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In-house Market Research


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How to conduct effective research linked to your business strategy

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In-house Market Research

  1. 1. In-house Market ResearchHow to conduct effective research linked to your business strategy
  2. 2. About market Linking market Case study research research to business strategy 2
  3. 3. About market Linking market Case study research research to business strategy 3
  4. 4. Market research is gathering informationabout customers, or markets. • Good information is a tool that can be used to support business decisions. 4
  5. 5. Market research can help businesses makedecisions associated with:Identifying and evaluatingopportunities in the market PUnderstanding potential andexisting customers PSetting strategies andtargets PMonitoring performance P 5
  6. 6. There are two main categories of market research.• Secondary • Primary – Information that – Information gathered first-hand already exists from the source 6
  7. 7. Secondary data is available from a varietyof 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 7
  8. 8. Primary data is gathered directly from themarket to address an organisation’s specificneeds.• Sources of primary data include: – In-depth interviews – Field visits • Observation • Customer intercepts – Focus groups – Surveys 8
  9. 9. Market research may be exploratory orconfirmatory. Exploratory Confirmatory Generating options Selecting the best option (Tends to be more qualitative) (Tends to be more quantitative) 9
  10. 10. As with decision-making, the exploratoryphase precedes the confirmatory phase. Exploratory Confirmatory Scan environment Generate options Select option Evaluate outcomes • Secondary • In-depth • Surveys • Surveys research interviews • Secondary • Focus groups research BUSINESS DECISION CYCLE 10
  11. 11. About market Linking market Case study research research to business strategy 11
  12. 12. Good market research should help anorganisation fulfil its purpose, or reason forexistence. 12
  13. 13. All organisations (regardless of whether they are for-profit or not-for-profit) exist to create value by producingsomething that the market wants or needs. Value = Benefits - Costs 13
  14. 14. Organisations strive to produce value byoperating their value chain. Value = Benefits - Costs• Organisations succeed by making a winning offer to valuable segments of the contestable market. 14
  15. 15. In the for-profit sector, the value that the organisationcreates is split between customers and shareholders.• 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. 15
  16. 16. Shareholder capitalism fails to recognise thatorganisations are embedded in and depend upon amassively complex system that is far more than just theeconomy.• Any strategy that weakens the total system is bad strategy. 16
  17. 17. The great opportunity of our time is to recalibrate business as a total system contributor. Environment Society EconomyTo achieve this, businesses must reimagine themselves as vehicles fordelivering true social and environmental value, in addition to customer value.In other words, businesses must identify their transcendent purpose.
  18. 18. Businesses with a transcendent purpose tend tolook something like this:
  19. 19. Market research cannot help yourorganisation find its transcendent purpose• Market research is not useful when conceiving an idea’s soul.• But it CAN help good organisations succeed. 19
  20. 20. Organisations that succeed over the longer termtend to excel in the following areas: Measures of Performance Vision Value proposition Value chain Culture Purpose 20
  21. 21. Market research can help organisations makedecisions associated with most of these factors. Measures of Performance Vision P P Value proposition P P P P Value chain Culture Purpose O 21
  22. 22. About market Linking market Case study research research to business strategy 22
  23. 23. The Ethical Toy Company is anorganisation with a transcendentpurpose.• The Ethical Toy Company exists to: Provide ethical toys and games that are simply awesome for children, families, society and our planet.• 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 23
  24. 24. Its values form the basis of itsculture. • Creative nature – We nurture and emulate the creative power of 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. 24
  25. 25. Like its purpose, The Ethical ToyCompany’s vision focuses on “systemlevel” value creation.• Long-term vision: Through our success, for “growing the common good” to become the common goal of toy and game companies world-wide. 25
  26. 26. The different components of the strategy fit together and reinforce each other. Sharing our wisdom Ethical, efficient value chain Nurturing & Irresistiblecreative culture offer & brand 26
  27. 27. Market research will help the company set its targets, achieve its goals and monitor its Internal & performance. partner surveys Benchmarking / secondary research Sharing our wisdom Ethical, efficient value chain Benchmarking / secondary Market & research customer research Nurturing & Irresistiblecreative culture offer & brandCulture surveys 27
  28. 28. The Ethical Toy Company’sstrategy is reflected in itsscorecard. Factor Metric 2013 2015 2018 $ invested in growingFinancial common good (50% of profit)Customer NPS Outcomes (customer Need a direct line to customers survey)Growth Market share Growth of categoryProcess WasteCulture Internal NPSTransparency Internal survey Partner survey 28
  29. 29. Today we will focus mostly on market research associated with delivering a winning offer to valuable segments of the market. Sharing our wisdom Ethical, efficient value chain Market & customer research Nurturing & Irresistiblecreative culture offer & brand 29
