Market Analysis

Market Definition

[]          This section describes the existing and projected marketplace in which you will introduce your company and products.

[]          Consult industry analysts, census reports, and trade journal studies for this information.

Industry Analysis

The [x] market is growing at a rapid rate. The market for these products amounted to $[x] million in 19[xx]—representing a [x]% growth over $[x] million in 19[xx].

Referenced sources agree that the major trend is for [x]. The trend has been toward the development of [products].

The overall [x] market for the [x] industry is projected to be $[x] million/billion by the end of 19[xx]. The overall market potential for [product category] is estimated to be $[x] million by 19[xx], and the [additional products] portion of this market is estimated to be $[x] million.

The area of greatest growth in the [x] market is in the area of [x].

[]          Source:  such as industry analysts, census reports, and trade journal studies.

Market Segment

Key points in defining the market segment for [product] are [x], [x], and [x].

[]          By product feature, by lifestyle of target consumers, by geographical location, by season, etc.

[]          Include charts where appropriate.

The major market segments are:

[Segment 1]

[Segment 2]

[]          List, by broad category, the types of customers you are likely to sell to. (Retailers, Electrical Contractors, Mail-order catalogs, etc.)

These products have been successfully distributed in many areas of the industry. Competitive products in this market are [produced/provided] by [competitor 1], [competitor 2], and [competitor 3].

In the next [x] to [x] years it is estimated that there will be more than [x] [thousand/million] of [product]s distributed by [company]. The market potential for [product] in these quantities—with a current retail price of $[x] per unit—is approximately $[x] million. This translates to a market share of [x]% of the overall market.

[]          Source:  Industry analysts, census reports, and trade journal studies.

Of the [x] customers, approximately [x]% will [buy/use/want/expect] [x] to help them to [deliver their work, maintain x, expedite their production, reduce costs]. [x] of these [products] will have a [x] capability, and about [x] of those [products] will require [other features].

[]          Repeat the above information for as many market segments as are required.

Strengths

[]          In covering your strengths, be sure to place at least as much emphasis on marketing as on your product, if not more.

In terms of product strength, [product] has several distinct advantages over the competition: [x].

[]          How else is the product/service favorably differentiated from the competition?

[]          In actual performance?

[]          In quality and reliability?

[]          In production efficiencies?

[]          In breadth of line and/or options?

In marketing, our most powerful assets are [x].

[]          In segmentation?

[]          In distribution?

[]          In pricing?

[]          In awareness/image?

Weaknesses

There is/are [x] handicaps inherent in our product. The only notable marketplace disadvantages are [x] and those are because [explanation and how to overcome].

Other known threats include [x] [environmental, corporate weaknesses, etc.].

Opportunities

The upside potential for [x] and [our products] in [each of the currently addressed markets] over the next two years is [x].

Unexploited Opportunities

An altogether new application for this product would be tapping [x] markets.

Further opportunity for our product exists in [x] market(s).

[]          Can the current line of products and technological capabilities be leveraged effectively?

[]          What is the estimated cost of entry, time-frame, and risk?

Still another possibility for development involves [x].

[]            Alternative distribution, technology licensing, creating up/down market brands, etc.

Customer Profile

[]          Use information from industry reports, census data, trade journal studies, etc.

[]            Knowing exactly who you're selling to is crucial to obtaining favorable response from your investors—they know that all the sales talent in the world is wasted unless it's directed at the proper person.

[]          What kind of profile does your customer fit?

            Innovator

            Early Adopter

            Early Majority

            Late Majority

            Laggard

[]          What current economic factors influence your customer's spending?

[]          Who is buying products or services?

            By Demographics: age, income, sex, family, location, occupation

            By Psychographics: lifestyle, motives, needs, interests (sports, etc.), purchase history (recent buyers of your product)

[]          Who influences the final decision to purchase?

The most typical customer for our product is someone who is in the [x] field, and who currently uses [product] for [give/application/purpose].

It is likely that potential customers are going to be familiar with [similar products, products that your new one will replace, your type of product] and that they will readily accept our new [x], provided that we [approach/educate/contact].

