Market Research SAMPLE CASE STUDY. February, Presented by

Transcription

1 Market Research SAMPLE CASE STUDY February, 2014 Presented by

2 MARKET RESEARCH 2 Business Intelligence Case Study In this mock up case study, we provide an illustration of how research could be used for fact-based decision making. Our clients may ask us to analyze market potential within a strategic planning process or contract us on a project basis. By combining various approaches and data-points, clients can gain access to information that positions them for competitive advantage. In this case study, our client (Z Vitamin) is a manufacturer of vitamin supplements who competes in 4 channels and wants to better understand their upside potential and sales productivity. Market Analysis As part of a market analysis, we provide snapshots of industry size, annual growth and market drivers within an industry. The value of a well thought out market analysis is that it frames the company s growth strategy. From the market analysis, management can make decisions on whether it should grow within its core business, explore growth in adjacent markets or diversify into new markets. Having a specific pulse for industry growth in an existing market is a vital assumption in the formation of strategy. NOTE THIS SECTION DOES NOT CONSTITUTE A COMPLETE MARKET ANALYSIS BUT REFLECTS SOME OF THE DATA THAT MAY BE INCLUDED IN SUCH A STUDY. It is also critical to understand market drivers; the key predictors of industry growth and profitability. Such drivers provide context on which factors may drive future demand. Also, the market analysis provides an important framework to evaluate competitors and their potential future behavior. It is not adequate to consider current competition; management must also consider new potential entrants into the market. Key Statistics Snapshot IBISWORLD INDUSTRY REPORT: VITAMIN & SUPPLEMENT MANUFACTURING IN THE US, OCTOBER 2013

3 MARKET RESEARCH 3 Example of a Key Driver to Industry Growth IBISWORLD INDUSTRY REPORT: VITAMIN & SUPPLEMENT MANUFACTURING IN THE US, OCTOBER 2013

4 MARKET RESEARCH 4 Market Share Analysis (5 Year Potential) Z Vitamin's existing market segmentation is as follows: Revenue Industry Size Penetration Growth Rate 4 Yr. Industry Size (Proj) Best- in- Class Margin Potential Target Penetration Target Revenue Drug Retailers $4,500,000 $95,000,000 5% 2% $102,600,000 Hi Low 10% $10,260,000 Big Box Retailers $4,250,000 $125,000,000 3% 3% $141,250,000 Low Very Low 7% $9,887,500 Nutrition Retailers $4,200,000 $85,000,000 5% 2% $91,800,000 Hi High 7% $6,426,000 Consumer Direct $2,250,000 $100,000,000 2% 10% $146,000,000 Hi High 12% $16,790,000 Other $750,000 $15,000,000 5% 0% $15,000,000 Low Low 8% $400,000 Totals $15,950,000 $43,763,500 One of Z Vitamin s channels is Nutritional Retailers. Based on the client s criteria, Optimize can calculate penetration, market share and market potential by channel and by geography (usually by state, or metro area). In this example, only nutritional centers with more than $1,000,000 in annual revenue were used in the sample. s Ave. Rev/Store Industry Rev Category Size Existing Rev Share Potential Northeast 140 $1,400,000.0 $196,000,000 $19,600,000 $577,121 3% $794,879 Southeast 134 $1,200,000.0 $160,800,000 $16,080,000 $940,349 6% $185,251 Midwest 97 $1,000,000.0 $97,000,000 $9,700,000 $498,078 5% $180,922 Southwest 104 $1,400,000.0 $145,600,000 $14,560,000 $755,961 5% $263,239 West 155 $1,600,000.0 $248,000,000 $24,800,000 $1,450,001 6% $285,999 $847,400,000 $84,740,000 $4,221,510 $1,710,290 Based on such data, a client can make informed choices. For example, if Z-Vitamin were looking to make decisions on sales coverage, such an analysis may inform on hiring regional sales managers. In this case, the West is the largest sales region, but in terms of potential, the Northeast may warrant additional sales coverage in the Nutrition Retailer channel.

5 MARKET RESEARCH 5 West + $285,999 Midwest + $180,922 NE + $794, 879 Southwest + $263,239 Southeast + $185,251 Optimize can also provide a study of penetration and specific client targets: Company Name Vision Direct, LLC D- U- N- S# NUTRITION SYSTEMS, INC D- U- N- S# Morrison Senior Dining D- U- N- S# BEYOND GENETICS SUPPLEMENTS LLC D- U- N- S# WESTERLY HEALTH FOOD, INC. D- U- N- S# TOTAL HEALTH NETWORK CORPORATION D- U- N- S# THE NUTRITION HOUSE INC D- U- N- S# British Delights, Ltd. D- U- N- S# Portland ME North Brunswick NJ Buffalo NY Jersey City NJ New York NY Farmingdale NY Manchester NH Westford MA Type Sales ($ Mil) Employees 28.00M M M M M M M M 10 SIC Vitamin food stores Health foods Health foods Health foods Phone Number

6 M A R K E T R E S E A R C H And even useful information about prospects, including contact information for key executives: 6

7 MARKET RESEARCH 7 Sales & Marketing Productivity Ratio (TIME SHIFTED) In order to understand the return on sales and marketing investment, we often calculate sales and marketing productivity ratio. Assuming a sales cycle (in this case 9 months) we calculate a time shifted productivity ratio as follows: Revenue $21,090,000 $18,000,000 $15,300,000 New Margin Dollars $3,200,000 $3,400,000 $2,500,000 Time Shifted % Selling Expenses 13% 11% 14% Prior Year Selling Expenses (in dollars) $2,700,000 $1,989,000 $1,680,000 Selling Expense Productivity Index Benchmarks Clients also use benchmarking information to compare various expenses within their industry. Selling expenses might be a one of the variables for comparison. If Z-Vitamin is below par for selling expenses, the company may make the decision to hire a Regional Manager for the Northeast. Benchmarks are generally available by industry code and by company size. With such an analysis, clients can compare profitability vs. the competition and understand the volume at which economies of scale come into play (in this example, above $50 Million). Company >100M $50- $100M <$50 M Revenue 100% 100% 100% 100% Gross Margin 40% 38% 39% 37% Selling Expenses 15% 13% 14% 16% Operating Expenses 15% 13% 14% 15% Net Profit 10% 12% 11% 6%