Outline for Discussion

• Competitor Analysis: Porter’s Five Forces

• Small Group Exercise

• Marketing Math
• Tools in your Toolbox
• Adjourn for Dinner (5:30pm)
Small Group Exercise

 Outline for Discussion

• Competitor Analysis: Porter’s Five Forces

• Small Group Exercise

• Marketing Math
• Tools in your Toolbox
• Adjourn for Dinner (5:30pm)
Marketing Math
 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.
 Market Potential

• Who uses your product? How often is it

used?
• Multiplying these two can give you an
indication of the market potential
(expressed as the number of customer or
sales) you might expect in a market.
• First, find accurate population stats then

• Combine with good “useage” stats

http://factfinder.census.gov/home/saff/main.html?_lang=en
 Market potential for Coffee
• Who uses your product?
• How often is it used?
• Multiplying these two can show market
potential
http://www.coffeeresearch.org/market/usa.htm
 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 potential
cups of coffee consumed in 27713
 Market Potential of Coffee

24,068 (50% drink coffee) = 12,034 potential

cups of coffee consumed in 27713
• How many competitors?
2 Starbucks, 4 McDonalds, and probably
24+ 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
 Market Potential of Coffee

12,043 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
 Another Example

• Birthday parties in the “Gardens”

• How many birthdays occur in your city
each week?
Divide population (30,903) by 365 days = 84
birthdays each day in Durham
• How many parties? Doesn’t matter as
much as supply (1 per day, 2 on
weekends)
 Customer / Product Matrix

Customers Homeowners Renters Businesses

Products
Annuals

Perennials

Trees &
Shrubs
 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?
 Percent of Households Buying
Annuals and Perennials
28%
35 annual transplants
30 vegetable transplants
perennial transplants
25
20
15
10
5
0
87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3
Source: National Gardening Association 2004
Participation and home ownership

Participation Home-owners Renters

(n=1012) (n=499)
Outdoor lawn care or 65.7% 35.3%
mowing*

© Bridget K. Behe and Jennifer H. Dennis

Outdoor flower 62.6% 30.5%
gardening with
annuals or
perennials*
Landscaping with 48.8% 23.4%
trees or shrubs*

* Significant difference for Chi-square test at p<0.05

 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

 Customer / Product Matrix

Customers Homeowners Renters Businesses

Products (4997) (1599) (625)
Four inch

Window
box
Large
planter
 Customer / Product Matrix

Customers Homeowners Renters Businesses

Products (4997) (1599) (625)
Four inch medium

Window large
box
Large large
planter
 Customer / Product Matrix

Customers Homeowners Renters Businesses

Products (4997) (1599) (625)
Four inch medium medium

Window large large

box
Large large small
planter
 Customer / Product Matrix

Customers Homeowners Renters Businesses

Products (4997) (1599) (625)
Four inch medium medium small

Window large large small

box
Large large small large
planter
 80 / 20 Rule

Customers Homeowners Renters Businesses

Products
Four inch medium medium small

Window large large small

box
Large large small large
planter
 Customer / Product Matrix

Customers New business Mid-age Established

Products business business
Seminar

Telephone
call
Personal
visit
 Customer / Product Matrix

Customers New Mid-age Established

Products business business business
Seminar +++ time ++ time ++ time
+ impact ++ impact + impact
Telephone +++ time + time + time
call + impact ++ impact ++++ impact
Personal +++++ time ++ time ++ time
visit ++ impact +++ impact +++ impact
 Customer / Product Matrix

Customers New Mid-age Established

Products business business business
Seminar 40 hr 30 time 30 time
+ impact ++ impact + impact
Telephone 40 hr 10 hr 10 hr time
call + impact ++ impact ++++ impact
Personal 50 hr 20hr 20 hr
visit ++ impact +++ impact +++ impact
 Customer / Product Matrix

Customers New Mid-age Established

Products business business business
Seminar +++ time ++ time ++ time
+ impact ++ impact + impact
Telephone +++ time + time + time
call + impact ++ impact ++++ impact
Personal +++++ time ++ time ++ time
visit ++ impact +++ impact +++ impact
 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.
 Why ask for a recommendation?

• Another tool for market potential.

