Market Analysis – the Macro and Micro Approach

In working with industrial clients on their market research we quite frequently meet overseas parent company market analysts that visit South Africa to carry out investigations on behalf of their local offices.

These analysts often spend a week or two in their South African office to investigate the market and to assist in drawing up a marketing strategy.  Their approach to market analysis is quite different from ours.  The differences are interesting.

Visiting market analysts have very little time to carry out market research programs involving interviews with customers, potential customers and other specifying bodies; consequently, they have developed what we call a macro approach to analysing markets.  The approach relies heavily on the use of secondary(published) sources of information that are available and the application of these by means of some magic figure to arrive at market sizes for some very specific product groups such as, for example, DC motors, process control instrumentation, photo copiers, switchgear, and so on.

Secondary sources of information are published statistics such as the country’s GDP, population, electricity consumption, number of industrial companies, number of motor vehicles on the road, etc. By using certain conversion factors which the analysts have developed for other countries and which they obviously believe to be reasonably correct they compute market size figures; however, the true correlation between many of these indicators and the products is very often spurious and possibly only vaguely connected.  Although the correlation may be strong in some countries it does not work in others.

Market Research South Africa

Another problem is that South African statistics are often suspect.  They are outdated, inaccurate and broken down into specific sectors or areas of little or no interest to the user.  Two main reasons are given for this.  Insufficient staff in Government to produce the detailed statistics and secondly that the market players themselves do not provide accurate enough figures and are late in submitting returns.

So the foreign market analyst is faced with a double problem.  Firstly, that the statistical indicators he has used overseas are not available in South Africa and secondly that the correlations he may have used successfully in other countries will not necessarily work in South Africa.  If he is lucky the market size figures will be reasonably correct but they could be horribly wrong. 

Parent companies and overseas principals often do not realise how small the South African market demand really is compared to its population. There are frequently differences of millions of rand in foreign suppliers’ estimates of the South African market compared with the more enlightened assessment of their local office as well as our own.

Well, how then do we go about making our estimates?

We use the micro approach because we have the local market research staff and the time to carry out a detailed study.  We also have several other things going for us, the major of which is our ability to call on competitors of our client to discuss the market with them.  We have only rarely been refused interviews because of the fear that we will reveal confidential information.

We avoid using macro indicators because we consider them too crude.  Instead, we carry out a considerable amount of field work by interviewing end users, specifiers and competitors on their specific markets.  In market research parlance this is called primary research whereby first-hand people information is used instead of second-hand published information.

Where better to obtain information that is up to date, accurate and pertinent to the product than to talk directly to the users and suppliers of the product?

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