Copyright 2013 Jack M. Kaplan & Anthony C. Warren Analyzing the Market, Customers, and Competition...

Copyright 2013 Jack M. Kaplan & Anthony C. Warren

Analyzing the Market, Customers, andCompetition

Patterns of Entrepreneurship Management4th Edition, Chapter 4

Chapter 4

Customer/ Market Analysis

Competitive

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Pricing & Positionin

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Presentation Outline

• Customer/Market Analysis– Niche or target markets

– One to One Marketing

– Define the Market Segmentation

• Evaluate the Competition-Sample Evaluation• Prepare the Pricing Plan• Position the Product or Service• Using The Internet for Market Research

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Niche or Target Markets

A niche market is a small segment of a large market ignored by other companies

Target marketing is a strategy to focus on segments of a market and prepare a plan for each market segment.

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Rogers’ Bell-Curve - Customer Adoption Patterns

When introducing a new product or service, you should target customers who are more likely to try something new – the innovators and early adopters. They are usually not price-sensitive

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Identifying Customers--Consider the 4 factors

• Market Identification--Current market and service needs determined

• Current and Best Customers--to allocate resources to segment the market

• Potential Customers--target by geographical or industry wide

• Outside factors--identify changing trends

Prepare the Marketing Analysis and Plan

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One to One marketing

Learn the profile or details about customers to identify the most valuable ones.

• Identify customers or get them to identify themselves

• Link customers identifies to their transactions

• Calculate individual customer lifetime value

• Strengthen a customer satisfaction program

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Define the Market Segmentation

There are Several Ways to Segment a MarketDemographic Segmentations-divide the market

into groups,based on age,income level and gender

Geographic Segmentation- divide people or businesses into regional and by location

Psychographic Segmentation-divides into cultural groups,value or social categories

Ethnic Segmentation- divide by ethic group

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Do potential customer groups have different needs?

Can the customers that fit into a given segment be identified?

Are customers both willing and able to pay?

Is the segment large enough to be profitable?

Can the segment be reached in a cost-effective manner?

Questions for Effective Segmentation

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• It is particularly important to identify which businesses will provide the most significant competition and predict what they will likely do.

• Analyze the situation by asking the questions provided below regarding six key areas of competition.

Conduct A Competitive Analysis

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Competitive Analysis: Porter’s 5 Forces

PotentialEntrants

Threat of New Entrants

IndustryCompetitors

Rivalry AmongExisting Firms

Bargaining Powerof Buyers

Bargaining Power

of Suppliers

Business to Consumers Business to Business

Internet Companies

Suppliers Buyers

•Switching Costs of Suppliers

•Importance of Volume to Suppliers

•Cost Relative to Total Purchases

•Impact on Cost or Differentiation

•Access to Distribution•Government Policies•Expected Retaliation

•Economics of Scale•Proprietary Product Differences•Brand Identity

•Buyer Concentration vs. Firm •Buyer Volume•Buyer Switching Costs•Substitute Products•Product Differences•Brand Identity•Impact on Quality/Performance•Buyer Profile

•Industry Growth

•Product Differences

•Brand Identity

•Exit Barriers•Diversity of Competitors

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Evaluating the CompetitionSample Evaluation

Factors Attractiveness

High Low Competition among companies

Competition is minimal but will become intense in 1 year

The industry is declining and is mature

The power of customers

Volume is high and willing to negotiate

Customer has few switching costs

The power power of suppliers

Many substitutes and sources are available

Limited supply; products differentiated

Internet companies No competition defined on the internet

Many companies are entering this market

Potential threats Complex barriers and costs are high to enter market

Few simple entry barriers to enter the business

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Measuring the Venture’sStrengths and Weaknesses

Factor Attractiveness

High LowManagement team Proven People with right

skills not availableFinancing You have comfortable

cushion or can raisecapital if needed

You have a narrowtime horizon to makemoney

Product development Complete product line One product oflimited life

Sales force Strong contacts;specialist skills

Limited contacts;generalist skills

Marketing Deep and tightly-focused

Untargeted

Operations Strategic allianceshelp improveexecution

Learning in a vacuum

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How is the competitive product or service defined?

How is it similar or different? Does the competition cater to a mass or

targeted market? What features of the product are superior? What strengths or weaknesses of the

competition can be exploited?

Product and Service Questions

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Price Questions

What is the competitor’s pricing strategy?

Is the competitor’s price higher or lower?

What is the competitor’s gross margin for similar products?

Does the competitor offer terms, discounts, or promotions

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Industry Competitors

Define the competition in terms of new, Internet, or potential threats of existing companies.

What are the strengths and weaknesses of each?

How will e-commerce companies affect the business?

How can the suppliers or buyers affect the competition?

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How strong is the competitor’s management team?

