Gone are the days of flying by the seat of your pants and making leadership decisions on “gut” instinct alone without a process or data. I’m not saying there isn’t a place for good instincts when making strategic decisions, but valid and credible data are critical when formulating a strategy.

Data that is valid and credible make a much stronger case for a manager’s intuition and yield additional insight that can provide an even greater competitive edge.

Here’s a quote that illustrates the importance of marketing research from Dan Zarella. Dan is an an award-winning social media scientist, author of four books, and leading marketing authority.

Marketing Research

Managers have a significant amount of tools and frameworks to negotiate in modern business. Marketing research is one of the tools modern marketers and Chief Marketing Officer’s use to drive marketing strategy and tactics.

The Benefits of Marketing Research

Marketing research plays a vital role in an increasingly complex business environment that is changing more quickly than ever. Technology advances, globalization, and economic cycles occurring more frequently provides a complex and rapidly changing environment to produce marketing that resonates with the intended target audience. Marketing research provides answers to commonly occurring management issues facing today’s leadership.

The issues facing management today include items such as:

  1. The growth rate and influence of the Internet
  2. Increased levels of competition
  3. Increased complexity of marketing decisions
  4. Greater computing power and speed
  5. Increased government regulation.

Research and Marketing Strategy

Marketing research forms the basis of a marketing plan using a systematic, investigative process to assist management with marketing decisions. Marketing research can be applied in each area of marketing planning that includes a situation analysis, target market determination, marketing mix, and control.

The insight acquired by conducting marketing research can be used to developing marketing strategies and tactics to achieve marketing and organizational objectives.

An organization uses primary and secondary research to uncover market intelligence coupled with consumer behavior knowledge revealing attitudes, behaviors, and intentions. Market intelligence and marketing research provide the foundation to develop marketing planning.

Consumer Behavior and Marketing Research

Marketing research provides insight into consumers’ heuristics used to research, evaluate, and integrate beliefs related to the goal. Understanding attitudes and intentions coupled with insight into the decision-making process assists in developing effective marketing strategies. An organization can develop a combination of strategies using the insight gained from marketing research to target consumers’ affect, cognition, behavior, and the environment.

Research Tools and Resources for Market Research

Marketing professionals and marketing managers use several resources to gather information for environmental analysis for the external and internal environments.

Internal Environment Resources

Marketing managers for organizations use internal reports that include cost, order, price, inventory, payables, receivables and any other internal information source to obtain critical information. Marketing managers also gather internal information by monitoring internal digital and social media resources and talking to suppliers, creditors, and customers.

External Environment Resources

Marketing professionals and marketing managers obtain information on the external environment from books, trade journals, newspapers, social media platforms such as LinkedIn and Twitter, industry associations, conferences, seminars, information on the Internet, and informal discussions with other industry professionals.

Other marketing intelligence sources that are valuable to an organization include the purchase of information from outside resources such as Nielsen, Claritas, and Information Resources Inc., online customer feedback, customer advisory panel, and government resources.

Competitor intelligence can be found using such as annual reports, independent goods and service review forums, distributor or sales agent feedback sites, customer review and expert opinion websites, complaint sites, North American Industry Classification System (NAICS), and blogs.

Census information from the United States Census Bureau provides population information such as population growth, population by age, geographic segmentation, gender, and ethnicity. In addition, the United Census Bureau also offers economic, business (NAICS code), education, housing, health, and income information.

Marketing Information System (MIS)

A marketing information system (MIS) is a critical marketing tool comprised of internal records, marketing intelligence (outside sources), and marketing research involving research design specific to the company for its marketing specific projects. The MIS is a useful software tool that helps marketers combine internal and external marketing intelligence along with the specific company projects that are used to help marketers gather information for analysis.

