Market and marketing are some of the key success factors of any business activity.  Without the existence of a market,  other factors like production,  personnel, finance and so on have little or no significance. Thus, market and marketing analysis are important aspects of a feasibility study as they reveal the marketing prospect for the product or service which have a direct bearing on  sales revenue and profitability of the proposed industry. Experience have shown that many projects have had to be abandoned on account of insufficient market prospects.

market and marketingBesides, there is conclusive evidence around the world by project development experts such as NISIET (1985) and UNIDO (1991) that prospective entrepreneurs face problems of what is to be produced and sold.  They are also faced with an array of questions such as how much quantity is saleable and at what price; at what places should the selling efforts be concentrated; which market segment offers the best prospects for the products; which channels of distribution should serve the product objectives and which promotional strategy should be adopted?
Social and Economic Environment

When designing an industrial project,  the promoters must explain the social and economic environment and its likely impact on the proposed business.  This should be within the context of a SWOT (strength,  Weakness,  Opportunities and Threat)  analysis which may impact positively or negatively on the proposed business.  This was explained by Onoja (2000) as a management tool generally used to assess a proposal in terms of its internal and external factors, controllable and uncontrollable variables, desirable and undesirable issues and so on.  It was further suggested that while planning a business, the promoters should make a SWOT analysis of the proposal and incorporate the implication in the feasibility study.

Once the analysis is done, strategies should be developed in the study to deal with the objectives of capitalising on the possible strengths,  eliminating the possible weaknesses and taking advantage of the opportunities to overcome the threats.  In one of his books on management,  Peter Drucker (1961) defines business as an economic performance which is rendered to others at a price and concluded that business has only two basic functions, namely, creation of a market and innovation. A business organisation thus differentiates itself from any other type of organisation by these two basic functions. All business organisations wishing to be effective and efficient in attaining the objectives for which they are created need to be innovative to adapt to changes which continuously occur.
Every purposeful business organisation is embedded in the environment within which it has to interact. Purposeful business system influence and are influenced by their environment principally because the business system inputs are derived from and the outputs are consumed by the environment.  In this connection,  project promoters must know that where outputs to the environment consist of products and services, the various inputs include market information, consumer needs, competition, legal and social restraints and human, material, financial, technology, and knowledge resources.
From the foregoing,  it is evident that the environment is characterized by complexity,  turbulence, uncertainty and risk. The dependence of a business on its environment is especially important in recent times with the rate of frequent changes brought about by technology, innovation,  government policy inconsistency, globalisation, trade liberalisation and frequent changes in the product, processes and other economic activities.  Therefore, business promoters must learn to develop capacity for responding and adapting to these environmental conditions which should be considered during project design and implementation.
market and marketingThe Product
An important aspect of a feasibility study is therefore definition of the promoters objectives in terms of products(s) proposed to be manufactured or services to be provided. A product can be defined by its technical specifications in terms of size, quality, quantity, composition, applications etc.  depending on the nature of the product. In Nigeria,  the standard Organisation of Nigeria (SON), and the National Agency for Food, Drugs Administration and Control (NAFDAC)  are responsible for product standardisation and certification. Standard specification of products in Nigeria has evolved with local availability of raw materials and the local requirements of industry and trade.  For instance,  over the past two decades,  the SON has evolved more than 4000 standards (ISOs) covering both industrial and consumer products in various sectors such as engineering, chemical, sports goods etc. In like manner, NAFDAC has set many guidelines and certification procedures for the production and sale of food and drugs in Nigeria.  Project promoters must be familiar with these guidelines before establishing their industry.
Besides, when manufacturing any product,  it is necessary to compare the proposed product with the product range of competitors existing in the industry in terms of specification with a view to establishing, product superiority or inferiority in relation to plus or minus factors or product attributes. Indirectly, this will also help in the assessment of the market share potential. In some cases, where there are no existing standard specifications, the products proposed by the promoters can be related to other products, while the requirement or specification with potential product users and the market acceptability of the product can be gauged. As stated earlier, in cases of food and drug products, there are stringent requirements by NAFDAC to ensure safety against contamination, deterioration during packaging, transit, storage retailing etc.  to be complied with.
