Transcript Standard 2

Entrepreneurship
Unit 2.1
Analyzing a business’s customers
Students will analyze their
market’s customers.

Students will be able to:
• Define target market
• Define market segmentation by
demographics, psychographics,
geographics, and buying characteristics
• Distinguish the difference between
primary and secondary research
• Describe a focus group
• Identify the steps of market research
Why Market Analysis?
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Market analysis presents research findings about
target markets.
Market analysis includes a target market profile
that explains the traits of the company’s potential
customers.
Market analysis provides potential investors with
a realistic forecast of the growth potential for the
market in which your company will operate.
What is a Target Market?
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A target market is a particular
group of customers of interest to an
entrepreneur.
Understanding the characteristics of
the desired market segment allows a
company to tailor its marketing effort
to reach and appeal to the market
segment.
What is Market Segmentation?
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Market segmentation is the process
of grouping a market into smaller
subgroups defined by specific
characteristics.
Market segments are subgroups of
buyers with similar characteristics.
What are the four types of
market segmentation?

Geographics
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Demographics
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Psychographics
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Buying Characteristics
4 Types of Market Segmentation
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Geographics – the study of the market
based on where customers live by
region, state, city, and/or area.
Demographics – the personal
characteristics of a population: age,
gender, family size, income, occupation,
family life cycle, education, religion,
race, nationality, or social class.
4 Types of Market Segmentation
(cont’d.)

Psychographics – the study of
consumers based on social and
psychological characteristics:
personality, values, opinions, beliefs,
motivations, attitudes, and lifestyle
elements, including activities and
interests;
Buying characteristics
– knowledge of and personal experiences
with the actual goods or services.
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Guidelines to Segment
the Target Market:
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The target market should be measurable.
How many potential buyers are in the market?
The segment should be large enough to be
profitable—to recover costs and make a profit.
The segment should be reachable.
Product information and product availability must be
considered.
The target segment should be responsive;
i.e., that people are interested in the
product.
Market Segment Profile
(Example)
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Situation: Clothing boutique specializes
in trendy fashions for teenagers. Located
in a fast-growing metropolitan area with
several high schools and a college.
Profile: Girls 13-18 years old; reside
within city, nearby suburbs, or rural areas;
part-time annual income of $1500; rarely
buy expensive items; aware of current
trends and attitude toward
where to buy influenced by peers.
3 Types of Market Research

1. Exploratory Research is used
when you know little about a subject.
Check with industry & government
publications.
You can organize a focus group of
people whose opinions are studied to
determine the opinions that can be
expected from a larger population.
3 Types of Market Research
(cont’d.)
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2. Descriptive Research
Develop a customer profile. Learn
the age, gender, occupation, income,
and buying habits of potential
customers. Such information can be
collected through questionnaires,
interviews, or observation.
3 Types of Market Research
(cont’d.)
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3. Historical Research involves
studying the past. Trade associations
and trade publications are two
sources of useful historical data.
Historical research might be useful to
learn why a type of business has
been successful or unsuccessful.
What is Primary Data?
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Research collected for the first time and
relates directly to the collector’s study.
How do I collect primary data?
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Observation
Interviews – in person, by phone, through mail
Surveys
Observe buyers at competitor’s site
Focus groups
What is Secondary Data?
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Information collected by someone else for
their own purposes.
Where do I find Secondary Data?
•
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•
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Internet
Government and community organizations
Website of the U.S. Census Bureau
Chamber of Commerce
Trade associations
Trade publications
Commercial research agencies
Five Steps of Market Research
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Step 1: Identify your Information
Needs.
• What data needs to be collected?
• What methods of analysis will be used?
• How will the data be used?
Example: Before opening a hobby store, you
need to know who your first customers will be
and what they want? Also, you must gather
information about the competition.
Five Steps of Market Research
(cont’d.)
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Step 2: Obtain Secondary Resources.
Information that has been collected by
someone else is called secondary data.
1.
2.
3.
4.
5.
6.
7.
8.
What are the demographics of the customer?
What are the psychographics of the customer?
How large is the market?
Is the market growing?
Is the market affected by geography?
How can you reach your market?
How do your competitors reach the market?
What market strategies have been successful with
these customers?
Five Steps of Market Research
(Cont’d.)
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Step 3: Collect Primary Data
1. What are the demographics of your customer?
2. Would potential customers purchase your
product or service? Why or why not?
3. How much would customers purchase?
4. When would customers purchase?
5. Who would customers like to find the product or
service?
6. What do customers like about your competitors’
products and services?
Five Steps of Market Research
(cont’d.)
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Step Four: Organize the Data
Categorize data based on the
research question it answers.
Working on each question, note how
many of your sources supported a
particular conclusion and how many
did not. This data can help you
refine your market analysis.
How may Data be Represented?
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Bar graphs
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Pie charts
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Line graphs
Five Steps of Market Research
(cont’d.)
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Step Five: Analyze the Data.
Now that your information has been organized,
ask yourself these questions:
1.
2.
3.
4.
5.
Is there a market for the product or service?
How big is the market?
Will the industry support such a business?
What do substitute products/service reveal about
demand for the product/service?
What do customers, end users, and intermediaries
predict the demand will be?
Let’s Review
• Define target market
• Define market segmentation by
demographics, psychographics,
geographics, and buying characteristics
• Distinguish the difference between
primary and secondary research
• Describe a focus group
• Identify the steps of market
research
Sources
Allen, Kathleen R., & Meyer, Earl
(2006). Entrepreneurship and small
business management. New York:
Glencoe.
 Green, Cynthia L. Entrepreneurship:
ideas in action. Boston: Thompson/
South-Western.
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Created by: JJ Abernathy
Snow Canyon High School
2006