SECTIO

6.1

Doing Market
Research

Defining Areas of 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
industry
aacollection
collectionofofbusinesses
businesseswith
withaa
common
commonline
lineofofproducts
productsoror
services
services

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6.1

Doing Market
Research

Industry four factors effect the nature of the industry

carrying
carryingcapacity
capacity
the
theability
abilityofofindustry
industrytotosupport
support
new
newgrowth
growth

uncertainty
uncertainty
the
thedegree
degreeofofstability
stabilityororinstability
instability
ininaagiven
industry
given industry

complexity
complexity
the
thenumber
numberand
anddiversity
diversityofof
contacts
contactswith
withwhich
whichaabusiness
business
must
deal
Chapter
6 Market
must
dealAnalysis
Glencoe Entrepreneurship: Building a Business

industry
industrylife
lifecycle
cycle
the
thecurrent
currentstage
stageofofan
anindustry
industry

Birth

Growth

Maturity

Decline

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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
companys efforts.

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

market
market
aagroup
groupofofpeople
peopleororcompanies
companies
who
have
a
demand
for
who have a demand foraaproduct
product
ororservice
and
are
willing
and
service and are willing andable
able
totobuy
it
buy it
target
targetmarket
market
aaspecific
specificgroup
groupofofcustomers
customers
whom
whomaabusiness
businesswishes
wishestotoreach
reach

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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
marketsegmentation
segmentation
the
theprocess
processofofgrouping
groupingaamarket
market
into
intosmaller
smallersubgroups
subgroupsdefined
definedby
by
specific
characteristics
specific characteristics

market
marketsegments
segments
subgroups
subgroupsofofbuyers
buyerswith
withsimilar
similar
characteristics,
segmented
characteristics, segmentedby
by
geographics,
demographics,
geographics, demographics,
psychographics,
psychographics,and
and
buying
buyingcharacteristics
characteristics

Target Market and Customer

Market Segmentation

geographics
geographics

demographics
demographics

buying
buying
characteristics
characteristics

psychographics
psychographics

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6.1

Doing Market
Research

Target Market and Customer

geographics
geographics
the
thestudy
studyofofthe
themarket
marketbased
basedon
on
where
customers
live,
including
where customers live, including
region,
region,state,
state,country,
country,city,
city,and/or
and/or
area
area

industrial
industrialmarkets
markets
customers
customerswho
whobuy
buygoods
goodsoror
services
servicesfor
forbusiness
businessuse
use
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business

psychographics
psychographics
the
thestudy
studyofofconsumers
consumersbased
basedon
on
social
and
psychological
social and psychological
characteristics,
characteristics,including
including
personalities,
values,
personalities, values,opinions,
opinions,
beliefs,
beliefs,motivations,
motivations,attitudes,
attitudes,
and
lifestyle
elements
and lifestyle elements

Target Market and Customer

The target market for your product
or service should be:
1

Measurable

Large enough to be profitable

Reachable

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
understandingthe
thebehavior
behaviorofof
consumers
consumersininaacertain
certainmarket
market

descriptive research

historical research
8

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6.1

Doing Market
Research

Select the Type of Market Research

exploratory
exploratoryresearch
research
the
theinitial
initialcollection
collectionand
andanalysis
analysis
ofofinformation
used
when
information used whenvery
very
little
is
known
about
a
subject;
little is known about a subject;itit
forms
formsaafoundation
foundationfor
forlater
later
research
research

focus
focusgroup
group
aagroup
groupofofpeople
peoplewhose
whoseopinions
opinions
are
studied
to
determine
the
are studied to determine the
opinions
opinionsthat
thatcan
canbe
beexpected
expected
from
a
larger
population
from a larger population

descriptive
descriptiveresearch
research
the
thecollection
collectionofofinformation
informationtoto
determine
determinethe
thestatus
statusofof
something,
something,such
suchas
asinindeveloping
developing
aacustomer
profile
customer profile

historical
historicalresearch
research
the
thestudy
studyofofthe
thepast
pasttotoexplain
explain
present
presentcircumstances
circumstancesand
andpredict
predict
future
trends
future trends

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

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.

10

SECTIO
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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
secondarydata
data
information
informationthat
thathas
hasalready
alreadybeen
been
collected
collectedby
bysomeone
someoneelse
else

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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
primarydata
data
information
informationthat
thatisiscollected
collectedfor
forthe
the
first
firsttime,
time,isiscurrent,
current,and
andrelates
relates
directly
to
the
collectors
study
directly to the collectors study

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

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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
barrierstotoentry
entry
conditions
conditionsororcircumstances
circumstancesthat
that
make
it
difficult
or
costly
for
make it difficult or costly for
outside
outsidefirms
firmstotoenter
enteraamarket
markettoto
compete
competewith
withestablished
establishedfirm
firmoror
firms
firms

SECTI
ON

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
economiesofofscale
scale
situations
situationswhere
wherethe
thecost
costofof
producing
producingone
oneunit
unitofofaagood
goodoror
service
servicedecreases
decreasesas
asthe
thevolume
volume
ofofproduction
increases;
the
production increases; the
decrease
decreaseofofproduction
productioncosts
costs
relative
to
the
price
of
goods
relative to the price of goodsand
and
services
services

SECTI
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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
brandloyalty
loyalty
the
thetendency
tendencytotobuy
buyaaparticular
particular
brand
brandofofaaproduct
product

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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

mass
massmarketing
marketing
the
theattempt
attempttotoreach
reachall
allcustomers
customers
with
withaasingle
singlemarketing
marketingplan
plan

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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
marketshare
share
aaportion
portionofofthe
thetotal
totalsales
sales
generated
generatedby
byall
allcompeting
competing
companies
in
a
given
companies in a givenmarket
market

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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
niche
aasmall,
small,specialized
specializedsegment
segmentofof
the
themarket
marketbased
basedon
oncustomer
customer
needs
discovered
in
market
needs discovered in market
research
research

SECTI
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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
marketpositioning
positioning
the
theact
actofofidentifying
identifyingaaspecific
specific
market
marketniche
nichefor
foraaproduct
product

SECTI
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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
competitiveadvantage
advantage
aafeature
featurethat
thatmakes
makesaaproduct
product
more
moredesirable
desirablethan
thanits
its
competitors
competitors

Researching the Target Customer

Create a customer profile.

Evaluate customers needs.
Conduct research to forecast demand.
Forecast

24

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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
customerprofile
profile
aacomplete
completepicture
pictureofofaaventures
ventures
prospective
customers,
including
prospective customers, including
geographic,
geographic,demographic,
demographic,and
and
psychographic
data
psychographic data

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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
customerneeds
needsanalysis
analysis
aastudy
studythat
thatpinpoints
pinpointsthe
thefeatures
features
and
andbenefits
benefitsofofgoods
goodsororservices
services
that
customers
value
that customers value

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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