Market Analysis 1 To ensure success, the entrepreneur needs to understand the industry and the market. He or she should define areas of analysis and conduct effective industry and market research. Section 6.1 Doing Market Research 6.1

Market Analysis 2 Defining Areas of Analysis In order to satisfy current customers or attract new ones, an entrepreneur must conduct market analysis. The entrepreneur will want to understand the nature of the industry he or she is analyzing. industry a collection of businesses with a common line of products or services Section 6.1 Doing Market Research Key Term

Market Analysis 3 Defining Areas of Analysis Thorough market analysis requires : Section 6.1 Doing Market Research Identifying prospective customers and determining their buying habits Analyzing your industry and assessing your chances for success within it

Market Analysis 4 Industry 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 Section 6.1 Doing Market Research There are factors that are useful in understanding the nature of an industry Key Term

Market Analysis 5 Uncertainty Uncertainty is the degree of stability or instability in an industry. Many high-tech ventures are in industries with uncertain climates. Section 6.1 Doing Market Research

Market Analysis 6 Complexity Some businesses must learn to deal with complexity in many industries. complexity the number and diversity of contacts with which a business must deal. Section 6.1 Doing Market Research Firms that operate in complex industries have more suppliers, customers, and competitors than firms in other industries. Key Term

Stage of Life Cycle Section 6.1 Doing Market Research 7 There are four stages to the life cycle of an industry Birth Growth Maturity Decline

Market Analysis 8 Target Market and Customer After first identifying your market, you will then need to select a target market to be the focus of your company’s efforts. market a group of people or companies who have a demand for a product or service and are willing and able to buy it Section 6.1 Doing Market Research target market a specific group of customers whom a business wishes to reach Key Term

Market Analysis 9 Target Market and Customer Consumer market segmentation is based on geographics, demographics, psychographics, and buying characteristics. market segmentation the process of grouping a market into smaller subgroups defined by specific characteristics Section 6.1 Doing Market Research market segments subgroups of buyers with similar characteristics, segmented by geographics, demographics, psychographics, and buying characteristics A business can select and serve multiple market segments. Key Terms

Target Market and Customer Section 6.1 Doing Market Research 10 Market Segmentation demographics geographics psychographics buying characteristics

Market Analysis 11 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 Section 6.1 Doing Market Research Key Term

Market Analysis 12 Target Market and Customer Demographics are personal characteristics of a population. This includes age, gender, family size, family life cycle, income, occupation, education, religion, race, nationality, and/or social class. Demographics are the personal characteristics of a population. Section 6.1 Doing Market Research Key Term

Market Analysis 13 Target Market and Customer An entrepreneur can study psychographics to learn about target customers’ feeling. psychographics the study of consumers based on social and psychological characteristics, including personality, values, opinions, beliefs, motivations, attitudes, and lifestyle elements Section 6.1 Doing Market Research Key Term

Target Market and Customer Section 6.1 Doing Market Research 14 The target market for your product or service should be: Measurable Large enough to be profitable Reachable Responsive

Market Analysis 15 Conducting Market Research Once you know the areas of the market you need to analyze, you are ready to begin market research. market research the collection and analysis of information aimed at understanding the behavior of consumers in a certain market Section 6.1 Doing Market Research The marketing research process can be used to identify potential markets, analyze demand, and forecast sales. Key Term

Types of Market Research Section 6.1 Doing Market Research 16 There are three types of market research exploratory research descriptive research historical research

Market Analysis 17 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 Section 6.1 Doing Market Research Key Term

Market Analysis 18 Select the Type of Market 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 Section 6.1 Doing Market Research Key Term

Market Analysis 19 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 Section 6.1 Doing Market Research Key Term

Market Analysis 20 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 Section 6.1 Doing Market Research Key Term

Identify your information needs Start the Research Process Section 6.1 Doing Market Research 21 The Five Steps of an Effective Research Plan Obtain secondary resources Collect primary data Organize the data Analyze the data

Market Analysis 22 Start the Research Process The most common methods of gathering primary data about customers are: primary data information that is collected for the first time, is current, and relates directly to the collector’s study Section 6.1 Doing Market Research observation interviews surveys Key Term

Market Analysis 23 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 Section 6.1 Doing Market Research Key Term

Market Analysis 24 Section Review Section 6.1 Doing Market Research 1.Why is it important to study your industry before developing a business concept? 2.What is the role of market research? 3.Explain one of the types of market research. 4.What are the steps of the market research process?

Market Analysis 25 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 increase his or her chances for success. Section 6.2 Industry and Market Analysis 6.2

Look Researching the Industry Section 6.2 Industry and Market Analysis 26 Understand Study Analyze Look at trends and patterns of change. Understand industry forces that affect your business. Study industry demographics. Analyze the competition.

Industry Forces That Affect Your Business Section 6.2 Industry and Market Analysis 27 barriers to entry threats from substitute products sources of supply buyers’ ability to bargain technology

Market Analysis 28 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 Section 6.2 Industry and Market Analysis Key Term

Market Analysis 29 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 Section 6.2 Industry and Market Analysis Key Term

Market Analysis 30 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. mass marketing the attempt to reach all customers with a single marketing plan Section 6.2 Industry and Market Analysis Key Term

Market Analysis 31 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 Section 6.2 Industry and Market Analysis Key Term

Market Analysis 32 The Competition Many entrepreneurial companies succeed by studying the competition to define a niche in the market. niche a small, specialized segment of the market based on customer needs discovered in market research Section 6.2 Industry and Market Analysis Key Term

Market Analysis 33 The Competition An entrepreneur who wishes to capture market share can use market positioning. market positioning the act of identifying a specific market niche for a product You can create a competitive grid to help define your competitive advantage. Key Terms competitive advantage a feature that makes a product more desirable than its competitors

Market Analysis 34 Creating A Customer Profile Creating a customer profile helps you to develop a marketing concept – how you will reach the customer. customer profile a complete picture of the venture’s prospective customers. It includes geographic, demographic, and psychographic data, such as age, income level, education, buying habits (when,where, and how much) places customers typically shop, and method of purchase. Section 6.1 Doing Market Research Key Term

Market Analysis 35 Creating A Customer Profile When you are creating a customer profile, ask yourself four questions: 1.Who are my customers? 2.What do they generally buy, and how did they hear about the products/services they buy? 3.How often do they buy? 4.How can my business meet their needs? Section 6.1 Doing Market Research

Market Analysis 36 Let’s try it! demographics geographics psychographics buying characteristics Example – Product: New Anti-Aging Skin Care Products Baby Boomers (Born in ) Demographics People with wrinkles Buying Characteristics People who enjoy the outdoors Psychographics

Create Evaluate Forecast Researching the Target Customer Section 6.2 Industry and Market Analysis 37 Create a customer profile. Evaluate customers’ needs. Conduct research to forecast demand.

Market Analysis 38 Section Review 1.Describe the importance of defining a target market and a market niche. 2. What is the role of competition in marketing? 3. What are four questions you should ask about your target customer?