ANALYSING THE MARKET

A market is a place where buyers and sellers meet. This may be in the street, a giant shopping
centre or on the trading floor of a stock exchange. In marketing, though, there is a slightly different
meaning for the phrase the market. When businesses refer to the market for their
products, they mean the customers. How many there are, whether the number is rising or falling,
what their purchasing habits are and much else. Successful marketing relies on a complete
understanding of the market.
This sounds a daft question, but the marketing guru Theodore Levitt considers it vital. Is Liverpool
FC in the football business, the sports business or the leisure business? Tottenham Hotspur nearly
went into liquidation in the 1980s because of an unsuccessful diversification towards leisure
clothing. Today Chelsea has its own hotel and restaurant complex. Barcelona FC runs an ice hockey
team and a basketball side.
When looking at the size and growth of a market, it is essential to be clear on the market under
consideration. As the above example shows, it can be difficult to decide on where the
markets boundaries are. Even when that is settled, the market can probably be broken down
into many sub-sectors. The car market, for example, can be broken down into luxury, executive,
large family, small and sports vehicles.
Market size is the measurement of all the sales by all the companies within a marketplace. It can be
measured in two ways: by volume and by value. Volume measures the quantity of goods purchased,
perhaps in tonnes, in packs or in units. Market size by value is the amount spent by customers on
the volume sold. So the difference between volume and value is the price paid per unit.
Market size matters because it is the basis for calculating market share, I.e. the proportion of the
total market held by one company or brand. This, in turn, is essential for evaluating the success or
failure of a firms marketing activities. Market size is also the reference point for calculating
trends. Is the market size growing or declining? A growth market is far more likely to provide the
opportunities for new products to be launched or new distribution initiatives to be successful.
In business, the most worrying markets are where volume is rising but value is falling. This means
the average price paid is falling quite rapidly. Computer manufacturers have grown used to this
situation. For most firms, though, it is very hard to cope with the combination of extra output/costs
with lower value/revenue.
Individual firms can do little to influence the overall growth of a market. Many factors are involved,
mostly stemming from broader economic and social changes. The main factors affecting market
growth are:
economic growth, in other words the growth of real incomes throughout the economy; luxury
markets will grow rapidly when people feel better off
social changes, for example the move away from family meals at home has led to above average
growth rates for markets such as fast-food, confectionery and prepared sandwiches
changes in fashion, most obviously in the market for trainers; when fashion was an important
influence, young people bought new trainers more often (increasing market size by volume) and

were prepared to pay higher prices (increasing market value)

the ability of the suppliers to identify and meet consumer requirements; the cinema market seemed
in terminal decline until multi-screen, modern cinemas revitalised the market.
Market share is the proportion of the total market held by one company or product. It can be
measured by volume, but is more often looked at by value. Among major companies in mature
markets such as soft drinks or confectionery, market share is usually the focus of a great deal of
attention. Famously, Coca-Colas biggest marketing mistake was in response to a decline in
its US market share from just 22.5% to 21.8% during the 1980s. Deciding that the taste of the
product was less popular than Pepsis, Coca-Cola changed its product formula and
relaunched as New Improved Coca-Cola. The American population, brought up on Coke rejected the
new product, forcing the company to reintroduce the old formula. The embarrassment was huge, as
Pepsi gloated publicly about the better taste of Pepsi. All because of a slip of 0.7% in market share.
Market share is taken by most firms as the key test of their marketing strategy. Total sales are
affected by factors such as economic growth, but market share only measures a firms ability
to win or lose against its competitors. Rising market share can also lead to the producers
ideal of market leadership or market dominance. Kit-Kat has market leadership among confectionery
brands. Walkers has market dominance among crisps and snacks. Nestles position with
Nescafe is stronger still, as the nearest competitor is Nescafe Gold Blend.
There are many advantages to a business in having the top-selling brand (the brand leader).
Obviously, sales are higher than anyone elses, but also:
The brand leader will get the highest distribution level, often without needing to make much effort
to achieve it. Even a tiny corner shop will stock Felix. Success breeds success.
Brand leaders will be able to offer lower discount terms to retailers than the Number 2 or Number 3
a brands in a market. This means higher revenues and profit margins per unit sold. For example
Nescafe may offer only an 8% margin to the retailer, whereas Maxwell House may need to offer
14%.
The strength of a brand leading name such as Walls Magnum makes it much easier to obtain distribu
tion and consumer trial for new products based on that brand name.
FIGHTING FOR MARKET SHARE
Large firms operating in consumer markets focus a great deal on market share. Usually, every brand
is looked after by a brand manager. He or she will have agreed targets for market share that must
be met or beaten by the year-end.