Market Research Drives Integrated Marketing Communications (IMC) and Branding

Have you ever tried to do a complex puzzle without searching for the border? Well, branding and IMC is the border. The branding process and IMC provide the structure to use the insight gained from market research. Branding and IMC sequentially come after the mission, vision, and values and overall business strategy have been selected. The branding and IMC approach uses marketing research to drive the branding process and assist in the first four steps of the IMC process that includes:

  1. Identify the target audience
  2. Perform an environmental scan
  3. Determine the marketing communication objectives
  4. Develop strategies and tactics
  5. Determine a budget
  6. Evaluate the IMC plan’s effectiveness

The branding process includes:

  1. Selecting a brand position
  2. Brand identification
  3. Creating a brand image

Failure to plan ben frank

The IMC strategy complements the brand strategy by coordinating and managing marketing communications providing consistent messaging promoting collaboration amongst all stakeholders. An IMC strategy influences perceptions of the brand across all channels.

The IMC can ensure successful brand identity using a strategically driven method. Without marketing research or a proper environmental scan, an organization is without purpose, direction, and unable to monitor progress toward a common goal. As the adage commonly attributed to Benjamin Franklin goes “failing to plan is planning to fail”.

Environmental Scan 101

An environmental scan consists of scanning the internal and external environment for the organization. The external scan is performed in three different environments that include the remote, industry, and operating. An internal scan includes either a SWOT or SWOTT (includes trends) analysis to provide an overview of the company’s strategic condition.

External Environment

The external environment has three different environments that include:

  • Remote
  • Industry
  • Operating

Remote Environment

The remote environment includes analyzing:

  • Demographics
  • Political
  • Economic
  • Social-cultural
  • Technological
  • Natural (ecological)

Industry Environment

The industry environment can use a technique of analysis developed by Michael Porter known as Porter’s five forces. Porter’s five forces strategy tool includes an analysis of:

  • The threat of entry
  • Bargaining power of suppliers
  • Bargaining power of buyers
  • Threat of substitutes
  • Intensity of rivalry

Operating Environment

The operating environment consists of the competitive position of the organization, customer profile, suppliers, creditors, and human resources.

Internal Environment

The internal environment uses SWOT (strengths, weaknesses, opportunities, and threats) analysis to provide an overview of the company’s strategic condition. In addition, the organizational structure and resources of the firm provide critical consideration when analyzing the internal environment.

Methods, Tools, and Techniques – Environmental Scan

Remote Environment

The remote environment analyzes the demographic, political, economic, social-cultural, technological, and natural (ecological) by using secondary research from the census bureau information, and partnering with companies such as Claritas. The industry environment can use different techniques at the industry level with Porter’s five forces being a popular choice.

Industry Environment

The industry environment can be analyzed by an organization by developing its own primary or secondary research or purchasing reports from data partners that include First Research, Gartner, Hoover’s, Plunkett, IBISWorld, Nielsen and many others analyzing the industry and the various factors within a specific industry or industry segment.

Operating Environment

The operating environment consists of the competitive position of the organization, customer profile, suppliers, creditors, and human resources. The operating environment can obtain market share data from companies such as Thomson Reuters, competitor data from annual reports and field discussions, and customer profile from internal and external databases. Supplier information can be accessed by comparison shopping vendors, credit information from the Wall Street Journal, and human resources information from employee survey data and retention rates of the company.

Internal Environment

An internal scan includes either a SWOT or SWOTT (includes trends) analysis to provide an overview of the company’s strategic condition. Sales reports, market share, and consumer behavior research provide insight that helps validate a company’s strengths, weaknesses, opportunities, and strengths using a combination of data sources. In addition, value chain analysis, market opportunity analysis, and three circles analysis provide strategic approaches to identify and quantify each SWOT item accurately.

Amazon Environmental Scan Example

When conducting marketing research, I always start by investigating an organization’s mission statement. I have found an aligned mission statement is one of the many common elements of successful businesses. An aligned mission statement helps to align an organization’s mission to every business decision the company makes. Amazon and the Amazon Fire TV is a great example of aligning its mission with its strategy, tactics, and is the lens each employee uses for everyday business decisions.

