Latin America: Breaking the barriers
Thomas Rideg of Global Intelligence Alliance on the challenges of gathering market intelligence in Latin America – and some tips on getting things right.
Market intelligence still has some way to go to establish itself in Latin America. Primary market research has existed for a long time, but systematic approaches combining primary research with the analysis of published reports, ongoing market monitoring, competitor intelligence, internal information gathering as well as the management of market information have only recently emerged. These go beyond just providing information and on to gaining a better understanding of market dynamics through analysis and strategic planning.
Some local Latin American giants have developed rather sophisticated market intelligence departments over the past five to ten years, but broader interest in setting up structured market intelligence processes, especially in companies with revenues above $200 million, is only just growing.
Most local companies lack an established market intelligence process and culture and struggle to know how to prioritise their internal procedures, whether in structured departments, continuous monitoring programmes or ad hoc assignments. Many are also unclear about how to position market intelligence within their organisational structures. It is not unusual to see market intelligence practitioners distant from strategic planning departments, which makes it difficult for their insights to be transformed into strategic action because they are located away from key decision-makers.
Thankfully, awareness of the strategic aspects of market intelligence and the need to seat the role close to the board is growing.
Conducting market intelligence in the region can be like driving in foreign territory without a detailed map. It requires keen understanding of the local landscape of cultures and potential pitfalls. There are several reasons.
“Industry associations tend to act more as lobbyists for their largest members than as sources of information”
Poor secondary information structures
Shortage of secondary information is one of the biggest problems global companies face when conducting competitive intelligence in Latin America. The development of reliable information structures has not matched the pace of economic development. While Argentina, Brazil, Chile and Mexico have the most advanced sources they still lack the precision and definition one finds in the US or Europe. This makes it difficult for businesses to plan adequately and causes management to be reactive.
One will find an absence of corporate financial data, as governments lack the resources to enforce timely reporting by private and public companies. Complex tributary systems tempt companies to under-report earnings.
Because of low demand few third-party company profile services exist, especially in second-tier markets. Multinationals that report global earnings for their listings in the United States, European or Asian stock exchanges are not always required to report country-level financial performance.
Lack of published industry research is another barrier. Unchecked theft of published reports and a lack of investment interest have been deterrents to the establishment of such services. Most governments do not invest in business-level research due to a lack of funds and industry associations tend to act more as lobbyists for their largest members than as sources of information.
Government research tends to focus on macro statistics such as population, income and health. Even then, measurement tools are incompatible with those of developed countries, and obtaining access to full data sets requires personal contacts within state organisations.
Few governments have reliable statistics departments to monitor trade activity. Tax regulations favouring exports lead to these figures being less accurate than import data. Manual data capturing often results in errors, and the lack of centralisation results in vast statistical disparity from one report to the next.
The industry and business press is also inadequate. In the second- and third-tier markets newspapers have traditionally relied on government advertising and ‘article sponsorship’ where companies pay for favourable coverage. This has led to a lack of objective business reporting. Magazines focusing on specific industries are not common.
Cultural knowledge and industry experience are the most valuable skills one can possess to overcome secondary information barriers. If you are conducting market sizing studies it is important to take into account unreported black or grey market factors. If you’re setting sales objectives, it is important to consider the impact of contraband products and copies.
Cultural barriers to primary research
The barriers in primary research are even more challenging. Interpreting primary results and transforming them into actionable solutions is impossible without local knowledge.
“High fiscal evasion (both in business and in households) has led to respondents being reluctant to share information regarding income, sales and revenue structure. Distrust is the norm”
Most companies in Latin America (even multinationals) exhibit higher levels of bureaucracy than those in more developed countries, and corporate decision-makers are often difficult to reach. Employee empowerment remains fairly limited; executives with valuable market information shut themselves away in hierarchal ranks. In the rare cases where information travels freely, internal staff are reluctant to reveal commonly available information such as gross sales for fear of upper management reprisals. So having good contacts is essential.
In both business and consumer markets it is very unlikely that respondents will answer questions about income accurately, if at all. High fiscal evasion (both in business and in households) has led to respondents being reluctant to share information regarding income, sales and revenue structure. Distrust is the norm.
