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22. April to 24. April 2013 / G2 Market & competition

Business plan basic seminar

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Agenda G2

G2 2

Understand more

Market

Find your place in the market

» Basic vocabulary

» Target market – top down

» Target market – bottom up

Discussion BIONADE

» USP

» Positioning

» 4 P‘s (Product, Place, Promotion, Price)

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Understand more (1)

G2 3

2. An idea for the solution:

» reasonable,

» appropriate and

» effective

When you‘re talking about an idea, you actually talk about…

1. A customer problem:

» discover,

» watch and

» understand

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Understand more (2)

G2 4

Now your task is to understand more about:

Market:

Find out direct

and indirect

competitors

Market research

Customer:

Understand the

customer‘s

problem and

needs

Talk to

customers

Understood more about the problem.

Is chosen market still the best?

Found many competitors.

Switch to a different problem?

Top down Approach Bottom up Approach

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Agenda G2

G2 5

Understand more

Market

Find your place in the market

» Basic vocabulary

» Target market – top down

» Target market – bottom up

Discussion BIONADE

» USP

» Positioning

» 4 P‘s (Product, Place, Promotion, Price)

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Source

Method

Qualitative

» In-depth research

exploring back-

ground and context

Quantitative

» Statistical

analysis of huge

amount of data

Secondary

» Data already available

» Has been collected for different

purpose

» Cheap and quick, but potentially

untargeted or difficult to apply to

concrete situation

Interview surveys

Questionnaires

Online panel

Depth interviews

Focus groups/

expert panel

Mystery shopping

Diaries

… Internet research

Databases

Press/newspaper

Governments/trade associations

Public records or company accounts

Primary

» Data collected for first time

» In customized way

» For specific problem

» Very focused, but time-

consuming

Sample methods

Marketing vocabulary – Market research

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Step1: Collect secondary research data that gives you a rough overview of the market

Step 2: Derive hypotheses

Step 3: Collect primary research data regarding relevant market aspects to enhance your

understanding and reality-check your hypotheses

Note: Market research can never be 100% complete. The aim is to get a broad overview, AND

deepen your understanding about relevant aspects.

Market research is never finished. It is rather a continous process as long as you pursue your

business idea (e.g. to not miss relevant emerging trends or new technologies).

Market research

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Marketing vocabulary – Market analysis

Important terms:

» Number of customers, quantity, sales

» Market volume = current sales quantity of own or similar products throughout the market

» Market potential = possible sales quantity for a product in a specific market

» Sales volume = a company’s sales quantity regarding one specific product

» Market share = sales volume / market volume ratio

» Market growth= future development of market volume and market potential in percent

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Case study BIONADE

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Product:

» Non-alcoholic refreshment drink

» Produced from natural raw materials (organic) in

a fermentation process

Process:

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Increased market understanding through market research

Value

proposition

Number of

customers / end

users

Frequency of

purchase

Price (e.g., via

market price)

Segmen-

tation

Market size

per segment

Total market

size

Adoption

barriers

too high

Target market

size

Potential

iterations

Step 1: Estimate total market

Step 2: Segment market

Step 3: Estimate target market

1) Find your target market (top down)

G2 10

Segmen-

tation

High

competition

intensity

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Increased market understanding through market research

Non-alcoholic

beverages

Number of end

users

Frequency of

purchase

Price (e.g., via

market price)

Market size

per segment High compet.

intensity

(Coca Cola,

Pepsi etc.)

Total market

of non-

alcoholic

beverages

Target market

size

Potential

iterations

Step 1: Estimate total market

Step 2: Segment market

Step 3: Estimate target market

Top-down market estimation:

BIONADE – Target market

G2 11

Segmen-

tation

11,5

Mrd ltr

9,8

Mrd ltr

3,2

Mrd ltr 1,3

Mrd ltr

3,3

Mrd ltr

Adoption

barriers too

high (listing

fees)

Sources: Statistisches Bundesamt

www.khs.com Beverage Industry

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Value

proposition

Number of

customers /

end users

Frequency of

purchase

Price (e.g., via

market price)

Total

market

size

Estimated by top-down approach

with secondary market research

2 main questions.

