Chapter Three

Market knowledge is essential in guiding business and marketing strategies

A)  Strategies and Markets are Interlinked

Market changes often require altering business and marketing strategies.  Many forces are causing the transformation of industries and are changing the nature of competition.  The drivers of change include deregulation, global excess capacity, M&A, and changing customer expectations

B)  Value Migration

Value migration is the process of customers shifting their purchases away from products generated by outmoded business models to new ones that offer superior value.  Value migration may affect a product category, a company, or an entire industry. Market knowledge is a key input to assessing migration trends

C)  Shared Vision About the Market

Developing a strategic vision about the future requires identifying and analyzing the forces of change and forming a vision about the future.

 

See Exhibit 3-1 for the process of gaining an understanding of markets

A)  Matching Needs with Product Benefits

Markets are groups of people who have the ability and willingness to buy something because they have a need for it.  A product market combines the benefits of a product with the needs that cause people to express a demand for that product

B)  Mapping Product Market Boundaries and Structure

	The generic product market includes a broad group of products that satisfy a general, yet similar need
	A product market includes all brands of a similar product type or class such as ovens

C)  Guidelines for Definition

In mapping the product market, it is helpful to determine the geographical area and buyer characteristics, the market size and characteristics, and the brand or product categories competing for the needs and wants of buyers

D)  Forming Product Markets 

Product market boundaries should be determined in a manner that will be of strategic value, allowing management to capitalize on existing and potential opportunities and avoiding threats.  Product market composition may change as new technologies become available and new competition emerges.

D)  Extent of Market Complexity 

Three characteristics of markets capture a large proportion of the variation in their complexity Customer function:  considers what the product or service does Different technologies:  may satisfy the use situation of the customer Customer segment:  recognizes the diverse needs of customers for a particular product

A)  Identifying and Describing Buyers

Characteristics such as family size, age, income, geographical location, sex, and occupation are useful in identifying buyers in consumer markets.  (See page 93)

B)  How Buyers Make Choices

See Exhibit 3-5

C)  Environmental Influences 

These influences include the government, social change, economic shifts, technology, and other factors that alter buyers wants and needs

D)  Building Customer Profiles 

The profiling process starts with the generic product-market.  At this level, customer profiles are likely to specify the size and general composition of the customer base

A)  Industry Analysis

Includes trends such as sales, number of firms, growth rates, operating practices, etc.

B) Value Chain Analysis

Consists of the study of supplier and distribution channels and includes the extent of outsourcing

C)  Competitive Forces 

Includes (Porter's Five Force Model):

Evaluating the competitor includes an analysis of: the competitor's market coverage; past performance, including sales and financial performance; how well the competitor meets customer value requirements; and a comparison of competing brands on attributes that are important determinants of customer satisfaction.

 

Involves answering the following questions:

Three key measures of market size are: