Environmental Analysis
DR. DAWNE MARTIN
MKTG 241
JANUARY 31, 2012
Agenda
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Review revised schedule
Review environmental analysis
Identify Customer Analysis components
Determine customer segments
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Identifying methods of segmenting consumer and b2b markets
What makes a good market segment?
Discover how Rethink Tool #3 applies to customers
For Next Time
 Quiz: Chapter 1 - 3
 Environmental Analysis – due Thursday, Feb. 9
 Extra Credit Opportunities
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CBA Professional Development Day – Friday, Feb. 10
CBA Distinguished Lecture, Monday, Feb. 13, 10:30-11:20 in Forum Hall

John Bilbrey, President & CEO of Hershey’s – K-State Class of 1978
Industry and Environmental Analysis
Due: Thursday, Feb. 9, 2012
 Purpose: Identify the external environmental
trends, threats and opportunities affecting the
industry in which your business resides. Key
questions include:
1) What are the significant trends and future events in the
industry?
2) What threats and opportunities do you see?
3) What are the strategic questions – areas of uncertainty as
to trends or events that have potential to impact strategy?
Evaluate these questions in terms of their impact.
 Economic: What are the economic prospects for
the industry, including the effects of economic
growth (GDP), interest rates, trends in related
industries, inflation? How will these affect your
business and strategy?
Environmental Analysis
 Social/Cultural and demographic: What are the relevant
current trends in lifestyles, fashions, technology use and
other components of culture that will affect your business.
What are the demographic trends that will affect
 Technological: What technological changes will impact
your customers, suppliers and your own operation?
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To what extent are the existing technologies maturing?
What technological
 Governmental/Political/Legal: What trends or changes in
the government, political and legal climate will affect your
business.
 Missing information important to your opportunity: What
information was not available or has not been forecasted
that might affect your business?
Characteristics of a Good Opportunity
 Opportunity: A good chance (Webster’s Dictionary
 Good Opportunity
 Create significant value for customers by solving a significant
problem or filling a significant unmet need for which the
customer is willing to pay a premium price
 Offers significant profit potential
 Represents a good fit with the capabilities of the entrepreneur
– experience and skills
 Offers sustainability over time – not a fad
 Can obtain financing
Evaluating Opportunities
 Market size
 Cost to enter the market
 Market growth rate
 Cost to scale up
 Significant customer value
 Time to first dollar
 Well-defined target
 Red ocean (existing
 Customer felt need
 Access to customers
 Command premium price
 Build and sustain the brand
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 Sustainable competitive
advantage
 Competitors
 Barriers to entry
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market) or blue ocean (new
market space)
Profit potential
What does the customer
think (voice of the
customer)
Personal fit
Financing available?
Customer Analysis: Preliminary
Identification of Market
 Market definition
 Who will be your likely potential customers
 How many are there?
 Trends in customer demographics?
 Geographic dispersion
 Segmentation:
 Who are likely to be your biggest customers?
 The most profitable customers?
 The most attractive potential customers?
 Are there any logical groups based on needs, motivations or
characteristics?
Customer Analysis
 Segmentation Approach: How should be the market
be segmented into groups, with relatively
homogeneous needs, that would require a unique
marketing strategy?
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Benefits sought
Usage level
Application
Organizational type or size
Geographic location
Customer loyalty
Price Sensitivity
Customer Analysis
 What is the customer’s motivation for buying your
product or service?
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What elements of the product or service are valued most?
What are the customer’s objectives? What are they really buying?
How do segments differ in their motivation priorities?
Do these needs represent leverage points for competitors?
 What are the customers unmet needs?
 Why are some customers dissatisfied?
 What are the severity and incidence of customer problems?
 What are the unmet needs that customers can identify and those
of which they are unaware?
 Do the unmet needs represent a leverage point for competitors?
 Summary and implications for your business
Market Segmentation – What is it
 Market Segments: Groups of customers that are
similar in the way they view products
 What Makes a Good Market Segment?
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Customers within the segments must have similar needs
Segments must be different from each other
Segments must be measurable
Segments much be large enough to be profitable
There must be a way to reach segments
 Why Do Marketers Segment Markets?
Fundamental Forces That Shape
Differences in Consumer Needs
Consumer Market
Customer Needs
Demographic
Forces
Age
Income
Marital Status
Household
Education
Occupation
13
Fig. 5.2
Lifestyle
Forces
Attitudes
Values
Activities
Interests
Opinions
Political Orientation
Usage
Behaviors
Quantity
Time of Use
Personal
Social
Gift
Frequency of Use
© 1997 Prentice-Hall, Inc.
