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Market IntelligenceSession 1Course Introduction, Backward Market Research, Secondary Data, Measure Types, Crosstabs1Todays AgendaCourse Overview: The Big PictureIntroduction to Backward Market ResearchSecondary dataMeasure typesCrosstabs Set up Luna Beer caseSome course details2We will generally follow the preassignment today with 5 main areas we want to cover.Framing and motivation for the course.Scenarios on ethics to raise awareness for different perspectives.BMr as fundamental concept for the entire course. Should have a strong influence on how you approach problems and research going forward.Our first case is next class and we will spend some time on set up of the southwest conquistador beer case Finally, we will make sure everthing is clear on our expectations for the class, what we intend to cover and we will cover it.Todays AgendaCourse Overview: The Big PictureIntroduction to Backward Market ResearchSecondary dataMeasure typesCrosstabsSet up Luna Beer caseSome course details3We will generally follow the preassignment today with 5 main areas we want to cover.Framing and motivation for the course.Scenarios on ethics to raise awareness for different perspectives.BMr as fundamental concept for the entire course. Should have a strong influence on how you approach problems and research going forward.Our first case is next class and we will spend some time on set up of the southwest conquistador beer case Finally, we will make sure everthing is clear on our expectations for the class, what we intend to cover and we will cover it.John DoerrThere are basically four risks we have to confront in each deal. There is technical risk: Can we split the atom? There is people risk: Will the key players on the team stay together? There is financial risk: Can we keep the company well financed? And there is market risk: Can we get the dogs to eat the dog food? The most dangerous of these risks is market risk. Removing market risk is expensive were risk takers but we will take a technology risk over a market risk any day of the week.

(Perkins & Perkins, 1999, The Internet Bubble, p. 74)4To help frame what our goal with market intelligence is I want to turn to a quote from John Doerr. Anyone read the book The internet bubble? Interesting read and for those interested in venture capital, there is some discussion of Kleiner Perkins a prominent VC firm. One of the big shots there was and is John Doerr and there was some discussion from him in the book on the secret to venture success. His secret was to get the risks out of the way as early as possible and he went on to state the followingMarket Risk can we get the dogs to eat the dog food. Seems like an issue marketers and the entire organization should be concerned with. Someone help us out here what is Doerr referring to here when he says market risk?Uncertainty, uncertainty about the demand curve the scale and shape of it.For VC with newer innovations this is particularly difficult to get your hands around compared to a mature product for there is less uncertainty. How big will the market be or could the market be given the right actions.~The whole idea of the course is to help you make those assessments and learn to reduce market risk by sophisticated use of market intelligence information about customers, competition, and markets. This in term allows for better strategic decisions.

Big decisions that will make or break your career are made around new products, product changes, new ideas. Where you dont have a history of quantity and price data to estimate a demand function and pull out an elasticity. How do you know how big the market will be? We will give you tools in this class to shrink the market risk.Segway ScootersHyped in 2001 by Jeff Bezos, Steve Jobs, John DoerrJobs: cities would be re-architected to leverageDoerr: Segway would make its first billion dollars faster than any company in historySegway released in 2002By the summer of 2004, less than 10,000 units had. 30,000 units through 2007.

How many of you are familiar with Segway? Anyone ever ride one? What context?This was a radical innovation. (slide material).Despite the insights Doerr provided us on the last slide, it appears he could also misjudge market risk and the demand uncertainty.So what happened here? Why did this product sell so few units? What research was needed?Perhaps a production focus? Very cool technology might have driven expectations (rather than a customer marketing orientation).Need to ask what is this a substitute for? Under what conditions? What market is this in?Do the relative benefits and benefit situations justify the costs? What constrains the price of a segway? Market uncertainty hinges on understanding this. Want to reduce this uncertainty about demand by understanding the drivers well.Who is buying where are the benefits strongest? Police, tourim, golf somewhat more urban, vehicles more difficult to use, put in use a larger portion of the day.

