FEASIBILITY

STUDY

Assoc. Prof. Irem UCAL SARI

Istanbul Technical University

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 Market Research

• Investigating the close

competitive environment of the
market, including customers,
competitors, suppliers,
distributors and retailers
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 Market Research

• Customer expectations
• Expectations about usability
• Design expectations
• Price expectation
• Demand forecast

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 Market Research

• Spend on Market Research

• Types of Market Research

• Potential Problems
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 Market Research Expenditures by Sector in
the UK
Other
Non-ad. research
agencies
Ad. agencies

Retailers and
wholesalers

Manufacturing
Companies

Public sector

Service Companies
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 The Ten Most Common Market
Research Activities (USA)
Directly
Activity Percentage of companies doing relevant to
activity* NPD

Determination of market characteristics 97

Measurement of market potential 97

Market share analysis 97

Sales analysis 92
Studies of business trends 91
Short range forecasting 89
Competitive product studies 87
Long range forecasting
87

Pricing studies 83

Testing existing products 80

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Top 10 market research activities

Market Measurement 18%

New Product development/concept testing 14%
Ad or brand awareness monitoring/tracking 13%
Customer Satisfaction (inc Mystery Shopping) 10%
Usage and Attitude Studies 7%
Media Research & evaluation 6%
Advertising developing and pre-testing 5%
Social Surveys for central/local government 4%
Brand/corporate reputation 4%
Omnibus Studies 3%

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 External Market Research Firms

Types Description

1. Syndicated - service research Data gathered periodically from

firms customers and distribution channels and
then sold to clients (e.g. A.C. Nielson)

2. Custom market research firms Hired to carry out specific research

projects for clients. The firm conducts the
survey and the results are the property of
one client only (e.g. Research
International)

3. . Specialty line research firms Firms providing a specialised service to

other market research firms, e.g. a firm
selling field interviewing services (e.g.
Continental Research)

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Why Conduct Market Research in
New Product Development?
Customer • The product must appeal to the customer (however
Recognition widely defined)
• Timely market research can help you mould the
product to the consumer’s need/wants

Market • Market research tend to point out successes and

Recognition failures before products are launched “for real”

As a result, it can save you money and time

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 Types of Market Research

By Source By Methodology By Objectives

• Prim ary • Qualitative • Exploratory

• Secondary • Quantitative • Descriptive

• Causal
(or experimental)

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 Types of Market Research:
By Source
Primary • Collection of data specifically for the problem or
project in hand

Secondary • Based on data previously collected for purposes

other than the research in hand (e.g. published
articles, government stats, etc)

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Comparing three survey methods on
selected factors
FACTOR MAIL TELEPHONE PERSONAL
Quantity Of
limited limited to good good
Information

Suitability For
limited limited good
Complex Questions

Turnaround Time slow fast moderate

Versatility limited limited to good good

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Types of Market Research:
By Methodology
Qualitative Quantitative

Type of Question • Probing • Simple

Sample Size • Small • Large

Information per respondent • High • Low

Questioner’s skill • High • Low

Analyst’s skill • High • High

• Subjective, • Objective
Type of analysis
Interpretative Statistical

Ability to replicate • Low • High

• Attitudes • Choices
Areas probed Frequency
Feelings
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 Benefits of Qualitative Market
Research vs Quantitative

Cheaper • Smaller sample size

Probes in-depth • Allows managers to observe (through one way mirror)

motivations and ‘real’ consumer reaction to the issue - e.g. comments and
feelings associations (e.g. Levis) regarding a new product fresh
from the labs

• Gives the research department a low cost and timely sense

Often useful precursor
of which issues to probe in quantitative research
to quantitative
research

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 Qualitative vs Quantitative
Market Measurement Total
Market Quant Qual
Share
NPD/Concept testing
18.4% 20.8% 3.3%

Ad/brand awareness
tracking 13.8% 11.6% 27.3%

Customer satisfaction
12.7% 14.4% 2.2%

Usage and attitude surveys

9.7% 10.4% 5.4%

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Types of Market Research: By
Objective

Exploratory • Preliminary data needed to develop an idea further. Eg.

outline concepts, gather insights, formulate hypotheses

Descriptive • Describe an element of an ideas precisely. Eg who is the

target market, how large is it, how will it develop

• Test a cause and effect relationship, e.g. price elasticity.

