A look at Market Research

1
A look at Market Research

• February 2004
• Nora Zietz
• Director
• Business Development Office
• Johns Hopkins

2
Market Research

• 1)What is it?
• 2) Why do venture capitalists require it?
• 3) How is it done?
• 4) Do I HAVE to do it?
• 5) What are standard techniques?
• 6) What will it tell you?

3
Market Research

• 1) What is it?
• Information on an industry, product, or customer
  set.
• 1) Primary market research
• . polling potential customers
• . interviewing competitors
• . talking directly to distribution channels
• quantify the opportunity and
  discover trends.
• Takes time can be expensive.
• 2) Secondary research primary research
  packaged by someone else (ex a market research
  firm) and somehow published.
• Expensive, but quick.

4
Market Research

• 2) Why do Venture Capitalists require it?
• Easy to obtain
• AND very expensive to fix if wrong
• Missionary sale dreaded words
• Market risk is --
• Worse than . Financing Risk
• . Management Risk
• .Technical Risk (except in
• 
  biotech -- maybe)

5
Market Research

• expensive to fix
• Astra Zenecas new statin Crestor
• Must displace some of Pfizers Lipitor market
  share
• Analysts expect AZ to spend over
  500 million in promotion, pre-launch through
  first year in US

6
Market Research

• AZs Crestor what if promotion does not work?
• 500 million down the drain.
• Poor market research is very expensive.

7
Market Research

• The cost of poor market research at Hopkins
• Office of Licensing has to guess which
• technologies are worth patenting.
• 1) Provisional -- 200
• 2) Convert to patent (US, Europe, Asia)
• -- 50,000
• If no one licenses the
  technology, money wasted.
• OTL is going to be very, very careful the way to
  help is to give them market research.

8
Market Research

• 2) Why do Venture Capitalists require it?
• or Why not let the VCs do it themselves?
• They will either be familiar with your market and
  (a) think its a good opportunity (
  if YOU know the market too, you look good)
• OR be familiar with your market and (b) think
  its a bad one ( you need to
  convince them they are wrong)
• OR be unfamiliar with your market and therefore
  less likely to be interested (lack of time)
  dont give them that excuse to say no. Be
  prepared.

9
Market Research

• 3) Standard Techniques?
• Primary research
• Focus Groups customers, distributors
• Phone/Live Interviews- customers, distributors,
  sales teams of competitors
• Trade Shows, Conferences
• Competitors catalogs and product lit
• Web searches (public company financials, annual
  reports)

10
Market Research

• How expensive?
• Primary research
• 1) time for someone to make the phone calls. In
  specialized markets (like medical markets),
  educated someone (expensive.) Also,
  professional researchers know how to ask
  questions (even more expensive)
• 2) cash to buy lists, prepare, mail, compile
  surveys.
• You get what you pay for large companies spend
  hundreds of millions.

11
Market Research

• 3) Standard Techniques?
• Secondary Research
• . Professional market research reports
• Web searches
• Library searches
• Magazines, reports
• Sales and Marketing Management Magazine
• US government publications
• Trade and professional associations
• Always read the publications your target customer
  reads, including the ads

12
Market Research

• How expensive?
• Secondary research
• can cost thousands of dollars (professional
  market research firms)
• Or less (often subsets of data available)
• Or even less - the web publishes teasers with
  high-level numbers from reports can be useful
  (free)
• Free? Library government reports, books, journals

13
Market Research

• Sales of secondary research on the web
• . www.mindbranch.com
• . www.marketresearch.com
• . www.ecnext.com
• Specialized journals, like those published by
  Windhover, also searchable online
  (www.windhover.com -- do have teasers)
  Specialize in healthcare business intelligence

14
Market Research

• 3) Do I HAVE to do it?
• YES
• Why waste your own time developing a product
  with no possible market?
• Knowing the market BEFORE you develop will
  affect sales
• Knowing the market will probably land you
  funding.

15
Market Research

• Do I HAVE to do it? Yes it shapes your market
  size
• The more successful biotech companies develop
  marketing strategies BEFORE the product is ready
  (to do that, understand market)
• Ex FOSAMAX (Merck). Initial clinical
  investigation showed useful for post-menopausal
  women with confirmed fracture and other factors.
• Merck redefined it, before product was ready as
  men and women at risk of osteoporosis (20-50
  times larger market big chunk of baby boomers)

16
Market Research

• 4) What will it tell you? (or, the questions you
  SHOULD be asking)
• -- is the market clearly identifiable? What,
  exactly, is it? What COULD it be?
• -- how large is the currently served market?
• -- how fast is it growing?
• -- who are the competitors, how large, growing?
  etc.
• -- how will you be different from competitors?
• -- current trends in the industry?
• -- regulations?
• -- why are competitors customers loyal (are
  they?)
• -- if you are successful, who benefits, who
  hurts?

17
Market Research

• What will it tell you (ctd)?
• -- Comparable sales growth
• -- Comparable profit margins
• -- Likely funders in your industry

18
Market Research

• Is the market clearly identifiable? What,
  exactly, is it?
• SAM Served Available Market
• TAM Total Available Market
• Differentiate them
• Explain why you will be in 1 or 2, and why
• Be as specific about your market as possible.
• A start we address the HIV market (too
• broad tells no story)
• Better HIV prevention
• Best Microbicides for HIV prevention

19
Market Research

• So which is it? Specific or Optimistic?
• It sounds as if
• 1) better be specific as possible
• 2) but also look at the largest potential
• YES be specific so (1) you know what to tell
  funders, honestly, and (2) focus
• but imagine the larger market, and plan
  strategically

20
Market Research competition
21
Market Research

• If you succeed, who benefits, who is hurt?
• Classic case generics
• Benefits consumer, insurance companies
• Hurts Big Pharma expect major
  marketing dollars spent against you (formulation
  not exact replica, poorly regulated, UNSAFE)
• Begin addressing those issues NOW
• and enlisting help of those who will benefit

22
Market Research

• What it may not tell you is how much of the
  market you could penetrate.
• Not good
• we plan on penetrating 3 of the market by year
  5
• Better
• 1 million supports 7 salesmen over 3 years.
• The average quota of a salesman in the
  industry being 150,000/year,
• we are targeting sales of over a million a
  year starting year 3.

23
Getting Started the minimum

• 1) Visit relevant association on web
• -- look at its board of directors (potential
  competition/allies)
• -- read featured journals and papers
• -- read annual meeting schedule (trends)
• -- visit posted industry resources
• -- visit list of members

24
Getting started the minimum

• 2) Visit Public competitors websites
• www.finance.yahoo.com
• Go to Stock Research enter symbol
• Click Get Quotes
• Click Company Profile
• See financials, analyst reports, news, etc

25
Getting started the minimum

• 3) Google try market industry
• This will bring up
  sites selling market research description and
  teasers included.
• Be familiar with WHICH market research firms are
  credible (hint they are quoted by large
  competitors and stock market analysts).

26
Market Research

• Dont write a business plan without it
• __________