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Expanding Direct Marketing in Emerging Markets: Methodological Approach and Cultural Value Analysis. Richard MICHON Ted Rogers School of Management, Ryerson University, Toronto Atul TANDON CEO, Tandon Institute, Bellevue, WA. Outline. Managerial Issues Literature Review Research Objectives

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expanding direct marketing in emerging markets methodological approach and cultural value analysis

Expanding Direct Marketing in Emerging Markets:Methodological Approach and Cultural Value Analysis

Richard MICHON

Ted Rogers School of Management, Ryerson University, Toronto

Atul TANDON

CEO, Tandon Institute, Bellevue, WA

outline
Outline
  • Managerial Issues
  • Literature Review
  • Research Objectives
  • Method
    • Economic Model
    • Cultural Value Model
  • Discussion
  • Conclusions, Limitations …
dm in emerging markets why not
DM in Emerging Markets: Why not?
  • Brazil, China, Indonesia, South Korea and Russia will account for more than half of all global growth by 2025 (Sommerville, 2011).
  • New wealth and new middle class
  • Fund raising: Some countries are in a position to give back
  • Few companies are stupid, but many behaved stupidly in China (The Economist, 1999)
    • Lack of marketing infrastructure
    • Macroeconomic data but not no product/market info.
    • Imperialist approach
emerging market research economics
Emerging Market Research:Economics
  • Macro-economic Indicators
    • Overall Market Opportunity Index (Cavusgil, 1997)
    • Comparing GDPs at PPP (Arnold & Quelch (1998)
      • Q = (P+NP) X (DevGDP – AdjGDP)
emerging market research sociology culture
Emerging Market Research:Sociology/Culture
  • CAGE (Ghemawat & Mallick, 2003): Cultural, Administrative, Geographic, Economic distances
  • Value Survey Module (Hofstede, 2001): Cultural distances: Power, uncertainty avoidance, individualism/collectivism, masculinity/feminity, time orientation
  • GLOBE (House et al., 2004): Global Leadership and Organizational Behavior Effectiveness
  • WVS (Inglehart & Welzel, 2005)
emerging market research issues with cultural values
Emerging Market Research:Issues with Cultural Values
  • Measuring values or preferences? (Maseland & van Hoorn, 2009)
  • Some abstract constructs difficult to measure
  • Values should correlate with practices: negative correlations between VSM and GLOBE
  • WVS: 84 countries (80% of population), 250 variables, constantly updated, data at individual level, N = 270,000
emerging market research marketing
Emerging Market Research:Marketing
  • Product-market subset
    • Business Model Success factors (Arnold, 2003)

Example:

Based on Mary Kay business model, Chinese women were far more motivated than Japanese to become « beauty consultants » and pocket extra income.

dm and fundraising
DM and Fundraising
  • “Generosity” index (e.g. CAF)
  • ODA & global private philanthropy (Hudson Institute)
  • Cultural clusters (Johns Hopkins’ NPS, 2004)
    • European Vs Anglo-Saxon countries
dm and fundraising donor profiles
DM and Fundraising:Donor Profiles
  • Compassionate conservative philanthropy (Brooks, 2006)
    • They are politically to the right;
    • They have strong family values;
    • They value personal entrepreneurship;
    • They are skeptical about governments’ intervention into economic life (and into income redistribution);
    • They are regular churchgoers (irrelevant of denomination).
research methodology objectives and assumptions
Research Methodology:Objectives and Assumptions
  • Identify new or neglected potential markets for DM fundraising programs
    • Capacity to give (Economic Analysis)
    • DM Infrastructure to give (Documentary Analysis)
    • Propensity to give (Predictive Modeling)
  • Research proposition:
    • Individuals ready to support private philanthropy share some common values
research methodology setting
Research Methodology:Setting
  • Empirical research:
    • Christian NGO raising funds in 25 countries
    • Exploring some 130 new markets for DM expansion
    • Successful DM Fundraising Markets: Australia, Canada, Germany, New Zealand, South Korea, Switzerland, Taiwan, the UK, the U.S.
capacity to give1

Estimate urban households

Estimate hhold income

Estimate hhlds by income

Estimate potential market

Population estimate

GDP per capita

% income distribution per decile/quintile

Hhld penetration assumptions over 5 years

Average incomeper decile/quintile

Estimate number of potential donors

% of urban population

GDP per household

Average household size

Hhld spending as % of GDP

Define hhld income threshold

Estimate potential income

Number of urban households

Household income

Capacity to Give

Sources:

