Market Research and Competitive Analysis for Start up Companies

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Market Research and Competitive Analysis for
Start up Companies

• Prepared by Tonée PicardforSan Jose State
  University

Presented on March 25, 2004
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Agenda

• Introduction
• Tonée Picard and Market Research
• Practical techniques vs. by the book
• Reiterative points about marketing
• Definitions and thought processes
• Examples of market research presentation
• Business plan outline sample
• QA

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Your Presenter Today Tonée Picard

• Professional experience
• President, Lighthouse Venture Forum
• Education and mentoring organization for
  technology entrepreneurs and young businesses
• VP, Business Development, Thuridion
• Responsible for strategy, marketing, business
  development
• Strategist for small growing companies
• Organizational Development
• Marketing strategy
• Business processes
• Outsourcing strategies
• 2 start up companies (Dascom and CREW)
• Education
• BS/BA, Business and management, University of
  Phoenix
• MBA, Golden Gate University

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What is market research

• Just a set of activities?
• Focused on defined goals
• Refines the direction of the 5 Ps
• Product, promotion, place and price (and
  positioning)
• View into social processes?
• Who, what, when, where and why!
• Necessary?
• Strategy does not take place in a vacuum
• Valued by organizations?
• Successful organizations..
• Market research supports every department

The bridge to the customer!
Yes!
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Market Research Fallacies

• MR is boring
• MR is unnecessary
• MR is for analysis geeks
• MR is a waste of time and
• MR is easyha!

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Intent of market research

• What results are you looking for?
• Define measurement of market potential
• Determination of market characteristics
• Market share analysis
• Sales analysis
• Business trends
• Refine opportunities to pursue and how
• Market segmentation and niche markets
• Features and benefits required for market success

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Marketing 101
Generic market definition
Customer or user need (Niche)
Customer type(segmentation)
Demographics/Market size
Product or Service



Target Product Market
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Why do Market Research

• Knowledge is King
• Learn from othersyou will have plenty of your
  own lessons
• Find strategic competitive advantages
• What are your barriers of entry? What are the
  competitors?
• Develop competitive differential opportunities
• Why are you better? How can you be the best?
• Understanding of core competencies and core
  rigidities
• Develop pricing models
• Targeted alliances/partnerships that extend reach
• Create the product roadmap
• Features, benefits to fit customer/consumer need
• Support the creation of the company/product/servic
  e vision
• Feed the machine with information
• Identify unmet needs
• Product extension into current market
• Extension into new markets

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Market Research is the Critical component to any
business plan

• Know the self
• Know the customer
• Know the market
• Know the industry
• Know the government

OBJECTIVE To develop an informed business in a
vibrant high growth market through strategic
competitive advantages
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Types of market research

• Exploratory research
• Review of literature (pubs, online, mags)
• Discussion with experts, officials, friends and
  family
• Study of competitors or case studies in similar
  industries
• Descriptive research
• Targeted at specific question or hypothesis
• Surveys/questionnaires
• random sample from a relevant population
• Focus groups
• Industry or product specific (usually expensive)
• Use your network! As a studentask for help from
  a targeted CEO
• Experimental research
• Looking for cause and effect (i.e. pharma
  research)
• Watching a user group use the product
• Story boarding service offerings/product
  offerings to group of targeted consumers

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Targeted research topics and why?

• Sales and Market research
• Market potential
• Market share analysis
• Market characteristics
• Sales Analysis
• Distribution sales channel studies
• Test marketing/focus groups
• Promotional research and studies
• Financial research
• Turnover and ratio analysis (public companies
  annual reports)

• Advertising research
• Motivation research
• Ad effectiveness
• Business Economics and Corporate research
• Forecasting
• Business Trends
• Pricing studies
• Acquisition/merger research
• Product research
• Product acceptance or potential
• Competitive product studies
• Testing of existing products
• Packaging design, etc.

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Competitive research

• Direct competition important
• Indirect competition critically important
• What to look for..
• Map their strategy
• Differentiate your offering
• Find pricing advantages
• Develop barriers to entry
• How to fill the whole need for
  customer/consumer
• Financial stability
• Market share and focus on new markets
• where are they going
• Take the short and long term view

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Short term advantages

• Refined tactics for customer reach
• Measurement of market potential
• Market characteristics
• Market share
• New product acceptance
• Produce evaluation
• Improvements
• Extensions

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Long range advantages

• Planning, goal setting, developing strategies
• Understanding business trends
• Global market opportunities
• Forecasting growth
• Management uses MR to reduce errors in decision
  marketing, expand sales and locate new
  opportunities
• Uninformed decisions can be failures

Market research is done so that all marketing
efforts can be strategically integrated into the
wants and needs of customers.
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Gorilla market research

• School libraries and Internet
• Observation
• Customer visits
• Listening to tech support calls
• Opinions of sales personnel
• Networking
• Use your gut feelings (intuition)

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More expensive options

• Scientific methods
• Systematic and accurate investigation with
  objective analysis of results
• Goal to reduce uncertainty and risk of error
• Research is reliable only if it can be repeated
  by another with the same results
• Surveys
• Mail, mall, telephone, focus groups
• High priced information 3rd party market analysis
• Gartner group, IDS, Industry specific
  (5,000-100,000)

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Primary Market Research

• Surveys
• Telephone, mail, in-person, (email)
• Focus groups
• Random sampling of population
• Scientific approach for primary market research
• Define the problem
• Dont confuse problems w/a symptom
• Analyze the situation
• What do you already have and what do you need
• Use secondary data
• Refine the specific problem
• Attain and interpret the data
• Solve the problem