The information in this post leaves out consumer behavior (primary research) and focuses on secondary research for the environmental scan with Amazon’s new Fire TV product. The environmental scan or analysis provides the ability to see the factors that affect Amazon and the set-top box (STB) industry.

Amazon’s Mission

Amazon’s mission is, “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices,”. The Amazon Fire TV is a product that fits with Amazon’s strategy providing consumers with a product they desire at a competitive price with features and benefits that offer significant value versus the competition.

amazon

Environmental Scan – Amazon Fire TV

In my experience, I typically like to start out analyzing the internal environment first. Starting with the internal environment is less time consuming, and you can gain momentum for the process.

Amazon’s Internal Environment

An internal analysis using Kotler’s SWOT analysis provides a proven method of assessing an organization’s strengths, weaknesses, opportunities, and threats.

Strengths

The Amazon brand is a trusted retailer in the e-commerce category and can leverage this comfort with the brand into Amazon Fire TV sales. According to Interbrand’s 2013 Best Global Brands, it is currently ranked number 19. Amazon is a pioneer in the e-commerce category continuously improving the customer experience delivering the widest assortment of products at low prices with convenient purchase and delivery.

Amazon has the first mover advantage and significant financial resources. The reinvestment in fulfillment technology and web technology allows Amazon to stay ahead of the competition.

The Amazon Fire TV has a larger processor providing better picture quality and reduced buffering versus the competition.  In addition, Amazon is a strong content provider with Amazon instant video to buy or rent movies or programs and Amazon Prime Instant video with unlimited streaming of movies and television shows.

Amazon also has more gaming partners and gaming options versus the competition. Amazon has voice search through the remote that the other set-top box (STB) competitors do not have along with Freetime. Freetime is a user-friendly interface that allows for several profiles to control access to content and set time limits.

Weaknesses

The Amazon Fire TV is somewhat of a late entrant into the STB market and, therefore, lacks the content options (36 channels) of Roku. Roku is the content leader with over 1,200 content options. Content is the main reason for purchasing a set-top box, and the ability to provide relevant content is critical in the STB market.

Opportunities

Amazon from the time of launch already offers more content options than Apple TV and Google Chromecast. If Amazon can continue to attract and acquire content partners, it can take significant market share from Apple TV its main competitor seeking to retain their consumers in the Apple ecosystem much like Amazon is attempting.

To drive out smaller competitors, Amazon cuts prices because of its significant financial resources and helps stimulate an increase in Amazon Prime Instant video revenue (Prime subscriptions). Amazon has a significant opportunity to be a leader in games. Amazon Fire TV has launched with over 100 games with thousands more coming soon providing a key differentiator.

Threats

Apple and Roku are very significant competitors. Roku has a clear first mover advantage in the STB industry with the largest portfolio of content that Amazon may never be able to match. Apple is the closest competitor with significant resources and similar business model of trying to lock consumers into one ecosystem.

Apple also does not have a direct channel for games but offers games through its AirPlay option casting content from a Mac or iOS device to the Apple TV. If Apple decides to enter the game market in a more direct manner than Amazon could lose this advantage.

Google Chromecast lacks the ability to compete with fewer content options than Apple, Amazon, and Roku and no games. However, if Google with its significant resources decides to increase its efforts by offering more content (14 plus channels) and offer games it could match Amazon.

Amazon’s External Environment

For the sake of brevity, we will focus on the remote and industry environment and omit the operating environment. The research methods and tools listed above can help guide you in researching the operating environment portion of the environmental scan.

Remote Environment

Demographic

Demographic factors such as population size, the growth rate of the population, ethnicity, age, family size, life expectancy, and employment affect the demand for goods and services. According to the Census Bureau, the population of the United States is estimated at 318 million, and the global population is about 7.1 billion. The growth of population and income causes an increase in the demand for goods and services.

According to the Department of Labor’s July Employment Situation report, the United States has six consecutive months with job growth topping 200,000. In addition, the United States has 53 consecutive months of private sector job growth indicating Americans’ incomes, and employment have stabilized.

