Market Research and Advertising

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Market Research and Advertising

• Kent Wolfe
• December 4th, 2002

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Why Market Research?

• It is easier to sell something people want than
  it is to sell something that is easy to produce

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Market Research

• Exposed to market research each and every day (TV
  Radio programming, cell phone packages,
  beverage products, shelf space, restaurant
  location).
• Used to determine customer perceptions, attitudes
  and preferences (i.e., Georgia Grown, war with
  Iraq, package or container size)
• Who uses what, when, how much, and what are they
  willing to pay

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Questions Market Research Can Answer
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Other Market Research Uses

• Produce manager survey
• Aquaculture
• Pelletized Poultry
• Peanut shelling facility
• Marketing cooperative
• Needs assessment
• Rabbit market analysis
• Clam market analysis

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Pricing Suggestion

• Research suggests rounding prices to the nearest
  Os.
• Consumers dont distinguish between a price of
  1.50 and 1.59.
• However, they do perceive a price difference
  between 1.59 and 1.60

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How Consumers Found Out About The Farmers Markets
They Patron

• Source Percentage
• Roadside Signs 50
• Newspapers 49
• Passing by 49
• Word of mouth 42
• Flyers 15
• Magazines 1
• Television 1
• Radio 1
• Internet 0.3

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Additional Market Research Uses

• Market research guides your communication with
  current and potential customers
• Market research helps you identify opportunities
  in the marketplace.
• Market research minimizes the risk of doing
  business.

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Types of Market Research

• Focus groups
• Taste tests
• in-depth interviews
• Surveys - mail, telephone and intercept

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New Agribusiness Opportunities First Step is
Target Market Identification

• Target Market A segment of the population that
  is most likely to use your product or service.
• Usually described using demographic variables
  like, Gender, Income, Race, Age
• Used to
• Determine market potential
• Develop product packaging
• Choose marketing channels
• Develop marketing mix and advertising strategy

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Target Market Examples
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Market Segmentation
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Micro Brewery

• Micro brewed consumers consume an average of 250
  worth of beer annually. 
• Younger people were more likely to have tried a
  microbrew. Thirty-six percent of beer drinkers
  between the ages of 25 and 34 had tried a
  microbrew.
• In contrast, 27 of beer drinkers between the
  ages 34 through 45 and 20 of those 45 and older
  had tried microbrews. 
• The appeal of micro brewed beer was strongest
  among White beer drinkers were almost twice as
  likely as black Americans to try a microbrew.

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Market Segmentation

• A 1995 National Pork Producers Council study
  identified five very different pork consumer
  segments and they are as follows
• Main Street Today
• Quality Carnivores
• Good N Plenty Guys
• Apathetic Eaters
• Politically Correct Eaters

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Main Street Today Segment

• Main Street Today
• Largest segment of the population
• Consist of strong pork supporters.
• Very price sensitive- cost conscious shoppers.
• Purchasing decisions are price based rather than
  product preference.
• Women (57)
• Middle aged - (20) being 50-59 years of age
• Lowest income 31,000 median household income
• Least educated less than 10 have college
  degrees
• Blue collar occupations
• 19 widowed/divorced (more than the other
  five segments)
• Average household size
• Most non-white group (29 are African
  American or Hispanic)

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Quality Carnivores Segment

• Quality Carnivores
• Generally males
• Prefer family and fine dining restaurants
• Not concerned with nutrition
• Indulge in food and prefer premium cuts of meat
• Males (77)
• On average 36 years old
• Not primary shopper
• High incomes (48,500 household incomes)
• Have some college (62) or a college degree
  (26)
• Married (66)
• On average is non-white
• Smaller households

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Good N Plenty Guys Segment

• Good N Plenty Guys
• frequent fast food and take-out restaurants
• meat lovers
• second most responsive to pork behind the Main
  Street Today segment.
• Mainly male
• Young (49 of the segment is under 35 years of
  age)
• 38,000 median household income
• 45 have some college
• Employed- split between blue and white color
• 61 were married
• Have large households 47 have 4 family members
• Primarily non-white

