E2: Entrepreneurship and E-Commerce
Building and Expanding Economic
Opportunities
Dr. Kent Wolfe
University of Georgia
May 16-20, 2005
Oklahoma City, Oklahoma
What is Market Research
 Marketing research is the systematic
gathering, recording, and analyzing of data
about problems relating to the marketing of
goods and services.
 Okay, but what does that mean.
Source: Small Business Administration, http://www.sba.gov/starting_business/marketing/research.html
Why use Market Research
 First
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It is impossible to sell products or services that
customers do not want.
 Second
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Learn what customers want .
 Third
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Package and present the produce or service in
accordance with customer demands.
Source: Small Business Administration, http://www.sba.gov/starting_business/marketing/research.html
Why Conduct Market Research
 Focuses and organizes marketing information.
 It ensures that such information is timely and permits
entrepreneurs to:
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Reduce business risks
Spot current and upcoming problems in the current
market
Identify sales opportunities
Develop plans of action
Source: Small Business Administration, http://www.sba.gov/starting_business/marketing/research.html
Projects  Oilseed crushing and processing facility - $50 million
 Pelletized Poultry Litter facility - $4 million
 Farm Raised Tilapia, eel and prawn - $2 million
 Grass Fed Beef Processing Facility - $1 million
 Impact of Ag on States Economy - $9 billion dollars (farm gate
value all commodities)
Essential Questions for Product Development
and Effective Marketing Strategies
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Who are my customers and potential customers?
What kind of people are they?
Where do they live?
Can and will they buy?
Am I offering the kinds of goods or services they want - at the best
place, at the best time and in the right amounts?
Are my prices consistent with what buyers view as the product's value?
Are my promotional programs working?
What do customers think of my business?
How does my business compare with my competitors?
Source: Small Business Administration, http://www.sba.gov/starting_business/marketing/research.html
Competitive Analysis
 Business takes place in a highly competitive, volatile
environment, so it is important to understand the
competition.
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Who are your five nearest direct competitors?
Who are your indirect competitors?
Is their business growing, steady, or declining?
What can you learn from their operations or from their
advertising?
What are their strengths and weaknesses?
How does their product or service differ from yours?
Collecting Competitor Information
 Start a file on each of your competitors and
collect information on:
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Advertising
Promotional materials
Pricing strategies
Hours of operation
Marketing channels
Packaging
What This Can Tell Us
 How often competitors advertise
 Do they sponsor promotions
 Do they offer sales
 Seasonality - when they advertise
 Sales strategies
 Target Market
 Marketing mix
What Else Can it Tell Us?
 The most popular package size.
 Where customers are looking for the product
or service.
 Product extension opportunities
 Whether market is expanding or contracting
 Whether the product is a commodity or
differentiated product
 Opportunities to improve existing products to
better meet customer needs
Target Market
 Your current customer base: age, sex, income, neighborhood
 How your customers learn about your product or service -
advertising, direct mail, word of mouth, Yellow Pages
 Patterns or habits your customers and potential customers share -
where they shop, what they read, watch, listen to
 Qualities your customers value most about your product or service -
selection, convenience, service, reliability, availability, affordability
 Qualities your customers like least about your product or service -
can they be adjusted to serve your customers better?
 Prospective customers whom you aren't currently reaching
Source: Small Business Administration, http://www.sba.gov/starting_business/marketing/research.html
New Agribusiness Opportunities – First Step is ID
Target Market
 Target Market – A segment of the population that is
most likely to use your product or service.
 Usually described using demographic variables like,
Gender, Income, Race, Age
 Used to:
 Determine market potential
 Develop product packaging
 Choose marketing channels
 Develop marketing mix and advertising strategy
Who is your Target Market?
Hybrid Car Driver - Profile
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Highly Educated
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Affluent – Household income of $100,000 +
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They’re more likely to be female.
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Older than the average car buyer—closer to fifty
Beyond these demographics,
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They drive fewer miles on average
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Keep car longer than the average
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Willing to pay more for an environmentally-friendly (or “green”) product.
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They personally want to do something to help reduce vehicle pollution. “
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They expect fuel prices to grow a lot faster than other people do.
Target Market Examples
Demographic
US Pop.
Hot Sauce
Enthusiasts
Pork
Consumers*
Frozen Pizza
Consumers
Gender
Male
50%
80%
43%
8.9%
Female
50%
20%
57%
90.8%
35.5
29
55
47
$34,076
$60,000
$31,000
$43,641
23.6%
78%
<10%
26%
2.65
1.45
2.65
2.47
Age
Income
Education –
College grad.
