In-house Market Research How to conduct effective research linked - - PowerPoint PPT Presentation

How to conduct effective research linked to your business strategy

Thursday 30th August 2012

In-house Market Research

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About market research Linking market research to business strategy Case study

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About market research

Linking market research to business strategy Case study

Market research is gathering information about customers, or markets.

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• Good information is a tool that can be

used to support business decisions.

Market research can help businesses make decisions associated with:

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Identifying and evaluating

• pportunities in the market P

Understanding potential and existing customers

P

Setting strategies and targets

P

Monitoring performance

P

There are two main categories of market research.

• Secondary

– Information that already exists

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• Primary

– Information gathered first-hand from the source

Secondary data is available from a variety

• f internal and external sources.
• Internal sources:

– Internal organisational data and reports

• External sources:

– Business source corporate database (available to all AIM WA Professional Members) – Other online databases – Libraries

• Journals
• Other publications

– The Australian Bureau of Statistics (ABS) – Business or industry associations – Government departments

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Primary data is gathered directly from the market to address an organisation’s specific needs.

• Sources of primary data include:

– In-depth interviews – Field visits

• Observation
• Customer intercepts

– Focus groups – Surveys

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Market research may be exploratory or confirmatory.

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Generating options (Tends to be more qualitative) Selecting the best option (Tends to be more quantitative) Exploratory Confirmatory

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Scan environment

• Secondary

research

Generate options

• In-depth

interviews

• Focus groups

Select option

• Surveys

Evaluate outcomes

• Surveys
• Secondary

research

Exploratory Confirmatory

BUSINESS DECISION CYCLE

As with decision-making, the exploratory phase precedes the confirmatory phase.

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About market research

Linking market research to business strategy

Case study

Good market research should help an

• rganisation fulfil its purpose, or reason for

existence.

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All organisations (regardless of whether they are for- profit or not-for-profit) exist to create value by producing something that the market wants or needs.

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Value = Benefits - Costs

Organisations strive to produce value by

• perating their value chain.

Value = Benefits - Costs

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• Organisations succeed by making a winning offer to valuable

segments of the contestable market.

In the for-profit sector, the value that the organisation creates is split between customers and shareholders.

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• This model is known as shareholder capitalism, and it is

fundamentally flawed – it defines value and its recipients far too narrowly and assumes an infinite supply of natural resources.

Shareholder capitalism fails to recognise that

• rganisations are embedded in and depend upon a

massively complex system that is far more than just the economy.

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• Any strategy that weakens the total system is bad strategy.

Economy Society Environment

The great opportunity of our time is to recalibrate business as a total system contributor.

• To achieve this, businesses must reimagine themselves as vehicles for

delivering true social and environmental value, in addition to customer value.

• In other words, businesses must identify their transcendent purpose.

Businesses with a transcendent purpose tend to look something like this:

Market research cannot help your

• rganisation find its transcendent purpose

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• Market research is not useful when conceiving an idea’s soul.
• But it CAN help good organisations succeed.

Organisations that succeed over the longer term tend to excel in the following areas:

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Value proposition Value chain Culture

Purpose

Vision

Measures of Performance

Market research can help organisations make decisions associated with most of these factors.

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Value proposition Value chain Culture Vision

Purpose

P

O P

P P P P

Measures of Performance

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About market research Linking market research to business strategy

Case study

The Ethical Toy Company is an

• rganisation with a transcendent

purpose.

• The Ethical Toy Company exists to:
• Our most important measures of performance are:

– Total funds donated to growing the common good (50% of profit) – Net Promoter Score (NPS) and outcomes-based evaluation

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Provide ethical toys and games that are simply awesome for children, families, society and our planet.

• Creative nature

– We nurture and emulate the creative power

• f nature.
• Liberation

– Our products explore young people’s possibilities, and reject stereotypes, especially around gender.

• Virtuousity

– Our products celebrate and reinforce the diverse array of human virtues.

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Its values form the basis of its culture.

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Through our success, for “growing the common good” to become the common goal of toy and game companies world-wide.

Like its purpose, The Ethical Toy Company’s vision focuses on “system level” value creation.

The different components of the strategy fit together and reinforce each other.

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Nurturing & creative culture Ethical, efficient value chain Irresistible

• ffer &

brand Sharing our wisdom

Market research will help the company set its targets, achieve its goals and monitor its performance.

