Welcome to UCL extensions Department of business management and legal programs video lecture series on entrepreneurship new venture formation and strategic business plan and development this video gives instructions. On how to develop an i market analysis basically an introduction to the point of entry into an industry I’m Harry reading er. Your instructor there is a total of over 40 videos in this lecture series that integrate with our UCLA Extension the Department of Business and management’s online course management program canvas each video strives. To be brief and will have a little overlap with each other to tie our curriculum together okay let’s get started our first slide here is kind of an abstract slide it kind. Of sets the the mindset that we want to have as we go into the process of developing a market analysis yeah I use this very same slide to introduce how to develop an.
Industry analysis for the same reason and that’s because this is a section of the business plan or the process of understanding the industry are getting into as a entrepreneur or someone who’s starting a. New venture there is potentially an endless amount of information out there in the marketplace that that you’re want to be aware of to to fully understand the marketplace and. The point of entry into the marketplace so the concept behind this particular image up here this is what’s referred to as a titration in chemistry and a titration is a way of determining. The percent of something in something else or in this case a good example is that percent of alcohol that is. In the liquid in this in this beaker and a titration is where we can put drops of a chemical into the solution and by counting the number of drops into the solution that. Has a known volume that we can at some point the solution will.
Turn color from from clear to purple or pink and and then we can count the number of drops up on a chart per the volume and see what is. In that point where it turns colors is what we. Refer to as a point of super saturation and and at the same point. We can look up and say well what percent of alcohol is in that particular liquid when we go into the marketplace to acquire information on the market the point of entry into. The industry at the point of super saturation at the point that we know the industry well enough that we can have a dialogue conversation about it that this is when we’re. Ready to start actually developing the information the the industry analysis section we don’t want to copy.
And paste information off the internet into it we want to know it well enough that from the heart from the mind that we can just have dialogue with someone about. It and once we know how to profile and explain the four sections of market analysis that’s when we’re ready so I share this with. You just so you know when it’s time to stop doing research and start actually writing going. Forward with the process of your business plan or with the process of developing your business model. For your entrepreneurial venture the next slide I’m gonna share. And I share the slide much throughout our lecture series and this is an image of Malcolm Gladwell’s book the tipping point and the reason why.
I have this up here as we go through and research and assemble the articles the information necessary to complete our market analysis we want to be. Aware of changes small changes that are occurring right now in the marketplace that that might. In fact lead to pandemics and demand because this book is all about how to detect us how little differences can create huge demand for what you’re you’re selling as a business so every day.
Every week every quarter things change and if we’re looking for them for aware of them that that they’re discovered we now can say what my gosh if I taking this knowledge of this trend. In market demand that we can tweak our mission statement our vision of success are our phase the competitive. Development to take advantage of this so we want to be very aware of opportunities as we go through this.
Process of assembling the four parts of a market analysis so as we stand. On the threshold of the market analysis the most important thing we have to understand about a market analysis is how to profile. The point of entry into the market such as supply and demand demographics psychographics competitive advantages that we have over a competitor our position.
In the marketplace since but the bottom line is we need to make very clear from the standpoint of profile whom selling to and who are competitors who. Are we going to be doing economic battle with and so much of the mission statement stuff is reflected in here and here is also where we start to understand how we’re gonna crack. The market how we’re going to compromise barriers of entry to get into the market capture market share and survive the whole process. Of a business launch market analysis is all about the point of entry in. The market so we have a you know a magnifying glass we want to study our point of entry. Now we we want to stay also that in the industry analysis explain how the industry works nationwide worldwide but the conditions of the market here in Los Angeles could be totally.
Different than Boston or Chicago or New York or something like that so market conditions change based on the point of entry so the requirements to. Get started in a market in Dallas Texas or or Sacramento California could be totally different than what it would be in Chicago. Or Boston or something like that so we’ve got to be aware of it. Things change and this also requires boots on the ground we have to live the market we get this has got to be where we understand and can meet the consumer this is. Something that you really can’t learn from books you’ve got to go meet people you know this is where experience comes comes into.
Play I want to profile some of the objectives of a market analysis first its define the point. Of entry into the market we often use maps to do this maps and diagrams to do. This second we want to review the markets level of supply and demand so you know the what’s the millions of dollars of demand for our product and services. And and then what level of a supply meaning competitors are out there supplying that demand and so you know later we’re going to define what’s a market opportunity. In essence a market opportunity is where there’s more demand than there is. Supply and duh and and perhaps even in cases where there’s more supply than demand if you differentiate yourself this gets back to Malcolm Gladwell’s book the.
Tipping point if you differentiate yourself just right you might be able to find new pockets of demand that your competitors are asleep at the wheel with next is profiling the markets. Consumer you know all businesses that are successful know their consumer like the.
Back of their hand they know their favorite colors they know what they do on weekends so a key to success is knowing your customer and. And what they really want and what they need versus what they want and we’re going. To talk about that and I got a little video clip. That’s really in a drive home you know the importance of that of having that kind of knowledge the next is profile the markets competitor who you’re. Gonna do you know battle with I always like to think of this is you know Star Wars Luke Star worker with. A lightsaber you know to go out and and doing battle in the marketplace but truly you know we live in a you know a capitalistic economy and we have competitors and we have.
