YOUR GUIDE TO MARKET RESEARCH A GUIDE TO PRACTICAL AND LOW COST MARKET RESEARCH METHODOLOGIES IN EU COUNTRIES EXPORT MANUAL CENTRE FOR THE PROMOTION OF IMPORTS FROM DEVELOPING COUNTRIES YOUR GUIDE TO MARKET RESEARCH A guide to practical and low cost market research methodologies in EU countries Compiled for CBI by: Searce in collaboration with A. van Duijvenbode 2003 CONTENTS PART 1: INTRODUCTION 1.1 Why is research so essential? 1.2 What is market research? PART 2: THE MARKET RESEARCH PROCESS 2.1 Step 1 Define your research problem 2.2 Step 2 Which research technique? 2.2.1 Desk research 2.2.2 Desk research using the Internet 2.2.3 Field research 2.3 Step 3 Research planning 2.4 Step 4 Collecting relevant data 2.5 Step 5 Analysis - from data to information 2.6 Step 6 Transform information into intelligence PART 3: RESEARCH AT EXPORT MARKETING STAGES 3.1 Stage 1 Export Market Analysis, Internal Analysis and SWOT 3.1.1 Market size 3.1.2 Market requirements 3.1.3 Trade flows 3.1.4 Market structure 3.1.5 Market growth and trends 3.1.6 Market targeting and segmentation 3.1.7 Competitors 3.1.8 Consumers / buyers 3.1.9 Internal Analysis and SWOT 3.2 Stage 2 Decision making and formulating objectives 3.3 Stage 3 Market Entry Strategy (MES) and Export Marketing Plan (EMP) 3.3.1 Product and positioning 3.3.2 Prices and margins 3.3.3 Place and distribution 3.3.4 Promotion 3.4 Stage 4 Evaluation and feedback PART 4: ORGANISING MARKET RESEARCH 4.1 Research preparation and budget 4.2 Involving other people in research 4.3 Organising your data and information (MIS) CHECKLIST APPENDICES 1 Useful Internet sites 2 Useful addresses 3 Recommended reading GLOSSARY PAGE 5 5 6 7 8 9 9 13 17 20 21 22 24 25 26 27 30 33 34 35 37 39 40 41 42 43 44 45 46 47 48 49 49 51 53 55 57 57 58 60 61 PART 1 INTRODUCTION ‘Your Guide to Market Research’ is a manual which provides practical guidelines for exporters from developing countries to become familiar with their prospective mar- kets. This manual consists of four parts: Introduction to research (Part 1), How to carry out research using the Market Research Process (Part 2), What to research during the Export Marketing Stages (Part 3) and Organising Market Research (Part 4). 1.1 Why is research so essential? 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 know- ledge 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 environ- ment 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 house- holds. 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. a good understanding is the key to succes narrow your view from a broad scope being proactive as a competitive edge 5 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 analysed 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. 1.2 What is market research? 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: There are various research techniques, which are covered in Chapter 2.2. definition research research does not need to be expensive 6 • 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 part- ner 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 EU countries. There are many low cost techniques (e.g. desk or internet research) which are explained in this manual. • 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. PART 2 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. 7 Step 1 Define your 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 Step 2 Which research technique? Step 3 Research planning • Which information is available? • Which countries to start with? Step 4 Collecting relevant data • Explain the cause and predict what will happen • Give indication of actions Step 6 Transform information into intelligence • Desk research • Desk research using the internet • Field research Step 5 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 2.1 STEP 1 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 to the EU? Do you already have clients in some countries or is this your first export business venture to the EU? For example, when starting to export to the EU, you first have to find out whether this business venture is worth your investment. Your research problem would be then first to familiarise yourself with EU 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 EU markets and are considering expanding to other EU countries. In both cases, you will have to deal with each export marketing stage in which you will have to find relevant information. What to research during each export marketing stage will be further explained in Part 3 of this manual. What do you want to be clarified by research? When you have become familiar with EU 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 EU markets within your own com- pany. 