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Identifying Marketing Opportunities
BSBMKG501 Identify and evaluate marketing opportunities
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Analysing market and business needs
For investigating comparative market information and trends we need to know these topics:
Information systems
Market research
Information sources
Opportunity and threat analysis
Assessment of markets and trends
Marketing Information Systems(MIS)
Marketing information system is consisted of
People
Equipment (Technology)
Procedures
to gather, sort, analyse, evaluate, and distribute necessary, timely, and accurate information to marketing decision makers.
MIS is intended to bring together
unconnected items of data into a
body of information
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Data vs. Information
Data
Information
Organised
Processed
Raw,
un-organised fact
Useful,
Context given
Market research
Market research is the process of gathering information to help identify and define opportunities and problems, as well as sales.
The research process can help to:
Evaluate all marketing activities to make better decisions
Understand consumers and the marketplace
Monitor performance and find out where mistakes are being made
Continuously improve marketing processes and efforts
Market research is the process of gathering and analyzing information to help identify and define marketing opportunities and problems, and generate sales.
The research process can help to:
refine and evaluate all marketing activities to make better decisions
understand consumers and the marketplace
monitor performance and find out where mistakes are being made
continuously improve marketing processes and efforts.
It is important to be able to access the latest information about markets, clients, industry and location to help increase the chances of business success.
Marketing research can be divided into two types:
Primary
Secondary
Primary research is customised and involves conducting and compiling research for the purpose it was intended
Primary research is:
Expensive to prepare, collect and interpret. However the information can be used to enter new markets.
Used to determine the wants and needs of certain markets which could shape the development of the product.
Two types of research methods are used to conduct primary research:
Qualitative methods – about people’s feelings and thoughts in relation to certain concepts
Quantitative methods – data through numbers that can be measured
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Market research
Primary research – is performed by the organisation. It is collected directly from the respondents at the time it is required, so it can be expensive but it helps determine the wants and needs of certain markets
Secondary research – has already been collected and compiled by another individual or organisation. It saves time and money in developing the marketing strategy. Government organisations and other websites are useful in providing secondary data
Market research is the process of gathering and analyzing information to help identify and define marketing opportunities and problems, and generate sales.
The research process can help to:
refine and evaluate all marketing activities to make better decisions
understand consumers and the marketplace
monitor performance and find out where mistakes are being made
continuously improve marketing processes and efforts.
It is important to be able to access the latest information about markets, clients, industry and location to help increase the chances of business success.
Marketing research can be divided into two types:
Primary
Secondary
Primary research is customised and involves conducting and compiling research for the purpose it was intended
Primary research is:
Expensive to prepare, collect and interpret. However the information can be used to enter new markets.
Used to determine the wants and needs of certain markets which could shape the development of the product.
Two types of research methods are used to conduct primary research:
Qualitative methods – about people’s feelings and thoughts in relation to certain concepts
Quantitative methods – data through numbers that can be measured
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Information sources
The Internet is a tool that can provide a business with a wealth of information about its competitors, trends and new opportunities
Primary research can be expensive and time consuming but can provide great insight into customer needs.
Secondary data may be collected sometime ago, so it is important to determine whether the information is still relevant and current.
The internet is a tool that can provide a business with a wealth of information about its competitors, trends and new opportunities. The internet can also be overwhelming and provide information that is out of date and misleading.
The key to locating the correct information is to critically analyse the information and its source to ensure it suits the business needs.
Locating information from pprimary research involves conducting and compiling research for purposes that no other business has needed.
As a result, a business does not always have time and the resources to conduct primary research of their customers and markets. Primary research can be expensive and time consuming but can provide great insight into customer needs.
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Opportunity and threat analysis
Once marketing research has been undertaken there are key method and techniques to identify opportunities and threats in the market
This step helps identify gaps in the market which can be filled by the business
Types of analysis:
SWOT
Ansoff’s gap analysis – current and desired performance
market analysis – estimating demand in the market
competitive analysis – who are the competitors?
Once marketing research has been undertaken there are key methods and techniques to identify opportunities and threats in the market.
This step helps identify gaps in the market which can be filled by the business.
Opportunity and threat analysis should be an ongoing and comprehensive process to enable the business to stay ahead of the competition.
Analysis methods to identify opportunities and threats include four methodologies:
opportunity and threats analysis
gap analysis
market analysis
competitive analysis.
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1. SWOT analysis
Simple method of environmental scanning by looking at internal and external factors that impact on a business
The reason for analysing the external factors is to identify changes and trends that affect the business and its client
The Opportunities and Threat analysis is also called a SWOT analysis.
SWOT Analysis:
Strengths and weaknesses are internal factors
Opportunities and threats are external factors.
The SWOT analysis tool is a simple method of environmental scanning by looking at internal and external factors that impact on a business.
