web entrepreneurship market research & opportunity assessment dr. ken cosh
TRANSCRIPT
What is Market Research? “The process of systematic gathering, recording and
analyzing of data about customers, competitors and the market. Market research can help create a business plan, launch a new product or service, fine tune existing products and services, expand into new markets etc. It can be used to determine which portion of the population will purchase the product/service, based on variables like age, gender, location and income level. It can be found out what market characteristics your target market has. With market research, companies can learn more about current and potential customers.”
(That Wikipedia site)
Market Research
Researching your market The process of finding out about your market e.g.;
What Products (or services) they might buy. What Price they would pay. Where it should be Placed, or what channels it should
be distributed through. How it should be Promoted, or how it should be
communicated to the customer.
4*P’s, Product, Price, Placement & Promotion.
Failing to do Market Research
Coca Cola in India Bought existing market leader, and withdrew popular
‘Thums Up’ brand Ketchup to Japan
Or should it be Soy Sauce? Cornflakes to Japan
What is breakfast? Knorr soups
Yes please! Oh, its dry soup? Instant Coffee in France
Doh!
Market Research Process
Specification of what information is needed Collection and analysis of information Interpretations of the information
How does this fit with the ‘Entrepreneurship’ topics we’ve discussed so far? “Get Going” “Weave a MAT”
Formulate a Problem
Research can be a lot more focused if you define the problem you are trying to answer. A problem could be not having evidence of
market demand to present to VC’s. Or not knowing what price people are prepared to
pay. Or not knowing what appearance would appeal to
your market.
Collecting Data
Exploratory Research Discover ideas and insights, normally small scale
and flexible. Descriptive Research
Determining relationships between 2 variables, or frequencies of some event occurring, normally following a hypothesis.
Causal Research Determining cause and effect relationships – if I
lower the price, what will the effect on sales be?
Exploratory Research
Is the most relevant to early entrepreneurs. Approaches can include;
Literature Search In-depth interviews Focus Groups Case Analysis
Examining ‘benchmark’ organisations Ethnography
Projective Methods Word Association Sentence Completion Role Playing
Interpreting Results
Study Business Stats and Research! There are numerous statistical methods to
analyse data. Regression ANOVA
Entrepreneurs and Market Research
“Studies indicate that small businesses are less likely than large businesses to use marketing research in their decision making. Reasons cited include monetary and time expenses, skepticism about potential benefits of marketing research, and the owner/manager's self-perceived inability to carry out the study.”
Snepenger
The Idea Stage
For some entrepreneurs, getting the idea-and imagining the possibilities-is the easy part. It's the market research that doesn't come so naturally.
Spaeder A full-throttle approach can cost you. Entrepreneurs
are often so passionate about their ideas, they can lose objectivity. Rather than taking the time to thoroughly plan and research, they sometimes plow ahead with execution, only to spend valuable dollars on unfocused or untargeted activities.
Shenker
Managers
One of the difficulties companies face with marketing occurs when the owner/manager thinks he or she knows what the customer wants, how they want it, where they want it and when they want it. Marketing research can help find the problem and identify a solution. It helps managers to look outside of themselves for solutions.
Snepenger
MR Myths Perfect information is needed
Nope – Any new knowledge can help guide you, you don’t need the full picture to ‘get going’.
Big decisions only Nope – some market knowledge can help make any number of
decisions. Surveys is the way
Nope – a lot of market knowledge can be gained from a trip to the library, observing people, brief discussions with a ‘focus group’.
It’s expensive It doesn’t need to be.
It’s difficult You don’t need a PhD. to do research.
What can we do?
List some questions What don’t you know about your business? Some of these
questions can be answered by a quick phone call.
Analysis Look at your business plan from 4 perspectives
Your Company Your Customers Your Competitors Your Collaborators
How are they likely to see your business?
What can we do? (2)
SWOT Analysis Check out the competition
Google search the terms that you will compete on.
What do they do well? What are they missing? Ask your friends what they think. Ask their
customers what they think. Bounce ideas off your ‘soul-mate’
Forecasting
Reducing the What If’s Ideally based on historical data!
But for entrepreneurs there is no historical data, so we can used expert judgments; Our Best Guess
Estimating Trends Graphical Judgment Least Squares Moving Averages
Least Squares Calculating the best fitting line, by minimising the deviations
from that line. More scientific than graphical judgment
Assumes data follows the following formula; Y = mX + b m is the gradient of the line and b is the intercept with the y axis.
Calculate m and b using;
Moving Averages
Useful for smoothing data
Y1+Y2+Y3+…..Yn
n
Y2+Y3+Y4+…..Yn
nEtc.
Strongly affected by extreme data
Break Even
Comparing costs and benefits of business. The break even point is where the two meet.
0
10
20
30
40
50
60
Year 1 Year 2 Year 3 Year 4
Income
Costs
Payback
Determining how long it will take for the cumulative benefits to payback for the cumulative costs. Payback period is very often the deciding factor for projects
0
10000
20000
30000
40000
50000
60000
70000
Benefits
Costs
Payback Flaws
Short term approach to investment decisions No consideration for the timings of payments Doesn’t consider the returns may go well
beyond the payback year
Cash Flow Analysis
Cash flow looks at when the organisation will start to gain positive cash flow from the project, rather than when the project will break even.
In the previous case the project would have a positive cash flow straight after the initial investment.
Present Value Analysis 1000 Baht today is not worth the same as 1000 Baht in 5
years time, and this should be taken into account. The cost of money is really the opportunity cost, the rate that
could be obtained if the money was invested in another project (normally a safe project).
Year 1 2 3 4 5 6 Total
Cost 40000 42000 44100 46300 48600 51000 272000
Benefit 25000 31200 39000 48700 60800 76000 280700
Present Value Suppose an alternative project offered an annual 12% return,
we can calculate the present value of the costs and benefits by multiplying by a factor;
1/(1+i)n
Here, i is the alternative interest rate (0.12), and n is the time period (year).
Year 1 2 3 4 5 6 Total
Cost
Multiplier
Present Value
40000
.89
35600
42000
.80
33600
44100
.71
31311
46300
.64
29632
48600
.57
27702
51000
.51
26010 183855
Benefit
Multiplier
Present Value
25000
.89
22250
31200
.80
24960
39000
.71
27960
48700
.64
31168
60800
.57
34656
76000
.51
38760 179484
Lies, D@*n Lies and Statistics You can use any of these approaches to support a business plan
that you are recommending (or argue against a business plan you don’t agree with). Break Even Analysis
If system needs to be justified in terms of costs, not benefits (or if benefits don’t improve much)
Payback When the improved tangible benefits form a convincing argument for
the proposed system Case Flow Analysis
If the project is expensive (comparatively) or if the organisation would be affected by a large initial expense
Present Value If payback period is long, or the cost of borrowing money is high.