PRODUCT -

MARKET
- Recognizes that a market exists only when there are
buyers with needs who have the ability to purchase goods
and services and products are available to satisfy the
needs.
MARKETS – comprised of group of people who have the
ability and willingness to buy something because THEY
HAVE A NEED (value requirement) for it.
- Matches PEOPLE WITH NEEDS – needs that lead to a
DEMAND for a good or service – to the PRODUCT
BENEFITS that satisfy those needs.
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
EXAMPLE:
Financial services product-market for short-term
investments may include money market accounts, mutual
funds, treasury bills, bank certificates of deposit, and
other short-term investment alternatives.
DEFINING AND ANALYZING PRODUCT-
MARKETS STEP
STEP 1A company’s brand competes with other companies’
brand in generic, product type, and product-variant
S
DETERMINE THE
BOUNDARIES AND product-markets.
STRUCTURE OF PRODUCT- PRODUCT-MARKET STRUCTURES:
MARKET
FORM THE PRODUCT- • GENERIC PRODUCT-MARKET : includes a broad
MARKET group of products that satisfy a general, yet similar,
DESCRIBE AND ANALYZE • need.
PRODUCT-TYPE PRODUCT-MARKET : includes all
END USERS
brands of a particular product type in which it offers a
ANALYZE COMPETITION specific set of benefits intended to satisfy a
customer’s need or want in a specific way.
FORECAST MARKET SIZE
AND RATE OF CHANGE • PRODUCT-VARIANT PRODUCT-MARKET :
differences in the products within a product-type
product-market may exist
DEFINING AND ANALYZING PRODUCT-
MARKETS STEP
STEP 1 STARTING POINT in determining product-market
The
S
DETERMINE THE
BOUNDARIES AND
boundaries is to IDENTIFY THE PARTICULAR NEED
STRUCTURE OF PRODUCT-
OR WANT THAT A GROUP OF PRODUCT
MARKET SATISFIES.
FORM THE PRODUCT- In defining the product-market, it is helpful to indicate:
MARKET (1) The basis for identifying buyers in the product-
DESCRIBE AND ANALYZE market of interest (geographical area, consumer /
END USERS business, etc.);
ANALYZE COMPETITION (2) The market size and characteristics; and
(3) The brand and/or product categories competing for
FORECAST MARKET SIZE the needs and wants of the buyers included in the
AND RATE OF CHANGE
product-market.
DEFINING AND ANALYZING PRODUCT-
MARKETS STEP
STEP 1
KITCHEN APPLIANCE PRODUCT-MARKET
S
DETERMINE THE
BOUNDARIES AND Determining the Composition of a Product-Market
STRUCTURE OF PRODUCT-
MARKET
FORM THE PRODUCT-
MARKET
DESCRIBE AND ANALYZE
END USERS

ANALYZE COMPETITION

FORECAST MARKET SIZE

AND RATE OF CHANGE
DEFINING AND ANALYZING PRODUCT-
MARKETS STEP
STEP 1
S
DETERMINE THE
BOUNDARIES AND
STRUCTURE OF PRODUCT-
MARKET
FORM THE PRODUCT-
MARKET
DESCRIBE AND ANALYZE
END USERS

ANALYZE COMPETITION

FORECAST MARKET SIZE

AND RATE OF CHANGE
DEFINING AND ANALYZING PRODUCT-
MARKETS STEP
STEP 2
FACTORS PRODUCT-MARKET BOUNDARIES:
S
DETERMINE THE
BOUNDARIES AND • PURPOSE OF ANALYSIS
STRUCTURE OF PRODUCT- • CHANGING COMPOSITION OF MARKETS
MARKET
FORM THE PRODUCT-
MARKET
DESCRIBE AND ANALYZE
END USERS

ANALYZE COMPETITION • EXTENT OF MARKET COMPLEXITY

FORECAST MARKET SIZE
• Customer function
AND RATE OF CHANGE • Different technologies
• Customer segments
DEFINING AND ANALYZING PRODUCT-
MARKETS STEP
STEP 2
S
DETERMINE THE
BOUNDARIES AND
STRUCTURE OF PRODUCT-
MARKET
FORM THE PRODUCT-
MARKET
DESCRIBE AND ANALYZE
END USERS

ANALYZE COMPETITION

FORECAST MARKET SIZE

AND RATE OF CHANGE
DEFINING AND ANALYZING PRODUCT-
MARKETS STEP
STEP 3
S
DETERMINE THE
BOUNDARIES AND
STRUCTURE OF PRODUCT-
MARKET
FORM THE PRODUCT-
MARKET
DESCRIBE AND ANALYZE
END USERS

