CHAPTER 1
NATURE & SCOPE OF THE STUDY
1.1) DEFINING MARKET POTENTIAL
Market or sales potential must be stated for a given product or group of
product for a given area for a given period of time, usually a year.
Market potential is the total sales volume that all organization selling
during a stated time period in a specific market could expect to achieve under
ideal conditions.
A market potential indicates how much of a particular product can be said
to a particular market segment over some future period. The term potential refer
to a maximum level of sales and assumes that all the marketing plans are sound
and effecting implemented and all prospective customer with the desire and
ability to buy do so.
Analyzing market potential
The important steps in analyzing the market potential are
1. Market identification
The first step in analyzing a products market potential is to identify its
market identification requires finding out
a. Who buy the products?
b. Who uses it off?
c. Who are the prospective buyers and/or users?
2. Market motivation
The second step in analyzing market potential is to detect the reasons why
customers buy the product and the reasons why potential customers might buy it.
Market motivation studies answers the twins questions. Why do people buy and
why don’t people buy? Most explaining the buyer behavior of ultimate customers
rather than industrial users. The information from motivation studies helps not
only estimating a products market potential but also assist in deciding.
a. How best to present the products in sale talk
b. The relative effectiveness at different selling appeals
c. The appropriateness of various promotional methods
3. Analysis of market potential.
Having identified the potential buyers and their buying behavior their step
is to analyze the market potential generally market potential cannot be analyses
directly. So an analysis makes use of market factors. A market factor is a market
potential. It is a two-stepped process.
a) Select the market factors associated with the product demand
b) Eliminating those market segments that do not contain prospective buyer
at the product.
Market potential analysis is a strategic tool to identify market
opportunities and invest resources where they will have the greatest return in the
long run. Market potential analysis enables companies to:
Categorize countries as lead markets, breakout markets or emerging
markets.
Quantify market potential for a given product by country, region or
globally, now and in the future
Identify growth drivers and barriers in those markets.
Understand how to exploit growth markets by tailoring marketing; product
development and production strategies to meet customer demands and
overcome market barriers.
1.2) MARKET POTENTIAL INFLUENCERS
Many forces influence market potential, but there are two broad sets of
factors that are key: Demand Drivers and Inhibitors (Figure 1).
Figure 1. Demand drivers for product
Demand Drivers
Demand drivers are the factors that affect the size, readiness or
exploitability of markets. Three are especially important.
The first is the size and wealth of a market. This determines the number
of households, companies, government agencies and other organizations
that can actually afford to buy a product. This is not a simple calculation,
and average figures such as total population and GDP per capita offer only
a starting point. Other factors include household income distribution and
the structure of the business sector. Much of the value of market potential
analysis comes in calculating accurately the number of potential customers
there are for a given product.
The second is the utility of a product in a particular market. This varies
according to the nature of the product and the characteristics of the
market. For instance, if you are selling an English-only online service, the
number of people who speak English in a given market will determine the
value of the service. Similarly, if you are selling PCs for small businesses,
the value of the systems will depend on how easily they can be networked
and communicate internally.
The third demand driver is the supporting infrastructure for a product.
Frozen foods require refrigerators, and refrigerators require electricity, so
the demand for frozen foods is dependent on the presence of reliable,
affordable electrical power. For information and communication products,
the necessary infrastructure can include telephone lines, satellite uplinks,
and human resources such as skilled programmers, technicians and users.
The quality of infrastructure generally corresponds to national wealth, but
there are significant differences among countries at similar levels of
wealth.
Demand Inhibitors
Market potential in a given country can appear to be high, but actual
demand remains low. This is usually due to the presence of demand inhibitors that
either raise the cost or lower the utility of a product. An obvious example is a tax
or tariff, which increases the price to final customers. Quotas and other trade
barriers have the same effect. Some inhibitors such as tariffs are explicit and can
be quantified, while others are less visible and can only be identified through in
depth knowledge of a country. For example, the business model of companies,
management culture, and labor environment (e.g., lifetime employment, strong
unions) can inhibit demand.
Market Potential for Super foods Analyzed
According to a recent report from Data monitor, New York, “Super food
& Drinks: Consumer Attitudes to Nutrient Rich Products,” the “super food” food
and beverage market is expected to double by 2011. The report builds on the
momentum of several trends to point to potential growth opportunities for this
market. Some of the current trends driving this include:
• “Super food” is a concept that has been popularized in the last two years;
• Consumers are paying additional attention to diet and nutrition;
• Consumers are increasingly opting for food and drinks with additional health-
promoting benefits;
• Consumers are increasingly incorporating more fruit into their diet;
• Numerous super food-status products are enjoying buoyant sales, especially in
the United States where the concept is more widely promoted.
Market Potential for Cellulose Ethanol
The Market for Cellulose Ethanol report from US government is an in-
depth analysis of the prospects for the use of cellulose ethanol as a fuel. The
report includes a comprehensive analysis of how cellulose ethanol is produced, its
cost-effectiveness, the growth drivers promoting the use of ethanol over other
fuels, the barriers to market, and much more. The report also focuses on the steps
the government is taking to promote ethanol use, including tax incentives, funding
for research and development, funding for technology, and other measures. The
report also covers the basics of ethanol production; how ethanol differs from other
fuels and the benefits to consumers from using ethanol.
