Developing A Business Plan (DP)

Understand and learn how to recognize a

potential market in developing a business
plan.
Learning Competencies
 Recognize and understand the market

Determine who the customers are in terms of:

 Target Market
 Customer requirements and
 Market Size
 Determine Who the Customers
 Entrepreneur must write a business plan. A business plan
is a comprehensive paper that details the situation
analysis, objectives, strategies and tactics and how to
monitor and control the enterprise. This will familiarize
you on how to prepare a strategic marketing plan as a
first component of the business plan. Some
entrepreneurs fail to give importance to the voice of a
business venture – the market. If ignored or given small
attention this become a major source of the
entrepreneur’s failure.
 Primary & Secondary Target Market
 Most entrepreneurs believe in the misconception that they can
serve all types of customers or if not, a wide range of customers.
Little do they know that this thinking may lead to failure?
Entrepreneurs must focus only on customers whom they can
serve beneficially because they will be wasting resources if they
will target all or worse, target none.
 Market Intelligence – which includes customer profiling,
drives the entrepreneur on what correct strategies and tactics to
employ. This can only be obtained through a meticulous market
segmentation process.
 Market Segmentation – is the process of grouping similar or
homogenous customers according to demographic,
psychographic, geographic (location) and behavior.
Methods of Customer Profiling
Demographic
Psychographic
Geographic (location) and
Behavior
 Methods of Customer Profiling
 Demographics Segmentation – also called socioeconomic
segmentation. Is a process of grouping customers according to
relevant socioeconomic variables for the business venture. We
categorize customer into the ff:
 Age
 Income Classes
 Occupations
 Social Classes/Reference groups
 Ethnic backgrounds
 Religious beliefs
 Domiciles
Methods of Customer Profiling
 Psychographics Segmentation - defines the customer’s
motivations, perceptions, preferences, and lifestyle.

 Motivation goes to roots of customer’s needs and wants.

 Perception is the way person chooses to receive.
 We begin to appreciate things because of our emotional and
mental memories.
Methods of Customer Profiling
 Geographic Segmentation – is simply grouping
customers according to their location. This is critical in the
analysis of the target market as this encompasses the cultures,
beliefs, preferences, politics and lifestyles of certain
geography. It can be as small as a street, a village or a
barangay. It can also on be based on municipality, city,
province or region. It can be as big as a country or continent
depending on the entrepreneur’s business objectives.
Methods of Customer Profiling
 Behavioral Segmentation – is the process of grouping the
customers according to their actions. These behaviors are
instigated by occasions, desired benefits, loyalty and usage
products or availment of services.
 Market Aggregations
 Happens when an entrepreneur wants to target a broader
market as possible because the product or service that the
business offers is suited for an undifferentiated market such
as fruits, vegetables, rice, water and bread as well as services
such as haircut, plumbing or transportation.
 Customer Requirements
 Customers are said to be the lifeblood of the business. These
are the people who buy the product or avail the services of
entrepreneur. Their thoughts, feelings and experiences shape
the decisions of the business. Thus, the phrase “the customer is
always right” is a mantra that most successful entrepreneurs
follow.
 Customer requirements – are specific features and
characteristics that the customer need from a product or a
service.
 Entrepreneurs must be aware of all these requirements for
them to come up with features that best suit their needs.
 Entrepreneurs should also be vigilant with the constant
change in customer requirements. For example: Cellphone
repair services 5 years ago are way different now because of
the proliferation of smartphones today as compared with
regular mobile phones before.
FOR EXAMPLE:
The customer is the voice of every business that every entrepreneur
should listen to.
 In a restaurant business, some customers will prefer cheaper
prices bundled menu; some will prefer a cozy ambiance;
some will prefer a place with relaxing music; some will
prefer to have a food served fast; and some will prefer to pay
using their credit card and not cash. In short, customer
requirements vary from person to person. Thus the
entrepreneur must group them together, calculate their size
and come up with products and services that suit them.
“The customer is the voice of every business that every
entrepreneur should listen to.”
 MARKET RESEARCH
Entrepreneur; know thy market well! This simple reminder must
keep the entrepreneur alert all the time.
Why Purpose and Objective for conducting the market research.

What Determines the scope and the limitations of the market research to be conducted.

Which Determines which segment of the market must be studied; this must be the market
segment that the entrepreneur is eyeing.

Who Identifies who among the members of the selected market segment will participate in
the market research.

When Determines the time and timing of the research.

Where Pinpoints the relevant location of the market research.

How Determines the methodology to be used in the market (e.g., survey, focus group
discussion, observation, etc.,)
Market Research Methodologies
 Important market information can only be obtained by
conducting a good market research. The more the
entrepreneur knows about his or her relevant market, the
more customers can be properly segmented and reached,
products can be positioned, brands can be promoted prices
can be set up, and locations can be pinpointed.
 Market Size
Is simply the size the arena where the entrepreneur’s business will play. It is
the approximation of the number of buyers and sellers in a particular market.
The entrepreneur is required to determine the market size first to gauge the
vastness to tininess of the market where he or she intends to join.

1st Step – Estimate the potential market -the approximate number of customers
that will buy the product or avail the service. It is also called as market space
or market universe because this is the total market.
2nd Step – Eliminate the customers who are probably unlikely to buy the product or
avail the service.
3rd Step – Estimate the market share – which is the plotting and calculation of
the competitors’ market share to determine the remaining portion for the
new venture. The entrepreneur should first assess the market situation via
surveys, customer reviews or any other data-gathering methods.
 Market share computation illustration:
Mr. Alvin Antonio, a budding entrepreneur, wants to establish a
rice retailing business in his area in Brgy. San Isidro. He wants to
know if this business is worth his capital and effort. He dug deep
and found out that there are approximately 500 families in Brgy.
San Isidro with an average of five members per family. He did a
survey and found out that only 475 families eat rice; they consume
an average of 1 kilo of rice per day. There are four other rice
retailers in the area that have been there for 10 years already, and
they have equal market shares of 20% each. The other 20% of the
market is buying in bulk (per sack) from groceries or convenience
stores. The average net profit per kilo of rice is Php10. How big is
the market size and what could be the potential market share of
Alvin’s rice retail business?
Market size of rice business in San
Isidro = Number of families who eat
rice x average consumption per annum
Market Size = 475 families x 1 kilo per day x 365 days
= 173,375 kilos of rice

Market Size Profit = 173,375 kilos x Php10

= Php1,733,750 per annum
The objective of Mr. Antonio in the first year is to capture the
20% of the market by implementing marketing strategies in
pricing (reduces markup of Php2) and promotion (free delivery
of rice for five kilos and up) through text message or phone call.
None of the competitors have thought of or done these
strategies yet. In the example, the four rice retailers are
considered direct competitors because they offer the same
products and are structured similarly with Mr. Antonio’s
proposed business. On the other hand, the groceries and
convenience stores are considered indirect competitors because
they don’t offer exactly the same product type (i.e., rice sold in
sacks instead of by kilos) and are not similar in structures but
still compete with Mr. Antonio’s business indirectly.
Potential market share = market size profit per annum x estimated
market share of Mr. Antonio
= Php1, 733,750 x 20%
= Php346,750
Or
173,375 kilos of rice x 20%
=34,675 kilos x Php10.00 profit
=Php 346,750
However, because Mr. Antonio will reduce the markup
Php2, the net profit per kilo will only become Php8.

Potential market share = 173,375kilos x 20% x Php8

= Php277,400