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Entrepreneurship
Quarter 1 – Module 3
Recognize and Understand
the Market

Department of Education ● Republic of the Philippines

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Recognizing and Understanding the Market

Entrepreneurs are innovative opportunity seekers. They have endless curiosity to discover new
or different ideas whether these ideas will work in the marketplace. They see things in a very
positive way. They have great desire to achieve his/her goals. Entrepreneurs also have courage
and firm beliefs in what they can do. They create value by introducing new products or services or
finding better ways of making them.

The creation of entrepreneurial ideas leads to the identification of entrepreneurial

opportunities, which in turn results in the opening of an entrepreneurial venture. These
opportunities are waiting to be discovered. What it takes is a creative and positive mind that sees
opportunities in every problem, every challenge, and every situation. Once the opportunity
knocks, seize it, find your niche in the entrepreneurial world, and start creating your MARKET.

What I Need to Know

This module will help you understand the importance of recognizing and understanding the
potential market to help you make a successful venture. It will guide you to identify market needs
and let you propose solution/s in terms of product/s and service/s that will match the need using
techniques on seeking, screening, and seizing opportunities.

This also, helps in understanding concepts, underlying principles, and processes of

developing a business plan.

After going through this module, you are expected to:

1. Define market, product, and service;
2. Recognize a potential market;
3. Select the best product/service that will meet the needs of the market;
4. Determine and analyze the market need;
5. Understand the concepts, underlying principles and processes of developing a business
plan.

What I Know

Before we begin with this module, answer the questions below, let’s see if you already have
some idea about Recognizing Potential Markets.

Read and analyze the statements below. Write TRUE if the statement is correct and FALSE if the
statement is incorrect.
1. Products and services can both be perishable.
2. Market refers to the group of consumers or organizations that has the resources to
purchase a product or avail service.
3. A service is the result of the application of skills and expertise towards an identified need.
4. Customer needs and preferences change over time.
5. A potential market refers to those in the target market who have purchased the product.
6. All products are countable, touchable and visible.
7. A service may be capable of being reused.
8. There is a free competition among buyers and sellers in the market.
9. A market refers to a place where sellers and buyers of a product are spread.
10. Consumers’ age, culture, and status affect their preferences

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Multiple Choice: Write the letter of your choice.

_____11. This refers to the group of consumers who share similar needs and wants and are capable
of buying products or services.
A. market B. buyers C. customers D. clients
_____12. ___ is a group of people a business has decided to aim its marketing efforts and
ultimately its merchandise.
A. consumers B. target market C. prospect buyer D. customers
_____13. It is the process of dividing a broad market, normally consisting of existing and potential
customers into subsets of consumers that exhibit some type of shared characteristics.
A. market distribution C. market analysis
B. market segmentation D. market division
_____14. If you divide your market according to age, gender, or education, the segmentation is_.
A. geographic segmentation C. behavioral segmentation
B. demographic segmentation D. psychographic segmentation
_____15. A “Target Group” means ____.
A. a group of sellers
B. a group of persons at whom sales should be focused
C. a group of products
D. a group of suppliers

What’s In

In the previous lesson, you learned about the different entrepreneurial activities and
concepts. You have also established the entrepreneurial opportunities that match your
knowledge, skills, values, and experiences as well as your goals and vision. If you decide to start
an entrepreneurial career, you need careful planning to minimize the risk. You have to remember,
when selling products or services, it is important to understand what, when, where, why, how, and
how often people buy.
In creating a product or service, entrepreneurs can meet customers’ needs. Entrepreneurs
explore opportunities brought about by consumer needs and wants, preferences or dislikes.
Because of the many choices that customers have to struggle with every day, a product or service
must be able to win the battle for the customer’s mind.
In analyzing the market need, the following questions should be asked:

1. What does the market need or want?

2. Who will get interested in buying the product or will avail the service and why?
3. What, how much, how, where will they be buying those goods or services?

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 What’s New

Activity
Analyze the given picture. Are the items listed below present in the picture? If yes, check the box
before the item or otherwise, leave it blank.

A local market in the Philippines, Streetfood& Seafood! #Foodtrip

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1. Product/Commodities
2. Buyers
3. Sellers
4. Competition
5. Price

What is It

In our previous lesson, you have learned that Entrepreneurship is focused on how to start and
manage a business by combining management, accounting, finance, and marketing principles.
As an entrepreneur, you need to perform marketing functions. Marketing is a process which
involves identification and development of the product, and determination of its price, selection of a
distribution channel to reach the customers’ place and development and implementation of
promotional strategy.

Concepts about Product and Service

A product is a tangible item, an object or system, made available for consumer use; it is anything
that can be offered to a market to satisfy the desire or need of a customer, while a service is an
intangible item which arises from the output of one or more individuals.
Services are special forms of products which consist of activities, benefit, or satisfactions
offered for sale and do not result in the ownership of anything. This includes banking, airline
travel, communication services, hotel services, etc.

