Market Analysis
I. Introduction
· Market analysis breaks the industry into segments and zeroes in on the specific
segment (or target market) that the firm will tackle
· The market analysis section of a business plan is distinctly different from the
marketing section
· The market analysis section focuses on describing a firm’s target market,
customers, and competitors, how it will compete in the marketplace, and
potential sales and market share
· The market analysis is an extremely important section of a business plan for
two reasons:
o The market analysis helps define the nature of the business and the
remainder of the plan
o It affirms that a company has a well-thought-out target market,
understands its customers, and can generate sales in the face of
competition
· To raise investment capital, a firm must demonstrate that its target market has
sufficient potential to enable it to rapidly increase sales and return to its
investors an amount that is 5 to 20 times the original investment
a. Market Segmentation
o Markets can be segmented in many ways, such as by geography
(city, state, country), demographic variables (age, gender,
family size, income), psychographic variables (personality,
lifestyle, values), behavioral variables (benefits sought, product
usage rate, brand loyalty), and product type (varies by product)
o There are requirements for successful market segmentation:
· Homogeneity of needs and wants within the segment
· Heterogeneity of needs and wants among segments
· Differences within the segment are small compared to
differences across segments
· The segment is distinct enough that its members can be
easily identified
· It should be possible to determine the size of the
segment
· The segment should be large enough to be profitable
o IBISWorld and Mintel provide suggestions for segmenting the
industries that they follow
o The entrepreneurial process often results in the identification of
new segments of an industry that weren’t previously considered
I. Introduction
· This chapter focuses on how the firm will actually find customers and close
sales
· It deals with the nuts and bolts of marketing in terms of price, promotions,
distribution, and sales
· Describe a company’s marketing plan by articulating its marketing strategy,
positioning, and points of differentiation and how they will be supported by
price, promotional mix, and sales process and distribution strategy
· The marketing section of the business plan must lay out specifically how you
plan to make your target market aware of the existence of your product or
service
· Reinforce how your product provides its user unique value and differs from
similar products in the marketplace
· There are two things to be mindful of as you write this section:
o The elements of a firm’s marketing plan should be developed with the
customer plainly in mind
o You must detail exactly who will sell your product and how your sales
process will work
· Describe your sales process and the methods that you’ll use to sell your
product (e.g., via direct sales force, through distributors or wholesalers,
through an alliance with companies that sell complementary products, or
through some other means)
a. Positioning Strategy
o After selecting a target market, the next step is for a firm to
select a “position” in the market
o Position is concerned with how a firm is situated relative to its
rivals (or potential rivals)
o Determining which position to occupy and compete in is
simply a judgment call on the part of a company based on its
mission, its overall approach to the marketplace, and its
competitive landscape
b. Points of Differentiation
o You should also clearly articulate your specific points of
differentiation early in the marketing plan section of your
business plan
o It’s typically best to limit the points of differentiation that you
talk about to two or three points, to make them memorable and
distinct
o Make sure your points of differentiation aren’t liabilities, if a
discerning reader starts playing devil’s advocate
o The most compelling forms of differentiation are created
through innovations that are difficult to imitate because they
are created by competencies unique to a firm
o A useful way for a start-up to visually depict its primary point
of differentiation is through a product attribute map
· A product attribute map is created by articulating two of
a product’s most important attributes, one on the x-axis
and the other on the y-axis
a. Sales Process
o Sales process (or cycle) varies by firm, but normally includes
the following steps:
1. Prospect for (or gather) sales leads
2. Make the initial contact
3. Qualify the lead
4. Make the sales presentation
5. Meet objections and concerns
6. Close the sale
7. Follow up
o Following a structured process to generate and close sales
benefits a firm in two ways: (1) it enables a firm to fine-tune its
approach to sales and build uniformity into the process and (2)
it helps a firm qualify leads, so the firm can spend its time and
money pursuing the most likely buyers
b. Promotions Mix
o Promotions mix includes the specific tactics that a firm uses to
communicate with potential customers including advertising,
public relations, and other promotions-related activities
i. Advertising
· Advertising is making people aware of a product
in hopes of persuading them to buy it
· The major goals of advertising are to raise
customer awareness of a product, explain a
product’s comparative features and benefits, and
create an association between a product and a
certain lifestyle (or a certain objective in a
business-to-business context)
· Media include direct mail, magazines,
newspapers, radio, the Internet, television, and
billboard advertising
· Media used normally depends on the firm’s
target market
· There are many downsides to conventional
forms of advertising, which steers start-ups
away from advertising on a broad basis:
· Low credibility
· Possibility that high percentage of
viewers will not be interested
· Message clutter
· Relative costliness
· Perception that advertising is intrusive
· Possibility that poorly crafted ads run
risk of irking target market
· Most start-ups tend to be selective in advertising
efforts, such as limiting their print ads to
industry trade journals or using focused pay-per-
click