Check Assumptions When Marketing to Emerging Markets

Two Harvard Business School professors argued last week that, despite the economic crisis in the United States and elsewhere, companies should not slash marketing budgets too severely, and that even reduced marketing funds can yield good results if spent appropriately. Their formula for success includes staying focused on core customers, combining research efforts with trusted partners, cutting advertising programs selectively, and – of note to Vital Wave Consulting – shifting the research focus to emerging markets.

The professors argue that emerging markets are a better target for market research because “the costs of research in emerging economies are less and the payoff from incremental insight can often be greater. [Also,] brand preferences and consumption levels in emerging markets such as China, India and Brazil tend to be more fluid.” These assertions invite a little scrutiny, however. Research in emerging economies does not necessarily cost less. In developed countries, there are inexpensive tools and a robust market research industry. In emerging markets, the lack of secondary data often necessitates primary research, which can be time-consuming, labor-intensive and costly due to the limited reach of basic research tools such as phone lists and Internet connectivity. It is true that the payoff from incremental insight in emerging markets can be greater; mature markets are much more familiar and there is a great deal more reliable data available. By contrast, many multinational technology companies have less reliable data and know comparatively little about emerging-market customer segments, local languages and cultures, or the business environment. Good research can help companies make crucial decisions on all elements of market entry and expansion. Brand preferences and consumption levels in emerging markets can be fluid, but in some instances brand preference is very steady due to nationalistic support for local heroes (e.g., Baidu’s stubborn market leadership over Google in China). In other cases (e.g., mobile operators), “fluidity” or churn can be ascribed to price sensitivity, unlocked mobile phones and a flurry of new entrants to the market.

The basic argument by the Harvard business scholars is correct – despite the economic downturn, now is not the time to abandon near-term and long-term opportunities in emerging markets. But the companies that realize the most from their emerging-market strategies will be those that allocate appropriate resources to market research, understand the limitations of available data, and address the challenge of overcoming those limits. Knowledge of the market dynamics in emerging markets and a research-supported strategy will save critical time and resources.