6 Market Analysis Section 6 1 Doing Market

6 Market Analysis Section 6. 1 Doing Market Research Section 6. 2 Industry and Market Analysis Glencoe Entrepreneurship: Building a Business

SECTION 6. 1 Doing Market Research Section Objectives • • Define areas of analysis for industry and market research. Describe how to conduct effective market research. Chapter 6 Market Analysis Glencoe Entrepreneurship: Building a Business

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 Content Vocabulary industry value chains carrying capacity complexity market target market segmentation market segments geographics Chapter 6 Market Analysis Glencoe Entrepreneurship: Building a Business psychographics industrial markets market research exploratory research focus group descriptive research historical research secondary data primary data

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. 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 Defining Areas of Analysis 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 Industry 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 Industry You will want to find an industry that has carrying capacity so that your new business can expand prosper. Chapter 6 Market Analysis Glencoe Entrepreneurship: Building a Business carrying capacity the ability of industry to support new growth

SECTION 6. 1 Doing Market Research Industry 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 Complexity 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. 1 Birth 2 Growth 3 Maturity 4 Decline 11

SECTION 6. 1 Doing Market Research 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. Chapter 6 Market Analysis Glencoe Entrepreneurship: Building a Business market target a specific group of customers a group of people or companies who have a demand for a product whom a business wishes to reach or service and are willing and able to buy it

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 segments segmentation subgroups of buyers with similar the process of grouping a market into smaller subgroups defined by characteristics, segmented by specific characteristics geographics, demographics, psychographics, and buying characteristics

Target Market and Customer Market Segmentation geographics demographics buying characteristics psychographics 14

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

SECTION 6. 1 Doing Market Research Target Market and Customer Businesses that cater to industrial markets must consider customers’ individual situations. Chapter 6 Market Analysis Glencoe Entrepreneurship: Building a Business industrial markets customers who buy goods or services for business use

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 18

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 20

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. Chapter 6 Market Analysis Glencoe Entrepreneurship: Building a Business 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 Select the Type of Market Research Another way to gather information is to form a focus group. Chapter 6 Market Analysis Glencoe Entrepreneurship: Building a Business 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 Select the Type of Market Research Descriptive research can be gathered through questionnaires, interviews, or observation. Chapter 6 Market Analysis Glencoe Entrepreneurship: Building a Business 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 Select the Type of Market Research You can use historical research to forecast your business’s future potential. Chapter 6 Market Analysis Glencoe Entrepreneurship: Building a Business historical research the study of the past to explain present circumstances and predict future trends

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. 25

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

SECTION 6. 1 Doing Market Research After You Read 1. Define areas of analysis for industry and market research. Areas of analysis for industry research include carrying capacity, uncertainty, complexity, and stage of life cycle. Areas of analysis for market research include identifying the target market through market segmentation and conducting target marketing. Chapter 6 Market Analysis Glencoe Entrepreneurship: Building a Business

SECTION 6. 1 Doing Market Research After You Read 2. Discuss how to conduct effective market research. First, identify the focus of the research. Next, select the type of market research—exploratory, descriptive, or historical. Finally, start the research process by identifying your information needs, obtaining secondary resources, collecting primary data, organizing the data, and analyzing the data. Chapter 6 Market Analysis Glencoe Entrepreneurship: Building a Business

SECTION 6. 1 Doing Market Research Quiz 1. What are two examples of buying characteristics ? 2. What are four guidelines to use when segmenting the target market? 3. Explain the term carrying capacity and why it is important in market research? Chapter 6 Market Analysis Glencoe Entrepreneurship: Building a Business

SECTION 6. 2 Industry and Market Analysis Section Objectives • • Explain how to research an industry. Identify a customer profile and customer needs analysis. Chapter 6 Market Analysis Glencoe Entrepreneurship: Building a Business

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

SECTION 6. 2 Industry and Market Analysis Content Vocabulary barriers to entry economies of scale brand loyalty mass marketing market share Chapter 6 Market Analysis Glencoe Entrepreneurship: Building a Business niche market positioning competitive advantage customer profile customer needs analysis

Researching the Industry Look at trends and patterns of change. Understand industry forces that affect your business. Study industry demographics. Analyze the competition. 34

Industry Forces That Affect Your Business barriers to entry threats from substitute products sources of supply buyers’ ability to bargain technology 35

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 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 Conduct research to forecast demand. 44

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

SECTION 6. 2 Industry and Market Analysis After You Read 1. Explain how to research an industry. To research an industry, look at trends and patterns of change, industry forces that affect your business, industry demographics, and the competition. Chapter 6 Market Analysis Glencoe Entrepreneurship: Building a Business

SECTION 6. 2 Industry and Market Analysis After You Read 2. Describe a customer profile and customer needs analysis. A customer profile is a complete picture of a venture’s prospective customers. It includes geographic, demographic, and psychographic data. A customer needs analysis pinpoints the features and benefits of your goods or services that customers value so you can provide them with what they want. Chapter 6 Market Analysis Glencoe Entrepreneurship: Building a Business

6 Market Analysis End of Chapter 6 Section 6. 1 Market Doing Market Research Analysis Section 6. 2 Industry and Market Analysis Glencoe Entrepreneurship: Building a Business