Market Research

9 04 2009

the-apprentice-home-gymWatching the candidates of The Apprentice talk about themselves misleads one into feeling that not only are they the best, but that they are the best of the best of the best when it comes to running a business and that Sir Alan Sugar should feel lucky that they are willing to work for him. Yet, when it comes to doing a task, they forget the most basic of business concepts.

As seems to be the norm these days, the task involved designing a portable piece of fitness equipment for, surprise surprise, the cash strapped consumer. It was clear from the beginning that the whole task was about the product. It is no surprise then that team Empire, which came up with a Gym-in-a-box idea failed to sell even one unit to two of the three retailers they pitched to. The candidates failed to realise that the perfect product isn’t one that tickles their own fancy, or one which their family would like to buy, but one which addresses the needs of the consumer, hence filling a possible gap in the market.

Both teams failed to conduct even basic market research to help them develop their product. Team Empire should have realised that creativity wasn’t their strongest bit and rather than sit around the table bouncing useless ideas of each other, they should have sent two people to the local gym to talk to the members there about the kinds of products they would like to buy and what price they were willing to pay for it. Another team of around two people could have scoured the internet looking at the products that their competitors were selling at that price level. After all, the task was about designing a product for consumers who were finding the gym membership too expensive and were looking for low cost alternatives. Who better to ask about the product than those who are going to buy it in the end.

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Their lack of research was also evident in their pricing strategy. It felt as if they had just closed their eyes and picked the figure of £29.99 randomly for their product. At that price, there are numerous alternatives in the market which are certainly better looking if not better value for money. Even the promotional material, including the pictures, looked like something that came out of a secondary school student’s Media Studies project.

Although team Ingnite failed to do any market research either, they still won the task and were offered a deal of exclusivity by John Lewis. One of the reasons why their product succeeded was perhaps because it was simple. Their opponents product was a case of “Jack of all Trades, Master of None”, like a new mobile phone which offers to make you a cup of tea and take your dog for a walk. Ignite’s product was also more pleasing to look at and truly portable.

Two days to come up with a concept, build a prototype and pitch a product is indeed a tall order and both the teams did that with a lot of patience and commitment. Was firing Majid the right decision? Its not for us to decide. After all, this isn’t a talent show, its a long job interview and Sir Alan should keep those whom he feels would be right for his organisation.

The Apprentice on BBC iPlayer

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Children help their parents spend their money

14 11 2008
David Beckham in a Motorola advertisement

David Beckham in a Motorola advertisement

According to recent news, parents are unwittingly spending £191 million a year to fund their children’s shopping habits. Or rather, the children are doing it for them on their behalf to save their parents the trouble of doing so. According to a survey consisting of 500 parents and 500 children, around 20%, or 1 in every 5, children have admitted to using their parents’ credit card for their online purchases.

The items in the shopping basket include the latest electronics, games, etc. Put simply, items that are on every child’s wish list. The age of the children ranges from 8 to 16 years and the value of the average purchase is said to be around £25. Of the parents surveyed, only 2% felt that their children would purchase goods online without their permission. 20% of the children also knew their parents’ username and password for their shopping websites. This made it easy for them to access their accounts and place orders.

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The recent strain being put on personal finances due to the rise in prices and unemployment would have undoubtedly led to parents cutting back their spending on buying the latest gadgets and gizmos and branded fashion accessories for their children. This means that the children feel “left out” when all their peers have the latest mobile phone or mp3 player and they are stuck with the “old” one.

Certain companies prey on this insecurity that the children harbour by pressurising them to purchase, or rather pester their parents to purchase the products that are endorsed by their “heroes” whom they “look up to”. The advertising method is such that it sends out the message to youngsters that a brand name is much more important than they product itself. It is endorsed by a well-known celebrity and therefore it’s cool and fashionable to own it and most certainly well worth the expensive price tag.

Often, the prices of these products are 2-3 times the price of their unbranded, store own-brand or less known branded counterparts. The obvious reason for this is that it allows the companies to “skim” the market, or in other words, pricing their products higher than the competitors since they know that the consumers will still want to buy them.

