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UNDERSTANDING MARKETS AND CUSTOMERS. Module 3. UNDERSTANDING MARKETS. Conduct a market analysis. WHY A MARKET ANALYSIS?. It helps in the determination of attractiveness of a market. It helps in understanding the dynamics of the market. COMPONENTS OF A MARKET ANALYSIS. - PowerPoint PPT Presentation
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UNDERSTANDING MARKETS AND CUSTOMERS
Module 3
UNDERSTANDING MARKETS Conduct a market analysis
WHY A MARKET ANALYSIS? It helps in the determination of
attractiveness of a market. It helps in understanding the
dynamics of the market.
COMPONENTS OF A MARKET ANALYSIS Actual / Potential Market Size Market Growth and Profitability Distribution Systems Trends and Developments Key Success Factors
ACTUAL / POTENTIAL MARKET SIZE Total sales Potential sales
MARKET GROWTH
What will be the market’s size in the future?
What forces “drive” or impact the market?
FORECASTING MARKET GROWTH Commonly Used Qualitative
Techniques
– Trend Extrapolation http://www.hfac.uh.edu/ MediaFutures/forecasting.html
Identification of leading indicators
LEADING INDICATORS New orders of durable goods Index of net business formations Corporate profits after taxes New building permits (private) Change in manufacturing inventories Contracts and orders for plant &
equipment Change in consumer installment debt
FORECASTING MARKET GROWTH Experience of analogous industries
(Analogy Method) Delphi Technique
MARKET MATURITY / DECLINE Price pressure caused by
overcapacity or lack of product differentiation
Buyer sophistication Growth of substitute products No apparent growth sources Customer disinterest
MARKET PROFITABILITY ANALYSIS PORTER’S MODEL
– Rivalry among competitors
– Potential entrants
– Substitute products
– Bargaining power of customers
– Bargaining power of suppliers
DISTRIBUTION SYSTEMS
What are the alternative distribution channels?
What are the trends? Who has the power in the channel?
MARKET TRENDS
What are the trends?
– it helps us to focus on change
– it tends to identify what is important
Example: Food Industry
– http://foodnet.fic.ca/trends/ecft.html# Executive Summary
KEY SUCCESS FACTORS
These are the critical assets and skills that provide the bases for competing successfully
Example: Chemi-Dansk
– http://angelfire.com/biz/ chemidansk/ksf.html
KEY SUCCESS FACTORS
Strategic necessities Strategic strengths
KEY SUCCESS FACTORS
Which are most critical today? Which will be critical in the future?
MARKET ANALYSIS--Summary We conduct a market analysis to
determine market attractiveness and to understand its dynamics.
We conduct a market analysis along seven factors (market size, growth, profitability, trends, costs, distribution, KSF’s).
UNDERSTANDING CUSTOMERS
“The key to failure is trying to please everybody.” (Fortune Cookie)
IDENTIFYING MARKETS TO SERVE
CUSTOMER NEED
MARKET EMERGENCE
MARKET BOUNDARY DEFINITION
SERVED MARKET
CUSTOMER SEGMENTATION
CUSTOMER NEED
Understand customer needs! Business strategy can be based on
the certainty that needs exist Key is to expose/discover non-
obvious needs
MARKET EMERGENCE
Needs - Market Opportunity - Market Emergence
Must be able to measure market size and market potential
DEFINING MARKET BOUNDARIES
The crux of any strategy formulation is market definition
Can define in terms of – products (home cooking appliance
market)– technology (gas, electricity, microwave)– customer functions (bake, roast, fry,...)– customer group (contractors, households)
SERVED MARKET
Should the business serve the entire market or limit itself to serving part of it?
Pages 112 / 113 present a list of factors that may impact selection of served market(s)
CUSTOMER SEGMENTATION
What niches exist within the marketplace?
What opportunities are there that are not being met?
SEGMENTATION
divide a heterogeneous market into homogeneous groups
“The process of placing customers into subgroups so that the buyers in a segment will respond similarly to a particular marketing strategy” (Cravens, 1996)
SEGMENTATION
Market segmentation is warranted when:– market is homogeneous– number of consumers is large– consumers are accessible with particular
media and distribution channels– size and consumer characteristics can be
measured
SEGMENTATION
Consumer markets:
– Demographic descriptors
– Geography
– Lifestyles (VALS) http://future.sri.com/vals/vals2desc.html
– Product Usage Rates
– Benefits Sought
SEGMENTATION
Business-to-business markets:
– NAIC’s• http://www.ntis.gov/yellowbk/
1nty205.htm
– Geography
– Customer Size
– Product Uses
SEGMENTATION
Outcomes:
– divide the large mass market into small, similar groups
– describe and profile each market
FROM THE TEXT
Pages 101 to 119