At the start of the year, the brand manager will divide up his or her budget between above-the-line
activity (media advertising), below-the-line promotions and market research. He or she will probably
be trying to strike a balance between this years market share targets and the needs of future
years. Media advertising boosts short-term sales but also strengthens brand awareness and image
for years to come. Below-the-line activity merely strengthens short-term demand. A balanced
approach might consist of two bursts of TV advertising during the year supported by trade
promotions (to boost distribution), consumer price promotions, a consumer competition and an on-

pack special offer. During the year, the market research budget will be used to check that the TV
commercials achieve their objectives and to monitor customer attitudes to the brand (and its
competitors).
If the marketing plan proves unsuccessful, with market share sliding by the mid-year, a rethink may
be needed. The Autumn advertising budget may be cut back to provide more money for a big
consumer promotion. Or on-pack special offer pricing may be needed to boost sales and market
share. The risk with these actions is that rival firms may feel forced to respond, causing a flurry of
promotional activity which cancels itself out.
TRAINER WARS
In 1987, Reebok was the dominant supplier of sports footwear to America. It had a 30% share
far in excess of the Number 2, Nike. Then, as the market size exploded in the early 1990s,
Reebok found it increasingly difficult to compete. Nike kept hitting home with the smarter moves.
With Michael Jordan and Tiger Woods, it was Nike who tied up the biggest star names. And Nike
who proved one step ahead in new product development. By 1996 Nike was spending almost $1,000
million a year on marketing. Reebok could only afford $400 million, but even this was insufficient to
prevent a slide in market share. Between 1994 and 1996, Reeboks market share fell from
21% to under 16% of the US market. Nike, meanwhile, jumped from 30% to 43%.
In early 1998 Reebok announced a change in strategy. No longer would it attempt to compete in the
fashion-oriented youth market dominated by Nike marketing. Reebok would aim more at the adult
market, accepting that lower market share would not matter as long as costs fell sharply enough.
Reebok was raising the white flag in the trainer wars. In Europe, it would be Adidas that would keep
Nike on its toes.
1 Market analysis is rooted in a deep understanding of customers. Why do they buy Walkers crisps,
not Golden Wonder? And who are the key decision makers? Purchasers (perhaps parents buying a
multipack in Tesco) or the users (perhaps young teenage children slumped in front of the television)?
Is the brand decision a result of child pester-power, or parental belief in the products
superiority? Knowledge of such subtleties is essential. Only then can the firm know whether to focus
marketing effort on the parent or the child.
To acquire the necessary knowledge about usage and attitudes, firms adopt several approaches. The
starting point is usually qualitative research such as group discussions. Run by psychologists, these
informal discussions help pinpoint consumers underlying motives and behaviour. For
example, it is important to learn whether Kit-Kat buyers enjoy nibbling the chocolate before eating
the wafer biscuit. In other words, to discover whether playing with confectionery is an important
part of the enjoyment. This type of information can influence future product development.
The huge multinational Unilever has appointed a head of knowledge management and development
(David Smith), to ensure that insights such as this can be spread around the business. As he says,
The companys collective knowledge is potentially a great competitive
advantage. By encouraging improved communication and networking, Unilever believes it is
benefiting from:
improved decision making
fewer mistakes

