1. Expanding Direct Marketing in Emerging Markets: Methodological Approach and Cultural Value Analysis Richard MICHON Ted Rogers School of Management, Ryerson University, Toronto Atul TANDON CEO, Tandon Institute, Bellevue, WA

2. Outline Managerial Issues Literature Review Research Objectives Method Economic Model Cultural Value Model Discussion Conclusions, Limitations …

3. DM in Emerging Markets: Why not? Brazil, China, Indonesia, South Korea and Russia will account for more than half of all global growth by 2025 (Sommerville, 2011). New wealth and new middle class Fund raising: Some countries are in a position to give back Few companies are stupid, but many behaved stupidly in China (The Economist, 1999) Lack of marketing infrastructure Macroeconomic data but not no product/market info. Imperialist approach

5. Literature Review

6. Emerging Market Research: Economics Macro-economic Indicators Overall Market Opportunity Index (Cavusgil, 1997) Comparing GDPs at PPP ( Arnold & Quelch (1998) Q = (P+NP) X (DevGDP – AdjGDP)

7. Emerging Market Research: Sociology/Culture CAGE (Ghemawat & Mallick, 2003): Cultural, Administrative, Geographic, Economic distances Value Survey Module (Hofstede, 2001): Cultural distances: Power, uncertainty avoidance, individualism/collectivism, masculinity/feminity, time orientation GLOBE (House et al., 2004): Global Leadership and Organizational Behavior Effectiveness WVS (Inglehart & Welzel, 2005)

8. Emerging Market Research: Issues with Cultural Values Measuring values or preferences? (Maseland & van Hoorn, 2009) Some abstract constructs difficult to measure Values should correlate with practices: negative correlations between VSM and GLOBE WVS: 84 countries (80% of population), 250 variables, constantly updated, data at individual level, N = 270,000

9. Emerging Market Research: Marketing Product-market subset Business Model Success factors (Arnold, 2003) Example: Based on Mary Kay business model, Chinese women were far more motivated than Japanese to become « beauty consultants » and pocket extra income.

10. DM and Fundraising “Generosity” index (e.g. CAF) ODA & global private philanthropy (Hudson Institute) Cultural clusters (Johns Hopkins’ NPS, 2004) European Vs Anglo-Saxon countries

11. DM and Fundraising: OECD Donor Countries

12. DM and Fundraising: Donor Profiles Compassionate conservative philanthropy (Brooks, 2006) They are politically to the right; They have strong family values; They value personal entrepreneurship; They are skeptical about governments’ intervention into economic life (and into income redistribution); They are regular churchgoers (irrelevant of denomination).

13. Research Objectives and Methodology

14. Research Methodology: Objectives and Assumptions Identify new or neglected potential markets for DM fundraising programs 1. Capacity to give (Economic Analysis) 2. DM Infrastructure to give (Documentary Analysis) 3. Propensity to give (Predictive Modeling) Research proposition: Individuals ready to support private philanthropy share some common values

15. Research Methodology: Setting Empirical research: Christian NGO raising funds in 25 countries Exploring some 130 new markets for DM expansion Successful DM Fundraising Markets: Australia, Canada, Germany, New Zealand, South Korea, Switzerland, Taiwan, the UK, the U.S.

16. Capacity to Give

17. Population estimate % of urban population Average household size Number of urban households Estimate hhold income GDP per capita GDP per household Hhld spending as % of GDP Household income Estimate potential market % income distribution per decile/quintile Average income per decile/quintile Define hhld income threshold Hhld penetration assumptions over 5 years Estimate number of potential donors Estimate potential income Estimate urban households Estimate hhlds by income Sources: World Bank Development Indicators CIA World Factbook

18. Capacity to Give: Hhlds with Income Threshold > $20K RankCountryWorld Bank ClassificationPotential Hhlds (000)Annual Potential Mkt Growth Rate 1S. KoreaHigh income7,1944% 2BrazilLatin America6,2363% 3SwedenHigh income2,9943% 4ArgentinaLatin America1,99610% 5RussiaEurope & C. Asia1,8636% 6IndiaSouth Asia1,79810% 7PolandEurope & C. Asia1,4933% 8IndonesiaE. Asia & Pacific1,4427% 9GreeceHigh income1,3044% 10ColombiaLatin America1,0497% 11VenezuelaLatin America1,02911% 12PeruLatin America9528% 13MalaysiaE. Asia & Pacific6947% 14IranM. East & N. Africa6718% 15ThailandE. Asia & Pacific4905% 16HungaryEurope & C. Asia4884% 17IraqM. East & N. Africa348-% 18LebanonM. East & N. Africa3301% 19Czech Rep.Europe & C. Asia3166% 20RomaniaEurope & C. Asia2774% 21GuatemalaLatin America2636% 22N. KoreaE. Asia & Pacific2602% 23EcuadorLatin America2406% 24El SalvadorLatin America2055% 25SloveniaHigh income1984%

