DIY Market Insight
Today I want to talk about field observation in emerging markets. It’s an essential component of any serious market research project but it’s usually overlooked by agencies. Now, you may not have a budget for field work but if you can squeak in a trip to an emerging market I also want to give you a tool set you can use if you don’t have the budget to commission market research. So this is a long post. It’s not rocket science, but it’s not checkers, either, because good market research combines anthropology, psychology, ethnography and geography.
Why do market research at all? Because you don’t live there, and it’s a big, big world. If you want to connect with talent in places you don’t know in languages you don’t speak and navigate local issues you don’t understand, you have two choices:
- Throw money at your agency (they’ll take it) and ask them to figure it out (they’ll fake it);
- Do market research (Don’t worry, your agency doesn’t need nearly as much for media as they insist they do. Remember: they’re faking it.)
If you can afford to, hire a firm that gathers market insight. If you can’t, but you can get budget to visit the markets you’re interested in, you can tell a lot from a little if you know where to look. So what do I look at? I look at three things: civic infrastructure; individual expenditure; private investment. (I’ll talk about how to conduct great focus groups in a later post.)
Here’s what I look for in each category:
I. Infrastructure. While it’s everywhere, infrastructure can be deceptive, because what catches your eye may not be terribly important, and unless your budget is huge, you’ll need to make observations that are fast and meaningful. So I look at power supply, road stock, and light rail systems.
- Power supply is the first thing I look at because without power, economic growth can’t happen. Often developing countries struggle to keep power supply growing at the same rate as the private economy. And if they can, they struggle with the physical demands of routing wires to ever more locations from a fixed power grid. The reason for this is simple: as more and more buildings electrify, they tap into a grid built before homes—and businesses—were rich enough to require electricity. In Vietnam, for example, virtually every telephone pole in downtown Ho Chi Minh City (Saigon) is topped off with a crows-nest of wires. And though Bangkok is superficially much farther along the development curve, you’ll see an extremely overburdened power grid with power lines everywhere and often, a chaos of wiring at individual poles. Eventually, the development will peak. Eventually that peak will be followed by the orderly replacement of the haphazard wiring. Until then, it’s a good indicator that the location is still on the upward side of the growth curve.
- Road quality follows a predictable progression from dirt to gravel to either asphalt or concrete as cities grow. However, the demands of growth—heavy traffic, excessive trucking carrying heavy loads—often degrades roads faster than they can be developed, particularly when there is limited capital for government investment. In city centers, the quality of roads—including curbs and sidewalks—tells you far more than the number of new buildings you see. Taken together with the moped index (I’ll post about this later), road quality is a great indicator of the health of the public and private sector.
- Capital investments in transportation such as rail lines are important because they’re a sign of arrival. Only when a population is large enough, fixed enough in location, and regular enough in migration patterns does it make sense to alleviate the strain on roads by investing in light rail systems. Similarly, even if there’s no light rail in place, investment in second level (i.e., raised or below-ground) pedestrian walkways can be a good sign that the local economy is maturing.
II. Individual Expenditure. This is often the easiest to assess. I look to see how people spend their discretionary income, also in three variable areas. Climbing the development ladder these are: shoe stock, owned transportation, and women’s accessories.
The key things to look at include:
- Shoe stock can tell you a lot because good shoes are durable, expensive, and, because of their durability, they can tell you a lot through wear and tear about the wearer’s underlying economics. In the areas my target talent works, I look carefully at the average quality of shoe stock and how new (or “well heeled”) the average shoes are. This is not about assessing whether people are wearing cheap or expensive shoes—it’s about whether they’re wearing newer, rather than older, and higher quality, rather than lower quality shoes.
- Owned transportation can vary from bicycle to Benz, and from very new to very old. And it can tell you a great deal about how far talent can travel to find work--not nearly so far on bicycle as in a car. Second to housing, which you probably can’t observe without knowing more about your talent’s migration patterns than you’ll have access to, transportation is the largest area of investment you’ll see. (Sending children to a good school may cost more, but it’s impossible to observe indirectly.) Again, I’ll write about the moped index in a later post, but for now, suffice it to say the more cars there are, the newer the cars are, the higher the relative cost of talent (i.e., wages) and local level of development.