reduced duplication
converting new knowledge more quickly into added value to the business.
Among the other ways to gather information on customer usage and attitudes are quantitative
research and obtaining feedback from staff who deal directly with customers. An example of the
latter would be bank staff whose task is to sell services such as insurance. Customer doubts about a
brochure or a product feature, if fed back to head office, might lead to important improvements.
Quantitative research is a common way to monitor customer usage and attitudes. Many firms
conduct surveys every month, to track any changes over time in brand awareness or image. This
procedure may reveal that a TV commercial has had an unintended side-effect in making the brand
image rather too upmarket. Or that customers within a market are becoming more concerned about
whether packaging can be recycled.
Marketing decisions are very hard to make without a clear picture of your customers. Who are they?
Young? Outgoing? Affluent? Or not. From product and packaging design, through pricing, promotion
and distribution all these aspects of marketing hinge on knowing your target market.
A consumer profile is a statistical breakdown of the people who buy a particular product or brand,
e.g. what percentage of consumers are women aged 16-25? The main categories analysed within a
consumer profile are the customers age, gender, social class, income level and region. Main
uses of profile information are:
for setting quotas for research surveys
for segmenting a market
for deciding in which media to advertise
A large consumer goods firm will make sure to obtain a profile of consumers throughout the market
as well as for its own brand(s). This may be very revealing. It may show that the age profile of its
own customers is becoming older than for the market as a whole. This may force a complete rethink
of the marketing strategy. The company may have been trying to give the brand a classier image,
but end up attracting older customers.
Having analysed consumer attitudes and consumer profiles, it is possible to create a market map.
This is done by selecting the key variables that differentiate the brands within a market. Then
plotting the position of each one. Usually this is done on a two-dimensional diagram as below. Here,
the image of shoe shops has been plotted against the key criteria of price (premium-budget) and
purpose. For example, Bally shoes are expensive and are bought to impress others. Churchs
are expensive but bought because their buyers believe they are a top quality product.
Market mapping enables a firm to identify any gaps or niches in the market that are unfilled. It also
helps monitor existing brands. Is the firms image becoming too young and trendy? If so,
booming sales in the short term might be followed by longer term disappointment. By monitoring the
position of their brands on the market map, firms can see more easily when a repositioning exercise
is required. This may involve a relaunch with a slightly different product, a new pack design and a
new advertising campaign.
THE TOAST OF LONDON

Founded in 1945, Dualit built up a reputation for its toasters and kettles. Fierce competition from
multinational electrical goods firms in the 1960s and 1970s forced it out of the consumer market.
Instead of giving up, the company redesigned its products to aim for the catering trade. Dualit
stainless steel, extra-durable toasters became the norm in cafes and hotel kitchens. Dualits
founder has explained that: I spotted a gap in the market and started to cater for the smaller
demand in what was a niche area. Remarkably, the elegant and robust design of the Dualit
toaster made it fashionable in the 1990s. Despite costing more than 100, the Dualit made a
comeback in a small segment of the consumer market. The company now employs 75 skilled workers
in South London and makes more than 1.5 million profit on 10 million of sales.
Analysing industrial markets requires a slightly different approach. When selling to other firms,
image is less of an issue. Traditionally, all that mattered was the right product at the right price at
the right time. Today this will not always do. Firms are looking for more from their suppliers. They
want complete solutions to problems or requirements. This may require the design of a brand new,
tailor-made product. Or organising a series of suppliers to work together to supply a complete unit
of production. For instance, a car manufacturer might want matching car seats, car- pets and
interior trim to be delivered to the right part of a production line at precise times.
To find out exactly what is needed, direct contact with potential and existing customers is essential.
Fortunately it is also possible, as industrial markets are unlikely to have more than a hundred or so
customers. Each may have slightly different requirements, so flexibility will be a key requirement.
Visits to trade exhibitions should generate some contacts. Sales representatives should then follow
these up by visiting the customer to discuss requirements.
Market analysis is therefore largely based on information gained from individual customers, rather
than from general sources such as secondary research. The industrial supplier that waits for the
phone to ring is likely to lose out in the short term. It will also fail to gather the market knowledge
needed to keep improving the products in line with changing customer demand.
Among the main issues raised by this article are:
The importance to a firm of constantly measuring and rethinking its position in the market. This is
why expenditure on market research needs to be regular; not just related to the latest new project.
Given the importance of market knowledge, how can new firms break into a market? The answer is:
with difficulty. Mars did remarkably well to break into the ice-cream market in 1990. But it has
probably not yet made a profit on ice-cream in the UK market.
If all companies follow similar techniques for market analysis, why dont they all come up
with the same answers? Fortunately, there remains huge scope for initiative and intuition. Two
different managers reading the same market research report may come up with quite different
conclusions. The Sony Walkman was the inspiration of one man, the Sony Chairman Akio Morita.
The Haagen Dazs launch advertising campaign was similarly inspired.
Market analysis is at the heart of successful marketing. All the great marketing decisions are rooted
in a deep understanding of what customers really want. From the UK launch of Haagen Dazs,
through the 1980s relaunch of Levis 501s to the marketing of The Spice Girls. All these
successes were rooted in an understanding of the consumer. The clever market stall trader acquires
this understanding through daily contact with customers. Large companies need the help of market
research to provide a comparable feel. Techniques such as market mapping then help clarify the
picture.