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Ethical, efficient value chain Irresistible

• ffer &

brand

Benchmarking / secondary research Culture surveys Benchmarking / secondary research Internal & partner surveys

Nurturing & creative culture Sharing our wisdom

Market & customer research

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Factor Metric 2013 2015 2018 Financial $ invested in growing common good (50% of profit) Customer NPS Outcomes (customer survey) Growth Market share Growth of category Process Waste Culture Internal NPS Transparency Internal survey Partner survey

Need a direct line to customers

The Ethical Toy Company’s strategy is reflected in its scorecard.

Today we will focus mostly on market research associated with delivering a winning offer to valuable segments of the market.

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Ethical, efficient value chain Irresistible

• ffer &

brand

Market & customer research

Nurturing & creative culture Sharing our wisdom

The market research planning process always begins with identifying and articulating the underlying decision problem.

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Set the research

• bjective

Identify information needs Identify sources of information Choose research method

Identify the decision problem · Why are we conducting this research? · What are the questions we want answered? What information do we need? · What is relevant? · How much do we need? · How accurate must the information be? How do we get the information? · Can we find the people we seek? · Do we have the skills to collect and analyse the information internally? What research techniques? · One research technique or several? · Qualitative, quantitative or some combination?

• Market research techniques should be selected to match the

research objective and the information needs.

When setting your market research objective, start with a global objective stated in one or two sentences, and then expand these to a list of specific information goals.

• The following questions may be useful when developing your

market research objective:

– What is the marketing problem we are trying to solve? – What is already known that relates to the subject?

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– What are the consequences of making a wrong decision? – What are the alternative courses of action available to us? – What do we expect the results of the study to tell us? – How accurate must the information be? – What hypotheses are there to test on the subject? – What assumptions are being made?

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Identifying and evaluating

• pportunities in the market

P

Understanding potential and existing customers

P

Setting strategies and targets

P

Monitoring performance

P

Let’s imagine that the CEO and marketing manager at the Ethical Toy Company are deciding whether to launch in the Australian market.

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Set the research

• bjective

Understand the size and structure of the Australian toys and games market Identify information needs

• What is the value of the market for toys and games?
• Is the market in growth or decline?
• What are the main categories and what is their share?
• Which channels are the most important?
• What are the key trends?

Identify sources

• f information
• Industry reports
• Journal articles

Choose research method Secondary research

Set the research

• bjective

Identify information needs Identify sources of information Choose research method

Identify the decision problem · Why are we conducting this research? · What are the questions we want answered? What information do we need? · What is relevant? · How much do we need? · How accurate must the information be? How do we get the information? · Can we find the people we seek? · Do we have the skills to collect and analyse the information internally? What research techniques? · One research technique or several? · Qualitative, quantitative or some combination?

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Reports available for purchase

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Identifying and evaluating

• pportunities in the market

P

Understanding potential and existing customers

P

Setting strategies and targets

P

Monitoring performance

P

Market segmentation

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Market segmentation is the selection of groups who will be most receptive to our existing or potential value proposition.

• The goal of segmentation is to identify clusters of people with

distinct buying preferences.

• This enables us to more specifically and efficiently tailor our offer

to win customers.

• Different segments will respond differently to strategies associated

with:

– Product – Price – Promotion – Channel

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Segmentation is based on factors that vary between groups within a market, but that are consistent within groups.

• Typical segmentation bases for consumer markets include:

– Geographic

• Region, population density

– Demographic

• Age, gender, income, education, household status

– Psychographic

• Values, attitudes, life-style

– Behavioural

• Product usage,

– Occasions/purpose

• Price sensitivity
• Brand loyalty
• Benefits sought

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• Frequently a combination of

methods is used.

The market segmentation process can initially be undertaken using qualitative techniques and managerial judgement

• The segmentation process is as follows:

– Undertake a broad enquiry using exploratory techniques, e.g.

• Analyse internal data
• Use secondary research to identify possible segmentation schemes

proposed by industry analysts or actually in use by competitors.

• Observation to explore behavioural differences between groups, e.g. CSFs
• Use focus groups to explore psychological differences, e.g. values.

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– Identify linkages between these differences and behaviours of interest. – Decide one or more bases upon which to segment – Test the segments’ viability using the questions on the following slide

The following questions can help an

• rganisation test whether an identified segment

is viable:

• Is the segment measurable?
• Do the members of the segment exhibit similar buying preferences

and responses to the marketing mix?