ANALYZE COMPETITION

FORECAST MARKET SIZE

AND RATE OF CHANGE
DEFINING AND ANALYZING PRODUCT-
MARKETS STEP
STEP 3
IDENTIFYING AND DESCRIBING BUYERS
S
DETERMINE THE
BOUNDARIES AND
STRUCTURE OF PRODUCT-
MARKET
FORM THE PRODUCT-
MARKET
DESCRIBE AND ANALYZE
END USERS

ANALYZE COMPETITION

FORECAST MARKET SIZE

AND RATE OF CHANGE

 Types of Products
DEFINING AND ANALYZING PRODUCT-
MARKETS STEP
STEP 3
HOW BUYERS MAKE CHOICES
S
DETERMINE THE
BOUNDARIES AND
STRUCTURE OF PRODUCT-
MARKET
FORM THE
PRODUCTMARKET
DESCRIBE AND ANALYZE
END USERS

ANALYZE COMPETITION

FORECAST MARKET SIZE

AND RATE OF CHANGE
DEFINING AND ANALYZING PRODUCT-
MARKETS STEP
STEP 3
ENVIRONMENTAL INFLUENCES
S
DETERMINE THE
BOUNDARIES AND
STRUCTURE OF PRODUCT-
MARKET
FORM THE PRODUCT-
MARKET
DESCRIBE AND ANALYZE
END USERS

ANALYZE COMPETITION

FORECAST MARKET SIZE

AND RATE OF CHANGE
DEFINING AND ANALYZING PRODUCT-
MARKETS STEP
STEP 3
BUILDING CUSTOMER PROFILES
S
DETERMINE THE
BOUNDARIES AND
STRUCTURE OF PRODUCT-
MARKET
FORM THE PRODUCT-
MARKET
DESCRIBE AND ANALYZE
END USERS

ANALYZE COMPETITION

FORECAST MARKET SIZE

AND RATE OF CHANGE
DEFINING AND ANALYZING PRODUCT-
MARKETS STEP
STEP 4
S
DETERMINE THE
BOUNDARIES AND
STRUCTURE OF PRODUCT-
MARKET
FORM THE PRODUCT-
MARKET
DESCRIBE AND ANALYZE
END USERS

ANALYZE COMPETITION

FORECAST MARKET SIZE

AND RATE OF CHANGE
 STEP 4: ANALYZING COMPETITION
involves analyzing the competition’s:
• Companies strengths, weaknesses
• Brands
• Strategies, tactics, positioning, sales
5 steps
1. Define the competitive arena for generic, specific
and variant product markets
2. Identify key competitors
3. Evaluate key competitors
4. Anticipate actions by competitors
5. Identify and evaluate potential competitors
ANALYZING COMPETITION
• A Competitors’ Analysis would also include an
analysis of each competitor’s past sales
• An understanding of a competitor’s sales
trend is important
• Especially, when compared to your company’s
sales trends
ANALYZING COMPETITION
• An overall evaluation of the key competitor's current
strengths and weaknesses would also include looking at the
competitor’s:
- Management capabilities
- Financial position
- Marketing strategy
 Examples of Levels of Competition
Budget competition:
food & entertainment Baseball
cards

Bottle Video
Fast water Games
Food Regular
colas Diet lemon Ice
Beer limes Cream
Diet-Rite
Cola
Fruit
flavored Diet
Diet Pepsi
colas Coke Wine
Product from
competition: Lemon
Product category
diet colas limes
Juices competition:
soft drinks
Coffee
Generic competition:
beverages
Industry Analysis
• Two kinds of information are needed:
• An analysis of the value chain channels that
link together the various organizations in
the value-added system
• The industry analysis includes:
• Industry characteristics and trends
• Operating practices of the firms in the
industry
Industry Analysis
• Industry Analysis is horizontal and covers similar types of
firms and operating practices of the firms
• Competitor analysis is conducted from the point of view of
a particular firm
• Two other kinds of information are needed:
• Descriptive profile of the industry (horizontal)
• An analysis of the value chain (distribution) channels
(vertical)
 Industry Analysis

Industry analysis looks at:

