In-house Market Research

How to conduct effective research

linked to your business strategy

In-house Market Research

2

About market

research

Linking market

research to business

strategy

Case study

3

About market

research

Linking market


strategy

Case study

Market research is gathering information

about customers, or markets.

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• Good information is a tool that can be

used to support business decisions.

Market research can help businesses make

decisions associated with:

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Identifying and evaluating

opportunities in the market P

Understanding potential and

existing customers P

Setting strategies and

targets P

Monitoring performance P

There are two main categories of market

research.

• Secondary

– Information that

already exists

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• Primary

– Information gathered first-hand

from the source

Secondary data is available from a variety

of 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

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Primary data is gathered directly from the

market to address an organisation’s specific

needs.

• Sources of primary data include:

– In-depth interviews

– Field visits

• Observation

• Customer intercepts

– Focus groups

– Surveys

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Market research may be exploratory or

confirmatory.

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Generating options

(Tends to be more qualitative)

Selecting the best option

(Tends to be more quantitative)

Exploratory Confirmatory

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Scan environment • Secondary

research

Generate options • In-depth

interviews

• Focus groups

Select option • Surveys

Evaluate outcomes • Surveys

• Secondary

research

Exploratory Confirmatory

BUSINESS DECISION CYCLE

As with decision-making, the exploratory

phase precedes the confirmatory phase.

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About market

research

Linking market


strategy

Case study

Good market research should help an

organisation fulfil its purpose, or reason for

existence.

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All organisations (regardless of whether they are for-

profit or not-for-profit) exist to create value by producing

something that the market wants or needs.

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Value = Benefits - Costs

Organisations strive to produce value by

operating their value chain.

Value = Benefits - Costs

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• Organisations succeed by making a winning offer to valuable

segments of the contestable market.

In the for-profit sector, the value that the organisation

creates is split between customers and shareholders.

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• 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.

Shareholder capitalism fails to recognise that

organisations are embedded in and depend upon a

massively complex system that is far more than just the

economy.

16 • Any strategy that weakens the total system is bad strategy.

Economy

Society

Environment

The great opportunity of our time is to

recalibrate business as a total system

contributor.

• To achieve this, businesses must reimagine themselves as vehicles for

delivering true social and environmental value, in addition to customer value.

• In other words, businesses must identify their transcendent purpose.

Businesses with a transcendent purpose tend to

look something like this:

Market research cannot help your

organisation find its transcendent purpose

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• Market research is not useful when conceiving an idea’s soul.

• But it CAN help good organisations succeed.

Organisations that succeed over the longer term

tend to excel in the following areas:

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Value

proposition

Value chain Culture

Purpose

Vision

Measures of Performance

Market research can help organisations make

decisions associated with most of these factors.

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Value

proposition

Value chain Culture

Vision

Purpose

P

O

P

P P

P

P

Measures of Performance

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About market

research

Linking market


strategy

Case study

The Ethical Toy Company is an

organisation with a transcendent

purpose.

• The Ethical Toy Company exists to:

• 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

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Provide ethical toys and games that are simply awesome for

children, families, society and our planet.

• 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.

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Its values form the basis of its

culture.

Like its purpose, The Ethical Toy

Company’s vision focuses on “system

level” value creation.

• Long-term vision:

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Through our success, for “growing the common good” to become

the common goal of toy and game companies world-wide.

The different components of the strategy

fit together and reinforce each other.

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Nurturing &

creative culture

Ethical,

efficient

value chain

Irresistible

offer &

brand

Sharing our

wisdom

Market research will help the company set

its targets, achieve its goals and monitor its

performance.

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Ethical,

efficient

value chain

Irresistible

offer &

brand

Benchmarking

/ secondary

research

Culture surveys

Benchmarking

/ secondary

research

Internal &

partner surveys

Nurturing &

creative culture

Sharing our

wisdom

Market &

customer

research

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Factor Metric 2013 2015 2018

Financial

$ invested in growing

common good (50% of

profit)

Customer NPS

Outcomes (customer

survey)

Growth Market share

Growth of category

Process Waste

Culture Internal NPS

Transparency Internal survey

Partner survey

Need a direct line to customers

The Ethical Toy Company’s

strategy is reflected in its

scorecard.

Today we will focus mostly on market research associated

with delivering a winning offer to valuable segments of

the market.