The Product Mix
Within the limitations of investment potential and scale of operations, it is desirable for the project promoters to design or arrive at a product mix which:
a)  has components to serve as complimentary to each other with respect to functional utility of each component.
b)  provides for optimum utilisation of manufacturing capacity to be set up.
c)  provides for full utilisation of manufacturing materials including by products conversion which facilitates full capacity utilisation.
The product mix of the industry being proposed should consider the products “life cycle” particularly in their application by the end users.  With rapid technological changes, the usefulness of a given product might undergo a substantial change over a period of time. To take care of product obsolescence, it is necessary for promoters to engage in a reasonable exercise of technology forecast. This may be more applicable to high technology areas where most products in usage may undergo transformation in terms of technology over a period of time. With rapid change of technology,  project promoters must design products for shorter life cycle.  In this era of globalisation, trade liberalisation and competition, it is also essential for entrepreneurs to formulate and adopt internationally acceptable specifications for different products.
In the years to come,  manufacturers for export would be the order of the day in many developing economies such as Nigeria. It may therefore be useful for project promoters to study and assimilate international specifications particularly for export to European Union (EU) countries,  the United States of America (USA) under the African Growth and Opportunity Act (AGOA) and product specification by Asian countries.
Product Pricing
There are many factors that can affect the price of a proposed product. Some of these include the cost of raw materials and inputs, product trade mark where the product is produced under licence, tariff barriers, import prohibition, franchise agreement, patent monopoly, competition and exclusive know how rights.  In many situations, the price of product does not depend on the action of the entrepreneur alone.  If there is intensive competition in the market for the same similar or substitute products then there is a “marked price” above which the products cannot be sold. Similarly,  if there is a tariff protection,  the maximum price at which a product can be sold is determined by the landing price,  (cost, insurance, and freight (CIF) price and tariff) of the same or substitute imported product.
However, in May cases reference prices, even when available, cannot be used as a basis for product pricing particularly in cases where imports are banned,  when functional substitutes are available or when there are various types and qualities of a product. In spite of these, product pricing can be determined through full cost pricing, target return pricing, marginal cost pricing, skimming or penetration.
a)  Full Cost Pricing.
Under this method, the products must bear their full share of costs. This means it must cover all the overhead costs plus a reasonable profit mark up or profit margin. This can be calculated by using the following formula: Price=ATC(1+M) where, ATC=Average Total Cost Per Unit
M=Profit Mark-up(calculated as a percentage)
The costs involved include raw materials and inputs, cost of transportation and insurance, custom duty on raw materials (if it is imported),  direct labour costs,  fixed costs i.e, production,  administrative, selling, distribution, excise duty on finished goods etc.
b) Target Return Pricing.
In this method, the product price is designed to provide a predetermined return on the investment employed in the production and marketing of the products.  Both costs and profit goals are based on the standard volume or quantity expected to be produced in a given year or an average volume expected to be produced in future years.
c)  Marginal Cost Pricing.
When using the marginal cost pricing method, only the incremental or variable costs are relevant. No attempt is made to cover the full costs. However,  it is expected that some contributions be made towards offsetting such costs.
The pricing method is: P=AVC + M.
P=price to be set.
AVC = Average Variable Cost.
M= Marginal Costs based on fixed cost per unit.
The other methods are “skimming” which involves setting the price relatively high and appealing to the more affluent segment of the market, and “penetration” which is a strategy whereby new product prices are set relatively low in order to gain instant dominance in the market and build a long range position of leadership.  Any of the above methods could be used by project promoters. In doing this,  it should be borne in mind that there are certain factors such as elasticity of demand, costs (fixed, variable,  direct, indirect etc), competition,  legal restraints that may significantly affect the pricing policy.
The Market
An analysis of the market should state in specific terms the general market areas in which the proposed business will operate. In this respect, a statement on the size and nature of the expected initial and future market will be necessary. The market outlook including the current market size, the projected growth, major business applications, the major customers and end users of the products or services should be stated.
Besides, the entrepreneurs must also define clearly and precisely the market segments that they hope to penetrate. For instance, the market for semovita or garri which are consumer goods is different from machine spare parts which is a capital good. The common errors which are usually made by project promoters should be avoided. Some of these include the use of statistics or data of market size and composition which in reality relate to a “wider market” than a “target market”, the assumption that all market segments contain a standard mix of large, medium and small enterprises. Otters are the failure to identify any significant unusual market characteristics which can easily result in over optimistic sales projections which can lead to financial problems during project implementation.
