Need can either be recognized or generated. Most utility-based products like refrigerators, washing-machines, cars, etc. were introduced to the market because the manufacturers felt that there was a need for such products in the market. Refrigeration, cleaning and transport were far inferior before these products were launched, and post-introduction, they were easily accepted by the society.

On the other hand most fashion accessories, colas, computer games, etc. originated no such popular need; rather such products were able to create a need for them in the market, which did not exist before. These products did not originate from any popular need because suitable substitutes were already in place. For example, fashionable clothing did not add any utility to existing clothing; beverages could easily substitute colas and there were sufficient number of indoor games which could substitute computer games. What these new products did was give new dimensions to existing products which did not exist before. When these offering were perceived superior to existing ones these new products flourished while in other cases they failed.In any case a detailed market analysis is a must before even starting the production of a new product. In the first step when we do not know what product to actually launch we have to first identify different populations and do a market structure analysis to understand the requirements of various groups of people.

Market structure analysis or segmentation seeks to identify and profile subgroups of a given population. Cluster analysis and perceptual mapping are 2 such useful tools for market structure analysis.

  • Cluster Analysis: Cluster analysis is a set of techniques for separating objects into mutually exclusive groups such that the groups are relatively homogeneous. To explain in simple words, the analyst has to decide how many unique clusters it wants to divide a target population into. The respondents from a market research are then divided into these clusters as per one of their responses. Then an iterative process follows by virtue of which the average answer of a respondent over the set of attributes being investigated by the market research, determines his/her cluster. This iterative process continues until a respondent cannot be reclassified any further.
  • Perceptual Mapping: It is an insightful and innovative process to estimate the target population’s expected perception of a product or service when it will be launched, or its perception of an existing brand or product/service offering. Most commonly it is a 2D map displaying the strength of association of a product/service with certain attributes, and also in respect to other products/services or competitors.

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