In Part 1 of this two-part series, I noted that many respected analysts believe that the future of the global economy (and, therefore, the fortunes of many businesses) depends on emerging market countries and the consumers who live there. Many of those same analysts noted, however, that companies that believe they can use a one-size-fits-all strategy for emerging markets are going to be disappointed. Not only do emerging markets have peculiarities that make them unique, consumers living in those markets also have varying taste and lifestyle preferences. The only way to discover those variations and respond correctly to them is through the collection and analysis of Big Data. In this post, I'll discuss recommended strategies for getting to know the consumers in emerging markets and the conditions in which they live.
Boston Consulting Group analysts conclude that "multinational companies have the right priorities — emerging markets are the growth spots of the future — but have not fully put in place winning practices." ["Playing to Win in Emerging Markets," by Amitabh Mall, David C. Michael, Lori Spivey, Andrew Tratz, Bernd Waltermann, and Jeff Walters, bcg.perspectives, 13 September 2013] That's because they don't fully understand the consumers living in areas in which they hope to expand. Mark Harrington, the Chief Marketing Officer at ListenLogic, asserts that Big Data now provides the opportunity to obtain that understanding. ["How Marketers Are Finally Getting to Know Their Customers," Direct Marketing News, 24 July 2013] he writes:
"Having the ability to visualize millions of consumers based on their needs, attitudes, actions, and experiences delivers multidimensional insight to drive critical marketing components, ranging from promotions to product innovation. Marketers can gain deep understanding of what prospects and customers want, need, like, and dislike without ever asking a question. And they can do this on a continual basis to track markets shift in the always-on world."
One of the tools he suggests using is ethnography. Jessica Weber and John Cheng explain that ethnography involves "studying the customs of individuals and cultures." ["Making the Most of Ethnographic Research," UX Magazine, 5 August 2013] They continue:
"Ethnographic research offers several key benefits for defining a long term, multi-channel [user experience] strategy, including:
- Identifying user needs that have yet to be met
- Testing market demand for products that do not exist
- Providing a holistic view of a problem space
- Exposing opportunities for competitive differentiation
"The principal advantage of ethnographic methods is the ability to see the impact of the physical world on factors that could drive digital design. Ethnographic research is all about discovery of the unknown — disproving assumptions about user behavior and uncovering unexpected insights. Whenever you're in the field, something you see is going to surprise you, and those surprises are almost always at the root of innovation."
In previous posts, I've noted that providing a positive user experience at every touchpoint in a consumer's digital path to purchase is important because it is so easy to opt out of a purchase decision at any given moment. Weber and Cheng add:
"The user experience can be thought of as a composite of the user, the interface, and the context; context being an amalgamation of environment and situation. In ethnography, research is conducted in the field, where users' real-world behaviors and interactions with products and services take place, so that researchers can gain insight into how context impacts the user experiences."
Ethnographic research can also take advantage of Big Data and the refined segmentation that it can provide. Weber and Cheng conclude, "To design and develop optimal user experiences, companies must answer the right questions at the right time." Big Data that is analyzed by a cognitive computer system can actually help discover some pertinent questions that might have been overlooked and test hypotheses about them. Jodie Sangster, CEO of the Association for Data-Driven Marketing and Advertising in Australia, believes that global marketing in the future is going to be data driven. ["Where Is Global Marketing Going?" Direct Marketing News, 26 August 2013] "The future of all marketing and advertising around the globe is data-driven," she writes, "and at last, the value of measurable, accountable, customer-centric marketing has been realized." Nevertheless, Sangster agrees with Boston Consulting Group analysts that companies are still grappling with winning strategies. She explains:
"As organizations prepare themselves to ride the Big Data wave, most businesses are still struggling to centralize, analyse, and commercialize their own small data sets. It's not a local issue and it's not a new one, either: The IBM Global CMO Study first identified this struggle as the number one issue keeping CMOs worldwide awake at night in 2011. Another study released in Asia Pacific last year 2012 noted that Down Under, more than 50% of organizations felt ill equipped to grapple with the challenge of how to retrieve the value that's locked away in their data. This will continue to be the case for many more years."
Erin Haselkorn reminds us that "collecting data and analyzing it to find meaningful conclusions has always been part of how marketers go about connecting with consumers." However, with the advent of Big Data technologies, "their strategies have improved dramatically over time." ["Data helps marketers move beyond general stereotypes," Marketing Forward, 10 September 2013] As a result, he writes, marketing teams have been able to "transition away from broad stereotyping toward better targeted forms of data mining. ... We now have the capability to zoom in on the specific customer."
Although most new global middle class consumers are found in Asia, "the middle class in Latin America and the Caribbean region grew by 50 percent over the past decade." ["World Bank: Middle class grows by 50 percent in Latin America, Caribbean region," Fox News, 13 November 2013] It doesn't take a data scientist to know that tastes and lifestyles vary greatly in Latin American, Asia, and Africa — the three areas experiencing the greatest middle class growth. Regardless of where consumers are located, local conditions and culture will play a major role in their purchasing behavior. McKinsey analysts Maria Valdeviesa de Uster, Jon Vander Ark, and Wesley Walden assert that unless companies learn how to "act like a local" they will never succeed in emerging markets. ["Act like a local: How to sell in emerging markets," McKinsey & Company, September 2012] They offer three "imperatives" that will help companies "accelerate growth in emerging markets." They are:
- "Get on the ground. Information on customers and the market is often hard to obtain. Successful companies invest in all the data sources and expert information available, but nothing beats getting a firsthand sense of how the market works by visiting local areas and resellers. This ground-level view also gives sales leaders a clear read of where the market is heading and lets them plan for it.
- "Overinvest in the right partners. In developed markets, a company may have many capable potential partners. In emerging markets, finding a partner is a much more strategic endeavor. With limited choice, partnerships are for the long haul, which means companies must find the right capabilities and partners that share their values.
- "Build talent for the long term. Annual growth in emerging markets can exceed 10 percent. That pace requires sales leaders to think creatively about how they will attract and retain the talent they will need to keep up."
Although I don't disagree with the "boots on the ground" imperative, I can't help but observe that the emerging world's embrace of mobile technologies means that every day more data becomes available for analysis. That data doesn't necessarily need to be analyzed in-country. And, I as noted in Part 1 of this series, emerging markets are likely to have large virtual marketplaces to accommodate this phenomenon. In addition to the fact that smartphone use is increasing, another reason that the number of virtual marketplaces is growing is that infrastructure in many emerging market countries is lacking or sub-standard. That makes building and supplying brick-and-mortar stores more challenging. Lack of infrastructure is one of the many challenges identified by McKinsey analysts. They conclude:
"Emerging-market infrastructure is often less developed, channels are fragmented, and cultural preferences often more complex and varied. Demand can be unpredictable, making the near-term return on sales investment uncertain, even if long-term growth prospects are extremely attractive."
Some of that uncertainty can be reduced by good data collection and analysis. One thing that most analysts can probably agree upon is that companies that get a late start in getting to know emerging markets are going to have a tougher time cracking those markets in the years ahead.