Greater Insight: Matthew Harrison, B2B International - Taking a different approach

Interest in developing markets such as China, India, Brazil and Russia has increased rapidly over the past 10 years. This has resulted in market research and intelligence agencies exploring a wider variety of geographies than ever before. This presents challenges throughout the market research process, for field workers, managers and analysts alike.

As is to be expected, different insights arise from one geographical location to the next. A closer look at the critical marketing success factors in the developing and developed worlds provide a good illustration of this.

Product

In most B2B markets, customers regard product quality and durability as a 'hygiene' requirement; performance must be high for the supplier to even be considered. Companies with low quality are not in business for long, leaving serious players to differentiate on the extended offer, such as service and brand.

In developing markets, good quality is often not even a hygiene requirement, let alone a differentiator. Some 80%-90% of buyers of pump and instrumentation products in Russia or China are happy to buy products that last 18-24 months, whereas their Western counterparts demand a life span of six years or more. This results in a preponderance of low-quality buyers in the developing market, and quality becomes a key differentiating factor for the customers that demand it.

To the Western company with a high cost base and high-quality product, the best strategy in a developing market is to target the 10%-20% of quality-focused buyers. In developed markets, suppliers should focus on service quality, knowledge and people.

Price

Value-added pricing is common in developed markets - buyers are willing to pay more for a superior offer, usually based on service and other benefits beyond the product itself. In developing economies, the willingness to pay extra for a superior offer is far less prevalent, with most B2B buyers relating price primarily to quantity.

Western clients tend to premium-price in developing markets, communicating high quality to a small part of the market and receiving high margins in return. Even companies relatively undifferentiated in their home markets frequently succeed when premium-pricing in developing countries.

In developed markets, the picture is less clear, with customers generally more demanding and high-quality competition more prevalent. This is where specialist pricing research comes into its own, be that competitive pricing intelligence or more model-based market research tools such as SIMALTO and conjoint analysis.

Place

Western businesses frequently underestimate the difficulties associated with routes to market in developing economies. Channels in a developing market may be unrecognisable, fragmented, ephemeral and highly dependent on local knowledge and relationships.

Many Western consumer-facing companies are experiencing real success in developing markets, with shampoo and cosmetic providers, for example, making huge profits in rural cities via local distributors and retailers.

Industrial companies have been slower to build up their knowledge, many still relying on generic import-export agents and a low-quality, poorly trained salesforce. Underestimating the importance of a permanent on-the-ground presence and even local-language capability is another common mistake.

Promotion

In any B2B market, promotional messages should focus on customers' 'hot buttons': product quality or price in developing markets; service, brand, consultancy and other value-added messages in developed markets.

Promotional routes will also differ. While direct mail is increasing in prevalence in most developing B2B markets, it is still a scarcely used and ineffective channel there. Relationship-focused promotions, such as trade shows and site visits, are key, since trust in brands is in short supply.

Matthew Harrison is a director of B2B International. Contact him at matthewh@b2binternational.com.

This article was first published on marketingmagazine.co.uk