Political, Legal, and Regulatory

Political, legal, and regulatory are three important elements that regulate, control, and monitor business enterprises and activities. The changes in the regulatory framework of the government also impact businesses with individual state tax policies that affect locations of organizations.

The set-top box industry requires an awareness of the various business laws that include the Federal Trade Commission (FTC) which protect consumers, competitors, and the organization. Organizations in the set-top box industry in the United States should also be aware of laws relevant to the company, competitors, intellectual properties, foreign exchange, and labor.

The Federal Trade Commission (FTC) protects a consumer’s privacy and commercial related activity using a combination of law enforcement, consumer and business education, and policy initiatives. The set-top box industry adheres to the guidelines of the FTC and the Federal Communications Commission (FCC) identified in Amazon and Amazon Fire TV’s terms of use.

Economic

According to the Bureau of Economic Analysis, the real GDP of the United States decreased 2.9 percent at an annual rate during the first quarter of 2014 after a 2.6 percent increase in the fourth quarter of 2013. The decrease in real GDP in the first quarter primarily consisted of negative contributions from exports, state and local government spending, inventory investment, residential fixed investment, and nonresidential fixed investment. The negative contributions from exports were somewhat nullified by a positive contribution from consumer spending.

The first quarter of 2014 real disposable personal income (DPI) increased 1.5 percent and in the fourth quarter of 2013 it increased 0.7 percent. The personal saving rate, personal saving as a percentage of current-dollar DPI, was 4.4 percent in the first quarter of 2014 indicating a .1% increase in the fourth quarter of 2013 (4.3 percent).

Technological

Technological factors sometimes pose serious problems. The Internet, streaming video, global adoption of broadband technology, and telecommunication systems are important global technological developments.

Increased broadband Internet service providers (ISP) along with increases in processor technology have played a significant role in the set-top box market. Access to the Internet is another critical factor that allows a large number of consumers to connect to the Internet.

Social and Cultural

The socio-cultural environment includes such as values, norms, beliefs and traditions of the society are important factors that influence a consumer’s decision-making process. Social issues like the role of television and entertainment in society, products and environmental pollution, mass media usage and products and services consumption are important factors in the external environment. In addition, social attitudes, social customs, values, beliefs, changing lifestyle patterns, rituals, and materialism are critical factors that a brand must consider.

Changes in the family consisting of the family values, family structure, and attitudes towards the family also influence the consumer spending and the set-top box market. Other socio-cultural factors to consider for products and services include the role of women in society, nature of responsibilities in society, position, and education level. Streaming content such as music, videos, especially TV shows, movies, and gaming are very popular in the United States and western countries and expanding globally.    

Natural (Ecological)

Natural environment includes geographical and ecological factors such as national resource endowments, weather, and climate conditions. Set-top box manufacturers ship products from warehouse processing centers and share the same characteristics that include environmental pollution and disturbance of the ecological balance as other electronics manufacturers.

Electronics manufacturers, including set-top box manufacturers, do not cause any significant environmental concerns. Set-top box manufacturers follow ecological guidelines and, therefore, have additional responsibilities that increase the cost of production and marketing on par with electronics manufacturers.

Industry Environment

Industry Sales and Market Share

roku photo
Photo by JeepersMedia

The market for set-top box devices has grown over the past few years (IHS, 2013). With products such as Google Chromecast, Apple TV, and Roku entering the market early, the Amazon Fire TV was only introduced in April of 2014. In 2013, entertainment streaming devices hit 1.7 billion units sold, which is a 20% increase from 2012.

In 2012, Apple TV led with 56% of the market share, followed by Roku with 21% market share. After the Amazon Fire TV was released in April 2014, the device currently has 21% of the market.

Amazon’s Fire TV is currently beating out Roku (18% market share) and trailing Apple TV with 32% market share in the United States. Apple TV retails for $99.99, with projected sales at 8.8 million units, Apple TV generates nearly $900 million in sales. Amazon Fire TV retails for the same price, $99.99, and has projected sales of 5.8 million units and nearly $600 million in sales.

