1. International Marketing Researches Stefano Pelle October 2013 October 2013

2. Contents Marketing Researches: an indispensable tool Marketing Researches: an indispensable tool The most common mistakes The most common mistakes Global Marketing Research Process and Phases Global Marketing Research Process and Phases Why and Where Marketing researches: a practitioner perspective Why and Where Marketing researches: a practitioner perspective Some Examples Some Examples

3. What is Marketing? “Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual (customer) and organizational objectives”. “Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual (customer) and organizational objectives”.

4. Marketing Researches and Marketing As per the above definition marketing researches are imperative for a company to know what type of products or services would be profitable to introduce in the market As per the above definition marketing researches are imperative for a company to know what type of products or services would be profitable to introduce in the market Also with respect to its existing products in the market, a good market research enables a company to know if it has been able to satisfy customer needs and whether any changes need to be made in the marketing mix Also with respect to its existing products in the market, a good market research enables a company to know if it has been able to satisfy customer needs and whether any changes need to be made in the marketing mix

5. Marketing Researches An Indispensable tool to compete in the market place An Indispensable tool to compete in the market place Is this true? Is this true?

6. Marketing Researches The most used decision making tools The most used decision making tools Rules of thumb Rules of thumb Back of the envelope calculations Back of the envelope calculations Gut feeling Gut feeling

7. Marketing Researches The most effective decision making tools The most effective decision making tools Common sense Common sense

8. Marketing Researches Though what mentioned earlier is often the reality of facts, marketing researches are indeed extremely useful tools to help decide in a more accurate way Though what mentioned earlier is often the reality of facts, marketing researches are indeed extremely useful tools to help decide in a more accurate way At times the empirical tools can be deceptive and bring unpleasant surprises and waste of resources At times the empirical tools can be deceptive and bring unpleasant surprises and waste of resources

9. The Most Common Mistakes

10. An American company learned that tomato ketchup was not available in Japan In order to gain first mover advantages, the company immediately shipped without first hesitation (and researches) a large quantity of its ketchup to Japan The products remained longtime on the shelves before being withdrawn and disposed of Successive researches showed that Japanese consumers preferred soy to tomato-based condiments. From Ricks, David (1983) Big Business Blunders. Dow Jones-Irwin, Homewood, Illinois Ignoring the Need for Marketing Researches

11. In China Toyota was forced to withdraw an ad showing some stone lions bowing to a Toyota Prado The Ad struck an historic nerve since the lions resembled those flanking the Marco Polo bridge in Beijing, site of the opening battle of the 1937 Japan’s invasion of China From Cultural pitfalls tarnish some Ads in China, Asian Wall Street Journal, January 19 th, 2004 Ignoring the Need for Marketing Researches

12. Kentucky Fried Chicken (KFC) learned through secondary data about Brazilian loving the chicken and decided to enter the Brazilian, market planning to open 100 stores However the Initial reactions in Sao Paulo were disappointing In Brazil Street corner vendors sell low-priced charcoal- broiled chicken virtually everywhere Successive researches revealed that local consumers preferred the taste of charcoal broiled to deep fried chicken Insufficient Marketing Research From Ricks, David (1983) Big Business Blunders. Dow Jones-Irwin, Homewood, Illinois

13. A U.S. soft drink company conducted research in Indonesia to determine market potential The research focused on the major urban areas: the results obtained were extrapolated to the whole country The company established large bottling and distribution facilities Sales were disappointing: rural and urban consumers have very different behaviors. Only foreign visitors and tourists purchased the product. Misleading Research From Ricks, David (1983) Big Business Blunders. Dow Jones-Irwin, Homewood, Illinois

14. Global Marketing Research

15. M.R. : A Necessary Tool Given the complexity of the global marketplace, solid marketing research is critical for a host of global marketing decisions Given the complexity of the global marketplace, solid marketing research is critical for a host of global marketing decisions Most of the cultural blunders in global marketing stem from inadequate marketing research Most of the cultural blunders in global marketing stem from inadequate marketing research

16. Conducting Global M.R. Six steps in conducting global market research Six steps in conducting global market research 1. Define the research problem(s) 2. Develop a research design 3. Determine information needs 4. Collect the Data (secondary and primary) 5. Analyze the data and interpret the results 6. Report and present the findings of the study