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Secondary Market research tools

• The internet
• Competitive research
• White papers
• Press releases (statistics
• Industry tradeshows
• School databases
• Industry analysts
• Gartner Group
• IDS
• Internal records (sales, etc)
• Libraries
• Government
• SIC codes/Industry codes
• Demographics
• Commercial firms (competitors, partners, like
  companies)
• Press releases, conferences, tradeshows
• AC Nielsen, Dun and Bradstreet
• Trade, professional and business associations

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Decisions driven by market research

• Overall company vision
• Product or service positioning
• Product or service innovations/extensions
• Investment in marketing at segments of market
• Understanding of potential distribution channels
• Branding
• Credibility
• Lock in or switching costs

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What are you looking for

• Basic understanding, knowledge, facts, trends
• Markets are uncertain find your niche
• Technology is complicated find your focus
• Competitors are moving targets understand them
• Demographics who, what, when and why
• Where you fit in the product/service life cycle
• Introduction of new idea, growth market, shakeout
  (MA opportunity), mature market (commodity) or
  declining market
• Who are your target markets? The adoption
  process
• Innovators, early adopter, early majority, late
  majority or laggards(Crossing the chasmGeoffrey
  Moore)
• Answers will effect your WHOLE marketing
  strategyif you dont understand these concepts
  and where you fit inenter at your own risk

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SWOT Analysis
Ideas for presentation of information

• Strengths
• Your competitive strengths (would include
  barriers to entry)
• Patents, management team, financial resources,
  market leader, etc.
• Weaknesses
• Your weaknesses (competitor strengths)
• Funding, branding, lack of partners, etc.
• Opportunities
• Market opportunities
• Logical product extensions, high growth market
• Threats
• Competitive threats
• Microsoft is a competitor
• Economic, demographic, etc.
• Baby boom retirement, interest rates, etc.

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Strengths Weaknesses Opportunities Threats
Ease of use (intuitive GUI). Funding need asap Logical product extensions exist. Competition is well funded.
Product champions exist excellent early testimonials. Ability to brandgood product names are taken. High growth market Time to market is critical path to success.
Switching costs (emotional and time) Initially it is a low margin product. Volume and market share are critical. No existing market leader yet. Microsoft has low barriers to entry
Management team has taken companies public Lack of strategic partnerships with other companies for bundling. Ability to position company as an acquisition candidate. Economy in the technology industry
Barriers to entry - patents. Traction in distribution channels
Superior engineering skills.


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Competitive Grid
XZY Inc. Microsoft Mail Frontier Cloudmark Brightmail Banter
End User Product Yes Yes Yes Yes No No
Personalization Yes Yes Yes No No ?
Accuracy 90 10-25 10 - 75 10 - 75 80 ?
Adaptive Learning Yes No No No No ?
Classify beyond spam Yes Yes No No No Yes
Individual client Yes Yes Yes No No ?
Enterprise server Yes No No P2P Yes Yes w/ integration
Price Point 39/seat Free, but painful Free Free 4,900 75,000 750/seat
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Presentation of Market Research
intelliMail
classification
Banter
prioritization
functionality
Brightmail
Mail Frontier
Vipuls Razor
Cloudmark SpamNet
filtering
Inbox Protector
McAfee Spamkiller
technology
rules/signature based
machine learning
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Viewed as Situation Analysis
External forces Customer Competitor
Government/Political Economy Funding trends Environment trends Social trends Technology trends Pain points Market Segmentation Niche (very focused) Motivations what will make them buy! Strategies/objectives Financial condition Market share Target markets OT (part of SWOT)
Know the operating environment!
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Sample Business Plan Outline

• Executive summary
• Company description
• Organizational plan
• Outsourcing, in-sourcing
• Management
• Product
• Industry Analysis and Trends
• Target Market
• Segmentation
• Niche
• Competition
• Competitive Grid
• Summary of OT (part of SWOT)
• Strategic position and risks
• SWOT analysis
• Marketing strategy
• 5 Ps
• Financial projections
• Important Market share will feed financial
  forecast

• Potential exhibits
• Management bios
• Product technology overview
• Product timeline (if applicable)
• Screen shots (if applicable)
• Organizational structure (org chart)
• Product pricing
• Detail of distribution channels
• Detail competitive threats and resolutions
• Competitive core competencies
• Barriers of entry and detail
• Other deals that are critical to your success

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General starting points for market research

• Business magazines
• Business Week
• Business 2.0
• Fast Company
• General business pubs
• Wall Street Journal
• Red Herring
• Economist
• Industry trade pubs
• PC Week
• Info Week
• Retail specific

• Government pubs
• SIC industry codes
• Online
• Ask Jeeves, Google,
• Yahoo! Finance
• Ratio analysis and competitive analysis
• SJSU libraries
• DB reports

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Questions to ask?

• Who are your biggest competitors?
• Who are your customers?
• What does it take to get to your customer?
• What does your product/service solve?

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Sample of Local Organizations

• SVAMA
• Silicon Valley American Marketing Association
• AMA
• American Marketing Association
• SVASE
• Silicon Valley Association of Start up
  Entrepreneurs
• WITI
• Women in Technology International
• Churchill Group
• Largest Silicon Valley networking organization
• SD Forum
• Software Developers Forum

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Words of wisdom

• What counts most is not being right the first
  time, but how quickly a company can learn and
  modify its path.Jakki Morr, Marketing of High
  Technology Products and Innovations
• Grey markets are the most importantthat area
  not fully understood must be respected. Prof.
  Charles White, Golden Gate University
• Knowledge is a weaponuse it to win. Unknown

Q A