Chapter 3: Market Potential, Market Demand, and Market Share

Question 1

marketing myopia (and its problem)

Answer 1

narrow focus on existing product markets
– Problem: oblivious to market changes

Question 2

benefits of a broad market definition

Answer 2

– Reveals new opportunities - a broader set of customer needs
– Recognize potential substitutes and competitive threats
– Provides management with understanding of client needs

Question 3

what’s an example of a board market view

Answer 3

coke vs. coca cola portfolio

– “Cola wars” focus replaced by beverage diversification

Question 4

when can narrow market be a strength rather than a limitation

Answer 4

– Can be a strength rather than a limitation
* Red Bull Today
– 0.7% of non alcoholic beverage market
– But 50% of energy drink market

Question 5

market potential formula

Answer 5

market potential = max consuming units X buying ceiling x purchase rate x purchase qty x avg price

Question 6

market development index formula (MDI)

Answer 6

MDI = (Current market demand/ market potential) x 100%

Question 7

MDI below 33% = ______

Answer 7

great mkt. growth potential

Question 8

MDI between 33% and 67% = ____________

Answer 8

growth based on improving deficiencies
and lowering price

Question 9

MDI above 67% = __________

Answer 9

more difficult to grow

Question 10

what does low MDI signify?

Answer 10

• untapped market potential

–> Awareness, availability, ability to use, lacks benefits, not affordable

Question 11

market potential

Answer 11

The maximum number of customers the market could attract, given a specific definition for the served market.

Question 12

market penetration

Answer 12

current number of customers

Question 13

rate of entry

Answer 13

the percentage of potential customers who enter the market during a given period.

Question 14

major customer groups during the market development cycle

Answer 14

• innovators
• early adopters
• early majority
• late majority
• laggards

Question 15

describe innovators

Answer 15

2.5% of customers

As the first to buy a new product or service, these customers see genuine value in it and are willing to pay a premium price, despite any deficiencies in ease of use, support services, and the set of features.

Question 16

describe early adopters

Answer 16

(13.5%)—

Because they are well informed, these customers are aware of the innovators’ experience and satisfaction with a new product or service. They are attracted to the product’s benefits and are willing to pay a premium price even though the product or service lacks the refinements that will come later.

Question 17

early majority

Answer 17

(34%)—A product has penetrated the mass market when the early majority of customers have adopted it. The price is affordable, the product is useable, and the feature set is attractive. Until these product attributes are met, the market’s development will be delayed.

The early majority customers are quality conscious, fairly well informed, and somewhat price sensitive

Question 18

late majority

Answer 18

(34%)—The customers in the late majority are skeptics. They wait to see whether the product or service will really deliver meaningful benefits. These customers are more price sensitive than early majority customers and often are not as well informed about new products, but they do notice the new products that are being used around them.

Lower prices, increased availability, advertising, the opportunity to observe others using the product, and having heard the experiences of others all con- tribute to the late majority’s entry to the market.

Question 19

laggards

Answer 19

(16%)—As the name indicates, these are the last customers to adopt a new product or service. They are often price constrained, do not see the need for the new product, or both. Promotions and lower prices bring these customers into the market.

Question 20

what are the seven major forces that tend to restrict a market or product from realizing its market potential

Answer 20

1. unaffordable
2. unrecognized need
3. lack of awareness
4. lacks desired performance
5. consumers lack skills to use
6. insufficient infrastructure
7. unavailability

Question 21

what are the 5 customer adoption forces

Answer 21

1. Feel a need
2. Perception of risk (e.g safety risks, loss of money, loss of status, etc)
3. Buying decision process
   - If the decision to buy a product or service can be made without having to get the agreement or input of several people, market growth will develop more rapidly. An individual decision maker can act quickly if he or she does not first need the approval of others.
   - Conversely, when deci- sions to purchase a product are likely to be group decisions, such as those by a married couple, an organization’s governing board, or the managers or owners of a business, the rate of customer entry into a market is slowed.
4. Observable behavior
   - extent to which potential customers can observe the use of the product by current customers.
   - e.g demand for products that are easily observed, such as televisions and fashionable sun- glasses, grows faster than for products that are less observable, such as household clean- ers and insurance programs.
5. Trialability
   - products that can be tried at the point of purchase or offered on a trial basis will penetrate their markets more quickly than products that customers cannot try before buying.

Question 22

What are the 5 product adoption forces?

Answer 22

1. Advantage/relative benefits
2. Ease of use
3. Performance
   - and perception/doubts of this performance
4. Availability
   - both the product itself and any necessary support or maintenance services must also be readily accessible

(5. Affordability)

Question 23

market share index formula

Answer 23

MSI= product awareness x product preference x price acceptability x product availability x service experience

Question 24

what does market share index formula do

Answer 24

• Helps identify causes of lost market share
• Mechanism for assessing market share change
• Estimate reasonable potential
  Copyright Roger J. Best

Question 25

share development index (SDI) formula

Answer 25

SDI = (Market share index/ share index potential) x 100%

Question 26

what does the share development index show (example)

Answer 26

The SDI of 41 means that the business is achieving only 41 percent of its potential market share performance

Question 27

By combining the ___________ with the ____________ , a business can discover whether they should focus on market development or share development or both, depending on the product’s position in the growth opportunity portfolio.

Answer 27

Market Development Index (MDI) with the Share Development Index (SDI)