17. Research Problem Definition A well defined problem is often a half solved one A well defined problem is often a half solved one Once the nature of the research problem becomes clear it needs to be translated into specific research questions: Once the nature of the research problem becomes clear it needs to be translated into specific research questions: –e.g. What does the target consumer want from a similar product? What is he getting from the existing competitors? In an international context the marketing research problem formulation may be hindered by the self reference criterion In an international context the marketing research problem formulation may be hindered by the self reference criterion

18. Self Reference Criterion Refers to the unconscious tendency to resort to their own cultural experience and value systems to interpret a business situation Refers to the unconscious tendency to resort to their own cultural experience and value systems to interpret a business situation A four step correction mechanism for this: A four step correction mechanism for this: – Define the business problem (BP) as per own culture – Define the same as per the host culture –Isolate the SRC and understand how it interferes with the BPs –Redefine the BP with the SRC influence

19. Research Problem Definition Even more dangerous than the SRC is the trap of ethnocentrism, the belief that one’s own culture is superior to others Even more dangerous than the SRC is the trap of ethnocentrism, the belief that one’s own culture is superior to others This leads to major mistakes not only in the researches but often also in products formulations This leads to major mistakes not only in the researches but often also in products formulations Many MNCs have seen failures in their launches due to this Many MNCs have seen failures in their launches due to this

20. Research Problem Definition A major difficulty in formulating the research problem is the lack of familiarity with the foreign environment A major difficulty in formulating the research problem is the lack of familiarity with the foreign environment This may lead to false assumptions hence eventually implying misleading research results This may lead to false assumptions hence eventually implying misleading research results Some preliminary and exploratory researches can reduce part of the uncertainty: a useful tool for this are Omnibus Surveys Some preliminary and exploratory researches can reduce part of the uncertainty: a useful tool for this are Omnibus Surveys

21. Conducting Global M.R. Six steps in conducting global market research Six steps in conducting global market research 1. Define the research problem(s) 2. Develop a research design 3. Determine information needs 4. Collect the Data (secondary and primary) 5. Analyze the data and interpret the results 6. Report and present the findings of the study

22. Research Design and Information Research Design and Information Depending on the problems, several kinds of research designs could be envisaged. It could even be possible to go through several round of researches, but this would also depend on the budget available Depending on the problems, several kinds of research designs could be envisaged. It could even be possible to go through several round of researches, but this would also depend on the budget available Once the research issues have been stated, the management needs to determine the information needs: this will also help fine tune the most adequate research design Once the research issues have been stated, the management needs to determine the information needs: this will also help fine tune the most adequate research design

23. From: Young, R.B. and Javalgi, R.G. (2007). International marketing research: A global project management perspective. Business Horizon 50: 113-122 The Marketing Research Process

24. Secondary Data Collected by persons other than the researcher for general purposes Primary Data Collected by the researcher ad hoc for the specific research Data Collection

25. Sources of Secondary Data Data Sources Primary data sources Secondary data sources Internal records External sources Published data Standardized sources of marketing data Sales results (outcomes) Marketing activity (inputs) Cost information Distributor reports and feedback Customer feedback Consumer Attitudes and Opinion Polls Market Segment Definition Market Tracking Media Usage and Promotion Effectiveness Monitoring Printed Electronic Indexes Dictionaries and Encyclopedias Directories Statistical Sources

26. Secondary Data Selected Secondary Data Sources: National Trade Data Bank, U.S. Department of Commerce, CIA Factbook, Japan External Trade Organization (JETRO), OECD, IMF, The Economist Intelligence Unit (E.I.U.), ACNielsen Co, Taylor Nelsen Sofres, etc. Selected Secondary Data Sources: National Trade Data Bank, U.S. Department of Commerce, CIA Factbook, Japan External Trade Organization (JETRO), OECD, IMF, The Economist Intelligence Unit (E.I.U.), ACNielsen Co, Taylor Nelsen Sofres, etc.

