Back to the Market Research Survey

As I mentioned, I’m fairly confident in my neighborhood demographics, but I need to find out what the demand for my baked goods looks like. I need some way to predict the volume of purchases I can expect. Once I have that magic number, I can crunch a whole bunch of numbers and find out what kind of space and equipment I need, supply costs, employee costs, etc. But it all centers on knowing how much I can expect to sell in my neighborhood. So goal one of my survey is to get this number.

A second goal, since I’m not likely to be able to do a second survey quickly, is to get feedback on a couple of potential messages I might use to market my bakery and see which message gets the best response. For instance, I now live in Colorado, but I’m originally from Alabama where my grandmother taught me to bake. My recipes are mostly southern-style cakes and pies passed down through my family (although modified to death now because of altitude!). So I could potentially market as a southern-style bakery… but is that a positive or negative in Colorado? I’m not sure. My neighbors may hear southern-style and think made-from-scratch goodness , or they may think high-fat, lard, gross. I need to know what their perception of southern-style is before I use it in any concept for my bakery. This is the other bit of information I’d like to get out of the survey.

So the goals are:
1) Estimate sales volume per year
2) Test response to two or three potential marketing concepts and see which works best

I have an initial outline for the survey which was put together with the help of a market researcher. Surveys can get tricky in that you can unintentionally influence the answers in the way you ask the question. Market researchers know how to avoid this problem. Because I want accurate results, I felt it was worthwhile to pay for a few hours of time with a market researcher to be more confident in the result. We are not done yet, but this is the outline I have so far:

1) Disqualifying questions
2) Purchase volume
3) Concept Description
4) Concept Likeability questions
5) Concept Uniqueness questions
6) Concept Believability questions
7) Anything Confusing?
8) Need or want questions
9) Totally replace, partially replace, or supplement questions?
10) Product Features (scale — important to not important)
11) Which are the 3 most important?
12) How do current offerings rate in terms of the above?
13) How familiar are these motives (scale)
14) Misc. questions

So I will break these down and try to give examples. I’ll only do a couple today as it is my baby’s birthday — he’s 16 and towers over me by a good 10 inches, but I guess he will always be a baby. :-)

So starting with #1, disqualifying questions should be asked first to make sure you don’t include people that may skew your results, and that you are talking to the decision maker. So in my case, I’m going to exclude people who work for a grocery store, warehouse store, or bakery. Also, I want to ask to make sure the person we’re talking to makes decisions about where to buy cakes, pies, etc. for their household. If not, then there would be no need to continue the survey. So those types of questions go first, and you want there to only be a couple.
Examples
- Which of the following types of companies, if any, are you employed by:
- Are you one of the primary decision makers responsible for decisions about grocery shopping in your house?

#2 is the purchase volume question. In my survey, I’ve opted to ask how frequently do you currently buy baked goods like cakes, pies, cookies, and muffins — then offer a scale of weekly, monthly, 4x per year, etc. I am playing a little with the wording on how to define baked goods because I don’t want to get answers for breads and bagels, as I don’t provide these. If I just said baked goods, bread is probably the first thing that would come to mind.
Example
- How frequently do you or members of your family purchase baked goods?

#3 is the concept description. In practice, the survey giver would at this point hand a card with the concept description to the taker and let him or her read it. This description should be short, but should describe the concept for the bakery and include words and emotions that convey the benefits to the survey taker — it should define why a person would buy from this bakery vs. a grocery store bakery. This is another area where I have opted to involve a marketing consultant. I want a well-written description that lets me gauge the concepts potential. I don’t want my inexperience in writing a concept description cause me to get a false reading on its appeal.

I should have concept ideas to review next week — I’ll let you know how it goes! I will also continue to explain the survey outline and give examples of what the questions might look like.

Until then…

Bake Happy,

“Even if you’re on the right track, you’ll get run over if you just sit there.”
– Will Rogers

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A Bit on Neighborhood Demographics

So I belong to a great community of fellow cake decorators called Cake Central. If you’ve never heard of it, you should should definitely check out the site here: www.cakecentral.com

Cake Central Logo

I posted about my bakery plans on the forum there, and received good feedback about not limiting my focus by geography, but instead focusing on demographics. And they were absolutely right! In my last post I mentioned my plans to focus on my own zip code, but cautioned that you may have to focus on a larger geography depending on your area.  So I think it may be worth explaining further how I came to my conclusion and how you might do the same.

When looking at an area, you should find out how many people live there, what are the household incomes, are they married or single, do they have kids, etc. This will hopefully tell you whether there are enough people with extra money to buy your baked goods. And knowing the makeup of the households will tell you whether you can expect to sell cupcakes two at a time or by the dozen. If there are a lot of kids – this probably means more parties.

In my case, my zip code has about 11,000 households and 28,000 people.  About 70% are married with kids.  The average income is just over $90,000. Currently the only bakeries in the zip code are grocery stores, Costco, and Panera. There are some coffee shops selling baked goods as well. There is a custom bakery about 7 miles away, then 2 or 3 more about 10-12 miles away.

Because I live in a fairly affluent neighborhood, I think I’m ok focusing on the zip code, but I could still be wrong — and that is why the market research is still important. There seems to be enough people and enough money, but what if there is not enough demand? First, why are there no custom bakeries now? Maybe I’m lucky, or maybe others are smarter?? Also, it is a very health conscious community, so maybe my neighbors are not willing to buy enough sweets to support a bakery.  What if they buy plenty of sweets, but only care about low costs and convenience — meaning they may be perfectly happy buying cheap baked goods in the local grocery store so I still wouldn’t get any business.  These are some of the concerns I’m trying to address with market research.  Having enough people with disposable money in your market area is a first step for sure, but you then need to understand their buying habits and motivations in order to determine your real market opportunity.

