SECTION 6.

1
Doing Market
Research

Defining Areas of Analysis

The entrepreneur will want

to understand the nature of industry
the industry he or she is a collection of businesses with a
analyzing. common line of products or
services

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTION 6.1
Doing Market
Research
Industry four factors effect the nature of the industry
carrying capacity
industry life cycle
the ability of industry to support
new growth the current stage of an industry

1 Birth
uncertainty
the degree of stability or instability
in a given industry 2 Growth

3 Maturity
complexity
the number and diversity of
contacts with which a business 4 Decline
must deal
Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTION 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.
market
a group of people or companies
who have a demand for a product
or service and are willing and able
to buy it
target market
a specific group of customers
whom a business wishes to reach

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTION 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.
market segmentation
the process of grouping a market
into smaller subgroups defined by
specific characteristics
market segments
subgroups of buyers with similar
characteristics, segmented by
geographics, demographics,
psychographics, and
buying characteristics

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

Target Market and Customer
Market Segmentation

geographics

buying
demographics
characteristics

psychographics

5
SECTION 6.1
Doing Market
Research
Target Market and Customer

geographics psychographics

the study of the market based on the study of consumers based on

where customers live, including
region, state, country, city, and/or
area
social and psychological
characteristics, including
personalities, values, opinions,
beliefs, motivations, attitudes,
and lifestyle elements

industrial markets
customers who buy goods or
services for business 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 research
the collection and analysis of
information aimed at
understanding the behavior of descriptive research
consumers in a certain market

historical research

8
SECTION 6.1
Doing Market
Research
Select the Type of Market Research
exploratory research focus group
the initial collection and analysis a group of people whose opinions
of information used when very are studied to determine the
little is known about a subject; it opinions that can be expected
forms a foundation for later from a larger population
research

descriptive research historical research

the collection of information to the study of the past to explain
determine the status of present circumstances and predict
something, such as in developing future trends
a 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
SECTION 6.1
Doing Market
Research

Start the Research Process

Research secondary data secondary data

before researching primary information that has already been
sources because it is easily collected by someone else
obtained and inexpensive.

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTION 6.1
Doing Market
Research

Start the Research Process

The most common methods primary data

of gathering primary data information that is collected for the
about customers are: first time, is current, and relates
observation 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
SECTION 6.2
Industry and
Market Analysis
Industry Forces That Affect Your Business

In established businesses, barriers to entry

the dominant businesses
have advantages that are
barriers to entry to
smaller, new ventures.
conditions or circumstances that
make it difficult or costly for
outside firms to enter a market to
compete with established firm or
firms

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTION 6.2
Industry and
Market Analysis
Industry Forces That Affect Your Business

Established businesses economies of scale

have achieved economies
of scale in production,
marketing, and distribution.
situations where the cost of
producing one unit of a good or
service decreases as the volume
of production increases; the
decrease of production costs
relative to the price of goods and
services

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTION 6.2
Industry and
Market Analysis
Industry Forces That Affect Your Business

Customers with brand brand loyalty

loyalty do not easily switch the tendency to buy a particular
to a new company that brand of a product
enters the industry.

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTION 6.2
Industry and
Market Analysis
Issues in Entrepreneurship

In the past, businesses mass marketing

used mass marketing to the attempt to reach all customers
sell products with universal with a single marketing plan
appeal and few features to
differentiate them from
competitors products.

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTION 6.2
Industry and
Market Analysis
The Competition

Usually, competing market share

products are already a portion of the total sales
established in the market. generated by all competing
To succeed, you must be companies in a given market
able to capture market
share by differentiating
your business.

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTION 6.2
Industry and
Market Analysis
The Competition

Many entrepreneurial niche

companies succeed by a small, specialized segment of
studying the competition to the market based on customer
define a niche in the needs discovered in market
market. research

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTION 6.2
Industry and
Market Analysis
The Competition

An entrepreneur who market positioning

wishes to capture market the act of identifying a specific
share can use market market niche for a product
positioning.

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTION 6.2
Industry and
Market Analysis
The Competition

You can create a competitive advantage

competitive grid to help a feature that makes a product
define your competitive more desirable than its
advantage. competitors

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

Researching the Target Customer

Create a customer profile.

Evaluate customers needs.

Forecast research to forecast demand.

Conduct

24
SECTION 6.2
Industry and
Market Analysis
Creating a Customer Profile

Creating a customer customer profile

profile is the first step in a complete picture of a ventures
targeting your marketing prospective customers, including
efforts. geographic, demographic, and
psychographic data

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTION 6.2
Industry and
Market Analysis
Evaluating Customers Needs

In order to provide what the customer needs analysis

customer wants, you should a study that pinpoints the features
prepare a customer needs and benefits of goods or services
analysis. that customers value

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

SECTION 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