Identifying opportunities and threats
The reason for analysing the external environment is to identify changes and trends in environmental factors that affect the business and its clients.
A business opportunity is a set of circumstances arising through changes in the environment that the business could take advantage of to achieve its objectives.
This type of opportunity is largely outside the control of the business.
Characteristics of business opportunities:
The opportunity exists for a short time
The opportunity is identified by the business and is taken advantage of.
Examples of a business opportunity:
A larger building becomes available which means that business can add another service eg a coffee shop
An environmental disaster – oil spill – at the local beach means that your industrial supplies business can supply the material to clean up the spill
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2. Ansoff’s gap analysis
Gap analysis is used to identify how the business is performing
The Gap Analysis process has seven steps:
Market potential
Identify market potential in product units rather than sales value eg 1,000 units rather than $1 million.
This helps to identify number of people sales must be made to and existing demand patterns for the product.
Usage gap
Estimate number of product units being sold by this business and other businesses in the marketplace
The usage gap is the difference between the potential use and the actual use of the product.
Company position
Determine number of current sales made by the business
Product line gap
What is the product and is the demand being met by competitors?
Distribution gap
Are your competitors in areas where your business is not?
Competitive gap
How can your business fill the gap? Brainstorm ideas to identify how the business can fill the gap.
Strategy formulation
What strategy will the business use to fill the gap?
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3. Market analysis
Analysing markets includes analysing customers and customer demand for the particular products.
This allows the business to identify opportunities for sales and profits.
A business can also estimate the total market potential which is maximum amount of sales that might be available to all businesses in the market
Analysing markets includes analysing customers and customer demand for the particular products. This allows the business to identify opportunities for sales and profits.
Market analysis is used to inform a business’s planning activities particularly around the decisions of:
Inventory and stock
Purchases
Work force expansion or contraction
Infrastructure and facility expansion
Purchases of capital equipment
Promotional activities
Assessing markets and estimating demand
Once marketing research and analysis has been undertaken, the business must enter the best markets and sales territories. To do this, they must estimate the best market potential.
This can be achieved in two ways:
Market build-up method – identifying potential buyers in each market and estimating their potential purchases. This method is useful if there are accurate results of the potential buyers in the market and an accurate assessment of what they may buy.
Market-factor index method – a method for calculating area market potential in an area or location using a weighted index.
For example, the estimated household expenditure information from consumer research could be utilised to estimate the sales of certain products.
It is usually based on three factors – personal disposable income, retail sales and population, Kotler, 2010
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Market Potential Example
Calculate the total market potential for low-fat milk in Australia. If ten million people buy one carton of low-fat milk each day and the average cost is $2:
What is the dollar value of the total market potential?
10,000,000
$2
365
$7,300,000,000
4. Competitor analysis
Marketing managers need to understand the activities of current and potential competitors:
Who the competitors are
What the competitors’ objectives are
What their strategies are
What their strengths and weaknesses are
What their reaction patterns are
Assessing markets and trends
Trends in the market refers to long-term pattern of growth or decline in certain products
Trends can be cyclical or seasonal
Industry associations track trends in particular industries
Free information available from media and websites.
Market trends
Trends in the market refer to the long-term underlying pattern of growth or decline in certain products. This as a result of changing demographics, changes in population or technology.
Trends can be cyclical or seasonal.
Cyclical trends are difficult to predict whereas seasonal trends are consistent patterns based on seasons.
How can a Marketing Manager keep up to date with trends?
There are a range of resources freely available to inform the research including media and websites. The media can identify trends in business, industry and fashion. Trends are influenced by external factors and some industry associations are useful in locating this information.
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Research new market
It is absolutely important to understand the market environment and to research how customers perceive your product or service.
Surprise is inherent in business.
Not understanding the environment or customers can lead to sudden demise for businesses. The rate of change and developments in technology are rapid.
A small amount of detailed investigation into the buying decision process of existing and potential customers is often very revealing and informative for determining pricing, sales messages and the most cost effective means of reaching all those who make or influence supplier selection.
Many businesses have customers of which they are hardly aware of and present an opportunity to grow the business with customers who are already known.
This is an easier strategy than gaining new customers.
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1. Customer analysis- segmentation, targeting and positioning
The primary purpose of customer analysis to facilitate and encourage potential customer.
What are the motivations and behaviours of potential customers?
Not every potential customer will have the:
Same needs
Want the same product
Be influenced in the same way by the same marketing program.
So, the business must determine whether there are multiple market segments that will response differently to the products, services or marketing program.
The challenge is how to best define, identify and appeal to those segments because not every segment will be equally attractive for the business.
The next step is to target and position the product or service in the target segment relative to where the competitors are positioned in the market.
The strategic marketing program for a particular product/market entry should reflect the market demand and be competitive within the target market.