Household Size
Market Segmentation
 A 1995 National Pork Producers Council
study identified five very different pork
consumer segments and they are as follows:
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Main Street Today
Quality Carnivores
Good N’ Plenty Guys
Apathetic Eaters
Politically Correct Eaters
Market Segmentation
Product
Age Group
Consumption %
30-39
44%
60+
50%
Gin
60+
50-59
29%
29%
Tequila
20-29
52%
Vodka
Bourbon
Market Potential
 Market Potential – the maximum sales
opportunities achieved by all sellers in the
market.
 Sets the upper limit on consumption units
Estimating Market Potential
 Crucial to evaluating a business opportunity
or idea.
 Is the market large enough to support my
business
 Is my market area sufficient to support the
business
Information Needed to Estimate
Market Potential
 Must define the market area.
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Selling in the county
Selling regionally
Selling nationally
Selling globally
 Identify your target market or the group of
people most likely to use or purchase your
product or service.
Information Needed to Estimate
Market Potential
 Estimate current purchase or usage patterns
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Is the product used frequently- food
Is the product purchased infrequently- i.e.,
Truck or TV
Per capita consumption of ice cream
Per capita consumption of eels
Usage of conference facilities
Usage of lawn maintenance materials
Estimating Market Potential
 MP=NxQ; where
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MP= Market Potential
N= number of buyers (Target Market in market
area)
Q= average number purchased by each buyer
 Adjustments will most likely have to be made, i.e.,
Soft drink Market Potential is significantly larger than
Coke Market Potential.
Steps to Estimating Market Share
 Determine the market area
 Estimate the total market potential
 Identify each of your competitors and
estimate their market share
 Decide or estimate what you think your
market share might be or what portion of the
market you intend to capture
Simple Example Market Share Calculation
 Market share for new hot sauce to be
marketed locally
 A supermarket visit identified 10 sauce
competitors
 Market share data is not available, assume
each product captures and equal share of the
market (10%)
Example Market Share Calculation- Con’t.
 New product will mean there are 11
competing products
 Assuming equal market share, you can
assume to capture roughly 9.1% of the
market
 Does 9.1% of the market generate enough
sales to make your business feasible?
Estimating Market Share - Example
Table 6. Total Sales from 216 Georgia stores for Wheat and Multigrain Crackers for a 52 week period ending May 15, 2004 - Includes data from 219 stores
Wheat Based Product
Annual Sales
% Change
Units Sold
Annually
Gross Margin
Annual Sales Per Store
Private label Multigrain Wheat Square Box 9oz.
$78,960.27
41.2%
76,180
$20,432.53
$ 360.55
Private label Wheat Square Box 9oz.
$58,565.87
-4.4%
55,307
$16,692.00
$ 267.42
Private label Low Salt Wheat Squares 9 oz
$20,096.27
2.8%
19,212
$40,001.87
$91.76
Nabisco Veg Thins Snack Crackers 8 oz
$42,671.20
-16.2%
16,619
$11,342.93
$ 194.85
Nabisco Wheat Thins 16 oz
$227,007.73
10.4%
73,920
$58,146.40
$1,036.56
Nabisco Wheat Thins ranch 9.5 oz
$ 58,531.20
-18.4%
22,845
$15,291.47
$ 267.27
Nabisco Wheat Thins reduced Fat 14.5 oz
$310,984.27
20.6%
101,074
$80,007.20
$1,420.02
Nabisco Big Wheat Thins 8 oz
$100,394.67
-9.1%
39,194
$25,324.00
$ 458.42
Nabisco Multigrain Wheat Square Box 9.5 oz.
$ 53,851.20
-26.5%
21,171
$13,932.53
$ 245.90
Keebler Wheatables Original 10 oz
$ 30,357.60
-31.6%
11,922
$10,015.20
$ 138.62
Keebler Wheatables Reduced Fat Original 9 oz
$ 46,172.53
-35.6%
18,089
$14,709.07
$ 210.83
Keebler Wheatables Honey Original 9 oz
$ 45,780.80
-26.3%
17,992
$14,615.47
$ 209.04
Keebler Wheatables 7 grain 9 oz
$ 32,347.47
-34.3%
$10,441.60
$ 147.71
3,678
Store Sales Market Share – Total Product Sales
Wheat Based Product
Units
Sold
Share of
Sales
Private label Multigrain Wheat Square Box 9oz.
76180
16%
Private label Wheat Square Box 9oz.
