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Glencoe Entrepreneurship: Building a Business Doing Market Research SECTION SECTION 6.1 Chapter 6 Market Analysis To ensure success, entrepreneurs need.

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Presentation on theme: "Glencoe Entrepreneurship: Building a Business Doing Market Research SECTION SECTION 6.1 Chapter 6 Market Analysis To ensure success, entrepreneurs need."— Presentation transcript:

1 Glencoe Entrepreneurship: Building a Business Doing Market Research SECTION SECTION 6.1 Chapter 6 Market Analysis To ensure success, entrepreneurs need to understand the industry and the market. They should define areas of analysis and conduct effective industry and market research. The Main Idea

2 Glencoe Entrepreneurship: Building a Business Doing Market Research SECTION SECTION 6.1 Chapter 6 Market Analysis Defining Areas of Analysis In order to satisfy current customers or attract new ones, an entrepreneur must conduct market analysis. The entrepreneur will want to understand the nature of the industry he or she is analyzing. industry a collection of businesses with a common line of products or services

3 Glencoe Entrepreneurship: Building a Business Doing Market Research SECTION SECTION 6.1 Chapter 6 Market Analysis Thorough market analysis requires: Identifying prospective customers and determining their buying habits Analyzing your industry and assessing your chances for success within it Defining Areas of Analysis

4 Glencoe Entrepreneurship: Building a Business Doing Market Research SECTION SECTION 6.1 Chapter 6 Market Analysis There are four factors that are useful in understanding the nature of an industry: carrying capacity uncertainty complexity stage of life cycle Industry

5 Glencoe Entrepreneurship: Building a Business Doing Market Research SECTION SECTION 6.1 Chapter 6 Market Analysis Industry You will want to find an industry that has carrying capacity so that your new business can expand and prosper. carrying capacity the ability of industry to support new growth Uncertainty is the degree of stability or instability in an industry. Many high-tech ventures are in industries with uncertain climates.

6 Glencoe Entrepreneurship: Building a Business Doing Market Research SECTION SECTION 6.1 Chapter 6 Market Analysis Complexity Some businesses must learn to deal with complexity in many industries. Firms that operate in complex industries have more suppliers, customers, and competitors than firms in other industries. complexity the number and diversity of contacts with which a business must deal

7 Stage of Life Cycle 7 There are four stages to the life cycle of an industry Birth Growth Maturity Decline

8 Glencoe Entrepreneurship: Building a Business Doing Market Research SECTION SECTION 6.1 Chapter 6 Market Analysis Target Market and Customer After first identifying your market, you will then need to select a target market to be the focus of your company’s 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

9 Glencoe Entrepreneurship: Building a Business Doing Market Research SECTION SECTION 6.1 Chapter 6 Market Analysis 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

10 Target Market and Customer 10 Market Segmentation demographics geographics psychographics buying characteristics

11 Glencoe Entrepreneurship: Building a Business Doing Market Research SECTION SECTION 6.1 Chapter 6 Market Analysis Target Market and Customer Information about the geographics of the target market can help an entrepreneur decide on a geographic area to focus marketing efforts. geographics the study of the market based on where customers live, including region, state, country, city, and/or area

12 Glencoe Entrepreneurship: Building a Business Doing Market Research SECTION SECTION 6.1 Chapter 6 Market Analysis Target Market and Customer An entrepreneur can study psychographics to learn about target customers’ feelings. psychographics the study of consumers based on social and psychological characteristics, including personalities, values, opinions, beliefs, motivations, attitudes, and lifestyle elements

13 Glencoe Entrepreneurship: Building a Business Doing Market Research SECTION SECTION 6.1 Chapter 6 Market Analysis Target Market and Customer Businesses that cater to industrial markets must consider customers’ individual situations. industrial markets customers who buy goods or services for business use

14 Target Market and Customer 14 The target market for your product or service should be: Measurable Large enough to be profitable Reachable Responsive

15 Glencoe Entrepreneurship: Building a Business Doing Market Research SECTION SECTION 6.1 Chapter 6 Market Analysis Conducting Market Research Once you know the areas of the market that you need to analyze, you are ready to begin market research. The marketing research process can be used to identify potential markets, analyze demand, and forecast sales. market research the collection and analysis of information aimed at understanding the behavior of consumers in a certain market

16 Select the Type of Market Research 16 There are three types of market research exploratory research descriptive research historical research

17 Glencoe Entrepreneurship: Building a Business Doing Market Research SECTION SECTION 6.1 Chapter 6 Market Analysis Select the Type of Market Research A good way to start exploratory research is to read government or industry publications. exploratory research the initial collection and analysis of information used when very little is known about a subject; it forms a foundation for later research Another way to gather information is to form a focus group. focus group a group of people whose opinions are studied to determine the opinions that can be expected from a larger population

