P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 1

P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 1

CHAPTER OUTLINE The role of market research Conducting market research Developing a strategy Developing a business model P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 2

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WHY DO MARKET RESEARCH? To find out 1. Is the business concept viable from a market perspective? 2. What are the major risks and information gaps in this venture, and what information is needed to characterize and minimize these risks? 3. Will the business model and entry strategy succeed? Getty Images P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 4

MARKETING RESEARCH DEFINED The systematic and objective process of generating information for aid in making marketing decisions P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 5

Marketing Research Types Basic research Applied research P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 6

BASIC RESEARCH Attempts to expand the limits of knowledge Not directly involved in the solution to a pragmatic problem P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 7

BASIC RESEARCH EXAMPLE How to improve the effectiveness of information system? How to integrate technology into the overall strategy objective of the company? P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 8

APPLIED RESEARCH Conducted when a decision must be made about a specific real-life problem P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 9

APPLIED RESEARCH EXAMPLE Should McDonalds add Italian pasta dinners to its menu? Marketing research told McDonald s it should not Should Procter & Gamble add a high-priced home teeth bleaching kit to its product line? Research showed Crest Whitestrips would sell well at a retail price of $44 P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 10

SCIENTIFIC METHOD The analysis and interpretation of empirical evidence (facts from observation or experimentation) to confirm or disprove prior conceptions P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 11

USING MARKETING RESEARCH We can use Marketing Research to: Identify & Evaluate Opportunities Analyze Market Segments Select Target Markets Plan & Implement Marketing Mixes Analyze Marketing Performance Performance Monitoring Research P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 12

DETERMINING WHEN TO CONDUCT MARKETING RESEARCH Time Constraints Availability of Data Nature of the Decision Benefits vs. Costs Is sufficient time available? Yes Information already on hand inadequate? Yes Is the decision of strategic or tactical importance? Yes Does the information value exceed the research cost? Yes Conduct Marketing Research No No No No Do Not Conduct Marketing Research P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 13

WHAT INFORMATION ARE ENTREPRENEURS MISSING? Research has identified four areas where entrepreneurial information is typically incomplete: 1. Risk in the form of financial return to investors 2. Complexity -- the number of inputs with which a business must deal 3. Ignorance -- what the entrepreneur doesn t know that he doesn t know 4. Indeterminism not knowing how an entrepreneur s actions will affect the outcome P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 14

CHARACTERIZING THE TARGET MARKET WHO IS YOUR CUSTOMER? Getty Images P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 15

CHARACTERIZING THE TARGET MARKET The customer or target market is that segment of the marketplace that will most likely purchase the product or service. The target customer is not always the end-user of the product or service. The target customer could be a manufacturer producing a product that is sold to a distributor, who in turn sells to the end-user -- the consumer perhaps, or another business. P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 16

SEGMENTING THE TARGET MARKET By geographic area WHERE DO THEY LIVE? (area and region) By psychographics WHAT IS THEIR LIFESTYLE, VALUES, PERSONALITY TRAITS and MOTIVES? By demographics WHAT IS THEIR AGE, NATIONA L ORIGIN, SOCIAL CLASS and GENDER? P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 17

KEY QUESTIONS OF MARKET RESEARCH Who is your primary customer? What products/services do they typically buy? How did they hear about it? How do they like to buy this type of product/service? How often do they buy? How can we (our business) best meet the customer s needs? P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 18

Make your product easier to buy than your competition, or you will find your customers buying from them, not you. -Mark Cuban Owner of the Dallas Mavericks Chairman of HDNet and 2929 Entertainment P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 19

ENTREPRENEURIAL MARKET RESEARCH PROCESS The market research process for entrepreneurs differs in four fundamental ways from the research undertaken by large companies: 1. entrepreneurs questions about the market are generally broader and more exploratory in nature; 2. entrepreneurs have fewer resources to work with; 3. they are usually on a short time frame; and 4. they typically have limited experience with their customer. Seiger, A. (June 18, 2004). Note on Market Research, Stanford Graduate School of Business Case E-165. P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 20

SIX-STEP MARKET RESEARCH PROCESS 1. Design some business prototypes 2. Assess and prioritize information needs, key assumptions, and unknowns based on the prototype designs 3. Conduct interviews with opinion leaders and experts in the industry and market 4. Prepare for market research 5. Conduct field analysis or primary research with the customer 6. Organize, analyze, modify, and conduct further research P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 21

1. DESIGN SOME BUSINESS PROTOTYPES The business concept describes... the customer, the value proposition, the product or service being offered, the channel through which the benefit will be delivered. P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 22

2. ASSESS AND PRIORITIZE INFORMATION NEEDS An ideal market should have the following characteristics: Over RM100 million and growing 30-35 percent growth rates Gross margins of 40-50 percent or more Relatively low start-up requirements Allows for break-even in two years or less P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 23

ASSUMPTIONS AND UNKNOWNS What assumptions are we making about the... Product/service Industry/market Customers Competitors Business we hope to start We need to find proof that these assumptions are realistic. What information do we need to test these assumptions? Where can we find this information?...how can we get it? MAKE A LIST OF THE INFORMATION YOU NEED, AND WHERE YOU WILL GO TO OBTAIN IT. P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 24

3. CONDUCT INTERVIEWS WITH OPINION LEADERS AND INDUSTRY/MARKET EXPERTS Talk with people in the industry who understand the value chain, the markets and the customers. Getty Images P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 25

4. PREPARE FOR MARKET RESEARCH The following questions help to uncover the underlying rationale for the research. What are you trying to achieve? Who do you want (or need) to convince? What do you need to know in order to make a compelling case for sufficient market demand? P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 26

