The Basics of E-marketing

The basics | The how to | When you need to hire a professional | Help and where to find itThe purpose of this factsheet series is to help producers and processors understand the key elements needed to manage a business. The factsheets also discuss some of the essential components used to develop a business plan and assess the profitability of a business venture. Finding out if people will pay one-third more for your natural, organic produce rather than buying produce at the local grocery store... calculating if you can make a profit if it costs $5.00/jar to make and market your gourmet jams and jellies... asking customers if they would patronize a gourmet coffee bar if you added one to your store - these are all examples of market research. The Basics What is market research? Market research is an orderly, objective way of learning about people - the people who buy from you or might buy from you. It can provide unbiased answers to questions such as: Who will buy your product? Will people other than family and friends buy your homemade dilled carrot pickles? What are the requirements of your customers? What price will they pay for your pickles? What size of jar do they prefer? What are their requirements for shipping that would affect jar size and/or shape? Where do they want to be able to buy your pickles? Are there other types of pickles they would buy? What are the characteristics of your customers? Who buys and eats pickles - what is their age, gender, income level? Where do they live? What are the attitudes and perceptions of your customers? Are they looking for new and different pickle products? Is the combination of dill and carrot an appealing one? Who else is producing the same or similar product - at what cost? Can you compete with their price, quality, etc? If no one else is producing such specialty pickles, why? What advantages can you offer that your competition can't or doesn't? It may be that your carrots are organically grown or that your pickles are an Alberta made product. What marketing constraints exist? Are there expensive start-up costs involved with going into pickle production? Are there major legal requirements needed to get the name or label information you want? Is the market saturated or is there room for your company? Will you be one of many companies selling pickles to people in your market area? Is this an area with an expanding market or one that is declining? In other words, can you make a profit at it? Does trend data indicate increased consumption of pickled products? Is there a growing or shrinking body of scientific evidence about possible health risks associated with eating too many pickled foods? How might this affect people's consumption of pickles? What do you see as the future for your business? Do you visualize your pickles to be on the shelves of all Canada Safeway stores in Alberta? ...in Western Canada? Why do market research? It's impossible to sell people what they don't want. That's obvious. Just as obvious is the fact that nothing could be simpler than selling people what they do want. Market research is essential in helping you find out what people want.Market research provides what you need to get sound information about your agri-food product, service or market so you can develop good marketing and business strategies. Who should do market research? All businesses, big and small, old and new, need to do market research. A common feeling of many small business owners is that they don't need to do market research as they already have a feel for their customer market, given their long experience. However, experience, though useful, can lead to a false sense of knowing. Be careful as information gathered randomly over the years may be out of date, vague, biased or of a folk tale nature. Business owners can't afford to make errors in judgment. Their savings, their families' future and their business reputations are at stake. Market research is a critical step. When should I do market research? Market research is not a "one time only" activity. It needs to be done on an ongoing basis and whenever a major business decision needs to be made. It usually needs to be done: before starting a new business when introducing a new product or service to maintain your existing business Before starting a new business Innovative ideas and gut feelings aren't enough when it comes to predicting success for a product or service.Just because your friends and relatives rave about the great parties you throw, doesn't necessarily mean your party planning and catering business will be an overwhelming success. Up front, you need to know: Is there a need for this service? Who is likely to buy your service? Are there enough of these people in your market area? How are you going to find these customers? Is a competitor meeting the need? If so, can you offer something they can't? How much are these people willing to pay? Will finding customers cost more than the profit margin allows? Is there a profit margin? Introducing a new product or service Again, a good idea, experience and intuition aren't enough when it comes to predicting success.Without market research at this stage of a business, you could end up with a basement full of jars of your gourmet mustards, which didn't sell nearly as well as your popular line of flavoured vinegars. Or, you might face competing products sold at local delis, supermarkets, gift shops and farmers' markets that you didn't even know existed. Or, adding a fried pastry product to your existing line of healthy muffins may damage your company's reputation for healthy snack foods. Maintaining your existing business Success today doesn't necessarily mean success tomorrow. Changes in markets, competition, technology and customers mean you can't rest on your laurels. You need to constantly be sure your product or service fits with these changes. You need to know what your customers think of your specialty dog biscuits. Is there a new untapped market - perhaps lower calorie biscuits for older, less active dogs? Are your customers ready for a new product? Are your prices in line? Is there