27. Secondary Global Marketing Research Problems with Secondary Data Research: Problems with Secondary Data Research: –Accuracy of Data: definition of certain indicators differ across countries (e.g. procedures to assemble data in developed or emerging markets) –Age of data: countries collect information at different moments (e.g. frequency of Census) –Reliability over Time: definitions of indicators can be changed (e.g. basket of goods to measure inflation)

28. Secondary Global Marketing Research Problems with Secondary Data Research: Problems with Secondary Data Research: –Comparability of Data: comparing indicators across countries can be misleading, since data could have come from different sources. This could be partly handled by triangulation. i.e. obtaining of data for the same item from at least three different sources and analyze the reasons behind the differences. Comparability also depends on Functional and Conceptual Equivalence

29. Developing a Research Plan for Primary Data Collection Do we need quantitative or qualitative data? Do we need quantitative or qualitative data? What is the information worth (versus what will it cost to collect)? What is the information worth (versus what will it cost to collect)? What will it cost if we don’t get the information? What will it cost if we don’t get the information? What can be gained from the information? What can be gained from the information?

30. Primary Global Marketing Research Primary Global Marketing Research Focus Groups (Qualitative) Focus Groups (Qualitative) Survey Methods for Cross-Cultural Marketing Research: Survey Methods for Cross-Cultural Marketing Research: –Questionnaire Design  Conceptual and Functional Equivalence  Translation issues (parallel, back translation)  Scalar Equivalence: scores from subjects of different countries should have same meaning and interpretation

31. Primary Global Marketing Research Primary Global Marketing Research –Sampling - A sampling plan consists of:  Sampling unit –what is the target population?  Sample size – how many people should be surveyed?  Sampling procedure – how should respondents be chosen? –Contact Method  Mail  Telephone  Person-to-person interviews  Online Survey Methods : –E-mail surveys –Random Web site surveys –Panel Web site surveys

32. Primary Global Marketing Research Some of the issues encountered in collecting primary data are the following  Issues of non response  Courtesy bias  Social desirability bias  Redundancy (asking the same question in different ways)  Issues of ethnographic research

33. Issues in Primary Global Researches Non response: Non response: – mainly for reluctance to talk to strangers, confidentiality, cultural bias Courtesy bias: Courtesy bias: –respondents feel obliged to please the interviewer Social desirability: Social desirability: –attempting to reflect a certain social status in their answer Redundancy: Redundancy: – helpful to ask the same questions in different ways

34. Challenges In Global Marketing Researches Structuring a research in several markets together implies different problems vs. a one country research Structuring a research in several markets together implies different problems vs. a one country research 1. Complexity of research design due to environmental differences 2. Lack and inaccuracy of secondary data 3. Time and cost requirements to collect primary data 4. Coordination of multi-country research efforts 5. Difficulty in establishing comparability across multi- country studies

35. Example: choice of a Country to Expand the International presence Example: choice of a Country to Expand the International presence

36. The Country Selection Leads the process of formulating the international marketing marketing startegy: influences the entry in the country and the budget allocation Wrong (or sub-optimal) choices imply a number of negative consequences, in terms of actual costs as well as opportunity-costs

37. The Country Analysis Universe of countries to be considerd for the analysis First screening Potentially attractive countries Second screening Countries attractive for the specific Industry Third screening Countries attractive for the Company Competitive Pressure

38. Market Size Assessment When using market size estimates, keep the following rules in mind: When using market size estimates, keep the following rules in mind: –Use several different methods –Don’t be misled by numbers –Do a sensitivity analysis by asking what-if questions –Look for interval estimates with a lower and upper limit rather than for point estimates

39. Understanding the Actual Market Potential Understanding the Actual Market Potential Bangladesh has over 160 million people: its market potential is almost 3 times that of Italy Bangladesh has over 160 million people: its market potential is almost 3 times that of Italy The per-capita Income in 2005 was 21.000 US$ in Italia, 420 US$ in Bangladesh The per-capita Income in 2005 was 21.000 US$ in Italia, 420 US$ in Bangladesh

40. Understanding the Actual Market Potential The price of sugar in Holland is almost double than the corresponding one in India: there is a major opportunity in importing sugar from India The price of sugar in Holland is almost double than the corresponding one in India: there is a major opportunity in importing sugar from India In India sugar export is banned In India sugar export is banned

