Lesson 1.1 - Research Your Market

Lesson 1.1

TARGET MARKET •••••••••••••••••••••••••••• • •·

DESCRIBE how to reach your target market.

EXPLAIN how to analyze your competition.

The student population at Randolph Career Technical Center has increased since the school hired a bilingual advocate. Mr. Munoz has been instrumental in recruiting Hispanic-American students from the Detroit Metropolitan area. Once the students arrived , the Eatery staff was eager to serve its new customers. However, the staff noticed that most of the Hispanic students were not visiting the Eatery but were bringing their food from home. Student employees asked the school store advisor if they could develop a survey with a focus on ethnicity segmentation . Questions were designed to ask Hispanic-American students about their food preferences. The information that was gathered not only expanded the store's existing product mix but also created an awareness of diversity. This diversity led to a special event that featured foods from a variety of ethnic groups during the month of February.

Work in a group to create a list of products and services that would be appropriate based on each of the following demographic groups in your school: age, gender, income level, ethnic background, education, and occupation.

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PROFILING YOUR CUSTOMERS A group of people or companies that have a demand for a product or service and are willing and able to buy it is defined as a m arket. The particular group that you are interested in reaching is called a target market. Your primary objective should be to learn as much as you can about your target market. To begin the process, you must identify the type of customer your school-based enterprise, or school store, usually attracts or the type of customer you want to attract. This step will help you discover whether there is a group of customers for your product or service and whether there are enough of those customers for your school store to survive. Developing an accurate profile of your customer allows you to decide which group of customers to target first. You then can measure how many of those customers exist in your trade area.

Everyone is not going to buy all of the products or services that are offered in your school store. You must analyze the market to discover where you fit.

TARGET MARKET The success of operating a profitable school-based enterprise depends upon your ability to meet customers' needs and desires.

To do this, you must know who your customers are , what they want, where they live, and what they can afford. In order to 4

1 Research Your Market

market your product or service, you must tailor your marketing and sales efforts to target the segment of population that will most likely buy it. First, you must clearly identify your primary market. You cannot be all things to all people.

Targeting your customer is simply identifying who your primary customer will be. The market should be measurable, sufficiently large, and reachable. For example, suppose the target market for a new "power" drink consists of students who are active in sports.

You will need to segment this market into something more manageable using the following guidelines:

• The market segment should be measurable. Find out how many students at your school are involved in sports activities.

• The segment should be large enough to be profitable. You will have to spend money to market your product. Are there enough students who participate in sports to recover your costs and make a profit?

• The segment should be reachable. You must be able to promote your power drink to the customer. Once the potential customer is aware of your new beverage, you must be able to position your product in the right place at the right time.

FINDING YOUR CUSTOMERS Finding your customers involves three steps. They are: 1. Identify why a customer would want to buy your product or

service.

2. Segment your overall market.

3. Research your customer.

Step 1. Identify Why a Customer Would Want to Buy Your Product or Service In identifying your target market, the first step is understanding what your products/ services have to offer. To do this, create a features/benefits chart. A feature is a characteristic of a product or service. A benefit is the advantage provided to a customer as a result of the feature. By knowing what your product/ service has to offer and what makes customers buy, you can begin to identify common characteristics of your potential market. For instance, there are many different customers who drink Gatorade TM and other power drinks to replenish those nutrients lost during vigorous activity. Target a specific group of consumers with similar characteristics such as students in your school who are active in football, baseball, basketball, volleyball, golf, swimming, cheerleading, or wrestling.

Step 2. Segment Your Overall Market Your promotional budget will be much more cost effective if you promote to a specific group of customers. This allows you to create a highly focused campaign that will meet the needs of each specific group. This is called market segmentation. Market segmentation involves using specific characteristics to analyze your market by breaking down a larger target market into smaller segments. Segmentation will help you customize a product/ service to meet the specific needs of a narrowly defined customer group. The market is usually segmented on the basis of demographics , psychographies, geographies, and buying characteristics.

Companies have simplified their research procedures through the use of online focus groups that engage in online chats about products.

