Marketing the New Venture 211buy at specific price points. The more focused the question, the better the chances of
generating valid and reliable answers.
Step 2is the point at which the researcher decides which data sources—primary or
secondary—are best suited to the objectives of the study. Primary dataare generated
from scratch by the research team. Secondary sourcesconsist of data, information, and
studies that have already been completed and published by others. These sources are use-
ful for planning original-data collection activities because they contain in-depth back-
ground information on customers and markets, most are easily accessed, and access is
generally either free or inexpensive. Virtually unlimited information is available from
hundreds of sources. Some published studies are examples of concept, product, and mar-
ket tests similar to those the new venture might want to conduct. These are frequently
available over the Internet and/or in public libraries, and they are always available in the
business libraries of major business schools.
One fine example of the use of secondary sources can be demonstrated in the found-
ing of Quantum Health of Columbus, Ohio. In 1999 Kara Trott was working as a cor-
porate lawyer with clients in the healthcare industry. She saw first-hand how economic
competition between providers and insurers was causing problems for patients, and she
wanted to make a difference. Her ideas met with a good deal of skepticism, but never-
theless she did her research. Using data supplied by her law firm’s clients, she tracked
the healthcare decisions of almost 3,000 patients, 260 doctors, and 140 other healthcare
employees. She found that about 50 percent of patients leave doctors’ offices without
knowing what to do next. Few received guidance or answers to their questions, so they
often chose the wrong type of specialist for their problems. On average, these errors cost
an additional $3,500. With this data in hand, Trott quit her job and started Quantum
to help patients ask better questions, make better decisions, and save everyone money.
The business model? She collects a percentage of the money saved by employers. Last
year Quantum managed 52,000 patients (a 100 percent increase year over year), and her
revenues rose to $7 million. That initial research was the basis for the business idea, the
pitch to companies, and the clincher to financiers.^11
After secondary sources are consulted and data organized, primary data collection can
be conducted if needed. Three common entrepreneurial primary-data projects are the
concept test, the product test, and the market test.
Concept testingoccurs very early in new venture planning, often before the final
venture configuration is complete. The purpose of the concept test is to determine
whether customers can envision how the product or service will work and whether they
would purchase it. Customers respond to a descriptionof the product or service. After
reading the description, they are asked whether they understand the product and would
be likely to purchase it.
Concept testing can also be used for potential investors, suppliers, or members of the
managerial team. Each of these groups is in a position to evaluate the new venture con-
cept, and the entrepreneur can gauge whether the concept is likely to be accepted by
these important stakeholders. In addition, feedback from these people at the concept
stage enables the entrepreneur to make adjustments and alterations to the concept that
can save time, money, and reputation down the road.
Product testingrequires having potential customers or investors react to the actual