Section Three: Understanding your Market
You will recall that marketing attempts to identify the needs of a particular target group, and then satisfy those needs in the best way possible.
To be successful, your business must be perceived as being unique or better in some way. You will need to be aware of what’s going on in any industries related to your business and what your competitors are up to.
This section will help you zero in on a specific group of customers so that you can develop a customer profile, identify the current status and trends occurring in related industries, and figure out who your competitors are.
If your business is like other companies, you will have to attract new sales with limited resources. You will want to target specific customers, or identify niches, where you feel you will have the greatest success. This is called your target audience.
Selecting your target market is one of the most important strategic decisions an entrepreneur can make. The easiest way to achieve this is to concentrate on carefully selected, well defined market segments or niches.
A business market consists of many common groups of customers, or market segments, each with its own profile and set of needs.
Each segment represents a different opportunity. Effective marketing comes from understanding the make-up of these segments and delivering the appropriate sales message to each one.
Defining Market Segments
Market segments can be defined in a number of ways:
Survival requires an understanding of how and why change is occurring. If you can look at change as an opportunity rather than as a threat, then you can take advantage of it.
Key aspects of change that will affect your marketing strategy include:
Changing Consumer Market
Many changes are occurring in the consumer market:
In the coming years, there will be fewer workers entering the work force and fewer consumers to purchase the fruits of their labour. Slowdown is expected to last well into the next century.
Baby boomers drove the markets in the 60s, 70s and 80s. They fuelled the housing boom and increased spending on durables such as new appliances and furniture. Now many of these boomers are middle aged, sophisticated consumers.
Overall Population Change
The general trend in Canada, with one exception, has been towards lower rates of population growth. Through the 60s, Canada’s population growth averaged 1.7%. This average dropped to 1.2% in the 1970’s, and to 0.8% over the first half of the 1980’s. From 1986 to 1991, Canada experienced a “boomlet” with annual population growth of 1.6%. This was in part the result of the younger boomers delaying childbirth until they had established their careers. However, the first half of the 90’s once again showed a population growth slowdown averaging 1.1% per annum. (Source: Population Dynamics in Canada, 1994)
The baby boom, which began in Canada in 1947, unleashed a wave of demographic change that gathered force over an entire generation. An average of 400,000 new Canadians were born each year from 1947 to 1965. Today there are 9.2 million baby boomers in Canada. This massive cohort represents nearly one third of Canada’s population making it the largest consumer group in the country.
The last baby boomers turned 25 in 1990. Age 25 is important because that is when people begin to set up households. There has been a steady stream of 25 year-olds since the early ‘70s which ignited the house-building and house-price boom of the ‘70s and ‘80s.
The annual growth rate of Canadian households will be much slower than in recent years. By 2016, households are expected to grow at an average annual rate of only 1.3%, compared with 2.2% from 1986-91 and 1.7% from 1981-86. The declining growth rate reflects the impact of the A baby bust generation that followed the baby boomers. As the baby boomers left their parental homes in the 1960s and 1970s, households grew at a vigorous pace. The rate of growth began to slow in the 1980s as the baby bust generation arrived. (Source: Statistics Canada)
Baby boomers produced an average of 4 children per family. This has steadily declined to 1.7 children per family. An estimated 15% of the baby boom women born in the 1940s and early 50s have chosen not to have children. (Source: Statistics Canada).
Canadian society is aging rapidly. The oldest boomers turn 50 in 1996. There are 3.5 million Canadians 65 years of age and over. Seniors 65+ represented 12.2% of the population in 1996, up from 11.6% in 1991. The number of people 65 and over has grown by 128% from 1961-1991. By 2031, one in five Canadians will be 65 and over. Life experience rather than youthfulness will characterize Canadian age structure as it moves into the 21st century. (Source: Statistics Canada)
Marketers have become aware of the aging trend and are repositioning products and services like antacids and bifocals to entice consumer spending into the next century (Source: Globe and Mail).
Canada presently has one of the youngest populations in the Western World. Canada will have one of the oldest populations within 40 years because both baby boom and baby bust were more pronounced here.
As population aging continues over the next 50 years, businesses of all types should be increasingly attentive to the effects on the demand for new and existing products and services.
Table 3: Canada’s Seniors
|Traditional Stereotype||Actual Profile|
Incomes are becoming more divergent. The rich are getting richer, the poor are getting poorer. The middle class is disappearing.
Baby boomers are cutting back on conspicuous consumption and thinking more about saving for the future. Responsibilities are mounting for sending children through college or university, supporting elderly parents and preparing for retirement.
Table 4: Major Trends in Consumer Attitudes
|Home is where the heart is…and the office.||
|Time is a rare commodity.||
|Grandma really is younger.||
|Well, well, wellness||
|Quality is Job One||
|At Your Service||
Changing Business Market
There are two basic types of markets – emerging and mature. Most businesses have become mature markets.
Table 5 compares these two types of markets.
Table 6 outlines some business trends.
Table 5: Basic Market Types
|Characteristic||Mature Market||Emerging Market|
Table 6: Major Business Trends
|Constant and rapid change||
|Increased growth in World Trade/ Globalization of Marketplace||
|Environmental Regulation, Health and Safety||
|Customer Expectations for Quality||
|Continued High Unemployment||
|Need for Education and Training||
|Outsourcing and Subcontracting||
Click on Worksheet 2.3 (Word Document) to identify trends and other factors affecting your business.