Market Research /Trend Forecasting

Dr. Patrick LynchSenior ResearcherThe RIKON Group

Waterford Institute of Technology

RIKON: Who are we?

RIKON Office: 051 834032Email:  rikon@wit.ie

The RIKON Group is located within the School of Business at Waterford Institute of Technology and undertakes pioneering research and consultancy in:

1. Innovation,

2. Knowledge Transfer 

3. Organisational Networks

Internationally recognised quality researchers

The Group consists of six senior researchers and 22 researchers

Mission

Is to become the leading Group for small business innovation and knowledge management research in Ireland and gain an international reputation for its activities in research and practice.

Since its inception, the RIKON Group has grown to become one of the Ireland’s most respected and prolific research groups

What do we do ?

The RIKON Group will work closely with companies to understand their specific requirements and to craft an Innovation Voucher that will deliver and innovative solution, provide additional value for the company and have on-going benefits

EI Innovation Vouchers €5,000

The Innovation Voucher initiative is designed to encourage SME’s and public knowledge providers such as the RIKON Group at WIT to work together on specific innovation questions and projects related to the company's needs.

All small enterprises are eligible to apply

Less than 50 employees Has either an annual turnover and/or

an annual Balance Sheet total not exceeding €10m

An integral part of the RIKON mission is

......to assist SMEs to;

enhancing their managerial capabilities

facilitating the development and the management of collaborative business networks.

The team are dedicated to delivering actionable insights to business decision makers through cost effective commercial research.

National Demographics

Demographic Trends 4.42 million 54.5% (25-64)- Majority 34.6% (0-24) – Smaller families 151,600 persons over 65 (2008)-

mostly female

Birth rates increased in the last year in all other age categories, with the birth rate for women aged 35 to 39 (91 per 1,000 women) and 40 to 44 (18 per 1,000 women) being the highest since 1982 and 1987 respectively.

The excess of births over deaths has increased almost three fold since its low point of 16,600 in 1994.

The overall population increase of 0.8 per cent was unevenly distributed across the regions,

Mid-East –strongest growth at 2.1 %

Dublin -weakest growth at -0.5%

Population

2008 2009

4,422,100 4,459,300

Increase:

National Picture 2009Gross Domestic Product declines (GDP) GDP prices were 7.4 per cent lower GNP was 11.6 per cent lower.

The Truth of the Matter:

2009 figures in comparison to 2008 figures as follows:

Consumer spending - was 6.8 per cent lower

Capital investment, - declined by 24.4 per cent

Net Exports (exports minus imports) were €1,369 million higher

The volume of output of Industry (incl. Construction) decreased by 11.3per.

Construction alone - fell by 30.8 per cent

Output of Distribution, Transport and Communications was down 8.6 per cent while,

Output of Other Services was 2.8 per cent

Unemployment Rises

1. There were 186,900 males and 77,700 females unemployed in the second quarter of 2009,

2. An increase of 137,900 (+108.8%) in the year.

3. Unemployed males increased by (+122.0%),

4. female unemployment increasing by (+82.4%).

Figures 2009 Persons

Employment 1,938,500

Unemployment    264,600

Labour Force   2,203,100  

Household Incomes

Rural versus Urban Indices of Disposable Income per person

Region 2005 2006Border, Midland and Western 91.6 91.7

Border 90.3 91.1

Midland 91.8 90.6

West 92.9 93

Southern and Eastern 103.1 103

Dublin 112.3 112.3

Mid East 102.3 102.6

Mid West 98.3 97

South East 92.1 93.2

South West 97 96.4

Rural households’ disposable income is already below that of their urban counterparts and recent

CSO figures show

disposable income per person was highest in the Dublin region, = 12% above the State average.

The Border region was 8% below the average and the Midland region was 9.4% below average.

Only Limerick, Kildare and Meath were the other counties above the State average.

Donegal had the lowest disposable income per person at more than 16.5% below the state average

Household Income: Debt to income ratio: This affects spending ........

Source: CSO In an international league table of personal indebtedness, Ireland’s consumers had moved from 17th in 1995 to 4th in 2008

Average earnings after tax (disposable income):

Assuming all earnings are increased in line with pay agreements, the estimated gross earnings in October 2008 = €41,200 per person;

However...... We must consider the debt to

income ration

Furthermore we must consider the income levy which /......

