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8/7/2019 Competitor Analysis green

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Outline for Discussion Competitor Analysis: Porters Five Forces Small Group Exercise

Marketing Math

Tools in your Toolbox Adjourn for Dinner (5:30pm)


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Small Group Exercise


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Outline for Discussion Competitor Analysis: Porters Five Forces Small Group Exercise

Marketing Math



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Marketing Math


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Market Potential

Start with possible pool of customers Identify number of competitors and their

share (assume equal).

Identify your potential share. Plug information into customer product

matrix.


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Market Potential Who uses your product? How often is it

used?

Multiplying these two can give you anindication of the market potential(expressed as the number of customer orsales) you might expect in a market.

First, find accurate population stats then Combine with good useage stats


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http://factfinder.census.gov/home/saff/main.html?_lang=en


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Market potential for Coffee Who uses your product? How often is it used? Multiplying these two can show market

potential


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http://www.coffeeresearch.org/market/usa.htm


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Hot coffee Who uses your product?

Maybe half of the adults > age 18

How often is it used?

Once daily, perhaps the morning Multiplying these two can show market

potential

24,068 (50% drink coffee) = 12,034 potentialcups of coffee consumed in 27713


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Market Potential of Coffee24,068 (50% drink coffee) = 12,034 potential

cups of coffee consumed in 27713 How many competitors?

2 Starbucks, 4 McDonalds, and probably24+ additional competitors = 30

What is an equal share of the market?

12,043 cups of coffee 30 = 401 cups each

Could go further and see sales & profit


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Market Potential of Coffee12,043 cups of coffee 30 = 401 cups each Could go further and see sales & profit

401 cups at $2.00 each = $802 in sales

401 cups at $0.50 each = $200.50 in profit But that is per day, what about annually?401 per day x 364 days = 145,964 cups

annually or $291,928 in sales annually


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Another Example Birthday parties in the Gardens How many birthdays occur in your city

each week?

Divide population (30,903) by 365 days = 84birthdays each day in Durham

How many parties? Doesnt matter asmuch as supply (1 per day, 2 onweekends)


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Customer / Product MatrixCustomers

Products

Homeowners Renters Businesses

Annuals

Perennials

Trees &Shrubs


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Market Potential for Annuals First, is it a household purchase or an

individual purchase? How many households?How many homeowners?

How many renters? How many households using annuals?


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Percent of Households BuyingAnnuals and Perennials

05

101520253035

87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3

annual transplantsvegetable transplants

perennial transplants

Source: National Gardening Association 2004

28%


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Participation and home ownershipParticipation Home-owners

(n=1012)Renters(n=499)

Outdoor lawn care ormowing*

65.7% 35.3%

Outdoor flowergardening withannuals orperennials*

62.6% 30.5%

Landscaping withtrees or shrubs* 48.8% 23.4%

* Significant difference for Chi-square test at p


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Market Potential How many homeowners? 7983 How many renters? 5245 How many gardeners using annuals?

7983 x 0.626 (buying annuals) = 4997 5245 x 0.305 (buying annuals) = 1599

Total buyers = 4997 + 1599 = 6596 How many competitors? 30 Expected market share = 219


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Products

Homeowners

(4997)

Renters

(1599)

Businesses

(625)Four inch

Windowbox

Largeplanter


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Products

Homeowners

(4997)

Renters

(1599)

Businesses

(625)Four inch medium

Windowbox

large

Largeplanter large


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Products

Homeowners

(4997)

Renters

(1599)

Businesses

(625)Four inch medium medium

Windowbox

large large

Largeplanter large small


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Products

Homeowners

(4997)

Renters

(1599)

Businesses

(625)Four inch medium medium small

Windowbox

large large small

Largeplanter large small large


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80 / 20 RuleCustomers

Products

Homeowners Renters Businesses

Four inch medium medium small

Windowbox

large large small

Largeplanter

large small large


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Products

New business Mid-age

business

Established

businessSeminar

Telephonecall

Personalvisit


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Products

New

business

Mid-age

business

Established

businessSeminar +++ time

+ impact

++ time

++ impact

++ time

+ impact

Telephonecall

+++ time

+ impact

+ time

++ impact

+ time

++++ impact

Personalvisit +++++ time++ impact++ time+++ impact

++ time+++ impact


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Products

New

business

Mid-age

business

Established

businessSeminar 40 hr

+ impact

30 time

++ impact

30 time

+ impact

Telephonecall

40 hr

+ impact

10 hr

++ impact

10 hr time

++++ impact

Personalvisit 50 hr++ impact20hr+++ impact

20 hr+++ impact


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Products

New

business

Mid-age

business

Established

businessSeminar +++ time

+ impact

++ time

++ impact

++ time

+ impact

Telephonecall

+++ time

+ impact

+ time

++ impact

+ time

++++ impact

Personalvisit +++++ time++ impact++ time+++ impact

++ time+++ impact


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Customer product matrix Clearly segment customers Create a long list of products, focusing on use of the core and augmented product Consider carefully sources of information

to complete the center of the matrix Think about the best fit for your business

in the short run (where do the circles

match)? Use it as a tool for business growth.


