Advertising agencies, facilities for marketing research, repair services, specialized consumer financing agencies and storage and warehousing facilities are facilitating agencies created to serve the particular needs of expanded markets and economies. These institutions do not come about automatically and the necessary marketing structure does not simply appear. Part of the marketer’s task when studying an economy is to determine structure does not simply appear. Part of the marketer’s task when studying an economy is to determine what in the foreign environment will be useful and how much adjustment will be necessary to carry out stated objectives. In some developing countries it may be up the marketer to institute the foundations of a modern market system.
The limitations of Exhibit in evaluating the market system of a particular country are that the system is in a constant state of flux. To expect a neat, precise progression through each successive growth stage as in the geological sciences, is to oversimplify the dynamic nature of marketing development. A significant factor in the acceleration of market development is that countries have been propelled by the influence of borrowed technology.
Marketing structures of many developing countries are simultaneously at many stages. It is not unusual to find traditional marketing retail outlets functioning side with advanced modern markets. This is especially true in food retailing where a large segment of the population buys food from small produce stalls while the same economy supports modern supermarkets equal to any found in the United States. On the same street as the Wal-Mart store described in the Global Perspective are mom and pop food stands.
Demand in a developing Country:
Estimating market potential in less developed countries involves myriad challenges. Most of the difficulties arise form the coexistence of three distinct kinds markets in each country: (1) the traditional rural/agricultural sector, (2) the modern urban / high income sector (3) the often very large transitional sector usually represented by low income urban slums. The modern sector is centered in the capital city and has jets airports, international hotels, new factories, and an expanding westernized middle class. The traditional rural sector tends to work in the country side as it has for decades or centuries. Directly juxtaposed to the modern sector, the transitional sector contains those moving from the country to the large cities. Production and consumption patterns vary across the three sectors. India is a good example. The 11th largest industrial economy in the world India has a population of approximately 1 billion of which 200 million to 250 million are considered middle class. The modern sector demands products and services similar to those available if any industrialized country; the remaining 750 million in the transitional and rural sectors, however, demand items more indigenous and basic to substances. As one authority on India’s markets observed a rural Indian can live a sound life without many products. Toothpaste, sugar, coffee, washing soap, bathing soap, kerosene are all bare necessities of life to those who live in semi urban and urban areas.
One of the greatest challenges of the 21st century is to manage and market to the transitional sector in developing countries. The large city slums perhaps present the greatest problems for smooth economic development.
Developing countries thus have at least three different market segments. Each can prove profitable, but each requires its own marketing program and products and services appropriate for it market characteristics. Many companies market successfully to both the traditional an the modern market segments but often have problems in the transitional segments, where for example advertising targeting high income consumers reaches low income consumers.
Tomorrow’s markets will include expansion in industrialized countries and the development of the transitional and traditional sectors of less developed nations, as well as continued expansion of the modern sectors of such countries. The traditional sector offers the greatest long range potential but profits come only with a willingness to invest time and effort for longer periods. Market investment today is necessary to produce profits tomorrow.
New marketer also means that the marketer has to educate the consumer. Procter & Gamble, Colgate, and Unilever are all aggressively pursuing dental health education programs — from school visits to scholarships at dental universities to sponsorship of oral care research. While creating new markets for their products they are also helping to spread more healthful practices. In China, for instance, only about 20 percent of the population in rural areas brushes daily – most view brushing as purely cosmetic rather than medicinal. P&G’s efforts may change that attitude as school children with Crest’s giant inflatable Tooth Mascot which appears when the mobile dental van makes a stop in the country side. Crest’s program reaches 1 million children in China each year.
The companies that will benefit in the future from emerging markets in Eastern Europe, China, Latin America, and elsewhere are the ones that invest when it is difficult and initially unprofitable. In some of the less developed countries the marketer will institute the very a foothold in an economy that will somebody be highly profitable. The price paid for entering in the early stages of development may be a lower initial return on investment but the prices paid for waiting until the market becomes profitable may be blocked market with no opportunity or entry.