Market Analysis

A Six-Step Approach to Understanding

the Nature of Competitive Markets
Define the Relevant Market
Analyze Primary Demand for the Relevant Market
Analyze Selective Demand for the Relevant
Market
Define Market Segments
Assess the Competition
Identify Potential Target Markets

Defining the Relevant Market

A set of products and/or services that

management considers to be strategically
important.
For example, a brand of herbal tea may have a
large share of that market but a very small
share of the total tea market

Defining the Relevant Market

Describe the Structure of the Relevant

Market
Classify competing product market
alternatives at three levels.
a . Competing brands within a product form
b . Competing product forms within a product class
c . Competing product classes within a generic need

Defining the Relevant Market

Define the Boundaries Within the Market.

Important for determining Market Share

Market Structure for Soft Drinks

Noncola

Cola

Diet

Regular

Diet

Regular

Caffeine Caffeine Caffeine Caffeine Caffeine Caffeine

Caffeine
Free
Free
Free

BRANDS

Caffeine
Free

Defining the Relevant Market

Describe Product Market Structure
Identify potential competitors
Classify competitors in terms of similarity
Define Relevant Market Boundaries
Broad Relevant
Market Boundary
Primary Demand

Narrow Relevant
Market Boundary
Secondary Demand

Analyzing Primary and Secondary Demand

Define Relevant Market Boundaries

Primary Demand

Selective Demand

Identity of buyers of
product form/class
Factors impacting
willingness and ability
to buy the product
form/class

Type of buyer
decision process
Identification of
determinant attributes

Questions on Buyer Identification

Characteristics of Buyers or Users

Can buyers of this product category be
classified by location, demographics, or
lifestyle and psychographic factors?
If so, how?

Questions on Buyer Identification

The Buying Centre

Who is involved in the buying process:

Reference groups
Colleagues
Family members?

Questions on Buyer Identification

Customer Turnover

Is there a high degree of customer turnover

because of mobility or because purchase is
tied to age or other demographic factors?
If so, why?

Questions on Willingness and

Ability to Buy

Willingness to Buy
Would new or improved related products and
services increase utilization?
What usage problems exist or are perceived to
exist?
Is the product or service compatible with the
values and experiences of the buyer?
What types of perceived risks are significant in
the purchase of the product form?

Questions on Willingness and

Ability to Buy

Ability to Buy
To what extent do purchase prices and other
acquisition and maintenance costs inhibit
purchase?
Are product size or space problems creating
problems for customers?
Is the product available at a time and place
that meets customer needs?

Market Structure for Holiday Travel

N e e d fo r H o l i d a y T ra n s p o rta ti o n
Bus

R a il

G re y h o u n d G ra y G o o s e

V ia

A u to m o b i l e
R ent
A v is

H e rtz

P e rs o n a l
B udget

A ir
C a n a d ia n

A ir C a n a d a

N o rth w e s t

Questions on Selective Demand

Decision Processes

How extensive is the search for

information?
Do buyers use personal or impersonal
sources of information?
Do buyers seek information about brand
or supplier characteristics?

Sequential Process of Consumer Choice

Total Brand Set

Awareness Set

Consideration Set

Tide
Trend
Cheer
Gain
Surf
Rinso
Bold
Oxydol
Wisk
Purex
Ultra
Fab

Tide
Cheer
Bold
Wisk
Fab

Tide
Cheer
Fab

Types of Decision Processes

Consumers

COMPLEX

Organizations

Extensive Problem
Solving

New Task

Limited Problem
Solving

Modified Rebuy

Routinized
Response

Straight Rebuy
SIMPLE

Questions on Selective Demand

Determinant Characteristics
What are the benefits buyers hope to obtain from
usage or ownership of the product?
What product attributes or characteriatics are
viewed as providing these benefits?
What is the relative importance of the various
benefits desired?
How much variation is perceived among the
alternatives on each of the important attributes?

Attributes of Fast Food Restaurants

ATTRIBUTE

IMPORTANCE

Food Taste

4.30

Quality and Cost

3.79

Food selection

3.58

Menu Alternatives

3.58

1 = unimportant
5 = very important

Attribute Ratings for Three Restaurants

ATTRIBUTE
Food Taste
Quality and Cost
Food Selection
Menu Alternatives
1 = Poor
5 = Excellent

A
4
3
3
3

B
3
5
5
4

C
4
4
3
3

Assessing Whether an Attribute is

Determinant
Perceived Variation Among Alternatives
Low

Low
Perceived
Importance
High

Irrelevant
Irrelevant
Attribute
Attribute

Defensive
Defensive
Attribute
Attribute

High

Optional
Optional
Attribute
Attribute
Determinant
Attribute

Determinant
Attribute