Fundamental Forces That Drive
Differences in Business-to-Business
Customer Needs
Business-to-Business
Customer Needs
Firmagraphic
Forces
Number of Employees
Sales Volume
Number of Locations
Years in Business
Industry (SIC)
Financial Situation
14
Fig. 5.3
Company
Culture
Business
Sophistication
Growth Orientation
Innovativeness
Technology
Centralized Decision
Making
Usage
Behaviors
Application
Quantity
Time of Purchase
Frequency of
Purchase
Experience
Users
© 1997 Prentice-Hall, Inc.
Segmentation Hierarchy
Niche A1
Market Demand
Segment A
Segment A
Custom A1
Custom A2
Custom A3
Custom B1
Segment B
Segment B
Custom B2
Mass
Market
Approach
Segment C
Segment C
Multisegment
Strategy
Single
Segment
Strategy
Custom C1
Segment
Niche
Strategy
Mass
Customization
Target Market
16
Fig. 5.13
© 1997 Prentice-Hall, Inc.
Exercise
 Make an Initial Identification of Your Potential
Markets
 What variables would you use to segment the
market? Why?
 Where might you find information about your
market and potential customers?
Rethink Tool #3
3-15
 Use intuition, imagination, inspiration. and
ideation to think the unthinkable.
 Implications
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Smart customers do dumb things
Products we create to meet customer needs often change the
way we live
Customer use products in the ways we never intended
So how do we harness creative customers?
© 2009 Prentice Hall
Implications
 Customers are
Smart: Faced with a
dilemma that can be
solved by consumption,
customers will engage
in
Problem definition
 Search for information
 Information processing
 Decision making
 Action
 Finally feedback loop
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3-16
 Customers still do
seemingly dumb things
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They are emotional rather
than rational
Buy products no one ever
thought they would
Don’t buy some of best
offerings ever invented
Pay prices no one ever
expected
Are intensely loyal to stores
Hate advertising yet post and
watch on You Tube
© 2009 Prentice Hall
Customer behavior: 2 perspectives
3-17
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Products and services developed in response to
customer needs
•
Offerings often assume very different flight paths
than intended
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Cup holder—humble simple device that has
changed consumption behavior of entire nation. 1
out of every 5 meals in the United States is eaten in
a car
Customers interact with products in unintended ways
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To great benefit, merely playful, or downright
dangerous
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SMS—originally designed to send messages from
company to subscribers, now a popular way to flirt,
in 2001 more than 1 billion seasonal greetings sent
in place of traditional Christmas cards
© 2009 Prentice Hall
The Paths that Products Take:
What Products Do to Customers
3-18
 Offerings evolve
 Intentional
 Extension
by creator—“new and improved”
 Subversion by consumer
 Diversion—mobile phones with cameras banned
from public spaces where unsuspecting persons could
be filmed in compromising states
 Unintentional
 Emersion—SMS
to notify parents of truant students
 Aspersion—4x4 vehicles cause damage to off-road
environments
© 2009 Prentice Hall
An Offering Evolves by Either
3-19
 Intentional process
(people change offering)
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Extension – Changes
planned by company
Subversion– Intentional
change of offerings by
social actors (Nike as a
status symbol)
Diversion – 3rd party
changes the use of the
product/offering (Napster
– Google Books)
 Unintentional process
(offering changes
people)
Emersion – offering
changes the way people
behave – email, mobile
phones, text, twitter
 Aspersion–
unanticipated side
effects of products –
childhood obesity and
computer gaming
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© 2009 Prentice Hall
Clever Customers vs. Lead Users
320
 Lead users
 User of novel or
enhanced products
 Faces needs that
will be general in
marketplace in
future
 Positioned to benefit
significantly from
obtaining a solution
 Creative customers
 Work with all offerings
 Don’t necessarily face
needs of general public
 Need not benefit
directly
 Rarely ask permission
to experiment with
firms offering
© 2009 Prentice Hall
Treat Creative Consumers Strategically
3-21
 They exist and are here to stay
 The potential for consumers to reprogram,
adapt, modify, and transform offerings is
growing
 Creative consumers are a rich source
of innovation
 Challenge
for firms
 Recognizing
that creative consumers exist
 Identifying their actions
 Understanding how to capture and create value from
them
© 2009 Prentice Hall
Treat Creative Customers Strategically
 Consumer Creativity ≠ Creative Consumers
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Consumer creativity
Study
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of consumer problem solving
Creative consumers
Reality
of how consumers adapt, modify, or
transform proprietary offering
 Firms Stances Toward Creative Consumers
 Discourage
Resist
Encourage
• Enable
© 2009 Prentice Hall
Capturing and Creating Value from
Creative Consumers
3-23
 Awareness—many firms are blissfully
unaware, but since advent of Internet,
ignorance is less common
 Analysis—what are implications for the
firm, should attitude be positive or negative,
hands-off or engage
 Response—should be unambiguous, send
appropriate message to all stakeholders
© 2009 Prentice Hall