subject: THE IMPORTANCE OF MARKET RESEARCH IN EXPORTS [print this page] THE IMPORTANCE OF MARKET RESEARCH IN EXPORTS
By Arshad Husain
Market research is an essential business tool and a must in a competitive market environment where buyers are not really waiting for your product. The more knowledge you have about your prospective markets and its customers, the more likely you will succeed. A good understanding of local consumer target groups and their buying habits will help you to find out the right applications for your product. Using research you can develop a product concept and choose the right positioning strategy in each market. For example, you may discover that a particular taste in food is mainstream in one market, while it is a specialty in another market. From discovering a niche to planning an effective export marketing strategy, research can provide the details which can be crucial for success. Less money and energy will be wasted on false hopes, especially when you plan to export for the first time.
On the other hand, do not expect that market research is a guarantee for business success. However, it can certainly help prevent you from taking wrong decisions.
Market research can help you in the following ways:
You can find out: the largest markets for your product, the fastest growing markets, market trends and prospects, market conditions, practices and your opportunities.
It enables you to narrow down your view from a broad scope. You can set your priorities towards a specific target market and plan future markets over a longer term.
It helps you to identify the best product introduction tactics. After e.g. one year, you can evaluate your own and your trade partners' efforts. Then you can make the necessary adjustments in each market.
Getting an insight into your competitors, including their strengths and weaknesses, their mistakes and reasons for success.
You may also find ideas for new product development.
By showing more interest in and understanding of their market, buyers will take you more seriously.
Proactive approach
By staying aware of latest developments in your target markets, you can make your marketing decisions more quickly. In a fast changing international business environment you need such a proactive approach, which is actually your competitive edge. Even in a period of slowing population growth, new trends and consumer target groups emerge. For example, the growing number of older people or single households. Both groups look for convenience products. By market research you can find out how large these groups are, how they differ by country and you can anticipate their interests.
By responding quickly and introducing your product specifically tailored to these groups in terms of size, appearance etc., your proactive approach may prove to be successful.
Research as an integral part of your strategy
Market research is more than just compiling data and statistics. All data collected needs to be analyzed and to be transformed into relevant information. This forms the basis of your marketing strategy and tools. Researching markets, like all planning processes, is cyclical. At first, as you review your initial data, you may find that some of the information raises new questions that suggests the need for additional research.
In the end you can build up your own information system and add missing or new data after each search, keeping your system up-to-date. So, research does not stand on its own, but forms an integral part of your Export Marketing Strategy. It is a continuous process.
Research needs a commitment
Market research requires a commitment in terms of time and money. Many companies still aim to make every export venture self financing', i.e. start to export and finance the investment from the profit from sales in these markets. This does not apply to market research. Here you need to invest some money before introducing the product, which prevents you from making expensive mistakes in your target markets later on.
As you now have become more aware of the essence of market research, you need to know what it exactly is. Market research includes all methods to evaluate which foreign markets have the best potential for your products. A simple definition is:
Market research is the collection and analysis of data about markets, people, restrictions, channels and players to support better export marketing decisions.
The following myths keep exporters away from undertaking any form of research:
Myth 1: Research is only for intellectuals and academic people'
This misunderstanding is partly created by researchers who have their own sophisticated definitions and jargon. However, good researchers are well aware that research can be easily designed and implemented by anyone.
Myth 2: The trade partner will do all necessary research'
Some exporters believe that they already have enough information through their trade partner or expect the research to be done primarily by them. In addition, some exporters regard market information as a by-product of their accounting system. But often trade partners lack giving a neutral overview of the market and channel developments in their country.
Myth 3: Market research is too expensive'
Market research does not necessarily mean doing surveys, interviewing large numbers of people and carrying out complicated computer analyses, which are expensive especially when entering different countries. There are many low cost techniques (e.g. desk or internet research).
Myth 4: I am afraid to lose control with an information overload'
Some exporters are already very busy and are afraid of losing track when browsing through all information and dealings with researchers. However, most research discussed in this manual requires common sense and a time commitment.
