Module 3

Market Study

Overview

Discusses the Marketing Aspect of the feasibility study its importance and contents..

Module Objectives

At the end of this module, the students are expected to be able to:

1. Understand the importance of the Market Aspect in a Feasibility Study

2. Know the contents of the Market Aspect
3. Prepare the market aspect of the feasibility study

Course Materials

The Market Study

The Market Study is the lifeblood of every project feasibility study. A good idea is useless if
there is no demand for the product. When we say demand, it can be an existing demand or
created demand.

This aspect seeks to determine the following:

a. The size, nature and growth of total demand for the product.
b. The description ad price of the product to be sold.
c. The supply situation and the nature of competition
d. The different factors affecting the market of the product
e. The appropriate marketing program for the product.

Product Description

The users of feasibility study must have a clear understanding of what is being
discussed about the product/service description. What makes the new product/service different
from others available in the market and an explanation of its usage must be understandable.
What makes the business unique from those of the possible competitors should be specified.

When writing a product description, make certain that there will be a connection of the
product features to the way that they can do well to customers. It is better to have an apparent
understanding of what the product is, to be in a better situation to completely take advantage of
its potential when advertising and selling it. A comprehensive definition of the product can also
help customers formulate informed decisions and advance their intensity of satisfaction.

In describing the product to be offered, the following are taken into consideration:

1. Name of the Product – popular and scientific if any, and the reason for choosing it.
2. Properties of the Product – physical or chemical composition of the product.
3. Uses of the Product – as a finished product or as input to production.
 4. Users of the Product - who are the major users of the product/service (ex. students,
female, ages 15-50)
5. Geographical areas of dispersion – where the product is to be marketed. (ex.
Nationwide, Region 3, Bataan)

Example:

Product: Food Supplement

Name of the Product Zili Plus A

Zili Plus A come from its main ingredients cayenne pepper
which is popularly known to us Filipinos as Sili. Plus A
because it has been processed to become a number 1
food supplement.
Properties of the Zili Plus A is an herbal food supplement made from
Product grinded cayenne pepper. Cayenne Pepper is one of the
most powerful hers in the world because of its benefits to
human body. It is made out of vegetable capsules which
has the highest concentration of Capsaicin among other
pepper herbs. Capsaicin, a compound found in Cayenne
Pepper, stimulates blood circulation and digestion. It
contains vitamins A, B complex and Vitamin C and K. The
herbs contribute significantly to a healthy heart and strong
peripheral circulation.
It contains contains mineral compounds that promotes
systemic cleansing, increase peripheral circulation and
promote overall health and well being.
Uses of the Product In general this will help cure health conditions such as
poor blood circulation, weak digestion, chronic pain, sore
throats, headaches and toothaches.
This also helps to reduce weight, stimulates body
metabolism, stomach cramps, acidity, reflux and gas, and
helps regulates digestions of carbohydrates.
For muscle pains, this also provides relief of rheumatic,
joints and arthritis pains.
Users of the Product Anyone who is suffering from ailments and wanted to be
cured the natural way.
Area of Dispersion Initially, the product will be offered in Region III.

Demand/Market Demand:

Market demand as defined by Philip Kotler is the total volume that would be bought by a
defined customer group in a defined geographical area in a defined time period in a defined
marketing environment under a defined marketing programs. Thus, market demand indicates
total sales of the product to a specific groups of buyers in a specific period and in defined
geographical areas in a a given marketing environment.

In determining the demand for the product it is important to identify the needs of
consumers and their willingness and capability to buy. It is equally important to know who
your target market is.
Target Market:

Target Market is a group of customers in which the business aimed to offer the
product/service. A well define target market is the first element to a marketing strategy. There
are five elements of a marketing mix strategy that determines the success of a product in the
market place. The marketing Mix is also known as the 5Ps of Marketing: Product, Place,
Promotion, Price and People.

It is not realistic to assume that the new product/service can meet the needs of
everyone, therefore choose the target market carefully by considering the following:
1. Needs – What unmet needs do prospective customers have? How does the business
meet those needs? It is usually something the customer does not have or a need that is
not currently being met. Identify those needs.
2. Wants – This different from needs. Wants refers to what the customer desires or wish.
It can also be a deficiency.
3. Problems – Remember people buy things to solve a problem. What problems does the
product or service offer to solve?
4. Perceptions – What are the negative and positive perceptions that customers have
about the company or its product/services? Identify both the negative and positive
consequences. Information gathered will be used in marketing and promoting the
product.

