This document provides an overview of how to analyze markets, customers, and competition when starting a new business. It discusses identifying niche markets, conducting market segmentation, evaluating competitors, developing a pricing plan, and positioning products or services. Key aspects covered include defining target customer segments, conducting competitive analyses, assessing strengths/weaknesses, and determining appropriate pricing strategies. The document provides questions to consider and sample evaluations for each step of the market analysis and planning process.

1. copyright 2003 Jack M. Kaplan
Analyzing the Market,
Customers, and
Competition
Patterns of Entrepreneurship
Chapter 3

2. copyright 2003 Jack M. Kaplan
Session Outline
• 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

3. copyright 2003 Jack M. Kaplan
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.

4. copyright 2003 Jack M. Kaplan
 Identify 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

5. copyright 2003 Jack M. Kaplan
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

6. copyright 2003 Jack M. Kaplan
Define the Market Segmentation
There are Several Ways to Segment a Market
Demographic 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

7. copyright 2003 Jack M. Kaplan
 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

8. copyright 2003 Jack M. Kaplan
• 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

9. copyright 2003 Jack M. Kaplan
Evaluating the Competition - Marketing Analysis
Potential
Entrants
Threat of
New Entrants
Industry
Competitors
Rivalry Among
Existing Firms
Bargaining Power
of 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

10. copyright 2003 Jack M. Kaplan
Evaluating the Competition
Sample Evaluation
Factors Attractiveness
High Low
competition among
companies
competition is
minimal but w ill
become intense in
1year
The industry is
declining and is
mature
The pow er of
customers
volume is high and
w illing to negotiate
Customer has few
sw itching costs
The pow er pow er 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

11. copyright 2003 Jack M. Kaplan
Measuring the Venture
Strengths and Weaknesses
Sample Evaluation
Factor Attractiveness
High Low
Management team Proven People w ith right
skills not available
Financing You have comfortable
cushion or can raise
capital if needed
You have a narrow
time horizon to make
money
Product development Complete product line One product of
limited life
Sales force Strong contacts;
specialist skills
Limited contacts;
generalist skills
Marketing Deep and tightly-
focused
Untargeted
Operations Strategic alliances
help improve
execution
Learning in a vacuum

12. copyright 2003 Jack M. Kaplan
• 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

13. copyright 2003 Jack M. Kaplan
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

17. copyright 2003 Jack M. Kaplan
Prepare 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?

18. copyright 2003 Jack M. Kaplan
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