By ESOMAR MENAP Representatives
The Middle East may be the smallest research market, it’s also the fastest growing region. We asked the ESOMAR representatives in the MENAP countries (Middle East, North Africa, Afghanistan, and Pakistan), about the challenges, opportunities and trends in their markets.
In most MENAP countries spending on market research is still relatively low, leaving plenty of room for growth. Take populous Egypt, where spending per capita can only grow. Tamer El Naggar, ceo of the American Chamber of Commerce in Egypt, speaks of a relatively low value associated with marketing research by local corporations. Large multinationals are responsible for almost 70% of the country’s research spend. “This problem of market education is the basic impediment to a larger industry.” He describes how several research providers actively engage with both academia and their clients, showing them the latest advancements in the industry and demonstrating how research could drive better ROI. “This effort needs to be sustained and exercised by more research corporations.” At the moment, the competition for human resources, is leading to higher rewards and more expensive (or less profitable) services in a relative low-cost and price-sensitive market, observes El Naggar.
Likewise, market research is not yet a mature industry in Saudi Arabia. It’s a market with its own rules too, explains Masood Abdullah, head of market intelligence at Saudi Aramco. “Understanding the cultural and societal trends is a major challenge that market researchers must take into account. Moreover, the researcher should also think about gaining trust, as Saudi respondents would generally hesitate sharing their perspective unless taken into confidence.” On the other hand, the fact that more than one-third of the Kingdom’s population is 35 or younger, and digitally connected, offers a great opportunity, he adds. “Young indigenous entrepreneurs are opening up boutique research firms to cater to the growing needs of the industry.”
Challenges and opportunities are manifest in both the full service and data collection segments of the UAE industry, says John Presutti, ceo of Market-i Research Services & Consultancy UAE. He tells of a limited availability of online or mobile panel providers. “While the industry struggles to minimise its dependence on face-to-face data collection, the online and mobile panel providers can hardly keep up with the demand.” He also sees a growing shift to online and mobile qualitative research in the region. Companies that provide these services will be greeted with open arms, he believes. “It represents a great opportunity to disrupt the face-to-face paradigm that has doggedly persisted within the region for far too long.” Another challenge Presutti sees is that research agencies have been slow to up their game in delivering strategic insights to clients. “Research analysis and reporting, whether qualitative or quantitative, still looks pretty much the same as it did ten or even fifteen years ago – heavy on slides of data and light on impactful marketing and business implications. Big data and data analytics is still embryonic.”
In Pakistan, Quratulain Ibrahim, ceo at TNS Aftab, also hopes improvements can lead to industry growth. “The biggest challenge – as well opportunity – is the shift from pen and paper, face-to-face interviewing to telephone and internet data collection.” A challenge indeed, as data collectors have to be trained and a new skill set is needed. But the rewards she sees are a decrease in the cost of data collection and improved quality of data. “This will also encourage the research industry to shift from a data collection mind-set to a data collation and analytical/insightful mind-set. This will help enhance the size of the industry, as many new local companies will be encouraged to use research.”
Money may be no object in prosperous Saudi Arabia and UAE, in Lebanon per capita spending on research is still small: just under US $2 annually. Tarek Ammar, regional director at ARA Research & Consultancy knows this is almost half of the average spent in GCC (Gulf Countries Council: Saudi Arabia, Kuwait, UAE, Oman, Bahrain, and Qatar), and about one tenth of the European average. “The reasons are simple: there’s little use of research and pricing is low.” Another market with room for growth is Iran. Here the recent lifting of international sanctions gives Parissa Porouchani, managing director and head of qualitative at Bazaarnegar Marketing Research Consultants, reason for optimism. “Considering the demographics and number of consumers, we’ll surely see a variety of global brands in different sectors heading to this country.” In their wake, these brands may bring global research companies – a development Porouchani sees as both a threat and a new opportunity for local providers. “A threat because of a lack of expertise and strength to compete with sophisticated global agencies, but an opportunity as it may bring close collaborations such as joint ventures.”
Changing times too in Israel, where Avi Degani, president of the Geocartography Knowledge Group (GCKG), observes how the traditional advertising industry is shrinking and changing, with digital media enabling brands to communicate directly with potential consumers. Israeli market research is going through similar changes. “The increasing use of online, cheaper, but less representative panel-based surveys, bites deeply into the flesh of the more representative CATI surveys. But the industry is suffering from declining response rates, and as such is becoming more expensive.”
