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Outline for Discussion Competitor Analysis: Porters Five Forces Small Group Exercise

Marketing Math

Tools in your Toolbox Adjourn for Dinner (5:30pm)

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Small Group Exercise

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Outline for Discussion Competitor Analysis: Porters Five Forces Small Group Exercise

Marketing Math

Tools in your Toolbox Adjourn for Dinner (5:30pm)

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Marketing Math

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Market Potential

Start with possible pool of customers Identify number of competitors and their

share (assume equal).

Identify your potential share. Plug information into customer product

matrix.

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Market Potential Who uses your product? How often is it

used?

Multiplying these two can give you anindication of the market potential(expressed as the number of customer orsales) you might expect in a market.

First, find accurate population stats then Combine with good useage stats

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http://factfinder.census.gov/home/saff/main.html?_lang=en

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Market potential for Coffee Who uses your product? How often is it used? Multiplying these two can show market

potential

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http://www.coffeeresearch.org/market/usa.htm

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Hot coffee Who uses your product?

Maybe half of the adults > age 18

How often is it used?

Once daily, perhaps the morning Multiplying these two can show market

potential

24,068 (50% drink coffee) = 12,034 potentialcups of coffee consumed in 27713

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Market Potential of Coffee24,068 (50% drink coffee) = 12,034 potential

cups of coffee consumed in 27713 How many competitors?

2 Starbucks, 4 McDonalds, and probably24+ additional competitors = 30

What is an equal share of the market?

12,043 cups of coffee 30 = 401 cups each

Could go further and see sales & profit

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Market Potential of Coffee12,043 cups of coffee 30 = 401 cups each Could go further and see sales & profit

401 cups at \$2.00 each = \$802 in sales

401 cups at \$0.50 each = \$200.50 in profit But that is per day, what about annually?401 per day x 364 days = 145,964 cups

annually or \$291,928 in sales annually

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Another Example Birthday parties in the Gardens How many birthdays occur in your city

each week?

Divide population (30,903) by 365 days = 84birthdays each day in Durham

How many parties? Doesnt matter asmuch as supply (1 per day, 2 onweekends)

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Customer / Product MatrixCustomers

Products

Homeowners Renters Businesses

Annuals

Perennials

Trees &Shrubs

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Market Potential for Annuals First, is it a household purchase or an

individual purchase? How many households?How many homeowners?

How many renters? How many households using annuals?

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Percent of Households BuyingAnnuals and Perennials

05

101520253035

87 88 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3

annual transplantsvegetable transplants

perennial transplants

Source: National Gardening Association 2004

28%

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Participation and home ownershipParticipation Home-owners

(n=1012)Renters(n=499)

Outdoor lawn care ormowing*

65.7% 35.3%

Outdoor flowergardening withannuals orperennials*

62.6% 30.5%

Landscaping withtrees or shrubs* 48.8% 23.4%

* Significant difference for Chi-square test at p

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Market Potential How many homeowners? 7983 How many renters? 5245 How many gardeners using annuals?

7983 x 0.626 (buying annuals) = 4997 5245 x 0.305 (buying annuals) = 1599

Total buyers = 4997 + 1599 = 6596 How many competitors? 30 Expected market share = 219

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Customer / Product MatrixCustomers

Products

Homeowners

(4997)

Renters

(1599)

Businesses

(625)Four inch

Windowbox

Largeplanter

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Customer / Product MatrixCustomers

Products

Homeowners

(4997)

Renters

(1599)

Businesses

(625)Four inch medium

Windowbox

large

Largeplanter large

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Customer / Product MatrixCustomers

Products

Homeowners

(4997)

Renters

(1599)

Businesses

(625)Four inch medium medium

Windowbox

large large

Largeplanter large small

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Customer / Product MatrixCustomers

Products

Homeowners

(4997)

Renters

(1599)

Businesses

(625)Four inch medium medium small

Windowbox

large large small

Largeplanter large small large

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80 / 20 RuleCustomers

Products

Homeowners Renters Businesses

Four inch medium medium small

Windowbox

large large small

Largeplanter

large small large

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Customer / Product MatrixCustomers

Products

New business Mid-age

business

Established

businessSeminar

Telephonecall

Personalvisit

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Customer / Product MatrixCustomers

Products

New

business

Mid-age

business

Established

businessSeminar +++ time

+ impact

++ time

++ impact

++ time

+ impact

Telephonecall

+++ time

+ impact

+ time

++ impact

+ time

++++ impact

Personalvisit +++++ time++ impact++ time+++ impact

++ time+++ impact

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Customer / Product MatrixCustomers

Products

New

business

Mid-age

business

Established

businessSeminar 40 hr

+ impact

30 time

++ impact

30 time

+ impact

Telephonecall

40 hr

+ impact

10 hr

++ impact

10 hr time

++++ impact

Personalvisit 50 hr++ impact20hr+++ impact

20 hr+++ impact

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Customer / Product MatrixCustomers

Products

New

business

Mid-age

business

Established

businessSeminar +++ time

+ impact

++ time

++ impact

++ time

+ impact

Telephonecall

+++ time

+ impact

+ time

++ impact

+ time

++++ impact

Personalvisit +++++ time++ impact++ time+++ impact

++ time+++ impact

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Customer product matrix Clearly segment customers Create a long list of products, focusing on use of the core and augmented product Consider carefully sources of information

to complete the center of the matrix Think about the best fit for your business

in the short run (where do the circles

match)? Use it as a tool for business growth.

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Why ask for a recommendation? Another tool for market potential. Asking one simple question, How likely are youto recommend us to a friend? December 2003 HBR had an article that was

simplistic and valuable (The One Number You

Need to Grow, Harvard Business Review,81[12]:46-54).

Use a 10-point scale for the recommendation toa friend, where 9= extremely likely torecommend, and 0= was not at all likely torecommend.

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Ask for A Recommendation Customers who responded with 8 or 9 are

Promoters. People with a 6 or 7 are Passively

Satisfied, because while they were happy,they werent as willing to put their ownreputation on the line and recommend the

business to a friend or colleague. TheDetractors responded with a 5 or less.

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Net Promoter Percentage 50 clients last year 2 rated you 9 2 rated you 8 22 rated you 7 12 rated you 612 rated you 5 or below 4/12=25% and 16% was the median(study)

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Recommend us to a friend? Key to growing a business is to have a Net

Promoter Percentage of 16% or more (4Promoters to 25 Detractors)

A ratio of Promoters {8 or 9} to Detractors{5 or less} of