Assessing the Market when Writing the Business Plan A KEY TO SUCCESS February 15, 2012
Assessing the Market when Writing the Business Plan DEFINITIONS MARKETING: Determining what the customer wants and how to get it to him SALES: Selling what is in the warehouse.
Importance of Market Dynamics The single biggest reason for new product introduction failure is a lack of market understanding You need to do market research to understand the dynamics of the market and how you are going to win.
Importance of Market Dynamics Economics—where do you want to market your product? Size of the market within each region (quantity and revenue) Overall growth rate within each region Size and growth of product segments Size of functionally available market
Importance of Market Dynamics Functionally available market Defined as the size of the market that your new product can participant in Factors include price, performance, service required, segment Need to consider how much market share you can capture—replacement of current products versus capture of growth potential
Global Pigment Market by Region (billion $) % annual growth Region to 2009 Total Pigments United States Western Europe China Japan Asia/Pacific Rest of World
FunctionallyGrowth U. S. MarketsTotal, %Total, billion $ Available, million $Rate, %mil$/Year Printing Inks * Paints & Coatings Textiles Plastics Other * =78 x (new market available) FUNCTIONALLY AVAILABLE MARKET
Importance of Market Dynamics What changes market conditions? New technology Changes in government regulations Change in economy Change in industry Health considerations
Importance of Market Dynamics What benefits do your products and services provide? Market pull? Technology push? Price Availability Delivery, warranty, refund policy DO THEY SOLVE AN UNMET NEED? What is the value proposition? Are they differentiated?
A. Technology-Push B. Market-Pull C. Product/Markets (Hybrid of A & B) R&D defines the technical solution ManufacturingSales Market defines the needs R&D Fit?Manufacturing Marketing and R&D define the needs, fit, and solutions R&DManufacturing Sales Market need?
What are the barriers to entry? High capital costs? High production costs? Consumer acceptance and brand recognition? Unique technology and patents? Labor costs? Just-in-time delivery?
Who are your competitors? What companies and products compete with you? How will they compete— price/service/etc.? How important are indirect competitors? (video store versus movie theatre) What are strengths and weaknesses of your products and services?
Who are your customers? Demographics Geographic locations Income level Industry (for business customers) Size of firm (for business customers)
How will your customers know about your product? Promotion—advertising; image Promotional Budget? Pricing?
How will you sell your products and/or services? Distribution channels—direct sales, internet, distributor, sales representatives, catalog, mail order
How much will you sell? Sales forecasts—base case; upside; downside
Marketing Research Overview 1. Define the problem—market, customers, products, competitors 2. Determine the research design Primary data (info collected directly from respondents) Secondary data Guideline.com (industry and trend reports) Dialog.com (sorts firms by location, size, industry) Lexisnexis.com (information database) Business Source Complete (EBSCO)
Marketing Research Overview, continued Choose the method for collecting primary data Survey methods to interview respondents Questionnaires (loosely, moderately, or completely structured) Observational research methods—focus groups Online research
Marketing Problem #1 You have just come up with a brand new pill dispenser that has unique properties. What information do you need to assess the size of the market?
Marketing Problem #2 You have just come up with a brand new energy saving device for use with a refrigerated air conditioning unit. What information do you need to assess the size of the market?
Assessing the Market when Writing the Business Plan A KEY TO SUCCESS February 15, 2012