Marketing Research for Entrepreneurs

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Market Research: The Key to Defining Your Focus

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Market information known to you.

Own Costs Competition Market Demand Market Price

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Market information unknown to you.

Consumer Response The Incumbent’s Reaction to your offering The Emergence of New Competitors The Economy Random Factors

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I believe there are four key steps for successful marketing:

• Understanding the customer • Making value for your customer • Communicating your value to your target market • Making it easy for the customer to buy. JERRY R. MITCHELL 5

What is marketing research? . According to the American Marketing Association, marketing research is the systematic gathering, recording, and analyzing of data about problems relating to the marketing of goods and services.

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Every small business owner-manager must ask the following questions to devise effective marketing strategies: JERRY R. MITCHELL 7

     Who are my customers and potential customers? What kind of people are they? Where do they live? Can and will they buy? Am I offering the kinds of goods or services they want - at the best place, at the best time and in the right amounts? JERRY R. MITCHELL 8

 Are my prices consistent with what buyers view as the product's value?    Are my promotional programs working? What do customers think of my business? How does my business compare with my competitors? JERRY R. MITCHELL 9

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What is the purpose of marketing research?

• Marketing research focuses and organizes marketing information. It ensures that such information is timely and permits entrepreneurs to: JERRY R. MITCHELL 10

    Reduce business risks Spot current and upcoming problems in the current market Identify sales opportunities Develop plans of action JERRY R. MITCHELL 11

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What are some common misconceptions about marketing research?

• Many entrepreneurs think that marketing research should only be done by a small business when they are making a profit. JERRY R. MITCHELL 12

• Sometimes managers believe that unless research provides a complete description of a situation it is of no value. JERRY R. MITCHELL 13

• The misconception that marketing research requires big dollars keeps many entrepreneurs from doing research.. Marketing research can be done at many different levels both big and small. Many research projects can and are being done for $1000 or less.

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• Another misconception is that you can not do research unless you are a sophisticated researcher. You don't need an MBA. in marketing or statistics to do marketing research. Marketing research is mostly just hard work. Consult a good marketing consultant for advice and dig in and do it.

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Is marketing research worth the expense?

• A recent survey of small business managers revealed that 84 percent of those having conducted formal marketing research projects in the past three years felt that the information obtained was worth the money spent JERRY R. MITCHELL 16

• Overall, 65 percent said that they were able to incorporate the research findings into their decision making process. Only 7 percent reported that they were not able to implement the results JERRY R. MITCHELL 17

• Consequently, I believe that when small businesses do engage in marketing research the benefits usually exceeds the costs. JERRY R. MITCHELL 18

How large should your marketing research budget be?

• As a rule companies have marketing research budgets that range anywhere from .02 to 1 percent of company sales. Many companies spend 50 percent or more of the marketing research budget buying research from consulting firms. For new companies they must learn to do most of it themselves.

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What topics do small business managers and entrepreneurs address through marketing research studies?

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• What is your target market?

• How big is it? • Who buys your product? • Why do they need it? • Who pays for it? • Who uses it? JERRY R. MITCHELL 21

• How do the users fix the business problem you're addressing today?

• How much are they willing to pay? • Why would they buy from you? • What business problems are more important to them than this one?

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What are the two basic types of marketing research?

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• The two basic types of marketing research are quantitative and qualitative. Quantitative research answers questions that start with "how many" or "how much". Qualitative research addresses issues that deal with "why" or "how Quantitative research usually involves surveys while qualitative studies rely on observation or unstructured conversations with customers.

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Where can I get help for marketing research projects?

• When researching your business idea, it is important to do as thorough a search for information as is possible. It is also recommended to do as much of it as you can on your own. • This will help you know the market for your idea better, and can help to keep the costs down at the start. JERRY R. MITCHELL 25

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Some Places to start your research.

Factiva LexisNexis Business Source Premier ProQuest Direct Thomson Research

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• Factiva is an online database designed to allow access to business and financial information. This service covers publicly and privately held companies, industries, the stock market and the economy. Coverage is domestic and international. Current stock quotes, full-text newspaper, wire, and magazine articles, and company profiles can be located via a user-friendly web interface.

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• LexisNexis provides access to full-text articles from thousands of newspapers and magazines worldwide. Full-text SEC filings are available. Many local and most national & international newspapers are included. Extensive coverage of the accounting, tax, and legal literature JERRY R. MITCHELL 28

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Business Source Premier

The Business Source Premier database is a comprehensive, business periodical database that includes scholarly journals and business periodicals covering topics such as management, economics, finance, accounting, international business and much more. It contains content from full text sources ranging from general business periodicals such as Business Week, Forbes, Fortune, American Banker, etc. to academic journals such as Harvard Business Review, Journal of Management, Academy of Management Review, Review of Economics & Statistics, etc. It provides cumulative indexing and abstracts for 4362 business journals (3228 peer-reviewed) and cumulative full text for 3428 journals (2568 peer-reviewed). JERRY R. MITCHELL 29

• This database also includes Country Monitor and Industry Yearbook Reports from WEFA, 35 country reports from the Economist Intelligence Unit (EIU) and Wall Street Words. The peer reviewed full text content in Business Source Premier is unmatched, and full text back files are available for many journals back to 1990. Additionally, Business Source Premier includes embedded images for many of the full text journals. JERRY R. MITCHELL 30

• ProQuest Direct is a web-based service . ProQuest Direct indexes articles from over 1,000 business and general publications. This database covers a range of subjects from company information to marketing and management trends. JERRY R. MITCHELL 31

• Thomson Research provides web-based access to complete SEC filings for U.S. and international companies. Real-time and historical EDGAR filings. Full-text articles and summaries from the trade press, newspapers, wire stories and newsletters worldwide. JERRY R. MITCHELL 32

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Journals/Newspapers Business Internet Index

• In the white paper you will find a detailed list of places I use.