So where do you find neighborhood demographics? There are many great internet sites that can give you all sorts of data. Here are some I used:

www.city-data.com
www.neighborhoodlink.com
www.zipskinny.com

Also check with your local Chamber of Commerce – they have these types of statistics available as well, usually on their website. You might get slightly different numbers from the various sources, but  if you look at several, a basic picture will start to emerge.

A basic rule of thumb I’ve heard is to try and locate where there are no other bakeries serving your same niche within 5 miles for a city location or within 15 miles for a rural location. I’m sure there are plenty of exceptions to this, as there are to every rule, but it is something I did consider.

I know I promised a survey outline in this post, but I’m still working on it.  In the meantime, hopefully this is also food for thought. I’ll post the survey outline within the next couple of days.

Until then…

Bake Happy,

“Some people use research like a drunkard uses a lamppost: for support, not illumination.”
- David Ogilvy

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Market Research Comes BEFORE the Business Plan…

So just about every source on starting a business always says you need to write a business plan. Have you looked at the outline for one of those? You have to know how many cupcakes, cinnamon rolls, pies, etc. you are going to sell, so you can estimate your gross revenues. Knowing how much of each product also determines how many ovens, how big a fridge, how much freezer space, etc. — so that’s your startup equipment cost. How much product and how many customer determines how much space you will need — so that is your rent. It also determines how much help you need — so that’s your labor costs. So ultimately you can’t get anywhere with a business plan until you know about how many customers you can expect and how much of each product they will likely buy.

Now for me, I am not comfortable just making up those numbers. So what I’ve discovered from my market research and entrepreneur classes is that I need to conduct a survey and do some spying on the competition to get to the truth. One of the first things to do is make a list of all of your competitors — this includes not only direct competitors like other specialty bakeries, but also bakeries in grocery stores and Costco, plus coffee shops and other cafes where baked goods are sold. Then you need to set a schedule and go to each of these places during various times of the day and week. Plan to spend around 30 mins hanging out and count how many people come into the shop and make notes on what they buy. Ask the counter staff what their best selling items are, order them, and try them. Ask the sales people when they are busiest and try to come back then. Plugging this info into a spreadsheet and getting average purchases for each of the competition types can help you estimate how many people you might can expect to come to your bakery, and how much they may buy. For the first year, put your approximate visitor count and sales at just below average because you won’t have an established name yet. Also, if there are bakeries just like the one you want to open in other cities or towns, but in cities or towns that have a similar type of population, then go do the same thing there. This may give you an even more accurate estimate of the number of visitors to expect daily.

Next, it is a good idea to conduct a survey in the neighborhoods you hope to serve. For me, I’m limiting my target market to my zip code, as there are plenty of people in that small area. A more rural location may need to target a larger region. I’ve opted to enlist the help of a market researcher to help in writing my survey. First, my reading led me to understand that there was too much I didn’t really understand. Basically if you ask the questions in the wrong way or wrong order you can introduce bias into your results and invalidate the results. Since I intend to self-fund this venture, accurate research is VERY important to me. But I thought it would be helpful if I gave you the basic outline of my survey so you can get an idea of what might be important to ask. I am working on those details now, but I’ll post the outline next time. There is also the problem of how to deliver the survey – I’m hoping to have a good plan for that next time as well. I’ll keep you updated, and hopefully your venture will involve less work than mine!

Until then…

Bake Happy,

“Real knowledge is to know the extent of one’s ignorance. “
- Confucius

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I’m Starting A Bakery!

I’ve decided to start a bakery – Natalie’s Bakehouse!!

Just writing that down feels good. I’ve always loved baking and cake decorating, but it was something I always did on the side…after my “real” job. This year, I plan to make baking my real job — and I’m excited!

I’ve been doing custom cakes on the side for a year so I already rent a commercial kitchen, have a retail food license (currently for catering), have a retail sales tax number, and have a good start on my own scratch recipes (some original, some from my grandmother). I’m in the process of starting a business plan and getting help with some basic market research to make sure I have a market. And I’m reading like crazy to understand what I need to do to be smart about this. I decided to blog because it occurred to me that others might benefit by following along, plus writing has always helped me clarify my thinking. So join me as I open Natalie’s Bakehouse!

I know how to bake, but running a business is new to me. So I’ve started my quest with many books on starting a bakery and any online entrepreneur classes I can find. I haven’t found any books I absolutely love yet as they all want to focus on recipes instead of business. I mean maybe I’m wrong, but wouldn’t most people looking to open a bakery already know how to bake?? What I was hoping to find was how to estimate my market, where to start in sourcing product, and how to streamline my production process, I haven’t found that at all yet, so if you know a good book, please let me know!

I did find a website I like though: www.marketingprofs.com

MarketingProfs Logo

You can join this site for free and get access to a lot of content on business and marketing. I opted to pay for the pro membership because there were several premium seminars I wanted to take. Their Small Business Series has been particularly helpful in helping me understand the market research I need to do. Check them out, but if you do opt to go pro, make sure to first sign up for the free membership because they will then email you a coupon for a discount on the pro membership. Their forum is a great place to ask questions, and there are real experts sending answers.

So still studying and studying and studying….but next time I’ll update you on what I’ve learned.

Until then…

Bake Happy,

“The biggest mistake people make in life is not trying to make a living at doing what they most enjoy.”
Malcolm S. Forbes

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