Causal
Done through experiment

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 The Market Research Process

1. Defining the 2. Developing 3. Collecting 4. Analysing 5. Presenting

problem and the research the the the findings
objectives plan information information

Steps Decide on
Information is Statistical Overall conclusions
Distinguish - budget collected manipulation of to be presented
between the - data sources according to the data collected rather than
research type -research the plan ( it is (e.g. regression) overwhelming
needed e.g. approaches often done by or subjective statistical
- exploratory - research external firms) analysis of focus methodologies
instruments groups
- descriptive
- sampling plan
- causal
- contact methods

Comments
If a problem is The plan needs to This phase is Significant Can take various
vaguely defined, be decided upfront the most costly difference in forms:
the results can but flexible enough and the most type of analysis - oral presentation
have little to incorporate liable to error according to
bearing on the changes/ iterations -written conclusions
whether market supported by analysis
key issues research is
quantitative or - data tables
qualitative
Potential Problems with Market
Research

1. When and how not to do it

2. Problems with research buyers vs suppliers

3. Frequent technical pitfalls

4. Problems with traditional market research

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When and How Not to Conduct
Market Research
Occasion Comments/Example
• Lack of resources • If quantitative research is needed, it is not worth doing
unless a statistically significant sample can be used
• Research results not • Where psychographic data (for example) is used which
actionable won’t help the company form firm actions
• When research is used only as a rubber stamp of a
• Closed mindset preconceived idea
• When research results come too late to influence the
• Late timing: process decision

• Poor timing: marketplace • If a product is in the ‘decline’phase there’s little point in

researching new product varieties
• Vague objectives • Market research cannot be helpful unless it is probing a
particular issue
• Cost outweighs benefit • The expected value of the information should outweigh
the cost of gathering the data 19
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Problems With Research Buyers vs
Suppliers
Buyer Suppliers

• Narrow concept of • Variable quality of

research market researchers

• Research used • Market researchers not

tokenistically sufficiently demanding

• Unrealistic view of • Technical problems

timeframe

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Problems With Research Buyers

• Narrow concept of research

• many managers see M.R. as no more than fact-finding
• they therefore spend little time defining the problem or explaining the
context
• the results are irrelevant
• Research used tokenistically
• used to confirm existing views rather than objective look at marketplace
• Unrealistic view of time frames
• often results are expected very rapidly
• research therefore commissioned too late
• research firms bow to time pressure and results are sub-optimal

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Problems With Research Suppliers

• Variable quality of market researchers

• little uniformity of professionalism across the industry
• many small, poorly qualified companies
• Market researchers are not sufficiently demanding
• upfront time often insufficient
• little contact throughout process
• Technical problems arise
• problem ill-defined
• questionnaires poorly constructed

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Frequent Technical Pitfalls

1. Poor definition of problem

2. Designing the questionnaire

3. Sample size small

4. Data collection inadequate

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Issues to consider in questionnaire
design
• Sensitivity of question
• Bias in formulation
• Cultural issues
• Repetition
• Respondent motivation
• Questioner training
• Comprehensiveness
• Realism
• Ease of completion

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Sample Airline Questionnaire

1. What is your total income to the nearest hundred pounds?

2. Are you an occasional or frequent flyer?
3. Do you like this airline?
4. How many airline ads did you see last spring compared to this spring?
5. What are the most salient and determinant attributes in your evaluation of
airlines?
6. Do you think it is right for the government to tax air tickets and deprive a
lot of people of the chance to fly?

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Dodgy Questions: Airline Example
Question Objections
1. What is your total • - the respondent probably doesn’t
income to the nearest know the answer with this degree of
hundred pounds? accuracy
• - the firm doesn’t need to know the
answer with this degree of accuracy
• - people are not keen to reveal
income that accurately
• - a questionnaire should never begin
with such a personal question

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Dodgy Questions: Airline Example
Question Objections
2. Are you an occasional or • - how do you define occasional
frequent flyer? versus frequent: everyone will
define it differently

3. Do you like this airline? • - ‘like’is a relative term

• - will people answer it honestly
when phrased so blatantly?

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Dodgy Questions: Airline Example
Question Objections
4. How many airline ads did • - Who can remember?
• - What do you call ‘spring’?
you see last spring compared
• - What is an ad? Is it TV, magazine,
to this spring? poster or what?

5. What are the most salient • - What’s meant by ‘salient’and

‘determinant’?
and determinant attributes in
• - This sounds pompous and arrogant
your evaluation of airlines? even if people do understand

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Dodgy Questions: Airline Example
Question Objections

6. Do you think it is right for • - All objectivity is out of the

the government to tax air window
tickets and deprive a lot of • - Why ask if you’ve already made
people of the chance to fly? your mind up of the effects?

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Problems with Traditional Market
Research
1. Market research has allowed prominent product failures, and wrong
predictions
2.Markets are increasingly becoming micro-segmented (e.g. sports shoes
aimed at affluent fashion conscious women specifically for aerobics), so
mass market research becomes correspondingly irrelevant

3. It is helpful for improvements, but less so for radical innovations

4. For more accurate targeting it may be advantageous to work with leading
customers within the target group

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Coca Cola Example

May 1985 Old Coke withdrawn

New Coke introduced

Old Coke reintroduced as Coke Classic

June 1985

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Coca Cola Failure: Background
and Research
- Early 80s, share losses to Pepsi
- New Product research carried out
• $4m cost
• 200,000 taste tests
• 60% of consumers preferred it in blind tests
- BUT research was narrowly defined
• considered taste not emotions
• dropping Old Coke not mentioned

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U.S. Reaction to Old Coke’s Return

Political
• Senator David Prior of Arkansas on the Senate Floor:
“A very meaningful moment in the history of America, this shows that
some national institutions cannot be changed”
Media
• ABC interrupted its soap opera, General Hospital on Wednesday
afternoon to break the news

• Economic
• Coca Cola’s share price rose to its highest level in 12 years

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Limited Use of Market Research

“Formal market analyses continue to be useful for extending product lines,

but they are often misleading when applied to radical innovations. Market
studies predicted that Intel’s microprocessor would never sell more than
10% as many units as there were minicomputers, and that Sony’s transistor
radios and miniature TV sets would fail in the marketplace.

