module 2

George and Miguel are considering opening up a shoe store but first need to do market research. Which one of these is NOT part of the market research process?

The market research process includes the following steps: Identify research objectives, Determine methods and sources, Gather secondary research, Conduct primary research, Organize and analyze data, and Draw conclusions.

Sharon is thinking about opening a bakery. She knows she wants to set her own hours, reduce her stress and make a profit. But she still has a lot to think through. Which of the following would NOT be a good early step?

When evaluating a business opportunity, it's best to get as much info as you can about the opportunity. In fact, the only bad first step you can make is taking action without doing any opportunity screening and preliminary research first.

Direct Competitor

is a business in the market that sells a product or service similar to yours. For example, three different family pizza restaurants all sell pizza to customers.

business opportunity

is a consumer need or want that can be potentially met by a new business. While every idea that you come up with might be interesting, not every business idea turns out to be a good business opportunity.

Target Market Segment

is a specific group of customers in the broader target market who are most likely to buy a product or service. To be successful, businesses need to know who their potential customers are and how to provide what they need or want.

Consumer Profile

is an overview analysis of a group of potential customers that businesses use to improve how they market their goods and services. A consumer profile can include the following information: Demographics, Geographics, Psychographics, and Buying Patterns. Includes: Demographics: objective social and economic facts about people such as age, gender, and family size Geographics: where customers live and where businesses are located, including region, city, and neighborhood Psychographics: psychological characteristics of consumers such as attitudes, beliefs, and personalities Buying Patterns: what customers are willing to spend money on, and how much they are willing to spend

Primary Data

is new information gathered during the Market Research phase that comes directly from potential groups of customers or competitors in the market. We call this primary data because it is data that entrepreneurs collect for the first time, directly from the source, such as through Interviews, Surveys, Focus Groups, or Observations. Entrepreneurs should return to their list of questions, eliminate those that were answered by secondary research, and determine which ones require primary research

Why is it important to use the information gathered from your market research on your target market segment to build your marketing plan?

marketing strategies should be designed to appeal to these potential customer

Which of the following should you NOT do when collecting and evaluating data on your market?

only look for data that supports your initial idea It's important to use different sources to find data on your target customers and your competition so that you can make informed decisions about your business. Some entrepreneurs don't like hearing negative feedback about the idea, however, hearing all sides will help the idea shift to a more successful business opportunity.

market

potential group of customers - people or businesses - who are able and willing to purchase a particular product or service.

Competition:

rival businesses competing for the dollars your target market spends. Competition can be categorized into direct competitors and indirect competitors.

Which of the following is NOT an important step in the marketing cycle?

show customers your marketing plan

Which of the following ensures a good idea for a business is an actual business opportunity?

the idea solves a unique need or want in the market that a group of customers is willing to buy

Pete's disappointed with the projections of how much his cupcake cart will make in the first month. What could he do to try to improve his net profit?

to be profitable, businesses need to bring in more money than it spends. After doing projections, entrepreneurs can adjust selling price, projected sales numbers or costs to ensure the business is as profitable as possible.

Which of the following is NOT one of the four steps to preparing a sales forecast?

A Sales Forecast is a prediction of the amount of future sales your company expects to achieve over a certain period of time. Think through steps one might take to predict future sales.

secondary data

Secondary Data is existing information that was previously gathered for a purpose other than the study at hand. Secondary data may be relatively cheap and easy to obtain through sources such as Government Websites, Trade Groups and Journals, Business Magazines and Reports, or Local Community Resources. Examples of secondary data are economic forecasts issued by financial organizations and demographic data collected by the U.S. government.

Which of the following is a start-up expense for Maria's food truck?

Start-up expenses are usually one-time purchases that entrepreneurs must make before starting their business. Things that are paid on an ongoing basis, such as utilities, are considered fixed expenses.

Based on the diagram, has Pete's business broken even (meaning, covered its fixed expenses and become profitable)

The break-even units for a business determine if a business is generating a profit. Entrepreneurs should check to see if there is still money left over after subtracting their fixed expenses to see if they are breaking even as a business.

So how do you get to your creative idea?