19. DM Infrastructure

20. Infrastructure Telephone mainlines per 1000 habitants Cellular mobile subscribers per 1000 Number of PC's per 1000 Internet servers per million Percentage of households with TV sets Daily newspapers per 1000 (Source: World Bank, Development Indicators) Economic Freedom: Economic Freedom Index (Source: Heritage Foundation) Political Freedom Index (Source: Freedom House) Country Risk: Country risk rating (Source: Euromoney)

21. DM Infrastructure: Ranking of Latin/S. American Markets InfrastructureEconomic FreedomCountry Risk All CountriesRegionAll CountriesRegionAll CountriesRegion LATIN & SOUTH AMERICA Chile48182391 Mexico503204422 Costa Rica492286533 Brazil514449544 El Salvador7410367565 Colombia6175914586 Peru8514153597 Guatemala80125111678 Venezuela65921809 Bolivia771171168410 Honduras811345108511 Dominican Republic6484088712 Argentina52551118913 Ecuador55658139514 Nicaragua921520410715 Haiti9716691511716

22. Propensity to Give

23. Propensity to Give: Target Markets Australia Canada Germany New Zealand South Korea Switzerland Taiwan United Kingdom United States

24. Propensity to Give: Selected Indicators Familism:Family is very important in life Importance of child obedience Child needs a home with father and mother Divorce is never justifiable Religiosity:Religion is very important in life Belong to a religious organization Spend time at church, mosque or synagogue weekly Consider myself as a religious person Government:People should take more responsibility Government doing enough or too much against poverty Government doing enough or too much for less developed countries EntrepreneurshipOwners should be able to run their business We need larger income differences as incentive Private ownership of business should be increased Wealth can grow so there’s enough for everyone ConservatismSelf positioning on the political scale People are poor because of laziness and lack of will power Source: Brooks (2006)

25. Propensity to Give: Logistic Regression and Odds Values FAMILISM Family is very important in life1.117 Importance of child obedience.929 Child needs a home with father and mother.871 Divorce is never justifiable 1.114 RELIGIOSITY Religion is very important in life.867 Spend time at church, mosque or synagogue weekly 1.026 Consider myself as religious person.955 CAPITALISM Owners should be able to run their business 1.084 We need larger income differences as incentive.950 Private ownership of business should be increased 1.117 Wealth can grow so there’s enough for everyone 1.161 CONSERVATISM Conservative: Self positioning on the political scale.933 People are poor because of laziness and lack of will power 1.057

26. Ranking Canada1 New Zealand2 Denmark3 China4 Austria5 Switzerland6 Australia7 Ireland8 United States9 United Kingdom10 Taiwan11 Czech Republic12 S Korea13 Germany14 Finland15 Belgium16 Japan17 Israel18 Malta19 Portugal20 Norway21 Netherlands22 Croatia23 Estonia24 Sweden25 Propensity to Give: Top 25 Markets

27. Market Map: Capacity and Propensity to Give Ranking on countries propensity for private donations Ranking on countries economic market potential III IV III

28. Discussion: Multi-criteria Decision Analysis CountryCapacityTop 5% PropensityInfra-Freedom Risk Weighted to GiveIncome to Give structureScore Weights30%5%35%15%5%10%100% S. America Mexico54332372 Chile33335362 Argentina43322158 Venezuela43321157 Colombia43222253 Peru33312251 Dominican R.22322145 El Salvador23213239 Costa Rica23133238 Ecuador22121130 Guatemala23111230 Bolivia12111121 Honduras11112121 Nicaragua11112121 Asia China51521379 India41312255 Indonesia41312255 Philippines31322252 Malaysia32131343 Thailand31131240

29. Discussion: Fund Raising Markets Weberian Capitalism (Weber, 1904) Protestant Ethic and the Spirit of Capitalism (Weber, 1904) Private philanthropy PE  SC  MWC  IR (Lesnoff, 1981) Secularization of PE (Carroll, 2009) Asian Drama: An Inquiry into the Poverty of Nations (Myrdal, 1968): Hindu fatalism, Confucian hierarchy, Buddhist indifference material gains Confucian capitalism (Fukuyama, 1995; Lew, Choy & Wang, 2011)

30. Conclusions, Limitations and Future Research Contribution to methodology Importance of cultural values and predictive validity Multi-attribute and structured approach as decision support models Caveat: Western business model Modeling and human judgment Nonprofits’ core values and compromises