Income levy reduces disposable income by €824 per annum (CSO)

Law Reform Commission says Irish household debt to disposable income rose from 48% in 1995 to 176% in 2009 (Finfacts)

Simply the debt to income ratio has increased from 48% to 176% in 14 years

Disposable Income

Personal spending has declined dramatically over the last four years.

Gross National Disposable Income and its Use by Item and Year

  2007 2008

Disposable income (Gross national) (€ml)

160,254 153,481

Consumption of goods and services (€ml)

91,948 93,863

Gross National Savings (€ml) 41,031 30,717

Household Disposal Income

CSO – County Incomes and Regional GDP 2006

Overview of the Country's Disposal income.........

Most disposal income – Dublin >110

Meath, Carlow and Limerick – 100- 110

Cork, Waterford and Wicklow...... – 95-100

Clare, Tipperary, Kilkenny, Wexford... 90-95

Kerry, Laois, Offaly,......- >90

3.7% 11.1%

25.9%

29.6%

29.7%

>110100-11095-10090-95<90

Sales Fall: Volume

The only sector showing year on year volume increases in Retail Sales were department stores – up 0.2%I

Sales have plummeted, in particular in the motor industry.

The most significant declines are;

CSO- sales are down 15% July 2009 compared to 2008

The motor trade alone is down 48.2%

Non specialised stores-inc supermarkets down 3.8%

Clothing and textiles – down 9.4%

Bar Trade – down 9.7%

Household equipment – down 17.1%

If Motor Trades are excluded the volume of retail sales decreased by 6.2%

Retail Sales Decline : Value

Value of retail sales fell by 19.2% (July 2009- compared to the same period 2008)

However there are signs of stabilisation in retail spending ........ Economist Deirdre Ryan (2009)-

This will result in retail job loses and excess commercial space – for some years (IBEC, 2009)

Consumers will be encouraged to save and pay off debts than to spend

Wage rates have been frozen and some are decreasing.

Exports of goods and services falling by 5% in 2009.

Prices fall by 6.5% in the year to September

Statistics prepared by CSO, 2009

The most notable changes in the year were decreases in Housing, Water, Electricity

Gas & Other Fuels (-28.5%), Clothing & Footwear (-13.8%), Food & Non-Alcoholic Beverages (-6.0%) Transport (-4.0%).

Prices fell Services by 7.5% Goods fell by 5.3%. Beverages (-1.3%) and Transport (-0.9%).

Transport fell due to decreases in airfares.

There were increases Miscellaneous Goods & Services (+7.6%), Alcoholic Beverages & Tobacco (+7.5%), Education (+3.9%) Health (+2.5%). Clothing & Footwear (+3.6%).

Conservative Shopper At Present

Consumers are postponing “big ticket” purchases on the back of worrying about future income .

Consumers are changing the way they shop

Conservative Purchasing is now the trend.

They are being smarter with their money focusing more intently on

1. Quality

2. Value

3. After sale service

4. Deals/ bonus etc.

Once stability returns.......

new stability 2010 will not mark a return to the spending patterns that dominated before the economic downturn

The shopper of tomorrow is a conservative shopper-

Will spend 6% to 10% less

That means some spending habits consumers have adopted during the recession will likely continue when good times return,

In surveys conducted, consumers made such remarks as "We have lived and learned and will continue to be more conservative,

and "We've gotten used to the new way and see the benefits."

When companies focus on profitability they tend to look at their operating expenses, which generally results in headcount reductions and/or restructuring of company operations.

These are only short-term measures but have long-term effects.

While certain redundant headcount and other operational expenses may be eliminated, these reductions require that the remaining company resources be asked to do more with less.

Focus on Profitability & Operating Costs?

The continual talk of ‘tough times’, ‘economic hardship’, and a ‘recession’ is causing many business to be fearful of what lies ahead. A common response to declining sales is to cut the price

However, price is often the enemy of differentiation. Being different should be worth something. That difference is the reason that supports the case for paying a little more -or at least the same - for a product or service.

But when price becomes the focus of a company's marketing activities, what you are doing is making price the main consideration for picking your company’s product’s or service over your competition. NOT A HEALTHY OPTION

Few companies find happiness with this approach. Why? because your competitors can cut their prices any time they want as well. THERE GOES YOUR ADVANTAGE

As Michael Porter says, cutting prices is usually insane if the competition can go as low as you can.