To compete with them and quality cost time and and we and. The more we learn about them the better we’re going to understand how to compete with them if we don’t know what we’re competing. Against it’s really going to be hard to capture customers with your advertising campaign because you’re not. Going to really be aware of what because customers be in what that what the competition’s doing they they might have.
Many years of experience in a particular way of Kiev of taking care of their customer and so being aware of how they do what they do is going to be important knowledge. For you but also might introduce you to things they could be doing that they’re. Not be doing doing and and and how you might. Capitalize on filling that gap profile the company’s market position so early in our lecture series we talked about how to do a SWOT analysis and that’s a part. Of case study analysis and and and and strategic planning process so SWOT analysis one of the strengths the weaknesses and opportunities and threats well we we within the context of doing a market.
Analysis want to document what we perceive our strengths our weaknesses our opportunities and threats in the marketplace and by laying that out there the reader of our business plan. Our just knowledge and our colleagues and staff and management are going to be aware of it the more we’re aware of this the more likely we. Are to be prepared for it so if we know our strengths we know it to sell if we know. What our weaknesses we know how to protect them if we know our opportunities we know how align our resources to go after them and. We know our threats we know how to have our guard up.
And being aware of these situations when they apply identifying market opportunities so in the process of going through developing our market analysis we no doubt are going to stumble across opportunities that we. Didn’t realize getting into it and as we’ll touch on on the end of our lecture here this. Is where again Malcolm Gladwell’s book The Tipping Point comes in because if we can identify these we then also. Might need to go back and modify our mission statement our vision with success statement our organizational. Structure or business model and our phase the competitive development to take advantage of these market opportunities next is we need to outline our market threats and outline market threats and market threat. Solutions this is basically saying these are our dissipated problems.
And this is how we’re going to deal with it so by being able to identify things that are threats or things that we are our weaknesses and as we. Launch into the business and then solutions for each one we’re gonna be just a bit. More prepared so the more we’ll prepared the more we practice. And train to to defend herself and take advantage of opportunities when.
They’re when they appear the more instinctively we will in doing this so as I’ve mentioned. In in many lectures to this point or slide to the point you know one of my favorite authors is Rick. Pitino in the book successes of choice and this is where we where. We profile what an athlete or competitive athletic team goes through in terms of practicing plays over and over and over and over and over again and being aware. Of threat situations and opportunity situations and practice them from a strategy standpoint as a company management staff over and over and.
Over and over again when they appear we just seize the moment we take advantage of it if we’re not aware of it if we’re not practicing for. It a threat could come come about and take us down as a business or an opportunity to come back we could just be blind to in Teva knowing it’s there so the. More that we can identify and establish opportunities and threats relevant to our weaknesses and opportunities in strengths the better we are to respond when these conditions present themselves you know much of our market. Analysis section deals with our advertising our marketing programs are becoming aware of how we’re going to develop what we call a marketing mix.
Of how we’re going to do our advertising how we’re going to understand the market and I want to introduce you to what’s referred to as a marketing the marketing mix for peace. You can google this this is an established concept is also another one we’re going to touch on called the marketing. Mix seven P’s and there’s three additional P’s that can be added to it but fundamentally we have to be. Very very aware of these four p’s of a marketing mix of the mix of understanding our market the first P is. Product and our product has to align with the needs and desires of the customer the client the doesn’t fit the task at hand I mean this. Is dumb logic but it’s totally possible that you the overly enthusiastic entrepreneur might develop and product asura and service that’s what you think the customer wants.
But it’s not what the customer wants it’s it’s it’s missing the sweet spot its we never unit you never took the time to really find out what they’ll cop the customer. Needs and wants because what they need might be different form they want so you kind of have to understand. This and a lot of this understanding comes into what we refer to as the eighth P which we’re going to talk about in just a second and a great video clip.
Fulness so let’s just be aware of our product service alignment to the marketplace the next is place this has to do with product distribution so if we’ve got a product and service. That we want to sell to a customer client we’ve got to also have a way to get to them so it’s going to be.
Community convenient or it’s going to be something that can. Be disseminated through the internet in some kind of way such as you know video conferencing or downloadable books and PDFs versus actually print the book and put it in the mail and. Mail it to somebody but we have to be very aware of how we’re going. To distribute our goods and services to our target customer client next is.
Our price our price why I mean obviously boy if you’re off on your price point it’s it’s a kiss of death so we have to clearly. Understand the relationship between our mission statement what are we selling to whom are selling what makes it competitively. Different and our brand a price because if we’re trying to be. A JC Penney’s with a Nordstrom price or vice versa we got a big problem and again this is where experience comes in and when we get into our competitive strategy sections there’s a.
There’s a whole strategy call or price strategy and how we come up with that and how we define and explain that so price is a part of developing understanding our marketplace. The next is our promotion ads advertising public relations sales promotions sales point direct sales personnel and social media Facebook. Linkedin powering influence personal references networking it all goes in what is. The mix of promotions that you’re going to use to promote your products and services to your customers clients in the marketplace and that has to again be in balance with distribution. Place the alignment of the type product and services and price these all are interconnected and we have to understand all.
Four of these concerns these four p’s of your your marketing mix to develop a well-thought-out marketing program marketing strategy that’s all a part of. Your market analysis now I want to talk about its the extended the these seven P’s. And so there’s actually three additional P’s of the marketing mix that we. Want to present the first four are just integrated with each other and so the next three are going to take a little more of a dynamic two things that we.