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Limited Use of Market Research

At the same time, many essential failures such as Ford’s Edsel and
supersonic transport were studied and planned exhaustively on paper, but
lost contact with the customers’ real needs.

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 New Market Research

Reliance on lead customers

Traditional Market
Research • interactive development

• increasingly popular (3M, HP,

Sony, Raychem)

• Better for true innovations

 Large Company Relianc e on
Customer’s Views
• Many experienced large companies are
What relying more on interactive development
with lead customers

• Traditional market research for truly

Why innovative new products has frequently
proved misleading

Who • 3M, Hewlett-Packard, Sony

• Radically new products introduced by

small teams working closely with lead
How customers (e.g. retailers). With this info.
designs rapidly modified and interactive
changes made
Market Research: Summary
Upon completion, the entrepreneur should be able to answer the following
questions:
• Who produces similar products?
• Where are the competitors located?
• What is the quality and price of your products?
• What can I do to make a new product better than competitors?
• Why would customers or consumers want to switch to a new product?
• What offers or incentives are competitors giving to retailers?
•What are competitors likely to do when a new product is launched?
The answers to these questions are then used to formulate a marketing
strategy.
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 ALCO-Locker

SAMPLE PROJECT-1

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 ALCO-Locker

Project Idea Integrating a gas sensor in cars that

measures the alcohol level of the user
and prevents it from being used by
locking the vehicle when necessary

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 ALCO-Locker
1. Your age?
2. Do you think drunk drivers are adequately supervised?
Questionnaire 3. What is your alcohol use frequency?
4. With which vehicle do you provide transportation when you are
drunk?
5. Do you believe that Alco-locker will reduce accidents?
6. Would you pay extra for special vehicles with this project?
7. If yes, how much?
8. Would you pay extra for the journey with taxis with this project?
9. If yes, how much?
10. Do you have any developer suggestions for this project?
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 Healthy
Food/Soup
Vending
Machine
SAMPLE PROJECT-2

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 Healthy Food/Soup Vending
Machine

Placement of soup vending machines in

Project Idea
university canteens and subway stations
to promote healthy and inexpensive
eating

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 Healthy Food/Soup Vending
Machine
1. Personal information
Age, income, education level
Questionnaire
2. Consumption habits
vending machine use

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 Healthy Food/Soup Vending
Machine
2. Consumption habits
2. Frequency of use of vending machine
Questionnaire

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 Healthy Food/Soup Vending
Machine
2. Consumption habits
3. Product specifications from vending machines
Questionnaire

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 Healthy Food/Soup Vending
Machine
2. Consumption habits
3. Which healthy foods do you prefer?
Questionnaire

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 Healthy Food/Soup Vending
Machine
2. Consumption habits
4. How often do you prefer healthy foods?
Questionnaire

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 Healthy Food/Soup Vending
Machine
2. Consumption habits
5. How much money do you spend on vending machines?
Questionnaire

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 Healthy Food/Soup Vending
Machine
3. Product
1. Is there a place at your school/workplace where you can
Questionnaire
buy healthy food?

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 Healthy Food/Soup Vending
Machine
3. Product
2. If yes, how much do you pay for the healthy snack you get here?
Questionnaire

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 Healthy Food/Soup Vending
Machine
3. Product
3. Would your frequency of use increase if there were healthy foods in
Questionnaire
vending machines?

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 Healthy Food/Soup Vending
Analysis
Machine
Questioned Hypotheses:

H1: There is a positive relationship between university students and vending machine
use.

H2: Low- and middle-income people are more likely to use vending machines.

H3: As the income level increases, the money spent on the vending machine will also
increase.

H4: As the frequency of healthy product consumption increases, the use of healthy
product vending machines will also increase.

H5: Those who prefer partially healthy products such as protein bars will use healthy
58
vending machines more.
 Healthy Food/Soup Vending
Analysis
Machine
Questioned Hypotheses:

H6: People who spend a lot of money on the vending machine will also use the healthy
product vending machine.

H7: People who can't find healthy food around tend to use healthy vending machines
more.

H8: People who spend a lot of money on healthy products are more likely to use healthy
product vending machines.

H9: People used to spend 0-5 TL on our healthy vending machine. (They spend 9.16
TL)
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