SECTION
6.1
Doing Market
Research
Defining Areas of Analysis
The entrepreneur will want
to understand the nature of
the industry he or she is
analyzing.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
industry
a collection of businesses with a
common line of products or
services
SECTION
6.1
Doing Market
Research
Industry – four factors effect the nature of the industry
carrying capacity
the ability of industry to support
new growth
industry life cycle
the current stage of an industry
1
Birth
2
Growth
3
Maturity
4
Decline
uncertainty
the degree of stability or instability
in a given industry
complexity
the number and diversity of
contacts with which a business
must deal
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION
6.1
Doing Market
Research
Target Market and Customer
market
After first identifying your
market, you will then need
to select a target market to
be the focus of your
company’s efforts.
a group of people or companies
who have a demand for a product
or service and are willing and able
to buy it
target market
a specific group of customers
whom a business wishes to reach
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
SECTION
6.1
Doing Market
Research
Target Market and Customer
Consumer market
segmentation is based on
geographics, demographics,
psychographics, and buying
characteristics.
A business can select and
serve multiple market
segments.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
market segmentation
the process of grouping a market
into smaller subgroups defined by
specific characteristics
market segments
subgroups of buyers with similar
characteristics, segmented by
geographics, demographics,
psychographics, and
buying characteristics
Target Market and Customer
Market Segmentation
geographics
demographics
buying
characteristics
psychographics
5
SECTION
6.1
Doing Market
Research
Target Market and Customer
geographics
psychographics
the study of the market based on
where customers live, including
region, state, country, city, and/or
area
the study of consumers based on
social and psychological
characteristics, including
personalities, values, opinions,
beliefs, motivations, attitudes,
and lifestyle elements
industrial markets
customers who buy goods or
services for business use
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
Target Market and Customer
The target market for your product
or service should be:
1
Measurable
2
Large enough to be profitable
3
Reachable
4
Responsive
7
Select the Type of Market Research
There are three types of market research
exploratory research
market research
the collection and analysis of
information aimed at
understanding the behavior of
consumers in a certain market
descriptive research
historical research
8
SECTION
6.1
Doing Market
Research
Select the Type of Market Research
exploratory research
focus group
the initial collection and analysis
of information used when very
little is known about a subject; it
forms a foundation for later
research
a group of people whose opinions
are studied to determine the
opinions that can be expected
from a larger population
descriptive research
historical research
the collection of information to
determine the status of
something, such as in developing
a customer profile
the study of the past to explain
present circumstances and predict
future trends
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
Start the Research Process
The Five Steps of an Effective Research Plan
5
4
3
2
1
Analyze the data.
Organize the data.
Collect primary data.
Obtain secondary resources.
Identify your information needs.
10
SECTION
6.1
Doing Market
Research
Start the Research Process
Research secondary data
before researching primary
sources because it is easily
obtained and inexpensive.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
secondary data
information that has already been
collected by someone else
SECTION
6.1
Doing Market
Research
Start the Research Process
The most common methods
of gathering primary data
about customers are:
• observation
• interviews
• surveys
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
primary data
information that is collected for the
first time, is current, and relates
directly to the collector’s study
Time for
a break
Researching the Industry
Look at trends and patterns of change.
Understand industry forces that affect your business.
Study industry demographics.
Analyze the competition.
14
Industry Forces That Affect Your Business
barriers to entry
threats from substitute products
sources of supply
buyers’ ability to bargain
technology
15
SECTION
6.2
Industry and
Market Analysis
Industry Forces That Affect Your Business
In established businesses,
the dominant businesses
have advantages that are
barriers to entry to
smaller, new ventures.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
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
SECTION
6.2
Industry and
Market Analysis
Industry Forces That Affect Your Business
Established businesses
have achieved economies
of scale in production,
marketing, and distribution.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
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
SECTION
6.2
Industry and
Market Analysis
Industry Forces That Affect Your Business
Customers with brand
loyalty do not easily switch
to a new company that
enters the industry.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
brand loyalty
the tendency to buy a particular
brand of a product
SECTION
6.2
Industry and
Market Analysis
Issues in Entrepreneurship
In the past, businesses
used mass marketing to
sell products with universal
appeal and few features to
differentiate them from
competitors’ products.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
mass marketing
the attempt to reach all customers
with a single marketing plan
SECTION
6.2
Industry and
Market Analysis
The Competition
Usually, competing
products are already
established in the market.
To succeed, you must be
able to capture market
share by differentiating
your business.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
market share
a portion of the total sales
generated by all competing
companies in a given market
SECTION
6.2
Industry and
Market Analysis
The Competition
Many entrepreneurial
companies succeed by
studying the competition to
define a niche in the
market.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
niche
a small, specialized segment of
the market based on customer
needs discovered in market
research
SECTION
6.2
Industry and
Market Analysis
The Competition
An entrepreneur who
wishes to capture market
share can use market
positioning.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
market positioning
the act of identifying a specific
market niche for a product
SECTION
6.2
Industry and
Market Analysis
The Competition
You can create a
competitive grid to help
define your competitive
advantage.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
competitive advantage
a feature that makes a product
more desirable than its
competitors
Researching the Target Customer
Create a customer profile.
Evaluate customers’ needs.
Forecast research to forecast demand.
Conduct
24
SECTION
6.2
Industry and
Market Analysis
Creating a Customer Profile
Creating a customer
profile is the first step in
targeting your marketing
efforts.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
customer profile
a complete picture of a venture’s
prospective customers, including
geographic, demographic, and
psychographic data
SECTION
6.2
Industry and
Market Analysis
Evaluating Customers’ Needs
In order to provide what the
customer wants, you should
prepare a customer needs
analysis.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business
customer needs analysis
a study that pinpoints the features
and benefits of goods or services
that customers value
SECTION
6.2
Industry and
Market Analysis
Forecasting Demand
Several methods can be used to forecast demand:
Use historical analogy.
Interview prospective customers and intermediaries.
Go into limited production.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business