Trustworthy, dependable market research can help your company to make those inscrutable decisions that keep management teams awake at night and ultimately, it can be used to benchmark the performance of those decisions in markets.
Eyes and Ears of Your Company
Market research is the eyes and ears of a company’s strategic and tactical development, and operational processes. Sometimes it is informal, using unplanned feedback channels from customers, procurement, and sales teams. Sometimes its formal using sophisticated studies and data gathering. In either case the core purpose of market research is to inform and to reduce the risks of decision making.
The classic definition of market research is the process of obtaining market information to support the 4 “Ps” of marketing: product (which ones), place (how to be successful in chosen sales channels), promotion (marketing), and pricing (how much to charge). Great market research supports decisions by truly understanding customer wants and needs so that subsequent products address real value propositions in a world where competing solutions will not be far behind.
Not all Market Research Companies Do the Same
Market research comes in two general types: one concerns the markets between businesses and the other between business and consumers. Consumer research is often based on large data gathering methodologies about actions, behaviors and preferences. Focus groups are a popular method to dive deeper or to market test. Metrics like click-throughs and sell-through statistics drive consumer market decision making.
B2B or industrial market research can use modified forms of consumer research. Industrial markets can be measured in 100’s to low thousands of customers (e.g., for businesses in manufacturing). Whereas consumer markets (or segments) start in the millions and go to the 100’s of millions. The fragmented and proprietary nature of industrial market research requires additional skills and techniques to be applied to get meaningful results.
So, taking an industrial market of a 1000 customers will require the research to be very targeted to be meaningful. A big challenge in industrial market research is getting people to share real information. Whether you are a supplier, channel partner, or buyer your information, your time is considered valuable, and it often is not shared without some reciprocal benefit. The best independent market research firms know how to gain the trust of their primary information sources. These firms also have transparent methodologies regarding quality control and use secondary research and market models to challenge outlying data points.
Finding the Truth Out There, With the Right Questions
There is a lot of information out there and a lot of garbage as well. As a market research buyer, one needs to ensure not only that the market research gathered is valid, but that it answers the right questions for your company.
Having an expert on your market research team can help with sifting through the debris and will give credibility to the data. An expert will understand your customer’s customers and will keep an eye on what new technology might aid or disrupt the current domain. Through conversations an expert will also consider what is not being said as what is being emphasized and all this will help ensure that the data you receive will give a better representation of the industry.
Meanwhile, the world is also littered with underperforming products whose development teams did not do adequate market research to match their products’ features and benefits to what the customers prioritized needs actually were. The corollary is developing a product with just one or two customer’s input and then getting stuck with a product that has a thin customer base – not enough to be profitable.
The best market research is actionable and can reduce the risk of answering questions. Examples include:
- Which product feature sets or type of solution should be offered?
- Should I choose this new technology (buyers’ perspective)?
- When should we ‘end-of-life’ a certain product?
- Will the customer be willing to pay for after-sales and service support?
- Will customers “value” the trade-off of higher acquisition costs against lower operational costs?
- How valuable would a market education campaign be in driving demand?
- Who are the best channel partners to work with?
- How should I respond to my competitors’ actions?
Identifying high quality research
So how do you determine the market research you are going to purchase is high quality?
Independent and Unbiased
Sometimes market research conclusions do not align with the wishes of powerful internal entities who are at risk of losing out in one way or another. This of course has been the topic of many business books, perhaps most famously captured by Clayton Christensen’s book “The Innovator’s Dilemma”. Sometimes really good independent market research conclusions can be painful. Well managed companies figure out a way to create a culture of healthy debate and overcome internal blindness so that new information is soberly considered.
One of the challenges independent market research has is to is stay free of the sponsoring company’s bias on the results. Sponsoring company messaging about products and technologies can creep into study results. There has certainly been many the market study that ends up parroting company talking points rather than reflecting an unbiased appraisal of the market landscape. This type of research can add to the hype distortion and give sellers and buyers the wrong information to make solid decisions. Good independent market research can minimize the effects of this type of bias.
A comparison of this type of market research bias can be drawn through the analogy of software development, on how projects can be biased and end-result modified throughout the process. This “Sandra and Woo” comic depicts a rather humorous picture of this process:
The best market research guides real strategic and tactical decisions directly. It should not be just numbers without any context. In the example: Should we raise prices? Should we demand a discount? Market research that characterizes the supply and demand dynamics is very useful. What market share do I have? (Or how big a customer am I really) plays directly to the gaming exercise that is contract negotiations. Knowledge is power.