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Ethical,

efficient

value chain

Irresistible

offer &

brand

Market &

customer

research

Nurturing &

creative culture

Sharing our

wisdom

The market research planning process always begins with

identifying and articulating the underlying decision

problem.

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Set the research

objective

Identify

information needs

Identify sources of

information

Choose research

method

Identify the decision

problem

· Why are we

conducting this

research?

· What are the

questions we want

answered?

What information do we

need?

· What is relevant?

· How much do we

need?

· How accurate must

the information be?

How do we get the

information?

· Can we find the

people we seek?

· Do we have the skills

to collect and

analyse the

information

internally?

What research

techniques?

· One research

technique or several?

· Qualitative,

quantitative or some

combination?

• Market research techniques should be selected to match the

research objective and the information needs.

When setting your market research objective, start with a

global objective stated in one or two sentences, and then

expand 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?

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– 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?

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Setting strategies and targets P


Let’s imagine that the CEO and

marketing manager at the Ethical Toy

Company are deciding whether to launch

in the Australian market.

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Set the research

objective

Understand the size and structure of the Australian toys

and games market

Identify

information

needs

• What is the value of the market for toys and games?

• Is the market in growth or decline?

• What are the main categories and what is their share?

• Which channels are the most important?

• What are the key trends?

Identify sources

of information

• Industry reports

• Journal articles

Choose research

method Secondary research

Set the research

objective

Identify

information needs

Identify sources of

information

Choose research

method

Identify the decision

problem

· Why are we

conducting this

research?

· What are the

questions we want

answered?

What information do we

need?

· What is relevant?

· How much do we

need?

· How accurate must

the information be?

How do we get the

information?

· Can we find the

people we seek?

· Do we have the skills

to collect and

analyse the

information

internally?

What research

techniques?

· One research

technique or several?

· Qualitative,

quantitative or some

combination?

Reports available for purchase

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Market segmentation

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Market segmentation is the selection of groups

who will be most receptive to our existing or

potential 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

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Segmentation is based on factors that vary

between groups within a market, but that are

consistent 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

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• Frequently a combination of

methods is used.

The market segmentation process can initially

be undertaken using qualitative techniques and

managerial 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.

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– 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

The following questions can help an

organisation test whether an identified segment

is 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.

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• 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?

Now let’s imagine that the Ethical Toy

Company is established in the Australian

market, and has decided to segment the

market for toys and games.

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Set the research

objective

Identify a method of segmentation that matches our

business strategy & requirements, market trends and

managerial judgement

Identify

information

needs

• How do competitors segment the market?

• What are the important market trends?

• What criteria should we use to segment the market?

Identify sources

of information

• Industry reports

• Competitors’ segmentation

• ABS

• Existing and potential customers

Choose research

method

• Secondary research – marketing manager

• In-depth interviews with retailers

• Managerial judgement

• Focus group – market research firm

The Ethical Toy Company’s research has

revealed 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.

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Formulating strategies and

targets P


Successful strategy relies on targeting the most

valuable segments of the contestable market

with a tailored value proposition that

outperforms competitors on a few key criteria.

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Segment

Prioritisation

Tailoring the

Customer Value

Proposition (CVP)

Segment Prioritisation

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A common decision problem for organisations is

understanding which segments of the market they

should 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.

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Segments are plotted on a matrix according to

size, attractiveness and the organisation’s

competitiveness 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.

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Mark

et

Att

racti

veness

Low

Hig

h

Competitiveness

Uncompetitive Parity Competitive

80 85 90 95 100 105 110 115 120

The matrix clearly shows segment priority

and assists with identifying strategy.

Segment 1

Segment 2

Segment 3

Segment 4 Segment 3

Segment 1

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Segment 2

Segment 4

Strategy:

• Grow and protect our

share of segment 3.

• Increase our

competitiveness in serving

segments 1 and 4.

Now that it has identified four segments

of interest, the Ethical Toy Company

wants to use the DPM to understand

which are the most valuable.

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Set the research

objective Identify the market segments that we should target

Identify

information

needs

• Which segments are most attractive?

• Which segments can we serve most competitively?

