WHY A MARKET SURVEY ?
The era of the seller’s market has gone. Ours is now a market-driven economy and hence, understanding a customer and his needs and motives becomes very important. An entrepreneur has to understand his customer’s behaviour, demands and desires. He has to satisfy their desires if he wants to corner a sizeable share of the market. For an entrepreneur the risk of setting up an enterprise and managing it successfully depends mainly on how he makes his decision in conditions of uncertainty which involve both risk and opportunity. An entrepreneur should know his market and customers well so he can avoid risks and take maximum advantage of the opportunities.
Markets are becoming increasingly dynamic and competitive. Their successful exploitation calls for greater investment and more innovations. Decision making therefore, must be faster and less susceptible to many of the needless errors of intuitive judgement. It is advisable that a detailed market survey is undertaken to understand the market and feasibility of marketing the product instead of taking a hasty decision to start a venture.
WHAT DOES MARKET RESEARCH/SURVEY INVOLVE ?
Market Research or Survey may be defined as an objective and systematic collection, recording analysis and interpretation of existing or potential markets, marketing strategies, tactics and interaction between markets, marketing methods, and currently available products or services. It helps apply a truly analytical approach to decision – making and assists in the evaluation of the effects of decisions which have already been taken. These six basic questions can give us information about buyers or potential buyers :
What do they buy ? (which product or service)
Why do they buy? ( the reason for buying the product)
Who does the buying? (young or old, man or woman, etc.)
How do they buy? ( in bulk or units, by cash or credit)
How much do they buy? (quantity, how many times, etc.)
Where do they buy? (shop/agent/mail order/direct, etc.)
The objective of the survey should be to enable you to answer the following questions:
What is the size of the market and the anticipated share for my product/service in terms of volume and value?
What is the pattern of demand?
What is the market structure?
What are the buying habits and motives of the buyers?
What will be my strong points in marketing my product or service?
What are the past and future trends?
For a new entrepreneur, a major problem in conducting a market survey is the lack of knowledge about sources of information and contacts. You should, however, try to gather the above information, as trying to market a product without it is just like shooting in the dark without knowing where the target is.
The process of a market survey involves the following steps:
Defining the objectives of the study and specifying information required
Working out details of the study :
identifying sources of information
time and cost involved
methodology and action plan
Selecting samples and deciding contacts and visits
Preparing questionnaire and plan for survey and interviews
Collection and analysis of data
Preparation of a report with findings of the survey
The operational work can be divided into three major areas-table work, field work, and report writing.
Market Segment
A market is composed of different sections like the teenagers' market, adults' market, rural market, urban market, upper class market and so on. Each section is known as a 'Market Segment'. A new entrepreneur conducting a market survey should try to thoroughly study the market segment at which his/her product is targeted.
To have a qualitative and/or quantitative assessment of the market, you must rely on data which may be primary data (information to be collected for the first time), or secondary data (information that already exists, e.g. printed matter).
HOW TO COLLECT PRIMARY DATA
Observation Method: By observing customers' behaviour, responses and movements, one can get partial answers to many questions related to the marketing of a particular product (e.g. how people respond to words like 'sale', ‘discount' 'free', or the effect of a particular colour or shape).
Experiment Method: In this method a market situation is created and then a study is
made (e.g. having a display of clothes and noting the reactions of customers).
Survey Method: This is the most common method because it provides much more information. It is expensive but reliable if the research objectives are clearly defined. If the aim is not clear then the objective is not fulfilled.
Mode of Survey: There are two main methods of selecting samples from people: (i) non-random or judgement sampling, and (ii) random -or probability sampling. In random sampling, anybody can be chosen for the survey. In non-random judgement) sampling, personal knowledge and opinion are used to identify the people who are to be included in the sample.
Systematic Sampling: In systematic sampling, you select samples at a uniform level that is measured in time, order or space.
Stratified Sampling: To use this method, you divide the population into relatively homogenous groups. You either select at random from each group or draw an equal number from each group.
Cluster Sampling: You divide people into groups or clusters and then select a random sample of these clusters.
Convenience Sampling: You choose the samples on the basis of convenience or
accessibility. This method should be used only for special situations in marketing.
Quota Control Sampling: Here you attempt to ensure that the sample selected is representative of your target market segment on the basis of certain parameters such as age, sex, occupation, etc.
Area Sampling: This, of course, is self-explanatory.
Secondary para Sources
Data which is already available may be used for investigation purposes. This information may be obtained from those who are indirectly involved (e.g. traders or manufacturers' associations) or from published data.
TIPS FOR CONDUCTING MARKET SURVEY
It is very important for you to make a proper survey and gather relevant information. It can happen that persons who are in a position to supply the information may not realize the value or importance of keeping this in mind. You have to work tactfully to gather data in such a way that you can obtain the information he requires. The following tips can help you conduct the survey effectively and systematically.