Generally speaking,  the market can also be defined as the local production of any goods or services plus importation including smuggling of the product less any export.  According to Kajogbola (1989), some scholars have argued against the validity of including the export variable in the calculation especially where a case of smuggling is established. The consensus however is that the exclusion of export variable will exaggerate the demand for the product.
Market Research Techniques
The objective of market research for a new project is to enable the entrepreneur assess the sales prospects for a particular product or group of products.  Based on this, the entrepreneur makes decision on production level and the capacity of plant and machinery to be installed, number of people to be employed, the requirement of production equipment and the estimated income that will accrue to the project over a period of time. In view of the above, market research for a new product is concerned with analyses of the nature, size, and characteristics of the market for particular goods and services and the various economic and other factors affecting the market.
Market research seeks to identify the actual and potential buyers in number, location, and types and finding out the characteristics of the consumers and motives.  The market size of a product is the study of effective demand for the product within a well defined geographical area i.e a country, state, region, local government area, town, community etc.  The time frame for the study is usually one year or more.  In carrying out the study, the project promoters should be able to distinguish between nominal and real demand so as to avoid overestimation of the market demand for the product.
Data Collection
To conduct a market research, data must be collected from primary and secondary sources. Collecting information in Nigeria is usually an herculean task.  This is because most individuals and establishments still regard information as sacred and not to be given out.  Secondary data are those already in existence and accessible from various sources including existing establishments within the related industry, government ministries and parastatals,  Federal Office of Statistics, Central Bank annual reports, Customs and Excise, Commercial and Development Banks, Research Institutes, Trade Associations, Non Governmental Organisations (NGOs), Chamber of Commerce and Industry, producers, consumers, distributors and so on.  Though secondary data is more cost effective as it saves time and money, however, its major disadvantages are inadequacy of information which may not meet ones need and may sometimes be outdated.
There is therefore the need to collect additional information from primary sources which can either be through observation or survey or both.
a) Observation.
This involves visits by the promoters to various places where some, most or all the competitors e.g pure water production, garri production, polythene extrusion etc are located to collect as much information as possible. This is usually done in the business premises through observation. The promoters may visit these places while posing as a customer, an observer or a researcher. This strategy will put the competitor at ease and engender the necessary confidence for a smooth communication and information gathering.
The observation made can be put down in writing immediately after leaving the places visited. Any attempt to write down information without prior permission is usually met with suspicion.  In carrying out the observation, information on production process, products, customer reactions toward design, colour, size, materials, packaging etc. can be collected.  With the permission of the business owner, such information can be stored in tape recorders, photographs, recorded in tally sheets etc.
b) Survey
Questions can be solicited from selected people through the administration of questionnaire. Its purpose is to gather information on the market for the product or service. The questions can be directed to consumers, suppliers of raw materials and competitors among others.  The questions can be put either verbally or in writing depending on the circumstances.
In designing the questionnaire,  various factors that can affect consumer demand should be noted.  These include household income,  age,  sex, occupation,  religion, consumption pattern,  social religious, recreational and educational factors. It is  very necessary to pre-test the questionnaire before being used on a large scale, while interview may be conducted personally or by means of telephone.
In summary, the following factors suggested by UNIDO (1979) should be taken into consideration when embarking on a market survey:
a) Determination of market trends during the past five years or more for each major product or any substitute products.  Usually, this is expressed in tabular form to show:
-domestic production by volume and value over a period of five years or more.
-imports and exports to and from Nigeria.
-net local consumption.
-anticipated development in the local market.
-existing per capital consumption in Nigeria.
b) present and potential users of the products.
c) Geographical distribution of local producers.
d) Installed capacity of local producers and their capacity utilisation rates.  This includes existing production and imports of substitutes.
e) Data on complimentary or substitute products.
f) Information on the marketing,  the products by the existing producers.
g) Information on consumers buying behaviours.
h) Information on prices and costs of production in the industry.
I) Government policies relating to tariffs, import restrictions, foreign exchange regulations, incentives and concessions, sales tax, excise duties and price controls ( if any).
j) Proportion of the proposed production that is intended for export.
