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Pa e 1Spire Research & Consulting Speech to Asia Insight 2005

Address to Insight Asia

Conference 2005

Non-Traditional Tools for Understanding Consumers

Thursday 25 August, 3.45pm, Swissotel Merchant Court Hotel, Singapore

Speaker: Leon Perera, Group MD, Spire Research & Consulting


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Spire background

Spire: a strategic market intelligence firm serving enterprises in the Asia-

Pacific.

We focus on holistic, strategic studies on the external business environment tosupport market entry, feasibility and strategic investment decision-making.

Material for this session is drawn from Spires regional practice and from

material published in the Spire E-Quarterly.

To receive the Spire E-Quarterly, please email us at spire-

[email protected]


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Thesis: Non-traditional research tools add value when usedprior to traditional consumer research programs

The non-consumer research methodologies used by Spire include business and

professional interviewing, expert interviewing and secondary data analysis

Non-traditional tools can be useful in:

Setting priorities for traditional consumer market research investment

Formulating hypotheses for testing

Adding context to better understand consumer research findings

Such non-traditional tools include:Secondary data analysis

Expert interviewing, targeting:

Expert observers of a market

ChannelsCompetitor and substitute analysis

Non-traditional tools can be a powerful source of competitive advantage in a

consumer insight program informing recruitment criteria, questionnaire or DG design

and interpretation of results.


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Example: The China Beer MarketScenario: Introducing an imported, foreign brand of beer into China

Review consumer study

objectives focus on promising

niches?

Secondary research to understand share of

imported/foreign beer and trend, from analysis of trade

data

Expert interviews and visits to pubs, hotels and retailers

for products checks to form a preliminary view on the

major imported brands

Channel interviews (distributors, retailers, pubs, hotels),

secondary research on geographic and demographic

patterns by income and beer consumption to form a

preliminary view on promising channel segments,customer segments and geographic regions

Key Competitor analysis using secondary research to

analyze data on critical success factors such as bottle

design and relationships with key channels

First register which are the

import brands that have afoothold later used to test

consumer awareness of those

brands to work out best

positioning

To later design consumer

questionnaire to test importance

of competitor CSFs eg is

choice of pub more important

than choice of brand

If there is need to prioritize

consumer research budget, use

this to help decide focus by

geography orchannel segment


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How do non-traditional research tools add value?

The value of non-traditional tools can be seen in terms of:

Setting priorities for traditional consumer market research investment where

necessary:

Selecting geographic areas of greatest interest

Prioritizing segments of greatest interest by product category or

customer type

Formulating hypotheses for testing using consumer research tools

Providing context for understanding consumer research findings


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Identifying promising Geographic zones

We can prioritize geographic areas by looking at economic or demographic

indicatorsbut which ones?

Much depends on whether one is marketing high-end or low-end

consumer products or commercial/industrial products

For products with low income elasticity, we should look more at population

distribution, taking into account age, ethnic or religious demographics where

necessary

For products with high income elasticity, we should look more at metrics like income

per head, household spending, retail sales or disposable income...

though this data is not always easily available by province and city and in

some cases may need to be estimated


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Identifying promising Geographic zones (continued)

We can prioritize geographic areas using macro-strategic research to discover historical

sales of product by type

Secondary data may be available in some cases, eg vehicle

registrations by province

but often, secondary data is not available and estimates need to be

made based on industry interviews

Judgements about promising geographic

regions should take into consideration not only

absolute sales volumes but sales values

and the likely growth rate, taking into account

product life cycles


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Identifying promising Product Categories

Prioritizing segments by product category, price band or customer type

is another path for non-traditional tools to add value

Product category prioritization:

Often a program of consumer research examines demand for a product category which

has a number of sub-categories, eg different engine capacities for motorcycles

Macro-strategic research tools can be used to

elicit information on historical and forecasted future

sales by product sub-category, based on secondary

data searches and information exchange with channels

and competitor producers

This helps to prioritize focus by product category, to make

best use of limited budget or time


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Identifying promising Customer Segments

Customer segment prioritization:

This objective is more problematic using non-traditional tools

Engaging with channels to understand their view of key segments can be of value

One example: power tools research, where non-traditional tools helped determine what

proportion of the market was DIY/home consumer versus industrial users, a critical input for

prioritizing customer segments for traditional research

For example:

Research on data-enabled phones interviews with retailers to understand characteristics of

customers in terms of demographic profile and line of work, to validate our hypotheses about

what profile of customers to recruit for consumer research

Research on industrial equipment arriving at a view on the most promising vertical segments

and geographic regions by starting first with competitor and channel interviews before going on

to customer interviews


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Formulating Hypotheses for Testing

Formulating or validating initial hypotheses for testing can be done

with the help of expert or channel interviews and secondary

research. These can relate to:

Usage and attitude towards product category and brands

Drivers of buying and switching behaviour

Which competitors or substitutes have a strong position

Examples of using non-traditional tools prior to consumer research, to generate

hypotheses for testing

Online sales of electrical and electronic goods in Japan competitor benchmarking

suggested that Japanese e-commerce consumers prefer a COD mode of payment

Home computer peripherals - competitor analysis helped our client to ask the right

questions during consumer research about reactions to new competitor product concepts


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Interpreting Consumer Research Findings

Non-traditional tools can provide context for understanding and making use of consumer

research data by, for example:

Understanding the reasons behind consumer research findings,for example changes in the economy or access to credit

which may impact consumer interest in a product

Quantifying the size of demographic, economic or geographic

segments, so as to set feasible sales targets

Understanding the number, distribution and companies in

specific types of channels (for example: hypermarkets,

DIY retail stores, Post Office outlets, photography mini-labs) ,to help plan channel programs

Elaborating on legal and regulatory requirements necessary

when at the go-to-market stage



Non-traditional tools: Secondary Research

Secondary data analysis encompasses :

Published economic, demographic and industry data

The reliability of sources, even where they are Government sources, needs to be

scrutinized and adjustments made where necessary

Such data can inform the choice of consumer research method for example telephone

penetration viewed in conjunction with income per head data can help decide if most of

the targeted segment can be reached by telephone

Product sales trend data is sometimes available from published sources, based onunderlying macro-environmental research programs

Import/export data and production data can be extracted and examined

Trade data for product categories is often grouped together to secure minimum numbers

of data points per HS codeTrade data should be adjusted for re-exports

Trade data in some Asian countries should be used with caution due to problems with

underlying data collection accuracy

For products where substantial volumes are not imported but locally produced, local

production data can be crucialbut sometimes hard to find



Non-traditional tools: Secondary Research (continued)

Published market commentary is often very helpful in formulating hypotheses about:

Trends in product design, consumption patterns, competition, distribution and technology

Popular product sub-categories

Such commentary can be found in trade periodicals and news media, but also from

other sources such as:

Sector reports published by investment banks

Competitor press releases, annual reports and IPO prospectuses

Trade and country news websites

Example: a press released on a publicly listed competitors website highlighted

consumer research findings on a stationery product market in Korea



Non-traditional tools: Competitor Product Analysis

Studying competitor or substitute products can yield valuable inputs for designing

consumer research questionnaires and discussion guides

For example, when researching the digital print mini-lab business,knowing that online print websites are thriving in a country like Korea

may suggest a question about when they would print online versus

visiting a digital mini-lab

Another example: when researching almonds in Indonesia, local

products were found that looked similar to almonds, known

as Java almonds.

Consumer interviewees were shown the difference between Java almonds andWestern almonds, to ensure correct survey results



Non-traditional tools: Expert Interviewing

Experts can offer input on prioritization & hypotheses for testing

Who could be experts?

Academics.

Example: Business school academic specializing in

BPO, interviewed for a project on document outsourcingJournalists

Can be trade periodical journalists but also news media journalists with

relevant specialization

Government officialsUseful because regulators can offer an understanding of the market

situation, but also because Government influences trends rather than just

observeing them

Trade bodies

Can be useful in cases where the trade organization has permanent staff

and conducts research.

A Delphic approach can be used to process expert feedback



Non-traditional tools: Channel interviewing

The clients channels can be engaged using in-depth interviews

or focus groups bringing together executives with similar roles in

the channel company Spire is experienced in both

The value of Channel interviews is similar to that for Experts

The principle to follow would be to select channels that are closest

to the end-customer and to interview the relevant individuals in the company

For some industrial and commercial products, the decision-making process can be complex andelongated, with various tiers of channels, contactors and consultants influencing or even making

the decision to buy

Understanding novel channels will help in prompting consumers during qualitative or quantitative

consumer research. Novel but emerging channels would include auction web-sites, Multi-LevelMarketing and direct sales initiatives from manufacturers



Non-traditional tools: Competitor Analysis

Studying how competitors view their customers, what new product concepts they have

placed before customers and how their activity may have impacted customer attitudes

and perceptions

is valuable in designing consumer research tools.

We should also study providers of substitutes and successful best practice leaders whichmay not be direct competitors.

Forecasting competitor future plans can be useful.

Examples:

Using patent searches to suggest new product concepts in the competitors pipeline, which can

be tested in consumer research to determine the best counter-strategy

Studying product substitutes when researching a consumer data storage product, to understand

what was the closest substitute people now had to our client's product. In some countries, it wasflash cards and for others, back-up portable drives. Recruitment of consumer respondents would

be by ownership of the dominant product.

Studying a successful direct selling firm in Japan, learning how customers may call up several

times to ask questions before they buy this hypothesis could be tested in consumer research



Lastly, it should be noted that interviews with client company executives

in charge of local sales can be useful in developing initial hypotheses to

inform consumer research.

Interviews or focus groups that are conducted by an external market

research firm can be more useful in eliciting frank feedback about the

market situation from such executives.

Non-traditional tools: Client interviews


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