Really need to understand to understand the point of entry into a market and the first one here is people you know all companies are reliant on people who run. Run them from front to back sales to management so we we need to we we we want to make sure that the point of. Entry into the market has the qualified people to staff and run the company so you know first we.
Start a company out not in a market point of entry it’s out you know in in nowhere you know you know it’s gonna. Be kind of hard to find the qualified people perhaps to to do what you do if it’s high-tech we probably need to be close to a high-tech type hubs Silicon. Valley or you know something like that over the Bay Area you know and there’s a number of high tech hubs that are emerging. All over the nation but obviously if we’re going to be a company that provides goods and services that are high tech a. Computer internet type things we’ve got to be close to people who can do coding and understand or technology that can understand.
This stuff the next year is process how you deliver your service and how it’s done the process. Of manufacturing the value-added that comes from maybe the unique way that you assemble things and and one and once again this is. You know that this is one of the things the customer pays for. Also going back to the mission statement what are we selling and to whom are selling and.
Then the next sentence of what makes us competitively different in the marketplace. And this process can it’s often what differentiates you the aspect that differentiates you in the marketplace why is some customers are going to hire. You versus someone else so and when we start getting into. Researching our competitor me you might find out that they use a totally different process that might be an eye dyeing outdated process so understanding our process relevant to what attracts a. Customer client to us is very important and might be an aspect that you may.
Overlook that and and thus be missing out on opportunities physical evidence you know this this. Deals with you know the so much of how products and. Services are sold are intangible some because people buy you first and what you’re selling second but we still have they have to have the evidence the testimonials that it works. And so as we go into a market we want to make sure that we regardless of how we differentiate and our our jingles and slogans. And culture and all that kind of stuff and it’s all important that we also have to have the evidence that are come on our. Competency that our product service works it’s a viable solution and we have the evidence to show that here’s the.
Eighth P that I want to talk about in the marketing mix and basics is the product product and productivity and. Quality this PE ask is what you are offering your customer a good deal you know there’s a saying in a beauty. Is in the eye of the beholder you know so it is sometimes people are attracted to. You for really hard to understand reasons but it’s important that you do. Understand these reasons and where the problem lies here I here let me just finish reading this this is less about you as a business improving your own productivity for cost management and more about. How your company passes this on to its customers and clients so the magic of what you do and how you do what you do though may save money may be.
A really fabulous alignment with your personality and your passions and all that’s stuff which makes everybody a happy camper but we have to also bear bear in mind what we’re selling and how we’re. Selling so how it satisfies your personal needs is in a way ill relevant to the importance of it’s satisfying your customer and. Being aware of what your customer really wants and needs and they might want something but really. Needs something else and then how do you do the switcheroonie kind of of market development tactic well over 20 years ago one of my. Students is Clark voce and Clark was I think took my class about my calf termite my third year teaching at UCLA Extension I’m going into my 24th year now and and this is before.
Back then Clark nor I had gray hair we both have gray hair but Clark went on to form a very successful market branding consulting company. He’s worked with some really big big-name organization redbull there’s a whole whole list but I knew you know he’s.
Did some really big projects with with redbull the the energy drink company and I’m gonna play a video. Here of just about a two-minute section introduction to to Clark this is a he he frequently guest speaks to my UCLA classes and this is about an hour long video or 45 minutes. Or so video but I’m only going to play about two minutes of the video and up front.
That really summarizes the the the real gist of the importance of understanding brand marketing so I’m going to go ahead and. Start this video and come back at about two minutes so I understand that you here to turn and learn about factors essential for turning a great idea into a successful. Business so I’m going to tell you a little bit about my background and and. We’ll take some lessons from that but I want to start as Harry – my name is.
Clark of Oh ta for now that’s French pronounced vote EA like you’re voting and I want to. Start with this quote and if I teach you nothing else tonight. I want to leave you I want to start and end with this quote it’s the most important quote I believe I can give you and it’s there’s nothing more irrelevant than what I. Think you need and I think this is this is the key to success. For any entrepreneur it’s when you really think about this quote and really what it means people don’t buy what they need necessarily we don’t need we won’t know we need certain things but.
We buy what we want so you’ve got to tap into your target audience with your product you’ve got you’ve got. To basically sort of like a Trojan horse you’ve got to deliver what they want and also give them what they need but you don’t necessarily lead with what. They need so it makes sense so if there’s one idea concept that I can instill in you it’s this and this this quote it’s a simple corporate it’s there’s a lot. To it and I’ll keep coming back to it as we go through my slides but just think about it in context of what you’re trying to do in. And a good example is we we fall in love with their own.
Own ideas sometimes a lot of times especially if you’re starting up a new business and that can that’s a. Good thing you should be passionate and as Harry said people. Buy you first the product second so you need to be passionate about what you’re selling but you can’t fall in love with it so much that you don’t meet the market where. It wants to be met so that’s kind of the essence.
Behind this quote you’ve really got to you’ve got to read read know and understand your market that you know exactly what they will buy what they. Will want as opposed to you know it’s sort of. Think about health and D listen to your parents when.
They give you advice right they know what you need but it may not be this way what you. Want so think of it in that context so I want to I just wanted to okay. So words of wisdom and just so you know the important take-home from that little clip is just you know try to set your once you master your passions and what your your. Mission saying what you’re selling to whom you’re selling and what makes you can peddle be different gosh really take. The time to talk to your customer your client and understand what does it say they really want I’m a lot of people do surveys.