For New products, and changes to products (even minor) where you dont have data on demand b/c its never been in the market.This is hard context, really innovativeMarket RiskMarket risk = demand uncertaintyMarketers and managers can make better decisions when uncertainty is reduced It is reduced through market intelligence

Mature productUS Sales of Wine 2008 2013Innovative ProductiPad6Wine Mintel reportPrediction for 2009 ?7

Prediction for 2015 ? 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Youre going to have a better baseline with more mature market. Without looking at next slide, can you get a pretty good estimate for next year? What do you predict?

7Wine Mintel report8

2009 2010 2011 2012 2013 2014 2015 2016 Youre going to have a better baseline with more mature market. Without looking at next slide, can you get a pretty good estimate for next year? What do you predict?

8Apple iPadPre-launch demand uncertaintyJan 21, 2010 WSJApples tablet foray faces several obstacles. Analysts say demand will depend on its price, which some believe to be about $1,000. Apple must also convince consumers the product is worth buying in addition to an iPhone and a laptop computer. And Apple faces competition from cheaper netbooks and other devices such as Amazon.com Inc.s Kindle e-book reader.9Almost exactly a year ago I opened up the WSJ and there was an article on the iPad. I started skimming through and a few things jumped out to me. Here is an extract .So, here is new device, and it appears to face a fair amount of demand uncertainty from what was being said in the press at the time. The source of the demand uncertainty was generally price apple would choose and the response to that price.Consumer wants and needs, how they perceived this device compared to alternative offerings or substitutes, and perception of how well competitive offerings met certain needs.

What is market risk centered on here?9Jan 22, 2010, FastCompany.comAbout 20% of US Consumers Would Buy Apples Tablet

Initial reaction?10About the same time I see a fastcompany article on demand for the iPad. This article actually went so far as to provide an estimate for demand for the iPad.Before I have you read the extract I have what do you think about the headline? 20% at a good price?OK. Read the rest.Large sample, is it representative, do they love apple, do they have high income, Time frame is relatively short 90days. There was a description to help respondents think of the same type of device.Then we get to how they came up with 20%. The survey measured purchase intentions - 4% very likely, 14% somewhat likely top 2 box total of 18%, round it to 20%. What do you think about that ?What you get from survey respondents is not always the truth that you seek. Why? Hard to estimate future. Might be trying to please the survey sponsor. Might be asking the wrong people.We know people do this though. In a case we will do toward the end of the term, this type of survey of purchase intentions plays a role and we will look at what Nestle did with it. It will vary by product by you essentially use prior experience to discount the purchase intentions: might say,4% very likely x 80% + 14% somewhat likely x 30% = 3.2%+4.2%=7.4%.Price response suggest some demand curve.Not clear that this survey did enough to understand demand uncertainty and market risk.

10Jan 22, 2010, FastCompany.comAbout 20% of US Consumers Would Buy Apples Tablet

A survey of over 3,300 U.S. consumers has shown nearly 20% of them would buy one. Its success looks assured.

Purchase intent question: 4% of the responders said they were very likely to buy such a device, with 14% more labeling themselves as somewhat likely. That means close to 20% of the US consumers surveyed would be interested in buying Apples machine11About the same time I see a fastcompany article on demand for the iPad. This article actually went so far as to provide an estimate for demand for the iPad.Before I have you read the extract I have what do you think about the headline? 20% at a good price?OK. Read the rest.Large sample, is it representative, do they love apple, do they have high income, Time frame is relatively short 90days. There was a description to help respondents think of the same type of device.Then we get to how they came up with 20%. The survey measured purchase intentions - 4% very likely, 14% somewhat likely top 2 box total of 18%, round it to 20%. What do you think about that ?What you get from survey respondents is not always the truth that you seek. Why? Hard to estimate future. Might be trying to please the survey sponsor. Might be asking the wrong people.We know people