18 Glencoe Entrepreneurship: Building a Business Doing Market Research SECTION SECTION 6.1 Chapter 6 Market Analysis Select the Type of Market Research Descriptive research can be gathered through questionnaires, interviews, or observation. descriptive research the collection of information to determine the status of something, such as in developing a customer profile

19 Glencoe Entrepreneurship: Building a Business Doing Market Research SECTION SECTION 6.1 Chapter 6 Market Analysis Select the Type of Market Research You can use historical research to forecast your business’s future potential. historical research the study of the past to explain present circumstances and predict future trends

20 Identify your information needs. Start the Research Process 20 The Five Steps of an Effective Research Plan Obtain secondary resources. Collect primary data. Organize the data. Analyze the data.

21 Glencoe Entrepreneurship: Building a Business Doing Market Research SECTION SECTION 6.1 Chapter 6 Market Analysis Start the Research Process Research secondary data before researching primary sources because it is easily obtained and inexpensive. secondary data information that has already been collected by someone else

22 Glencoe Entrepreneurship: Building a Business Doing Market Research SECTION SECTION 6.1 Chapter 6 Market Analysis Start the Research Process The most common methods of gathering primary data about customers are: observation interviews surveys primary data information that is collected for the first time, is current, and relates directly to the collector’s study

23 Industry and Market Analysis Glencoe Entrepreneurship: Building a Business SECTION 6.2 Chapter 6 Market Analysis Studying a company’s industry and market helps an entrepreneur create a product or service that people want. It also helps the entrepreneur develop a customer profile, estimate demand, and increase the chances for success. The Main Idea

24 Look Researching the Industry 24 Understand Study Analyze Look at trends and patterns of change. Understand industry forces that affect your business. Study industry demographics. Analyze the competition.

25 Industry Forces That Affect Your Business 25 barriers to entry threats from substitute products sources of supply buyers’ ability to bargain technology

26 Industry and Market Analysis Glencoe Entrepreneurship: Building a Business SECTION 6.2 Chapter 6 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. 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

27 Industry and Market Analysis Glencoe Entrepreneurship: Building a Business SECTION 6.2 Chapter 6 Market Analysis Industry Forces That Affect Your Business Established businesses have achieved economies of scale in production, marketing, and distribution. 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

28 Industry and Market Analysis Glencoe Entrepreneurship: Building a Business SECTION 6.2 Chapter 6 Market Analysis Industry Forces That Affect Your Business Customers with brand loyalty do not easily switch to a new company that enters the industry. brand loyalty the tendency to buy a particular brand of a product

29 Industry and Market Analysis Glencoe Entrepreneurship: Building a Business SECTION 6.2 Chapter 6 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. mass marketing the attempt to reach all customers with a single marketing plan

30 Industry and Market Analysis Glencoe Entrepreneurship: Building a Business SECTION 6.2 Chapter 6 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. market share a portion of the total sales generated by all competing companies in a given market

31 Industry and Market Analysis Glencoe Entrepreneurship: Building a Business SECTION 6.2 Chapter 6 Market Analysis The Competition Many entrepreneurial companies succeed by studying the competition to define a niche in the market. niche a small, specialized segment of the market based on customer needs discovered in market research An entrepreneur who wishes to capture market share can use market positioning. market positioning the act of identifying a specific market niche for a product

32 Industry and Market Analysis Glencoe Entrepreneurship: Building a Business SECTION 6.2 Chapter 6 Market Analysis The Competition You can create a competitive grid to help define your competitive advantage. competitive advantage a feature that makes a product more desirable than its competitors

33 Create Evaluate Forecast Researching the Target Customer 33 Create a customer profile. Evaluate customers’ needs. Conduct research to forecast demand.

34 Industry and Market Analysis Glencoe Entrepreneurship: Building a Business SECTION 6.2 Chapter 6 Market Analysis Creating a Customer Profile Creating a customer profile is the first step in targeting your marketing efforts. customer profile a complete picture of a venture’s prospective customers, including geographic, demographic, and psychographic data

35 Industry and Market Analysis Glencoe Entrepreneurship: Building a Business SECTION 6.2 Chapter 6 Market Analysis Evaluating Customers’ Needs In order to provide what the customer wants, you should prepare a customer needs analysis. customer needs analysis a study that pinpoints the features and benefits of goods or services that customers value

36 Industry and Market Analysis Glencoe Entrepreneurship: Building a Business SECTION 6.2 Chapter 6 Market Analysis Several methods can be used to forecast demand: Use historical analogy. Interview prospective customers and intermediaries. Go into limited production. Forecasting Demand


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