THE MARKET RESEARCH PROCESS
Effective research comes from good preparation, categorization and planning. Within the limits of time and budget, you have to collect a lot of data, without losing track. Your research will succeed when you structure your approach. This Part explains the 6-step research process (see below), and focuses on some low cost techniques which could be used during this process. Within each process, you can combine different research subjects (e.g. countries, market size, target groups, trends, players, trade channels) and use different techniques.
Research problem
What export marketing experience do you have?
What do you want to be clarified by research?
Categorizing data by country and subject
Structuring by a Research Action Plan
Which research technique?
Research planning
Which information is available?
Which countries to start with?
Collecting relevant data
Explain the cause and predict what will happen
Give indication of actions
Tansform information into intelligence
Desk research
Desk research using the internet
Field research
Analysis - from data to information
Sorting and avoid getting lost (information overload)
Filtering and matching reliable and useful data
Organising and checking against the research problem
Define your research problem
What export marketing experience do you have?
Most exporters start with a broad view by doing (desk) research initially or by looking at the market environment. Here it is important to define your research problem in relation to your export marketing experience. Where does your company stand in exporting? Do you already have clients in some countries or is this your first export business venture?
For example, when starting to export, you first have to find out whether this business venture is worth your investment. Your research problem would be then first to familiarize yourself with the markets by finding out relevant information on subjects such as: market sizes, requirements, structure, developments, segments, main players etc. This research problem is evident if you are considering exporting for the first time, but also if you already have customers in markets and are considering expanding to other countries. In both cases, you will have to deal with each export marketing stage in which you will have to find relevant information.
What do you want to be clarified by research?
When you have become familiar with the export markets, knowing which opportunities exist, and when you have an idea of which markets to approach, the logical next step is to go further into details. The more details you want, the more specific your research problems will be. Finding out how your competitors sell in these markets - if you should imitate them or innovate - and how to adapt your product in both cases could be a problem which you can clarify by research.
In assessing export opportunities, you may have carried out some research in the past.
You also may already have some information on foreign markets within your own company. Once you have checked your internal sources and defined your research problem, you can make a list of what you want to know and what can be found out. You should try to find information which is obtainable, affordable and relevant. It may take some time and effort to become more trained in research, but once you carried out a research process a few times, it will be easier and ultimately be of great benefit, particularly when you know the useful sources which are relevant for your specific product.
EXAMPLE: AN EXPORTER OF TEXTILES
Which research technique?
Now that you have thought about the necessary information of each country, you need to find out the sources to get some of this information.
In market research there are several techniques for collecting data, which are either desk research or field research. Each technique relates to the sort of data, which is subdivided into primary data and secondary data:
Primary data: in this case you, or a research specialist, collect data directly from the foreign marketplace using mainly field research. Field research always relates specifically to your product, is done on the spot, and usually follows desk research.
Secondary data: here you are looking for data previously collected by others e.g. companies, governments using desk research. Secondary data is less expensive and by using the internet, you can find much in on-line databases. The next section focuses on these techniques, which are useful and affordable for exporters from developing countries.
Desk research
What is it and what to collect?
Desk research is the best technique to do your first assessment. Here you collect secondary data in your company (internal sources) or elsewhere (external sources). You search for information in hardcopy or in electronic form.
Some examples are: country overviews, market surveys, company profiles, sales tracking data, trade statistics, consumer surveys, articles, newsletters, magazines etc. Within the abundance of information, especially in developed countries, you can familiarize yourself with new markets. At the same time, you must try to find relevant data for your specific product. The challenge here is to collect and compile as much useful information and statistics about your target markets within a limited time. During your desk research, try to mark the pieces of information with a date and source. In doing so, you still know where you got it from, especially if the information proves to be irrelevant later on.
Advantages/Disadvantages
- Data collection is fast
- It is often too general
- Relatively cheap
- You have to validate its reliability
- Field research could be obsolete
- Conflicting statistics, different definitions
- You or your staff can do it
- Information can be too old
Where to find secondary data?
Start collecting all data from your office at your desk, surfing on the Internet and requesting data by e-mail, phone, fax etc. In most countries, especially in Germany, France and the UK, people want a written request for information including a short explanation who you are and why you need it. Data collection usually takes time, so you could have trainees or students doing much of this work. Here you need to give them a clear briefing of what you want.
How to ask for free or low cost information?
