International Market Research Explained


Information is a key ingredient in the development of a successful marketing strategy, as familiarity with customers, competitors and market environment is critical to operating profitably.

Let’s not forget that the primary goal of global marketing is to make and sell what international buyers want, rather than simply selling whatever can be most easily made. This is why customers must be assessed through marketing research and by establishing a decision support system so that the requirements of the customers can be fulfilled. This is where market research makes itself essential.

We can define market research as follows:

Market research is the gathering, analysing and presenting of information related to a well-defined problem.

Market research should not be considered, some kind of academic, theoretical endeavour, on the contrary now managers and researchers share a strong overlap when it comes to delivering data-driven decisions.

There is a wealth of information that would be necessary to undertake all the necessary decisions foreseen by a market growth strategy, but we need to practical about information-gathering in order to be successful.

As we approach market research there are two goals that need to be accomplished, on the one end, we need to identify the type of information that is both interesting and relevant to our decision, but also decide how we are going to acquire the data. This latter problem is why we will approach research by making a distinction between primary and secondary research.

  • Primary data. Information that is collected first-hand, generated by original research, tailor-made to answer specific research questions.
  • Secondary data. Information that has already been collected for other purposes and is readily available.

Both these types of data are useful to understanding how we can approach decision-making and in this post we are going to discuss them both in detail. Also, we’re going to explore alternative approaches to data collection and processing.

In this post, we’re going to discuss the following topics:

  1. Secondary Research in International Marketing
  2. Primary Research in International Marketing
  3. Other types of data in International Marketing
  4. Conclusions

1. Secondary Research in International Marketing

When approaching research, we can see that secondary data has obvious advantages, such as the fact that:

  • Is cheap (or at least less expensive).
  • Is quicker to collect.
  • It’s a valuable first stage of data collection, to collect background information and limit our focus for primary investigation.

At the same time the data we collect has a variety of issues:

  • Non-availability of data. (Data can be non-available or scarce)
  • Reliability of data. (Sometimes political considerations affect the reliability of data)
    • Who collects the data?
    • For what purpose was it collected?
    • What was the methodology adopted?
    • Is the data internally consistent?
  • Data classification. (too broad to be used)
  • Comparability of data. (can we interpret it by comparing it with other similar datasets?)

To the marketer, other internal types of data sources may be available by looking at internal data from competitor firms, which can be collected from a firm’s financial statements.

  • Total Sales
  • Sales by Country
  • Sale volumes by market segment, etc.

However we should remember that in reality, the purpose of secondary data is not necessarily to come up with a final clear, sharp analysis, as much as with having a useful estimate of foreign market potential, so it’s not worth a company’s time trying to extrapolate the highest detail of accuracy as much as developing a grounded opinion. This is why aside from using and adapting other studies and research  it is possible to use other methodologies. Here follows a list of the most commonly used ones:

  • Proxy Indicators. A market proxy is a broad representation of the overall stock market. A market proxy can serve as the basis for an index fund or statistical studies. For instance, the S&P 500 index is the best-known market proxy for the U.S. stock market. The most popular is the BigMac Index (comparing BigMac prices in different countries).  In a generalised sense, for instance, ownership of durable household appliances is considered a proxy for economic development. If a household has a refrigerator is indicative of ownership of washing machines. This approach may lead to validity issues, based on the choice of proxy variables.
  • Chain Ratio Method.  The chain ratio method consists in estimating market demand by multiplying a base number by a chain of adjusting percentages. For example, Connect Phone’s product is designed to replace a household’s telephone as well as provide “always-on” Internet access. For instance, the number of washing machines is relative to the rate of urbanization, x number of household, x number of people having access to electricity and people who can afford the product.
  • Lead-Lag Analysis. This method determines demand, by comparing two countries, where we assume that the determinants of the demand are the same in similar countries, with only a lag in time.
  • Estimation by analogy. This is simply when a correlation value for one market is used in another international market. For instance, we want to estimate the target market in Germany by comparing it to the figures of the UK market, simply adjusted for population difference.

However, it may be the case that the information we’re looking for is simply not available. This is why we need to consider acquiring new data from the market by using primary data. In the next section of the post we’re going to explain what this entails.

2. Primary Research in International Marketing

When we talk about primary research, we’re talking about research methodologies or strategies to collect the data we look for from our market. In order to talk about research let’s start with clarifying two distinct options when it comes to conducting research.

There are two types of research.

  • Qualitative research: data analysis based on questionnaires, or non-numeric data.
  • Quantitative research: provides a holistic view of the problem, by integrating a larger number of variables, but focusing only on a few respondents.

There are several challenges with primary data too, as in order to collect primary data we need to first design the type of research we wish to carry out.

