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Market Size Estimation
Importance of a broad view of the market.
Essential to develop a vision about how the market is likely to change in the future.
Continuous Monitoring is Necessary to:
Find promising opportunities
Understand competitors’ positioning
Forming
Forces of change create both market opportunities and threats
Inherent danger in faulty market sensing
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Value Migrations
Customers shift purchasing to new business designs with enhanced value offering
Beware of disruptive technologies
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Product-Market Boundaries and Structure
Forming Product-Markets for Analysis
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Matching Needs with Product Benefits
A product – market matches people with needs to the product benefits that satisfy those needs
“A product – market is the set of products judged to be substitutes within those usage situations in which similar patterns of benefits are sought by groups of customers.”*
*Srivastava, et al. (1984) Journal of Marketing, Spring, 32.
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INNOVATION FEATURE
In the period 1994 to 2004, Progressive Insurance increased sales from $1.3 billion to $9.5 billion, and ranks high in the Business Week Top 50 U.S. companies for shareholder value creation.
The company invents new ways of providing services to save customers time, money and irritation, while often lowering costs at the same time.
Loss adjusters are sent to the road accidents rather than working at head office, and they have the power to write checks on the spot.
Progressive reduced the time needed to see a damaged automobile from seven days to nine hours.
Policy holders’ cars are repaired quicker, and the focus on this central customer need has won much automobile insurance business for Progressive.
These initiatives also enable Progressive to reduce its own costs – the cost of storing a damaged automobile for a day is $28, about the same as the profit from a six-month policy.
Progressive Insurance:
Customer Needs at the Center of Strategy
Source: Adapted from Mitchell, Adrian (2004)”Heart of the Matter,” The Marketer, June 12, 14.
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Determining Product-Market Structure
Start with the generic need satisfied by the product category of interest to management
Identify the product categories (types) that can satisfy the generic need
Form the specific product – markets within the generic product – market
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Purpose of analysis
Change due to new technologies and emerging competition
Consider existing and emerging markets
Identify alternative ways to meet needs
Extend product-market analysis beyond industry boundaries (e.g. Fast-foods)
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3. Customer segments in the product-market
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Identify and Describe End-Users
Evaluate Key Competitors
Forecast Market Size
and Growth Trends
Family size, age, income, geographical location, sex, and occupation
Illustrative factors in organizational markets:
Type of industry
External factors influencing buyers’ needs and wants:
Government, social change, economic shifts, technology etc.
These factors are often non-controllable but can have a major impact on purchasing decisions
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Start with generic product – market
Move next to product- type and variant profiles >> increasingly more specific
Customer profiles guide decision making (e.g. targeting, positioning, market segmentation etc.)
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5. Identify
Diet-Rite
Cola
Typical marketing practices
Industry strengths and weaknesses
Strategic alliances among competitors
Source: Michael E. Porter, Competitive Advantage, Free Press, 1985, 5.
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Market position and trends
Marketing program positioning strategy
Key competitive advantages (e.g., access to resources, patents)
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Industry Boundaries Blurring and Evolving
Competitive Structure and Players Changing
Value Migration Paths
Firms are Collaborating to Influence Industry Standards
Source: C. K. Prahalad, Journal of Marketing, Aug. 1995, vi.
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