  30. 30. The market research planning process always begins withidentifying and articulating the underlying decisionproblem. Set the research Identify Identify sources of Choose research objective information needs information method Identify the decision What information do we How do we get the What research problem need? information? techniques? · Why are we · What is relevant? · Can we find the · One research conducting this · How much do we people we seek? technique or several? research? need? · Do we have the skills · Qualitative, · What are the · How accurate must to collect and quantitative or some questions we want the information be? analyse the combination? answered? information internally?• Market research techniques should be selected to match the research objective and the information needs. 30
  31. 31. When setting your market research objective, start with aglobal objective stated in one or two sentences, and thenexpand 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? – 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? 31
  32. 32. Identifying and evaluatingopportunities in the market PUnderstanding potential andexisting customers PSetting strategies and targets PMonitoring performance P 32
  33. 33. Let’s imagine that the CEO andmarketing manager at the Ethical ToyCompany are deciding whether to launchin the Australian market.Set the research Understand the size and structure of the Australian toysobjective and games market • What is the value of the market for toys and games?Identify • Is the market in growth or decline?information • What are the main categories and what is their share?needs • Which channels are the most important? • What are the key trends?Identify sources • Industry reports Set the research Identify Identify sources of Choose research objective information needs information methodof information • Journal articles Identify the decision What information do we How do we get the What research problem need? information? techniques? · Why are we · What is relevant? · Can we find the · One research conducting this · How much do we people we seek? technique or several?Choose research · research? What are the · need? How accurate must · Do we have the skills to collect and · Qualitative, quantitative or some Secondary research questions we want answered? the information be? analyse the information combination?method internally? 33
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  38. 38. Reports available for purchase 38
  39. 39. Identifying and evaluatingopportunities in the market PUnderstanding potential andexisting customers PSetting strategies and targets PMonitoring performance P 39
  40. 40. Market segmentation 40
  41. 41. Market segmentation is the selection of groupswho will be most receptive to our existing orpotential 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 41
  42. 42. Segmentation is based on factors that varybetween groups within a market, but that areconsistent 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• Frequently a combination of methods is used. 42
  43. 43. The market segmentation process can initiallybe undertaken using qualitative techniques andmanagerial 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. – 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 43
  44. 44. The following questions can help anorganisation test whether an identified segmentis 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.• 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? 44
  45. 45. Now let’s imagine that the Ethical ToyCompany is established in the Australianmarket, and has decided to segment themarket for toys and games. Identify a method of segmentation that matches ourSet the research business strategy & requirements, market trends andobjective managerial judgementIdentify • How do competitors segment the market?information • What are the important market trends?needs • What criteria should we use to segment the market? • Industry reportsIdentify sources • Competitors’ segmentationof information • ABS • Existing and potential customers • Secondary research – marketing managerChoose research • In-depth interviews with retailersmethod • Managerial judgement • Focus group – market research firm 45
  46. 46. The Ethical Toy Company’s research hasrevealed 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. 46
  47. 47. Identifying and evaluatingopportunities in the market PUnderstanding potential andexisting customers PFormulating strategies andtargets PMonitoring performance P 47
  48. 48. Successful strategy relies on targeting the most valuable segments of the contestable market with a tailored value proposition thatoutperforms competitors on a few key criteria. Segment Tailoring the Prioritisation Customer Value Proposition (CVP) 48
  49. 49. Segment Prioritisation 49
  50. 50. A common decision problem for organisations isunderstanding which segments of the market theyshould 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. 50
  51. 51. Segments are plotted on a matrix according tosize, attractiveness and the organisation’scompetitiveness 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 offering is less competitive, equal to, or more competitive than the best competitor in the market. 51
  52. 52. The matrix clearly shows segment priorityand assists with identifying strategy. Segment 1 Segment 2 High Segment 1 Segment 3Market Attractiveness Segment 3 Segment 4 Segment 4 Strategy: Segment 2 • Grow and protect our Low share of segment 3. • Increase our competitiveness in serving segments 1 and 4. 80 85 90 95 100 105 110 115 120 Uncompetitive Parity Competitive Competitiveness 52
  53. 53. Now that it has identified four segmentsof interest, the Ethical Toy Companywants to use the DPM to understandwhich are the most valuable.Set the research Identify the market segments that we should targetobjectiveIdentify • Which segments are most attractive?information • Which segments can we serve most competitively?needsIdentify sources • Managerial judgementof information • Existing and potential customers • Secondary research – marketing managerChoose research • Customer intercepts – marketing managermethod 53