»What is the size of today’s

overall market?

»What does tomorrow's market

look like?

1.1) Total market size

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BIONADE – Total market size

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Source: Stat. Bundesamt Germany

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Macroscopic trends: overarching

external forces, possibly affecting

multiple/all markets, e.g. regulatory

changes

Microscopic trends: market

internal/specific forces particularly

affecting considered market, e.g.

technology developments

2015 2010

+XX%p.a.

A simple press search (e.g., via

Google News) can provide useful

hints on statements to market trends

1.2) Find out trends

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Macroscopic trends: overarching external forces, possibly affecting multiple/all markets

Examples:

Regulatory changes (e.g. recycling regulations)

Population development (e.g. birth rates)

Infrastructure developments (e.g. smart grids)

Microscopic trends: market internal/specific forces particularly affecting considered market

Examples:

Technology developments (e.g. ebook reader)

Customer relationship/marketing (e.g. facebook fan page)

Key drivers of end customer demand (e.g. key buying factors)

1.2) Find out trends

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BIONADE - Trends

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Customer‘s openness towards new kinds of soda, new flavors

Take off organic food

Trend towards healthy living

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2) Market segmentation

Market size

per segment

Segmentation:

Who are our target customers?

» Which segmentation criteria make most sense?

» Which segment(s) do I choose as the target market?

Total market size

G2 17

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Multiple dimensions are

often used in combination

Needs/problems

What value does the

customer require or

want? Profitability

How financially attractive is

the relationship with the

customer?

Activities/occasions

How does the customer

respond in different

situations?

Attitudes

What underlying beliefs

are shaping the

customer's mindset?

Perceptions

What does the customer

believe about the

marketplace?

Behaviors

What does the customer

actually do in the

marketplace? Firmographics

How is the customer's

organization characterized?

Geographic

Where is the customer's

organization located?

Relationship

Where in the 'relation-

ship life cycle' is the

customer?

Channel

Where does the

customer buy?

2.1) Segmentation criteria

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BIONADE – Market segmentation

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Adoption barriers:

» How high are (additional) costs?

» Are risks involved (e.g., quality or

brand risks)?

Competitors

» How does your product differ from

those of your competitors?

» Who are your direct, and indirect

competitors?

» How is business for the competitors

(stable, growing, declining)?

» What are the strengths /

weaknesses of your competitors?

2.2) Adoption barriers and competitors

Target market

size

Market size

per segment

High

competition

intensity

Identified by primary and

secondary market research

G2 20

Adoption

barriers

too high

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Costs:

Switching costs : What it costs to switch to another product or service (e.g. Windows vs. Mac)

Production costs: Increased costs because of new product (e.g. new production line)

Sales costs: Increased costs because you need to win new customers/ segments (e.g. Porsche

cars, then Porsche sunglasses)

Risks:

Product performance related risks (e.g. product features not fully understood or tested)

Reputation/brand risks (e.g. unforeseen side effects)

Market-related risks (e.g. end-consumer uptake smaller than anticipated)

2.2.) Adoption barriers

G2 21

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BIONADE – Adoption barriers and competitors

G2 22

Market structure:

» Industry: Non-alcoholic beverages

» Barriers: Established distribution channels,

high listing fees

» Competitors: Global players like Coca Cola,

national and regional manufacturers

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Adoption Life Cycle

23 G2

Very Early Adopters

„Techies“

Early Adopters

„Visionaries“

Laggards

„Skeptics“ Early Majority

„Pragmatics“

Late Majority

„Conservatives“

Quelle: Geoffrey Moore (2002): Crossing the Chasm.

