Market Potential, Market Demand, and Market Share

Chapter ThreeChapter Three

MMarket-Basedarket-Based Management, 4Management, 4thth editionedition

3-2

Market Potential, Market Market Potential, Market Demand, and Market ShareDemand, and Market Share

Chapter Three

• Various forms of Market Demand and Opportunities

• Market Potential and Growth

• Product Life Cycle

• Marketing Mix and Market Share Performance

• Market Share and Development Metrics

3-3

Market DefinitionMarket DefinitionNarrow vs. Broad Market Focus

3-4

Market OpportunitiesMarket OpportunitiesVertical vs. Lateral Market Demand

3-5

Market PotentialMarket Potential

Market Penetration vs. Market Demand

= Current Market DemandMaximum Market Demand

Market Development Index (MDI)

3-6

Five Forces of Market Five Forces of Market PotentialPotential

1. Awareness

2. Availability

3. Affordability

4. Ability to Use

5. Benefit Deficiency

3-7

Market GrowthMarket Growth

Three Forces of Market Growth

1. Market Potential

2. Market Penetration

3. Rate of Entry

3-8

Accelerating Market GrowthAccelerating Market Growth

3-9

Product Life CycleProduct Life Cycle

Product Life Cycle and Marketing Profitability

3-10

The Marketing MixThe Marketing Mix

• Product Awareness – Promotion and Advertising Channels

• Product Attractiveness– Effect of Substitutes

• Price Acceptability• Product Availability

– Distribution and Location

• Service Experience

3-11

Market Share Development Market Share Development TreeTree

3-12

Market Share MetricsMarket Share Metrics

• Market Share Market share = Sale Volume / Market Demand

• Market Share Index (MSI)– Awareness X Preference X Intent to Buy X Availability X Purchase– Three Important Benefits of MSI

• Share Development Index (SDI)– Actual Market Share/Potential Market Share

3-13

Market Development vs. Market Development vs. Market ShareMarket Share

(31, 72)

3-14

TakeawaysTakeaways//ReviewReview

• Importance of Market Definition and Analysis

• Encouraging Growth, PLC, and Hastening Adoption

• Marketing Mix Performance

• Market Share– Tree– Evaluation

• Market Performance Metrics – Market Development Index– Market Share Index– Share Development Index

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Marketing Performance ToolsMarketing Performance Tools

Market Demand and Unit Sales Volume

Market Development Base Year Year 1 Year 2 Year 3 Year 4 Year 5

Calendar Year 2004 2005 2006 2007 2008 2009

Market Potential (units) 250,000,000 250,000,000 250,000,000 250,000,000 250,000,000 250,000,000

Market Demand (units) 180,000,000 197,000,000 215,000,000 230,000,000 240,000,000 245,000,000

Market Grow th Rate 9.4% 9.1% 7.0% 4.3% 2.1%

Market Development Index 0.72 0.788 0.86 0.92 0.96 0.98

Market Share (percent) 5% 5% 5% 5% 5% 5%

Volume Sold (units) 9,000,000 9,850,000 10,750,000 11,500,000 12,000,000 12,250,000

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Marketing Performance ToolsMarketing Performance Tools

Customer Adoption and Product Adoption

Customer Customer Forces Affecting the Rate on New Product Market Penetration

Percent Adoption Forces Percent of Customers who…

80% Felt Need have a strong, recognized need for this product.

90% Personal Risk perceive little or no economic, social or safety risk associated w ith ow ning or using this product.

30% Buying Decision can buy product relatively easy w ith little or no input from others.

67% Observable can easily observe this product in use prior to purchase.

30% Trialability can try or sample the product prior to purchase.

80% Recommend w ould recommend this product to others.

63% Average Customer Adoption Score

Product Product Forces Affecting the Rate on New Product Market Penetration

Percent Adoption Forces Percent of customers who…

90% Product Advantage believe this product offers a discernable advantage over existing products.

20% Affordable Price feel the price of the product is affordable given their buying pow er.

80% Easy to Use feel this product is not overly complex and w ould be easy to use.

60% Performance Risk feel there is little or no chance the product w ill fail to perform as advertised.

80% Availability feel the product is readily available at the point of purchase preferred by customers.

20% Customer Service feel there is suff icient after-sales services in place to support any after-purchase problems.

58% Average Product Adoption Score

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Marketing Performance ToolsMarketing Performance Tools

Customer Adoption and Product Adoption Forces

Forces Impacting the Rate of New Product Adoption C

ust

om

er A

do

pti

on

Fo

rces

Product Adoption Forces

0%20

%40

%60

%80

%10

0%

0% 20% 40% 60% 80% 100%

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Marketing Performance ToolsMarketing Performance Tools

Market Share Index and Share Development Index

Current Achieveble Performance

Market Share Performance Metrics Performance Performance Gap

% Target customers suff iciently aw are of product and benefits 60.0% 60.0% 0.0%

% Aw are customers that prefer product benefits over competing product offerings 40.0% 40.0% 0.0%

% Customers that are not deterred by the price of the product given its benefits 60.0% 60.0% 0.0%

% Customers that can readily purchase your product at their preferred point of purchase 30.0% 30.0% 0.0%

% Customers that try/buy and continue to purchase the product 80.0% 80.0% 0.0%

Market Share Performance Metrics 3.5% 3.5% 0.0%

Market Share Devoplement Index 100

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Marketing Performance ToolsMarketing Performance Tools

Market Share Index and Share Development IndexMarket Share

Market Share Market Share Metrics

Potential Index Development Index

3.5% 100 3.5%

80.0%

30.0%

0.8%

60.0% 20.0%

10.1%

40.0% Price is a Problem 70.0%

9.6%

60.0% 40.0%

36.0%

Not Aw are 60.0%

40.0%

40.0%

99.9%

Attraacted to Core Benefits

Service is Not Available

Level of Aw areness

Not Attracted to core Benefits

Try or Purchase Product

Service Available

Price Acceptable Don’t Purchase Product