• Can we serve the segment competitively (by targeting our offer to

their requirements), or become competent at serving them in the future?

– Can we develop superiority versus competitors against one or more of this segment’s critical success factors.

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• Is the segment attractive?

– Is it large enough to warrant targeting? – Can a profit be made from this segment? – Is the segment in growth or decline?

• Do we have access to the right

distribution and communication channels to reach this segment?

Now let’s imagine that the Ethical Toy Company is established in the Australian market, and has decided to segment the market for toys and games.

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Set the research

• bjective

Identify a method of segmentation that matches our business strategy & requirements, market trends and managerial judgement Identify information needs

• How do competitors segment the market?
• What are the important market trends?
• What criteria should we use to segment the market?

Identify sources

• f information
• Industry reports
• Competitors’ segmentation
• ABS
• Existing and potential customers

Choose research method

• Secondary research – marketing manager
• In-depth interviews with retailers
• Managerial judgement
• Focus group – market research firm

The Ethical Toy Company’s research has revealed four segments of interest:

• Parents buying for under 12s
• Teenagers influencing purchases for themselves and friends
• Parents buying for primary school birthday parties
• Parents buying for toddlers
• This segmentation uses a combination of demographic (life stage)

and behavioural (product usage / purchase occasion / benefits sought) variables.

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Identifying and evaluating

• pportunities in the market

P

Understanding potential and existing customers

P

Formulating strategies and targets

P

Monitoring performance

P

Successful strategy relies on targeting the most valuable segments of the contestable market with a tailored value proposition that

• utperforms competitors on a few key criteria.

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Segment Prioritisation Tailoring the Customer Value Proposition (CVP)

Segment Prioritisation

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A common decision problem for organisations is understanding which segments of the market they should pursue.

• Because we cannot afford to pursue every segment, we must

prioritise our effort towards those segments that are most attractive and that we can serve most competitively.

• The Directional Policy Matrix (DPM) is used to identify priority

segments and develop strategies for targeting them.

• To use the DPM, the organisation must assess:

– The determinants of segment attractiveness. – The critical success factors used by different segments to make decisions. – The performance of our value proposition against these critical success factors versus the best competitor.

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Segments are plotted on a matrix according to size, attractiveness and the organisation’s competitiveness in serving them.

• A segment’s attractiveness is determined by its performance against key

criteria including:

– Profit – Potential for growth – Strategic alignment – Risk – Entry cost

• An organisation’s competitiveness in serving a segment is assessed by

identifying the critical success factors that the members of that segment use when deciding between competitive offerings, for example:

– Price – Convenience – Brand/reputation – Service

• For each critical success factor the organisation must then assess whether its
• ffering is less competitive, equal to, or more competitive than the best

competitor in the market.

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Market Attractiveness

Low High

Competitiveness

Uncompetitive Parity Competitive

80 85 90 95 100 105 110 115 120

The matrix clearly shows segment priority and assists with identifying strategy.

Segment 1 Segment 2 Segment 3 Segment 4

Segment 3 Segment 1 52 Segment 2 Segment 4

Strategy:

• Grow and protect our

share of segment 3.

• Increase our

competitiveness in serving segments 1 and 4.

Now that it has identified four segments

• f interest, the Ethical Toy Company

wants to use the DPM to understand which are the most valuable.

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Set the research

• bjective

Identify the market segments that we should target Identify information needs

• Which segments are most attractive?
• Which segments can we serve most competitively?

Identify sources

• f information
• Managerial judgement
• Existing and potential customers

Choose research method

• Secondary research – marketing manager
• Customer intercepts – marketing manager

Market Attractiveness

Low High

Competitiveness

Uncompetitive Parity Competitive

80 85 90 95 100 105 110 115 120

Market map

Parents buying for under 12s Teenagers influencing purchases for themselves and friends Parents buying for primary school birthday parties Parents buying for toddlers

Primary school b’day parties Parents buying for under 12s 54 Teenagers Toddlers

DPM results

• Based on the DPM analysis, the Ethical Toy Company decides to

target the following segment:

– Parents buying for under 12s

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Segment validation is best undertaken by a professional market research organisation.

• After the exploratory research has been done, it may be

appropriate to seek expert assistance validating the segments that have been identified using formal research and statistical analysis techniques.