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Market Analysis

• Two groups were identified
• Local Market - area residents
• Metro Atlanta ethnic markets
• Local Market
• Interviewed 232 potential customers residing
  within 60 miles of Toccoa
• 71 people (232) indicated they did not eat fish
• 69 of area residents are fish consumers
• Ethnic Markets
• Visited 8 ethnic markets in Metro Atlanta

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Local Market Customer Base
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Market Potential

• Market Potential the maximum sales
  opportunities achieved by all sellers in the
  market.
• Sets the upper limit on consumption units

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Estimating Market Potential

• MPNxQ where
• MP Market Potential
• N number of buyers
• Q average number purchased by each buyer

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Estimating Market Potential

• Information needed to estimate market potential
• Market Area - US, State, County, city
• Roadside stands 10-20 mile draw
• School field trips 45 miles or 45 minutes
• Demographic composition of the specified area
• Number of people in area with similar
  characteristics
• Consumption or usage levels

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Estimating Market Share

• A market area and the target market within that
  area will support a certain level of sales
• A companies portion of these total sales is
  referred to as its market share
• Estimating market share is not easy but essential

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Three Steps to Estimating Market Share

• Estimate the total market potential
• Identify each of your competitors and estimate
  their market share
• Decide or estimate what you think your market
  share might be or what portion of the market you
  intend to capture

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Example Market Share Calculation

• Market share for new hot sauce to be marketed
  locally
• A supermarket visit identified 10 sauce
  competitors
• Market share data is not available, assume each
  product captures and equal share of the market
  (10)

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Example Market Share Calculation- Cont.

• New product will mean there are 11 competing
  products
• Assuming equal market share, you can assume to
  capture roughly 9.1 of the market
• Does 9.1 of the market generate enough sales to
  make your business feasible?

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Estimated Retail Sales

• The potential retail sales for a specific retail
  operation can be estimated by using a standard
  formula
• ES P x EXP x (ADI/MDI) x MS where
• ES Estimated Sales
• P Trade Area population
• EXP Average expenditures for retail outlet
  category
• ADI Area Estimated Average Household Disposable
  Income
• MDI Georgia Average Household Disposable Income
• MS Estimated Market Share

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Estimated Retail Sales Example

• 50 of Americans consume beer
• Thirty-six percent of microbrew drinkers are 25
  -34, 27 are 34 - 45 and 20 are 45 and older.
• Microbrew consumers have average incomes of
  54,000
• Microbrew consumers spend between 250 annually
  on these products
• Microbrewery Market Area Demographic Information
• 50,000 residents
• 15 are 25-34
• 16 are 34-45
• 29 are 45
• 25 have incomes over 54,000

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Income Information

• Area Estimated Av.e Household Disposable
  In.67,000
• Georgia Average Household Disposable Income
  30,240

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Trade Area Sales Estimate

• ES P x EXP x (ADI/MDI) x MS
• P 50,000 x 50 (percentage of beer drinkers)
  25,000
• 25,000 x 15 3,750
• 25,000 x 16 4,000
• 25,000 x 29 7,250
• 15,000
• 37 of area residents have incomes over 50K
• 15,000 37 5,550
• EXP250
• (ADI/MDI)(67,000/30,240)
• MS Estimated Market Share 10
• ES 5,550 x 250 x (67,000/30,240) x 10
  307,416

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Demographic and Population Sources

• Sources for Demographic Information
• Chamber of Commerce
• University (www.agecon.uga.edu/caed/)
• www.georgia.stats.uga.edu
• US Census Bureau (WWW.CENSUS.GOV)
• Easy Demographics (WWW.EASYDEMOGRAPHICS.COM)

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Easy Demographic Data (WWW.EASIDEMOGRAPHICS.COM)

• Miles 20 15 10
• Population 82,683 59,644 36,409
• Households 31,974 22,806 13,773
• White Population 77,003 56,126 34,497
• Black Population 4,881 2,901 1,506
• Asian Population 623 473
  307
• Hispanic Population 719 518 275
• Median Age 37.0 36.7
  36.4
• Med. HH Inc.() 29,572 30226 32,214
• Av. HH Inc. () 40,855 41,877 43,165

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Consumption and Usage

• Sources for information on Consumption and usage
• USDA per capita food consumption estimates
• Trade Associations
• Commodity Groups (e.g. Nation Pork Producers
  Association)
• University Research

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Marketing

• There is no silver bullet or formula for
  success
• Marketing is more like an art than a science

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What is Marketing?