In business it is common for Latin American companies to keep two sets of books, and there may only be one or two people who know the real numbers. As a result indirect questions and mapping via secondary source data are almost always required. Direct questions regarding revenue should be avoided. Even once you’ve reached the appropriate person, they are usually reticent in sharing information, giving the traditional runaround speech. It is preferable to approach this subject through in-depth face-to-face interviews. Access to such interviews, however, will mostly only be successful through local contacts.
For similar reasons, in consumer research alternative income estimates must be used, such as asking about the quality of life of the household (the size of the home or the number of cars or telephones). In focus groups, social class disparity can be counterproductive, and classes should be kept separate so as to avoid any dominance within the group structure. Understanding how local firms segment and position their markets is a major challenge for global companies because socio-economic segments are comparable with those in the US and Europe. Until very recently the lower segments were considered unprofitable and were ignored by major market players.
Some Latin cultures are extremely reluctant to provide frank opinions in questionnaires. For instance customer satisfaction scores in the region will almost always be higher than in the US, Europe or other areas where people tend to be more direct in their communications.
In most Latin American cultures it is considered highly impolite to give a straightforward ‘no’ as an answer. This trait is often observed in qualitative studies, as candidates give the traditional runaround of not answering calls and emails. The most common excuses are that candidates are ‘out to lunch’, ‘in a very important meeting’ or ‘out of the country’. In quantitative studies, therefore, researchers must keep the ‘afraid to say no’ syndrome in mind, especially with information that is difficult to obtain. Respondents will prefer to give erroneous statements rather than admit to a lack of knowledge.
Again, local knowledge and experience of designing, conducting and analysing surveys within the Latin American context is crucial. Local qualitative studies should be designed, implemented and analysed in order to develop targeted quantitative surveys. This is well understood in theory, but unfortunately not often put into practice.
Challenges to proper analysis
As with any market intelligence challenge in any country, the most crucial phase is transforming all the collected information into decisions, and then strategic action.
In recent years the competitive environment has evolved into a dynamic marketplace, fuelled by constant legislative changes, new market entrants and an increasingly sophisticated consumer base.
Market intelligence practitioners need to know how to analyse and interpret all the information that they receive from the market and have highly honed skills to cond-uct reality checks or cross-verification analysis in the context of the local culture. Having a local market intelligence partner is therefore critical.
Five tips for research success
1. Quiz your intelligence provider on their knowledge of the market
Ensure that your market intelligence team has hands-on experience on the ground. This includes continuously interacting with consumers, distributors and competitors, and living or having lived in the country. Delegating a market intelligence challenge in Chile to a practitioner who lives in São Paulo can be just as challenging as delegating it to someone who lives in London - unless it happens to be someone who understands Chile thoroughly.
2. Use multiple sources to verify information before taking action
Excellent and reliable secondary sources of information can be found on paper and on the internet - but there are also truckloads of unreliable information that will confuse analysts and provoke misguided interpretations and conclusions. Differentiating what is good information from what is bad is a challenge.
3. Don’t rely on secondary data alone
Nothing beats being on the ground and talking to the people involved. Latin Americans are generally talkative, but will not always tell you what you want to hear, so it’s always best to come prepared to meetings by understanding the general context of the subject matter. This will allow you to validate existing insights as well as seeking new information. Multiple interviews throughout the value chain (including your own company) are always best.
4. Monitor your markets continuously
Things are constantly changing in the dynamic and emerging markets of Latin America, so it’s important to monitor the marketplace continuously. Ad hoc studies are excellent, but may lose value as time goes by. Businesses are gradually migrating from one-off ad-hoc studies to continuous market monitoring partnerships.
5. Manage your internal knowledge
Knowledge management and market intelligence work hand in hand. How often have you hired external consultants to find information that you have in-house? Companies have sales representatives and employees who constantly interact with the external environment and who can contribute systematically to the knowledge management library. Internal research is often duplicated because of inefficient use of a knowledge management system – or not having one.
Thomas Rideg is regional director, Latin America, for Global Intelligence Alliance. He is based in São Paulo