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Why ask for a recommendation? Another tool for market potential. Asking one simple question, How likely are youto recommend us to a friend? December 2003 HBR had an article that was

simplistic and valuable (The One Number You

Need to Grow, Harvard Business Review,81[12]:46-54).

Use a 10-point scale for the recommendation toa friend, where 9= extremely likely torecommend, and 0= was not at all likely torecommend.


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Ask for A Recommendation Customers who responded with 8 or 9 are

Promoters. People with a 6 or 7 are Passively

Satisfied, because while they were happy,they werent as willing to put their ownreputation on the line and recommend the

business to a friend or colleague. TheDetractors responded with a 5 or less.


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Net Promoter Percentage 50 clients last year 2 rated you 9 2 rated you 8 22 rated you 7 12 rated you 612 rated you 5 or below 4/12=25% and 16% was the median(study)


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Recommend us to a friend? Key to growing a business is to have a Net

Promoter Percentage of 16% or more (4Promoters to 25 Detractors)

A ratio of Promoters {8 or 9} to Detractors{5 or less} of 16% or more.

Ask the question seasonally; calculateyour ratio. Relate it to growth.


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Lifetime value What is the one-time purchase of a cup of

gourmet coffee? $3.50 Weekly (5 of the 7 days)?

$17.50 Annually (50 of the 52 weeks)? $910 Long term purchases (20 years)? $18,200


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Lifetime value What is the one-time purchase of a

annual plants by an averagehousehold?

$76 Long term purchases (20 years)? $1520


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Market Potential Use conservative numbers Go low on the use statistics Go high on the competition statistics Calculate annual purchases, but strive forlifetime customers Costs more to acquire one new customer

than it does to have a current customerbuy one more item.


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Outline for Discussion Competitor Analysis: Porters Five Forces Small Group Exercise Marketing Math



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Tools now in your tool box Construct a customer profile

Construct a customer/product matrix Calculate market potential

Caution entrepreneurs to now add thought to the data and interpret what they see. Remember: Numbers dont make

decisions, thoughtful people do!


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The CustomerWho would buy or is buying a similar

product? Can you describe them interms of measurable variables like age,income or home value, gender, ethnicity,

zip code, or education level? Do youknow how often they purchase theproduct or similar products?


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The CustomerDo you know how they use the product? Do

you know where they use the product (athome, at a friends home, in the car, or ata restaurant)? Do they go to get the

product or service or does it come tothem? Do you know why they purchasethe product or similar products? Are thereenough of them in the current market?


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The Product

What is the product? Can you describe the

product in terms of its features (technicalaspects), functions (how someone coulduse the product), and benefits (what

does the feature do for the customer?).Do products need to be customized orcan they be mass produced? Can theybe stored easily or are they perishable?


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The Competition

Who is the competition? Think broadly

about substitute products (chocolate milkcan substitute for some in the place ofwhite milk but there are no substitutes for

gasoline in a car engine). Is anyoneselling the product or good products in themarket youre considering entering?


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The Market

What is the market like? How much control

do suppliers have over things you need?How easy is it for buyers to negotiateprice or other product attributes? Are

there a lot of substitutes in the market?What is their value proposition (how dothey compare on price, time, and qualitysavings or expenditures)? How stiff orlax is the competition? How easy is it fora new business to start up?


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Your Company

What about your company? How does it compare in aSWOT analysis? What are the business strengths?

What do you do very well? What do you haveproblems doing or what are some weaknesses? Doyou have the resources to invest to overcome theweakness? What have you learned from past

mistakes? What opportunity do you see outside thecompany? What have competitors not seen and/or notdone well? What have they failed at doing and whatleads you to believe you could be successful? What

are the strengths of the competition (threats to yourbusiness)?


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What information is missing that you can

observe? Can you talk with othersinformally who can provide you withfactual information? Can you visit other

businesses and gain some factualinformation?


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What information listed above do you need

to find? Try to find it first in a secondarysource, such as the Chamber ofCommerce, community organization,

library, Internet, or printed sourcebefore your consider collecting theinformation from consumers

themselves.


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Customer / Product Matrix

Customers

Products

Homeowners

(4997)

Renters

(1599)

Businesses

(625)Four inch medium medium small

Windowbox

large large small

Largeplanter

large small large


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Customer / Product Matrix

Customers

Products

Homeowners

(4997)

Businesses

(625)Four inch medium small

Windowbox

large small

Largeplanter

large large


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Your Marketing PlanA. Consider the array of potential products you may

offer, including the sizes, shapes, colors, and

cultivars of each.B. Which customer segments will you target? How do

you most easily describe them?

C. How will you price the product? What will be yourvalue proposition? Will you have high or lowquality? Will you have customers invest time for theproduct or save them time? Will the price be low orhigh? Remember, customers want high quality at

low prices and low time investment, but thiscombination is not sustainable for most businesses.


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Part puzzle completion

Part chess strategy


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Parting Thoughts

Much art to the science of marketresearch.

Always be incomplete information, but find as much good information as possible.

Be creative and think broadly aboutmarkets and consumers thats where theprofit is.

Dont discount the elements of risk andluck involved to be successful.


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Thank you!

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