Identify sources

of information

• Managerial judgement

• Existing and potential customers

Choose research

method

• Secondary research – marketing manager

• Customer intercepts – marketing manager

Mark

et

Att

racti

veness

Low

Hig

h

Competitiveness

Uncompetitive Parity Competitive

80 85 90 95 100 105 110 115 120

Market map

Parents buying for under 12s

Teenagers influencing purchases

for themselves and friends

Parents buying for primary school

birthday parties

Parents buying for toddlers

Primary

school b’day

parties

Parents buying for

under 12s

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Teenagers

Toddlers

DPM results

• Based on the DPM analysis, the Ethical Toy Company decides to

target the following segment:

– Parents buying for under 12s

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Segment validation is best undertaken by a

professional 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.

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Tailoring the Customer

Value Proposition (CVP)

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Target markets make decisions and choose between

competitors on the basis of their selection criteria, which

are 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.

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• Outperforming competitors on some focused

combination of these critical success

factors, supported by a tailored value chain,

gives a competitive advantage.

The Ethical Toy company has decided to

launch a new product that targets

parents buying for under 12s.

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Set the research

objective

What are the range of values that parents most want to

instil in their children? (To support the design of a new

product.)

Identify

information

needs

• Which values are considered most important by

parents.

Identify sources

of information • Parents of under 12s

Choose research

method Focus groups

Results

• The focus group reveals that the values parents are most

interested in are:

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Kindness Perseverance Respect

Finally, the Ethical Toy Company decides

to conduct a survey to understand which

of these options should be incorporated

into their new product development.

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Set the research

objective

Choose the value that will be the focus of our next

product

Identify

information

needs

• Which of the three values (kindness, perseverance and

respect) is considered the most important by parents?

Identify sources

of information • Parents of under 12s within our customer database

Choose research

method Survey

Conducting in-house surveys can be a useful way

to 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

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The survey implementation process is a natural

continuation of the market research planning

process.

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Set the research

objective

Identify information

needs

Identify sources of

information

Choose research

method

Sampling Gather data Data analysis Interpretation

· Ensure the sample is

representative of the

population

· Pre-test the method.

· Administer the process

· Correct any biases

· Analyse using

percentages, averages

cross-tabulations

· Check results for

statistical accuracy.

· Interpret findings in the

context of the decision

problem

Survey design usually occurs in the

following 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

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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

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• Lead with questions that are clearly

relevant, interesting and non-threatening

• Place demographic and other classification

questions last

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”

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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.

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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%



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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.

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Sample size

• Use the following table to calculate the number of respondents

required at margins of error of ±3%, ±5%, ±10%.

• As a general rule, aim for 100 respondents in each major subgroup

to be analysed.

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Population Size +/-3% +/-5% +/-10%

500 345 220 80

1,000 525 285 90

3,000 810 350 100

5,000 910 370 100

10,000 1,000 400 100

100,000 1,100 400 100

1,000,000 1,100 400 100

10,000,000 1,100 400 100

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.

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A qualified researcher can perform the

following 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.

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The Ethical Toy Company’s survey reveals that

the value parents most want to instil in their

children is “kindness”.

• This information is used to inspire the company’s latest family

game, Play it Forward.

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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,

please drop in and say hi at www.ethicaltoycompany.com.au

Play it Forward

Get to know someone

new & then choose a

packet of seeds just

for them.

Here at the Ethical Toy Company we’re all about

growing the common good. We exist to provide

ethical toys and games that are simply awesome

for children, families, society and our planet.

Creative nature

• We nurture and emulate the creative power

of nature.

Liberation

• Our products explore young people’s

possibilities, and reject stereotypes.

“Virtuousity”

• Our products celebrate and reinforce the

diverse array of human virtues.

Our decisions are guided by the following values:

This challenge is best for:

Big people Small people

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Market research can assist with populating

organisational scorecards that are used to

monitor performance.

• A typical scorecard is provided below:

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Factor Metric 2013 2015 2018

Financial Profit

Revenue

Customer Net Promoter Score (NPS)

Outcomes (customer

survey)

Growth Market share

Growth of category

Process Waste

Culture Internal NPS

Target setting and monitoring performance

often 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.

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• 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.

The Net Promoter Score (NPS) can be useful in

determining satisfaction levels, which relate

loyalty and to reputation.

• NPS is based on the fundamental perspective that every company's

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 company's 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 company's 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

Play it Forward NPS Results

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Category Score Tally Total by

category %

Detractors

0

1

2

3

4

5

6

Passives 7

8

Promoters 9

10

TOTAL NPS =

Thank you.

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www.pollenstrategy.com.au

http://www.pollenstrategy.com.au/

In-house Market Research

Business

Transcript of In-house Market Research