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 know your buyers’ market conditions your efforts will be rewarded later 8 An exporter of textiles sent samples of his new collection to his existing customers and to potential customers whose addresses he collected from a mailing list. He was convinced that this was the most effective way of doing market research because ‘response could immediately turn into orders’. So he invested some money to send his parcels and was hoping to get at least some reactions. But unfor- tunately he did not receive any feedback from potential customers, who already receive so many sam- ples. His existing customers politely told him that they were not interested because both the design and colours of his collection were dated. ‘He should have sent these one year ago’ a few of them said. With these results the exporter concluded that market research was too costly. Besides, it did not give him any return and thus would not be needed anymore. The mistake he makes here is that he does not regard this result positively, as a basis for a new market research. Even if he was already selling to some customers, he runs the risk of losing them in the future. So he has a research problem to solve here! By analysing his market more closely he can create a new collection, becoming the basis for his future strategy. He could do some desk research e.g. looking at internet sites of European exhibitions and magazines to get an idea of the trend forecasts and visiting sites of some major clothing retailers. With this infor- mation, he can develop an export collection and a well thought-over USP (Unique Selling Proposition) to clients. Instead of spending money on sending samples, he could search on Internet sites of some tra- ding platforms, where he can find buyers who may be interested. Once the contact is there, samples can be sent. secondary data as the first step finding relevant infor- mation in a limited time 9 2.2 STEP 2 Which research technique? Now that you have thought about the neccessary 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 (see Chapter 2.2.3). 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. 2.2.1 Desk research What is it and what to collect? Desk research is the best technique to do your first asses- ment. 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 deve- loped countries, you can familiarise 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. DESK RESEARCH 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 EU 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 - see also Chapter 4.1. 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 organisation 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 organisation, 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 CBI CBI is a good starting point for your desk research. There are around 35 informative EU Market Surveys on specific sectors available. Each survey reviews the latest mar- ket developments, opportunities and provides export marketing guidelines. They are already tailored for exporters from developing countries. In addition, each survey gives many references and sources (addresses and Internet sites) for further research. Registered exporters can download the CBI surveys from the site www.cbi.nl. CBI also provides manuals on export planning and other topics, two fashion forecasts per year and a bimonthly magazine, the CBI News Bulletin. A special database, the Accessguide, has been set up with all relevant information on non-tarif trade barriers (e.g. environmental, health, safety and social issues) - see - www.cbi.nl/accessguide. In most EU countries, there are similar organisations which stimulate imports from developing countries. These can be found at www.tpo-net.com. BSOs In many developing countries, there are organisations which promote the exports from their country through assistance and export promotion programmes. There are governmental BSOs (e.g. ministries and national trade promotion organisations) and sector associations. Next to individual assistance, they can provide the following information services: • Trade and country statistics and publications about EU markets. • News bulletins and information on market opportunities for specific products. • Database of other exporters in your country and of EU importers. • Specific product or market information through customised research. do not ask too many questions simply explain what you are looking for 10 2 1 NGOs Within the large number of NGOs, some organisations such as ITC, FAO, OECD, UNCTAD, World Bank, Oxfam etc. offer assistance programmes for exporters from developing countries. Concord is a EU coordination centre for NGOs, which is a good starting point to find NGOs in your target markets. Their site www.concordeurope.org gives an overview of National NGO platforms e.g. www.bond.org.uk and of NGO networks in all EU 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 EU countries. Chambers of Commerce Before approaching organisations 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 organisations. Addresses of Chambers of Commerce in EU countries are given in Appendix 2. Trade Associations European Trade Associations that are well organised 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 organisations at different levels (e.g. retail, manufacturing, or industrial level). Each organisation 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 organisations. 