The Value of Market Research

Objectives Identify a target market by understanding your customers. Research your market using primary and secondary data.

What is a Target Market? Mass marketing- a single marketing plan used to reach all potential customers Products that appeal to all consumers for the same reason and are basically the same as the competition are suitable for mass marketing.

Target market- individuals or companies that are interested in a particular product or service and are willing and able to pay for it Identifying your target market helps you reach the people you most want to sell to

Examples: A car dealer selling moderately priced minivans would target middle-class families with children A car dealer that offers expensive sports cars might target single people with good incomes

The Marketing Concept- uses the needs of customer as the primary focus during the planning, production, distribution, and promotion of a product or service Identify what will satisfy the customer’s wants and needs. Develop and market products or services that customers consider better than other choices. Operate profitably.

Understand Your Customer Customers- people who buy products or services offered by companies Economic want- unfilled desire of a customer Examples: designer clothes, luxury cars, vacations Economic need- required to live Examples: food, water, shelter

Businesses that identify their target markets are the businesses that succeed. If a business concentrate their selling efforts on a certain type of individual, they will be more likely to give individuals exactly what they want.

Demographics and Psychographics Demographics- data that describes a group of people in terms of personal characteristics Examples: age, marital status, family size, gender, ethnicity, profession, education, income Psychographics- data that describes a group of people in terms of their tastes, opinions, personality traits, and lifestyle habits Examples: eating healthy foods, exercising

Identify Your Target Market To identify a target market, answer these questions: Who are my customers: individuals or companies? If my customers are individuals, how old are they? How much money do they earn? Where do they live? How do they spend their time and money? If my customers are companies, what industries are they in? Where are those industries located? What needs or wants will my product or service satisfy?

How many potential customers live in the area in which I want to operate? Where do these potential customers currently buy the products or services I want to sell them? What price are they willing to pay for my products or services? What can I do for my customers that other companies are not already doing for them?

Checkpoint>> Why is it important to answer the above questions when identifying a target market?

The Importance of a Customer Profile Customer profile- description of the characteristics of the person or company that is likely to make a purchase Can assist in understanding what needs to be done to meet customer demand The profile should include: demographic, geographic, and psychographic data

Market Segments Market segment- groups of customers within a large market who share common characteristics Market research can be used to identify market segments Dividing a market into several groups can help to develop a product or service to meet customer needs and wants

Understand the Competition Knowing a lot about your competition will also help you define your target market. A business can be successful when entering into areas where there is competition if they identify some special customer need or want that is not being met.

Checkpoint>> Why is it important to have a customer profile and understand your competition when determining your target market? List and describe two advantages of market segmentation?

Market Research Market research- system for collecting, recording, and analyzing information about customers, competitors, goods, and services Based on the findings of market research, a business will be able to determine which strategies will be most effective and profitable. Market research can be very expensive and time consuming, but worth doing to assist in making decisions

Secondary Data Secondary data- found in already published sources Information about the following can be found in secondary data sources: Population Family size Household income Economic trends Industry forecasts

Places to find secondary data include: Publications issued by government and community organizations such as the US Census Bureau, Small Business Administration, Chamber of Commerce Books about specific industries

Information on Web sites for government and business Books about other entrepreneurs who set up similar businesses Specialized magazines and journals devoted to particular fields Newspaper articles and statistics

Checkpoint>> Why would you use secondary sources to locate information about potential customers?

Primary Data Primary data- information collected for the very first time to fit a specific purpose A researcher collects primary data to help identify and understand the target market

Questionnaire or Survey Questionnaire or survey- list of questions to ask customers to find out demographic and psychographic information Can be presented by mail, over the phone, or in person

Observation Examples: If you are considering opening a juice bar in a mall you might want to see how many customers you could attract. Do this by counting the number of people purchasing drinks at the mall. An entrepreneur interested in starting a motorcycle repair shop might count the number of motorcycles at a busy intersection.

Focus Groups Focus group- interview with groups of target customers who provide valuable ideas on products and services Allow for more in-depth discussion about a topic than questionnaire does Led by a moderator who asks questions about buying habits, likes and dislikes, and interest in products Session is recorded so comments can be reviewed later

Disadvantage of Primary Data Time consuming and expensive

Checkpoint>> What is the difference between primary and secondary market research data?

Assignment Thinking Critically #1-5