B U L L E T I N
Tools and Resources for Data-Driven Market Research
Third Wave Research
Vol. 2 No. 11   November 2003
IN THIS ISSUE:
  • From the Editor: Responding to a Reader Query
  • Survey: Where do you find Competitor Information?
  • Tool Bits: Market Research Tools for Evaluating Competition
Bulletin Archive

FROM THE EDITOR

Responding to a Reader Query
In a mini-survey back in June 2003, I asked you what article topics you’d like to see explored in upcoming issues of the Bulletin. I’ve been using your responses to guide my topic choices ever since. And I’ve been getting very few "unsubscribe" responses, so I gather you’re finding my tips helpful. Thanks again to those of you who responded to that survey!

In this issue I respond to an entrepreneurial reader’s request: "Where can I find information on competitors? I’d like to get to know the market I’m entering better."

Remember that competitors come in three flavors, and I don’t mean Vanilla, Chocolate and Strawberry. Current, potential and substitute businesses all compete with you. The current competitors you probably know by name, if you’ve been in business very long.

The potential competitors may not even be in business yet, so don’t worry about them—but do take note of whether there are high or low barriers to entry in your line of business. If the barriers are low, as in the "career coaching" and "home organizing" categories, better watch your back!

Substitute competitors are the most frequently overlooked players in the game. If a person could be lured away by a substitute, you need to know that. Must I remind you that people don’t buy products, they buy solutions to problems? To discover and defend against substitute competition, think about other ways they might solve the problem that brings them to you. A person needing "home defense" might shop for a burglar alarm—or for a rottweiler.

Here are three specific action steps you can take to increase your competitive intelligence:

#1: Read about your market area and about your industry. Look for relevant directories and periodicals. To find details about specific competitors, use the Dun & Bradstreet Directory or the Thomas
Register. You’ll get snapshots of parent/subsidiary relationships, ballpark financial figures, estimates of sales, descriptions of product/service line, and more. To find general business news for your region, search for periodicals like those published by American Business Journals or Crain Communications. And read your
Bonus Tip:
Visit your competitors from time to time. Why not? Observe customer traffic, wear and tear, overcrowded or under-utilized space—any change to these observable factors might tip you to their next move.
local paper, even the want ads. Competitors’ hiring may tip you to their expansion plans.

#2: Join your local chamber of commerce and other business/professional groups, such as the Rotary Club or the local chapter of the American Marketing Association. Some groups meet at local businesses. Some include spotlights on members. Go! People talk, and you’ll be there to hear them.

#3: Talk to sales reps and suppliers. If they call on you, they most likely call on your competitors too. Part of their stock in trade is gossip. Get your share! Bankers, real estate agents, and others in the financial community are also "in the know". They won’t relay confidential information, but they can help you spot trends and confirm hunches. And finally, don’t forget to talk to your customers! They may shop with competitors. Encourage them to tell you why.

Resources
Find out if American Business Journals publishes an edition for your metro area.
Find a trade publication covering your industry.
"How to deepen ties with current customers"
"Spy on your competitors: 4 steps"



TOOL BITS

bCentral Tools for Competitor Research

Product Line Planner to the Rescue
Are you just getting to know an industry sector? Not even sure who’s competing with you? If you sell directly to consumers, you’ll find our latest tool, the Product Line Planner, helpful. The tool produces reports on products and businesses in the retail trade, accommodations, and food service sectors. Using the tool, you can view specific sales information by product line or by kind of business.

If, for example, you are interested in selling "optical goods" (glasses, sunglasses, contact lenses, etc.) you could use a "Kinds of Business Selling Product Line" report to discover what types of stores carry these goods, their total sales for this product, and the proportion of that sales to their overall store sales. Two types of report are available: one displays the data by product line and the other by kind of business. Click on the hot-linked codes in the left column to switch from one view to the other. All reports are free during this introductory period, so click away!

For Market Area Research, Use Demographic Profiler and Household Spending
Use the Demographic Profiler tool to find out more about the population in your current trade area, or to evaluate the potential of new trade areas. View population and household counts by several demographic variables including gender, age, race, household income, and more, for any geographic area you specify. This data helps you understand your competitors’ customer bases—and your own.