2. Market analysis questionnaire
Market analysis questionnaire is the first step in determining if there is a market need.
Knowing the market’s needs and how they are currently serviced provides you with key information that is essential in developing your product/service and marketing plan.
A marketing analysis is an assessment of the target market, the competition and the requirements for marketing that product/service
The questions needed to be asked are;
What other companies are servicing this market? How big is the market? Is the market highly competitive?
What marketing strategies have been used in the past for this market or industry?
What is the budget for marketing activities?
Who are our customers? What are their demographics?
Why would a customer choose our product? What are their expectations and do we have a competitive advantage?
How do we reach these customers?
What qualitative and quantitative research is required?
(1) Quantitative research:
Conducted by using surveys
Relies on large samples in order to collate data
The data is generated as the form of numbers and figures or ‘yes’ and ‘no’ answers
Used to generate statistics on population, market trends or demographics
e.g. How many people bought avocados last shopping?
Do you live in a house or an apartment?
Quantitative research differs from qualitative in that it gathers parametric statistical information, i.e., information with a number to it.
Sample sizes are generally larger and more representative of the market. From the statistics or data generated, conclusions can be drawn.
Survey research is usually quantitative in nature. It seeks structured responses, which can be summarized in numbers, like percentages, averages or other usable statistics. An example of quantitative research is what percentage of the consumers shopping in grocery stores purchase coffee. An average score can be calculated.
Survey questionnaires often provide fixed responses to questions to simplify the reply. This multiple choice format makes it faster and easier for the respondent. Simple fill-in-the-number, circle-the-range or exact answer questions are also widely used. A market researcher might ask how many suppliers you use for household appliances or what is your salary range (multiple choices given with ranges of salaries). Fixed responses are computer-friendly, which is how most surveys are analysed.
A common approach to objectively measuring consumers' attitudes and opinions is to have respondents indicate how much they agree or disagree with a questionnaire statement. Another approach is to have respondents rate a product using a rating scale, called a Likert scale.
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(2) Qualitative research:
Gathers participants thoughts and feelings about certain issues
Provides a deeper understanding of the needs, desires and consumer habits of a target market
Can be conducted by using individual interviews and focused groups
The data does not immediately show any trends across a populations
What does influence your decision to buy or not to buy avocados at the supermarket?
How much more rent would you be willing to pay for an extra room in your rental property?
Qualitative research approaches require the researcher to exercise judgment in summarizing all the information and gaining depth in answers.
Focus group interviews are the most widely used format for qualitative marketing research.
This involves the interviewing of six to 10 people in an informal setting. Open-ended questions are posed to gather in-depth information on the subject matter. In a group setting the researcher looks for group interaction to stimulate thinking.
A skilled focus group leader or facilitator can learn a lot from this approach. The facilitator's role is to establish guidelines for the group interaction, to talk as little as possible, to keep the group focused, and to ask simple open-ended questions.
A typical focus group session lasts an hour. The sessions can be videotaped for different managers to view. Conclusions reached vary depending on the skill level of the individual.
Although qualitative research can be objective, it requires extensive training and experience. Qualitative research may provide ideas or hypotheses, but other approaches based on larger sample size and objective measures are needed to test the hypothesis.
Researchers often use qualitative research to prepare for quantitative research.
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Different directions when seeking opportunities in a new market
Sell existing products to existing markets – market penetration.
Develop new products for existing markets – product development.
Extend existing products to new markets – market development.
Develop new products for new markets – diversification.
A business can go in differing directions in seeking new opportunities.
Expansion of its current business activities
Market Penetration
Product Development
Market Development
Diversification into new business
Vertical integration - Vertically integrated companies in a supply chain are united through a common owner. Usually each member of the supply chain produces a different product.
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break-even point
the point where the amount for money made by a company’s sale is even with the costs of making products and running the business
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Marginal costing model; Cost Volume Profit (CVP) analysis
Analysis of the relationship between production costs, sales volume and profit
Using marginal costing/CVP you can calculate the break-even point
When a business knows their break-even point, they know how much money and how much product needs to be sold before they can make a profit
To use CVP analysis, the contribution margin must be determine first.
Contribution margin
Unit contribution margin (CM) =
Price per unit(P) – variable cost per unit (V)
CM = P – V
So, the unit contribution margin is the marginal profit per unit of sale (or gross profit per unit)
Gross profit = CM number of unit
If you know the gross profit and fixed costs, you can calculate net profit:
Contribution margin
The contribution margin may also be expressed as a ratio
The contribution margin ratio tell you the amount of profit the company makes from the sales;
Using Total sales figures:
Contribution margin ratio(CMR) =
Using unit figures:
=
You will get the same result by using any of formulas
Break-even
Number of units required to break even =
$ Sales required to break even =
Sales volume
Number units required to reach profit =
$ Sales required to reach profit =