Kind of suck because who wants to likes filling out surveys but you know I encourage you to actually go meet with people do do lunch do coffee do you do cocktails. But you know have that had the pointed question what is it you truly like about my practice or me. You know what what is it that that you really want or really need or the you know. What may well in your eyes what makes what we do unique and why you are one of our customers or clients the more you do that the more you. Ask that question the better you’re going to understand and that might be some really really valuable information in developing and growing your business I want to now take a.
Look at the four parts of a market analysis the first part is profiling the market region. And again as I mentioned we often use a map the second is profiling the target customer whom we’re. Selling to you this is mission statement stuff what are we selling and to whom are we selling so this. Is going to get into demographics psychographics you know the demographics might be covered in profiling the market region but the sure is we’re going to get into values and and. What why people make the decisions they do we have a whole slide on that in just. A minute and then we also need to profile our competitor who who.
Do we have to steal customers from who do we have to. Acquire market share from so the better we understand our competitor the more. Successful we are in in compromising the barriers of entry into the industry. And surviving in the industry once we get there and then file it finally profiling our position in the industry a SWOT. Analysis in terms of profiling our market position in our own industry okay so let’s now talk about profiling the market market region this actually this slide.
Is kind of a overview of everything we’re going to talk about in a bit. In a bit but first off up here and this is just just a way of looking at all of. What we’re getting into before we get into it kind of an overview this is kind of a four four step process here. But our step one is define define and target your market so how. You know this Friday how could how do we define our market place of well who are trying trying to get to who were targeting okay.
It’s critical so you got the overall market but then here’s. All the potential customers but but then here’s the statistical most likely to based on what. Makes us competitively different will buy from us or high risk customers so can we do then can we outline the market structure.
The structure the market in terms of the categories of. Customers that we sell to the the methods and techniques by which we get to these customers. Can we can we come up with any kind of diagram that categories and boxes in it you know if we don’t do this it’s kind. Of like shooting in the dark the more the better we have a target we can we can aim you know we can we can. No target our marketing app if we don’t we’re just you know we’re.
Putting expensive marketing out in the inner mark and we might or might not hit the spot the. Second step is define and target your customer whom are we selling to this gets. Into the psychographic so once we got the market established now we’ve got to really take.
A look at who’s in that market that’s most likely going to buy goods and services from us and now we have to understand the psychographics we then want. To measure our customer base so the better we understand whom we’re selling to can we now figure out what percent of the market are these people are they 1%. 2% 10% 50% 75% because once we know that we can take the price point of our. Profit centers our goods and services and start multiplying that out. Based on the percent of people potential statistically most likely.
Customers and now we can put a price on the value of the market and and when you do this by the way it can be really eye-opening you might. Not have any idea how much opportunities out there until you really start to take a look at you know most likely to hire as customers in the marketplace the. Price point of our goods and services and multiply those two together and sometimes that can be a really big.
Number I mean in the millions of dollars kind of number and in that so. All this might bring much new insight into what your real vision of success statement is the third step here is defining the defining and. Targeting your competitors who’s going to try to put us out. In business who’s gonna undercut us who’s gonna look at us as competition and so we then need to assess what advantages we have over those competitors so who are.
Competitors what are their strengths weaknesses opportunities and threats etc what. Are our strengths we it’s an opportunity setter our SWOT analysis and how can we capitalize on any differences there so in our advertising material and our direct sales. And things like that we can call to our potential customers and clients the what makes us difference and why. You want to hire us so and by the way this kind of information once did not just happen at the process of getting into the mark for the first. Time this is a perpetual process that we always want to be aware of because.
Things change daily weekly monthly quarterly annually etc finally we want to summarize our market analysis with SWOT analysis what the strengths weaknesses opportunities and threats of the whole. Market not just our position but the whole market and being aware of that we want to talk a little bit about targeting your market and this is.
Kind of a cool graph yeah so Bob this is UCLA and Los Angeles kind of our our point of entry so I got a. Little magnifying glass and Los Angeles there but but we want to be you know aware of how we’re going to segment the market so much of. Market development deals with subject matters of market segmentation how are we going to divide this market out so that when we target our. Social networking or Direct Mail our direct sales are our blanket newspaper advert I know. TV all that kind of stuff we have to be really really aware of how we’re segmenting the market to get to the person we really are our most likely customer because a more effective. We are in our market development program needless to say the more successful will no doubt be as a business so there’s Geographic.
Concerns there’s psychographic concerns there’s behavioral concerns there’s demographic concerns so we add this. All up in terms of geographic location demographics of who they are. And what part of the demographics are we targeting you know behavior type of things in terms of politics and political and lifestyle kinds of stuff and then psycho drag. Graphics you know behaviors value structures you know these all come into play to how we segment the market to like you know I’m post.
Think of them like filters like sunglass filters that we put on and and what shows up at the. End of all these looking through these filters is exactly who you’re marketing to the better you understand. Who you’re trying to get to needless to say you’re. Just going to be much more effective and how you design develop and distribute to market development material and then when you meet these people for the first. Time to do one-on-one sales you’re just gonna be so much more effective in doing what you’re you’re doing to achieve your objectives so I just for the you know funny in terms of. Profiling the point of entering the market let’s so if we said you know the Greater Los Angeles area so it doesn’t take so if.