Market Demand Forecasting
The main purpose of manufacturing a product is to satisfy a specific societal need through the production of goods or services to meet demand. It is very obvious that there is no use to produce a product or provide a service for which there is no demand.  Therefore, the first step in the development of a production plan is to estimate the probable demand for the product or several products for some period of time in the future.  In the absence of a sales forecast, it will be difficult to achieve the optimum use of labour, plant and capital.
Before the project is formulated, the promoters must determine the size and composition of the present effective demand by each product segment.  This should be determined in order to estimate the possible degree of market penetration. Income from sales will have to be projected by taking into consideration the technology used, plant capacity, production programme and marketing strategy. Other parameters recommended by Kajogbola (1989) include:
a) Market Trend
Historical pattern of a product has been found by researchers and project analysts to be one of the most reliable parameters for forecasting the future market demand for a product.  Historical data on the consumption are collected over the past years, sometimes five years or more. This historical data should include volume and value of domestic production, imports and exports, net local production as well as the anticipated new market for the products. The data collected will be analysed to determine the consumption pattern and the rate of growth of consumption which will then be used to forecast the market or the demand for the product as the case may be.
More often,  complete historical data may not be available. In the Nigerian context of reliable data in the five years preceding the year of preparing the feasibility study is usually a myth. Sometimes, data on domestic production when available in documented form are usually outdated. The promoters may then rely on the primary source explained earlier for current data.
When historical data on the market are not available or not reliable enough to use in forecasting market demand, another method that can be used is the per capital consumption of the product.
B)  Estimated Per Capital Consumption.
Once the per capital consumption of a product is known, it is compared with the per capital consumption of the same product in other similar countries to ascertain it’s validity. The rate could then be used to multiply the population of the country to arrive at an estimated market size for the particular product in the country. However,  the accuracy of the result obtained in using the per capital consumption as a parameter depends to a great extent on the validity of the population figures used. Where the population is far from being accurate as it is currently the case in Nigeria, the market size or demand projected is likely to be exaggerated and distorted.
C) Laws and Regulations.
Laws and regulations especially fiscal and monetary policies such as the rate of import and export duties, exchange rate, interest rate, tariff, quotas, restrictions and subsidies among others may affect the demand for a product.  Project promoters should quantity the effect of these policies, make necessary adjustments in their projections to arrive at a reliable figure. For instance, the effect of high Tariff, quotas and restrictions on the consumption of a product must be clearly identified in projecting the market size for the product.  A high Tariff on a product may push the price of such product beyond the reach of an average citizen and consequently lead to a higher rate of suppressed demand.
D) Export.
Project promoters must make provisions for the export potential of any product in determining the market demand. Earlier on,  demand for a product has been defined as the quantity of a product produced locally after making allowance for units exported plus the number of units of the product that have officially come in from abroad. However, it is very essential that promoters take into consideration the products that have been smuggled in and out of the country as this could pose a serious threat to the market projection in the future.
The nature, intensity and ability of the competition will prove critical to the prospects of any proposed business. It should therefore feature prominently in every feasibility study. When doing this, common mistakes which include the over estimation of the competitive strengths and the underestimation of weaknesses should be avoided.
Analysis of competition should take cognizance of the following critical factors.
A) Identification and analysis of the existing competitors including their strengths and weaknesses. This could be based on their sizes or scale of operation, type of technology or process being used their target market, product being produced, distribution methods, price etc.
B) Identification of competitor’s strategic position in the market.
C) Assessment of the likelihood of possible new entrants to the industry i.e. danger of future market entry by new competitors.
D) Identification of competitors producing substitute products.
Apart from the competitive factors identified above, other basis for competition which are also very essential include:
– Sensitivity of consumers to price changes.
–  Prevalence of price discounting.
–  Sensitivity of consumers to product quality.
–  Importance of branding particularly by large scale producers.
– Special service to distributors.
Most of the information above may not be available to project promoters. It may not even be necessary nor desirable to get a complete information on all the items mentioned above.  However, the checklist will assist the promoter particularly after commencement of production when a close watch on the market is necessary to take corrective steps whenever necessary.
Demand/Supply Gap
The demand/supply gap is the difference between the total market demand level and the total supply both through domestic production and importation.  The demand/supply gap is also referred to as the “unsatisfied demand”.
The supply gap is important as it is critical determinant of the commercial viability of a product. If the market study shows that the demand for the product is already being satisfactorily met by domestic production and import, it will be unnecessary to proceed with the project for lack of demand justification.  The supply gap helps to answer the crucial question of whether there will be a domestic market for the product or not.