41. Management of Global Marketing Research Selecting a Research Agency: The following considerations should be taken into account while choosing agency: Selecting a Research Agency: The following considerations should be taken into account while choosing agency: –Level of expertise –Qualifications –Track record –Credibility and experience –Client record Coordination of Multi-Country Research: Coordination of Multi-Country Research: –Emic versus Etic dilemma

42. Designing Questionnaires to be Administered Globally Emic instrumentsEtic instruments

43. Management of Global Marketing Research Management of Global Marketing Research –The emic school focuses on the peculiarities of each country –The etic approach emphasizes universal behavioral and attitudinal traits –In cross-cultural market research, the need for comparability favors the etic paradigm with an emphasis on the cross-border similarities and parallels –Several approaches may be used to balance these conflicting demands

44. Enhancing Comparability of Data Emic analysis Ethnographic in nature Ethnographic in nature Studies culture from within Studies culture from within Uses cultures’ own meanings and values Uses cultures’ own meanings and values Etic analysis From the outside From the outside Detached perspective that is used in multi- country studies Detached perspective that is used in multi- country studies Enhances comparability but minimizes precision Enhances comparability but minimizes precision

45. International Research Stages Preliminary assessment Preliminary assessment Macro Analysis Macro Analysis Micro Analysis Micro Analysis

46. Preliminary Assessment  Prescriptive Information: Laws, regulations, rulings concerning taxes, earnings, dividends in both host and home countries  General Environment: Overall review of socio-cultural, political, and technological environments  Economic Environment: GDP Growth trend, Balance of payments, interest rates, attractiveness of country currency

47. Research Stage 1: Macro Preliminary Opportunities Macro-level Research (Estimation of General Market Potential) Growth Trends for Similar ProductsGrowth Trends for Similar Products Cultural Acceptance of Such ProductsCultural Acceptance of Such Products Availability of Market DataAvailability of Market Data Target Market SizeTarget Market Size Stage of Market DevelopmentStage of Market Development Taxes & Duties, LawsTaxes & Duties, Laws Regulations concerning earnings/dividends in both host and home countriesRegulations concerning earnings/dividends in both host and home countries Possible Opportunities Possible Opportunities

48. Research Stage 2: Micro Micro-level Research (Specific Factors Affecting the Product) Existing and Potential CompetitionExisting and Potential Competition Entry BarriersEntry Barriers Reliability of DatabasesReliability of Databases Cost of EntryCost of Entry Sales ProjectionSales Projection Probable Product Acceptance (Demand estimates, consumer behavior, review of marketing mix)Probable Product Acceptance (Demand estimates, consumer behavior, review of marketing mix) Profit PotentialProfit Potential Probable Opportunities Target Markets Corporate Factors Influencing ImplementationCorporate Factors Influencing Implementation Country Priority Listing

49. Practical Example A Confectionery Company wants to enter one priority market through a direct investment

50. Preliminary Assessment Prescriptive Information Prescriptive Information Possibility of FDI in the confectionery sector Possibility of FDI in the confectionery sector Possibility of fully owned subsidiary Possibility of fully owned subsidiary Food Laws Food Laws Fiscal Laws Fiscal Laws Possibility of profit repatriation Possibility of profit repatriation Labor Laws Labor Laws

51. Preliminary Assessment General Information General Information Political stability Political stability Economic environment (GDP, Exchange,..) Economic environment (GDP, Exchange,..) Income distribution Income distribution Structure of population Structure of population Percentage of food expenses Percentage of food expenses Labor Cost Labor Cost Cultural restrictions Cultural restrictions

52. Evaluation of political risk Source: Root (1994), p. 155 Copyright © 1994.

54. Research Stage 1: Macro General Industry Information General Industry Information Market size and trend Market size and trend Presence of Competitors and general data Presence of Competitors and general data Distribution network Distribution network Trade typologies and margins Trade typologies and margins Availability and prices of main materials (e.g. sugar, glucose, flavors, wrappers,…) Availability and prices of main materials (e.g. sugar, glucose, flavors, wrappers,…) Consumer profile Consumer profile Consumption Patterns Consumption Patterns

55. Research Stage 2: Micro Business related Information Business related Information Business plan Business plan Definition of Marketing Mix variables Definition of Marketing Mix variables Market and Competitors details Market and Competitors details Sales projections Sales projections