new technology that would enable modifications or substitutions for an approved product? Has your target market become more concerned about the health and well-being of its dogs? Are competitors introducing new product lines? How to do market research? It's to your advantage to do at least some of your own market research. The more you do, the less money you'll pay to consultants and the more insight you will have regarding your product/service and market.Start by doing some indirect market research. Gather information that is already done and available to you at little or no cost. Existing businesses can look at their records and talk to employees. All businesses are well-advised to read government reports, food industry magazines, trade association surveys and other documents. Be sure to talk to people directly and indirectly involved in the agri-food industry. Some good initial contacts include Alberta Agriculture, Food and Rural Development, Alberta Economic Development, Community Futures, municipal offices and chamber of commerce offices. Check to see what your competition is doing. You may then find you need to do some direct market research. In other words, generate some information yourself. It might include such things as conducting a taste test of your new food product, doing a telephone survey, or observing the numbers and types of people who shop at the local delicatessen. This type of market research, since it is often more complicated than indirect market research, can benefit from the expertise of a market research professional. This doesn't necessarily mean turning the entire research project over to a consultant. Rather, it may mean the consultant does some work (e.g., develop a questionnaire) and you do some work (e.g., conduct a taste test of your vegetable dip at the local farmers' market and have tasters complete the questionnaire). So, although there is a need for specialists and consultants, they aren't needed to solve every problem. With additional reading on the subject, even those with no formal market research training can take an active role in conducting their own market research. Where to do market research? Much of your market research can be done at home or close to home since you need to know as much as possible about the market in your target area. Research the internet as well as your local public, college or university library. Chambers of commerce and government departments are also excellent places to begin your search on local and global market information. The How To Market research for small business involves applying some basic guidelines and techniques to ensure your marketing plan and business decisions are right on the mark. The eight steps of market research As with any business activity, your market research should be carefully planned, written down and carried out. If your business is already up and running, you probably do market research every day in your routine management activities without even realizing it. Market research simply makes the process more orderly and ensures no bias. The eight steps of market research are: Step 1 State the situation you are facing. For example, many adults in southern Alberta go to work every day without first eating breakfast. There are very limited food choices, often only sweet pastries, available at worksites for mid-morning snacks. Step 2 Clearly define your product or service. You want to market two varieties of low-fat, high-fibre homemade muffins - carrot pineapple and zucchini bran. Step 3 State the objective(s) of your market research. What do you need to find out? Think about what decisions you want to make from the information you will get. An objective may be identifying or verifying a target market, identifying or verifying customer needs and wants, finding new opportunities and new markets, or estimating the size of markets. A well-written objective is clear, concise, complete, realistic and commercially worthwhile. One objective may be to find out whether working people in the community are interested in more nutritious mid-morning snacks. Another objective may be to learn whether or not your nutritious muffins appeal to the tastebuds of these people. A third objective may be to discover whether the local high school will sell them in its snack shack. Step 4 Look at the information you already have. Research may simply mean organizing and analyzing existing information. Check sales receipts for your saskatoon cranberry muffins from the past three years. They may show a steady increase in sales, indicating your market is ready for more muffin varieties. Step 5 Collect additional information if needed. Begin by doing some indirect market research. Find information that is already available such as government or nutrition studies which look at peoples' breakfast habits, the importance of nutrition in peoples' food choices and the importance of a low-fat, high-fibre diet for good health. Then, if need be, do some direct market research. Generate some information yourself by doing a taste test of your new muffin varieties at a local supermarket or farmers' market. Don't be afraid to let the cat out of the bag. You need to talk to all kinds of people about your idea as part of your research to help determine if your idea is feasible. You can be assured that the advice you get from a professional consultant or government department/agency will remain confidential. Step 6 Organize and analyze the information collected. Make sure your research answers the questions who, what, where, when and why, so you don't jump to conclusions. Is there anything else you need to know? Who is your competition? Who else is producing muffins, breakfast bars or non-nutritious snack foods? Information from every source should be compared, ie. all similar types of snack foods available in local and nearby supermarkets. Contradictions or gaps in information mean more information is needed. You may learn that your target market is interested in nutritious snacks and likes the taste of your muffin varieties. However, if you don't know whether they are willing to pay $1.25 for a muffin, $0.25 