Multi-tasking and non-traditional research approaches are required when working in Vietnam, write Tran Ngoc Dun and Tuong Tuan Thong.
Small and medium enterprises (SMEs), employing fewer than 300 employees, account for a significant proportion of national wealth and growth in less developed countries. In Vietnam, a typical developing and emerging country, the number of SMEs is reaching 400,000. They represent 99 per cent of the number of businesses of the country; employ 77 per cent of the workforce and account for 80 per cent of the retail market.
Growth in the market research industry in Vietnam will come from SMEs and not just the big multinational corporations. This is because SMEs have been consistently the source of growth in Vietnam; on average, their profits grow about 20 per cent each year.
SMEs in Vietnam receive great attention from the Vietnamese government as well as non-government organisations (NGOs) in initiatives designed to improve their competitiveness. Organisations such as the Vietnam Chamber of Commerce and Industry (VCCI), the World Bank and the Asian Development Bank (ADB) have implemented a variety of programs supporting SMEs to help them improve working skills for their employees and business management skills for leaders.
In particular, recent initiatives by the Ministry of Trade and Industry and VCCI have helped Vietnamese SMEs conduct professional market research by financing part of the research costs. This research, which has focused on finding ways for Vietnamese brands to enter rural markets, has generated strong awareness among SMEs about the benefits of using market research. Market research agencies in Vietnam have been encouraged to participate into these initiatives to support SMEs and also to promote the agencies’ names to this sector.
Until 2007, large businesses (mostly multinational) remained the biggest spenders on research in the country. However, after joining the World Trade Organisation (WTO) in 2007, many SMEs in Vietnam have grown to be significant players in their industries. Typical cases are Nutifood Nutrition & Dairy, THP Beverage and Masanfood. These companies (established approximately nine to 10 years ago) have grown from small enterprises to become substantial players, with research budgets that have grown significantly and are now comparable with multinationals in the same category. Before 2007, the list of top 10 advertising spenders included typical names such as Unilever, P&G, Coca Cola and Pepsi. By 2010, THP and Masan were ranked number one and number three respectively in ad expenditure.
This illustrates how market research agencies that effectively promote and sell their services to SMEs could potentially grow alongside these companies.
Current market research awareness and usage
However, in a recent survey of 200 local fast moving consumer goods (FMCG) SMEs in Ho Chi Minh and Hanoi, conducted by FTA Marketing Research, less than 30 per cent had a separate marketing department. None had a functional market research department.
Therefore, it is not surprising that only half of these SMEs agree that market research is the tool for understanding target consumers. Only about 45 per cent agree that market research should be the foundation for business strategy. Only 30 per cent agree that market research should be used to improve current product offers or develop new products.
Fifty one per cent had never used services from a market research agency. Instead, they used mostly information from their sales force, from staff, from informal talk with consumers at point of sale or with others in the same industry. They relied on business owners’ experience and learning from trial and error.
While 49 per cent reported they had tried outsourcing market research services in the past three years, nearly half were not satisfied. The top three reasons for being dissatisfied and saying they are not likely to use market research again were:
1. Did not provide value for money
2. Did not solve business problem (after doing the research, the owners received only general results and recommendations from research agencies that were considered as too broad, not practical and not particularly feasible to their business)
3. Based on inaccurate information (as a result of inappropriate research design, from talking to the wrong target, or from not asking the right questions).
Key barriers to usage
The most significant barrier to research usage among SMEs in Vietnam is that it is perceived to be a cost item, not an investment. This is the result of not being able to see the benefits of research, nor seeing the linkage between market research and business success and failure.
The second barrier comes from the low awareness of what research is and how it could be used. Technical research terms such as qualitative, quantitative, usage and attitudes (U&A), concept test, price sensitivity and retail audit could be hard for SMEs (with no research background, no marketing background and even no formal business training background) to understand.
If market research products could be seen to help generate sales reports, consumer feedbacks reports, promotion preference reports, product rating reports and so on, then SMEs could link these to the immediate benefits of using research.
The third most serious barrier is SMEs’ management vision. Usually, if the owners do not trust market research agencies (as a result of either perception or past trial experience), then this would largely result in limited resources (people to absorb and use research) and limited or no budget for research.
On the other hand, agencies need to better demonstrate their ability to understand SMEs’ business, background, structure, people, and financial resources. Research products and models that are used for multinational corporations might not be appropriate in the SME sector.
To be more relevant, there needs to be a shift from research language to business language. Not only does the research product name need to change, but also the research tools need to be relevant to SME’s day-to-day business. These are the outcomes SMEs want to see:
• Sales reports
• Distribution updates
• Sales intelligence
• Consumption trends
• Product benchmarking
• Price intelligence
• Promotion plan
• Investment maximisation
• Growth maximisation
• New market / product development (associated with new risks, far away from experience and core expertise).
Among SMEs interviewed in the survey, the most important driver of market research usage was the expectation that research should clearly identify SME’s strategic direction and also how to reach the end goal – the destination. They expect to see the researcher’s ability to act as a business and marketing consultant. Not only do they expect to hear ‘what to do’, they also want to hear ‘how others did’. For them, research is a fact based business solution, thus research must show how it could actually solve the business problem. They expect researchers to show experience and real market validation from servicing other big multinational clients and explain how the big fishes did it.
Researchers need to conduct comprehensive pre-research discussions and effectively act as an internal research department.
Key decision makers for marketing strategy and market research remain the SME’s owner, the managing director and the marketing director (normally head hunted and hired from multinational companies).
Over the past five years in Vietnam, many SME owners have attended practical training courses in marketing and market research. They, in turn, send their marketing staff to these courses. As a result, they are getting to know about marketing and market research concepts and services.
In our recent survey with SMEs, the top source of research awareness and adoption is training. Usually, SMEs talk to the trainers for advice and also seek marketing consultant from this source.
In many other SMEs, the restructuring processes to cope with growth results in the employment of experienced marketing seniors (who used to work for multinational companies) and this also facilitates the adoption of market research. These are often SMEs that sell, process and export raw materials. Now they are focusing more on domestic market, which requires serious brand building. They are seeing opportunities in the domestic growth but also seeing strong competition from multinationals. They feel the risk is high, they are now pulled out of their comfort zone and realise that relying on their own experience isn’t enough.
SMEs (in particular those operating in the FMCG sector) represent an area of potentially strong growth for those operating in the Vietnamese market research industry. This segment is not easy to penetrate, with many barriers for research agencies to overcome. However, once SMEs trust and adopt research, a research agency could win a full annual research package and an exclusive deal.
Tran Ngoc Dung (executive director, FTA Marketing Research) and Tuong Tuan Thong (FTA Marketing Research) will presented their paper titled ‘Market research for local SMEs in less developed countries’ at this years ESOMAR APAC 2011.
Originally published in the March 2011 edition of Research News and reproduced with the permission of the authors and the Australian Market and Social Research Society