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SpirE-Journal 2011 Q3

Market Research: Adapting to Emerging Countries

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Market Research: Adapting to Emerging Countries

Customer behavior in emerging economies poses a challenge to the established paradigms of market research – which is, after all, a discipline which originated in the West. Should the same traditional research models be applied world-wide because human nature is the same everywhere? Or should research approaches be adapted to the much less transparent, heterogeneous and “messy” world of emerging markets?

Emerging economies like Brazil, Mexico, India and China contribute over 30% of world GDP and 70% of the world’s population. Yet they have accounted for over half of global GDP growth since 2001. Understandably, multi-national corporations (MNCs) are falling over themselves to sell in the emerging world. Along with sales comes customer research – a field pioneered in the West. While MNCs understand that the next wave of growth lies in the emerging world, they often force-fit insights and strategies from the OECD into emerging countries, leading to disastrous results. 

Examples of how developed world assumptions can be mis-applied to emerging market situations include: 

Assuming that the same research methodologies should be applied regardless of market maturity

Phone and internet surveying is often the research methodology of choice in the rich world. This is due to low costs and a widespread culture of co-operation with research projects. But in many emerging markets, street intercepts or other forms of face to face interviews may offer superior value, due to many consumers not entertaining calls on their land-lines and not taking internet research seriously.

Assuming that change takes place slowly

In emerging markets the pace of economic growth gets translated into faster development and change in the consumer psyche. As emerging market citizens experience rapid social change and rapid income increases, consumer profiles can evolve much more rapidly than they would in a more stable, rich-country environment. This in turn leads to more brand churn and shorter product life cycles.

Assuming that the market eco-system is the same everywhere

Emerging markets are characterized by much more unorganized retail industries, irregular value chains, counterfeit products and low-cost options. This is highly relevant to good questionnaire design and interview execution

“When respondents say “I will definitely buy”, it often means “I may consider buying.”

Assuming that respondents are the same everywhere

Emerging market respondents may display more “politeness” when rating product concepts and brands. This needs to be taken into consideration when analyzing data. For example, when respondents say “I will definitely buy” it often means “I may consider buying.” Levels of education and sophistication about purchasing products may also lag that in rich countries, due to the immaturity characteristic of so many product markets. Moreover some respondents in emerging markets may hesitate to comment due to a reluctance to “speak out” – in some cases nurtured by the character of domestic education and political systems.

Assuming that emerging markets are too under-developed

The purchasing habits and disposable income of the top income earners in the emerging world’s 1st tier cities may parallel those in the OECD. Moreover emerging markets can leapfrog technology due to their immaturity – for example countries like Indonesia have far more mobile phone lines than land lines, making telephone interviewing increasingly problematic in reaching out to some segments. Some MNCs still struggle to accept how market sizes for seemingly “high-end” products can be larger in some emerging markets than in OECD countries, thanks to domestic producers.

Research Challenges in Emerging Economies – A Closer Look

Mature markets typically require studies aimed at drawing deep customer insights for product repositioning or a qualitative assessment of perceptions amidst competitive clutter. Such research is common in emerging countries too. But emerging market studies tend to be more about market potential, determination of unmet needs and latent needs of consumers for a hypothetical product-category. This is a function of these markets generally lying at an earlier stage on product life cycle curves. 

Moving to the logistics of research execution, market research in rural areas poses a huge challenge due to the travel times and skills required. About 70% of Indians and 52% of Chinese live in rural towns and villages. Nor is internet research necessarily a solution. Unlike farming households in countries like Japan and the UK which often have a high living standard and robust internet connectivity, households in rural villages and towns in BRIIC countries contribute to the low broadband penetration rates of these nations – 34% in China and 8% in India for example. This limits the applicability of internet research. 

Alongside these are cultural issues. Among the Chinese, studies show that a phone interview should not last more than 15 minutes. However, surveys typically exceed 20-30 minutes because they involve “ice-breaker dialogue” before the main questions – thereby eroding the respondent’s attention. 

Taboo areas for interviewing in emerging economies include the following: 

China: Sensitive questions on religion and history

Japan: Any question that could create even the slightest embarrassment for the respondent, or lead to overt criticism of the client

Singapore: Cold-calling on land lines or door-knock interview

Malaysia and Indonesia: Questions to female respondents that seem to tread too close to their private lives

One study undertaken in Japan saw initial low interview acceptance rates because potential respondents wished to avoid any possibility of criticizing the client. Only with great persistence were interviewees recruited. 

Language can throw up barriers as well. OECD countries can certainly be multi-lingual – think of countries like Switzerland, Belgium, Spain and Canada. But they rarely approach the degree of linguistic diversity or complexity seen in the largest emerging markets. 

 “India has 18 official languages and thousands of dialects.”

China is home to 200 languages and many more dialects which are dissimilar to Mandarin in phonetics and morphology – Cantonese being one of the most prominent ones. These dialects co-exist alongside the national language, which is Mandarin. Even in the middle of a business conversation in Mandarin Chinese, respondents might switch to a local dialect if they wish to discuss something among themselves or something of a less precise nature. India is even more diverse, with 18 officially spoken ‘Scheduled’ languages and innumerable dialects which vary with every village and province. For researchers to understand issues deeply, the ability to shift to local dialects is vital. 

Issues in Business Customer Research

Analyzing the business customer base for B2B products usually involves far more estimation than in the OECD. This is due to the poorer quality of published data, which in turn is linked to lower disclosure requirements and a larger proportion of small and medium-sized firms. 

Due to unfamiliarity with research, many companies would also distrust phone or internet research and only agree to face to face interviews, and even then reluctantly.

Social-network based Research – A way out?

Social media consumption is exploding in emerging markets, as is widely known. In the Middle East, for example, social media played a crucial role in fomenting the so-called Jasmine revolutions that led to regime change in Tunisia, Egypt and Libya this year. 

Social-media can help to overcome some of the problems inherent in emerging market research by: 

Tracking buzz around a product/service, thus avoiding asking direct questions
Aiding in targeting and recruitment of respondents who might otherwise be hard to recruit

Conclusion

Emerging markets are clearly the fastest growing destination for global market research. They also require more frequent, more holistic and more in-depth research given the immaturity yet rapid growth of many product categories – which attracts market entry plays. 

The problems associated with market research in emerging markets are far from formidable. The path to overcoming them begins by not blindly importing research models that have worked well elsewhere in the world. It then requires the deployment of fact-based approaches to:- 

Planning – deploying customized Market Environment Research to generate baseline information about the business eco-system to inform the design of good methodologies and questionnaires, rather than relying on (often non-existent) published data

Recruitment – using localized forms of persuasion and a big dose of persistence to overcome suspicions about research

Methodology choice – relying more on face to face interviewing and testing, supplemented by phone or internet (including mobile internet) research where relevant

Execution – ensuring linguistic and cultural proficiency of interviewers, while allowing sufficient time and budget to navigate a more challenging physical environment

Interpretation – assessing responses in a culturally grounded manner, while allowing for ethnographic research to overcome the limitations of self-reporting

Not all the differences between geographic regions can be ascribed to the OECD versus emerging market divide. But it does account for a major source of market research failures – and creates an opportunity for the thoughtful, non-dogmatic market researcher to succeed.

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