Business Analytics and Independent Benchmarks
Business analytics can help automate the scrutiny of one’s data like shipment volumes, prices, deal terms, inventory levels, etc. But the problem is that without independent benchmarks you have no idea if you have a competitive advantage or not.
One of the recurring mistakes made by procurement organizations for example is assuming they have the best prices possible. Let us say they received a “good” price quote relative to what they got last time, say no increase. One might be led to believe that all is supposedly well, however, what if market prices actually declined by 5%. They did not act on that knowledge and that is a loss directly to the bottom line.
Another measure of good research is knowing how accurate past market sizing and forecasts were. No forecast can be perfect, however, the assumptions and the identified “Influence Factors” behind the forecast can be very valuable. Influence Factors include for example “competitive response” which can accelerate unit demand but often at the cost of selling prices.
Good B2B Research Does Not Have to be Elusive. When you enlist a market research company to help with your valuable decision making, identifying a good one will pay off in the long run. Do not be afraid to ask questions, to check on their methodology and granularity of their data and ensure that the experts at the firm are independent, stand behind their data and are available to answer those questions.
From a Grid Equipment Perspective
For grid equipment markets, it becomes especially relevant to verify the market research methodology or the market model used. Grid equipment market research requires certain technical knowledge of the grid operation on the part of the analyst to really understand the interconnection between various equipment types and the effects of macroeconomic parameters on the grid infrastructure growth.
In addition to the points discussed before, it can be highly important to do high-level sanity-checks on the market figures using available macro-data as a first step. Being a capital-heavy industry, the developments in the power grid sector are heavily influenced by the economic stability of the country. Indicators like renewable penetration, industrial growth, construction spends, investment rankings and to some extent GDP are directly correlated with the capital expenditure in the power grid sector. You can also utilize specific indicators like power generation capacity (GW), utility transformation (MVA) and utility annual CAPEX etc. to cross-check market growth or to check different country market sizes against to each other. For example, India adding ~13GW of renewables and US adding ~12GW of renewables would indicate similar new additions of the equipment used like medium voltage switchgear and distribution transformers in in the generation vertical for both of these countries.
In addition to it, as everything in the grid is connected, market data for other equipment types (if available) can be used to cross-check market numbers of the connected equipment. Power transformers growth will influence high-voltage switchgear market and growth in distribution transformers will indicate a similar trend in the medium voltage switchgear market. Similarly, growth in transformers market would indicate a growth in fuses or bushings market. For example, if Turkey’s market is seeing a sharp decline in power transformers market above 100kV, the market for HV Switchgear above 100kV would also slow down. On a more technical level, ratios like transformer additions per GW of generation added or primary switchgear per GW of generation can be used to roughly rationalize if the data points across countries are valid or not.
Given the nature of decision making on this information, ranging from product launch to market entry/exit strategies, quick sanity-checks like these on the research can help you identify good from bad market research. Which in turn make or at-least save you millions of dollars by helping you avoid decision making based on bad data.
About The Authors
Greg Sheppard is a career user and creator of technology market research. He is currently a Silicon Valey based venture capital investor. Starting out his career in engineering and strategic marketing, he became an avid user of research, developing a sense of what was helpful and what was not. He later applied the learnings as a user when he worked in the technology market research at Gartner and as a founder of iSuppli. He is also an advisor at Power Technology Research.
Hassan Zaheer is the Co-founder and Exec. Director of Client Relations & Advisory at Power Technology Research. Starting in the power sector around a decade ago, he has been working for various Fortune-500, FTSE-100, DAX-30 and NIKKEI-225 clients, assisting them with global market studies in the power grid sector. In his current role, he works with clients to support their research requirements, both through custom consulting work and tailored research reports, on a range of topics including Power Grid Equipment, Distributed Energy Resources (DERs), Digital Asset Management Systems and impact of increased E-Mobility on power grid ecosystem. He holds a Masers in Power Engineering from the Technical University of Munich.
The views and opinions expressed in this article are those of the author and do not reflect the official policy or position of Power Technology Research. Any content provided by our bloggers or authors are of their opinion and are not intended to malign any organization, company, individual or anyone or anything.