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Entrepreneurship Unit 2.1

Entrepreneurship Unit 2.1

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Entrepreneurship Unit 2.1

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  1. EntrepreneurshipUnit 2.1 Analyzing a business’s customers

  2. 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

  3. Why Market Analysis? • Market analysispresents research findings about target markets. • Market analysisincludes a target market profile that explains the traits of the company’s potential customers. • Market analysisprovides potential investors with a realistic forecast of the growth potential for the market in which your company will operate.

  4. What is a Target Market? • 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.

  5. What is Market Segmentation? • 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.

  6. What are the four types of market segmentation? • Geographics • Demographics • Psychographics • Buying Characteristics

  7. 4 Types of Market Segmentation • 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.

  8. 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.

  9. Guidelines to Segmentthe Target Market: • 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.

  10. Market Segment Profile (Example) • 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.

  11. 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.

  12. 3 Types of Market Research (cont’d.) • 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.

  13. 3 Types of Market Research(cont’d.) • 3. Historical Researchinvolves 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.

  14. What is Primary Data? • Research collected for the first time and relates directly to the collector’s study. • How do I collect primary data? • Observation • Interviews – in person, by phone, through mail • Surveys • Observe buyers at competitor’s site • Focus groups

  15. What is Secondary Data? • Information collected by someone else for their own purposes. • Where do I find Secondary Data? • Internet • Government and community organizations • Website of the U.S. Census Bureau • Chamber of Commerce • Trade associations • Trade publications • Commercial research agencies

  16. Five Steps of Market Research • 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.

  17. Five Steps of Market Research (cont’d.) • Step 2: Obtain Secondary Resources. Information that has been collected by someone else is called secondary data. • 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?

  18. Five Steps of Market Research (Cont’d.) • 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? • How much would customers purchase? • When would customers purchase? • Who would customers like to find the product or service? • What do customers like about your competitors’ products and services?

  19. Five Steps of Market Research(cont’d.) • 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.

  20. How may Data be Represented? • Bar graphs • Pie charts • Line graphs

  21. Five Steps of Market Research (cont’d.) • Step Five: Analyze the Data. Now that your information has been organized, ask yourself these questions: • 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?

  22. 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

  23. 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. Created by: JJ Abernathy Snow Canyon High School 2006