Market and Demand Analysis
Market research and demand analysis for red white wooden barriers
In order to gain a competitive advantage, a company should either focus on becoming the cost leader or concentrate on differentiation. Our client concentrates on differentiation and has developed an innovative product idea. The idea promises enhanced safety and a longer lifespan of the product. However, is the optimized product also demanded by potential end customers?
Behare Sadriji & Celina Kasperzak & Cynthia Mathis & Cornelia Spillmann & Martina Hespelt, 2019
Projektarbeit/Praxisprojekt, Ruedersäge AG
Betreuende Dozierende: Yvonne Dietiker
Keywords: Market research, market analysis, demand analysis, red white wooden barriers, product idea, product differentiation, market potential red white wooden barriers
Our client produces red white wooden barriers that are used to barricade construction sites. To gain a competitive advantage, our client aims to differentiate the product by sealing the front sides of the barriers with a synthetic end cap. The trigger of the idea was the fact that red white wooden barriers are prone to moisture ingression from the front sides of the barriers. As a consequence, the barriers become damaged easily and wood splinters can cause injuries. The optimized product promises to increase safety and extend the lifespan. However, the launch of the product idea is associated with a large investment by our client. Therefore, before implementing the product, the market potential of the red white wooden barriers has to be identified as well as the demand for the optimized product.
To state whether our client should launch the product idea, three different methods to collect data and gather relevant information were applied. Firstly, an online survey was sent to construction companies throughout Switzerland to obtain information on the demand for optimized red white wooden barriers, the willingness to pay a surcharge, and the market potential of the product. Secondly, semi-structured interviews were conducted to collect more detailed information about the construction industry and opinions on our client's idea. After the analysis of the collected data, the information obtained was used to complete Porter's Five Forces Model, which addresses the competitive environment of our client's industry.
The principal findings of the survey have shown that there is a demand for high standard barriers and most survey participants are willing to pay a surcharge for an optimized product. However, most interviewees are not willing to pay a price premium as they doubt the promised extended lifespan and the enhanced safety aspects of the optimized product. Since there is a high price sensitivity, particularly for products that are regarded as expandable, the price of the wooden barriers is essential. Many building firms procure the barriers from retailers that offer low-priced barriers. In fact, many retailers obtain their products to low costs from abroad due to the weak Euro exchange rate. Consequently, our client deals with pricing pressure and a high rivalry among existing competitors within the market for red white wooden barriers.
As many interviewees doubt the promised improvements of the optimized barriers, our client needs to concentrate on promoting these aspects. However, all safety experts claimed that no severe injuries or accidents are caused by splinters of the red white wooden barriers. Thus, the safety aspect should not be overly promoted.
By pursuing product differentiation, our client promises value proposition and gains a competitive advantage that may lead to an increased market share. As disclosed by the online survey, the market potential of the red white wooden barriers is, on a yearly average, 1,600 running meters per end customer.
Based on the results, we recommend that our client launches the product idea. One reason for this conclusion is that a demand for longer living wooden barriers has been identified, as most survey participants are willing to pay a surcharge. Furthermore, it is crucial that a company pursues differentiation in order to gain competitive advantage. Nevertheless, the product improvements and, in particular, the longevity aspect need to be marketed extensively. Thus, a sophisticated marketing strategy is crucial.
Studiengang: Business Administration International Management (Bachelor)
Fachbereich der Arbeit: Strategie, Marketing & Kommunikation