In August this year, The Association of Teachers and Lecturers expressed concern when their research showed that children who didn’t have the latest gadgets or wear garments that didn’t sport a fashionable logo were often bullied and mocked by their peers.

The report also highlighted how “brand aware” the children are and how in the race to be up-to-date, they end up having low self esteem and self confidence because their “net worth” or “net value” amongst their peers is judged by the brands they own.

In essence, what these companies are doing is “adding value” to a product by merely associating it with their brand. So, what you end up paying for is the brand. Of course, many might argue that many branded products do offer good value for money because they are of a better build quality. And what you get in return for the premium charged is peace of mind that the product will last. No doubt, this is true. But then, this isn’t true in all cases.

Interestingly, 30% of the parents’ admitted to saving their banking details online.
If the children can easily access them, just imagine how easy it might be for a fraudster to access the details. Then the orders might not be for £25, but more like £2500.

http://ukpress.google.com/article/ALeqM5i_9ZhcHk7F5v3WAReNAjjeFmrMxg
http://news.bbc.co.uk/1/hi/education/7549770.stm
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Meeting with Headteacher Darling.

8 11 2008
Alistair Darling, Chancellor of the Exchequer. Image from TimesOnline

Alistair Darling, Chancellor of the Exchequer. Image from TimesOnline

Since many of the banks had seemed to have failed to pass on the Bank of England’s very generous 1.5% cut in interest rate to their customers on the Standard Variable Rate (SVR) mortgages, the mischievous bankers were summoned to a meeting with the head teacher, a.k.a., Alistair Darling, the Chancellor of the Exchequer. They were told to pass on the interest rate cut to their customers, or else, face detention.

A standard variable rate is where the interest rate is tracked by the lender, solely at its discretion, to the base rate of the Bank of England or the LIBOR rate. So, the obvious excuse that the bankers gave for not passing on this cut was that the cost of borrowing money on the open market, i.e., the LIBOR rate, had not come down at the same rate. That’s true, although the LIBOR rate did drop by 1.07% from 5.56% to 4.49% on Friday. The lowest rate since May 2004, incase you thought why it was that significant.

Bowing to pressure, Lloyds TSB, Halifax, Nationwide, Abbey, Royal Bank of Scotland, NatWest (part of Royal Bank of Scotland), Northern Rock and Bradford & Bingley have all cut the interest rate by a full 1.5%. Also, the fact that the LIBOR rate has fallen makes it hard for the banks to justify their reluctance to pass on the cut.

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Usually, the banks are quite quick to match a hike in interest rate by the Bank of England because it allows them to justify doing so. However, they don’t seem so keen when the rate is cut.

The opposite is true for the savings rate. Most banks have been more than happy to cut the interest rates on their savings account using the recent cut in rates by the Bank of England as the justification. This hardly seems like the right thing to do when banks are desperate for funds to lend and one of the sources is the deposits by the customers, the other being borrowing on the open market. Since its expensive to borrow on the open markets, as the banks themselves are saying, they should be trying to entice customers to deposit money.

But what’s amusing is that Alistair Darling and his advisors actually assumed that the banks would pass on the cut to their customers. Why would they? They are not charitable institutions that work for the best interests of their customers. They are financial institutions whose main aim is to make profit and make their shareholder’s investment in them worthwhile. Lets not forget that banks all across the globe have lost billions, if not trillions, of pounds in the financial crisis. So, it is but obvious that they would try hard as they could to make up for the loss.

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No wonder then that people have literally started to stuff cash under their mattresses. The chief executive of G4S, the security transport company, Nick Buckles, recently said that the amount of cash in the system had increased since people are preferring to use cash instead of credit. It emerged recently that the number of £50 notes in circulation had increased by 20%.

He added, “People use it as a means of budgeting. They don’t like credit, so clearly there’s more cash transactions, more ATM transactions. And I guess the £50 note issue is people hoarding cash at home.”

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