55307
12%
Private label Low Salt Wheat Squares 9 oz
19212
4%
Nabisco Veg Thins Snack Crackers 8 oz
16619
3%
Nabisco Wheat Thins 16 oz
73920
15%
Nabisco Wheat Thins ranch 9.5 oz
22845
5%
101074
21%
Nabisco Big Wheat Thins 8 oz
39194
8%
Nabisco Multigrain Wheat Square Box 9.5 oz.
21171
4%
Keebler Wheatables Original 10 oz
11922
2%
Keebler Wheatables Reduced Fat Original 9 oz
18089
4%
Keebler Wheatables Honey Original 9 oz
17992
4%
3678
1%
Nabisco Wheat Thins reduced Fat 14.5 oz
Keebler Wheatables 7 grain 9 oz
Store Sales Market Share – By Brand
Wheat Based Product
Units Sold
Share of Sales
Private Label
150,699
32%
Nab isco
274,823
58%
Keebler
51,681
11%
Store Sales Market Share – By Package Size
Wheat Based Product
Units Sold
Share of Sales
8 oz
55813
14%
9 oz
190458
47%
9.5 oz
44016
11%
10 oz
11922
3%
101074
25%
14.5 oz
Actual Market Analysis Example
 Identified seven potential markets in addition
to AgriRecycle, Inc.
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Homeowners
Cattle feed ingredient
Nurseries
Landscaping contractors
Golf courses Sod producers
Timberland companies
Potential Customer Population
Estimates
Market
Homeowners
Georgia
2,029,299
10,399,813
1,712
3,722
126
1,638
90
NA – Distance issues
Landscaping. Co.
Nurseries
Golf Courses (100 miles Douglas)
200 NA – Distance issues
Sod Producers (100 miles Douglas)
Cattle Blocks
Timberland Companies (land owners)
Southeast
313,000
Unsure
6.4 Million head
Unsure
Market Prices
 Marketing Channels
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Households
Cattle blocks
Commercial
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- $300/ton (organic)
- $200/ton
- $49/ton
Nurseries
Golf Courses
Landscaping Companies
Sod Producers
AgriRecycle
- $55/ton
Georgia’s Estimated Market
Potential by Segment
Outlet
Home owners
Estimated Market
Potential (tons)
$/ton
Estimated $$$
56,811
$300.00
$17,043,300
Landscaping. Co.
744
$49.00
$36,474
Nurseries
109
$49.00
$5,353
49
$49.00
$2,397
8,100
$49.00
$396,900
Cattle Blocks
33,375
$200.00
$6,675,000
Total
99,188
AgriRecycle
36,000
Golf Courses
Sod Producers
$24,159,424
$55.00
$1,980,000
Estimated Revenue
 AgriRecycle - $55/ton
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36,000 tons * $55/ton =$1,980,000
 Market Direct - $300/ton home owners (20 lb
bags of organic soil conditioner)
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36,000 tons * $300/ton =$10,800,000
36,000 tons represents only 64% of the
fertilizer and soil conditioners GA households
use annually
Southeast Estimated Market
Potential by Segment
Outlet
Home owners*
Estimated Market
Potential (tons)
$/ton
Estimated $$$
291,146
$300.00
$87,343,800
Landscaping Co.*
3,722
$49.00
$182,372
Nurseries*
1,411
$49.00
$69,127
Cattle Blocks**
133,500
$200.00
$26,700,000
Total
429,779
AgriRecycle
72,000
$114,295,299
$55.00
•*GA, SC, NC, AL,FL & TN
•** Cattle from Georgia, North Carolina, Virginia, and Kentucky
$3,960,000
Market Analysis Summary
 Identified seven potential markets in addition to
AgriRecycle, Inc.
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Homeowners – Large market, bagged product, high price
Cattle feed ingredient – Large market, future uncertain,
bagged, high price
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Nurseries –Small market, low price, bagged
Landscaping contractors – Small market, bagged, low
price
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Golf courses – Very small market, bulk, low price
Sod producers – Moderate market (distance), bulk, low
price
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Timberland companies – no identifiable potential
Estimating Retail Sales
 The potential retail sales for a specific retail operation can be estimated
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by using a standard formula:
ES= P x EXP x (ADI/MDI) x MS where
ES= Estimated Sales
P= Trade Area population
EXP= Average expenditures for retail outlet category
ADI = Area Estimated Average Household Disposable
Income
MDI = Georgia Average Household Disposable Income
MS= Estimated Market Share
Micro Brewery
 Micro brewed consumers consume an average of $250 worth of
beer annually.
 Younger people were more likely to have tried a microbrew.