• A qualified market researcher could also:

– Formally investigate segment size, – Conduct a conjoint analysis to understand how CSFs differ across segments of interest, and – Assess how your organisation’s value proposition is placed versus competitors.

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Tailoring the Customer Value Proposition (CVP)

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Target markets make decisions and choose between competitors on the basis of their selection criteria, which are essentially a list of critical success factors (CSFs).

• Customers weigh up an organisation’s value proposition against

that list and assess the ratio of benefits to costs.

• Different segments typically have different CSFs.
• Market research can help an organisation understand what these

critical success factors are, and how it fares on these criteria versus the best competitor.

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• Outperforming competitors on some focused

combination of these critical success factors, supported by a tailored value chain, gives a competitive advantage.

The Ethical Toy company has decided to launch a new product that targets parents buying for under 12s.

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Set the research

• bjective

What are the range of values that parents most want to instil in their children? (To support the design of a new product.) Identify information needs

• Which values are considered most important by

parents. Identify sources

• f information
• Parents of under 12s

Choose research method Focus groups

Results

• The focus group reveals that the values parents are most

interested in are:

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Kindness Perseverance Respect

Finally, the Ethical Toy Company decides to conduct a survey to understand which

• f these options should be incorporated

into their new product development.

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Set the research

• bjective

Choose the value that will be the focus of our next product Identify information needs

• Which of the three values (kindness, perseverance and

respect) is considered the most important by parents? Identify sources

• f information
• Parents of under 12s within our customer database

Choose research method Survey

Conducting in-house surveys can be a useful way to gather information about the market.

• However this method also brings risks associated with the

reliability and interpretation of the data.

• The risks of conducting an online survey in-house can be reduced

by:

– Using a captive sample, e.g.:

• A database of customers
• Staff
• Partners

– Checking that survey respondent composition is representative of the population being sampled – Correcting for any bias in the sample – Generating enough responses to make the sample statistically valid – Deriving key insights via simple cross-tabulations

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The survey implementation process is a natural continuation of the market research planning process.

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Set the research

• bjective

Identify information needs Identify sources of information Choose research method Sampling Gather data Data analysis Interpretation

· Ensure the sample is representative of the population · Pre-test the method. · Administer the process · Correct any biases · Analyse using percentages, averages cross-tabulations · Check results for statistical accuracy. · Interpret findings in the context of the decision problem

Survey design usually occurs in the following sequence:

• Determine question response format
• Develop question wording
• Decide flow and layout
• Develop introduction, conclusion, covering email, reminder email and

prize draw details, including: – Closing date – Details of department authorising the survey

• Pre-test

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Survey design guidelines

• Shorter is better
• Cluster the related content and seek a natural flow
• Ensure question order does not bias subsequent responses
• Keep questions simple and specific
• Ensure questions or statements are unambiguous
• Ask mostly closed-ended questions
• Avoid loaded questions

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• Lead with questions that are clearly

relevant, interesting and non-threatening

• Place demographic and other classification

questions last

Tips for designing response scales

• The options must be mutually exclusive
• There must be a logical sequence to the answer options in a scale –

they must flow in descending or ascending order

• All scales should flow in the same direction
• Where possible, avoid defining answer categories with subjective

words like “sometimes” or “often”

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Survey Monkey capabilities

• Responses can be anonymous, or can be set up to record the

respondent’s email address.

• Surveys can be limited to one response per IP address to prevent

multiple responses.

• Surveys can include quotas against certain responses, preventing a

sample from becoming biased by too many respondents from a particular category.

• People who have already responded to your survey can be excluded

from reminder emails.

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Additional tips

• A single reminder email to those who are yet to respond is an

effective way to increase response rates.

• Expect a response rate of between 5% and 30% depending on level
• f engagement.
• Expect a drop-out rate of around 10% for surveys approaching 35

questions in length.

• Survey Sampling International (SSI) asked the members of their

huge internet panel SurveySpot “what is the ideal survey length?” and received the following feedback:

– 2 to 5 minutes 21% – 6 to 10 minutes 44% – 11 to 15 minutes 21%

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Additional tips cont’d

• Remember that surveys are a communication tool. They should be

consistent with your brand and can be used to build awareness of your organisation’s value proposition – within reason.

• Be aware that offering a prize for survey completion will increase

response rates, but might also skew results or diminish response quality.