Use the Household Spending tool to generate estimates of market potential for specific products and services, segmented across demographic variables and geographic regions. A quick estimate is easy to make using the Household Spending report. The first line of that report shows the market potential for any selected product in any selected geography. To get that report, simply select your product category and choose the geographic selection that best describes your market area. If your business is an existing one, subtract your annual sales from the "Total Market Potential" in that top line. What’s left is an indication of the sales that are currently going to your competitors. If you are starting a new business, you already know the answer: all of your area’s sales are going to competitors! You can fall back on the research tactics described above to help you discover who your closest competitors will be... and how you can win a share of that total market potential.

Resources
"Forecasting a Market Area’s Sales: Belinda’s Bullish on Broad Ripple"
"Forecasting a market area’s sales—with accuracy"
SURVEY

Last month I asked you to e-mail me if you had a direct mail "war story" to share. Scroll to the end of this Bulletin to read Tom Cox’s tale and our Direct Marketing guest expert Tom Mac Arthur’s reply.

New survey: Where do you find competitor information? Visit our survey and share your tips.



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I look forward to your feedback.  Click here to write to me and I will try to respond promptly.

Best regards,
Sarah White, Editor, the Bulletin
Third Wave Research


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Tom Mac Arthur, Wellspring Communications
Tom Mac Arthur is a Milwaukee-based international award winning direct marketer providing program planning and creative services. During a career spanning over 20 years, Tom has created successful direct marketing programs for products as high-tech as a digital subtraction angiography system for General Electric Medical Systems, to as low-tech as a waterless composting toilet for Mullbank of Stockholm, Sweden.
For a free copy of Tom Mac Arthur’s White Papers on Customer Characteristic Analysis click here.

Customer Characteristic Analysis
Could you use a mailing list that improves your targeting by 30-80%?  Third Wave Research offers a service that takes the names of your current customers, merges and matches them with our master database, and finds thousands of new prospects who look like your best customers.  Start sending less mail and getting more results. To find out more, click here.

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Tom Cox’s tale and our Direct Marketing guest expert Tom Mac Arthur’s reply

Tom Cox worked for an advertising agency when he learned this direct mail lesson the hard way.

...One of my clients was starting a golf catalogue with young, hip, male-oriented merchandise. We purchased a list from the biggest list house in the country and were looking for a very specific demographic: young, male golfers. There were some red flags that we should have heeded before sending out a VERY expensive catalogue...

First warning sign: The list company had a tough time getting enough names for our mailing list.
Second warning sign: We were in a rush to get the catalogue out before Christmas.
Third warning sign: We were on a tight budget, being a startup business.

We were ecstatic when we finally put the piece in the mail. But when mail started bouncing back with bad names and addresses, we were a little worried. Then, instead of orders, the client was getting phone calls that the people we sent catalogues to were either not interested in golf at all, or they DIED, and had been dead for several years.

After some investigation, we discovered that our list company actually bought the list from a third party. The third party, supposedly without informing our list company, dug up records as far back as eight years. The list was terribly corrupt and nearly bankrupted the young startup. Hundreds of thousands of dollars invested in a catalogue were blown all because of the list.

What would I have done differently? I would have taken a few extra days to call a random sample of the list. We could have called 20 names and discovered the list was bad. But because of the rush and the budget, we failed to see where things could have gone wrong. P.S. I've sent out millions of direct mail pieces (literally) and the one thing I can say to your readers is don't underestimate the power of a hand-written address and a live stamp. It's worth the time and aching wrists, especially for B2B mailings.



Tom Mac Arthur’s reply:

Jim,

In lists as with everything else, "let the buyer beware".

Unfortunately you or your client got caught up in an unfortunate confluence of events that included a less than honest list broker, no time for testing, and a slim budget.

The sad thing about lists is that although they are the most important single factor in determining the success of a mailing program they are often little more than an afterthought.

And whereas mailers in the past took pains to test lists including calling a random selection of records as you suggest, everything today seems so rushed that no one has time for these basic quality assurance steps.

Remember the saying "There's never time to do it right but always time to re-do it".

Anyway good luck with your new agency and keep in touch.

Tom Mac Arthur
WELLSPRING COMMUNICATIONS GROUP INC
414 273-4877
414 276-6239
wtm@wtmdirect.com