Try to make a friendly but polite standard fax, e-mail or letter. You could use this several times by slightly modifying it according to the people or organization you are contacting. Avoid asking too many questions, start with 2 or 3 questions and try to be as specific as possible. In your request, it is important to set a deadline, which gives you a reason to follow up later, but do not push too hard unless you have to pay for the information.
It is important to find the right contact person, but often they are not in or too busy. So simply explain what you are looking for. There is a risk of miscommunication between you and staff of the organization, which is dealing with your requests. They may not be familiar with your product or your situation. Bear in mind that when asking for information free of charge, you cannot be certain to get specific answers.
The main sources
In many developing countries, there are organizations which promote the exports from their country through assistance and export promotion programs. There are governmental (e.g. ministries and national trade promotion organizations) and sector associations. Next to individual assistance, they can provide the following information services:
Trade and country statistics and publications about markets.
News bulletins and information on market opportunities for specific products.
Database of other exporters in your country and of importers.
Specific product or market information through customized research.
NGOs
Within the large number of NGOs, some organizations such as ITC, FAO, OECD, UNCTAD, World Bank, Oxfam etc. offer assistance programs for exporters from developing countries. At the sites www.unsystem.org; www.oneworld.net or www.euforic.org you also can find links to NGOs aiming for a greater fairness in global trade.
In addition, you could contact the local ministries of foreign affairs, which publish address lists of NGOs in their country. As well as providing information, NGOs may offer credit schemes, incentives or provide assistance in locating and contacting potential customers in countries.
Chambers of Commerce
Before approaching organizations abroad, you could check your local Chamber of Commerce, which also functions as a BSO. As well as the usual Chambers, there are bilateral Chambers of Commerce e.g. The Dutch - South African Chamber. In EU countries, most Chambers offer a variety of information e.g. regulations and the major trends in industry. You can also find information about local trade press, trade fairs, business culture and links to other relevant organizations.
Trade Associations
Associations that are well organized can provide good information.
They have their own reference libraries for their members. They sometimes conduct their own national or international market studies. In their annual report, which are sold at low cost to non-members, you can find extracts of these studies.
If possible, try to visit these associations direct or at trade fairs. Be aware that there are trade organizations at different levels (e.g. retail, manufacturing, or industrial level). Each organization provides information from their own perspective. Recently many Trade Associations have an Internet site from which articles can be downloaded. You also will find links to other product or sector related organizations.
Embassies
Your embassies in target markets can be a useful source for general economic data or country information. They provide guidance on any local regulations or laws. They usually also have general information on doing business within their country. In addition, they can introduce you to key persons or organizations in your sector, and to translators.
Banks
Banks are another source, especially for financially related data such as exchange rate forecasts. Major banks also have departments that are involved in researching world markets, economic trends and developments in international trade.
Information Centers
Most countries now have a local information centre in the major cities, or there may be a special corner in local libraries. Here you can find information on legislation and directives, funding schemes and sources. You can also find general information about various countries.
Libraries
You could visit libraries in your own country or in your target markets. As well as National libraries, most organizations mentioned so far, have libraries which you can visit. You often need to make an appointment beforehand. Searching in libraries is a self-service activity, which implies that you need to get familiar with their search system. You often search by subject, title or keyword, which leads you to a book or publication. You can copy useful parts. National libraries have an online catalogue at their Internet site. In case of a complex system, you could have a look beforehand. Some libraries have a document supply service which can carry out a search for you at limited cost and send the result of this search to you, even if you are overseas. You need, however, to become a full member. In most libraries, reading rooms have consumer magazines, international newspapers, journals, trade magazines, annual reports and sometimes an online article database and market reports.
Trade magazines and newspapers
Trade magazines published in your target market are very useful for gaining a general impression of current market activity - competitors, trends, current issues and opinions, active agents and distributors. Special features can sometimes include relevant market statistics. You can receive these magazines overseas by contacting them by e-mail, ask at a library, your embassy or to someone you know who lives there. Once you are in contact with them, you can ask for back copies.
Conclusion
The method to collect information from all these organizations as well as from airlines, national statistics offices, exhibitions, etc. Contacting these sources will give you a basic understanding of what information is available and some opinions of experts (e.g. at trade associations or trade press). You undoubtedly will get many tips on other sources for further research.