The target market must be segmented in order to properly identify your target market. Market
segmentation depends on the users of the product.
B2B – Business to Business market. B2B if the users of your product are other businesses.
Meaning your product is a raw material of other companies.

In B2B, Target Market can be segmented/grouped using common measures such as:
1. Geographic Target Market Segmentation – this is group using nature of business and
location.
2. Psychographic Target Market Segmentation – this market segmentation is useful for
repeat clients, who may be drawn to anything from price range, quality levels or delivery
terms.
3. Need Driven Target Market Segmentation - this can be the must difficult target
audience to assess, but also the most fruitful . This involves determining what is the
motive behind a purchasing decision? And what factors play into the company’s
decision making?
a. A price focused segment – which has a transactional outlook to doing business
and does not look for any extras. Companies in this segment are usually the small,
and regard the product/service as of low strategic significance to their business.
b. A quality and brand-focused segment – companies who wants the finest possible
product and is prepared to pay for it. Companies in this segment are usually
medium sized or large, work to high margins and regard the product/service as of
high strategic regards.
c. A service-focused segment – companies with high requirements in terms of
product quality and range but also in terms of after sales, delivery, etc. These
companies are likely to work in time critical industries and can be small, medium or
large. They usually buy in large quantities or volumes.
d. A partnership focused segment – usually the business consider this as key
accounts, which seek confidence and dependability and regards the supplier as a
strategic partner.
 B2C – Business to Consumers Market, the market for the product are the end users.
Example the product is shampoo, food supplement, perfume and the like.

Under B2C, market segmentation is about identifying group of people based on general
characteristics:
1. Demographic Factors – demographics are quantitative characteristics of a set of
people such as sex, age, income or place where they reside. Business that segment
their market based on demographics are trying to target definite market segment that
are more like to be interested in what they have to proposed.
Example: cosmetics – segmented based on sex or gender
Luxury cars – segmented based on income

2. Psychographic Factors – refers to qualitative attributes of a market and refer to the

way people think and what they like to do. Psychographic are personal attributes
related to personality, values, attitudes, interest and lifestyle.
Example: Apple Products like cellphone, i-watch, Dunlop products.

3. Behavioral Factors – this refers to segmenting market based on buying behavior of

the customers These can be done through observation.of customer’s behavior, their
spending pattern, likes and frequency of shopping.

4. Consumer Lifestyle – this refers to consumer trends.and market is segmented

using income. The higher income classes are taking pleasure in higher purchasing
power and can pay for higher-end products including food, housing, dining and
recreation

Current Trends among Filipino Consumers:

1. Workforce moving to the provinces. Example the creation of the different economic
zones in the different parts of the country.
2. Filipinos embraced vertical living. More Filipinos specially in the metropolis prefer to live
in a condominium with complete amenities, like shops, pool, restaurants and even play
grounds and gyms.
3. More Filipinos can afford to travel for leisure.
4. Fast smart phone adoption makes up for low broadband penetration
5. Filipinos are becoming more health conscious

Table 2: Consumer’s Trends

Factors Trends
Consumer Segmentation Babies and Infants
Formula Milk still in demand
Mothers warm up to natural baby products
Kids
Kids get hooked on downloadable games and
gadgets
Fast foods birthday parties are preferred
Pre-Teens
From textbooks to iPads and tablets
Growing fashion sense
Teens
Teens “like and share”
 Teens look up to role models

Young Adults
Fewer young Filipinos are getting married
No sign that social media use will slow down
Middle Youth
The rise of thirty something single women
Metrosexual men on the rise
Mid lifers
Traditional with money
Forever young mindset
Late lifers
Warming up to technology
Elderly immigrants return hone
Housing and Households Home Ownership
Pre-owned properties offer an alternative to vertical
living
Condominiums appeal to growing city workers
Household Profiles
Manila’s young professionals move out of their
parents home.
Single parents lobby for more support
Running Costs
Consumers are still afraid to drink tap water
Money and Savings Loans and Mortgages
(attitudes towards payment Wider credit card use
methods) Smartphone craze hits town
Eating and Drinking Eating Habits
Filipinos love their sweets
Korean foods are the latest craze
Drinking Habits
Milktea anyone?
All natural juice drink considered a healthier choice
Grooming and Fashion Male Grooming
Safer cosmetics
The use of BB and CC cream is growing
Fashion Trends
Young Filipinos embrace Korean inspired fashion
More fashionable Filipino men
Health and Wellness Attitudes to Smoking
Filipinos are becoming less afraid of generic drugs
Smokers shift to cheaper brands
Shopping Habits Shopping Online
Group buying is rising
City dwellers make time for membership shopping
Leisure and Recreation Sports & Fitness
People find streaming TV is a practical alternative
The popularity of ball games is rising
Vacations
Public Holidays, Celebration and Gift giving
 The rise of the short vacation in a local hotel
Group buying sites are shaping Filipino travel plans
Once the target market is established, the size, nature and growth of total demand for the
product must be determined in the following manner:
1. Who and where is the market? Here market segmentation is important. The manner on
segmenting the market depends on the product to produced.
2. What is the total domestic demand from the historical point of view.
3. Is there a foreign market? If so determine the historical demand.
4. Evaluate demand growth patterns in the past and project future demand by applying
appropriate projection methods.