Challenge Convention People have a tendency to simply accept the way things are done. Instead, challenge accepted norms by asking lots of "Why?" and "What if?" questions. For example, the founder of FedEx asked himself, "Why can't you ship a package overnight?" Think Backward Sometimes solving a problem is easier when you start by imagining the end result you want. The Roomba, a robotic vacuum cleaner, was designed after its parent company envisioned a self-sufficient robot that would clean the floors for customers. Be Flexible If you force yourself to examine things from different angles, even problems can become solutions. Take Post-It® Notes, for example. After 3M developed a glue that turned out to be relatively weak, an opportunistic scientist thought about using the glue in a different way— on small stick-able office memos. This flexible thinking produced a very successful product. Brainstorm in Groups and Do Not Judge When brainstorming ideas, especially in groups, try not to be negative or prejudiced. These attitudes lower creativity, as not all ideas have to make sense in the beginning. Sometimes ideas that seem silly at first inspire other, more useful solutions later. Ideas that were originally laughed at include computers, telephones, airplanes, cars, and light bulbs. Draw Idea Maps Use whiteboards, chalkboards and poster boards to sketch out ideas. As you sketch, one thought might branch out into six directions, and some of those branches might generate additional ideas. Drawing possibilities in this way often helps you see the bigger picture and new possibilities that you might have missed. You might also try using sticky notes on a wall or poster board. This method allows you to move ideas around.

About Primary Data

Common ways of obtaining data are: Interviews or Surveys: asking potential customers their thoughts regarding your business and/or the current businesses they visit Focus Groups: bringing a small group of people together to help solve a problem or answer a set of questions Observations: visiting competitors in the area and observing how they interact with customers

Which of the following is a fixed expense for Maria's sandwich food truck?

Fixed expenses are expenses that are not affected by the number of items a business produces, such as monthly bills. Variable expenses are expenses that a business pays every time they make a sale, such as the ingredients that are used to make each sandwich.

Primary Research

Focus groups are a great way to get insights into what consumers are looking for out of new products. Sometimes focus groups can even help participants realize there was a need for a product or service that they weren't even considering. People didn't necessarily realize they needed a car, or a smartphone, or a tablet until they were invented.

There's a difference between a business idea and a business opportunity.

How many times have you seen a product and said "I could have thought of that!"? An idea doesn't just become a business overnight. You need to find a customer base, learn about your competitors, and figure out a way to take your product or service to market.

Thinking Differently

Learning to identify business opportunities takes practice. To do this, let's work on getting some of your creative thinking muscles in shape. Creative Thinking is a thought process that involves looking at a situation or object in new ways. It is one of the most important skills for an entrepreneurial thinker - all businesses start as a creative idea.

Sharon realizes that she needs additional research before she approaches potential investors. What kind of research should she do to effectively evaluate her potential business opportunity?

While Sharon can find some great information by talking with friends and family in her network, they probably don't have enough information to tell her if there's a need or want in the market. Thorough research will let her objectively decide if her business is just a good idea or a real business opportunity.

Indirect Competitor

a business that sells a different product or service from yours, but fills the same customer need or want. For example, a taco truck, a burger shack, and a burrito stand are all places that customers can eat.

Competitive Advantage

a feature or benefit of your product that differentiates your business from the competition. Understanding your competitive advantage helps further solidify your business opportunity.

Internal Entrepreneurs

are entrepreneurs who apply their hobbies, skills, and interests into a business opportunity. Somebody who loves working on cars may start their own auto-repair shop for people who can't do it themselves, while somebody who enjoys fashion might start their own personal shopping business to help people who are less knowledgeable about putting together a personal wardrobe.

External Entrepreneurs

create business ideas by identifying sources of opportunity. There are five external sources of business opportunities: Problems: A problem that needs to be solved by a service or product Changes: A change in trends, laws, or customs that produces new needs or wants New Discoveries: Creation of a totally new product or service Existing Products or Services: Means that improve existing products or services Unique Knowledge: One-of-a-kind experiences or uncommon knowledge

Market research data

essential to evaluating whether or not a business idea is a viable opportunity. Good entrepreneurs understand that you can save time and money in the long term by putting in the time beforehand.

Which of the following is NOT a way that an entrepreneur could increase the contribution margin or profit of each unit sold?

expenses for buisness Increasing the selling price and decreasing the variable expenses per unit will both increase profit, as well as potentially changing the unit. The monthly fixed expenses do not affect the contribution margin of one unit.