Let’s Cut the Price?

Most will say they are in the business of selling a product or service to a particular group of customers in order to increase their revenues and market share.

Few will respond that they are in the business of providing value to their customers to create a long-term loyal and profitable relationship that will assure their market share.

So what does your company do?

We are now living in ‘uncertain economic times’ and this requires businesses to apply a ‘different’ kind of mindset to how they approach business issues going forward than they did during the ‘Celtic Tiger’.

Business viability is at top of everyone’s agenda. Cash flow is a major issue

Business should remember one basic truth – the source of your business’s cash flow is your customer base. So what are you doing to keep your existing customers loyal?

Irish consumers are faced with financial insecurity and instability, they will seek out Products/Services/brands they trust. So do you know whether your Products/Services/brands is delivering on your customer expectations in this uncertain economic times?

Going Forward is about Going Back to Basics

In the old ‘Celtic’ economy, most companies viewed customers on what they had to sell them – inside out perspective

In the new economy, the focus of companies has to be more of an out-side-in perspective based on identifying customers’ needs and what they will buy.

Focusing on what customers need is key to growing top-line revenues, reducing operating expenses and growing the bottom line.

Creating Value is Critical to Success

Loyal customers repeatedly do business with you whether or not you offer the best, lowest price or fastest delivery of your product/service.

Why ?

Because these customers perceive they are receiving value

Customers buy value, therefore it follows that improving the customer experience will improve the bottom line by increasing customer loyalty or retention.

Customers buy value

By providing a great experience with the right customers, over time, companies experience improved financial performance and more loyal customers.

A 5% reduction of customer defection can result in profit increase of 25-100%.

A 2% increase in customer retention equals cutting operating cost by 10%.

It costs at least five times more to obtain new customers than it does to retain (and resell to) customers you already have.

The Value of Customer Loyality

1. Lead by example

Practice what you preach (it’s not just about value but reinforcement of that value through actions)

Play to win-win (create a win-win with your employees who deliver the value)

Be picky (be selective in choosing your customers) Keep it simple (hold employees responsible and accountable

for loyalty and give them clear and simple guidelines to be able to create it)

Reward the right results (reward your loyal customers and those employees who create value for them)

Listen hard, talk straight (ask questions, seek to understand and communicate the answer clearly)

Increasing Revenue and Profitability Through Delivering Customer Value

2. Customer value is everyone’s responsibility

No one person is responsible for delivering value to customers but rather everyone is.

This requires teamwork that crosses organizational boundaries.

Employees must be given the authority and tools to treat customers right and to marshal whatever resources they need to address the problem.

Increasing Revenue and Profitability Through Delivering Customer Value

3. Create Customer Loyalty

Creating loyalty and establishing value goes beyond just having a satisfied customer.

Delighted Customers - Exceeded

Satisfied Customers - expected

Dissatisfied Customers

80 percent of businesses believe they deliver a superior customer experience, but only eight percent of their customers agree

Increasing Revenue and Profitability Through Delivering Customer Value

3. Create Customer Loyalty

Understand the buying behavior of your customer and their needs throughout the entire customer life cycle.

Understand Moments of Truth - episodes where a customer comes into contact with any aspect of a business (however remote) and thereby has an opportunity to form an impression

Do you understand your customers experience journey (Pre-joining, Joining, Participation, Leaving, Reflection)?

Is there a point of accountability within the company for taking care of the customer?

The importance of Research and Doing your Homework is Critical

Increasing Revenue and Profitability Through Delivering Customer Value

Step 1. Determine what your customers value most when making purchase decisions. Do they value quality more than cost?

Step 2. Assess your performance in each value. How do your customers rate your company in the areas they value most?

Step 3. How do you measure up against the competition? Step 4. Uncover your weaknesses, identify your strengths and

leverage them Step 5. Objectively look at the findings Step 6. Address the challenges identified. Develop and implement an

action plan for building loyalty and delivering superior customer value Step 7. go back to Step 1.

If you don't commit the time now to understanding your product/service and your customer, you may have a lot more time if your customer base begins eroding and you don't know why or how to stop the erosion.

Doing the Home-Work

Questions and Answers

Thanking you for attending today

Talk to us today about your needs

Ms. Clare FlindersRIKON Administrator

The RIKON GroupWaterford Institute of Technology

Tel. 051-834032 EM. cflinders@wit.ie