• Asking one simple question, “How likely are you
to 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 to
a friend, where 9= “extremely likely” to
recommend, and 0= was “not at all likely to
recommend.”
 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 weren’t as willing to put their own
reputation on the line and recommend the
business to a friend or colleague. The
Detractors responded with a 5 or less.
 Net Promoter Percentage
• 50 clients last year
• 2 rated you “9”
• 2 rated you “8”
• 22 rated you “7”
• 12 rated you “6”
• 12 rated you “5” or below
• 4/12=25% and 16% was the median
(study)
 Recommend us to a friend?

• Key to growing a business is to have a Net

Promoter Percentage of 16% or more (4
Promoters to 25 Detractors)
• A ratio of Promoters {8 or 9} to Detractors
{5 or less} of 16% or more.
• Ask the question seasonally; calculate
your ratio. Relate it to growth.
 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
 Lifetime value

• What is the one-time purchase of a

annual plants by an average
household?
• $76
• Long term purchases (20 years)?
• $1520
 Market Potential
• Use conservative numbers
• Go low on the use statistics
• Go high on the competition statistics
• Calculate annual purchases, but strive for
lifetime customers
• Costs more to acquire one new customer
than it does to have a current customer
buy one more item.
 Outline for Discussion

• Competitor Analysis: Porter’s Five Forces

• Small Group Exercise

• Marketing Math
• Tools in your Toolbox
• Adjourn for Dinner (5:30pm)
 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 don’t make

decisions, thoughtful people do!

 The Customer

Who would buy or is buying a similar

product? Can you describe them in
terms of measurable variables like age,
income or home value, gender, ethnicity,
zip code, or education level? Do you
know how often they purchase the
product or similar products?
 The Customer

Do you know how they use the product? Do

you know where they use the product (at
home, at a friend’s home, in the car, or at
a restaurant)? Do they go to get the
product or service or does it come to
them? Do you know why they purchase
the product or similar products? Are there
enough of them in the current market?
 The Product

What is the product? Can you describe the

product in terms of its features (technical
aspects), functions (how someone could
use the product), and benefits (what
does the feature do for the customer?).
Do products need to be customized or
can they be mass produced? Can they
be stored easily or are they perishable?
 The Competition

Who is the competition? Think broadly

about substitute products (chocolate milk
can substitute for some in the place of
white milk but there are no substitutes for
gasoline in a car engine). Is anyone
selling the product or good products in the
market you’re considering entering?
 The Market

What is the market like? How much control

do suppliers have over things you need?
How easy is it for buyers to negotiate
price or other product attributes? Are
there a lot of substitutes in the market?
What is their value proposition (how do
they compare on price, time, and quality
savings or expenditures)? How stiff or
lax is the competition? How easy is it for
a new business to “start up”?
 Your Company

What about your company? How does it compare in a

SWOT analysis? What are the business’ strengths?
What do you do very well? What do you have
problems doing or what are some weaknesses? Do
you have the resources to invest to overcome the
weakness? What have you learned from past
mistakes? What opportunity do you see outside the
company? What have competitors not seen and/or not
done well? What have they failed at doing and what
leads you to believe you could be successful? What
are the strengths of the competition (threats to your
business)?
What information is missing that you can
observe? Can you talk with others
informally who can provide you with
factual information? Can you visit other
businesses and gain some factual
information?
What information listed above do you need
to find? Try to find it first in a secondary
source, such as the Chamber of
Commerce, community organization,
library, Internet, or printed source
before your consider collecting the
information from consumers
themselves.
 Customer / Product Matrix

Customers Homeowners Renters Businesses

Products (4997) (1599) (625)
Four inch medium medium small

Window large large small

box
Large large small large
planter
Customer / Product Matrix

Customers Homeowners Businesses

Products (4997) (625)
Four inch medium small

Window large small

box
Large large large
planter
 Your Marketing Plan
A. 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 your
value proposition? Will you have high or low
quality? Will you have customers invest time for the
product or save them time? Will the price be low or
high? Remember, customers want high quality at
low prices and low time investment, but this
combination is not sustainable for most businesses.
Part puzzle completion
Part chess strategy
 Parting Thoughts

• Much art to the “science” of market

research.
• Always be incomplete information, but find

as much “good” information as possible.

• Be creative and think broadly about

markets and consumers – that’s where the
profit is.
• Don’t discount the elements of risk and
luck involved to be successful.
Thank you!