Assessment of the Market Potential of a New Product Combining Two
Diabetes
Medications, Pharmaceutical/Biotech, Brand Management
An emerging biotechnology company was considering developing a new
combination product and wanted to understand the market potential for this
venture. To determine the likely market segmentation and pricing for this product,
the client hired Campbell Alliance for assistance. The Campbell Alliance team
developed an interactive forecast model to estimate the sales of such a product,
and then produced detailed forecasts for production, revenue, and profit/loss.
Based on the results of these forecasts and the potential of the product, client
decided to proceed with production and is currently constructing a manufacturing
facility.
Market Potential for Computers and other Information Technologies
Kenneth L. Kraemer and Jason Dedrick, Center for Research on Information
Technology and Organizations, University of California, Irvine, CA 92697
May 1998, Working Paper: #ITR-149
This paper describes a methodology for estimating the market potential for
computers and other information technologies. Market potential analysis is not
market forecasting, although forecasting when the potential of a market might be
realized can be part of the analysis. At base, market potential analysis sizes
markets based upon a sequential and increasingly refined process from global or
regional to national markets and business, consumer and other segments within
national markets.
1.3) NEW-PRODUCT DEVELOPMENT
The development of original products, product improvements, product
modifications and new brands through the firm’s own R&D efforts.
Major stages in new product development are
1 Idea Generation
The systematic search for new product ideas. Major sources of new-product
ideas include internal sources and external sources such as Customers,
competitors, distributors and suppliers and others.
2 Idea screening
Screening the new-product ideas in order to spot good ideas and to drop poor
ones as soon as possible.
3 Concept Development and Testing
3.1 Product Concept
A detailed version of the new-product idea stated in meaningful consumer
terms.
3.2 Concept testing
Testing new-product concepts with a group of target consumers to find out if
the concepts have strong consumer appeal.
4 Marketing Strategy Development
Designing an initial marketing strategy for new product based on the product
concept.
5 Business analysis
A review of the sales, costs and profit projections for a new product is to find
out whether these factors satisfy the company’s objectives.
6 Product Development
Developing the product concept into a physical product in order to ensure that
the product idea can be turned into a workable product.
7 Test marketing
The stage of new product development in which the product and marketing
program are tested in more realistic market settings.
8 Commercialization
Introducing a new product into the market.
1.4) MARKETING RESEARCH
Market Research is the systematic design, collection, analysis and
reporting of data relevant to a specific marketing function facing an organization.
Marketing research is the systematic objective and exhaustive search for a
study of the facts relevant to any problem in the field of marketing .In order to
understand the needs of buyer and their behavior; we have a tool called marketing
research. It generates information for the decision markers to design and develop
suitable product and to price it properly, to produce it effectively and to distribute
it for the convenience of the buyer.
Marketing research can help marketers assess market potential and market
share; understand customer satisfaction and purchase behavior; and measure the
effectiveness of pricing, product, distribution and promotion activities.
The American Marketing Association defines marketing research as
“Marketing is the function which links the consumer, customer and public
to the marketer through information-information used to identify and define
marketing opportunities and problem; generate, refine and evaluate marketing
actions, monitor marketing performance; and improve understanding of marketing
as a process”
1.5) NEED FOR THE MARKET POTENTIAL
a. The companies’ uses marketing research to measure the market potentials,
characteristics of their markets, and their share of the markets.
b. It is used to obtain information that could help them make short range and
long range forecast.
c. It is used to evaluate new product opportunities and acceptances, and to
test the existing products relative to competitor’s product.
d. They are useful in better advertising decisions.
e. Marketing Research is a critical element that makes our marketing effort
effective.
1.6) SCOPE OF MARKET POTENTIAL
Marketing Research is used to find solution to any problem of marketing. It
anticipates a problem or can diagnose any existing problem marketing research
concern itself with any problem at marketing mix (four P’s of marketing –
Product, Price, Promotion and Place). It brings corporate research also with its
ambit. Marketing Research for the purpose of advertising and other marketing
decision generally cover the following are
Marketing Research
Advertising
Research
Product
Research
Consumer
Research
Sales
Research
Corporate
Research
1 Product Research
Product Research can be conducted regarding concept and positioning of
the product. Sales potential and sale forecasting for different products and market
trend analysis form the major activities in this research.
2 Promotion Research
Promotion Research is related to personal selling, advertising, public relation and
sales promotion research.
3 Distribution Research
This research activity includes location and design for distribution outlets,
transpiration and logistic studies, dealer’s surveys etc.
4 Price Research
It includes pricing studies about elastic ties marginal analysis, cost analysis and
perception regarding price.
The Principal task of marketing Management is to fulfill the aspiration of the
consumers like what they want; how they make the choice; or what are there
source of information and influence processes etc .In this process an organization
can identify new opportunities in the market; evaluating and monitor marketing
actions and in general, evolve better marketing program to serve the interest at
consumer. Thus market research acts as a link between the customer and the
marketer.
