wolfe mktres

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Dr. Kent Wolfe University of Georgia May 16-20, 2005 Oklahoma City, Oklahoma E2: Entrepreneurship and E-Commerce Building and Expanding Economic Opportunities

What is Market Research: 

What is Market Research Marketing research is the systematic gathering, recording, and analyzing of data about problems relating to the marketing of goods and services. Okay, but what does that mean. Source: Small Business Administration, http://www.sba.gov/starting_business/marketing/research.html

Why use Market Research: 

Why use Market Research First It is impossible to sell products or services that customers do not want. Second Learn what customers want . Third Package and present the produce or service in accordance with customer demands. Source: Small Business Administration, http://www.sba.gov/starting_business/marketing/research.html

Why Conduct Market Research: 

Why Conduct Market Research Focuses and organizes marketing information. It ensures that such information is timely and permits entrepreneurs to: Reduce business risks Spot current and upcoming problems in the current market Identify sales opportunities Develop plans of action Source: Small Business Administration, http://www.sba.gov/starting_business/marketing/research.html

Projects -: 

Projects - Oilseed crushing and processing facility - $50 million Pelletized Poultry Litter facility - $4 million Farm Raised Tilapia, eel and prawn - $2 million Grass Fed Beef Processing Facility - $1 million Impact of Ag on States Economy - $9 billion dollars (farm gate value all commodities)

Essential Questions for Product Development and Effective Marketing Strategies: 

Essential Questions for Product Development and Effective Marketing Strategies Who are my customers and potential customers? What kind of people are they? Where do they live? Can and will they buy? Am I offering the kinds of goods or services they want - at the best place, at the best time and in the right amounts? Are my prices consistent with what buyers view as the product's value? Are my promotional programs working? What do customers think of my business? How does my business compare with my competitors? Source: Small Business Administration, http://www.sba.gov/starting_business/marketing/research.html

Competitive Analysis: 

Competitive Analysis Business takes place in a highly competitive, volatile environment, so it is important to understand the competition. Who are your five nearest direct competitors? Who are your indirect competitors? Is their business growing, steady, or declining? What can you learn from their operations or from their advertising? What are their strengths and weaknesses? How does their product or service differ from yours?

Collecting Competitor Information: 

Collecting Competitor Information Start a file on each of your competitors and collect information on: Advertising Promotional materials Pricing strategies Hours of operation Marketing channels Packaging

What This Can Tell Us: 

What This Can Tell Us How often competitors advertise Do they sponsor promotions Do they offer sales Seasonality - when they advertise Sales strategies Target Market Marketing mix

What Else Can it Tell Us?: 

What Else Can it Tell Us? The most popular package size. Where customers are looking for the product or service. Product extension opportunities Whether market is expanding or contracting Whether the product is a commodity or differentiated product Opportunities to improve existing products to better meet customer needs

Target Market: 

Target Market Your current customer base: age, sex, income, neighborhood How your customers learn about your product or service - advertising, direct mail, word of mouth, Yellow Pages Patterns or habits your customers and potential customers share - where they shop, what they read, watch, listen to Qualities your customers value most about your product or service - selection, convenience, service, reliability, availability, affordability Qualities your customers like least about your product or service - can they be adjusted to serve your customers better? Prospective customers whom you aren't currently reaching Source: Small Business Administration, http://www.sba.gov/starting_business/marketing/research.html

New Agribusiness Opportunities – First Step is ID Target Market: 

New Agribusiness Opportunities – First Step is ID Target Market Target Market – A segment of the population that is most likely to use your product or service. Usually described using demographic variables like, Gender, Income, Race, Age Used to: Determine market potential Develop product packaging Choose marketing channels Develop marketing mix and advertising strategy

Who is your Target Market?: 

Who is your Target Market?

Hybrid Car Driver - Profile: 

Hybrid Car Driver - Profile Highly Educated Affluent – Household income of $100,000 + They’re more likely to be female. Older than the average car buyer—closer to fifty Beyond these demographics, They drive fewer miles on average Keep car longer than the average Willing to pay more for an environmentally-friendly (or “green”) product. They personally want to do something to help reduce vehicle pollution. “ They expect fuel prices to grow a lot faster than other people do.