Complementary products already in use by our customers are [other products that work with yours] and are seen as a tremendous help in [compelling customers to acquire our product/use our product].

[]          What motivates people to buy your product? (example; practical and emotional reason)?

[]          Ask your customers--telemarketing, warranty cards, ad inquiries, etc.

[]          How are the key competitors perceived?

[]          How do these people perceive your company and products? and how will they receive your [new] product?

[]          How sensitive are they to pricing differences?

Demographics

[]          On a separate page, list different types of customers, title, power, viewpoint, position, emotional and practical influences, and education. It may be appropriate to include several types of customers in your demographics, for example, Homemaker, Senior Executive, Young Married Couple, Wealthy Rural Family, Older Couple or Elderly. (The first sample list is appropriate for a business customer and the second for an end-user customer.)

[Business Customer]

Title:            [President, VP Finance, VP Manufacturing, Office Manager, Advertising Manager]

Power:            [Permitter, Decision Maker, Influencer, Technical Consultant, Initiator]

Viewpoint:            [Big Picture, Financial, Department, Personal]

Position:            [Responsibilities--daily activities]

Emotional Influences:            [Status, power, empire building]

Practical Influences:            [Saving money, efficiency]

Education:            [Ph.D., MBA, College, Technical School, High School]

Limitations:            [Geographical, Purchasing Approval]

[Target Customer]

Age:

Income:

Sex:

Family:

Geographic:

Occupation:

Attitude:

Competition

[]          Discuss your key competitors with regard to product or service, price, location, promotion, management, and financial position.

[]          Look in your telephone book's yellow pages.

[]          Look in the industrial directories at your local library. Search on-line databases that provide competitive profiles of other companies.

[]          Read industry magazines and look for advertisers.

[]          False or incomplete information here translates as dishonesty and negligence to investors, bankers, etc.

[]          Do not delude yourself (or your investors) regarding competition.

[]          If you are well-known in your industry, survey your competitor's order line anonymously and ask how their product is better than yours.

Companies that compete in this market are [competitor 1], [competitor 2], and [competitor 3]. All companies mentioned charge competitive prices [list examples and range of prices].

The major strengths and weaknesses of our competitors are [example: price, location, quality].

The major competitors' objectives and strategies are [list].

The major competitors' most likely response to current [economic, social, culture, demographics, geographic, political, governmental, technological, and competitive trends] affecting our industry will be [list response of competitors].

Our products or services are positioned relative to our major competitors by [example: price, delivery, location].

New firms entering and old firms leaving this industry affect our product (list how this affects your product].

The nature of supplier and distributor relationship in this industry is [the supplier and distributor effect on your product].

Competitive threats today come from [other companies, industries, new/entrenched technologies, foreign countries], and [x].

In all comparisons, [Company]'s products provide more features and have superior performance than do competitive products. In most cases, the number of differences is substantial. A complete technical comparison is available.

[]          Put all comparisons and test results in Supporting Documents.

[x]'s [competitive] product does not provide the same capabilities in a situation where [describe circumstances].

Risk

Business Risk

[]            Progress always involves risk; you can't steal second base and keep your foot on first.            -- Frederick Wilcox

Product Liability

[Company] has [x] liability insurance and will continue such coverage if available at a reasonable cost. However, future increases in insurance premiums could make it prohibitive for us to maintain adequate insurance coverage. A large damage award against [Company], not adequately covered by insurance, would adversely affect our financial position.

[]          Other risks that may affect your business include profit margin, seasonality, volatility of industry, substitution, limited suppliers, dependence on major customer and the performance of your management team. To evaluate the risk factors for your business, see Elements of Risk on the following page .

Environmental Risk

Economic

The economic risks affecting [Company] are [x]. The best strategy for [Company] is [diversification, offering numerous products or services to multiple market segments].

Weather

[Company] has provided [planning, good management, x insurance coverage] to protect against catastrophic weather such as fire, floods or drought. Despite these precautions, a major natural disaster could affect our business by causing [x].

Legal & Government

The State and Local ordinances or zoning laws that may impact our product are [x]. [Company] will stay abreast of legal issues facing [industry] through [industry publications] and [x].