Marketing Research: Market Prioritization

Choosing a market for marketing research can be more difficult than conducting it.

Practice working with companies shows that often the "stumbling block" on the path to conducting marketing research is the problem of choosing the actual object of research – that is, the market. For many products, there are a large number of geographic sales options, different channels can be used, and the focus can be on satisfying different needs (especially if the product can be adapted for the target segment). Choosing the direction for business development is the most intellectually complex and responsible decision from a management perspective.

Marketing tools for market prioritization

To conduct prioritization systematically, there are special strategic marketing tools. They are not as widespread in marketing practice in Russia as, for example, the 4P model, but they are quite effective when used correctly. First of all, we can recall market portfolio analysis methods, such as the Boston Consulting Group matrix (the simplest classic option to start familiarizing yourself with this group of methods) and similar derivative methodologies that allow setting priorities for markets, for example, the Ansoff matrix. Publications on strategic marketing contain a large number of various portfolio methods that can be easily adapted to the tasks of an enterprise.

I would like to dwell in a bit more detail on a very useful but rarely used tool in Russian marketing and strategic management – the Abell model. Perhaps this model is better than any other for justifying the strategic choice of markets for further expansion, i.e., prioritization.

The Abell model is a three-dimensional visualization of intersections along three axes:

1. Axis of consumer types (answering the question – who?) – groupings of consumers who can use the product.
2. Axis of needs (answering the question – what?) – groupings of key needs that the use of the product in the market aims to satisfy.
3. Axis of technologies (answering the question – how?) – types of technological solutions underlying the satisfaction of key needs.

It is important to note that within the Abell model, the company analyzes not its own assortment, consumers, and technological solutions, but looks at the market from the perspective of its overall development, both current opportunities of all players and intersections along the three axes not yet captured by anyone at the current stage, i.e., new promising niches.

At the same time, for convenience, we recommend separating (highlighting intersections – "cubes" in the three-dimensional image with different colors):

1. Segments already occupied by the company.
2. Segments where competitors operate, but the company does not.
3. Segments where no one operates yet, but entry is possible in the near future.
4. Segments that are absent in principle (in the foreseeable future) as intersections of consumer types (usually these are made transparent – as if "invisible," i.e., non-existent).

In the rare marketing works that contain examples of the Abell model implementation, one can see its visualization as three projections onto the plane of a three-dimensional graph, reflecting all possible two-dimensional combinations. This is convenient, but it is still better to create a three-dimensional graph in simple software implementations – this form of presentation is much more visual and convenient for presentations.

The Abell model is good because it clearly shows which intersections of the three parameters (volumes of three-dimensional space) deserve attention and can become objects of marketing research. First of all, those where competitors operate (you can use competitive analysis), as well as those where no current players are present yet, but where it is possible to enter in principle to become a pioneer.

Note that despite the apparent simplicity of this tool, its competent use in practice is rare. There are problems with the correct and complete formation of "labels" on the axes, and with the assessment of intersection types in space. Essentially, the expert or group of experts working with the Abell model must know the product market very well, but also be capable of creativity and imagination, applying analogies from other markets to form the third type of segments (not yet captured by the market, but with potential for entry).

A separate issue is the inconvenience of using this model to assess the prospects of geographical expansion. The prioritization of export markets will be discussed below.

Prioritization of export markets: the problem of choice

Sooner or later, any company whose products have export potential faces the problem of choosing a foreign market for the further development of its commercial activities.

And then the question arises – where to go, which territory to focus on. There are quite a few countries in the world, and therefore, with limited time, human and financial resources, it is impossible to engage with all of them at once, or even with many of them. Moreover, it is impossible to conduct high-quality marketing research for individual countries.

Prioritization of export markets is also a kind of algorithm, developed by us based on experience working with companies that need to develop sales abroad and conduct marketing research.

It is necessary to start by clearly defining the geographical area of possible physical movement of the goods (linked to roads, airlines, sea routes, etc.), which forms the potential positive economics of the project, taking into account both the location of the company (which is why working from logistics centers, especially on the coast, is so convenient) and the generic limitations of the product (shelf life, marginality per unit of weight/volume, etc.).

Some goods can be distributed over a distance of up to 1,000 km, others – up to 5,000 km. Similarly, it is necessary to assess in days of delivery (if the product is perishable or requires quick provision to the end consumer). At the same time, for many goods, not to mention services, the geographical area of distribution is the whole world or a large part of it.