Target Market Examples: 

Target Market Examples

Market Segmentation : 

Market Segmentation A 1995 National Pork Producers Council study identified five very different pork consumer segments and they are as follows: Main Street Today Quality Carnivores Good N’ Plenty Guys Apathetic Eaters Politically Correct Eaters

Market Segmentation: 

Market Segmentation

Market Potential: 

Market Potential Market Potential – the maximum sales opportunities achieved by all sellers in the market. Sets the upper limit on consumption units

Estimating Market Potential: 

Estimating Market Potential Crucial to evaluating a business opportunity or idea. Is the market large enough to support my business Is my market area sufficient to support the business

Information Needed to Estimate Market Potential: 

Information Needed to Estimate Market Potential Must define the market area. Selling in the county Selling regionally Selling nationally Selling globally Identify your target market or the group of people most likely to use or purchase your product or service.

Information Needed to Estimate Market Potential: 

Information Needed to Estimate Market Potential Estimate current purchase or usage patterns Is the product used frequently- food Is the product purchased infrequently- i.e., Truck or TV Per capita consumption of ice cream Per capita consumption of eels Usage of conference facilities Usage of lawn maintenance materials

Estimating Market Potential: 

Estimating Market Potential MP=NxQ; where MP= Market Potential N= number of buyers (Target Market in market area) Q= average number purchased by each buyer Adjustments will most likely have to be made, i.e., Soft drink Market Potential is significantly larger than Coke Market Potential.

Steps to Estimating Market Share: 

Steps to Estimating Market Share Determine the market area Estimate the total market potential Identify each of your competitors and estimate their market share Decide or estimate what you think your market share might be or what portion of the market you intend to capture

Simple Example Market Share Calculation: 

Simple Example Market Share Calculation Market share for new hot sauce to be marketed locally A supermarket visit identified 10 sauce competitors Market share data is not available, assume each product captures and equal share of the market (10%)

Example Market Share Calculation- Con’t.: 

Example Market Share Calculation- Con’t. New product will mean there are 11 competing products Assuming equal market share, you can assume to capture roughly 9.1% of the market Does 9.1% of the market generate enough sales to make your business feasible?

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Estimating Market Share - Example

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Store Sales Market Share – Total Product Sales

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Store Sales Market Share – By Brand

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Store Sales Market Share – By Package Size

Actual Market Analysis Example: 

Actual Market Analysis Example Identified seven potential markets in addition to AgriRecycle, Inc. Homeowners Cattle feed ingredient Nurseries Landscaping contractors Golf courses Sod producers Timberland companies

Potential Customer Population Estimates: 

Potential Customer Population Estimates

Market Prices: 

Market Prices Marketing Channels Households - $300/ton (organic) Cattle blocks - $200/ton Commercial - $49/ton Nurseries Golf Courses Landscaping Companies Sod Producers AgriRecycle - $55/ton

Georgia’s Estimated Market Potential by Segment: 

Georgia’s Estimated Market Potential by Segment

Estimated Revenue: 

Estimated Revenue AgriRecycle - $55/ton 36,000 tons * $55/ton =$1,980,000 Market Direct - $300/ton home owners (20 lb bags of organic soil conditioner) 36,000 tons * $300/ton =$10,800,000 36,000 tons represents only 64% of the fertilizer and soil conditioners GA households use annually

Southeast Estimated Market Potential by Segment: 

Southeast Estimated Market Potential by Segment

Market Analysis Summary: 

Market Analysis Summary Identified seven potential markets in addition to AgriRecycle, Inc. Homeowners – Large market, bagged product, high price Cattle feed ingredient – Large market, future uncertain, bagged, high price Nurseries –Small market, low price, bagged Landscaping contractors – Small market, bagged, low price Golf courses – Very small market, bulk, low price Sod producers – Moderate market (distance), bulk, low price Timberland companies – no identifiable potential

Estimating Retail Sales: 

Estimating Retail Sales The potential retail sales for a specific retail operation can be estimated by using a standard formula: ES= P x EXP x (ADI/MDI) x MS where ES= Estimated Sales P= Trade Area population EXP= Average expenditures for retail outlet category ADI = Area Estimated Average Household Disposable Income MDI = Georgia Average Household Disposable Income MS= Estimated Market Share

Micro Brewery: 

Micro Brewery Micro brewed consumers consume an average of $250 worth of beer annually.  Younger people were more likely to have tried a microbrew. Thirty-six percent of beer drinkers between the ages of 25 and 34 had tried a microbrew. In contrast, 27% of beer drinkers between the ages 34 through 45 and 20% of those 45 and older had tried microbrews.  The appeal of micro brewed beer was strongest among White beer drinkers were almost twice as likely as black Americans to try a microbrew.

