6.

1
Doing Market
SECTIO
N
Research

Defining Areas of Analysis

The entrepreneur will want

to understand the nature of industry
industry
the industry he or she is aacollection
collectionofofbusinesses
businesseswith
withaa
analyzing. common
commonlinelineofofproducts
productsoror
services
services

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

 6.1
Doing Market
SECTIO
N
Research
Industry four factors effect the nature of the industry
carrying
carryingcapacity
capacity industry
industrylife
lifecycle
cycle
the
theability
abilityofofindustry
industrytotosupport
support
new the
thecurrent
currentstage
stageofofan
anindustry
newgrowth
growth industry

1 Birth
uncertainty
uncertainty
the
thedegree
degreeofofstability
stabilityororinstability
ininaagiven industry
instability 2 Growth
given industry

3 Maturity
complexity
complexity
the
thenumber
numberand anddiversity
diversityofof
contacts 4 Decline
contactswith withwhich
whichaabusiness
business
must
must
Chapter
deal
dealAnalysis
6 Market

Glencoe Entrepreneurship: Building a Business

 6.1
Doing Market
SECTIO
N
Research

Target Market and Customer

market
market
aagroup
groupofofpeople
peopleororcompanies
companies
After first identifying your who
who have a demand foraaproduct
have a demand for product
market, you will then need ororservice
service and are willing andable
and are willing and able
to select a target market to totobuy it
buy it
be the focus of your
companys efforts.
target
targetmarket
market
aaspecific
specificgroup
groupofofcustomers
customers
whom
whomaabusiness
businesswishes
wishestotoreach
reach

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

 6.1
Doing Market
SECTIO
N
Research

Target Market and Customer

market
marketsegmentation
segmentation
the
theprocess
processofofgrouping
groupingaamarket
market
into
intosmaller
smallersubgroups
subgroupsdefined
definedby
by
Consumer market specific characteristics
specific characteristics
segmentation is based on
geographics, demographics,
psychographics, and buying
characteristics. market
marketsegments
segments
A business can select and subgroups
subgroupsofofbuyers
buyerswith
withsimilar
similar
serve multiple market characteristics,
characteristics, segmentedby
segmented by
segments. geographics, demographics,
geographics, demographics,
psychographics,
psychographics,andand
buying
buyingcharacteristics
characteristics
Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

Target Market and Customer
Market Segmentation

geographics
geographics

buying
buying
demographics
demographics characteristics
characteristics

psychographics
psychographics

5
 6.1
Doing Market
SECTIO
N
Research
Target Market and Customer

geographics psychographics
psychographics
geographics
the the
thestudy
studyofofconsumers
consumersbased
basedon
thestudy
studyofofthe
themarket
marketbased
basedonon social and psychological
on
where customers live, including
where customers live, including social and psychological
region, characteristics,
characteristics,including
region,state,
state,country,
country,city,
city,and/or
and/or personalities,
including
area
area personalities, values,opinions,
values, opinions,
beliefs,
beliefs,motivations,
motivations,attitudes,
attitudes,
and lifestyle elements
and lifestyle elements
industrial
industrialmarkets
markets
customers
customerswhowhobuy
buygoods
goodsoror
services
servicesfor
forbusiness
businessuse
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

7
Select the Type of Market Research
There are three types of market research

exploratory research
market
marketresearch
research
the
thecollection
collectionand
andanalysis
analysisofof
information
informationaimed
aimedatat
understanding
understandingthethebehavior
behaviorofof descriptive research
consumers
consumersininaacertain
certainmarket
market

historical research

8
 6.1
Doing Market
SECTIO
N
Research
Select the Type of Market Research
exploratory
exploratoryresearch focus
research focusgroup
group
the
theinitial
initialcollection
collectionand
andanalysis aagroup
ofofinformation
analysis groupofofpeople
peoplewhose
whoseopinions
opinions
information used whenvery
used when very are studied to determine the
are studied to determine the
little
little is known about a subject;itit
is known about a subject; opinions
forms opinionsthat
thatcan
canbe
beexpected
expected
formsaafoundation
foundationforforlater
later from a larger population
from a larger population
research
research

descriptive
descriptiveresearch historical
research historicalresearch
research
the
thecollection
collectionofofinformation
informationtoto the
thestudy
studyofofthe
thepast
pasttotoexplain
explain
determine
determinethethestatus
statusofof present
presentcircumstances
circumstancesand andpredict
predict
something,
something,such
suchas asinindeveloping
developing future trends
future trends
aacustomer profile
customer profile
Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

Start the Research Process
The Five Steps of an Effective Research Plan

5 Analyze the data.

4 Organize the data.

3 Collect primary data.

2 Obtain secondary resources.

1 Identify your information needs.

10
 6.1
Doing Market
SECTIO
N
Research

Start the Research Process

Research secondary data secondary

secondarydata
data
before researching primary information
sources because it is easily informationthat
thathas
hasalready
alreadybeen
been
collected
collectedby
bysomeone
someoneelse
else
obtained and inexpensive.