World Bank Development Indicators

CIA World Factbook

dm infrastructure1
DM Infrastructure
  • Infrastructure
    • Telephonemainlines per 1000 habitants
    • Cellular mobile subscribers per 1000
    • Number of PC's per 1000
    • Internet servers per million
    • Percentage of households with TV sets
    • Daily newspapers per 1000 (Source: World Bank, Development Indicators)
  • Economic Freedom:
    • Economic Freedom Index (Source: Heritage Foundation)
    • Political Freedom Index (Source: Freedom House)
  • Country Risk:
    • Country risk rating (Source: Euromoney)
dm infrastructure ranking of latin s american markets
DM Infrastructure:Ranking of Latin/S. American Markets

Infrastructure Economic Freedom Country Risk

All Countries RegionAll Countries RegionAll Countries Region

LATIN & SOUTH AMERICA

Chile 48 1 8 2 39 1

Mexico 50 3 20 4 42 2

Costa Rica 49 2 28 6 53 3

Brazil 51 4 44 9 54 4

El Salvador 74 10 36 7 56 5

Colombia 61 7 59 14 58 6

Peru 85 14 15 3 59 7

Guatemala 80 12 51 11 67 8

Venezuela 65 9 2 1 80 9

Bolivia 77 11 71 16 84 10

Honduras 81 13 45 10 85 11

Dominican Republic 64 8 40 8 87 12

Argentina 52 5 51 11 89 13

Ecuador 55 6 58 13 95 14

Nicaragua 92 15 20 4 107 15

Haiti 97 16 69 15 117 16

propensity to give target markets
Propensity to Give:Target Markets
  • Australia
  • Canada
  • Germany
  • New Zealand
  • South Korea
  • Switzerland
  • Taiwan
  • United Kingdom
  • United States
propensity to give logistic regression and odds values
Propensity to Give: Logistic Regression and Odds Values

FAMILISM

Family is very important in life 1.117

Importance of child obedience .929

Child needs a home with fatherand mother .871

Divorce is never justifiable 1.114

RELIGIOSITY

Religion is very important in life .867

Spend time at church, mosqueor synagogue weekly 1.026

Consider myself as religiousperson .955

CAPITALISM

Owners should be able to run their business 1.084

We need larger income differencesas incentive .950

Private ownership of business should be increased 1.117

Wealth can grow so there’s enoughfor everyone 1.161

CONSERVATISM

Conservative: Self positioning onthe political scale .933

People are poor because of lazinessand lack of will power 1.057

market map capacity and propensity to give
Market Map:Capacity and Propensity to Give

II

I

Ranking on countries propensity for private donations

III

IV

Ranking on countries economic market potential

discussion multi criteria decision analysis
Discussion:Multi-criteria Decision Analysis

Country Capacity Top 5% Propensity Infra- Freedom Risk Weighted

to Give Income to Give structure Score

Weights 30% 5% 35% 15% 5% 10% 100%

S. America

Mexico 5 4 3 3 2 3 72

Chile 3 3 3 3 5 3 62

Argentina 4 3 3 2 2 1 58

Venezuela 4 3 3 2 1 1 57

Colombia 4 3 2 2 2 2 53

Peru 3 3 3 1 2 2 51

Dominican R. 2 2 3 2 2 1 45

El Salvador 2 3 2 1 3 2 39

Costa Rica 2 3 1 3 3 2 38

Ecuador 2 2 1 2 1 1 30

Guatemala 2 3 1 1 1 2 30

Bolivia 1 2 1 1 1 1 21

Honduras 1 1 1 1 2 1 21

Nicaragua 1 1 1 1 2 1 21

Asia

China 5 1 5 2 1 3 79

India 4 1 3 1 2 2 55

Indonesia 4 1 3 1 2 2 55

Philippines 3 1 3 2 2 2 52

Malaysia 3 2 1 3 1 3 43

Thailand 3 1 1 3 1 2 40

discussion fund raising markets
Discussion:Fund Raising Markets
  • Weberian Capitalism (Weber, 1904)
    • Protestant Ethic and the Spirit of Capitalism (Weber, 1904)
    • Private philanthropy
    • PE  SC  MWC  IR (Lesnoff, 1981)
  • Secularization of PE (Carroll, 2009)
    • Asian Drama: An Inquiry into the Poverty of Nations (Myrdal, 1968): Hindu fatalism, Confucian hierarchy, Buddhist indifference material gains
    • Confucian capitalism (Fukuyama, 1995; Lew, Choy & Wang, 2011)
conclusions limitations and future research
Conclusions, Limitations and Future Research
  • Contribution to methodology
    • Importance of cultural values and predictive validity
    • Multi-attribute and structured approach as decision support models
  • Caveat:
    • Western business model
    • Modeling and human judgment
    • Nonprofits’ core values and compromises