Estimated Retail Sales - Example: 

Estimated Retail Sales - Example 50% of Americans consume beer. Thirty-six percent of microbrew drinkers are 25 -34, 27% are 34 - 45 and 20% are 45 and older. Microbrew consumers have average incomes of $54,000 Microbrew consumers spend between $250 annually on these products Microbrewery Market Area Demographic Information 50,000 residents 15% are 25-34 16% are 34-45 29% are 45+ 25% have incomes over $54,000 Area Estimated Average Household Disposable Income=$67,000 Georgia Average Household Disposable Income =$30,240

Trade Area Sales Estimate: 

Trade Area Sales Estimate ES= P x EXP x (ADI/MDI) x MS P= 50,000 x 50% (percentage of beer drinkers) =25,000 25,000 x 15% = 3,750 25,000 x 16% = 4,000 25,000 x 29% = 7,250 15,000 37% of area residents have incomes over 50K 15,000 *37% = 5,550 EXP=$250 (ADI/MDI)=($67,000/$30,240) MS = Estimated Market Share = 10% ES= 5,550 x $250 x ($67,000/30,240) x 10% = $307,416

AnotherEstimated Retail Sales Example: 

Another Estimated Retail Sales Example Specialty food shoppers spend between $500 and $1,000 Area population = 83,000 Condiments constitute 12% of specialty food purchases – or a $128 annually per specialty food shopper Area Estimated Average Household Disposable Income/Georgia Average Household Disposable Income ($67,000/30,240) MS = Estimated Market Share = 10% ES= 83,616 x $128 x ($67,000/30,240) x 10% = $2,371,332

Easy Demographic Data (WWW.EASIDEMOGRAPHICS.COM): 

Easy Demographic Data (WWW.EASIDEMOGRAPHICS.COM) Miles 20 15 10 Population: 82,683 59,644 36,409 Households: 31,974 22,806 13,773 White Population: 77,003 56,126 34,497 Black Population: 4,881 2,901 1,506 Asian Population: 623 473 307 Hispanic Population: 719 518 275 Median Age: 37.0 36.7 36.4 Med. HH Inc.($): $29,572 $30226 $32,214 Av. HH Inc. ($): $40,855 $41,877 $43,165

Demographic and Population Sources: 

Demographic and Population Sources Sources for Demographic Information: Chamber of Commerce University (www.agecon.uga.edu/~caed/) www.georgia.stats.uga.edu US Census Bureau (WWW.CENSUS.GOV) Easy Demographics (WWW.EASIDEMOGRAPHICS.COM)

Price Determination: 

Price Determination Don't know how much to sell your product for? Essential to developing a successful business. Price too low – may not cover total costs and loose money Price too high – may price the product out of the market One method of determining price- eBay Try putting it on eBay. Your correct price point will become very clear after only a few auctions. Source: The Importance of Market Research, Steven Strauss – BizLand.com

Price Determination: 

Price Determination Depending on the product or service, pricing flexibility changes significantly. Factors to consider: Is the product a commodity? Traditional agricultural commodities Consumer electronics, i.e., VCR’s, Computers, TV’s. Is the product highly differentiated? Cars – i.e., Porsche, Kia Produce- i.e., organic vs. traditionally produced Leasing hunting land vs. providing guide services Is the product a luxury item? Spa treatments Vacations – Hunting service ($150 ½ day of squirrel hunting) Jewelry, furs,

Price Determination: 

Price Determination What others are charging – Make a list of similar products or services and how much other companies charge for them. This information will tell you what the market is accustomed to paying. Review per unit costs for producing the product or service and compare to market price

Price Determination: 

Price Determination Build in a Profit! Need profits: to grow pay off debt continue to be a viable enterprise. Profit varies by industry, service, potential liability and general overhead.

Price Determination: 

Price Determination Rule of thumb in retailing is to at least double your fixed costs (Keystone pricing) in determining a retail selling price. Allows for discounting or running sales, i.e., 10-40 percent off sale still allows for a profit. Raise prices in accordance with inflation, need to maintain an acceptable profit margin

Use Market Research in MarketingOn-line: 

Use Market Research in Marketing On-line

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“Adding Value to Georgia’s Agricultural Economy Through Research and Extension” www.caed.uga.edu College of Agricultural & Environmental Sciences