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

 6.1
Doing Market
SECTIO
N
Research

Start the Research Process

The most common methods primary

primarydata data
of gathering primary data information
about customers are: informationthat thatisiscollected
collectedfor
forthe
the
first
firsttime,
time,isiscurrent,
current,andandrelates
relates
observation directly to the collectors study
directly to the collectors study
interviews
surveys

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

Time for
a break
Researching the Industry

Look at trends and patterns of change.

Understand industry forces that affect your business.

Study industry demographics.

Analyze the competition.

14
Industry Forces That Affect Your Business

barriers to entry

threats from substitute products

sources of supply

buyers ability to bargain

technology

15
SECTI 6.2
Industry and
ON Market Analysis
Industry Forces That Affect Your Business

In established businesses, barriers

barrierstotoentry
entry
the dominant businesses conditions
have advantages that are conditionsororcircumstances
circumstancesthat that
make it difficult or costly for
make it difficult or costly for
barriers to entry to outside
outsidefirms
firmstotoenter
enteraamarket
markettoto
smaller, new ventures. compete
competewith withestablished
establishedfirm
firmoror
firms
firms

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTI 6.2
Industry and
ON Market Analysis
Industry Forces That Affect Your Business

Established businesses economies

economiesofofscalescale
have achieved economies
situations
situationswhere
wherethethecost
costofof
of scale in production, producing
marketing, and distribution. producingoneoneunit
unitofofaagood
goodoror
service
servicedecreases
decreasesas asthe
thevolume
volume
ofofproduction increases;
production increases; thethe
decrease
decreaseofofproduction
productioncostscosts
relative
relative to the price of goodsand
to the price of goods and
services
services

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTI 6.2
Industry and
ON Market Analysis
Industry Forces That Affect Your Business

Customers with brand brand

brandloyalty
loyalty
loyalty do not easily switch the
to a new company that thetendency
tendencytotobuy
buyaaparticular
particular
brand
brandofofaaproduct
product
enters the industry.

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTI 6.2
Industry and
ON Market Analysis
Issues in Entrepreneurship

In the past, businesses mass

massmarketing
marketing
used mass marketing to the
sell products with universal theattempt
attempttotoreach
reachall
allcustomers
customers
with
withaasingle
singlemarketing
marketingplan
plan
appeal and few features to
differentiate them from
competitors products.

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTI 6.2
Industry and
ON Market Analysis
The Competition

Usually, competing market

marketshare
share
products are already aaportion
established in the market. portionofofthe
thetotal
totalsales
sales
generated
generatedby byall
allcompeting
competing
To succeed, you must be companies
companies in a givenmarket
in a given market
able to capture market
share by differentiating
your business.

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTI 6.2
Industry and
ON Market Analysis
The Competition

Many entrepreneurial niche

niche
companies succeed by aasmall,
studying the competition to small,specialized
specializedsegment
segmentofof
the
themarket
marketbased
basedon oncustomer
customer
define a niche in the needs discovered in market
needs discovered in market
market. research
research

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTI 6.2
Industry and
ON Market Analysis
The Competition

An entrepreneur who market

marketpositioning
positioning
wishes to capture market the
share can use market theact
actofofidentifying
identifyingaaspecific
specific
market
marketniche
nichefor
foraaproduct
product
positioning.

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTI 6.2
Industry and
ON Market Analysis
The Competition

You can create a competitive

competitiveadvantage
advantage
competitive grid to help aafeature
define your competitive featurethat
thatmakes
makesaaproduct
product
more
moredesirable
desirablethan
thanits
its
advantage. competitors
competitors

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

Researching the Target Customer

Create a customer profile.

Evaluate customers needs.

Conduct research to forecast demand.

Forecast

24
SECTI 6.2
Industry and
ON Market Analysis
Creating a Customer Profile

Creating a customer customer

customerprofile
profile
profile is the first step in aacomplete
targeting your marketing completepicture
pictureofofaaventures
ventures
prospective customers, including
prospective customers, including
efforts. geographic,
geographic,demographic,
demographic,and and
psychographic data
psychographic data

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTI 6.2
Industry and
ON Market Analysis
Evaluating Customers Needs

In order to provide what the customer

customerneeds
needsanalysis
analysis
customer wants, you should aastudy
prepare a customer needs studythat
thatpinpoints
pinpointsthe
thefeatures
features
and
andbenefits
benefitsofofgoods
goodsororservices
services
analysis. that customers value
that customers value

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTI 6.2
Industry and
ON 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