  • The first stage is translating a business problem into a research problem, with a set of specific objectives.
  • The successive stage is then, identifying the correct research approach. This may be an observation, a survey or an experiment. Here are some definitions to explain each.
    • Observation: this approach consists in watching or recording market-related behaviour, examples include store checks, mechanical observations, or cash register scanners.
    • Experiments: a common example of experiments are test marketing, whereby a product under development is placed on sale in one or more selected localities, observing its reception among consumers, in order to isolate sales effects of advertising campaigns.
    • Surveys: This is a method based on questioning respondents about their attitudes, buying habits, potential market size, market trends.

Also, we need to consider that we need to identify the right contact methodology to extract the information.

    • Contact methodologies relate to how data is collected balancing speed, degree of accuracy, and cost.
      • There are in general 4 contact modes: mail (non-intrusive, but take a long time), internet (economical, fast, may be regarded as spam), telephone (practical but no visual aid), in person (great but very expensive and may have a bias).
  • The next stage is defining the sampling plan, which is a way to outline the group to be surveyed in a marketing research study, how many individuals are to be chosen for the survey and on what basis the choice is made. There are many types of sampling procedures however the two most common ones are:
    • Probability sampling, in which case it’s possible to estimate the chances that each element in the population will have of being included in a sample, even if the probability is not equal in every case.
    • Non-probability sampling, here it’s not possible to determine the probability or to estimate the sampling error, these procedures rely on the judgement of the researcher an example of this is snowball sampling (participants recruit other participants).

The latter is usually preferred because non-probability sampling if executed correctly can still produce samples of the population that are reasonably representative.

In terms of the sample size, the larger the sample the smaller sampling error, however the larger the sample, the more expensive to run the research. Usually, the sample size is not chosen according to mathematical rule as much as in terms of budget. So when it comes to deciding ‘how many is enough’ there are some factors to consider:

  • Traditional statistical techniques (considering standard normal distribution)
  • Budget available
  • Rules of thumb or common sense
  • Number of subgroups to be analysed

When choosing methodologies that involve asking questions to participants, like in the case of surveys or interviews there are some additional cautions that need to be taken into account, which relate to the wording of the questions.

  • The wording must be clear, with words which do not have a bias potential.
  • Consider the ability of the respondent to answer questions (you can ask about habits, to understand unconscious behaviours).
  • Consider the willingness of the respondent to answer questions.

Here it’s important to take into account that in reality the language and culture plays a fundamental role in the process of collecting information. This is why in many cases before conducting field research pre-testing is foreseen.

  • Pre-testing consists in conducting limited trials of a questionnaire or some other aspect of a study to determine its suitability for the planned research project. In the context of advertising, research is carried out beforehand on the effectiveness of an advertisement.

Finally, data is collected and checked for correctness and then analysed and interpreted. Interpretation of international marketing research is very challenging because it is affected by the same cultural issues and limitations which inspired the research in the first place. This is why interpretation must be objective and monitored if possible by trained local personnel. Hopefully, the results of the research will be reliable and valid.

  • Reliability means that if the same phenomenon is measured repeatedly, with the same measurement device we would expect similar results.
  • Validity means that the measurement measure what is supposed to measure. There are in fact three types of validity, construct (operational), internal (establishes causal relationships) and external (the results are generalizable).

Now that we’ve analysed primary and secondary research it’s important to look at alternative research methodologies which can help us understand what are the most relevant pieces of information that we need to collect in order to develop our international expansion strategy.

3. Other Types of Marketing Research

Here are some alternative approaches to conducting business research:

  • Ad hoc research, research designed to test a specific marketing problem, like through attitude surveys.
  • Custom designed studies, assigned to market research companies, includes multi-client studies.
  • Delphi Studies. Research conducted by asking advice and answers by those who possess particular in-depth expertise, for instance, to understand the development of the international trading environment, by asking a group of 10-30 experts. The experts are required to explain the rationale behind their reasoning.
  • Longitudinal Studies, also called continuous research asks the same panel of individuals over a prolonged period of time. These can be consumer panels or retailer panels.
  • Sales forecasting. Sales forecasting is the process of estimating future sales. Accurate sales forecasts enable companies to make informed business decisions and predict short-term and long-term performance.
  • Scenario planning. Devising stories about plausible alternative futures, assessing convergent forces (factors driving development in the same direction) and divergent forces (forces driving development apart).

So there you have it! It’s now time to start drawing a few conclusions. In the next paragraph we’ll wrap up the topic.

4. Conclusions

As we’ve discussed there are several ways in which a company can acquire the necessary information to develop a well-structured and informed expansion strategy. Starting from data which can be more easily accessible, like secondary data, a firm can collect more country-specific information that can be used to gain ad additional edge against the competition.

Collecting market data can be a very resource intensive process, but it’s nonetheless a necessary one, as a firm need to be able to manage risks through market knowledge. 

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International Market Research Explained Market research is the foundation of an expansion strategy, in this post, we'll break down why it's so important and how to do it right.
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