The document discusses product market analysis and defines different levels of product markets including generic, product type, and product variant markets. It provides guidelines for defining a product market, such as identifying customer needs and the products that meet those needs. The document also discusses forming product market boundaries based on the purpose of analysis and market complexity. It emphasizes the importance of analyzing customers, competition, and forecasting market size and trends.
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Defining and analyzing product market
1.
2. Product market consists of a specific product or line of related
products that can satisfy a set of needs and wants for the people
or organizations willing and able to purchase it.
Product market structure-
A company's brand competes with other companies brands in
generic, product type and product variant product markets.
>Generic Product Market:
Generic product market includes a broad group of products that
satisfy a general, yet similar need.
>Product type product market:
The product type product market includes all brands of a
particular product type.
>Product variants product market:
Differences in the products within a product type product market
may exist, creating product variants.
4. In defining the product market,it is helpful to indicate the basis for
identifying buyers in the product-market of interest,the market size and
characteristics and the brand or product categories competing for the
needs and wants of the buyers included in the product market.
The composition of a product market can be determined by following
the steps.We illustrate how this process can be used to determine the
composition of the kitchen appliance product market.Suppose top
management of a kitchen appliance firm is considering expanding its
mix of products.The company's present line of laundry and dish-
washing product meets a generic need for the kitchen functions of
cleaning.Other kitchen use situations include heating andcooling of
foods.In this example the generic need is performing various kitchen
functions.The products that provide kitchen functions are ways of
satisfying the generic need.The break out of product into specific
product market (A,B,C,D)would include equipment for washing and
drying clothing,appliances for cooling food,cooking appliances,
and dishwashers.Need identification is the basis for selecting the
products that fit into the product market.
5. 2.Forming Product Market:
The factors that influence how product market boundaries should be determined
include the purpose for analyzing the product market,the rate of changes in
market composition over time and the extent of market complexity.
Purpose of Analysis-
If management is deciding whether or not to exit from a business,primary
emphasis may be on financial performance and competitive position.Detailed
analysis of the product market may not be necessary.In contrast,if the objective is
finding one or more attractive market segments to target in the product market,a
much more penetrating analysis is necessary.
Changing Composition of Market-
As discussed earlier product market may change as new technologies
become available and new competition emerges.New technologies offer buyers
different ways of meeting their needs.
Extent of Market Complexity-
Three characteristics of markets capture a large portion of the variation in their
complexity:
>The functions or users of the product needed by the customer
>The technology used in the product to provide the desired function
>The different customer segments using the product to perform a particular
function.
6. 3.Describing and Analyzing End Users:
After determining the product market structure it is useful to develop profiles of
end user buyers for the generic,product type,and product variant levels of the
product market.Buyers are identified ,described, value requirements are indicated
and environment influences determined.
a.Identifying and Describing Buyers-
Characteristics,such as family size,age,income,geographical location,sex and
occupation are often useful in identifying buyers in consumer
markets.Illustrative factors used to identify end users in organizational markets
include type of industry,company size,location and types of products.Many
published sources of information areavailable for use in identifying and describing
customers.
b.How Buyers Make Choices-
Often,simply describing buyers does not provide enough information to guide
market targeting and positioning decisions.We also need to try to find out why
people buy products and specific product brands.In considering how customers
decide what to buy,it is useful to analyze how they move through the sequence of
steps leading to a decision to purchase a particular brand.Buyer normally follow a
decision process.
7. c.Environmental Influences-
The final step in building customer profiles is to identify the
external environmental factors that influence buyers and thus
impact the size and composition of the market over time.These
influences include government actions,social change,economic
shifts,technology and other factors that may alter buyers needs
and wants.Typically these factors are not controlled by the buyer
or the firms that market the product and substantial changes in
environmental influences can have a major impact on customers
purchasing activities.
d.Building Customer Profiles-
Describing customers begins with the generic product market.At
this level customer profiles are likely to describe the size and
general composition of the customer base.For example the
commercial air travel customer profile for a specified
geographical area would include market size,growth rates,mix of
business and pleasure travelers and other general
characteristics.
8. 4.Analyzing Competition:
Competitor analysis considers the companies and brands that compete in the product market
of interest.Analyzing the competition follows the five steps
>defining the competitive area
>Identify key competitors
>Evaluate key competitors
>Anticipate actions by competitors
>Identify and evaluate potential competitors
a.Defining the Competitive Arena-
Competition often includes more than the firms that are direct competitors,like coke and pepsi.
The product variant is the most direct type of competition.Nevertheless,other product
categories of soft drinks also compete for buyers,as do other beverages.A complete
understanding of the competitive arena helps to guide strategy strategy design and
implementation.Since competition often occurs within specific industries,study of the industry
structure is useful in defining the competitive arena,recognizing that more than one industry
may be competing in the same product market,depending on the complexity of the product
market structure.
9.
10. Industry Analysis:
Competitor analysis is conducted from the point of view of a
particular firm.For example,a soft drink firm such as Coca-
cola should include other beverage brands in its industry
analysis.The industry analysis considers:
* Industry size,growth and composition.
* Typical marketing practices.
* Industry changes that are anticipated.
* Industry strengths and weaknesses.
* Strategic alliances and potential mergers.
>
11. Analysis of the Value added chain:
The study of supplier and distribution channels is important
in understanding and serving product markets.While some
producers may go directly to their end users,many work with
other organizations through distribution channels.
>Competitive Forces:
Different competitive forces are present in the value added
chain.The traditional view of competition is expanded by
recognizing Michael Porter's five competitive forces that
impact industry performance-
< Rivalry among existing firms.
< Threat of new entrants.
< Threat of substitute products.
< Bargaining power of suppliers.
< Bargaining power of buyers.
12. b.Identify key competitors-
Key competitors are brands that compete in the same product market or
segment.The rapid expansion of competitor intelligence activities by many
companies in the last decade highlights the high priority executives place on
monitoring competitors activities.
c.Evaluate Key Competitors-
A key competitor is any organization going after the same market target as the
firm conducting the analysis.Key competitors are brands that compete in the same
product market or segment within the market.Different product types that satisfy
the same need or want may also actively compete against each other.
d.Anticipate Action by Competitors-
The information obtained in the previous steps of the analysis should be helpful in
estimating future trends,although possible strategy shifts by competitors may
occur.
e.Identify and Evaluate Potential Competitors-
New competitors may come from four major sources:
*companies competing in a related product market
*companies with related technologies
*companies already targeting similar customer groups with other products
*companies competing in other geographical regions with similar products.
13. 5.Forecast Market Size and Rate of Change:
An important part of market opportunity analysis is estimating the present and
potential size of the market.Market size is usually measured by dollar sales unit
sales for a defined product market and specified time period.Three key measures
of market size are :
a.Market Potential-
Market potential is the maximum amount of product sales that can be obtained
from a defined product market during a specified time period.It includes the total
opportunity for sales by all firms serving the product market.
b.Sales Forecast-
The sales forecast indicates the expected sales for a defined product market
during a specified time period.The industry sales forecast is the total volume of
sales expected by all firms serving the product market.
c.Market Share-
Company sales divided by the total sales of all firms for a specified product
market determines the market share of a particular firm.Market share may be
calculated on the basis of actual sales or foretasted sales.