We go and and this is one of the beauties of the internet now cuz I’ve been in this business long enough. That I remember when there was not the internet you know. The very first class I taught at UCLA in 1993 there was over 30 students in the class and only one student had an email address.
Kent can you imagine how much things have changed so if we Google Greater Los Angeles market area demographics we will find paragraphs like this really nicely written paragraphs and here’s one case where you. Can copy and paste but these are you know Dell and much of this kind of information you can also be acquired through Chamber of Commerce and. We’ll get to that in a second but both these paragraphs are just copied and pasted out of a google search on Greater Los. Angeles market demographics and I mean it talks about the five counties the number of people residents and and various different you know counties so we have about 18 17. Point eight million residents that are in the area for the night the 2015 sets. The census it also you know has a comparison with New York could get a feel for you know how large our market is here so do you so our business plan our business model.
Are our knowledge wants to have kind of an idea of how many people are in our market area now we’re going to start taking a look at of all the. People in market area what percent of those are potential customers and what charge are most likely to hire us customers if we. Can get our marketing and development information to them just feel we’re that the US Chamber of Commerce.
Every market has some kind of chamber commerce and their job is to promote the the marketplace to businesses to. Have them come in and because would that come comes. Taxes so you know city government pays for this they. They give big contributions to help get them off the ground because these the Chamber Congress goes out and promotes this area to businesses and that’s where they get business.
Revenue tax revenues sales tax revenue and these chambers of commerce will often have brochures pamphlets on the. Demographics of the Greater Pasadena area or a Long Beach area or Santa Monica area so by.
Simply going to their Chamber of Commerce you can get a really neatly organized that you know in terms of number of. Households adults per household children per household number of cars average income average education I mean just.
A lot of really great information also the US Chamber. Of Commerce website you can probably get a lot of that for without without even.
Walking in a chamber commerce door also know that most public libraries have national state and regional chamber commerce type directories that profile a lot. Of this basic information on a national level so just know that. Through the Chamber of Commerce or there’s a lot of this demographic information out there and it’s very easy to get your hands on next we want to talk about how to profile our target. Customer and by the way this is the essence this aspect of entrepreneurship new venture formation it’s just so essential boy if you don’t understand your customer and. Donor stand or competitor you you know now you can start to understand why 80% of businesses fail within the first two and a half years it just you know you just can’t make mistakes.
If you’ve gotten the more you’re on target here the more you’re gonna have a very successful very fun exponential growth kind of experience built without this knowledge you. Could be cruising for a huge life in financial bruising so here. Goes this is a graphic up here that he’ll you know constant in stocks that talks about seven categories of whom you’re. Selling to and we’re gonna drill down and all seven of these categories in terms of.
Better understanding our target market so long right we’re just so we’re just asking question are we selling to in these seven categories of client customer profiling it’s going to. Give us a lot of insight in terms of what to look for and what to understand to better profile or customer the first area is our understanding on all of these deal. With our understanding our target market but first off is the industry excuse me so what.
We mean by this is what we mean by this is if you’re let’s say you’re an office supply business and clearly if we. Did an industry analysis we would do an SI c-code research on off the office supply industry but let’s say you sell office supplies. Specifically to the legal industry attorneys you know and all the many other types of businesses that play a role within the legal industry and so if this is the case then.
Needless to say you would probably need to know and want to know a lot of information about how law firms work laws regulations trends and all that stuff. Relevant to the lioness tree even though it’s not the industry you’re in but it’s the industry that you sell to so you won’t understand the industry. And or industries if relevant that you your mission statements targets or identifies as the the whom you’re selling to so you want.
To understand the industry or industries of your if they exist of your customers because you’re selling to. You know the residents or customers regardless of what they do then this is this.
Is not applicable next as understanding as far as targeting your market understanding the size of the organization or the value the annual income of the. Customer but how big they are so are we going after six-figure income individuals or are we are we going after companies.
That have 25 or more employees or 50 or million and more in sales so if size is relevant and we’re trying to be at some kind of defined sweet spot in size then. We want to know that for instance for selling the visuals and and be given what we’re selling. Is that if an individual is not clearing a you know six-figure income as a family then they are probably. Won’t be able to afford it it’s a good question to ask so we want to be aware of this. And if applicable we want to document it because this has a lot to do with how we segment quote-unquote segments at the market if you’re too little or if you too much you’re not.
The just right category so we want to understand whom we’re selling to from a size standpoint in. Preferably somehow the identified in our mission statement cute graphics. Here if our target market is defined in any way by technology either a master of Technology or or doesn’t understand any technology you know the other. Day I was getting I was dropping my car off at. My mechanic to have oil changed and looked at and all you know it’s just you know maintenance and I was chatting with him and this guy’s really good I.
Mean it’s really really good but he works on cars he doesn’t work on computers or technology or educational videos. And all this kind of stuff and he wanted surely with. Something on his website because he’s having problems with a guy who develops his website and he shows me hit the logo on his business cards on the website and I asked him. Do you have a JPEG of the of the image and he looked at me and goes what’s that well I mean if you have anything to. Do with graphics or you know Photoshop or any kind of mild application of technology you know what a JPEG images so anyway so I have this guy you know with a you.
Know a tin can because I’ve been for those of you. Who might not know if you take two tin cans poke. A hole in the center and tie a string pull the. String tension on it and the the the the round part of the tin cans like a diaphragm so if you talk in the tin can it’ll make that diaphragm you. Know vibrate which sends the vibration down the string to the other tin can of someone puts their ear to it. It works like a telephone pretty crude but you know it’s a form of communication so so anyway the point of this particular.