Successful marketing strategies rely upon the firms ability to target the real requirements of
the customers. How it goes about this task (through the marketing mix) is a less important
consideration.
BRAND LEADER the brand with the highest market share. In fragmented markets such as
chocolate, the brand leader may have no more than Kit-Kats 4.9%.
INDUSTRIAL MARKETS those where products are sold only to other companies, e.g. heavy
lorries.
Brand SEO Graphics are a Northampton internet business using many online and offline commercial
promotion systems which includes leaflet marketing Search, and Pay per click advertising solutions.
The fundamental components of creating a successful and worthwhile leaflet and/or flyer marketing
campaign.
Start here: In the long run, an ideal brochure or leaflet does a variety of things: generate the
recipient's curiosity, as well as get the individual to act.
Graphics: When considering layout, its far better to engage in a far more regular solution
with regard to print work. Excessive colours and print styles can thin down the important product
information. If you prefer something vivid, create a provocative title but keep the other parts of the
content readable as well as clear. A single sizable graphic will be more dynamic than countless
smaller visuals. Pick the hard hitting graphic which transmits the state of mind of the sales message
to work as your focus.
Size: Before thinking about how big to make your flyer, leaflet or poster, give thought to the
distribution plan. For the purpose of pamphlets which can be given out individually in the local
neighbourhood, as an example, A6 paper is typically reliable because it is small enough for the
recipient to place in their back pocket or check out quickly. A lot of leaflets, flyers and posters are
made using lighter weight cost effective paper, applying silk finish which is usually far more hard
wearing.
The text: You want to keep words and phrases minimal and benefits driven.
Logistics: From knowing the end user on a personal level, it will be easier to delineate the best
possible dissemination direction for the promotional content. There are numerous kinds of options to
consider: you may choose to distribute them on their own, with other leaflets, inserted in a
newspaper, on cars or door-to-door.
Overseeing call to action: Advertising and marketing offers that are leaflet driven are an excellent
approach to draw in participation. You won't lose much money and will get results through new
business when your customers act on it. As long as you are trying to keep your charges down but
optimise reach, leaflets are a fantastic promoting and marketing option. Having said that, they are
usually most cost-effective over a longer period of time based on interaction numbers. If full colour
leaflets are to be an integral constituent of your promotion and marketing approach, then you also
need to take into consideration dissemination on a consistent basis.
PESTER-POWER the ability of children to pester their parents into buying the products they
want.

PRODUCT POSITIONING deciding on the

image and target market you want for your own
product or brand.
TARGET MARKET the type of customer your
product or service is aimed at. For example the target
market for Cherry Coke is 10-16-year-olds from both
sexes.
TRADE EXHIBITIONS annual events where
suppliers display their products and services to the
buyers who come to see what is new or improved.