The companies can view sessions live via satellite networks instead of sitting behind a one-way mirror to observe the focus group engage in open dialogue.

Demographics Using physical characteristics, such as age, gender, location, education, occupation, income level, marital status, and household type, to segment your market is called demographics.

By analyzing demographics, you can develop a mental picture of the type and size of the potential customer base you can attract.

For example, by engaging in a thorough study of the income of your target audience, you will learn how much money is available to spend on different products.

Psychographies Using the social and psychological characteristics of your customers to help determine what motivates them to buy is known as psychographies. Some of the psychographies that might influence your customers include:

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Needs security, love Values status, success Buying Styles fads, price Culture religion, politics Interests recreation, shopping

You must have the right type of people in the area to use your service or to buy your product.

Geographies Market segmentation based upon where people live is called geographies. To segment a market geographically, you can refer to local, regional, national, or global markets. You will probably concentrate on segmenting your market locally by catering to people who live in the vicinity of the school. It is sometimes wise to start with a smaller geographic territory and then expand as you grow unless the territory that you have identified does not have enough target customers to support your business.

Buying Characteristics It is important to acquire information about your market's buying characteristics. You can do this by segmenting the market based upon the customers' knowledge of products and services and the customers' personal experiences and reactions to the products and services.

Step 3. Research Your Customer After you have determined the number of people who potentially fit your customer profile, you must identify your customer using various research methods, including library references, trade associations, and surveys. Using these research methods w ill help you answer the questions, "Where and how do I find out about my customer?"

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1 Research Your Market

Why is it important to segment your market before positioning a new product within your current product mix?

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ANALYZING THE COMPETITION

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The obvious competitor isn't your only competitor. For example, the CT Expressions school store at Cass Technical High School in Detroit must change its entire school store concept. The old school is being demolished, and students will move into a new school building in 2005. Looking over the architectural plans, the school store advisor noticed that the school store will be located directly in front of the school's cafeteria/ food court. If the CT Expressions school store continued to sell food items, it would be in direct competition with the food court. The school store advisor was wise to conduct research to discover this information before planning the store's layout. After polling the staff and students at Cass Tech, the school store advisor decided to sell clothing instead of food items in the new school store. The assistant principal conferred with a competitor's school store advisor to gather information about layout of the store and the type of apparel and accessories that would sell well.

COMPETITION RESEARCH Studying the competition can provide you with a wealth of information about your customer, the market, and the profit potential. In analyzing the competition, you may discover a niche market that the current competition isn't serving. For example, a school-based enterprise in Ohio sold sports paraphernalia. The advisor of that store visited a sportswear outlet and found lightweight nylon backpacks marked down to $8. She purchased the entire stock from the outlet store to sell in the school store. She purchased the bags in response to students' requests for the backpacks. Once the backpacks hit the selling floor, they sold out in one day. Student employees called the outlet store to order more of the backpacks. ŠGETIY IMAGES/PHOTODISC

1.1 Target Market

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Because no other school store in the area sold the product, students at this school store had found their niche.

Although local sports stores sold the backpack, the cost was much higher than the price at the school store because the store's advisor purchased the product from a factory outlet more than 100 miles away. Using a remote competition strategyidentifying a similar business not near the school's trade area-the school store advisor and student employees asked the manager of the retail outlet to help them find © CENGAGE LEARNING these backpackS at Other locations. The sports store outlet manager provided the school store staff with information to help support sales.

Having a competitive edge is critical to the success of your store.

Unless you have an edge over existing competition, there is no motivation for customers to change their existing buying habits and patronize your store. Another reason to compare your school store to the competition has to do with price. If your store's prices are higher than the competition, then its products and services must be superior enough to merit the customer paying the higher price.

Finally, recognizing your competitive advantage may make it easier to penetrate the existing market and take a portion of business from your competition. A key to successfully operating a school store involves establishing a unique market niche.

Ways that will help you research the competition include: • Visiting and observing • Calling and inquiring • Studying ads in newspapers, magazines, and the Yellow Pages

Why is it important to compare your school store with the competition?