• Industry size, growth, and composition
• Typical marketing practices
• Industry changes that are anticipated (e.g.
consolidation trends)
• Industry strengths and weaknesses
• Strategic alliances among competitors
Analysis of Value-added Chain
• Analysis of Value-added (Supply) Chain is important in
understanding and serving product markets
Firms need to look at:
• The extent of vertical integration
• Channel management issues
• The types of relationships (i.e. collaborative versus
transactional)
• The extent of outsourcing activities in the chain
 Defining Industry Structure & Characteristics

SUPPLIERS
Industry Form
Industry PRODUCERS
Environment
Competitive WHOLESALERS/
Forces DISTRIBUTORS
Value
Added
RETAILERS/DEALERS
Chain

CONSUMER/
ORGANIZATIONAL END
USERS
Framework to Analyze Competitive Forces

Companies need to consider:

• Rivalry among existing firms
• Threat of new entrants
• Threat of substitute products
• Bargaining power of suppliers
• Bargaining power of buyers
Key Competitor Analysis
There are 2 major aspects of competitor analysis:
1. Preparing a descriptive profile for each competitor
2. Evaluating the competitor’s strategies, tactics, strengths
and weaknesses
Exhibit 2.11 - Describing and Evaluating
Key Competitors
 Extent of
Market Coverage

Current Competitor Customer

Capabilities Evaluation Satisfaction

Past
Performance
Anticipating Competitor’s Actions
• These analyses may suggest future strategic initiatives of a
key competitor
• Never assume that an existing strategy will continue
• New competitors should be identified
• New competitors can come from four major sources
4 Major Sources of Competitors
1. Companies competing in a related product-market
2. Companies with related technologies
3. Companies already targeting similar customer groups with
other products
4. Companies competing in other geographical regions with
similar products
Likely Market Entry by Competitors May
Occur When:
• High profit margins exist by incumbents
• Future growth opportunities are attractive
• No major barriers to market-entry are present
• Only one or a few competitors exist
• Gaining a competitive advantage over existing firms
is feasible
STEP 5: Market Size Estimation
• This is usually measured by dollar sales for a product-market
for a specified time
Other measures include:
• Number of buyers
• Average purchase quantity
• Frequency of purchase
3 Key Measures of Market Size
1. Market potential
2. Sales forecast
3. Market share
Market Potential
• Is the maximum amount of product sales that can be
obtained from a product-market, during a specified time
Sales Forecast
• Is the expected sales for a product-market, during a specified
time
• This is the total volume of sales expected by all firms serving
the product market
Market Share
• Company sales divided by the total sales of all firms in a
product-market
• Market share can be calculated based on actual sales or
forecasted sales
• Essentials in preparing forecasts to specify:
• What is being forecast
• Time period involved
• Geographical area
 MARKET SIZE ESTIMATION

Product-Market Forecast Market Potential

Relationships Estimate
(area denotes sales in $’s)

Unrealized
Potential

Company Industry
Sales Sales
Forecast Forecast
 Product-Market Forecast Relationships for
Industrial Painting Units

Sales (in 1000s

of units)
900
800
Market
700 Potential
600 Sales Forecast

500
400
300
200 Company XYZ
Sales Forecast
100
0
2003 2004 2005 2006 2007 2008 2009 2010
 Exhibit 2.13 - Summary of Advantages and Disadvantages of
Various Sales Forecasting Techniques

Source: Mark W. Johnston and Greg W. Marshall, Sales Force Management, 9th ed. (New York: McGraw-Hill/Irwin, 2009), 141.
 Exhibit 2.13 - Summary of Advantages and Disadvantages of
Various Sales Forecasting Techniques

Source: Mark W. Johnston and Greg W. Marshall, Sales Force Management, 9th ed. (New York: McGraw-Hill/Irwin, 2009), 141.
 Exhibit 2.13 - Summary of Advantages and Disadvantages of
Various Sales Forecasting Techniques

Source: Mark W. Johnston and Greg W. Marshall, Sales Force Management, 9th ed. (New York: McGraw-Hill/Irwin, 2009), 141.
 Developing a Strategic Vision about the
Future
• Phases of competition
• Useful to distinguish between different phases in the development of
competition
• Anticipating the future
• Organizations that choose to invest substantial time and effort in anticipating
the future create an opportunity for competitive advantage
Exhibit 2.14 - Developing a Strategic
Vision
 DEVELOPING A STRATEGIC VISION ABOUT
THE FUTURE
 Industry Boundaries Blurring and Evolving
 Competitive Structure and Players Changing
 Value Migration Paths
 Product Versus Business Design Competition
 Firms are Collaborating to Influence Industry
Standards

Source: C. K. Prahalad, Journal of Marketing, Aug. 1995, vi.