What is their background or experience?

How do they recruit new key employees?

Management Team

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Is the competitor profitable?

What volume are sales and market shares?

Do they spend money for R&D, Internet, and web development?

Are they properly capitalized? How strong is their cash flow?

Financial Questions

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Preparing the Pricing Plan

Pricing Methods

Value: Price should not be based simply on cost, plus a modest profit. Instead, price should be based on the value of the product or service.

Rationale: Why prices differ from those of the competitors.For instance, does the new business perform a function faster or more efficiently?

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How to Position the Product or Service

• One way to charge a high price when competition and substitution are minimal

• Another is to “match competition” by pricing slightly under the competitor’s rates to expand one’s own market share (for example, Motorola or Verizon cellular phones).

• A third is to substantially under-price the market, so as to exclude competitors altogether

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Market Research Using the Internet

•The internet can be used to undertake initial market research cost effectively.

• Using “web 2.0” tools and social networks, a campaign can be carried out in just a few days

.• Here are just two examples of how the Internet can be used for market research…..


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Example 1: “Smoke-Screen Test”

Problem: how can “early-adopters” be attracted to a web-site offering new methods for alleviating asthma, what is the price they will pay, and how likely they will buy?

Cost effectively:•Gain website traffic by a social networking presence•Gather customer information and preferences

Resource Requirements:

• Daily monitoring of social networking (15 mins/day)

• $500 – $1,000 funding for Google AdWords campaign

to draw direct traffic to the site.


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Task 1: Build Web Presence

via Social Networking• Establish Twitter account: “@breathesimple”

• Continually track ‘tweet’ keywords:– Asthma attack

– Nebulizer

– Asthma emergency room

• Sample tweets:


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Task 2: Build Dummy Website to Draw Traffic

• www.breathesimple.com Home Page:


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http://www.breathesimple.com/

Task 3: Track Website Traffic

Using Google Analytics


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Task 4: Create Short Survey to Gather Customer Info

Goal:Gather as much information as possible without being asking too much of the customer.


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Task 5: Track Survey Results Using Automatic

Analysis Tool


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Results from Smoke-Screen Market Research

•Cost of Market Research - $1200

•Duration of Market Research - 2 weeks

•Number of visitors drawn to site – 2100

•Number that completed questionnaire and provided

contact information for purchase – 143

•Cost per customer acquisition - $8.40

•Conversion rate buyer/visitor – 6.8%

•Acceptable price point for product - $300.

The acquired data was sufficiently detailed for use in the business plan:

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Example 2: Primary Market Research

Problem: How will current customers view improvements to an existing product, what will they pay for these, and how much time will they invest in learning the new features?

Cost effectively:

•Target users of existing products

•Gather customer feed-back

Resource Requirements:

• Creating questionnaire (2 hours)

• $50 per respondent up to 150 replies with analysis

• 80 responses in 3 days, 150 within 2 weeks.


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Example 2: Primary Market Research

Use the service of, for example “Ask Your Target Market” (www.aytm.com)

• Over 2.5 million registered respondents.

• Questionnaire screens randomly selected respondents to identify “targeted audience” e.g., Q 1. “I have just bought

a pair of new shoes” or “I am planning a vacation in Thailand.”

• Only those meeting the required audience get to the

main questionnaire and get paid for their full response.

• Survey results collected over a few days and analyzed using aytm tools.

• Total costs are around 30% of traditional market research interview methods and take much less time.

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Example 2: Problem Definition

• Halare Inc. developed an improvement to the existing treatments of Sleep Disordered Breathing.

• The current method to alleviate the symptoms is for the sufferer to wear a “Constant Positive Airway Pressure” mask (CPAP) in bed.

• The company developed a short questionnaire to target existing users of CPAP machines in order to learn:

a) current usage patternsb) reasons for dissatisfaction of existing productsc) using a video example of the Halare product, how they viewed the potential improvementsd) how much time they would devote to learning to use the additional featurese) what percentage of respondents would purchase the new device and at what price.

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Example 2: Results

The next slide shows a typical chart derived from the questionnaire.

PQ is the pre-screening question, and eliminates any respondent that is not part of the target market.

Q1 examines the current usage patterns of CPAP machines.

It is shown that < 50% of the users do NOT use their CPAP’s everynight which can lead to serious health problems.

The Questionnaire continued to explore the reasons for poor compliance and offer Halare’s alternative solution.

The respondent number was capped at 150 which provided a statistically valid population while limiting total cost of the primary market research to $7500.00

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Copyright 2013 Jack M. Kaplan & Anthony C. Warrenand AYTM Inc.

Example 2: Typical Result Chart

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Copyright 2013 Jack M. Kaplan & Anthony C. Warren Analyzing the Market, Customers, and Competition...

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