Thirty-six percent of beer drinkers between the ages of 25 and
34 had tried a microbrew.
 In contrast, 27% of beer drinkers between the ages 34 through
45 and 20% of those 45 and older had tried microbrews.
 The appeal of micro brewed beer was strongest among White
beer drinkers were almost twice as likely as black Americans to
try a microbrew.
Estimated Retail Sales - Example
 50% of Americans consume beer.
 Thirty-six percent of microbrew drinkers are 25 -34, 27% are 34 - 45 and 20%
are 45 and older.
 Microbrew consumers have average incomes of $54,000
 Microbrew consumers spend between $250 annually on these products
 Microbrewery Market Area Demographic Information
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50,000 residents
15% are 25-34
16% are 34-45
29% are 45+
25% have incomes over $54,000
 Area Estimated Average Household Disposable Income=$67,000
 Georgia Average Household Disposable Income =$30,240
Trade Area Sales Estimate
 ES= P x EXP x (ADI/MDI) x MS
 P= 50,000 x 50% (percentage of beer drinkers) =25,000
 25,000 x 15% = 3,750
 25,000 x 16% = 4,000
 25,000 x 29% = 7,250
15,000
 37% of area residents have incomes over 50K
 15,000 *37% = 5,550
 EXP=$250
 (ADI/MDI)=($67,000/$30,240)
 MS = Estimated Market Share = 10%
 ES= 5,550 x $250 x ($67,000/30,240) x 10% = $307,416
Another
Estimated Retail Sales Example
 Specialty food shoppers spend between $500 and $1,000
 Area population = 83,000
 Condiments constitute 12% of specialty food purchases – or a $128
annually per specialty food shopper
 Area Estimated Average Household Disposable Income/Georgia
Average Household Disposable Income ($67,000/30,240)
 MS = Estimated Market Share = 10%
 ES= 83,616 x $128 x ($67,000/30,240) x 10% = $2,371,332
Easy Demographic Data
(WWW.EASIDEMOGRAPHICS.COM)
Miles
Population:
Households:
White Population:
Black Population:
Asian Population:
Hispanic Population:
Median Age:
 Med. HH Inc.($):
 Av. HH Inc. ($):
20
82,683
31,974
77,003
4,881
623
719
37.0
$29,572
$40,855
15
59,644
22,806
56,126
2,901
473
518
36.7
$30226
$41,877
10
36,409
13,773
34,497
1,506
307
275
36.4
$32,214
$43,165
Demographic and Population
Sources
 Sources for Demographic Information:
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Chamber of Commerce
University (www.agecon.uga.edu/~caed/)
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www.georgia.stats.uga.edu
US Census Bureau (WWW.CENSUS.GOV)
Easy Demographics (WWW.EASIDEMOGRAPHICS.COM)
Price Determination
 Don't know how much to sell your product for?
 Essential to developing a successful business.
 Price too low – may not cover total costs and loose
money
 Price too high – may price the product out of the
market
 One method of determining price- eBay
 Try putting it on eBay. Your correct price point will
become very clear after only a few auctions.
Source: The Importance of Market Research, Steven Strauss – BizLand.com
Price Determination
 Depending on the product or service, pricing flexibility changes significantly.
 Factors to consider:
 Is the product a commodity?
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Traditional agricultural commodities
Consumer electronics, i.e., VCR’s, Computers, TV’s.
 Is the product highly differentiated?
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Cars – i.e., Porsche, Kia
Produce- i.e., organic vs. traditionally produced
Leasing hunting land vs. providing guide services
 Is the product a luxury item?
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Spa treatments
Vacations – Hunting service ($150 ½ day of squirrel hunting)
Jewelry, furs,
Price Determination
 What others are charging –
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Make a list of similar products or services and
how much other companies charge for them.
This information will tell you what the market is
accustomed to paying.
 Review per unit costs for producing the
product or service and compare to market
price
Price Determination
 Build in a Profit!
 Need profits:



to grow
pay off debt
continue to be a viable enterprise.
 Profit varies by industry, service, potential
liability and general overhead.
Price Determination
 Rule of thumb in retailing is to at least double your
fixed costs (Keystone pricing) in determining a retail
selling price.
 Allows for discounting or running sales, i.e., 10-40
percent off sale still allows for a profit.
 Raise prices in accordance with inflation, need to
maintain an acceptable profit margin
Use Market Research in Marketing
On-line
“Adding Value to Georgia’s Agricultural Economy Through Research
and Extension”
www.caed.uga.edu
College of Agricultural & Environmental Sciences