Chapter 3: Market Potential, Market Demand, and Market Share Flashcards
marketing myopia (and its problem)
narrow focus on existing product markets
– Problem: oblivious to market changes
benefits of a broad market definition
– Reveals new opportunities - a broader set of customer needs
– Recognize potential substitutes and competitive threats
– Provides management with understanding of client needs
what’s an example of a board market view
coke vs. coca cola portfolio
– “Cola wars” focus replaced by beverage diversification
when can narrow market be a strength rather than a limitation
– Can be a strength rather than a limitation
* Red Bull Today
– 0.7% of non alcoholic beverage market
– But 50% of energy drink market
market potential formula
market potential = max consuming units X buying ceiling x purchase rate x purchase qty x avg price
market development index formula (MDI)
MDI = (Current market demand/ market potential) x 100%
MDI below 33% = ______
great mkt. growth potential
MDI between 33% and 67% = ____________
growth based on improving deficiencies
and lowering price
MDI above 67% = __________
more difficult to grow
what does low MDI signify?
- untapped market potential
–> Awareness, availability, ability to use, lacks benefits, not affordable
market potential
The maximum number of customers the market could attract, given a specific definition for the served market.
market penetration
current number of customers
rate of entry
the percentage of potential customers who enter the market during a given period.
major customer groups during the market development cycle
- innovators
- early adopters
- early majority
- late majority
- laggards
describe innovators
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.
describe early adopters
(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.
early majority
(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
late majority
(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.
laggards
(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.
what are the seven major forces that tend to restrict a market or product from realizing its market potential
- unaffordable
- unrecognized need
- lack of awareness
- lacks desired performance
- consumers lack skills to use
- insufficient infrastructure
- unavailability
what are the 5 customer adoption forces
- Feel a need
- Perception of risk (e.g safety risks, loss of money, loss of status, etc)
- 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. - 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. - 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.
What are the 5 product adoption forces?
- Advantage/relative benefits
- Ease of use
- Performance
- and perception/doubts of this performance - Availability
- both the product itself and any necessary support or maintenance services must also be readily accessible
(5. Affordability)
market share index formula
MSI= product awareness x product preference x price acceptability x product availability x service experience
what does market share index formula do
- Helps identify causes of lost market share
- Mechanism for assessing market share change
- Estimate reasonable potential
Copyright Roger J. Best
