Analyzing the Market,
Customers, and
Competition
Patterns of Entrepreneurship
Chapter 3
copyright 2003 Jack M. Kaplan
Session Outline
•
•
•
•
Niche or target markets
One to One Marketing
Define the Market Segmentation
Evaluate the Competition-Sample
Evaluation
• Prepare the Pricing Plan
• Position the Product or Service
copyright 2003 Jack M. Kaplan
Niche or Target Markets
 A niche market is a small segment of a
large market ignored by other companies
 Target marketing -is a strategy to focus on
segments of a market and prepare a plan
for each market segment.
copyright 2003 Jack M. Kaplan
Prepare the Marketing Analysis and
Plan
 Identify Customers- Consider the 4
factors
Market Identification-Current market and
service needs determined
Current and Best Customers-to allocate
resources to segment the market
Potential Customers- target by geographical
or industry wide
Outside factors -identify changing trends
copyright 2003 Jack M. Kaplan
One to One marketing
Learn the profile or details about customers
to identify the most valuable ones.
Identify customers -or get them to identify
themselves
Link customers identifies to their transactions
calculate individual customer lifetime value
Strengthen a customer satisfaction program
copyright 2003 Jack M. Kaplan
Define the Market Segmentation
There are Several Ways to Segment a Market
Demographic Segmentations-divide the market into
groups,based on age,income level and gender
Geographic Segmentation- divide people or
businesses into regional and by location
Psychographic Segmentation-divides into cultural
groups,value or social categories
Ethnic Segmentation- divide by ethic group
copyright 2003 Jack M. Kaplan
Questions for Effective Segmentation
 Do potential customer groups have different
needs?
 Can the customers that fit into a given
segment be identified?
 Are customers both willing and able to pay?
 Is the segment large enough to be profitable?
 Can the segment be reached in a costeffective manner?
copyright 2003 Jack M. Kaplan
Conduct A Competitive Analysis
• It is particularly important to identify
which businesses will provide the most
significant competition and predict what
they will likely do.
• Analyze the situation by asking the
questions provided below regarding six key
areas of competition.
copyright 2003 Jack M. Kaplan
Evaluating the Competition - Marketing Analysis
Potential
Entrants
•Economics of Scale
•Proprietary Product
Differences
•Brand Identity
Bargaining Power
of Suppliers
Suppliers
•Switching Costs of Suppliers
•Importance of Volume to
Suppliers
•Cost Relative to Total
Purchases
•Impact on Cost or
Differentiation
Threat of
New Entrants
•Access to Distribution
•Government Policies
•Expected Retaliation
Industry
Competitors
Bargaining Power
of Buyers
Rivalry Among
Existing Firms
•Industry Growth
•Product Differences
•Brand Identity
Business to Consumers
Business to Business
•Exit Barriers
•Diversity of
Competitors
Internet
Companies
copyright 2003 Jack M. Kaplan
Buyers
•Buyer Concentration
vs. Firm
•Buyer Volume
•Buyer Switching Costs
•Substitute Products
•Product Differences
•Brand Identity
•Impact on Quality/Performance
•Buyer Profile
Evaluating the Competition
Sample Evaluation
Factors
competition among
companies
The pow er of
customers
The pow er pow er of
suppliers
Internet companies
Potential threats
Attractiveness
High
competition is
minimal but w ill
become intense in
1year
volume is high and
w illing to negotiate
Many substitutes and
sources are available
No competition
defined on the
internet
Complex barriers and
costs are high to
copyright 2003 Jack M. Kaplan
enter market
Low
The industry is
declining and is
mature
Customer has few
sw itching costs
Limited supply;
products
differentiated
Many companies are
entering this market
Few simple entry
barriers to enter the
business
Measuring the Venture
Strengths and Weaknesses
Sample Evaluation
Factor
Attractiveness
Management t eam
High
Proven
Financing
Product development
Sales f orce
Market ing
Operat ions
Low
People w it h right
skills not available
You have comf ort able You have a narrow
cushion or can raise
t ime horizon t o make
capit al if needed
money
Complet e product line One product of
limit ed lif e
St rong cont act s;
Limit ed cont act s;
specialist skills
generalist skills
Deep and t ight lyUnt arget ed
f ocused
St rat egic alliances
Learning in a vacuum
help improve
execut ion
copyright 2003 Jack M. Kaplan
Product and Service Questions
 How is the competitive product or service defined?
 How is it similar or different?
 Does the competition cater to a mass- or targeted
market?
 What features of the product are superior?
 What strengths or weaknesses of the competition can
be exploited?
copyright 2003 Jack M. Kaplan
Price Questions
 What is the competitor’s pricing strategy?
 Is the competitor’s price higher or lower?
 What is the competitor’s gross margin for similar
products?
 Does the competitor offer terms, discounts, or
promotions
copyright 2003 Jack M. Kaplan
Industry Competitors
 Define the competition in terms of new, Internet, or
potential threats of existing companies.
 What are the strengths and weaknesses of each?
 How will e-commerce companies affect the
business?
 How can the suppliers or buyers affect the
competition?
copyright 2003 Jack M. Kaplan
Management team
 How strong is the competitor’s management team?
 What is their background or experience?
 How do they recruit new key employees?
copyright 2003 Jack M. Kaplan
Financial Questions
 Is the competitor profitable?
 What volume are sales and market shares?
 Do they spend money for R&D, Internet, and web
development?
 Are they properly capitalized? How strong is their
cash flow?
copyright 2003 Jack M. Kaplan
Prepare the Pricing Plan
Pricing Methods
Value-Price should not be based simply on cost,
plus a modest profit. Instead, price should be
based on the value of the product or service.
Rationale -why prices differ from those of the
competitors.For instance, does the new business
perform a function faster or more efficiently?
copyright 2003 Jack M. Kaplan
How to Position the Product or Service
• One way to charge a high price when
competition and substitution are minimal
• Another is to “match competition” by
pricing slightly under the competitor’s rates
to expand one’s own market share (for
example, Motorola or Verizon cellular
phones).
• A third is to substantially under-price the
market, so as to exclude competitors
copyright 2003 Jack M. Kaplan
altogether