The Roku 3 (most current model) also retails for $99.99 with sales projections of five million units and approximately $500 million in sales.

Google Chromecast retails for $35 with sales projections of four million units and $140 million in sales. Sales of the top four devices in the set-top box industry totaled $2.14 billion in 2014 to date.

Competitors

2833430255_2943e5f897_q_apple-inc1Amazon Fire TV is part of the set-top box industry that includes three notable competitors; Apple TV, Google’s Chromecast, and Roku. Competition in the set-top box market is characterized by differentiation in the product offering by each competitor.

The adoption of HDTV’s and Smart TV’s by consumers have helped to grow the popularity and the number of companies that provide the hardware and software required for streaming content. Each competitor offers similar services at various prices, and each competitor has slightly different product attributes that meet consumer’s needs.

Apple leads the market share (31.8%) with forecasts of $8.8 million in expected sales for Apple TV. Google’s Chromecast has 14.4% market share and is not far behind Apple forecasting $4 million in sales.  Although Roku is notably smaller in size, they have 18.1% market share with forecasts of $5 million in sales.

Competitor’s Marketing Strategies

Roku’s strategy includes a value proposition based on content, ease of use, and three product offerings at different price points including an ergonomically efficient streaming stick. In addition, its upcoming release of Roku smart TV’s partnering with global leaders TCL and Hisense thus, highlighting its newly introduced Roku user interface. Chromecast boasts its products penetrating price point, ease of use, and brand recognition.

Apple TV uses its strong brand recognition, advanced technology, well-designed products, and brand equity as the basis of its marketing strategy while leveraging the iTunes platform in a self-contained ecosystem. Apple TV’s features include seamless wireless connectivity for all Apple devices.

Amazon is leveraging Amazon Prime to retain their most profitable customer segment with a set-up offering.  Amazon’s Fire TV mirrors the same business model Amazon uses for all its products and services. Amazon uses a price, convenience, and accessibility value proposition with a differentiation business strategy in the B2C streaming media device market.      

Product attributes

Apple TV has a list of inherent characteristics such as reliability, seamless integration, and durability from market presence and effective branding from the iPhone, iPad, and Mac products. Additionally, Apple TV syncs with popular services like iTunes and new features such as Airplay.

Chromecast is backed by a strong market presence and branding deriving from Google’s success in the market place. Adding to Google’s growing line of Chrome products, including synchronizing Chromecast with popular web browser Google Chrome and Google Play Music store.

Roku boasts an impressive number of past streaming media players dating back to 2008.  Accordingly, Roku expanded its market presence globally teaming up with leading global TV manufacturers TCL and Hisense for future smart TV releases.

Marketing mix

Priced at $35, Chromecast presents a sleek modern streaming stick, and special offers include 90-day free all access subscription courtesy of Google Play Music for owning a Chromecast.

Apple TV is a palm-sized, energy efficient, quiet, and high-quality product priced at $99.

Roku boasts three different price points ranging from $49.99, $69.99, and $99.99 reaching a wide range of consumers. Specials include $10 off Roku 1 and two months free of Hulu Plus.

Each set-top box provider uses effective retail placement, internet sales, and multi-channel sales with a distribution network of UPS, FED EX, USPS, and local transportation services where applicable.

Strengths, Weaknesses, and Competitive Trends

Roku has more content channels resulting from being the first player in the market, however, lacks an integrated store. Apple lacks the gaming option, however, has the advantages of a large integrated store. Chromecast has an effective pricing strategy, international sales, and offers a pocket-sized device. Chromecast lacks key features like parental controls and gaming availability.

The trend set by Amazon is a larger focus on games and voice search new to the set-top box market. Chromecast and Roku both offer a smaller (HDMI) device that is slightly larger than a thumb drive that the other competitors do not. Roku is the content leader with over 1,200 channels by acquiring channel partners for content. Content is one of the primary factors for consumers when purchasing a streaming device.

                                          

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