Apart from import, part of the demand of the industry is being met from weaving yarn which is a substitute product.
Estimated Market Share
The market share is the ratio of the total products supplied to the market by the competitors to the total market demand.  The lower the ratio, the more viable it is for the promoters to start the production of a product because it shows the share of the market captured by competitors.  For example, if companies X, Y and Z supplies 70 units to a market where 100 units are demanded, the market share of competitors is 70%.
Thus, any company entering the market has a chance of having to meet part of the 30% unsatisfied demand or demand gap.  However,  if the market survey shows that the combined market share is almost 100% then there is no justification to start producing a product or venture into the business at all.
The company’s estimated annual production is normally based on the normal feasible capacity.
Estimated Sales Revenue
For planning purposes and particularly in the preparation of a feasibility study, project promoters should avoid the temptation of setting prices which may be attractive on paper but will not be acceptable in the market.  A way of doing this is to adopt a conservative approach in estimating product price.  Usually, this is done by maintaining a constant price for the yearly estimation of the annual sales revenue.
Under this circumstance, if the project is profitable by using a “constant price” method for sales and revenue projections,  it will definitely be more profitable in the market since product prices are really expected to achieve a modest increase in the long run.
Marketing Strategy
Marketing strategy can be defined as a set of objectives, policies and rules that guide overtime,  the marketing effort i.e level, mix, allocation etc. which is partly independent and partly in response to changing environmental and competitive conditions. Generally speaking, marketing strategy is a written plan describing all the activities involved in achieving a particular marketing objective and their relationship to one another in both time and magnitude.
For a new industrial project, these will include sales and revenue forecast, production programme and profit target, pricing policy, promotional and selling strategy,  staffing requirements as well as the selected marketing mix.  Whatever marketing strategy employed by project promoters should be depended on what it is aimed at achieving i.e is it to introduce a new or existing product(s), to increase market share, to increase profit,  to maintain market position, to be a market leader, to improve on corporate image and so on.  It could be achieved by a manipulation of the marketing mix i.e the four Ps of marketing and the four Os.
Product Life Cycle
Project promoters must also understand that there are four basic stages in a product life cycle. They are:
– Market development
– Growth
– Maturity
– Decline
The characteristics of each stage are different and must be taken into account in developing an appropriate marketing strategy during the planning and implementation stage of the project.
A) Market Development Stage.
In the market development stage,  which is the product introductory stage,  sales are usually low and unprofitable. The product demand is very low because it is still untried and untested. The strategic requirement at this stage is to create customer demand, get them to try new product and overcome resistance to changes.
It can be achieved by a low introductory price,  massive advertisement, promotional displays and awareness creation.
B) Market Growth Stage.
At this stage, customer demand is high, distribution channels are filled and there is a rapid increase in sales and profitability.  This will attract other firms to the industry. In anticipation, strategic emphasis must shift to creating product preference through advertising, better distribution channels and more effective pricing. However,  with increasing competition,  the market will move towards saturation.
C)  Market Maturity Stage.
In the market maturity stage,  growth will reduce substantially while profitability declines. Emphasis moves to satisfying special market segments through product differentiation, product innovation and product branding.
D)  Market Decline Stage.
At this stage,  there is no further growth. The “cream” has gone off the market. Project promoters should arrest the decline in profitability by by better cost control.
Promotional Mix
From the above analysis, it is obvious that project sponsors must decide what combination of promotional tools to adopt that will achieve the desired objectives.  In doing this,  four factors should be taken into consideration. These are the amount of capital estimated for promotion,  the nature of the market, the type and nature of the product(s) and the stage of the product life cycle.
Strategic Alliance
Strategic alliance is a newly introduced concept in project formulation directed towards the attainment of increasing productivity and uninterrupted production in enterprise management. It involves the establishment of mutually beneficial relationship between the enterprise and its suppliers on one hand and its customers on the other. For instance,  there are some occasions when an enterprise may be confronted with cash flow problems to the extent that it is exceedingly difficult for it to meet it’s immediate production obligations.  A quick recourse to the suppliers of raw materials and other production inputs that are in alliance with the enterprise will provide the necessary support that may get it out of trouble.
This concept could also be applied to institutions that are providing essential services to the enterprise.
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