  54. 54. Market map Parents buying for under 12s Teenagers influencing purchases for themselves and friends High Parents buying for under 12s Parents buying for primary school birthday partiesMarket Attractiveness Parents buying for toddlers Toddlers Primary school b’day parties Teenagers Low 80 85 90 95 100 105 110 115 120 Uncompetitive Parity Competitive Competitiveness 54
  55. 55. DPM results• Based on the DPM analysis, the Ethical Toy Company decides to target the following segment: – Parents buying for under 12s 55
  56. 56. Segment validation is best undertaken by aprofessional 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. 56
  57. 57. Tailoring the CustomerValue Proposition (CVP) 57
  58. 58. Target markets make decisions and choose betweencompetitors on the basis of their selection criteria, whichare 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.• Outperforming competitors on some focused combination of these critical success factors, supported by a tailored value chain, gives a competitive advantage. 58
  59. 59. The Ethical Toy company has decided tolaunch a new product that targetsparents buying for under 12s. What are the range of values that parents most want toSet the research instil in their children? (To support the design of a newobjective product.)Identify • Which values are considered most important byinformation parents.needsIdentify sources • Parents of under 12sof informationChoose research Focus groupsmethod 59
  60. 60. Results• The focus group reveals that the values parents are most interested in are: Kindness Perseverance Respect 60
  61. 61. Finally, the Ethical Toy Company decidesto conduct a survey to understand whichof these options should be incorporatedinto their new product development.Set the research Choose the value that will be the focus of our nextobjective productIdentify • Which of the three values (kindness, perseverance andinformation respect) is considered the most important by parents?needsIdentify sources • Parents of under 12s within our customer databaseof informationChoose research Surveymethod 61
  62. 62. Conducting in-house surveys can be a useful wayto 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 62
  63. 63. The survey implementation process is a naturalcontinuation of the market research planningprocess. Set the research Identify information Identify sources of Choose research objective needs information method Sampling Gather data Data analysis Interpretation · Ensure the sample is · Pre-test the method. · Correct any biases · Check results for representative of the · Administer the process · Analyse using statistical accuracy. population percentages, averages · Interpret findings in the cross-tabulations context of the decision problem 63
  64. 64. Survey design usually occurs in thefollowing 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 64
  65. 65. 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• Lead with questions that are clearly relevant, interesting and non-threatening• Place demographic and other classification questions last 65
  66. 66. 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” 66
  67. 67. 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. 67
  68. 68. 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 of 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% 68
  69. 69. 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. 69
  70. 70. Sample size• Use the following table to calculate the number of respondents required at margins of error of ±3%, ±5%, ±10%.Population Size +/-3% +/-5% +/-10%500 345 220 801,000 525 285 903,000 810 350 1005,000 910 370 10010,000 1,000 400 100100,000 1,100 400 1001,000,000 1,100 400 10010,000,000 1,100 400 100• As a general rule, aim for 100 respondents in each major subgroup to be analysed. 70
  71. 71. 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. 71
  72. 72. A qualified researcher can perform thefollowing 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. 72
  73. 73. The Ethical Toy Company’s survey reveals thatthe value parents most want to instil in theirchildren is “kindness”.• This information is used to inspire the company’s latest family game, Play it Forward. 73
  74. 74. Here at the Ethical Toy Company we’re all about Play it Forward growing the common good. We exist to provide ethical toys and games that are simply awesome for children, families, society and our planet. Our decisions are guided by the following values:Get to know someonenew & then choose a Creative nature • We nurture and emulate the creative power packet of seeds just of nature. for them. Liberation • Our products explore young people’s possibilities, and reject stereotypes. “Virtuousity” • Our products celebrate and reinforce the diverse array of human virtues. This challenge is best for:   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, Small people Big people please drop in and say hi at
  75. 75. Identifying and evaluatingopportunities in the market PUnderstanding potential andexisting customers PSetting strategies and targets PMonitoring performance P 75
  76. 76. Market research can assist with populatingorganisational scorecards that are used tomonitor performance.• A typical scorecard is provided below: Factor Metric 2013 2015 2018Financial Profit RevenueCustomer Net Promoter Score (NPS) Outcomes (customer survey)Growth Market share Growth of categoryProcess WasteCulture Internal NPS 76
  77. 77. Target setting and monitoring performanceoften 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.• 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. 77
  78. 78. The Net Promoter Score (NPS) can be useful indetermining satisfaction levels, which relateloyalty and to reputation.• NPS is based on the fundamental perspective that every companys 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 companys 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 others, 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 companys Net Promoter Score, subtract the percentage of 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. 78
  79. 79. Play it Forward NPS Results Total byCategory Score Tally % category 0 1 2Detractors 3 4 5 6 7Passives 8 9Promoters 10TOTAL NPS = 79
  80. 80. Thank you. 80
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