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Expanding Direct Marketing in Emerging Markets:Methodological Approach and Cultural Value Analysis
Richard MICHONTed Rogers School of Management, Ryerson University, Toronto
Atul TANDONCEO, Tandon Institute, Bellevue, WA
Outline
Managerial Issues Literature Review Research Objectives Method
Economic Model Cultural Value Model
Discussion Conclusions, Limitations …
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
Literature Review
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
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
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
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
“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:OECD Donor Countries
Jap
an
Po
rtu
gal
Ital
y
Fin
lan
d
Gre
ece
Ger
man
y
New
Zea
lan
d
Bel
giu
m
Irel
and
Fra
nce
Sp
ain
Sw
itze
rlan
d
Au
stra
lia
Un
ited
Kin
gd
om
Au
stri
a
Un
ited
Sta
tes
Can
ada
Den
mar
k
No
rway
Lu
xem
bo
urg
Net
her
lan
ds
Sw
eden
-1.66533453693773E-16
0.2
0.4
0.6
0.8
1
1.2
Remittances
Private Giving
ODA
Source: Hudson Institute
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 Objectives and Methodology
Research Methodology:
Objectives and Assumptions
Identify new or neglected potential markets for DM fundraising programs
1. Capacity to give (Economic Analysis)2. DM Infrastructure to give (Documentary Analysis)3. Propensity to give (Predictive Modeling)
Research proposition: Individuals ready to support private philanthropy share
some common values
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 Give
Capacity to Give
Population estimate
% of urban population
Average household size
Number of urban households
Estimate hhold income
GDP per capita
GDP per household
Hhld spending as % of GDP
Household income
Estimate potential market
% income distribution per decile/quintile
Average incomeper decile/quintile
Define hhld income threshold
Hhld penetration assumptions over 5 years
Estimate number of potential donors
Estimate potential income
Estimate urban households
Estimate hhlds by income
Sources: World Bank Development Indicators CIA World Factbook
Capacity to Give:Hhlds with Income Threshold > $20K
Rank Country World Bank Classification Potential Hhlds (000) Annual Potential Mkt Growth Rate
1 S. Korea High income 7,194 4%2 Brazil Latin America 6,236 3%3 Sweden High income 2,994 3%4 Argentina Latin America 1,996 10%5 Russia Europe & C. Asia 1,863 6%6 India South Asia 1,798 10%7 Poland Europe & C. Asia 1,493 3%8 Indonesia E. Asia & Pacific 1,442 7%9 Greece High income 1,304 4%
10 Colombia Latin America 1,049 7%11 Venezuela Latin America 1,029 11%12 Peru Latin America 952 8%13 Malaysia E. Asia & Pacific 694 7%14 Iran M. East & N. Africa 671 8%15 Thailand E. Asia & Pacific 490 5%16 Hungary Europe & C. Asia 488 4%17 Iraq M. East & N. Africa 348 -%18 Lebanon M. East & N. Africa 330 1%19 Czech Rep. Europe & C. Asia 316 6%20 Romania Europe & C. Asia 277 4%21 Guatemala Latin America 263 6%22 N. Korea E. Asia & Pacific 260 2%23 Ecuador Latin America 240 6%24 El Salvador Latin America 205 5%25 Slovenia High income 198 4%
DM Infrastructure
DM Infrastructure
Infrastructure Telephone mainlines 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
Infrastructure Economic Freedom Country Risk All Countries Region All Countries Region All Countries Region
LATIN & SOUTH AMERICA
Chile 48 1 8 2 39 1Mexico 50 3 20 4 42 2Costa Rica 49 2 28 6 53 3Brazil 51 4 44 9 54 4El Salvador 74 10 36 7 56 5Colombia 61 7 59 14 58 6Peru 85 14 15 3 59 7Guatemala 80 12 51 11 67 8Venezuela 65 9 2 1 80 9Bolivia 77 11 71 16 84 10Honduras 81 13 45 10 85 11Dominican Republic 64 8 40 8 87 12Argentina 52 5 51 11 89 13Ecuador 55 6 58 13 95 14Nicaragua 92 15 20 4 107 15Haiti 97 16 69 15 117 16
Propensity to Give
Propensity to Give:Target Markets
Australia Canada Germany New Zealand South Korea
Switzerland Taiwan United Kingdom United States
Propensity to Give:
Selected Indicators
Familism: Family is very important in life Importance of child obedienceChild needs a home with father and motherDivorce is never justifiable
Religiosity: Religion is very important in lifeBelong to a religious organizationSpend time at church, mosque or synagogue weeklyConsider myself as a religious person
Government: People should take more responsibilityGovernment doing enough or too much against povertyGovernment doing enough or too much for less developed countries
Entrepreneurship Owners should be able to run their businessWe need larger income differences as incentivePrivate ownership of business should be increasedWealth can grow so there’s enough for everyone
Conservatism Self positioning on the political scalePeople are poor because of laziness and lack of will power
Source: Brooks (2006)
Propensity to Give: Logistic Regression and Odds Values
FAMILISM
Family is very important in life 1.117Importance of child obedience .929Child needs a home with father
and mother .871Divorce is never justifiable 1.114
RELIGIOSITY
Religion is very important in life .867Spend time at church, mosque
or synagogue weekly 1.026Consider myself as religious
person .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
RankingCanada 1New Zealand 2Denmark 3China 4Austria 5Switzerland 6Australia 7Ireland 8United States 9United Kingdom 10Taiwan 11Czech Republic 12S Korea 13Germany 14Finland 15Belgium 16Japan 17Israel 18Malta 19Portugal 20Norway 21Netherlands 22Croatia 23Estonia 24Sweden 25
Propensity to Give: Top 25 Markets
Market Map:Capacity and Propensity to Give
Ran
kin
g o
n c
ou
ntr
ies
pro
pen
sit
y f
or
pri
vat
e d
on
ati
on
s
Ranking on countries economic market potential
1112131415161
1
11
21
31
41
51
61
Argentina
AustraliaAustria
Belgium
Brazil
Canada
Chile
China
Colombia
Croatia
Czech Republic
Denmark
Dominican Republic
El Salvador
Estonia
Finland FranceGermany
Greece
Hungary
India
Indonesia
IranIraq
Ireland
Italy
Japan
Jordan
Latvia
Lithuania
Malta
Mexico
Netherlands
New Zealand
Norway
Peru
Philippines
Poland
Portugal
RomaniaRussia
S Korea
Serbia and Mon-tenegro
Singapore
SlovakiaSlovenia South Africa
Spain
Sweden
SwitzerlandTaiwan
Turkey
United Kingdom
United States
Venezuela
III
IVIII
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. AmericaMexico 5 4 3 3 2 3 72Chile 3 3 3 3 5 3 62Argentina 4 3 3 2 2 1 58Venezuela 4 3 3 2 1 1 57Colombia 4 3 2 2 2 2 53Peru 3 3 3 1 2 2 51Dominican R. 2 2 3 2 2 145El Salvador 2 3 2 1 3 2 39Costa Rica 2 3 1 3 3 2 38Ecuador 2 2 1 2 1 1 30Guatemala 2 3 1 1 1 2 30Bolivia 1 2 1 1 1 1 21Honduras 1 1 1 1 2 1 21Nicaragua 1 1 1 1 2 1 21
AsiaChina 5 1 5 2 1 3 79India 4 1 3 1 2 2 55Indonesia 4 1 3 1 2 2 55Philippines 3 1 3 2 2 2 52Malaysia 3 2 1 3 1 3 43Thailand 3 1 1 3 1 2 40
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
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