Chapter 2: Market Insight Disclaimer: All logos, photos, etc. used in this presentation are the...

Chapter 2:

Market Insight

Disclaimer:• All logos, photos, etc. used in this presentation are the property of their respective copyright owners and are used here for educational purposes only

© Stephan Sorger 2015. www.StephanSorger.com; Marketing Analytics: Market Insight Ch. 2.1

http://www.stephansorger.com/

Outline/ Learning Objectives

Topic Description

Terminology Know the difference between markets and products

Data Sources Assemble your go-to list of data sources

Sizing Practice sizing with reports, top-down, and bottom-up

Trends Find trends using PESTLE & Porter 5 Forces techniques



Topic Description

Market Description Describe market based on need that product fulfillsAvoid overly narrow (product-based) descriptionsExample: Wang word processors in 1980s

Market Groups of customers buying products from sellers

Potential Market All people in population with interest in product/service

Available Market People with interest, plus means (money)

Qualified Available Mkt. Legally allowed to putchase product/service

Served Market Segments targeted by company

Market Description

Served Market

Potential MarketAvailable Market

Qualified Available Market



Topic Description

Industry Groups of sellers making “similar” products/ servicesExample: White Goods (appliances) industryCompanies: GE, Westinghouse, Samsung, etc.

Category Subset of industryGroup of competing firms selling to market segmentExample: High-end kitchen appliance manufacturersCompanies: Wolf, Sub Zero, etc.

Industry Description

IndustryExample: White Goods (Appliances)

CategoryExample: High-end Appliances



Market Data Sources

Secondary Research

Government DataAnalyst Reports

Business and Trade Publications

Other Sources

Commissioned ReportsB2C: Retail Salespeople

B2B: Company Salespeople

Surveys

Primary Research



Government Data

Government Data

U.S. Census Bureau: Census every 10 years, plus New American Community estimatesU.S. Bureau of Labor and Statistics: Data on employment, productivity, inflation, etc.

U.S. Bureau of Economic Analysis: Data on national GDP, regional GDP, personal income,..

Local Chambers of Commerce: Data on local area



Topic Description

Purpose Assign unique ID number to every industrySimilar to the role of ZIP codes or Dewey Decimal

SIC Standard Industrial Classification (1987)

NAICS North American Industrial Classification System (1997)20 Industry Groups, defined using 2 digits eachMore digits More specific industry segment (6 max)

U.S. Census SIC and NAICS Codes: Purpose

51 - Information 513 – Broadcasting & Telecommunications 5133 – Telecommunications 51334 – Satellite Telecommunications 513340 – Satellite Telecommunications

www.census.gov/naics



U.S. Census NAICS Codes: Industry Groups



U.S. Census NAICS Codes: Industry Example



U.S. Census SIC and NAICS Codes

Sample Industry SnapshotNAICS 52421, Insurance Agencies and Brokerages



Data Source Description

Analyst Reports Available published market reports by industry analystsAnalysts cover popular markets and publish reportsOften cover market size, growth rate, and trendsExpensive: $1,000+ per report; $10,000+ subscriptionB2C: Arbitron, Dun & Bradstreet, NielsenB2B: Forrester, Gartner, IDC

Commissioned Specialty firms can conduct custom market researchGet exactly the data you needSlow; Can take weeks to get the dataVery expensive: $15,000+ per report

Market Sizing: Data Sources: Reports

Just some of manyB2C analyst firms



Data Source Description

Internet Searches Search available literature on internetPress releases from analyst firms with “teaser data”

Business Press Larger markets will have coverage in major mediaExamples: Fortune, Wired, New York Times

Trade Associations Almost every industry has a trade associationLow-cost membership; High-quality articles

Blogs, Social Media Information available from social media streamConsider reputation of blogger

Market Sizing: Data Sources: Articles

Substantial datais available for free;It pays to search



Market Sizing: Stakeholders

Channel Partners

Financial Services

Marketing Departments

Operations Departments

Stakeholdersfor

Market Sizing

- Investigate new markets- Calculate market share

- Products manufacturing: how many units to make- Service delivery: how many people to hire

- Number of units to move through channel

-VC: Large and growing market-- $500M - $1B



Market Sizing: Applications

Market SizingApplications

Market Trends

Sales Forecasts

Salesforce Sizing

Distribution Channels

Market Segments

Market Share

Adoption Rate

Life Cycle

Market Investment

-Continue investing in market?- Explore new niche?

- Number & size of segments

- Need total size to calculate share

- Keeping up with industry average?

- Growth or decline?

