SECTION

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

a collection of businesses with a

common line of products or
services

SECTION

6.1

Doing Market
Research

Industry four factors effect the nature of the industry

carrying capacity
the ability of industry to support
new growth

industry life cycle

the current stage of an industry

Birth

Growth

Maturity

Decline

uncertainty
the degree of stability or instability
in a given industry

complexity

the number and diversity of

contacts with which a business
must deal
Chapter 6 Market Analysis
Glencoe Entrepreneurship: Building a Business

SECTION

6.1

Doing Market
Research

Target Market and Customer

market

After first identifying your

market, you will then need
to select a target market to
be the focus of your
companys efforts.

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.

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

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

Target Market and Customer

Market Segmentation

geographics

demographics

buying
characteristics

psychographics

SECTION

6.1

Doing Market
Research

Target Market and Customer

geographics

psychographics

the study of the market based on

where customers live, including
region, state, country, city, and/or
area

the study of consumers based on

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

Large enough to be profitable

Reachable

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
consumers in a certain market

descriptive research

historical research
8

SECTION

6.1

Doing Market
Research

Select the Type of Market Research

exploratory research

focus group

the initial collection and analysis

of information used when very
little is known about a subject; it
forms a foundation for later
research

a group of people whose opinions

are studied to determine the
opinions that can be expected
from a larger population

descriptive research

historical research

the collection of information to

determine the status of
something, such as in developing
a customer profile

the study of the past to explain

present circumstances and predict
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

SECTION

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 data

information that has already been

collected by someone else

SECTION

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 data

information that is collected for the

first time, is current, and relates
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

SECTION

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 to entry
conditions or circumstances that
make it difficult or costly for
outside firms to enter a market to
compete with established firm or
firms

SECTION

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 of scale
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

SECTION

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 loyalty

the tendency to buy a particular

brand of a product

SECTION

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 marketing

the attempt to reach all customers

with a single marketing plan

SECTION

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 share

a portion of the total sales

generated by all competing
companies in a given market

SECTION

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
a small, specialized segment of
the market based on customer
needs discovered in market
research

SECTION

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 positioning

the act of identifying a specific

market niche for a product

SECTION

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 advantage

a feature that makes a product

more desirable than its
competitors

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
profile is the first step in
targeting your marketing
efforts.

Chapter 6 Market Analysis

Glencoe Entrepreneurship: Building a Business

customer profile
a complete picture of a ventures
prospective customers, including
geographic, demographic, and
psychographic data

SECTION

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 needs analysis

a study that pinpoints the features

and benefits of goods or services
that customers value

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