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The Difference between Product and Service

Product Service
It is tangible. It is intangible
Quality standards can be attained. It is very difficult to attain quality standards.
It may be an asset sometimes, e.g., fridge, It involves expenditure without any tangible
television set, etc. return benefit.
Physical possession is possible. Physical possession is not possible.
It can be stored. It cannot be stored.
It can be transported. It cannot be transported.
The producer and the seller may be The producer of service is the seller too, e.g.,
different persons. medical and legal services.
Assembling is very important. Assembling has no relevance at all.
Skill of the service provider is the deciding
Skill of the seller alone cannot determine factor in most cases, e.g., legal, catering and
sale. medical services.
Production and distribution of service will
Production and distribution need not take have to be done simultaneously, e.g.,
place simultaneously. provision of electricity.
Packing plays a crucial role in the Packaging has no relevance in the marketing
marketing of any product. of service.
Labeling is an integral part of marketing.
It is required as per law. Labels have no relevance.
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These products and services are offered to satisfy the needs and wants of the market

What is Market?

Ordinarily, the term “market” refers to a particular place where goods are purchased and sold.
According to Prof. R. Chapman, the term market “refers not necessarily to a place but always to a
commodity and the buyers and sellers who are in direct competition with one another”.

Characteristics of Market
The essential features of a market are:
• An Area- a market refers to the whole region where sellers and buyers of a product are
spread.
• One Commodity– a market is not only related to a place but to a particular product.
• Buyers and Sellers– the presence of buyers and sellers is necessary for the sale and
purchase of a product in the market.
• Free Competition– There should be free competition among buyers and sellers in the
market.
• One Price– The price of a product is the same in the market because of free competition
among buyers and sellers.

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In marketing, the term “market” refers to the group of consumers or organizations that is
interested in the product, has the resources to purchase the product, and is permitted by law and
other regulations to acquire the product. A Market refers to a group of consumers who share
similar needs and wants and are capable of buying products.

Moreover, a market pertains to people with needs to satisfy, money to spend, and are willing to
buy a certain product or avail service.

Beginning with the total population, various terms are used to describe the market based on the
level of narrowing:

• Potential market - those in the total population who have interest in acquiring the
product/service.
• Available market - those in the potential market who have enough money to buy the
product/service.
• Qualified available market - those in the available market who legally are permitted to
buy the product/service.
• Target market - the segment of the qualified available market that the firm has decided to
serve (the served market).
• Penetrated market - those in the target market who have purchased the product or
availed service.

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Facts about market/customer needs:
• Customer needs and preferences change over time
• Refer to the tastes of particular groups of people
• The consumers’ age, culture, and status affect their preferences.
• In contrast, consumer dislikes refer to the things that irritate customers.
• Can be a product and/or service (some examples are the clothes people wear, the food
they eat, the music they listen to, and the movies they watch)

In order to know and understand your market, you would have to go through a process to be able
to make marketing activities worthwhile. This process that you need to go through includes the
following: segmentation, profiling, targeting and positioning. (SPTP)

What is market segmentation?

Market segmentation is a marketing strategy that involves dividing a broad target market
into subsets of consumers that have common needs and priorities, and then designing and
implementing strategies to target them.

A market segment is a small unit within a large market. Market segments are made up of
customers with similar buying behavior. They share common interests, needs, wants and
demands. One market segment is totally different from the other segment.

Characteristics of Good Market Segments

1. Homogeneous within
A homogeneous market is a group of people exhibiting similar characteristics.

2. Heterogeneous from the other segments

A heterogeneous market exhibits distinctions among segments in terms of characteristics
relevant to consumption patterns or behavior. (matures, boomers, gen- xers, millennials)

3. Substantial or profitable
A substantial market indicates sufficiency to justify the resources required to target them.

4. Measurable
The differentiating characteristics of the segments must be identifiable and accessible.
Quantifiable characteristics may include demographics, psychographics, usage behavior
among others.

Why is it important to segment the market?

Market segmentation makes planning campaigns easier, as it helps to focus the company
on certain customer groups instead of targeting the mass market. Segmentation helps
entrepreneurs/marketers to be more efficient in terms of time, money and other resources.
Market segmentation allows companies to learn about their customers. They gain a better
understanding of customer’s needs and wants and therefore can create campaigns to customer
segments most likely to purchase products.

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 Ways of Segmenting a Market

a. Geographic Segmentation – dividing the market based on geography. It is generally

observed that people needs vary depending on where they live.

b. Demographic Segmentation – People with different personal characteristics have

different needs and interest

c. Psychographic Segmentation – People in different psychographic segments spend

money differently.

d. Behavioral Segmentation – Behavioral characteristics influence shopping patterns. It

includes conative (usage) affective (like/dislike) and cognitive (involved/not involved)
dimensions.