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 organisations 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. EU Information Centres Most EU countries now have a local information centre in the major cities, or there may be a special European corner in local libraries. Here you can find information on EU legislation and directives, EU funding schemes and sources. You can also find general information about the EU member countries here. NGO platforms and local networks extracts of studies in annual reports general information EU member countries 11 3 4 5 6 7 8 [...]... easy to enter ➧ Secondly, you will have to set your priorities and choose target markets in terms of primary, secondary and tertiary markets In this choice, you can use much of the data gathered so far, including your chances in these markets • Internal Analysis • SWOT ➧ Thirdly, you narrow down your view by segmenting your primary markets and and focus your research to get more details about your. .. will have to assess the markets for your product or service in each country Depending on your product, you could focus on consumer markets or on industrial markets 27 Consumer markets Try to collect reliable current and historical data In CBI market surveys, other market reports, trade press and trade associations, you can find market values (in € or US$) or volumes for your product or sector Much of... relevant informationon the subject So you need to go on the Web again, the disappointment may be repeated etc etc Try to be prepared, creative, stick to the subject and know when to stop How to structure your Internet search? Similar to all other research techniques, structure your search and write down beforehand what you are looking for, keeping your Research Action Plan (see Chapter 2.3) at hand... can collect by desk research using the Internet (see Chapter 2.2.2 for an example) most you can find by desk research How to define consumer markets? To estimate the market size carefully, try to collect as much market data as you can You will have to judge the market size using data from various sources collected according to different definitions, for example: • RETAIL SALES Total sales by retail... information are: • MARKET SIZE s s s s s ➧ TYPICAL SUBJECTS AND QUESTIONS: What are the market sizes of the most important EU countries? Is it possible to make a good comparison between these markets? What are the largest markets for your product? How have these markets developed over the past three to five years? Has market growth been consistent year to year for these markets? 28 • MARKET SIZE ➧A FEW... company is new to exporting You can divide these prospective markets into: start with a few markets when new to exporting • Primary markets, where you can expect a relatively fast payback against your investment at a relatively low risk These markets are also referred to as pilot or target markets • Secondary markets expose your company to a greater risk But if you have enough resources and approach... under Market size at Chapter 3.1.1 Segmentation in consumer markets Once you have decided on your primary markets, the next step is to get control over these markets You will have to narrow your search (desk research and Internet research) by focussing in on segments within these markets For example, you could start by collecting information on particular regions Most EU countries can be divided into... may find out that some markets have too strict regulations or require too much investment on your part So already at this stage, you can decide not to export to these countries and stop your research there for the time being Nowadays, regulations and market requirements in the field of product quality, safety, health, environment and social issues are growing throughout all sectors of the economy Generally,... vegetables Try to get information from buyers or other people with some knowledge of the market structure You could check retail prices through websites of competitors, retailers or of mailorder companies Other sources - see Chapter 3.3.2 34 3.1.5 Market growth and trends Now you try to assess your chances in your prospective EU markets by researching their developments So you need to find out which markets... your company and product range Thereby, you create a database with prospective customers who you can approach directly 19 2.3 STEP 3 Research planning Once you have clarified your research problem and decided which research techniques to use, you will be in the position to set out a plan of action - research planning - to get the information you need Categorizing data by country and subject Start to . Introduction to research (Part 1), How to carry out research using the Market Research Process (Part 2), What to research during the Export Marketing Stages (Part 3) and Organising Market Research. YOUR GUIDE TO MARKET RESEARCH A GUIDE TO PRACTICAL AND LOW COST MARKET RESEARCH METHODOLOGIES IN EU COUNTRIES EXPORT MANUAL CENTRE FOR THE PROMOTION OF IMPORTS FROM DEVELOPING COUNTRIES YOUR. Why is research so essential? 1.2 What is market research? PART 2: THE MARKET RESEARCH PROCESS 2.1 Step 1 Define your research problem 2.2 Step 2 Which research technique? 2.2.1 Desk research 2.2.2