Market Research and Competitive Analysis for Start up Companies

Prepared by Tonée Picardfor

San Jose State University

Presented on March 25, 2004

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• Q&A

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

What is market research• Just a set of activities?

– Focused on defined goals– Refines the direction of the 5 P’s

• 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!

Market Research Fallacies

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

and $$• MR is easy…ha!

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

Marketing 101Generic market

definition

Target Product Market

Customer or user need (Niche)

Customer type(segmentation)

Demographics/Market size

Product or Service+++

Why do Market Research• Knowledge is King

– Learn from others…you 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/service vision

– Feed the machine with information• Identify unmet needs

– Product extension into current market– Extension into new markets

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

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 student…ask 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

Targeted research topics and why?• 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.

• 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)

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

Short term advantages

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

– Improvements– Extensions

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

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)

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)

Primary Market Research• Surveys

– Telephone, mail, in-person, (email)• Focus groups

– Random sampling of population• Scientific approach for primary market research

– Define the problem• Don’t 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

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

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

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 (M&A 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 chasm…Geoffrey Moore)

Answers will effect your WHOLE marketing strategy…if you don’t understand these concepts and where you fit in…enter at your own risk

SWOT Analysis• 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.

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 brand–good 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.

Competitive GridXZY 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

Presentation of Market Researchfilt

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rules/signature based machine learning

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intelliMailBrightmailVipul’s Razor

Inbox ProtectorMcAfee Spamkiller

Mail Frontier

Cloudmark SpamNet

Viewed as Situation Analysis

External forces Customer Competitor

Government/Political EconomyFunding trendsEnvironment trendsSocial trendsTechnology trends

Pain pointsMarketSegmentationNiche (very focused)Motivations – what will make them buy!

Strategies/objectivesFinancial conditionMarket shareTarget marketsOT (part of SWOT)

Know the operating environment!

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 P’s

• 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

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– D&B reports

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?

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

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 important…that area not fully understood must be respected. Prof. Charles White, Golden Gate University

Knowledge is a weapon…use it to win. Unknown