Ways of Segmenting a Market

Geographic Demographic Psychographic Behavioral

Countries, nations,
states, regions, cities Age Social class User status

Rural, suburban, urban Gender Values Usage rate

Climate or total
population Family Size Personality Benefits sought
Education Lifestyle Loyalty
Income Attitude
Life cycle

What is profiling?

Profiling is describing the identified segments. This is the next step after segmenting. This
is needed so that the marketer can identify which one has the biggest market size and which ones’
needs can be satisfied by the business. After describing the identified segments, it is recommended
that you name your segments in order to select target markets and develop suitable marketing
mixes.
In profiling you have to consider at least two things: your target market and your target
audience profile. These two may be different depending on their buying roles. Target audience
will be the target market or those that will influence your target market to acquire or use the
product.

What is targeting?
After segmenting and profiling the market, you choose which among the segments you will
target. The selection of potential customers to whom a business wishes to sell products or
services. The targeting strategy involves segmenting the market, choosing which segments of the
market are appropriate, and determining the products that will be offered in each segment.

This is important because all marketing strategies are directed to them. Identifying target
market provides focus to the marketing plans.

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What is positioning?

After targeting, the next step is to decide how you will position your products in the minds of your
target market as compared to other players in the market. Market Positioning refers to the process
of influencing consumer perception regarding a brand or product relative to competitors.
Examples:
- A detergent powder may position itself as the challenger brand
- A television network may position itself as the leading TV station in the country
- A handbag maker may position itself as a luxury status symbol

As an entrepreneur, you must be creative, present the best features of your product or service that
are different from other competitors. Give emphasis on the qualities of your product that you
want your target market to perceive.

What’s More
Do the following activities on your answer sheet.

Activity 1
Classify the following factors of segmentation as geographic, demographic,
psychographic, or behavioral.
1. age 3. personality 5. benefits sought 7. values 9. user status

2. climate 4. education 6. urban 8. social class 10. income

Activity 2
Complete the table below.
Who will most likely to buy and use the following?
Product Buyer User
1. ballpen
2. diaper
3. energy drink
4. detergent powder
5. lipstick
Who will most likely to avail the following services?
Service Consumer
1. manicure and pedicure
2. car wash
3. pet grooming

Activity 3
Identify the market need in your area. Think of a product/service that is (1) not yet available or
made by the local producers/sellers, (2) could meet the market need, and (3) give customer
satisfaction.
________________ is the product/service that could meet the
market need in our locality and will give customer satisfaction
if made available.

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 What I Have Learned

Complete the paragraph below by writing the missing words/phrases.

A (1)________ refers to a group of consumers who share similar needs and wants and are capable of
buying products.
(2)____________ is a marketing strategy that involves dividing a broad target market into subsets of
consumers that have common needs and priorities, and then designing and implementing
strategies to target them. (3) A__________________ is a small unit within a large market.
The ways of segmenting the market are geographical, (4)____________________ (5)__________________ and
(6)_______________________ segmentation. (7) ______________ is describing the identified segments.
The process of choosing which segments of the market are appropriate, and determining the
products that will be offered in each segment is called (8) __________________. Market positioning is
deciding on to decide how you will position your products in the minds of your target market as
compared to other players in the market.
Market needs can be a product and/or service. A (9) ________________ is a tangible item made
available for consumer use while (10) ________________ is an intangible item which arises from the of
one or more individuals.

What I Can Do

Activity
Based on your answer on Activity 3, identify the target market who will choose to purchase or
avail this product/service.

A. Describe the target market/customer group by creating a demographic profile including their:
1. Age__________________________________
2. Gender _______________________________
3. Income _______________________________
4. Occupation ____________________________
5. Education level _________________________

B. Explain why you have chosen this target market/customer group and/or why will they
purchase the product or avail the service.
_________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________

Assessment
Write the letter of your choice on your answer sheet.
_____1. ___ is a group of people a business has decided to aim its marketing efforts and
ultimately its merchandise.
A. consumers B. target market C. prospect buyer D. customers
_____2. You divide your market according to social class, personality, values, and style
A. geographic segmentation C. behavioural segmentation
B. demographic segmentation D. psychographic segmentation
_____3. Describing the identified segments is called __.
A. targeting B. positioning C. segmentation D. profiling

