Market Research – What’s behind Door Number #1

by Scott Goddin (director of the Portland US Export Assistance Center) and Rebecca Bostwick-Terry (intern)

As software companies consider international markets seriously, market research tools can help them prioritize marketing efforts and strategies based on the country or regional opportunity. International sales strategies may grow organically from increased orders from one destination, to enhanced sales related to strategic partnerships. Proactively responding to or crafting an international sales strategy can provide companies with a prediction of market opportunity, potential customer base, sales channels and the competitive environment. These insights can better inform a decision to make the necessary investment in developing the market based on factors such as growth of the market, market trends and outlooks, market conditions and practices, and competitive firms and products. This analysis is the second in a series of articles on selling software internationally – an ongoing series being produced by the International Marketing SIG.

Varying levels of market intelligence
Market intelligence can be gleaned from both formal and informal sources, ranging from costly but authoritative market analyses to pursuing discussions with firms who are established in the target market and offer complementary products and services. Starting with readily available public statistics, firms can review demographic information to profile target market characteristics of age, sex, income level, computer and cell phone use – among others – as potential consumers of their product. Firms selling enterprise or embedded applications can review institutional or industrial census data to estimate target population demographics. Financial, trade association and industrial directories can identify foreign-invested or domestic players in the market that represent viable customers worthy of a market development effort.

The Internet has made much of the above information readily available and accessible. Government websites often have links to demographic information and international organizations often present value-added statistics. National trade associations often have member lists and trade and finance ministry websites interested in business development, and investment attraction often have information on multinationals established in the country and their activities. While trade statistics are problematic for software, firms marketing software applications linked integrally with certain types or categories of hardware can use these stats to gain important market insights.

Research not just for marketing
While marketing staff should examine these sources of information, shipping and financial staff can review online research to gain a better understanding of tax, transportation and tariff issues that may impact business operation in the country. In many countries, the local American Chamber of Commerce website can be a “who’s who” of foreign firms operating in the country, as well as a valuable resource for insights on the business environment on issues ranging from permit approvals to corruption. Resources such as the Office of the US Trade Representative, Business Software Alliance and Transparency International offer annual reports on trade barriers, conditions impacting the ability of US firms to do business in the market and the availability and integrity of intellectual property rights protection in the market. These factors can affect decisions ranging from the type of presence established in the market to choice of partners to the option of serving the market through a regional hub or virtual presence.

Sources of research intelligence
Readily available market intelligence comes in all shapes and sizes with attendant costs. Market analyses are available from flagship high-technology research groups such as Gartner and DRI with customized research available from these groups, as well as the technology practices of the larger accounting firms – among others. Trade journals and industry associations are additional sources of useful information. The International Trade Administration of the US Department of Commerce has a significant database of free or low-cost market research and trade leads available to the US business community at www.export.gov. Current research reports and updates are also available at the Department’s E-market Express, which sources reports from US Commercial Service offices throughout the world. This Commercial Service network also works with market research companies overseas to offer customized market research products for US clients based on their needs. Finally, marketing consultants may often be the best approach for more specialized products and applications.

Proactive market research can involve attending target market (or regional) trade shows to evaluate the competition or even to evaluate a potential customer base. Competitor and customer websites will reveal the type of presence in the market, their local distributors and – sometimes – major customers or at least sectors served. Firms should seek out companies in their local business community who may have (and be willing to share their) experience in target markets and that could offer insights into a market entry/ development strategy. The members of the SAO International SIG are available for just such information sharing, along with referrals to additional resources. Informal discussions within these types of groups can introduce new ideas and approaches.

A strong market research effort can help to make an intelligent decision between what’s behind door number 1, 2 or 3. China is a growing and exciting market, but Germany may be solid, safe and profitable. A successful market effort in Mexico does not necessarily portend success in Chile or Argentina. Development of an effective international sales strategy will depend in part on doing your homework.

About the authors
This article was co-authored by Scott Goddin and Rebecca Bostwick-Terry (an intern at the Portland USEAC and a senior at Linfield College).

Scott Goddin is director of the Portland US Export Assistance Center (www.buyusa.gov/oregon) and has been working in international trade with the US Department of Commerce for more than 20 years. He works with Oregon and Southwest Washington high-technology companies to develop international markets, specifically helping them to design market-entry strategies; find and evaluate distributors, VARs or agents; evaluate product or service delivery methods; and “internationalize” their companies.

Goddin has served as a US trade negotiator working on Asian market access and standards issues for US high-tech and communications companies and intellectual property rights issues in Korea, Taiwan and China. Goddin also has served in temporary assignments as a commercial attaché at American Embassies in Seoul, Taipei and Nairobi and has managed the office in Portland supporting local Oregon firms since 1997. You can learn more about export assistance at www.export.gov or contact Goddin directly at scott.goddin@mail.doc.gov.