more than a pastry costs, you'd better find out. Step 7 Make decisions based on what you have learned. If all questions are answered, including customers' willingness to pay $1.25/muffin, make a decision to add these two new muffin varieties for a three-month trial basis. Step 8 Watch the results of your decision and learn from them. If sales receipts and customer feedback during the trial period indicate that fewer carrot/pineapple muffins are sold than your other types, you may want to further explore the reasons for this. The information will help you decide whether to scrap the muffin variety or simply make a minor recipe modification. Note: Steps 1, 2, 3, 4, 7 and 8 can often be done on your own. Step 5 can often be done at least partly on your own. Step 6 may benefit from some professional market research help. Market research methods Market research can take many different shapes and forms. It can be as simple and inexpensive as going to the local library to do some research or checking out your competition at the local farmers' market. It can also be something more complicated and expensive like test marketing your product at a local grocery store or doing a telephone survey. Market research can be divided into two basic types: Indirect is inexpensive and fairly easy to obtain (information that is already there for the taking or buying such as government reports and trade association surveys). Direct is often more complicated and can be more expensive. Because it is custom made, it allows you to answer specific questions and concerns about your business and thus make business decisions more effectively (information you generate yourself such as surveys and focus group testing). There are also two general types of information market research can give you. One is quantitative. This is information expressed as quantities, percentages or numbers (e.g., 4,200 women live in Barrhead's trading area and profits in the Alberta restaurant industry rose by seven per cent between 1985 and 1993). The other is qualitative. This is information about people's feelings and perceptions (e.g., the main reason men shop in the Centre Mall is convenience). Both types can be useful. How to do your market research The following process helps you conduct the nuts and bolts of your market research, i.e. complete Steps 4 and 5 above. First - look within your business This is very inexpensive, takes place very close to home and means doing some indirect research and maybe a little direct research. Check your records. Look at sales records, complaints, returns and receipts. Check the reasons people returned your potato chips to see if there is a common denominator. Find out what your competitor(s) charges for their potato chips and compare it to yours. Cross reference addresses on receipts with the type of potato chips bought, to tell you how effective an ad in a particular newspaper was. After checking your records, talk to your employees. They are excellent sources of information on customer likes and dislikes. They hear the positive comments, the minor gripes and the requests for a type of potato chips or potato-based snack food you don't carry. From their day-to-day contacts, employees can give you a good idea of your customer profile. Next - look outside your business Start by doing some indirect market research This will still be inexpensive and fairly close to home. Government studies, food industry magazines, business magazines, newspapers, business directories, demographics, statistics, computer databases and competitors' literature are just a few sources of useful information available at minimal or no charge. Much of this information can be accessed from libraries, chamber of commerce offices, Alberta Agriculture, Food and Rural Development, Community Futures, Alberta Economic Development and via the internet. Staff in these places can help you find the information you need. To ensure your indirect market research is done effectively and efficiently: determine what decisions you will make as a result of information collected decide what information you need identify and find possible sources of information evaluate usefulness of information found: Who collected it? When? Why? How? organize the information decide if direct market research is needed before making a decision Consider doing some direct market research - You may find this necessary and useful. Surveys, group interviews, test marketing and observation are the most common direct market research methods used by small businesses.Because this can be fairly complicated and/or require certain skills and time, this is where you may see the real benefit and need for a market research professional. This is especially true if you are considering making a major decision that requires a large amount of money. To ensure your direct market research is done effectively and efficiently: review Steps 1 and 2 of your indirect market research action plan and make decisions based on the information collected and what information you need to make the decision. decide which method is most appropriate, given the objectives decide on the appropriate sample size decide who you will contact for your sample develop a questionnaire and letter needed to gather the information review the method chosen to make sure it is the most appropriate. Test marketing your muffins at local farmers' markets may be a better way of getting information on the taste of your muffins than a telephone survey pre-test your survey and make changes if necessary gather the information organize and analyze the information make a decision(s) evaluate the result of the decision(s) The key to good marketing research is neither sophisticated technique nor reams of information. Rather, it's useful and timely information. So do market research, but don't overdo it.When you need to hire a professional Although small businesses can successfully do much of their own market research, there may be times when it is wise to hire a market research professional. You may use them as: project managers when the complexity or size of project is beyond the capabilities of your