Category is if there’s some unique application of technology that differentiates that that can be used to segment. Your target customer you want to write that down you want to be aware of. That so our next slide here deals with price point so some customers are hypersensitive about a. Good example is the mechanic I was just talking to you about she he does I mean less than 10 percent of his. Customers are new car customers the majority of your customers are people like me that are keeping an old car going for a host of reasons and but it’s important to. Me to have a really competent mechanic I mean the person I’m talking to is the person actually working on the car it’s not a sales rep and I have a certain kind of reassurance.
That based on the relationship I have with him it’s almost like a doctor patient because I depend on that car to start when I. Set the key in and and it means much to me to know that the guy I’m working with is is just a state-of-the-art auto mechanic technician I.
Mean he’s passionate and I just an absolute perfection ER so. What he does I’d feel a kind of leery about you know and never seeing the person’s working on my car it’s like it’s like having surgery or. Something done on you and you never get to meet the the surgeon you know they put you out and someone you never meet comes in and cut you open and dust I mean.
You wouldn’t like that you you want to have some kind of some kind of relationship with you know the person who’s gonna work on your body or your doctor and so so. The price point of this mechanic is going to be a little bit higher than your average what it cost to get things done but in.
My case that’s for me that’s worth it I don’t mind that so it’s price point it’s gonna be a little to. The right of the equilibrium maybe 10 or 20 percent but still for for me it’s well worth it because I want to know that it’s almost like an. Insurance I want to know that car is gonna start most likely I mean he. Can’t guarantee this stuff but most likely I’m doing all I can to have a very confident person look at it. You know in dealerships and in people who hide the mechanic in the back I don’t know if.
That’s going on so that’s just an example that sometimes people have a price. Point that’s actually higher than the equilibrium market price next is the distribution model I mean there’s all kinds of. Of getting products and service from point A to B from the person who produces to the person who receives every industry is different and there’s a wide range of disseminating distributing. Products and services to clients and customers so whatever that may be whatever you specialize in that might have. A lot to do with how you segment the market in terms of internet distribution versus hand hand distribution versus UPS FedEx US. Mail distribution get on the telephone of videoconferencing goto meeting.com it’s you know tight types of product service distribution but whatever you do it’s something.
You have to understand as a model and how it works cuz it it might be a real critical aspect of how you segment your marketplace relevant to how you distribute your your products and. Services okay the buying process how complex is the whole process of the selling and buying of the goods and. Services that you’re providing so this is an image of the stock market I mean and if you have something. You’re selling on an open stop mark oh my god the you know takes years of accountants of attorneys and things like that and millions of dollars in fees to organize an or. Corporation for to be sold on the open you know Nasdaq or New York Stock Exchange for example it’s very very complicated in order the process of buying. A car and licensing and and financing and there’s a lot of lot of.
Talent and understanding and knowledge goes into just how to make that that happen credit ratings etc or it could be just as easy as walking up to a counter and slapping down some. Bucks and picking up whatever you’re buying and walking out the door with it so is there a. Complex process or not what goes into it is there like if you sell guns you. Gotta you know do background checks and things like that so again this is another aspect of that might have much to do with how you segment your market to target. Your customer the next thing you want to be aware of is. Is what you’re selling is it a whole product solution or is it a part to a.
Product solution so is it the whole or is it some so is that a complete is it a complete solution or a point. Product solution so here I’ve got this this red sedan that’s a complete solution get in a starting take off but then I also.
Have a transmission or selling transmission that goes in the car we just as easily could have a little part that goes to. The transmission into the car so just kind of be aware is what you’re selling a part of the whole or a breakdown of the some because that might be some aspect. That you use in segmenting your market okay so this.
Is kind of an important but very simple looking graphic but it’s kind of important so we kind of profile the things that are relevant to demographics and things that. Are relevant to psychographics so relevant demographics age gender race location employment status we. Could also put in points that might be you know income. Employed unemployed but I’m assuming that means how much you make and then psychographics or maybe full-time versus part-time employment that. In any way but psychographic steals with things that are personality values.
Attitudes interests lifestyle so these are this kind of gives you. A feel for the difference between being someone in a market in how you demographically fall into that market versus being someone in a market and your values lifestyle or religion. Or politics and things of this sort and I’m being aware of this stuff which absolutely exists is something that we have to absolutely be aware of from the standpoint of doing segment market. Segmentation again the better we can segment the market the more likely we are to be more effective and efficient in distributing our marketing and advertising so next few slides are. Gonna deal with how we look at the whole two segments of the whole down to the most. Who’s most likely going to buy our products and services and how to put a price on the value of our.
Market so this light is entitled you know market segmentation if we look at the bottom here it goes you know the mass market the. Total the total market and then we’re looking at geography the location and then demographics how we’re gonna sort that location into demographic categories and then how we’re gonna take that and break. That down into psychographic categories and then how we’re going. To then take a look at that in terms of what are. The benefits that that psychographic category is looking for and then now we’re gonna look at. The usage rate how often are they going to buy these goods and services on a monthly annual basis and then wallah there’s our target there’s our you.
Know our target customer that we raft after and how are. We gonna get to that person you know but now by knowing this information we’re more likely to have a realistic and logical market development approach to it in. Terms of of trying to figure out people who are in the target market what kind of magazines of the read what’s what are they doing on weekends how can I be. The same place they are to meet them and create a personal relationship who are the mavens who are the connectors in this market another.
