BIRD 2006 All rights reserved. Business and Industrial Research. The Magic of Minds

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1 MARKET RESEARCH of critical importance Business and Industrial Research Division (BIRD), IMRB International The Magic of Minds

2 2 UNDP says Pillars of entrepreneurship too often missing Foundations of the private sector not yet in place Manageme nt Private Sector Growth Access to financing Rule of Law Access to skills & know- ledge Physical and social Infrastructure Domestic macro environment Global macro environment A BIRD study carried out for the SME centre of IIFT indicated that market information was very much desired by SMEs and there was a paucity of assistance in this regard

3 3 MR need not be expensive for a SME start-up Somewhere between scribbling your idea on a cocktail napkin and actually starting a business, there's a process you need to carry out that essentially determines either your success or failure in business "Entrepreneurs are often so passionate about their ideas, they can lose objectivity," Is the idea monetisable and is it scalable? Secondary research can be a good starting point. Small sample primary dipstick surveys help validate hypothesis. A focus group/observation research can help know the consumer better

4 4 Presentation structure What is Market Research (MR)? How / where does MR help your business? Criticality of MR to any start-up or a mature entrepreneurial venture Classic failures due to inadequate research MR how does it work? IMRB International

5 What is MR?

6 6 Entrepreneurs today function in a highly sophisticated business environment

7 7 Marketing research reduces uncertainty t or error in decision-making. Descriptiv e Prescriptive Functions of MR hence Predictive Diagnosti c The information collected by conducting marketing research is used for problem solving and decision making in various areas of marketing.

8 8 MR some definitions Marketing research is the systematic design, collection, analysis and reporting of data and findings relevant to a specific marketing situation facing the company. [Philip Kotler] the systematic gathering, recording and analyzing of all data about problems relating to the marketing of goods and services. [The American Marketing Association]

9 9 An example where MR is required Need An entry level car manufacturer wants to advertise to current two-wheeler owners Query What magazines and TV programmes should be used?

10 10 Another example Need A manufacturer of hair oils is diversifying into skin creams Query What should be the product portfolio? What price points? What should be the positioning? Who is the target group?

11 11 Some more Need Query A steel manufacturer wants to set up a new plant worth Rs 50 crores in collaboration with a foreign manufacturer to market advanced technology steel construction bars Should he go ahead and invest?

12 12 Yet another Need At telecom operator has been underperforming Query What changes are required?

13 How / where does MR help How / where does MR help your business?

14 14 To make strategic choices External environment Internal environment Strategic choices What businesses to be in? Corporate level Business level Positioning a business Marketing objectives Marketing strategy Marketing plan

15 15 Requires research Customer Groups Controllable Marketing Variables Product Pricing Promotion Distribution Assessing Information Needs Consumers Employees Shareholders Suppliers Marketing Research Providing Information Marketing Decision Making Uncontrollable Environmental Factors Economy Technology Laws & Regulations Social & Cultural Factors Political Factors Marketing Managers Market Segmentation Target Market Selection Marketing Programs Performance & Control

16 16 MR assists in answering Where Are We Now? Where Would We Like To Be? How Do We Get There? How Do We Make Sure We Get There? How Do We Know If We Got There? Where are we now? How Trends Do do in we We the get marketing Make there? Sure environment We How Where Do We Would Know We If We Like Got Get There? To Trends Potential affecting effectiveness location and There? of: Be? community Progress in achieving i Facilities, Level specific of services, success promotional strengths in achieving and marketing Needs and objectives characteristics weaknesses activities of primary or campaigns competitors marketing of overall objectives market for each Current Progress target in market using target distribution market mix characteristics and positioning Market penetration approaches trends approaches by segment Success of specific marketing Characteristics and size of potential pricing approaches markets Progress mix approaches, in using campaigns, specific Benefits and services that promotional and other activities match needs campaigns of segments' and packaging and other customers specific marketing mix Changes programming customer approaches activities satisfaction levels Likelihood partnership and arrangements amount of Changes use by customers in in a given satisfaction target quality market training levelsprograms Current market position Evaluation of past marketing plans

17 17 A roadmap Monitoring/ How am I doing? Where do I go from here? Sustaining Launch Strategy Development What do I do? Mix Development How do I do it? Customer/Market Understanding Where do I start?

18 Criticality of MR to any start-up or a mature entrepreneurial venture

19 19 From invention to innovation Danish Research showed that between 1985/1990: 5000 Starting ideas 350 Retained as original 94 Patented 30 Developed Products Only 15 Still in Production by 1991 (0.3%)!

20 20 A low success rate National Conference Board, USA (1967) studied 5000 innovations in 121 Companies and highlighted 6 common factors of failure. 1. Inadequate knowledge of the market 2. Poor performance linked to ineffective testing ti 3. Insufficient attention to reaction of competitors 4. Rapid obsolescence of the product 5. Poor Timing 6. Lack of understanding of market segments

21 21 Importance of research Cause for failure % of Companies Citing Inadequate market analysis 45 Product Problems 29 Ineffective Marketing Effort 25 Higher Costs Than Anticipated 19 Competitive Strength th of Reaction 17

22 Classic failures due to inadequate research

23 23 Invention Vs Innovation need dfor good research (even for large companies) Rabbit was the first mobile phone service in the UK (Hutchinson) It failed to lead the mobile phone revolution almost a decade before the mobile telephony boom WHY???

