition and maintenance costs inhibit
purchase?
 Are product size or space problems creating
problems for customers?
Is the product available at a time and place
that meets customer needs?
Market Structure for Holiday Travel
Need for Holiday Transportation
Bus
Rail
Greyhound Gray Goose
Via
Automobile
Rent
Avis
Personal
Hertz Budget
Air
Canadian
Air Canada Northwest
Questions on Selective Demand
 Decision Processes
 How extensive is the search for
information?
 Do buyers use personal or impersonal
sources of information?
 Do buyers seek information about brand
or supplier characteristics?
Sequential Process of Consumer Choice
Total Brand Set
Awareness Set
Consideration Set
Tide
Trend
Cheer
Gain
Surf
Rinso
Bold
Oxydol
Wisk
Purex
Ultra
Fab
Tide
Cheer
Bold
Wisk
Fab
Tide
Cheer
Fab
Types of Decision Processes
Consumers
COMPLEX
Organizations
Extensive Problem
Solving
New Task
Limited Problem
Solving
Modified Rebuy
Routinized
Response
Straight Rebuy
SIMPLE
Questions on Selective Demand

Determinant Characteristics
 What are the benefits buyers hope to obtain
from usage or ownership of the product?
 What product attributes or characteriatics are
viewed as providing these benefits?
 What is the relative importance of the various
benefits desired?
 How much variation is perceived among the
alternatives on each of the important
attributes?
Attributes of Fast Food Restaurants
ATTRIBUTE
IMPORTANCE
Food Taste
4.30
Quality and Cost
3.79
Food selection
3.58
Menu Alternatives
3.58
1 = unimportant
5 = very important
Attribute Ratings for Three Restaurants
ATTRIBUTE
Food Taste
Quality and Cost
Food Selection
Menu Alternatives
1 = Poor
5 = Excellent
A
4
3
3
3
B
3
5
5
4
C
4
4
3
3
Assessing Whether an Attribute is
Determinant
Perceived Variation Among Alternatives
Low
Low
Perceived
Importance
High
Irrelevant
Irrelevant
Attribute
Attribute
Defensive
Defensive
Attribute
Attribute
High
Optional
Optional
Attribute
Attribute
Determinant
Attribute
Determinant
Attribute