By the way another really great aspect of my the book the tipping. Point by Malcolm Gladwell he outlines how social networks work and. And reading that book really starts to help you understand you. Know how valuable is to meet you know a connector or a maven within a market and if you create a. Relationship there that person then turns around and and and communicates shares knowledge about you to hundreds of other people.
Eighty percent of all opportunities comes from a third party person refers. Your name so you know putting this time in can help you understand how. To segment and get to the person who in turn. Turns around and and and and shares your name with a hundred other people so one contact can be like. A pro and a more powerful way contacting a hundred other people because of the referral aspect the next slide here graphically shows. You’ve got the total market in this case it’s called the held the total available market a total available so that might be the you know the population.
Of Greater Los Angeles area you could say seventeen point eight million people now chances are not they’re all not probably going. To be interested in whatever you’re selling that a very large segment probably would. Be the next is the serviced available market who’s who are real. Life going to need your product and services in terms of what are. You selling to whom you’re selling and then the actual target market getting into psychographics and things like that distribution all the things we just got talking.
About could be the actual target market and and one of the. Reasons in when we click this now one of the reasons we do this is if we take the total market and if we can somehow say you know the service market.
Or the total potential market is a certain percent and if we can come down and. Say even if it’s like of 17 point eight million people there’s a potential market of 3.5% or 1.5% times okay so we got average price times the.
Number of potential of actual customers in that client that was that’s how we’d come up and put. The potential market value and sometimes these numbers are really big so some that which gives you much incentive.
To compromise barriers of entry to get in a business so kind of keep this in mind this is a way we can put a value on on on the market and it’s. Quite inspiring because there’s a lot of work that goes into just starting a business before you even get in the business I mean it’s sometimes two and. A half years before your business takes off that’s a. Lot of debt you got to have to get something off the ground that’s again why. It’s important to have alignment because by aligning it takes 10,000 hours in an industry before the industry embraces you before things take off and this gets back to glad the. Malcom Gladwell wrote a book called the outliers and just was how successful people became successful Beatles Gates the you know bit of athletic stars etc and you.
Know what much of its at the right place at the right time but in all cases all extremely successful people had over to Beethoven had over 10,000. Hours logged in doing what they’re doing in terms of practicing over and over and over and over and over again before the exponential growth curve. Success took off now I want to talk a bit about profiling our market competitor and and sometimes this is. Kind of hard because competitors don’t really publish all the information they have and this gets gets back to just.
Being around the industry slowly but surely you acquire this information. And we’re about to introduce to you seven categories of competitor information and again I’ve got the Malcolm Gladwell’s tipping point book up here because.
As we learn this information we might also be learning what our customers. Are or are not doing that actually represent an opportunity for you to take advantage of as a business so the very first category. Up here in terms of what is the competitor strategy how do they get their customer now here’s an example I have a Ken Dunn was a friend I know this guy.
Who’s got a chiropractic business in Pasadena and the chiropractic business is pretty competitive. Of Lux chiropractors and some time ago he started running club and this club BK has become very very successful it’s very large and and all of.
His customers tend to come through word of mouth through this running club and so this is a way where a competitor might. Start a non-profit and all the customers come through the relationships that are developed through the nonprofit or they’re very active in their church or a political party or. Activism in terms of you know environmental causes you know there’s all things you know the word of mouth references comes through relationships that are entered into under non-threatening basis and so all. Businesses have yeah unique and different strategies that might be aligned with what makes this CEO or or the owner of that business uniquely different as an individual taking.
The time to understand the strategy of how your competitors get their customers are going to be very enlightening because you could maybe do the. Same thing and it also might help you understand what is it that you’re passionate about that that gives you a non-threatening vehicle to meet. People that could turn become a potential customer someday next is a competitor’s research and developer innovations.
Is there anything they’re doing that’s just totally different than what other people. Do you know there’s there are businesses that are like dinosaurs they keep you know they. Use just all the fashion you know no technology you know tools and sometimes.
They’re better than the technology but that’s just maybe how they how they do. What they do and then there’s competitors that just everything’s computerized you got. To have a you know a bachelor’s degree in computer science to be able understand how to use the stuff and everything in between so you want to take a look. At what kind of innovate innovations are technology that your competitors using and are you doing the same thing and or not or or. Maybe you should be you know but it’s something that’s category of analysis the next is your competitors of market perception I mean everyone can have different. Perceptions of a marketplace how does your competitors see a market as dying growing are they developing new market profit centers are they investing are they you know I remember back.
With you know they like for instance we can take a look at. Technology and and you know CDs I mean you know iTunes is replace these kinds of things so you. Know so in competitors who are in investing in forms of archaic technology well there so could be demand but it’s but you know the the you know they’re gonna. Be in a very unique category and there will always be people for the old-fashioned way of doing it and so. Being aware of how competitors perceive a market and capitalize on that could be very valuable. Next is competitor detections what this means is what kinds.
Of things can does a competitor do that might be a secret you know that’s that’s not on the surface and no. One talks about it that they they have clandestine ways of doing things you know things that you have to be on the inside of the you know company you know. Industrial espionage kind of things but you know is there anything going on. That’s really secret and try to detect on the texture detection of some of these kinds of things next is just general competitor profile number of employees yours a business and. You’ll sales square foot of cells face profit centers just just a myriad of profiling information and this information is.