business advisors in choosing the appropriate research method from several alternatives and in reviewing different survey tools focus group moderators data collectors and compilers for surveys where a large number of responses are involved consultants in helping review research or interpreting results of research projects or focus group sessions interviewers, trainers and monitors for surveys Do you need to hire a professional? When do the benefits outweigh the costs? Consider these two situations: Joanne is the owner of a small food manufacturing business that is considering adding a new product line that could bring a profit of thousands of dollars every month. Bringing out this new product line will cost $100,000, most of which she will need to take out as a loan. Jim is currently working full-time, but wants to open his own business. He has found a new, non-food use for canola oil. He can buy a small amount of canola oil inexpensively. With a small amount of money to buy a few other ingredients, packaging and labels, he can produce his product and test it on a small scale. If all goes well, he may next have to decide whether he can make enough money to quit his job and run a successful business. Both situations would benefit from professionally done market research, but at what cost? Joanne should be willing and able to spend $5,000 to $10,000 or more, to investigate her idea as she risks everything by doing inadequate research. On the other hand, Jim would be well-advised to spend some time and money searching for market information given that his risk is smaller at this point.Your business may be somewhere between Joanne's and Jim's situations. Only you can determine how much to budget for your project and how much of your own time to spend on it. To help decide when it is wise to hire a market research professional, ask yourself: How much do I have to spend? In general, market research firms bid by the project, basing their charges on hourly rates ranging upwards to $200 or more. It's less expensive to use the market research services of post-secondary students and/or professors at local universities, community colleges and technical schools. Find out what market research help is available at your local post-secondary institution. Your research request might be a class assignment or you may be able to get help through consultation with a senior student or faculty staff. Consider all faculties relating to your agri-food product or service for research assistance. What is the benefit of research?What will I gain if it is done well? What is at risk?Jobs... money... reputation... your future? How much can I realistically do myself?What time do I have? What skills do I have or can I obtain easily? What are the benefits of doing it myself?This includes familiarity with your business, its background and having control. What are the benefits of having a market research professional do it? The professional is a research specialist who is objective, knowledgeable and credible. They can help you anticipate other demands or provide information that makes your market research more useful. How to choose a good market research firm If you decide to hire a market research professional, how do you get a good one?Consider your business needs carefully. Identify changes in your business that point to the need to do this research. Identify how a professional can help you. Talk to others. Ask who knows or has used market research firms. Contact Alberta Agriculture, Food and Rural Development, Alberta Economic Development and Community Futures for information. They can help guide you in selecting a reputable firm. Check your nearest city's phone book. Look under marketing research and analysis, or marketing consultants in the yellow pages. The aim is to come up with three or four research firms. Make contact with these market research firms. Preferably, this should be done by letter. Describe the problem/situation as fully as possible, explain it's importance to you and set out what you need from them. This gives them time and opportunity to consider what they have to offer. Arrange an interview with each firm. Not only will the interview give you a first impression of how the firm operates and the calibre of its staff, but it will allow you to: get background materials such as information about the firm, references and examples of similar work get a feel as to whether or not the research firm appears to have a good understanding of the nature of the problem learn how the firm works with clients - Does it welcome input or supervision from time to time? How often do they suggest meeting with you? Will they issue interim reports? In the case of a survey, would the research firm welcome using your skills or those of your staff to do some of the surveying? request a written proposal by a certain date outlining the research plan in enough detail to prevent future misunderstandings - Make sure you let each firm know that other research firms are being asked to submit proposals. Judge the proposals. Look for understanding of the problem and its marketing implications. Look for someone who has time to spend with you at the initial interview stage, when setting up the research work and during the research. Look for proven expertise in the qualifications of the individual who will be involved in the research. See that the total price is acceptable. Be cautious of large price differences between firms as this may reflect different assumptions. Check to ensure that there are acceptable plans in place for changes if they are needed.Choose a research firm. Have them write up a contract for both parties to sign. It should include all the details of the research study, i.e., who will do the work, how the work will be done, the timing of the research and subsequent report, the price, date and method of payment. Note: A well-written contract, along with a strong, ongoing and open relationship between you and the research firm, helps prevent errors of understanding or judgment and resolve any problems that arise. Help and Where to Find it There are many places to get help doing your market