- Take advantage of trends

- Forecast as % of total market

- Number of salespersons to hire

- Type of channel(s) to employ



Market Sizing Approach: Top Down

* Factor 1 =

General Market

Objective Market

Intermediate Market 1

* Factor 2 = Intermediate Market 2

* Factor 3 =




Example General Market/ Population Values




Example: Market Size for Eco-Friendly Dental Floss



Top Down: Area Market Demand

General Geographic AreaExample: USA

Geographic Area of InterestExample: State of Ohio



Top Down: Area Market Demand

Multiple-Factor Index ExampleEco-friendly floss market for state of Ohio



Bottom Up

Add up sales from each potential market segment

Sub-Segment 1 Sub-Segment 2 Sub-Segment 3

Market

Example: Total demand for TBM (tunnel boring machines)

Municipalities Major Construction CompaniesBechtel, etc.

International sales



Bottom Up: Niche Market Process



Topic Description

Market for PET/CT Scanning Machines Niche Market

Limited demand; Expensive $3M each

Identify Relevant Organizations Large hospitals: over 500 beds

Determine Quantity of Organizations 5% of hospitals over 500 beds5,795 hospitals in USA= 290 hospitals

Multiply Quantity by Price Price = $3 million each290 hospitals * 3 million = $870M

Identify Other Markets Looks for other markets: Urgent CareRepeat process for those markets

Market Sizing: Bottom Up: Niche Markets



Topic Description

Buildup Example You are the marketing manager for a small ad agencySpecialty: Professional services in state of ArizonaYou want to estimate your potential market size

1. Identify Buyers You often do business with the following industries: Accounting, Engineering, and Legal services

2. Identify Buy Rate Research industry average for ads as % of revenue:Industry NAICS Revenue %Accounting 541211 $400M 2%Engineering 541330 $1,100M 1%Legal 541110 $1,400M 3%

3. Sum ($400M)(2%)+($1100M)(1%)+($1400M)(3%) = $61M

Market Sizing: Bottom Up: Market Buildup Example


Market Sizing: Bottom Up: Limited Distribution

Channel 1

Aggregate Market

Channel 2 Channel 3 Channel 4 Channel 5 Channel 6

Individual Customers

Example: Only 39 Ferrari dealerships in entire United States of America


PESTLE Trend Analysis

Economic Forces

Social Forces

Technological Forces

Legal Forces

Environmental Forces

Political Forces

PESTLETrend Analysis

Present Future

Fast Forwardinto Future


Force Description and Laptop PC Example

Political Forces due to politics, such as federal regulationsExample: Indian customs duties cut: 16% to 8%

Economic Forces due to macroeconomic conditions, e.g., inflationExample: Low IT purchases in 2009 due to recession

Social Forces due to social customs, such as fadsExample: Trend to chic ultra-portables

Technological Forces due to technology changes, e.g. tablet PCsExample: Trend to smartphones and iPads

Legal Forces due to new legislation, e.g., new statutesExample: Patent battles

Environmental Forces due to environmental concernsExample: RoHS Directive for easier recycling

PESTLE Trend Analysis


Porter Five Force Framework

Threat of New Entrants

Intensity of Rivalry

Pressure from Substitute Products

Bargaining Power of Buyers

Bargaining Power of Suppliers

PorterFive Forces Framework

Present Future



Force Description and Examples

Threat of New Entrants New organizations/ competitors joining industryCompetitors attracted to profitable markets

Intensity of Rivalry Factors that intensify competitionNearly equal competitors; High exit costs

Pressure from Substitutes Products/ Services that can replace offeringSimilar (and dissimilar) products; Services

Bargaining Power of Buyers Conditions where buyers “call the shots” Buyers have full information, thanks to Internet

Bargaining Power of Suppliers Conditions where sellers hold the powerHigh switching costs, such as software

Porter Five Forces Framework


Porter Five Force Framework: Groupon in 2012Threat of New Entrants

Intensity of Rivalry

Pressure from Substitute Products

Bargaining Power of Buyers

Bargaining Power of Suppliers

PorterFive Forces Framework

Present Future


Not good: Few barriers to entry

Not good: LivingSocial, Amazon, Google, etc.

Not good: Many substitutes: FatWallet, etc.

Not good: Undifferentiated services

Not good: Not essential to buyers


Check for Understanding

Topic Description

Terminology Know the difference between markets and products

Data Sources Assemble your go-to list of data sources

Sizing Practice sizing with reports, top-down, and bottom-up

Trends Find trends using PESTLE & Porter 5 Forces techniques


Chapter 2: Market Insight Disclaimer: All logos, photos, etc. used in this presentation are the...

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