• Marketing is the process of planning and
  executing the conception, pricing, promotion, and
  distribution of ideas, goods, and services to
  create exchanges that satisfy individual and
  organizational objectives.
• -American Marketing Association

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What Exactly Does That Mean?

• Marketing is...
• All the actions you your employees
• take that promote the sale of your
• products.
• Building good relationships with your
• customers.

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What Exactly Does That Mean?

• The Company Name
• Company Goals
• Location
• Pricing
• Packaging
• Promotional Activities
• Advertising
• Sales Techniques
• Business Cards
• Employee Uniforms

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The Goal of Marketing

• To present your products/services to the market
  in a way that makes them more attractive than the
  products/services of
• your competitors.

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Advertising/Promotion

• Advertising Delivers information
• Promotion Involves generating consumer response
• Publicity inexpensive or free advertising

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Types of Advertising
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Newspaper

• Advantages
• Broad mkt coverage
• Immediate
• Short lead time
• Flexible ad size
• Visibility of product
• Color
• Use of coupons
• People believe what they read!

• Disadvantages
• Inconsistent reproduction
• One day life span
• Limited demographics
• Lost in the Crowd
• Lack of movement sound

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Radio

• Advantages
• Demographic selection
• High frequency
• Immediate
• Sound reinforcement
• Quick flexibility

• Disadvantages
• Restrictive message length
• Need for repetition
• Short recall factor
• Cluttered placement

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Television

• Advantages
• Use of sight, sound, motion, color
• Mass coverage
• Immediate
• Demographic selection

• Disadvantages
• Short exposure
• Expensive production
• Expensive to air
• Cluttered placement
• Viewing time drops as income increases

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Direct Mail

• Advantages
• Demographic selection
• Unlimited message length
• Consistent reproduction
• Direct response by order or coupon

• Disadvantages
• Expensive
• Difficult to obtain pure mailing lists
• Long lead time
• Negative reaction to junk mail

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Outdoor

• Advantages
• Reaches large audience
• Long-term exposure
• Color graphics
• Forms include billboards, posters, illuminated
  signs, moving vehicle signs, bench ads

• Disadvantages
• Limited message length
• Expensive to produce place
• Difficult to obtain the best locations
• Legal restrictions for use

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Examples of Advertising Costs and Exposure
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Signage is important

• Information that should be included on your sign
• Location
• Business hours
• Special Promotions
• Seasonal Products
• Other attractions
• Sign should reflect the stands personality

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Signage Is Important
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Words Read At Various Speeds
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Packaging Counts Specialty Food Expert

• Have a beautiful product, including jar and label
• Use expensive beautiful glass
• Go to trade shows to show product as well as find
  out what the competition is doing
• Make your product presentation count-90of the
  purchases of these niche products is based on
  product presentation.

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Packaging

• First Line of Promotion is Product Packaging and
  is your silent salesperson
• Evaluate your target market and create a package
  that is consistent with their expectations- i,e.
  single jar or 3-pack,
• Packaging should reflect a products desired
  personality (Tennessee Toe Jam)
• Packaging Considerations (size, plastic glass,
  dressy)
• Selling a 8 oz. Jar of Jelly for 6.95, it needs
  to be packaged accordingly

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Packaging Examples
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Hot Sauce Packaging Examples
6.95 (5 oz)
6.29 (5 oz)
7.59 (4 oz)
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Jams and Jelly Packaging Examples
4.50 (16 oz)
5.25 (10 oz)
5.00 (9.9 oz)
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Know Your Target Market

• Where and when does my target market look for
  information
• What is the most effective means of reaching my
  target market ? i.e., television, radio, print
  material, etc..
• What type of packaging are they expecting

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Adding Value to Georgias Agricultural Economy
Through Research and Extension

• www.agecon.uga.edu/caed/
• College of Agricultural Environmental Sciences