1.7) CONSUMER BEHAVIOUR
Consumer behavior is the study of how people buy, what they buy,
when they buy and why they buy. It blends elements from Psychology, sociology,
sociopsychology, anthropology and economics. It attempts to understand the
buyer decision-making process, both individually and in groups. It studies
characteristics of individual consumers such as demographics, psychographics
and behavioral variables in an attempt to understand people’s wants. It also tries
to assess influences on the consumer from groups such as family, friends,
reference groups and society in general.
Consumer behavior essentially refers to how and why people make the
purchase decisions they do. Marketers strive to understand this behavior so they
can better formulate appropriate marketing stimuli that will result in increased
sales and brand loyalty. There are a vast number of goods available for purchase,
but consumers tend to attribute this volume to the industrial world's massive
production capacity. Rather, the giant known as the marketing profession is
responsible for the variety of goods on the market. The science of evaluating and
influencing consumer behavior is foremost in determining which marketing
efforts will be used and when.
Marketers spend a great deal of time and money discovering what compels
consumers to make such on-the-spot purchases. Market researchers obtain some
of the best information through in-store research, and will often launch new
products only in select small venues where they expect a reasonable test of the
product's success can be executed. In this manner, they can determine whether a
product's success is likely before investing excessive company resources to
introduce that product nationally or even internationally.
INTERPRETING CONSUMER BEHAVIOR
There are two principal ways to evaluate the motivation behind consumer
purchases. These are by direction (what they want) and intensity (how much they
want it). Direction refers to what the customer wants from a product. Marketers
need to understand the principal motivation behind each type of product to
correctly target potential customers.
The other way to evaluate consumer behavior, intensity, refers to whether
a customer's interest in a product is compelling enough that they will go out and
make the purchase.
INFLUENCING CONSUMER BEHAVIOR
One of the best ways to influence consumer behavior is to give buyers an
acceptable motive. This is somewhat related to the idea of asking what type of
person would buy a certain product in evaluating consumer behavior. Consumers
want to feel they're doing something good, being a good person, eating healthy,
making contacts, keeping up appearances, or that they just deserve to be spoiled a
little bit. If marketers can convince consumers that they need a product or service
for some "legitimate" reason, customers will be more likely to make a purchase.
MOTIVATION
Motivation refers to an activated state within a person that leads to goal-directed
behavior.
It consists of the drives, urges, wishes, or desires that initiate the sequence
of events leading to a behavior.
Motivation begins with the presence of a stimulus that spurs the
recognition of a need.
Need recognition occurs when a perceived discrepancy exists between an
actual and a desired state of being
Needs, can be either innate or learned.
Needs are never fully satisfied.
Feelings and emotions (I.e., affect) accompany needs
Expressive needs involve desires by consumers to fulfill social and/or
aesthetic requirements.
Utilitarian needs involve desires by consumers to solve basic problems
(e.g. filling a car’s gas tank).
DISTRIBUTION CHANNEL
Distribution channel is defined as "all the organizations through which a
product must pass between its point of production and consumption"
Functions of a Distribution Channel
The main function of a distribution channel is to provide a link between
production and consumption. Organizations that form any particular distribution
channel perform many key functions:
Information Gathering and distributing market research and intelligence -
important for marketing planning
Promotion Developing and spreading communications about offers
Contact Finding and communicating with prospective buyers
Matching Adjusting the offer to fit a buyer's needs, including grading,
assembling and packaging
Negotiation Reaching agreement on price and other terms of the offer
Physical distribution Transporting and storing goods
Financing Acquiring and using funds to cover the costs of the distribution
channel
Risk taking Assuming some commercial risks by operating the channel (e.g.
holding stock)
Numbers of Distribution Channel Levels
Channel 1
Manufacturer Consumer
Channel 2
Channel 3
Channel 4
In the above figure, Channel 1 is called a "direct-marketing" channel,
since it has no intermediary levels. In this case the manufacturer sells directly to
customers.
The remaining channels are "indirect-marketing channels". Channel 2
contains one intermediary. In consumer markets, this is typically a retailer.
Channel 3 contains two intermediary levels - a wholesaler and a retailer. A
wholesaler typically buys and stores large quantities of several producers’ goods
and then breaks into the bulk deliveries to supply retailers with smaller quantities.
For small retailers with limited order quantities, the use of wholesalers makes
economic sense. This arrangement tends to work best where the retail channel is
fragmented - i.e. not dominated by a small number of large, powerful retailers
who have an incentive to cut out the wholesaler.
Manufacturer Retailer Consumer
Manufacturer Wholesaler Retailer Consumer
Manufacturer Wholesaler Jobber Retailer Consumer
1.8) OBJECTIVES OF THE STUDY:
To assess the market for MSD PHARMA in Nanded region and to assess
the opportunities to enter the market.
To identify the existing market players, their marketing channel and the
promotional activities they adapt.
To understand the consumer choice of buying float glasses in this market.
Finally to suggest measures based on the findings.