Supply

The supply situation may be determined as follows:

1. Who and where are the direct competitors? Classify them according to size, product
quality, location. Etc. The type of competition may influence the decisions on production
capacity and marketing strategies.
2. Determine historical domestic supply as comprised by local production and importation.
3. If there is a foreign market, determine the historical supply patterns in the targeted
countries as comprised by their local production and importations.
4. Evaluate supply growth patterns and project future supply by applying appropriate
projection methods.

Classification of Competitors:
Direct Competitors – are those that:
a. Offer the same products and/or services of identical functionality to similar customer
base.
b. Priced, advertised and merchandised similarly to appeal to the same intended
customer or demographics
c. Use the same strategy in advertising to bring news/information of products/services
to target market
d. Belongs to the same industry.

Indirect Competitors are those that:

a. Offer somewhat different products and services
b. Target similar customer base with the goal of satisfying the same need

Demand and Supply Analysis

The demand and supply analysis may be conducted in the following manner:
1. Compare the demand and supply trends
2. Determine the amount of demand unsatisfied (Gap). Nowadays, the demand appears to
be fairly satisfied by supply, meaning no demand and supply gap. In this case, it is
important to consider either or both of the following:
a. Whether the factors affecting the market may disrupt the equilibrium so as to cause
demand to grow faster than supply.
b. Whether the quality of the product is such that it may create additional demand or
redirect part of existing demand in its favor.
3. Determine the share of the market by establishing the proposed production volume as
against the total market size
 Price Study

In Economics, price is determine by the demand and supply situation. When the demand is
greater than supply, Price increases while the reverse will result in decrease in prices.
However, there are factors that influence price like Fixed and Variable costs, Competition,
Company Objectives, Proposed positioning strategies, Target group and its willingness to
pay.

The following must also be considered in setting selling price:

1. Determine the selling prices of all similar and substitute products.
2. Look into the history of prices and established the factors that influence their fluctuations
overtime.
3. Determine the responsiveness of demand to price changes
4. Establish the product selling price, taking into consideration all of the above

Table 3: Types of Pricing Strategy

Pricing Definition Advantages Example
Strategy
Penetration Here the business ● Entry barrier. New entrants to Mobile apps
Pricing sets a low price to the market will be deterred and games
increase sales and because of low price. which started
market share. Once ● Reduces competition as free.
market share has ● Market dominance
been captured the
firm may increase the
price
Skimming The business sets an ● Customers would perceive that iPhone
Pricing initial high price and high prices mean better quality
then slowly lowers the ● People have a thirst for the new
price to make the product and they would be
product available to a willing to pay more for the
wider market. The product.
objective is to reach ● When the firm lowers the price,
the average profits then it would attract new users
layer by layer and sales increases as a result.
● When price is high, New firms
would be reluctant to enter the
market. Its because they know
that price would fall down any
time and their investment would
go
Competition Setting a price in ● Higher rate of success. T-shirt
Pricing comparison with ● Prevent market loss Clothing
competitors. The firm ● Improve profit margin
has 3 options: to ● Dynamic Pricing
price lower, price the ● Efficiency
same or price higher
Bundle The business bundles ● The company will be able to sell Appliances
 Pricing a group of products at their less popular product with
a reduced price. the popular ones.
Common method is ● It will also help attract different
the buy 1 take 1 kinds of buyers
method ● Some customers will be
spending more that they initially
plan to spend
● Lower marketing cost
Psychological A pricing and ● It generates more sales Charm Pricing-
Pricing marketing strategy ● Ease of implementation pricing product
based on the theory ● Test different pricing tactics using fractional
that certain prices ● Direct buyer attention to figure ex. 99
have a psychological targeted items Artificial time
impact ● Appear in lower price bands constraints
Premium Setting the price high ● Increased profits Designer bags
Pricing to reflect ● Competitive edge Designer
exclusiveness of the ● Increase brand awareness clothes
product
Optional Selling the base ● The company can sell more Plane tickets
Pricing product at a relatively accessories along with the on sale, but
low price, but sells product and services, thus an extra charge
complementary increase in profit are given for
accessories at a pre-selected
higher price seat, use of wi-
fi, snacks ect.
Cost based The business takes ● It is easy to understand and Cost tp
Pricing into consideration the calculate the price Produced:
cost of production ● The pricing model makes sure Materials
and distribution, then that incurred costs are covered 12
they decide on a ● Helpful and do simplify Labor 8
mark up which they investment appraisal decision Overhead
would like for profit to ● Fair and logical 5
come up with the ● Useful in setting the price of Distribution
pricing decision new and innovative products Proif(40%)
10
Selling Price
35