Furthermore, it should not be overlooked that the problem of "geographical" limitations can be mitigated by an active presence in the export market – by opening a warehouse or production facility there.

After forming an understanding of where the product can in principle be sold with a positive margin, the company must assess itself against basic criteria to understand the level of internal competencies – production, commercial, financial, logistical, etc. – that will allow it to implement the project in the country markets selected above. This is complex work, but it is extremely important if the result is of real interest.

At this stage, it is impossible to delve deeply into the specifics (prioritization does not replace marketing research), but basic hypotheses and considerations must be checked, at least from the perspective of overcoming language and communication barriers, the availability of permitting documentation for releasing the goods into free circulation, project financing opportunities, etc.

The remaining country markets should be ranked by importance for the company. Conditionally, which to enter first, second, and so on. How to do this?

We recommend developing a methodology (unique for each product) that will include a list of relatively easily (quickly and without great cost) collected values of quantitatively defined indicators that characterize country markets in two aspects:

1. Market potential (roughly speaking, the possible commercial and/or financial result).
2. Market barriers (the fundamental possibility, time, and cost of entering the market as a player).

For different companies, the influence of these aspects on priority selection is not equivalent. Large businesses are more focused on market potential, as they have the resources to overcome barriers and are ready to work "for the long term," and are therefore interested in large-scale returns. Small businesses are more sensitive to barriers, as they do not have large resources for major investments in an export project, and therefore payback must be short-term. On the other hand, market potential is less important for them, as they do not claim a large market share. Even small batches on a market scale can be significant in the total sales volume of such a company.

Usually, it is sufficient to select 8-10 indicators for the assessment to be comprehensive and relatively representative. As noted above, it is desirable to avoid qualitative assessments. It is better for a model parameter to be indirect but quantitatively defined.

The actual ranking of countries can be done in various ways. The simplest is ranking by individual indicators followed by the formation of a consolidated rating taking into account the weight of each indicator (the sum of weights should be 100%). More correct, although slightly more complex, is to normalize all parameters so that the assessment of the contribution of each of them is more correct.

The main competencies for conducting such work are broad horizons, knowledge of information sources for many industries, product and, actually, country markets, and methodology of desk marketing research. Proficiency in statistical terminology in several basic languages (at least English) is desirable. The most important thing, perhaps, is the ability to generate multiple hypotheses and subject them to quantitative verification using open (conditionally open) sources.

The selected priority countries (one, TOP-3 or TOP-5) are subsequently considered as objects for detailed marketing research.

How to organize systematic work on market prioritization

The selection of priority markets can be attributed to the functions of the company's strategic marketing, which is implemented on an ongoing basis. More precisely – with a certain periodicity.

One way or another, market prioritization is closest to marketing research, but differs from them in that a much larger volume of information is processed with a lower degree of detail.

For market prioritization, the results of which will be used in developing and refining the company's strategy, to be effective and systematic, it is necessary to pay attention to the following key points.

1. Constant work on collecting, accumulating, and systematizing information.

As noted above, prioritization is based on a large amount of data, both from the markets of the enterprise's specialization and others, including those not directly related technologically and by industry chains. Collecting them in a short time is usually problematic, so gradual accumulation, processing of information, formation and testing of hypotheses based on it will have a favorable impact on the quality of work.

2. Ensuring competencies in the team.

Market prioritization requires both possession of certain techniques and the ability to think outside the box, discover new opportunities, and take a broad view of processes occurring outside the company. Objectively, most marketers are not capable of being the "center" that organizes the process of forming priorities. Quite often, the management of market prioritization must be taken over by a top manager or the owner (especially in small businesses).

3. Attracting outsourcing to solve specific tasks.

First of all, marketing outsourcing may be required in terms of setting up the market prioritization process and providing methodological support. This type of service is of interest to medium and large companies, whose employees then "take over" the work, having built up the missing competencies.

Certain types of market prioritization can also be outsourced, for example, in terms of export sales. Since country specificity is quite pronounced, for selecting entry points in certain "complex" regions of the world – Africa, Latin America, etc. – it may be justified to involve a marketing agency with experience in specific export markets.

Well-structured work on market prioritization is important for any company that has a diversified product portfolio and plans to develop new segments and types of markets. The larger the scale of activity, the higher the level of costs for marketing activities, market research, and competitive analysis. Market prioritization is designed to increase the conversion of these costs.