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3) Bottom Up Approach

G2 24

You can‘t do a bottom up sitting at your desk

„Get out of the building“

Talk to customers about their problem

therefore

that means

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Understand your customer

G2 25

Put yourself in their shoes.

Feel into and understand the customer’s problem

Look at the problem from the customer’s point of view

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Understand your customer

G2 26

Spend time with them.

Accompany the customer into their every day environment

Find out how the customer structures work, tasks, processes, etc.

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Understand your customer

G2 27

Watch and listen to them closely.

Ask precise questions and then listen closely

Keep your eyes open

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Understand your customer

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Find out what they actually mean.

Sometimes you need to interpret the feedback you get

Cross-check each of your interpretations with reality

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BIONADE – Market size bottom up

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Bottom up market estimation:

» First customer: beverage retailer Göttsche

Sells BIONADE to bars and clubs in Hamburg

» Following customers: Health food shops

» Crossing the chasm into mass market: Supermarket chain REWE, Deutsche Bahn, McDonalds

» Sales peak of 200 million bottles in 2007

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Agenda G2

G2 30

Understand more

Market

Find your place in the market

» Basic vocabulary

» Target market – top down

» Target market – bottom up

Discussion BIONADE

» USP

» Positioning

» 4 P‘s (Product, Place, Promotion, Price)

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From market segementation to positioning

31 G2

• Decide for segmentation

criteria and segment the

market

• Develop profiles for each

segment

• Rank segments

according to their

attractiveness

• Choose your target

segment

„Find the Gap“

• Develop, implement

and communicate

your positioning

concept

Market segmentation

Target market

Positioning

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Customer (core need)

Competitors Entrance barriers

Defendable USP

Can you solve a severe problem better than anyone else? It‘s the customer‘s decision!

Unique Selling Proposition (USP)

32 G2

Examples: Newness, quality, savings, usability, (price)

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Key Parts of the USP

33 G2

• Customers:

Who are your target customers for the USP?

What is the (core) customer need?

• Competitors:

What is the USP of your competition?

How can you differentiate your business?

• Entrance barriers:

How can you protect your USP from copycats?

For example: IP rights, customer contacts, process expertise, unique team

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• New Product Features

• New Combination of Product and Service

• Best Quality

• Longest Lifespan

• Acceleration of Processes

• Smallest Size

• Most Extensive Customer Service

• Intuitive, User-friendly User Interface

• Lowest Price

• Best value

Note: Combine two or three aspects if possible. For example, if the only difference is price then a

major competetitor could undercut your price, thereby eliminating your USP.

Example for a USP

G2 34

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BIONADE – Positioning (1)

G2 35

Red

Bull

Eco

Cool

Coca Cola Kombucha

Tea

BIONADE

Non-alcoholic beverages

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BIONADE – Positioning (2)

G2 36

Positioning:

» Healthy

» Cool

» Organic

» Criteria: ecology, taste, design

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Product

Variation

Differentiation

Innovation

Packaging

Derive the 4 P‘s from your positioning (1)

G2 37

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Product

• Innovation

Is a marketable product, which is completely or relatively new to the market

• Variation

Denotes a conscious change of either technical or aesthetic product features for adapting a

product to changed customer expectations

Can also be done by adding services to a product or changing existing services

In contrast to product differentiation, variation does not change the depth of the product range

Derive the 4 P‘s from your positioning (1)

G2 38

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Product

• Product Differentiation

Provides a new option that complements an already established product

Often an existing product can be specially altered to meet the diverse needs of individual

target customer groups or segments

• Packaging

Refers to the packing material for the product

Identifies, describes, protects and promotes the product

Often is the most relevant element for the establishment of a brand

Derive the 4 P‘s from your positioning (1)

G2 39

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BIONADE – Product (1)

G2 40

Product innovation and later differentiation

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Distribution

Distribution channel

Direct sales

Indirect sales

E-Commerce

Derive the 4 P‘s from your positioning (2)

