Market research
Analysis of supply
Market supply is comprised of competitor supply included in the overall context of the situation. That is why the main characteristic of the competitive situation is the division of the market into market shares. Determining market shares is as confusing a task as determining market capacity and requires similar sophisticated methods. One of indirect characteristics of leading brands is their share in the aggregated advertising budget (SOV - share of voices). This value can be applied only to really popular brands supported by a significant advertising budget. With broadly advertised brands, their shares in the advertisement turnover perfectly correspond to their sales volumes. Outsider brands, due to their limited budgets, are dropped from such an analysis. Advertising activity is determined by advertisement monitoring.
Information from sales outlets gives a more precise picture of turnover distribution among brands. Due to incorrect methods of product distribution and logistic errors, some brands are advertised uselessly: the advertising is going on while the product is waiting for custom clearance. Correct estimation of comparative popularity of brands is only possible on the basis of the data about product availability in retail networks and frequency of purchases.
Retail audit, distribution analysis
To analyze distribution of brands in a retail network, their cost and the influence of the sales outlet’s location on distribution and product price, physical observation or "store check" as well as control purchases or just speaking to a salesperson without buying the product or ghost shopping are used.
To get some understanding of today’s variety of brands, manufacturers and prices, it is not enough to have personal experience in buying products. The supply structure and prices vary from region to region, depend on the purchase volume, form of payment and may change dramatically in a short time. Perhaps a retail seller can keep track of the market segment they participate in, within a region the customer also knows peculiarities of the market segment, but a manufacturer has to coordinate their steps with the overall situation on the market, and a specially organized procedure of retail audit can help them in doing that.
The idea of the store checking method is simple: it registers the availability and prices of different brands in several selected retail and wholesale outlets, monitor the supply in specialized editions for business people and electronic databases. All this is done regularly and summarized on some basis.
No matter what they say about numerous effects of various factors on consumer behavior, the price is the key buying factor. However, to create a complete picture of the market, it is necessary to correlate prices with advertising expenditures, thereafter, we need data about these expenditures which may be obtained with the help of advertisement monitoring. It is also good to know about the availability of the brand on the market, distribution channels, peculiarities of taxation, and production costs to determine profitability,.
Given all expenses connected with obtaining this information, the store checking results become rather expensive. But how valuable is it? What, except for average values and dynamics of prices, does the customer get? A comprehensive picture of the economic structure of the market - assortment and structure of the supply, prevalence and, indirectly, popularity of brands, the brand’s price range and, consequently, its stability; difference between wholesale and retail prices and, connected with it, profitability of the commercial operations. And finally, the analysis of factual data makes it possible to indirectly estimate the market share and even sales volumes of particular producers.
Unlike countries with stable economic position, in our country the competitors’ sales volumes is strategic information and, moreover, a commercial secret no matter whether it concerns a retail seller trying to avoid paying taxes and negotiating with racketeers about the sum to be paid for protection or a major manufacturer obtaining customs facilities and donating the interest on the declared profit to charities. Nobody is eager to provide true data about their budget either free or for money. That is why the only means of indirect estimation of competitors’ market share is estimation of advertising volumes (share of voice) and store checking.
Observations of price fluctuations provide material for peculiar generalizations in respect of the strategies of retail sellers and consumer behavior. For example, the connection between the proximity of the kiosk to busy places and the level of prices is not direct. Bringing the kiosk closer to the underground and increasing the populousness of the place causes the price’s growth. This fact matches a popular conception that “on periphery everything is cheaper than in the center”. However, in the busiest places, prices drop again though not lower than in the kiosks located farther from the underground. This fact is explained by two reasons: firstly, higher competitiveness in places with a lot of kiosks, secondly, more opportunity to make profit in such places is due to increased turnover, not higher price. It is possible to take these facts into account thinking about them in your office, but price monitoring makes it possible to express their real significance in exact values – consumer roubles.
Store checking also shows that, unlike kiosks whose owners are more flexible in pricing and more subjective in determining supply and a psychologically attractive price, the pricing policy of stores is more stable and valid. A significantly higher price in stores in the center than in stores on periphery proves this fact. As for kiosks of any region, even located near each other, a whole range of prices can be seen, from the lowest to obviously high.
Prices in the street are connected with an advantageous location of the kiosk in the region or near the underground. But they are more connected with the owner’s conception of necessary profitability of operations, their being good choice of purchase sources, racketing policy concerning the owner, and other situational factors. Besides, some products may be present in the kiosk’s assortment only as a complement to main income items, which are often limited by beer and cigarettes. Store rather focus on brands which have been advertised for a long time and therefore are more popular, which makes them more expensive places for buying products .
Store checking may include interviewing salespeople about their subjective estimation of sales volumes of each brand. In this case the picture of brands’ availability on the market is supplemented by data about their comparative popularity.
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