SECTION 6.1
Doing Market
Research
The Main Idea
To ensure success, entrepreneurs need to understand the industry and the market.
They should define areas of analysis and conduct effective industry and market research.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business

SECTION 6.1
Doing Market
Research
Defining Areas of Analysis
In order to satisfy current customers or attract new ones, an entrepreneur must conduct market analysis. industry a collection of businesses with a common line of products or services
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

SECTION 6.1
Doing Market
Research
Thorough market analysis requires:
Identifying prospective customers and determining their buying habits
Analyzing your industry and assessing your chances for success within it
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business

SECTION 6.1
Doing Market
Research
There are four factors that are useful in understanding the nature of an industry: carrying capacity uncertainty complexity stage of life cycle
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business

SECTION 6.1
Doing Market
Research
You will want to find an industry that has carrying capacity so that your new business can expand and prosper.
carrying capacity the ability of industry to support new growth
Uncertainty is the degree of stability or instability in an industry.
Many high-tech ventures are in industries with uncertain climates.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business

SECTION 6.1
Doing Market
Research
Some businesses must learn to deal with complexity in many industries.
Firms that operate in complex industries have more suppliers, customers, and competitors than firms in other industries.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business complexity the number and diversity of contacts with which a business must deal

Stage of Life Cycle
There are four stages to the life cycle of an industry.
3
4
1
2
Birth
Growth
Maturity
Decline
7

SECTION 6.1
Doing Market
Research
After first identifying your market , you will then need to select a target market to be the focus of your company’s efforts.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business a group of people or companies a specific group of

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 specific characteristics segmented by geographics, demographics, psychographics, and buying characteristics

Target Market and Customer
Market Segmentation geographics demographics psychographics buying characteristics
10

SECTION 6.1
Doing Market
Research
Target Market and Customer
Information about the geographics of the target market can help an entrepreneur decide on a geographic area to focus marketing efforts.
geographics the study of the market based on where customers live, including region, state, country, city, and/or area
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business

SECTION 6.1
Doing Market
Research
Target Market and Customer
An entrepreneur can study psychographics to learn about target customers’ feelings.
psychographics the study of consumers based on social and psychological characteristics, including personalities, values, opinions, beliefs, motivations, attitudes, and lifestyle elements
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business

SECTION 6.1
Doing Market
Research
Target Market and Customer
Businesses that cater to industrial markets must consider customers’ individual situations.
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
14

SECTION 6.1
Doing Market
Research
Conducting Market Research
Once you know the areas of the market that you need to analyze, you are ready to begin market research .
The marketing research process can be used to identify potential markets, analyze demand, and forecast sales.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business market research the collection and analysis of information aimed at understanding the behavior of consumers in a certain market

Select the Type of Market Research
There are three types of market research exploratory research descriptive research historical research
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SECTION 6.1
Doing Market
Research
Select the Type of Market Research
A good way to start exploratory research is to read government or industry publications.
exploratory research the initial collection and analysis of information used when very little is known about a subject; it forms a foundation for later research
Another way to gather information is to form a focus group .
focus group a group of people whose opinions are studied to determine the opinions that can be expected from a larger population
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business

SECTION 6.1
Doing Market
Research
Select the Type of Market Research
Descriptive research can be gathered through questionnaires, interviews, or observation.
descriptive research the collection of information to determine the status of something, such as in developing a customer profile
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business

SECTION 6.1
Doing Market
Research
Select the Type of Market Research
You can use historical research to forecast your business’s future potential.
historical research 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
1
5 Analyze the data.
4 Organize the data.
3 Collect primary data.
2 Obtain secondary resources.
Identify your information needs.
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SECTION 6.1
Doing Market
Research
Start the Research Process
Research secondary data before researching primary sources because it is easily obtained and inexpensive.
secondary data information that has already been collected by someone else
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business

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

SECTION 6.2
Industry and
Market Analysis
The Main Idea
Studying a company’s industry and market helps an entrepreneur create a product or service that people want.
It also helps the entrepreneur develop a customer profile, estimate demand, and increase the chances for success.
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business

Researching the Industry
24

Industry Forces That Affect Your Business barriers to entry threats from substitute products sources of supply buyers’ ability to bargain technology
25

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.
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
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business

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.
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
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business

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.
brand loyalty the tendency to buy a particular brand of a product
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business

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.
market share a portion of the total sales generated by all competing companies in a given market
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business

SECTION 6.2
Industry and
Market Analysis
The Competition
Many entrepreneurial companies succeed by studying the competition to define a niche in the market.
An entrepreneur who wishes to capture market share can use market positioning .
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 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 .
competitive advantage a feature that makes a product more desirable than its competitors
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business

Researching the Target Customer
33

SECTION 6.2
Industry and
Market Analysis
Creating a Customer Profile
Creating a customer profile is the first step in targeting your marketing efforts.
customer profile a complete picture of a venture’s prospective customers, including geographic, demographic, and psychographic data
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business

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 .
customer needs analysis a study that pinpoints the features and benefits of goods or services that customers value
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business

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