Cultural Intelligence- Testing the Global Market

What is the real importance of Cultural Intelligence, and how much do market dynamics differ from country to county, more so when they are located in different continents? These considerations raised two most important questions- How would I define culture and What would my CQ, cultural intelligence quotient really be. I took a Cultural Intelligence test and came up with a score of 4.15, which did suggest that I needed to improve on some counts.

Culture is a set of habits, beliefs that have been ingrained into a society over several years, and which in marketing sense drive their purchasing decisions. CQ was the term used in the article, to describe the sum total of techniques, used to bridge this gap. CQ consists of three major components:

• The cognitive, what one perceive, and can be achieved by developing learning strategies and notice clues to a culture’s shared understanding.
• Physical: Being able to mirror custom in a market gives you which in turn makes the market trust you.
• Emotional : Or the factors that keep you motivated to adapt.

My own score for these three attributes makes an analyst. To cultivate a high CQ, I need to first examine my own strengths and weaknesses, then focus on training that would help me mask the differences and recognize personal resources that would help me to do so, and coordinate my plans with those from the target market. I also need to reevaluate my approach, and make it effective using a 360 feedback system.

The central challenge to any global strategy can be done by a clear understanding of the AAA triangle and adapting a clear strategy based on the structure of my organization.

For a country centered organization one needs to implement aggregation which seeks to boost revenues and market share by maximizing a firm’s local relevance. If an organizations aims to achieve cross-border groupings- global business units or product divisions, it needs to adapt Aggregation, that attempts to deliver economies of scale by creating regional or sometimes global operatives, by standardizing the product or service offerings and grouping together the development and production processes. Arbitrage is often a strategy pursued by a vertically integrated organization that pays explicit attention to balancing to the balancing of supply and demand within and across organizational boundaries. Arbitrage helps you exploit differences between national and regional markets, often by locating separate parts of the supply chain in different parts. While Adaptation calls for advertising intensity, aggregation calls for R&D intensity, and arbitrage calls for labor intensity. It is advisable to follow on an AA strategy instead of AAA strategy because of costs and investments involved, both functional and structural. One can also think of externalizing integration through Joint Ventures and Outsourcing operations.

Lets look at another business case for SADAFCO which shows that irrespective of how big your organization is and how good your product is, never underestimate the power of a localized producer, and their understanding of consumer habits and supply chain management. In cases of new markets or new product introduction, it would be a safe bet to go for a test marketing approach, to obtain a measure of sales and market potential, and effectiveness of one’s own strategies. The question of whether to conduct test marketing is basically decided by three objectives, the cost involved, the time to market objective and the competitive response, as you would be revealing your product to the market. The test should generally be conducted in a market and at a scale, that would be reflective of the actual market conditions in the terms of demographics, geography, social traits and competitive characteristics. We also need to monitor the control markets, where the test isn’t being conducted, to test the effectiveness of our marketing strategy. We have three choices while selecting a test market-

• Pseudo Market tests- The virtual simulation of the actual sales process, using methods like speculative sales, pre- market testing or a panel of customers and users.
• Controlled market tests- real live sale of product under controlled conditions by collaborating with participating retail establishments, using sales methods like, informal selling, direct marketing and mini-markets.
• Full Scale market- The implementation of the marketing program for a pre- determined period, reflective of the actual sales cycles.

The cycle to be chosen should be on average time for of three purchases — One trial, and two repeats. The costs involved in the test would include the COGS of the products produced, full or partial listing fees, in-store sampling, coupons, guarantee of distributor or retailer margin, transportation and shipping, creation of promotional material and media buy-in.

Once you’ve selected the test market and the test period, one need to develop a market plan, attain internal approval for it, prepare the product for consumption, conduct pre- test measurement, conduct the test, conduct post- test measurements and then analyze the findings to fine tune the strategy. The test is then evaluated using various measurements like total volumes and volume increase, average retail margins, trail rates, repeat rates, etc. This process helped Colgate gain important insight into the market, and develop localized advertising and promotional solutions to its product launch in Asia after it’s success in North America.

Another point of consideration is the importance of customer insights and how it can be used to develop effective marketing strategies. The first step into developing useful customer insights, is to develop an insights network that integrates data on attitudes, behavior, transactions and relationships with expert third parties and with key suppliers or customers. Good marketing decisions can be based on by developing synergies at intersections of different data sets available. To define a good insight network, we need to first define what sources of data the company needs. This includes foundational data like market and channel sales or category data, that help a company decipher who it’s current or potentail customers are, what do they want, where, where and why do they buy and how much are they worth. Then we need to add qualitative observations to this data. The network can be developed by collaborating with channel partners like manufacturers, upstream suppliers, and downstream retailers. Retailers can provide you with transactional data, while channel branded manufacturers have rich information by segment or region, about consumer relationships with their brands and categories. The other way of developing a network is through vendor partners, who specialize in developing such data.

Once you have obtained the data, you need to develop an insight driven decision process. So you start integrating your analysis within the marketing planning process with the help of well-connected analysts and managers. Insights can be used during the product development process, to identify new-product opportunities and make goof financing decisions. In the process of Account Planning, insights can help you develop account-specific, regional and store-level product ranges, mixes and pricing targets. Insights can only be helpful when there is cross-functional integration within the organization by outlining roles and responsibilities of different management teams involved. For Example in the case of launch or Tata Ace, customer insights and trend alertness helped them design a product which not only appealed to the customer, but also helped them become the only vehicle which could travel on all Indian Roads.

This brings us to the process of forecasting total market demand. . The first step is to clearly define your market. At the beginning let your market definition be as broad as possible, to include all potential end users, so as to identify the right demand drivers. There are two main concerns while defining a market- Understanding of product substitution and competitiveness. By conducting interviews with industrial customers, you can learn about product usage pattern, and other products available. Careful quantification of the economic value of the alternative products to different customers can yield deep insights into potential switching behavior, and thus have an idea of competitive behavior. Then we should divide the demand into components using the tree diagram, as shown in class during the Gillette Case. Imagine all the alternative segments, hypothesize their key demand drivers and decide how much detail is required to capture the true situation. Forecasting of demand drivers can be done through statics using regression processes, and then by observing the actual usage process of the product, to determine what is lacking. As in the case of Gillete razors for women, which proved to be successful launch. Once you have your demand drivers in place, we need to conduct sensitivity analysis, to identify potential risks and discontinuities. We should begin this analysis by thinking through and quantifying the areas of greatest strategic risks. After all this is done, one should develop a plan to determine an appropriate effort, one which would bring you closest to your objectives.

For example once demand drivers are determined for a product in India, one could follow specific steps to tailor the business model to India. (Source: Winning the Indian Consumer) . One is to offer value at the right price, as the consumer is extremely price conscious. Educating the customer also helps to build awareness and communicate the real value proposition the product has to offer. Then design a price, required to create demand, determine your desired profit margin, and then design a business model in which costs equals price less profit. This can surely be seen to be very effective strategy as can be seen in the case of Tata Ace. The next big challenge is determining the distribution system and obtaining distribution rights. With All these one can ensure the successful launch of one products in this market.

All in all to counter the threats posed by a global strategy one needs to gain useful customer insights, markets insights through it’s test market approach, and then a detailed understanding on demand drivers and consumer behavior, can help you design an effective marketing strategy.

Originally published at https://www.linkedin.com.