Going to be valuable because it’s so I’m gonna we’re gonna introduce you to what’s called a competitor comparison table and and and we can populate a competitor comparison table. With this kind of information all of this stuff can. Fit into a competitor comparison table what you want to do because it it shows. That you’re straight wise you just it’s one of those things you kind of have and then next is value proposition now a number of videos that we’ve. Presented up to this point talked about the value proposition ladder you. Know what’s the bait how can we have some kind of relationship where there’s no transaction but there’s value such as the guy who got the running club.
Going well he gives free advice to people in terms of. Their sore backs and that kind of stuff but then if the problem persists there’s a working relationship and they come. Up to him go say doctor or so and so I really feel like need to see you. As the doctor as well come on in and he signed them up an insurance company information and now.
He’s billing this guy $200 a week every time it comes in and in season so it’s. Good to have some kind of perception and or string of profit center and services where there can be a minimum entry point that. Leads to another number of the level to another level to it you know you just don’t come in and say. Oh sure come on in and there’s ten thousand dollar diagnosis fee well oh that’s an awful lot of money I think I think I won’t come in so it’s good to have a. Latter levels of sales points to guide a customer client through so you know you know. Scare them away with your ultimate objective and so to be aware does does your competitor have any kind of.
Value propositional ladder system in place and finally the financial profile the customer how how what’s their overall market value and and success from that. Standpoint so all these things deal with how to assess our competitor we’re almost done it’s kind of a long session here we want to talk a little bit about.
Barriers of entry and then we’ll be we’ll wrap it up so my berries to. Market entry can deal with market cultures credit and financing do you have the ability to financially get in the market market make. Up and and so so this is an aspect of market very. Stiff that has to be compromised operations and supply chain government regulations competing brands are all things that deal with. Barriers of entry every industry every markets different it’s just so be aware and try to identify the barriers of entry that might exist before you start the whole. Process of getting in because you don’t want to put all this.
Money all this life into getting a business to get into market and find out there’s some aspect of the. Market like you need a liquor license or something like that that’s just absolutely impossible to obtain for some kind of regulation reason and and and you find that out two years later.
And ten thousand dollars put into developing a business to get in the market and find it you can’t get the license to exist in the market this is a quickie example of this so. This is Amazon notice Amazon logo down here let’s say if you wanted to compete with Amazon can you imagine the high the economies of scale how much money would create that. You have to invest to have economies of scale to do what they do same thing with high learning curve I mean all the computers and distribution technology goes in. To what Amazon does the capital requirements of warehouses assembly distribution lines racks computerization and then the other thing.
Is any kind of business can hook up to their model and any kind of distribution can hook up to their model so they’re in almost you know a category killer under. Themselves they they kind of become the the distribution system for so many you know products and in the industry and it’s to.
The point you can almost buy a car through Amazon you know you go to a car click and a brand new car is delivered to your. Door so they it just is so you know so that’s just an example of just the impossible barriers that some industries can have the next is a compare. A compared to competitor comparison table and we populate these.
With just all this information relevant for company for all these categories by which you might compare competitors with and and then this is just an example. In other videos I talked about the organization I worked on getting off. The ground and not such a successful way but it might have another breath of. Life that at some point called veggie pack but here’s a competitor comparison table that I developed for the veggie pack organization and it just takes looks. And look at different types of competitors and and you know where what is. The level of threats relevant to categories of short range intermediate range long range competition type situations and then finally profiling your your market position.
And this is where we do a SWOT analysis identifying our strengths our weaknesses our opportunities and threats and here are some examples. Of you know different types of strengths or weaknesses this video is getting a little bit longer you can always stop the video and study this and if you’re a student in the class you’ll. Get a PDF of the PowerPoint here that you can download and the next is a a market position or strategic map diagram which is profiles the mission statement but this is. Another way of showing your market position in terms of products services broad to narrow customers and clients broad to narrow and where you are located in here it symbolizes market share.
Know that businesses that gravitate to the outer perimeter of the strategic map diagram are overwhelmingly more successful in than businesses that gravitate towards the center because businesses gravitate towards that are. Trying to be all products and services to all customers again understanding the supply demand model. In terms of understanding your market position and I think we’re pretty close to wrapping things up and then the market analysis as we go through it be aware that we’re probably going. To learn a lot much that’s going to maybe trigger the rewriting of our mission statement redefining our vision of success statement restructuring our organizational structure or our business model and redesigning our. Phasic competitive development so it be so this is why we often say that we have to go through the business plan development process three times before you get it. Right and the first time we go through a market analysis we are no.
Doubt going to learn an awful lot that’s going to. Trigger the the redesigning and and writing and development of these. Four sections of our business plan again be aware of Malcolm Gladwell’s tipping point it’s. Absolutely essential to seeing and identifying opportunities as well as potential. Threats within the marketplace and the more we can identify.
And the more we can train for them the more we can. Respond to them instantaneously so in in summary the market analysis is all about defining the point of.
Entry into the market clearly understanding whom we’re selling to and how to profile that also understanding our competition on and. How to view and and and understand what differentiates us in the market from our competition and all the categories to. Assess our competition with and then finally how to understand our overall general market position and this was an awful long session I thank you for hanging in there and so that concludes our talk.
On how to conduct a market analysis and we’ll see at our next video you.