- Women’s accessories are often the trickiest to assess and it’s not really worth it in most markets without good evidence of robust owned transportation. (If everyone’s on bicycles, the inventory of women’s accessories isn’t very telling.) But if the transportation stock is fairly good, women in many developing markets wear significant family wealth in their accessories and jewelry and this is an important marker of a variety of things ranging from safety and social order (higher if there’s significant jewelry present) to trust in the formal economy (lower if families believe they must keep significant wealth in gold in case of economic instability).
III. Private Investment. This is tricky. Not only is most of what you see private investment, but it’s hard to see, for example, whether the shiny new building you’re looking at is brand new or just a re-skinned brick building that’s about to fall down. But there are a few key elements of private investment I’ve learned to look for. In order of development, these are bike shops, 5&10 stores, and billboards.
- Bike shops (here I mean places that repair motorcycles and mopeds) tend to exist at high concentration where there are a high number of people getting around on two wheels. So lots of bike shops tend to be inversely correlated with high development. Similarly, they’ll range from street-corner operations through tented areas to real mini-garages. Each tells you something important about the degree of local development. And they’re ubiquitous enough (because bikes break down often) to be impossible to miss if your eyes are open.
- 5&10s, the mom-and-pop shops carrying everything from chicken wire and tin to dental floss and plungers are all displaced quickly when more efficient stores that bulk-buy come to town. But as long as the general income level is low, volume wholesalers can’t generate the revenue they need to offset their fixed operating and inventory costs. So if you see frequent five and dime stores, you’re looking at a market on the lower side of the development curve.
- Billboards may sound like a no-brainer: they’re everywhere, right? Yes, and no. Remember, billboards are constrained by the same market dynamics as wholesalers: they need a mass market ready and able to spend discretionary income on mass-produced product. So question one is “how many do you see?” Question two should be “what are they selling?” Billboards seem to climb a predictable ladder from beverages (Coke, for example, and local beers) to consumer electronics, then phone minutes/plans, then cosmetics, then lifestyle products, then designer brands. What you see will tell you a lot about where the local market is.
Great. Now what? Okay, you’ve made it this far and you’re ready to go visit your target market to develop an inventory of infrastructure, expenditure and private investment. But first you need to understand why these are important for the talent market.
Not to put too fine a point on it, but why should you care? And why should you bother?
First, because taken together, these details comprise a mosaic illustrating many important things about the fixed cost of the local economy and the local quality of living. As a general rule, the better each of these areas is, the more costly local talent will be.* That obviously has important implications for pay expectations. And keep in mind that the developing world is...developing. That means you might end up with a very different mosaic in two similarly-sized cities. And because migration patterns in developing economies are often driven by kinship and family ties, citizens of city one and city two may have exceptionally low awareness that the state of their local economic environment isn’t universal to the country as a whole.
But there’s a finer point to be had here, one that has everything to do with advertising and speaks to why it’s so important not to let your agency fake their way:
- the less developed the economy, the more important basic job elements will be to your core talent;
- the more developed the economy, the more likely talent is to seek self-individuation through work.
In plain English, if you’re try to use marketing messages about “a career of your dreams” in a marketplace where people dream about predictable income, you’ve missed your mark. But promise “stable work” in a marketplace where the talent wants development and advancement and you might as well sell nail clippers to penguins.
I’ll talk about how to conduct talent research in a later post. In the meanwhile, shoot me a note (kippen@evvivabrands.com) if you have questions and I’ll answer them if I can. And if you have suggestions about what else to look for in emerging markets, I’d love to hear them.
* Cost of talent sometimes correlates positively with education level, but because quality is generally predicated on suitability for a given task, that’s often not the case. The universal ranking of universities offering specialized programs are typically a better indicator.
This posting originally appeared in www.recruitingblogs.com
Posted on 9 February 2010 by David Kippen
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