Marketing Program

The marketing program should be the end product of the market study. After defining the target
market and the price, the marketing program cones in as the implementing arm. This consist of
the following procedures:
1. Determine the types of marketing programs prevalent to the industry and gauge their
effectiveness.
 2. Draw up a marketing plan that identifies and defines the target market, the selling price
and the packaging of the product, the distribution channels, the advertising and
promotion program.
3. Design the marketing organization which will implement the plan and the cost involved.

The business owner must decide on the methods of promotion he will use to communicate the
features and benefits of the new products/services to target customers. When the product is
new, the business objective will be to inform the target audience of its entry. Television, radio,
magazine, coupons and other means may be used to push the product through the introduction
stage

An effective communication campaign should comprise of a well thought out message strategy.
What message will be send to the target audience? How will the message be delivered? Will it
be through effective branding? Logos or slogan design? The message should reinforce the
benefit of the product and should also help the company in developing a positioning strategy for
the product.

Examples of effective message strategies:

Nike - Just do it
Coca Cola – the real thing
MetroBank – Your in good hands
BDO – We find ways

Table 4: Types of Promotional Strategy

Types of Promotion Definition
Advertising Any non personal paid form of communication using any form of
mass media. In traditional and online ads, be sure to include
testimonial from a customer, a trust signal or rating or an
endorsement. This way your consumers can see which other
people value and trust your business, which will help influence
their own decision,
Personal Selling Selling the product/service one to one. Whether your doing it in
person, over the phone or via email, you can use personal
selling to share case studies of other customers. This way you
can discuss in detail the results you have helped others to
receive. Personal selling is also a good opportunity to
crowdsource connections to partners and other potential
customers.
Sales Promotion Commonly used to obtain a increase in sales in short term.
Could involve using money off coupons, or special offers. This
may include an endorsement or testimonial in your promotional
email, coupon or sales signage can help convince those who
are on the fence about making a purchase. Not only does this
provide them with a price incentive but it also offers them crowd
wisdom
Direct Mail It is sending publicity material to a named person within an
organization. Direct mail allows an organization to use the
resources more effectively by allowing them to used publicity
materials to a named person within their target market. By
personalizing advertising, response rates increase thus
 increasing the chance of improving sales
Public Relations Involves developing positive relationships with the organization
media public. The art of good public relations is not only to
obtain favorable publicity within the media but it is also involves
being able handle successfully negative attention.
Internet Marketing Promoting and selling your services/product online using
various forms of online marketing techniques such as banner
advertisements, videos or social media

Additional note:
Projection method. There are different projection methods that can be used in feasibility study
such as:
1. Arithmetic straight line method
2. Arithmetic geometric curve
3. Statistical straight line
4. Statistical parabolic curve

All these methods need the use of historical data and may give different results. The most
simple and easy to use method and will be discuss here is the Arithmetic Straight Line Method.
The formula for this is
Yc = a + Yi – 1

Where a = Yn -Yc
N–1

Yc = initial value (1st year)

Yn = final value (last year)
N = number of years
Yi = value for the year past

Example:

Given the following data:

Year Quantity Demanded

2015 340,800
2016 416,200
2017 451,600
2018 512,200
2019 471,200

Computation:
Formula: Yc = a + Yi – 1

Where a = Yn -Yc or 471,200 - 340,800 130,400 = 32,600

N–1 5 - 1 4
Projected Values:

Year a + Yi-1 = Yc
2020 32,600 + 471,200 = 503,800
2021 32,600 + 503,800 = 536,400
2022 32,600 + 536400 = 569,000
2023 32,600 + 569,000 = 601600
2024 32,600 + 601,600 = 634,200