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Derive the 4 P‘s from your positioning (2)

G2 42

Distribution

• Distribution Channel

Includes company-owned and non-corporate organizational units that ensure the physical

sale and delivery of the goods

• Direct Sales

Selling a product directly to end users or consumers, without intermediaries

• Indirect Sales

Wholesale or retail as intermediaries to consumers

Critical in the consumer market for the distribution and presentation of large quantities of

goods

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G2 43

Distribution

• E-Commerce

Electronic Commerce over the Internet with the help of online shops

High flexibility on the supply side

Reduction of transaction costs

Derive the 4 P‘s from your positioning (2)

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BIONADE – Distribution (2)

G2 44

Distribution via intermediaries and direct sales

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Promotion

Individual communication

Mass communication

Brand

Corporate Identity

Derive the 4 P‘s from your positioning (3)

G2 45

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Promotion

• Individual communication

Form of communication in which selected individuals communicate with each other

Information flows in both directions, meaning each individual is a sender and a receiver

• Mass communication

Public communication, especially in the mass media

This method reaches many recipients, but the communication is not specific (high scattering

losses)

Derive the 4 P‘s from your positioning (3)

G2 46

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Promotion

• Brand

Represents all the properties that differentiate a company‘s products or services from those of

the competition

Eases the process by which consumers orient themselves among the various options

• Corporate Identity

Specifies the identity of a company

Based on the assumption that businesses are a type of social system and can function in a

similar way

Includes:

oCorporate Design, Corporate Communication, Corporate Behavior

oCorporate Philosophy, Corporate Culture, Corporate Language

G2 47

Derive the 4 P‘s from your positioning (3)

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BIONADE – Promotion (3)

G2 48

Strong brand, emphasis on authenticity

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Price

Cost covering price

Penetration pricing

Absorption pricing

Derive the 4 P‘s from your positioning (4)

G2 49

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Price

• Cost covering price

Prices are determined at high enough levels to sufficiently cover all costs incurred in

production and sales

• Penetration price

In the context of new product launches

Lowest possible price at beginning in order to quickly gain a large market share

Gradual price increases later on

Requires a large market and economy of scale (production and distribution costs per unit fall

as quantity sold increases)

Derive the 4 P‘s from your positioning (4)

G2 50

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Price

• Absorption Pricing (also called Skimming Strategy)

In the context of new product launches

Product initially introduced with a high price, which is then gradually reduced

Initially low sales volumes rapidly grow as prices are decreased

Requires customers who are willing to pay a premium for new products

Derive the 4 P‘s from your positioning (4)

G2 51

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BIONADE – Price (4)

G2 52

High price, emphasis on ecological friendliness

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Agenda G2

G2 53

Understand more

Market

Find your place in the market

» Basic vocabulary

» Target market – top down

» Target market – bottom up

Discussion BIONADE

» USP

» Positioning

» 4 P‘s (Product, Place, Promotion, Price)

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BIONADE – At a glance

G2 54

BIONADE development until today:

» Foundation 1995

» Annual growth rate of 300% per year

» Peak at 2007 with 200 million bottles sold

» 2008 rise in prices of 30% and selling BIONADE in PET

bottles

» 2009 Dr. Oetker (food company) takes over 70% of

BIONADE shares

» Sales volume decreases to only 60 million bottles today

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Next steps

G2 55

Investigate your market

Talk to customers

Send your idea as a poster

Find a team

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UnternehmerTUM GmbH

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85748 Garching Fax +49 (0)89-32 46 24-100 www.unternehmertum.de

UnternehmerTUM GmbH

Lichtenbergstraße 8 Tel. +49 (0)89-32 46 24-0 info@unternehmertum.de

85748 Garching Fax +49 (0)89-32 46 24-100 www.unternehmertum.de

Contact

G2 56

Franziska Heyde

heyde@unternehmertum.de

chris.eberl@tum.de

Chris Eberl