• Wherever possible, keep questions consistent from one survey to

the next to allow for the comparison of data.

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Sample size

• Use the following table to calculate the number of respondents

required at margins of error of ±3%, ±5%, ±10%.

• As a general rule, aim for 100 respondents in each major subgroup

to be analysed.

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Population Size

+/-3% +/-5% +/-10%

500 345 220 80 1,000 525 285 90 3,000 810 350 100 5,000 910 370 100 10,000 1,000 400 100 100,000 1,100 400 100 1,000,000 1,100 400 100 10,000,000 1,100 400 100

Data Analysis

• Cross-tabulation can be performed using pivot tables in Excel.
• Look for differences in the data, e.g. are people in Group A more

likely to feel strongly about a product attribute than people in Group B.

• Assess which apparent differences in the data are real, and which

are not.

• An apparent difference is accepted as a real difference if

statistical analysis reveals that it would arise by chance in fewer than 5 out of 100 cases.

• These statistical analyses can be performed in programs such as

SPSS or SAS.

• It is recommended that these be outsourced to a professional

researcher, an academic or a Ph.D student.

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A qualified researcher can perform the following tests when analysing data:

• Z‐Test

– To determine if the proportions of a variable in two independent samples are significantly different.

• T‐Test

– To determine if the means of a variable in two independent or two dependent samples are significantly different.

• Chi Square

– To determine if two variables are related by more than chance alone.

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The Ethical Toy Company’s survey reveals that the value parents most want to instil in their children is “kindness”.

• This information is used to inspire the company’s latest family

game, Play it Forward.

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This card uses 70% recycled paper and 50% of our profits are donated to the protection and restoration of the natural world. For more details, please drop in and say hi at www.ethicaltoycompany.com.au

Play it Forward

Get to know someone new & then choose a packet of seeds just for them.

Here at the Ethical Toy Company we’re all about growing the common good. We exist to provide ethical toys and games that are simply awesome for children, families, society and our planet.

Creative nature

• We nurture and emulate the creative power
• f nature.

Liberation

• Our products explore young people’s

possibilities, and reject stereotypes. “Virtuousity”

• Our products celebrate and reinforce the

diverse array of human virtues.

Our decisions are guided by the following values:

This challenge is best for: Big people Small people

 

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Identifying and evaluating

• pportunities in the market

P

Understanding potential and existing customers

P

Setting strategies and targets

P

Monitoring performance

P

Market research can assist with populating

• rganisational scorecards that are used to

monitor performance.

• A typical scorecard is provided below:

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Factor Metric 2013 2015 2018 Financial Profit Revenue Customer Net Promoter Score (NPS) Outcomes (customer survey) Growth Market share Growth of category Process Waste Culture Internal NPS

Target setting and monitoring performance

• ften requires market research techniques.
• If we have an understanding of market size, and market share,

setting targets becomes a more rational process than when it is done in the absence of information.

• One measure that is particularly well-suited to in-house market

research is the Net Promoter Score (NPS).

• NPS can be used externally to monitor customer or partner

satisfaction, and internally to monitor staff satisfaction.

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• NPS is a very effective measure to set

targets against as it is easy to track and is highly correlated with organisational growth.

• More information is provided overleaf.

The Net Promoter Score (NPS) can be useful in determining satisfaction levels, which relate loyalty and to reputation.

• NPS is based on the fundamental perspective that every company's

customers can be divided into three categories: Promoters, Passives, and

• Detractors. By asking one simple question — How likely is it that you

would recommend [Company X] to a friend or colleague? — you can track these groups and get a clear measure of your company's performance through your customers' eyes. Customers respond on a 0-to-10 point rating scale and are categorized as follows:

– Promoters (score 9-10) are loyal enthusiasts who will keep buying and refer

• thers, fuelling growth.

– Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive offerings. – Detractors (score 0-6) are unhappy customers who can damage your brand and impede growth through negative word-of-mouth.

• To calculate your company's Net Promoter Score, subtract the percentage
• f customers who are Detractors from the percentage who are Promoters.
• Companies with a better ratio of Promoters to Detractors tend to grow

more rapidly than competitors.

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Play it Forward NPS Results

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Category Score Tally Total by category % Detractors 1 2 3 4 5 6 Passives 7 8 Promoters 9 10 TOTAL

NPS =

Thank you.

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www.pollenstrategy.com.au