research. Local public, university, college, technical school, Community Futures and government department libraries are sources of valuable information having numerous reference books/reports, scientific journals, periodicals/ magazines, directories and computer databases. Ask the reference librarian for help in making sure you get the relevant information you need. Note: Some larger libraries offer special services. For example, Business Information Services, Calgary Public Library, 616 Macleod Trail S.E., Calgary, AB, T2G 2M2 (403) 260-2782 offers an inexpensive, custom-designed "fact finding" information service for any business in Alberta on market research or any other business topic. The Edmonton Public Library offers a similar "Smart Search" program. Local municipal and chamber of commerce offices have general information and demographics about communities and their businesses. The Community College Small Business Development Centre or Federal Business Development Bank (FBDB) can help guide you in planning and completing your market research. The following list will guide you to some of the best sources. Publications Alberta Agriculture, Food and Rural Development publishes The Packaged Goods on Food Processing, The Directory of Alberta's Agricultural Processing Industry, numerous other publications and home study materials. In addition, they have reference information, including production and commodity statistics and names of consultants and suppliers. Alberta Economic Development publishes Marketing For A Small Business, as well as other free publications for small business and reference material on business profiles, community profiles, general statistics and supplier information. Selected reports Assistance to Business in Canada - annual publication that gives information on all federal and provincial assistance programs. Canada's Postal Markets (Maclean-Hunter Ltd.) - statistics on consumer spending, vehicles registered, mother tongues, etc. - organized according to postal codes. Canadian Reference Directory on Business Planning and Funding - a list of sources of federal, provincial and private capital that is updated quarterly. Canadian Business Index (Micromedia Ltd.) - a list of Canadian periodicals and reports on business. Canadian News Facts - a list of information from news sources. Census Data From Statistics Canada (Supply and Services Canada) - this data comes in many forms including books of national statistics, books of provincial statistics and books of statistics for individual cities. Information includes: population characteristics, average family size, average income, population by gender, by age, etc. Corpus Almanac and Canadian Sourcebook (Southam Business Information and Communications Group Inc.) - invaluable in leading you to other sources, this book contains such information as associations and societies, federal, provincial and some municipal government agencies and public, private and university libraries. Market Research Handbook (Statistics Canada) - an annual document providing a convenient source of information and reference material for analyzing the many aspects of Canadian markets at local, provincial and national levels. The Apparent Per Capita Food Consumption in Canada (Statistics Canada) - a food consumption trend resource. The Financial Post Canadian Markets (The Financial Post) - demographic information on Canadian cities and regions. The Financial Post Survey of Industries (The Financial Post) - the characteristics, growth and health of various industries. Selected periodicals/magazines Canadian Grocer Canadian Journal of Market Research Western Grocer Food in Canada Grocer Today Inc. Magazine Commerce and Industry Journal of Small Business and Entrepreneurship Marketing Magazine Prepared Foods Profit: The Magazine for Canadian Entrepreneurs Report on Business Magazine Small Business Magazine The Financial Post Magazine The Financial Times of Canada Venture Selected reference books Andrew P. Garvin with Robert Berkman and Hubert Bermont, The Art of Being Well Informed. Garden City Park, NY: Avery Publishing Groups Inc., 1993. Blankenship, Albert and Breen, George. State of the Art Marketing Research. Chicago: NTC Business Books, 1993. Breen, G.E. and Blankenship, A.B.; Do-It-Yourself Marketing Research, Replica Books, 1998. Chakrapani, Chuck. Marketing Research: Methods and Canadian Practice. Scarborough: Prentice-Hall Canada, 1992. Churchill, Gilbert A. Basic Marketing Research. Toronto: The Dryden Press, 1988. David W. Stewart & Michael A. Kamins, Secondary Research:Information Sources and Methods, 2nd Ed., Newbury Park, CA: Sage Publications, 1993. Doman, Don, Dennison, Dell and Doman, Margaret. Look Before You Leap: Market Research Made Easy. Vancouver: Self-Counsel Press, 1993. Edmunds, Holly; AMA, Complete Guide to Marketing Research for Small Businesses, AMA,1996, 190 pp. Fink, Arlene (ed.); The Survey Kit; Thousand Oaks, CA: Sage Publications, Inc. 1995. (http://www.sagepub.com) This handbook consists of the following nine volumes, available in paperback: 1. The Survey Handbook by Arlene Fink 2. How to Ask Survey Questions by Arlene Fink 3. How to Conduct Self-administered and Mail Surveys by Linda Bourque and Eve P. Fielder. 4. How to Conduct Interviews by Telephone and In Person by James H. Frey and Sabine Mertens Oishi 5. How to Design Surveys by Arlene Fink 6. How to Sample in Surveys by Arlene Fink 7. How to Measure Survey Reliability and Validity by Mark S. Litwin 8. How to Analyse Survey Data by Arlene Fink 9. How to Report on Surveys by Arlene Fink. McQuarrie, E.F.; Marketing Research Toolbox; A Concise Guide for Beginners, Thousand Oaks, AC: Sage Publications, 1996. 154 pp.Pope, Jeffrey. Practical Marketing Research. New York: American Marketing Association, 1993. Soares, Eric. Cost - Effective Marketing Research. New York: Quorum Books, 1988. Sudman, Seymour and Blair, Edward, Marketing Research: A Problem-solving Approach; McGraw-Hill College Publishing, 1998. Websites These references were taken from The Burke Institute Practical Marketing Research Manual. Canadian comprehensive directories