The Market Research Process: New Product Development Patterns of Entrepreneurship Analytical Tools

New Product Development Process Business Strategy Idea generation Product/service development Idea screening and evaluation Product/service testing Business analysis Market entry The first part of this presentation concentrates on Idea Screening and Evaluation and Product/Service Development

Market Research Process Define problem and research objectives Develop research plan Collect Information Analyze Information Present Findings

Scoping Out Research Plan

Research Tool Kit Primary Research: Investigating the “original source” of data, interviewing customers/prospects Focus groups: gathering of 6-10 pre-selected respondents to discuss product or service; candid discussions encouraged; sample is too small to be projected; objective is exploratory Survey Research: Usually randomly selected (with parameters) sample to project to larger population in question; survey can contain open-ended and closed-ended questions; objective to learn perceptions, satisfaction levels, etc. Primary Research: Continued Experimental Research:Most scientifically valid; If you can develop a version of your product/service, select different groups of subjects, control for external variables and note differences. Comparable to a “test run” before product/service enters market.

Secondary Research Resources Secondary Research: Investigating research findings already written Sources - Government Publications Statistical Abstract of US (demographics, economics and social data) County and City Data Book (relevant stats broken down by county and city) U.S. Industrial Outlook (projections of industrial activity by industry including production, sales, shipments, etc.) Other government publications like Census of Population, Federal Reserve Bulletin, Survey of Current Business More Sources - Periodicals Standard and Poor’s Industry Surveys (provide updated stats and analyses of industries) Moody’s Manuals (financial data and names of executives) Marketing journals like Journal of Marketing, Journal of Marketing Research, Journal of Consumer Research Trade Magazines including Direct, BrandWeek, Sales and Marketing Management Business Magazines like Harvard Business Review and The Economist

Secondary Research Resources Quantitative Sources - Commercial Data A.C Nielsen Company Data (Data on products sold in retail, supermarket scanner, television and others) MRCA Information Services (Data on weekly family purchases of consumer products) Simmons Market Research Bureau (Annual reports covering verticals by demographics and brand preferences) Research Houses Sell data to subscribers useful to construct models for forecasting demand Audit Bureau of Circulation Arbitron Audits and Surveys Dun and Bradstreet National Family Opinion Standard Rate and Data Service

Statistical Tools Unlikely you will use most of these techniques; list presented below for your general knowledge Other modules on Wiley web site (companion site) offer interactive exercises Statistical tools: Multiple Regression: Estimating “best fitting” equation showing how value of dependent variable varies with changing values in number of independent variables Example: Estimate how unit sales are influenced by ad expenditures, price and competitors moves Discriminant Analysis: Classifying persons into two or more categories Example: Reveal variables that discriminate between loyal and non-loyal customers Conjoint Analysis: Ranking of preferences for different offers to identify relative importance of attributes to customers Example: Identify most important attributes (price, warranty, service and brand) and tradeoffs involved for end-users of a laptop computer manufacturer

Statistical Tools (Cont’d) Cluster Analysis: Separate data into specified number of mutually exclusive groups such that groups are homogeneous on chosen factors Example: Create five different types of technology consumers based upon purchasing behavior and recency of purchase relative to product release date; categories may be “earlier adopters,” or “laggards” etc. Multidimensional Scaling: Produce “perceptual maps” of competitive products or brands to measure how they stack up among each other Example: Find out how a particular brand is perceived versus other brands on “trust,” “reliability,” and “quality”

Assessing Market Demand Forecasting demand crucial for determining potential of new business idea Market demand function depends on external factors like industry marketing expenditures, demographics or economic conditions Market potential is the limit approached by market demand as industry marketing expenditures are maximized for a given economic environment (prosperity, recession) Note: Market potential is conditional to its economic environment Total market potential is the maximum amount of sales available to all firms in an industry during a given period. Q = nqp where: Q = total market potential n = number of buyers for product under given assumptions q = quantity purchased by average buyer p = price of an average unit n is often difficult to estimate; one technique is to start with population and sequentially remove segments outside of product’s market

Assessing Market Demand (Cont’d) Another method for calculating total market potential: chain-ratio Multiplying base number by several adjusting percentages Example: TMP for hair shampoo for dry hair for men Population x .5 (percentage of males) x personal discretionary income per capita x average percentage of discretionary income spent on personal products for men x average percentage of amount spent on personal products that is spent on hair shampoo x expected percentage of amount spent on shampoo that will be spent on shampoo for dry hair Some of the above data are available in the secondary sources listed in an earlier slide Sum of competitors’ sales Industry trade association will often collect and publish total industry sales More expensive option if needed: data research house like A.C. Nielsen

New Product Development Process Business Strategy Idea generation Product/service development Idea screening and evaluation Product/service testing Business analysis Market entry The second part of this presentation concentrates on Market Entry, including the 4 Ps.

Expansion Strategies Expansion opportunities – there are four basic strategies: Sell more existing products to existing customers (market penetration) Sell existing products to new customers (market development) Sell new products to existing customers (product development) Sell new products to new customers (diversification)

Types of Marketing Options by Four P’s

ALTERNATIVE MARKETING CHANNELS Marketing plan should specify where in supply chain business is marketing. Which of the above is the customer?

Channel design decisions and decision criteria Identification of channel alternatives Evaluation and selection of channel(s) to be used Selection participants Design stages Decision criteria Intensity of distribution Access to end-user Prevailing distribution practices Necessary activities and functions Revenue-cost analysis Time horizon for development Control considerations Legal constraints Channel availability Market coverage Capability Intermediary’s needs Functions provided Availability

PROMOTION MIX TOOLS Advertising Personal selling Print ads In-person sales Broadcast ads presentations Billboard ads Telemarketing Packaging logos and information The promotion mix Sales promotion Publicity Games, contests Print media Free samples news stories Trade shows Broadcast media Couponing news stories Trading stamps Annual reports Price promotion Speeches by Signs and displays employees

PROMOTION TOOL’S STRENGTHS AND WEAKNESSES Low Very low high Poor to good Good Moderate good Poor to None Low to moderate High to high Advertising Sales promotion Publicity Personal selling Criteria Cost per Audience member Confined to target markets Deliver a Complicated message Interchange with audiences Credibility

ADVANTAGES AND DISADVANTAGES OF MAJOR ADVERTISING MEDIA

ADVANTAGES AND DISADVANTAGES OF MAJOR MEDIA (continued)