Like Israel, Armenia boasts a very high mobile phone and internet penetration (over 80%) and social media are starting to play a big role. Unsurprisingly, the first online panels are expected this year, says Aram Navasardyan, president of the Armenian Marketing Association. He describes a local market of some thirty companies offering different marketing services, with most of them also providing research. Having people trust the results is another matter though. “When you publish results, for example ratings, some companies don’t appreciate that they are not number one. So instead of understanding the details and reasons behind this, they try to argue with the survey’s results.” Likewise, in Iran market research is not very well recognised by consumers and the response rate is low. “On the upside”, says Porouchani, “they have not yet been bombarded with survey requests.” Some Iranian sectors are lacking sufficient research services, and therefore proper data, such as: syndicated, b2b, feasibility studies, macro data, medical and automotive. Porouchani: “For research agencies there is a great opportunity to fill these gaps.”
Improvements are also needed in Egypt, where El Naggar pleads for a dedicated effort to train clients and new talent, smarter pricing, more technology, and the building of consultancy capabilities. The key trend in his country is the growing penetration of social media and the digital presence of consumers. The demographic profile of Egyptians on Facebook and other platforms is quickly expanding beyond the stereotypical young affluent. “This promises an opportunity to access consumers through online/mobile surveys, at least for higher-end products. Despite high illiteracy, the widespread mobile ownership should make cheaper sampling/interviewing possible.” In the UAE, the digital revolution started earlier and the entire country is now online 24/7, with smartphone penetration at nearly 75%. So if you want to engage and interact with customers, the place to do so is online, tells Presutti. “The region is facing an inflection point. Clients and researchers must remain vigilant as to how this will impact their businesses.”
The various research markets in the region each face their own trends and challenges. In Lebanon researchers have not yet sufficiently shown the added value of their work, explains Ammar. “The many disputes over the quality of opinion polling and media measurement have impacted the reputation of the industry. We need an industry body that sets norms and elevates the profession.” The huge economic differences are also reflected in regional research industry developments. In Israel, the consumer market has become heavily price-oriented, tells Degani, and tough bargaining has become a standard. “The common consumer is no longer willing to pay high prices for famous brands, when similar, cheaper products are readily available. I call this ReBrenQuity: the resetting of brand equity. Therefore, much needs to be re-evaluated by market research.”
A very different story in Azerbaijan, where the recent devaluation continues to drive up the cost of imported products. “Many companies have decreased their marketing communication activities, and consequently their market research activities,” tells Ashraf Hajiyev, research director at the SIAR Social & Marketing Research Center. Another negative trend in the country is the growing unemployment. The economic situation has impacted finance, automotive and durables severely. But Hajiyev also hopes that planned governmental initiatives will have a positive influence.
In Pakistan consumers have more disposable income, and more brands and product categories will come into the market, requiring concept/product tests. But it is a vast and varied country of some 120 million people. Therefore Ibrahim stresses: “Be very clear on what product you are launching and where. Lifestyle habits and levels of development vary significantly in various regions.” By comparison, Israel is small, with just over 8 million citizens. But it’s a highly developed society and most global brands are present. Newcomers would be wise to team up with local companies and look for what Degani describes as ‘two-way entrepreneurships’. The same goes for Armenia, where Navasardyan says: “Choosing the right research partner is a core need.” Indeed, in Saudi Arabia Abdullah echoes the sentiment: “For non-Saudi conducting research, it is critical to find a partner familiar with the local customs and cultural norms.” In Iran, brands also need to know local regulations and laws, warns Porouchani.
In the UAE, Presutti recommends partnering with the right person on the agency side, “so you have a trusted guide that will not only help navigate the cultural and structural complexities of the region, but will also act as a strategic thought-partner on how to identify genuine impactful insights and bring them to life.” Keeping those guidelines in mind, there is plenty of room for new business in the region. To illustrate Lebanon’s opportunities Ammar points at the GCC’s impressive growth rate (see box). He adds that the Lebanese market embraced research earlier than most Arab countries, with banks using crm and investing in customer satisfaction at the beginning of the century. “Companies who can show long-term commitment and high-quality work will certainly meet success.”
Small But Growing
The Middle East is the smallest regional research market with a value of US$ 325 million. It is also the fastest growing region though, with a 9.1% increase from 2014 to 2015. Topping the growth ranking is the GCC (Gulf Co-operation Council), with a market now almost 75% larger than in 2010. Israel also reported strong growth in 2014 (19.5%) but Egypt and Iran, the third and fourth largest markets, faced net declines in 2014 of 4.8% and 7.0% respectively. Most markets depend predominantly on domestic demand.
(source: ESOMAR’s global market research study 2015)
Many thanks to the authors:
Tamer El Naggar, ceo of the American Chamber of Commerce in Egypt
Masood Abdullah, head of market intelligence at Saudi Aramco
John Presutti, ceo of Market-i Research Services & Consultancy UAE
Quratulain Ibrahim, ceo at TNS Aftab
Tarek Ammar, regional director at ARA Research & Consultancy
Parissa Porouchani, managing director and head of qualitative at Bazaarnegar Marketing Research Consultants
Avi Degani, president of the Geocartography Knowledge Group (GCKG)
Ashraf Hajiyev, research director at the SIAR Social & Marketing Research Center