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_____4. You place your product in the minds of your target market as the challenger of the
leading brand of coffee in the market.
A. targeting B. positioning C. segmentation D. profiling
_____5. ___ is the process of evaluating each segment’s attractiveness and selecting one or
more segments.
A. targeting B. positioning C. segmenting D. distribution
_____6. What does a market segment identify?
A. all the products in the market C. competitors
B. group of people with similar buying habits D. price of the products
_____7. Market segment which is composed of those who have purchased your product is called_.
A. market share B. penetrated market C. unpenetrated market D. share market

_____8. Why does business break the market?

A. so they can target potential customers C. so it is cheaper
B. so it is less work D. so they don’t have to advertise so much
_____9. Which of the following is a not market segment?
A. user status b. family size C. shoe size D. personality
_____10. 1 : A homogeneous market is a group of people exhibiting similar characteristics.
st

2nd: A heterogeneous market exhibits distinctions among segments in terms of

characteristics relevant to consumption patterns or behavior
A. Only first statement is correct. C. Only the second statement is correct.
B. Both are correct. D. Both are incorrect.
Write P if the statement pertains to a product and S if it pertains to a service
11. It cannot be stored and transported.
12. Labels and packaging play an integral part of marketing.
13. Physical possession is not possible.
14. Quality standards can be attained.
15. The skill of the provider is the deciding factor in most cases.

Additional Activities

Read carefully and do the following:

1. Familiarize yourself about business planning by reading the discussion at the last
page of your module on page 12.
2. Analyze the market and identify business opportunity according to our present
situation.
3. Recognize your potential market.
4. Start creating your business plan by filling out the given template.

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 BUSINESS PLAN

PLAN
A detailed proposal for doing or achieving something
An intention or decision about what one is going to do
A detailed map or diagram
To decide on and arrange in advance
To design or make a plan of something to be made or built

Business Planning - thinking ahead of objectives, strategies, financing, production, marketing, profit prospects, and
growth possibilities. It is based on available resources, and is responsive to the needs of the community.
Why do Entrepreneurs need to have a Business Plan?
Entrepreneurs who plan to enter any business endeavor must have a business plan on hand to guide them
throughout the process.
A business plan is written prior to setting up an enterprise
They have to convey the capabilities and competencies of their owners and managers.
WHY DO YOU NEED TO WRITE A BUSINESS PLAN?
Writing a business plan is an opportunity to carefully think through every step of starting your company so you can prepare for
success. This is your chance to discover any weaknesses in your business idea, identify opportunities you may not have
considered, and plan how you will deal with challenges that are likely to arise.

Business Plan - A written document detailing a proposed venture, covering current status, expected needs and projected
results for the enterprise. It contains a thorough analysis of the product or service being offered, the market and
competition, the marketing strategy, the operating plan, and the management as well as profit, balance sheet and cash
flow projections.
A business plan serves many masters:
1. It serves the entrepreneur who must set a navigational course.
Such data give the entrepreneur the ability to make the right goals and effective strategies.
2. It serves investors and cautious financiers.
It can help convince investors or lenders to finance your business.
3. It serves the managers and staff of the organization so that they will know the strategies and programs of the enterprise.
It can persuade partners or key employees to join your company.

The Importance of Business Planning

It serves as a ROADMAP guiding the launch and growth of your new business.
It can eliminate business risks - It carefully studies the competence, interest and resources of the entrepreneur against the
needs of consumers, together with the presence of competitors. Through marketing research or feasibility study, the
entrepreneur can determine whether it is profitable to set up a certain kind of business or not.
It can minimize costs of production- The resources of production such as money, materials, machines and manpower are
properly used and scheduled according to plan. The entrepreneur monitors and controls every aspect of the business
operations to prevent unnecessary wastes.
It can detect the weaknesses of the business operations - In planning, goals and objectives are formulated. Alternative
strategies are designed on how to attain the objectives and goals. If the goals and objectives have not been accomplished
according to time frame, there is something wrong with the operation. The entrepreneur can then evaluate his planning.

Principles of Planning
PLANNING MUST BE REALISTIC - It must be based on available resources – human, financial and physical resources.
PLANNING MUST BE BASED ON FELT NEEDS - The objectives of the entrepreneur should fit the needs of the people in a
community. Such needs can be known through observations, personal interviews and questionnaires.
PLANNING MUST BE FLEXIBLE - Resources, needs and economic conditions change. Planning should be adjusted to such
changes to be effective and relevant.
PLANNING MUST START WITH SIMPLE PROJECTS - In the Philippines, many people have no business experiences. The
most appropriate project for them is the micro business.

A GOOD business plan is clear and concise.

A person outside of your industry should be able to understand it.
Avoid overusing industry jargon or terminology.
Be honest.
Investors, lenders and others reading your plan will want to see realistic projections and expect your assumptions to be
supported with facts.
Successful planning is highly dependent on adequate and accurate information.
This is much needed in knowing the needs of consumers, and the strengths and weaknesses of competitors.
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