24 24 Rabbit Handsets too large did not define the user needs and offered limited it user benefits!!! Short Battery Life Could not receive incoming calls Had to be close to a High Street Bank! Limited Availability

25 25 A marketing disaster Ford Edsel wrong car at tthe wrong time Failure to understand the nature of the American consumer Confused pricing strategy Wrong design (a large car at a time when small cars were popular) External environment was not conducive recession times Shrinking segment Unpopular name sounded like the name of a tractor A car launched with a lot of hype

26 26 So many examples of inability to understand the market The pets.com sock puppet

27 27 Majority of a company s value is moving into future value $13.1 $7.6 Sector Enterprise value $bn 100% $4.9 58% Future value as % EV Energy % Transportation % Automobile & component % Pharma & biotech 1,075 62% Enterprise Value $0.6 42% 4.2% First Year 38% Remaining Years Future Value Telecommunications % Utilities % Commercal serv & supplies % Materials % Capital goods % Current Value ($ trillion) Source: Russell 3000 data, May 2003 ($Trillions)

28 28 Mobile phone market different consumer segments beat the PLC

29 29 An optimal combination of R&D and MR

30 MR how does it work?

31 31 The marketing research process

32 32 Defining the market research objectives Marketing Research Problem Identification Research Problem Solving Research Market Potential Research Market Share Research Market Characteristics Research Sales Analysis Research Forecasting and Business Trends Research Segmentation Research Product Research Promotion Research Distribution Research

33 33 Classification of research design MARKETING RESEARCH QUALITATIVE RESEARCH QUANTITATIVE RESEARCH EXPLORATORY Focus Group; Observation; Others. DESCRIPTIVE Survey research CAUSAL Laboratory Experiment Field Experiment Research conducted to gather more information about a problem or to make a tentative hypothesis more specific Research conducted to clarify the characteristics of certain phenomena to solve a particular problem Research in which it is assumed that a particular variable X influences a variable Y

34 34 Collecting Data Types of data Primary data: data observed and recorded or collected directly from respondents Secondary data: data compiled both inside and outside the organization for some purpose other than the current investigation

35 35 Secondary data internal sources Daily, weekly, monthly and annual sales reports: Geography Product line Product Accounting information Expenses Profits Competitive information by sales force

36 36 Secondary data external sources Trade associations Industry publications and databases Government databases (nic.in, rbi.ord) MR firms prepared sales, volume, brandshare measurement systems (TGI, Retail audits) MR firm prepared demographic variables and market penetration (NRS) Private databases from thinktanks or information organisations

37 37 Sampling Methods Sampling Finite Population all the elements, units, or individuals of interest to researchers for specific study Large population - Sample a a limited number of units chosen to represent the characteristics of a total population Types of sampling Random each element has an equal chance for study Stratified study population divided into like groups Quota: population is grouped and elements are arbitrarily chosen etc

38 Comparison of four basic survey methods 38

39 39 Questionnaire i Construction ti Open-ended ended question Question which invites the respondent to answer as their own interests or personal subjectivity dictates Dichotomous question Question which to which the respondent can make only an either/or or yes/no response Multiple-choice question Question asks the respondent to choose a response from a fixed set of responses

40 40 Statistical Interpretation and analysis, report preparationp Analysis of survey data for interpretation: This may be descriptive Simple and complex cross tabs Univariate and multivariate analysis Segmentation, correspondence, association and so on

41 41 Tabulation cross section and longitudinal Brand Purchased in Period 1 Brand Purchased in Period 2 Brand ABrand B Brand C Total Brand A Brand B Brand C Total

42 42 Is highly hl reputed An Illustration : How Mutual Funds are positioned vis a vis other instruments MFs FD 5 5 I can trust with my savings 1 8 For investing small amounts -2 5 Provides reasonable, consistent returns -1 7 Recommended d by friends& relatives -1 5 Is safe Offers tax benefits 4-12 Easy liquidity 2-2 Limited i paper work 1 1 For young working people -1-5

43 43 Correspondence analysis Contains no preservatives Good for children Juice D A brand you can trust Milk B Nutritious My kind of drink Drunk by sports-people Drunk at breakfast Milk A For young people Cola C Refreshing Sweetened

44 Price Sensitivity Measure an example Too cheap cuml. expensive cuml Good bargain cuml Too expensive cuml Less than

45 IMRB International ti The Magic of Minds

46 46 India s largest MR company, part of the WPP group Research offices in 6 cities Field offices in 17 locations Offshore research activities in: UK Middle-east Africa Far East Sri Lanka

47 47 Our specialist divisions

48 48 Business & Industrial Research Division (BIRD) 40 consultants 40 consultants Diverse industry experience Various practice areas: Market analysis Demand modelling/ pricing studies Go / No Go studies Entry strategy Marketing strategy Positioning analysis Competitor mapping Distribution studies» and so on