Understanding the market
description
Transcript of Understanding the market
UNDERSTANDING THE MARKET
CHAPTER 3
Learning Objectives Explain the difference between an
industry and a market. Discover effective ways to research and
analyze an industry. Determine first customer and the
characteristics of the market. Understand anthropological techniques
for understanding customers. Gather competitive intelligence.
Definitions Industry: a grouping of businesses that
interact in a common environment as part of the value chain or distribution channel
Market: a grouping of customers that an entrepreneur targets
First customer: represents that segment of the marketplace that needs the product or service most
An Overview of Industry Analysis
Data collected should answer the following key questions: What does the industry look like? Is the industry growing? Where are the opportunities? What is the status of any new technology? How much do industry companies spend on research
and development? Who are the opinion leaders in the industry? Are there young, successful firms in the industry? What does the future look like? Are there any threats to the industry? What are the typical margins in the industry?
Gathering Secondary Sources of Industry Information
Common broad industries are easier to research using online and library resources.
Tips for researching smaller industries: Check the business press Talk to trade associations Consult trade association journals Check organizations that list government
and agency resources Look at blogs, wikis, websites, and social
networking sites
Primary Industry Data Secondary industry data needs to be
validated by talking with people in the industry (primary data): Industry observers Suppliers and distributors Customers Employees of key firms in the industry Professionals from service organizations Trade shows
Understanding Industry Life Cycles
Industries and products move through a life cycle that includes: Birth Growth and adaptation Differentiation and competition Shakeout Maturity and decline
Industry Life CyclesFigure 5.1
Industry TrajectoriesFigure 5.2
Porter’s Five Forces Model Barriers to entry:
Economies of scale Brand loyalty Capital requirements Switching costs for the buyer Access to distribution channels Proprietary factors Government regulations
Porter’s Five Forces Model (cont’d)
Threats from substitute products: Products/services which accomplish the
same function in a different way or at a different price
Threats from buyers’ bargaining power: The more large buyers understand the
nature of the industry and the more products are standardized, the greater the likelihood that these buyers will have significant bargaining power.
Porter’s Five Forces Model (cont’d)
Threats from suppliers’ bargaining power: If the number of these suppliers is few
relative to the size of the industry or the industry is not the primary customer of the suppliers, the suppliers’ potential power to raise prices or change the product quality of goods/services supplied to manufactures and distributors is greater.
Competitive rivalry among existing firms: In general, a highly competitive industry will
drive down profits and ultimately the rate of return on investment.
PEST AnalysisFigure 5.4
Characterizing the Target Market
Key questions to answer: What are the potential markets for the
product or service? Of these potential markets, which customers
are most likely to purchase the product or service at market introduction?
How much do these customers typically buy, how do they buy , and how do they hear about the product or service?
How often do they buy? What is their buying pattern?
How can the new venture meet these customers’ needs?
Characterizing the Target Market (cont’d)
Goals in market research:1. Identify and profile the first customer 2. Estimate potential demand from that
customer 3. Identify subsequent customer segments
and needs to grow the company
Targeting the First Customer Steps in market research:
1. Assess your information needs2. Research secondary sources first3. Measure the target market with primary
research4. Forecast demand for the product or
service
Exploring the Market with Primary Data
Primary research techniques: Anthropological techniques Structured interviews Informal focus groups (group interviews) Survey techniques
Online In-person Phone
Customer Matrix Segment the market with a customer
matrix to determine primary or first customer.Customer Pain Benefit Distributio
nCompetition
Hospital Administration – customer who pays
Need to increase productivity and reduce risk in patient procedures
Save money and decrease potential for litigation
Medical equipment distributor
Siemens (Acuson), General Electric, SonoSite, Zonare, Pocketsonics, Signostics - Australia
Table 5.4 (in part)
Primary Customer Profile Profile information is critically
important to the eventual marketing strategy.
Profile information should include: Age Income level Education Buying habits – when, where, how much Where customer finds products/services How customer would like to purchase
Gathering Competitive Intelligence
Identify the competition Three types of competitors for a product
or service: Direct Indirect or substitute Emerging or potential
Gathering Competitive Intelligence (cont’d)
Find information about competitors Visit competitors’ websites or outlets
where product is sold Buy competitors’ products Use internet search engines to read what
customers are saying Find information on public companies to
serve as benchmarks for the industry Deal with competition