{"id":6,"date":"2013-03-25T14:01:00","date_gmt":"2013-03-25T14:01:00","guid":{"rendered":"http:\/\/flevy.com\/blog\/?p=6"},"modified":"2025-04-29T08:29:45","modified_gmt":"2025-04-29T13:29:45","slug":"craft-a-successful-strategy-for-emerging-markets","status":"publish","type":"post","link":"https:\/\/flevy.com\/blog\/craft-a-successful-strategy-for-emerging-markets\/","title":{"rendered":"Craft a Successful Strategy for Emerging Markets"},"content":{"rendered":"

As the US and European economies remain teetering on the edge of uncertainty, we are seeing tremendous growth in the emerging markets. \u00a0Plus, these emerging markets are almost unfathomable in size. \u00a0Take Beijing, as an example. \u00a0The population of this one city\u2014not even the largest in China\u2014is more than double that of the populations of Manhattan, Los Angeles, Chicago, and San Francisco combined!<\/p>\n

Capturing just a minute slice of these markets would represent a substantial revenue source for any size company.<\/p>\n

So, how do we reach these consumers?<\/strong><\/p>\n

First, let\u2019s familiarize ourselves with the Customer Decision Journey framework. \u00a0This business framework, developed by McKinsey, captures consumer behavior as the customer moves through various phases from pre- to post-purchase. \u00a0This framework applies to customers in all markets. \u00a0However, there is a difference in phase emphasis between customers of Developed Markets and those of Emerging Markets.<\/p>\n

Customer Decision Journey Framework<\/strong><\/span><\/p>\n

A customer moves through 6 phases, 2 that are pre-purchase, purchase, and 3 post-purchase.<\/p>\n

    \n
  1. Consider<\/strong><\/span>
    \nIn this initial phase, the customer is only \u201cconsidering\u201d the purchase of a particular product or service.<\/li>\n<\/ol>\n
      \n
    1. Evaluate<\/strong><\/span>
      \nNow, the customer begins evaluating the various options available in the market.<\/li>\n<\/ol>\n
        \n
      1. Purchase<\/strong><\/span>
        \nThe customer makes the purchase decision and executes the purchase.<\/li>\n<\/ol>\n
          \n
        1. Experience<\/strong><\/span>
          \nThe customer is now experiencing the product.<\/li>\n<\/ol>\n
            \n
          1. Advocate<\/strong><\/span>
            \nDepending on the customer\u2019s experience with the product (along with post-purchase interactions with the seller–e.g. customer support), the customer may choose to advocate (or criticize) the product.<\/li>\n<\/ol>\n
              \n
            1. Bond<\/strong><\/span>
              \nWith more time, the customer may develop a bond with the product and brand\u2014i.e. develop brand loyalty.<\/li>\n<\/ol>\n

              The diagram below illustrates these various phases of the Customer Decision Journey framework.<\/p>\n

              \"image\"<\/div>\n

              Each of these phases represents a marketing battleground, where your company can influence the purchasing decision of a potential customer. \u00a0The difference between customers in a developed vs an emerging market is the degrees of importance across these battlegrounds.<\/p>\n

              For emerging markets, there is significantly stronger emphasis on these 3 phases: Advocate, Consider, and Purchase.<\/p>\n

              Advocate<\/strong><\/span><\/p>\n

              Even before the customer considers buying a product, it is critical that he has heard of your product from a friend or family member who advocates that product and\/or brand. \u00a0Word-of-mouth is incredibly powerful in emerging markets, as most consumers are first time buyers. \u00a0Thus, these customers have no direct previous experience to draw from. \u00a0Also, there are few brands that are truly established and time-tested in the market.<\/p>\n

              In the US, 40% of customers consult a friend or family member prior to purchase. \u00a0In the UK, only 29% customers do. \u00a0Compare this to China, where over 70% of customers first consult friend or family prior to purchase. In Egypt, this percentage jumps to over 90%!<\/p>\n

              This is analogous to one\u2019s behavior and sentiment when traveling to a new city or country for the first time. \u00a0You will often seek the recommendations of friends who\u2019ve been to the city (regardless of briefness of their stay), of the hotel concierge, and of a random local.<\/p>\n

              We should note that online recommendations carry little weight in emerging markets. \u00a0Online review sites aren\u2019t yet a trusted source.<\/p>\n

              Consider<\/strong><\/span><\/p>\n

              When the customer first decides to buy a particular product, your brand must be one of the brands that he is considering. \u00a0This obviously is best in all markets, but it is of particular relevance and significance in emerging markets.<\/p>\n

              For instance, in China, a customer typically considers an average of three brands and will purchase one of the three 60% of the time. \u00a0On the other hand, in the US and European markets, customers typically consider 4 brands and purchase one of these initial brands only 30-40% of the time.<\/p>\n

              In other words, in an emerging market, the customer<\/p>\n

                \n
              1. tends to consider a smaller set of initial brands; and<\/li>\n
              2. is less likely to switch to a different brand not in the initial list when making the final purchase.<\/li>\n<\/ol>\n

                Purchase<\/strong><\/span><\/p>\n

                When a customer in the US enters a store to purchase a product, he is likely going to purchase the brand he already had in mind. \u00a0He\u2019s done his research beforehand\u2014talked to some friends, read reviews online, etc.<\/p>\n

                Whereas a customer in an emerging market has also done research prior, his purchase decision is often swayed by his experiences in the store on the day of purchase. \u00a0In China, 45% of customers have changed the brand or product based on the salesmen\u2019s suggestions. \u00a0In US, only 24% do.<\/p>\n

                Furthermore, the sales cycle (particularly for big ticket items) are much longer in emerging markets. \u00a0This, again, is because in most cases, the customer is a first time buyer. \u00a0It will be the customer\u2019s first car or first TV. \u00a0As such, the customer is bit more wary of making the purchase quickly. \u00a0He will visit multiple stores, multiple times, test products, and often negotiate with retailers. \u00a0In China, buying an expensive electronic product typically takes two months and involves over four store visits.<\/p>\n

                Unfortunately, for most companies, it is very difficult to control the in-store experience\u2014especially in an emerging market. \u00a0In an emerging market, inconsistent packaging, merchandising, and in-store promotions can easily eclipse better products and advertising campaigns.<\/p>\n

                So, what does this mean?<\/strong><\/p>\n

                The primary strategic insight is\u2026 companies need geographic focus when developing their marketing strategies for emerging markets. \u00a0Geographic focus means focusing all efforts on a specific metropolitan area or a cluster of cities, instead of distributing marketing effort and spend across a larger region or country.<\/p>\n

                By doing this, they can maximize the impact of word-of-mouth marketing. \u00a0The tipping point to achieving effective word-of-mouth marketing in an emerging market is typically at 10-15% market share. \u00a0Many companies have already utilized this strategy, including P&G in India.<\/p>\n

                Furthermore, companies need to enhance in-store execution. \u00a0This can take the form of in-store promotions, such as product demos and free samples. Or, a company can create incentives for the existing retail sales staff. \u00a0Back in its earlier days, RIM ran a successful commission-based promotion encouraging retail sales employees to push Blackberry products. \u00a0In other words, as an employee of Staples, you would receive additional sales incentives directly from RIM. \u00a0Though this was a domestic sales strategy, it can also be applied to these foreign, emerging markets.<\/p>\n

                Need more strategies?<\/strong><\/p>\n

                You can read and learn more business strategies here on Flevy: Strategy, Marketing, & Sales documents<\/a><\/strong>. \u00a0Here are some specific documents you may be interested in:<\/p>\n