SECONDARY SOURCES OF CUSTOMER DATA Chambers of commerce. Information on the community in general as well as businesses. Small Business Administration. Broad-based information and services for small businesses. Small Business Development Centers. Branches of the Small Business Administration that contain a wealth of information and services for small businesses. P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 27

SECONDARY SOURCES OF CUSTOMER DATA Trade associations. Typically keep statistics on their members and their industries. Some of this information may be available to the public. Trade journals. What is happening in an industry: trends, problems, opportunities, and sources of information. Government Printing Office. The federal government provides free of charge pamphlets and documents on just about anything a business owner might want to know. P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 28

MORE ACTIVE SOURCES OF CUSTOMER DATA Trade shows. Attending trade shows in your industry is an excellent way to learn who the competition is and to see what the latest trends in the industry and your specific market are. Competitors. Competitors can be a great source of information. Become one of their customers and study their strategies and how they deal with their customers. Who are their customers? What can you provide the customer that they are not providing? P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 29

5. CONDUCT FIELD ANALYSIS OR PRIMARY RESEARCH Surveys Structured Interviews Focus Groups Choice Modeling and Concept Testing Choosing the Sample P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 30

5. CONDUCT FIELD ANALYSIS OR PRIMARY RESEARCH WITH THE CUSTOMER Data the entrepreneur collects through observation and talking with people = primary research Exploratory vs Confirmatory methods Focus Groups Presentations, experiential demonstrations, discussions Videotaped opinions and feedback Interviews Structured vs open-ended Face-to-Face and Phone Surveys (questionnaires) Mail On-line Phone P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 31

PICKING YOUR CUSTOMER SAMPLES Stratified Samples Based on geography Based on psychographics Based on demographics Convenience Samples Random Samples P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 32

SURVEY QUESTIONS Keep the questionnaire short Keep your questions neutral...no leading or bias Ask easy questions first...lead up to complex ones Ask demographic questions last When you ask sensitive questions, or when people hesitate...give them a range to pick from Your income level (in thousands) is... $20-$40, $40-60, $60-80, or $80+ P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 33

SURVEY WORRIES Respondents may increase their income by one level and decrease their age by one level (they distort or lie) Respondents may tell you what they think you want to hear, rather than what they really feel, or what they really intend to do...sure, I d buy X! Possible low response rates (less than 10%) on mail and on-line surveys make the data suspect On-line surveys may not represent a normal sample of people Mail surveys can t tap non-verbal communication messages or clarify ambiguous questions Phone surveys can clarify issues or questions, tap non-verbal feelings better, and gain higher response rates, but have to be short, are more costly, and are prone to surveyor bias. P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 34

6. ORGANIZE, ANALYZE, MODIFY, AND CONDUCT FURTHER RESEARCH Data when organized Becomes information which when analyzed Becomes intelligence P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 35

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WHAT TOWN IS THIS? P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 37

Franchise gives an individual an agreement to market a company s product in return for a percentage (royalty) of the profits. Semi-independent business. The company is the franchiser and the individual is the franchisee. The 1 st franchise operation was started by Singer Company in 1851 to sell sewing machines. In the last 40 years, franchising has really taken off, led by Ray Kroc of McDonald s. Today we have franchising for everything from hemorrhoid clinics [ You bend, we mend ] to auto clinics. A typical large city in the U.S. will have its share of Burger Kings, Foto-Mat, KFCs, Goodyear, Taco Bell, Pizza Hut, Dunkin Donuts, and others. There are 3,000 franchises in 670 industries, with 600,000 outlets. The franchiser will train your personnel, take care of marketing and accounting. The franchisee receives a tried-and-tested business method. P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 38

Advantages of Franchises A Benefits of a well known trade name, systemized management, and national advertisement. B Less than 5% fail each year (65% of all independently owned businesses fail within the first 5 years). C Chance to own your own business with minimum risk. Disadvantages of Franchises A May be too many restrictions imposed so independence is sacrificed. B Takes a lot of money for start-up C May lose your investment if the company goes bankrupt. Some franchises such as pizza, video rentals, frozen yogurt, instant printing, & tanning parlors will not make it because they are either too competitive or too unhealthy. P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 39

Cooperatives voluntary association of people formed to carry on some kind of economic activity benefiting members. Different Types of Cooperatives: 1. Producer Coop group of farmers who join to get better prices for their goods. They eliminate the middle-man charges. 2. Housing Coop formed by members to buy the building they live in. 3. Purchasing Coop retail store owned and operated by its customers. 4. Credit Union members pool their savings so they can borrow from it at lower rates (the most common form of coop) 5. Service Coop provides service to its members (electrical or telephone) 6. Baby-Sitting Coop families swap baby-sitting duties without ever exchanging money. P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 40

Nonprofit Organizations provides products without making a profit. Churches are the most common. (Boy Scouts, Y.M.C.A., Salvation Army, & Goodwill) P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 41

E-COMMERCE BUSINESS MODELS 1. Transaction fee model companies charge a fee for goods or services. 2. Advertising support model advertisers pay the site operator to gain access to the demographic group that visits the operator s site. 3. Intermediary model a web site brings buyers and sellers together and charges a commission for each sale. P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 42

MORE E-COMMERCE BUSINESS MODELS 4. Affiliate model sites pay commissions to other sites to drive business to their own sites. 5. Subscription model The website charges a monthly or annual fee for site visits or access to site content. P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 43

SIDE STREET EFFECTS When entrepreneurs start their enterprises and then let the market decide whether it likes their ideas. Unexpected opportunities may appear, so you must be prepared to act quickly and effectively on any opportunity that presents itself. P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 44

CLASS EXERCISE Suppose you want to start a new business in a particular field. What factors and what areas you would you research? How you would proceed? Getty Images P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 45

THANK YOU P R E P A R E D B Y : I N T A N N A Z U H A B T A B D U L L A H 46