November 18, 2017

Business plan and profitability communication (2)….By Goke Ilesanmi

MARKET ANALYSIS...NAIJA INVEST

MARKET ANALYSIS

… It is important to think in advance about the type of information you need to ask and  ask people the same questions each time, so that their answers can be compared and summarised. A convenient way of doing this is to prepare simple questionnaires, which can be used by entrepreneurs to remind themselves of the questions to ask.

Product quality survey

As regards the choice of fruit or vegetable product business mentioned last week, consumers are familiar with the types of fruit or vegetable products that are already on sale and surveys on these products are therefore easier than those for a completely new food. Questions can therefore focus on the things that consumers like or dislike about existing competitors’ products.

However, if prospective producers want to produce products that are new to an area, they need to have samples for potential consumers to taste and give their opinion on whether or not they like the products and would be willing to buy them. For the purpose of hygiene, when asking people to taste a product, a supply of spoons should be provided so that each person interviewed can use a clean one.

Although initially, new products have the advantage of not having competitors, the process of assessing demand is longer and costlier than that for products that are already in existence. Additionally, because about 80 per cent of new products fail, the risks are higher. When you want to go to a new area of business and want to do your feasibilitystudy, explain to each person you interview that you want to start a new business, and that you have prepared a sample for people to try. Ask them if they would like to taste the sample and give you their opinion on what it is like.

Market size and value survey

A different set of questions are needed when assessing the size of the market for a particular type of food (the total volume bought per month or year) and the value of the market (the amount of money spent on the products each month or year). At the same time, it is possible to gather information about the type of people that buy a particular type of food and where they buy it from. The information gathered from potential consumers, using appropriate questionnaires can be analysed by the entrepreneur to get a good idea of the quality characteristics of the product that consumers prefer, the total demand for the product and the total value of the market.

Market size and value questions

These are some of the questions you can ask regarding different segments of the market size and value:

About the market size: How often do you buy this product? Do you buy different amounts at different times of the year? When do you buy most? How much do you buy each time? When do you buy the least? How much do you buy each time? What is the amount of food in the pack?

About the market value: How much do you pay for a pack of the food? What is the price difference for larger or smaller packs? Does the price change at different times of the year? When is the price highest? When is the price lowest?

About the customer: Would you say that you have a low, medium or high income in your family? In which age group do you belong?

About sales outlets: Where do you usually buy this food? (Market stall?; Supermarket? etc.). However, this process involves making a number of assumptions and it is important to consider the following: (1) are the people interviewed really representative of all potential consumers? (2) were enough people interviewed? (3) were people giving accurate information?

Repeating questions

If a producer is unsure of the quality of information that has been given, he or she should ask more people the same questions to check the answers obtained. Clearly, the more people that are interviewed, the more accurately the information will reflect the real situation. However, a balance has to be drawn between the time and cost of interviewing a large number of people and the accuracy of the data obtained. As a guide, 50 to 75 interviews should result in a good idea about the market for a product in a particular area.

When analysing data collected about market size and value, it is often helpful to find official statistics about the people who are expected to be the customers for a new product. Similar information is sometimes available from local government offices, tax authorities and chambers of commerce, although it may not always be up to date.

Comments are closed.