Do not be prejudiced or status-conscious. Prejudices about education, caste, community and your own status-consciousness can act as a negative factor in collecting information from different people.
Arguments should be avoided. The objective of the survey should be to get information and hard facts, not personal opinions.
Don't misconstrue assumptions or personal opinions as data or information. Keep your cool and patience during the survey.
See that the person who provides information is in no way inconvenienced or harmed.
Make a habit of writing down the information gathered.
Avoid asking direct personal questions which can hurt the other person's feelings or invade his privacy. He may not like to answer questions about his income or profit or marital life.
The sequence of questions, your involvement and commitment to obtaining information are the key factors for success.
The best way to approach your competitors is to visit them as their client or customer.
Don't ask 'Will you buy our product?'. Mostly, the answer will be 'Yes'. This will misguide you. Try to indirectly gauge the level of his interest in your product and double check it before you consider that information.
Don't forget to thank the people whom you have approached for information.
At the end of the survey, a detailed report of the findings must be prepared in a written form. If possible, use the computer for tabulation and calculation.
This market survey report will not only help you in assessing the feasibility of marketing your product, but will also act as an important document to convince financial institutions of your understanding of the market and chances of success.
ANNEXURE 13.1
Questionnaire for Market Survey
The following will help you to collect information and thus enable you to understand the nature of your business. Here, a broader perspective has been suggested for the market survey, so that it may provide all the relevant commercial information. These are the questions that the survey should enable you to answer:
FOR RAW MATERIALS
Who are the major manufacturers/suppliers of the materials?
How much time separates the placing of the order and the delivery? Which terms of supply prevail? (tax structure, price, packaging, payment terms, etc.)
What is the standard/minimum packaging or the minimum order quantity?
Are all the materials freely available?
Are there any (created) shortages in the market at any particular time of the year?
What has been the trend of price changes and availability in the past (at least for the last two years)?
Will any government decision affect the availability and the price of any of the materials?
Will it be more advantageous to purchase the. material locally or to procure it from elsewhere?
FOR MACHINERY/EQUIPMENT
Who are the manufacturers and/or suppliers?
What capacity, specifications and brands are available in the market?
What are the prices of the machines? (Consider all applicable taxes, transport, accessories, etc.) . What electrical equipment such as motor, starter, switches, etc., are required?
What guarantee/warranty of performance is offered by the manufacturers?
What is the normal repair! maintenance cost per year? Which spare parts would be frequently required?
What are the terms for ordering-payment, advance, delivery time, etc.?
Before taking delivery of the machines can they be inspected done at factory?
What is the market standing of the manufacturers and the list of parties to whom the same machines have been supplied?
Will special transport and handling be required?
What are the overall dimensions of the machines and working (floor) area requirements?
What average (maximum) quality standards and output (production) can the machine(s) enable?
FOR MARKET
From Manufacturers (Competitors)
What is the general factory lay-out and the space occupied?
Their range of products, installed capacity and utilized capacity, and selling price.
Their normal terms of business.
What are their future plans for expansion/diversification?
Salient features of the units like technical skill, finance, other resources, etc.?
Their market area, segment and marketing practices.
Any special problems faced by the units?
From Suppliers (Traders)
Who are the present principal traders in the item? Range of products dealt with and general business terms, commissions, etc.
Their respective market areas and annual turnover estimates. . Duration and type of his relations with principal.
Possibility of trading with him and the expected business terms.
Normal level of stock he is maintaining and any specific problems he might have in stocking goods.
His predictions/comments on business conditions.
From Consumers (Customers)
What is the annual consumption and requirement?
What are the present sources of supply?
Customers' loyalty to brands and preferences like price, quality, terms of payment, etc.
Whether he is satisfied or dissatisfied with present product and supply?
What are his criteria for purchase and what is his purchasing power?
What is the consumption pattern? (basis of calculating his requirement)
What changes in his consumption are expected? (In quality, due to changes in technology, etc.)
What is the quantity of his average order, and when and with what frequency does he place orders?
ANNEXURE 13.2
Key Components Market Survey Report
Introduction
End products
End users
Suitability and strength of selecting particular product
Product
Specifications, sizes, brands, packagings, selling price, etc.
Assessment of Demand
Class and type of consumers/clients
Patterns of consumption and frequency of purchase
Product life cycle and present status
Past demand pattern
Anticipated future demand projections
Buying criteria and influencing factors
Supply Position
Current availability and production capacity versus utilization
Present indigenous and imported supply sources, their price comparisons, services, etc.
Marketing Practices
Prevailing marketing practices
Distribution
Packing/Forwarding
Credit Policy
Delivery, After Sales Services
Selling price, taxation structure and commission patterns
Purchasing procedures, time required and practices prevailing
Own Marketing
Own market share of supply-demand gap
Plans and Strategies
Strengths and special services to be offered, if any
Possible clientele and their likelihood of buying from you
Source: Hand Book for New Entrepreneurs by EDII