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Market Analysis Who is your customer?

• Knowledge of the customer enables you to determine the market size and what determines their buying decision. It provides information that will assist in choosing a location, determining product or services to be offered, establishing pricing and planning a selling strategy. JERRY R. MITCHELL 34

Key issues to consider are: • Who will buy your product? Primary and secondary target groups. • Where does the buyer live and what is their profile? • What factors influence the decision to buy? • Who is involved in the purchase decision? • How often will buyers buy? • Where do they buy, when and how much do they buy? • What are the buyer's preferences and needs? • Are customers loyal? Can long term relationships be built?

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What product or service are you selling?

An important aspect of market analysis is to ensure that the product or service meets the market (customer) needs. Product or service focus must be the customer.

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Issues to address are: • Specifications of all your products and or services and key features relative to what prospective buyers in your target market are saying they need. • Comparison with competitors and how customers perceive your product relative to others available. • What are the current trends, what stage of maturity is the product life cycle at? • What regulations apply to your product or service? • What packaging is required? JERRY R. MITCHELL 37

Who is your competition?

• Are there competitors that exist now and what new competitors are likely to enter the market? How will your product or service compare and what is the probable reaction of your competitors once you enter the market? JERRY R. MITCHELL 38

Issues to consider are: • Who are your major competitors? • What share of the market do they have? • What are their strengths and weaknesses (e.g. quality, price, service, payment terms, location, reputation, etc.)? • How do you compare to your competitors and how will they react to your entry into the market?

• What factors are there that could increase or reduce your competition? JERRY R. MITCHELL 39

What is your target market?

• Accurate identification and analysis of the target market enables you to develop an effective overall marketing strategy. The information will assist in determining business size (output requirements), distribution channels, pricing, promotion strategy and other marketing decisions.

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• Target market issues include: • What is the overall market size? Number of potential customers and physical boundaries? • Which segment of the market is the most attractive in terms of future growth potential, ease of entry, competition, profit potential and overall risk? JERRY R. MITCHELL 41

• How do products generally get to the customer? • What is the current dollar value or quantity of product/service being sold into each segment of the market? • What social, technical, environmental or economic changes are taking place within the market and how will they impact sales? JERRY R. MITCHELL 42

What are your distribution channels?

• There may be many options for moving your product to the customer such as direct retail, wholesale, consignment, broker etc. The method of distribution has important implications affecting your pricing structure, advertising message, cash flow, etc. You will want to choose the distribution method best suited for your product and where you want to be positioned in the marketplace. JERRY R. MITCHELL 43

Key issues are: • What methods of distribution are best suited for your product? • What methods of distribution do your competitors use? • What are the costs relative to market coverage? • Does your level of available capital or production capacities restrict your choice of distribution methods? • Are there ownership opportunities in the supply chain?

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Pricing

• The objective is to maximize profits while remaining competitive in the marketplace. Pricing can be based on either the cost price or market price (What will the market pay?). Regardless of the pricing method used, it is critical to know all of your costs involved in delivery of your product or service to avoid possible underpricing and operating losses. JERRY R. MITCHELL 45

• If the market will not support a price level sufficient to cover cost, it will be necessary to investigate whether costs can be lowered or alternatively, it may be necessary to abandon your plans to proceed.

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Issues to consider are: • What control do you have over the product price (e.g. exclusive product, no competition, high market demand, etc.)? • What are competitor prices and how do they price their products? • What price and sales volume are needed to achieve profit objectives? JERRY R. MITCHELL 47

• Can you sell your product at different prices into different markets? • Can you maintain your prices over time and what do you expect to happen to competitors prices? • Are your prices quantity sensitive?

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Promotion and Selling

• Promotion of your product or service and development of a promotion strategy is part of the market analysis. It is important to analyze what are the best methods of making your customer aware and what message will motivate them to buy. From the promotion strategy the advertising budget and overall sales plan are then developed. JERRY R. MITCHELL 49

Items to consider are: • What media of advertising and sales do your competitors use? • What media of advertising is best suited to reach your customer? Primary and secondary media. (e.g. Primary newspaper and radio; Secondary - flyers and trade shows). JERRY R. MITCHELL 50

• What sales tools and training will be required for staff? • What image are you attempting to build through your promotion? • Packaging?

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• While customer service, in store display and merchandising are not part of the market analysis, they are an important part of the business image and promotion package. Ongoing attention should be given to these areas to assure maximum promotional benefit is achieved and that the desired image is portrayed.

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Primary/Secondary Data Sources

• Primary data is the information you will obtain through your own efforts or by hiring someone and can include observation, surveying, and experimentation.

• Secondary data consists of information which has been gathered by someone else and is relevant to the venture you want to establish. JERRY R. MITCHELL 53