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 to

support market entry, feasibility and strategic investment decision-making.

Material for this session is drawn from Spire’s regional practice and from
material published in the Spire E-Quarterly.

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

equarterly@spireresearch.com

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 Thesis: Non-traditional research tools add value when used
prior 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
Channels
Competitor 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 Market
Scenario: Introducing an imported, foreign brand of beer into China

Secondary research – to understand share of Review consumer study

imported/foreign beer and trend, from analysis of trade objectives – focus on promising
data niches?

First register which are the

import brands that have a
Expert interviews and visits to pubs, hotels and retailers foothold – later used to test
for products checks – to form a preliminary view on the consumer awareness of those
major imported brands brands to work out best
positioning

Key Competitor analysis using secondary research – to To later design consumer

analyze data on critical success factors such as bottle questionnaire to test importance
design and relationships with key channels of competitor CSFs – eg is
choice of pub more important
than choice of brand

Channel interviews (distributors, retailers, pubs, hotels), If there is need to prioritize

secondary research on geographic and demographic consumer research budget, use
patterns by income and beer consumption – to form a this to help decide focus by
preliminary view on promising channel segments, geography or
customer segments and geographic regions channel 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

indicators…but 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

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 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 on
underlying 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 code
Trade 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 crucial…but sometimes hard to find

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 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 competitor’s website highlighted

consumer research findings on a stationery product market in Korea

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 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 and
Western almonds, to ensure correct survey results

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 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 outsourcing
Journalists
Can be trade periodical journalists but also news media journalists with
relevant specialization
Government officials
Useful 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

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 Non-traditional tools: Channel interviewing

The client’s 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 and
elongated, 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-Level
Marketing and direct sales initiatives from manufacturers

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 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 which
may 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 was
flash 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

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 Non-traditional tools: Client interviews

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.

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