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Market Analysis
The Macro and Micro Approach
In working with industrial clients 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 normally spend a week or two in South African office to investigate
the market and to assist in drawing up a marketing strategy for a particular
product group. Their approach to market analysis is quite different from ours.
The differences are interesting.
Visiting market analysts have very little time to carry out research programmes
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 produced, 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.
Another problem is that South African statistics are often suspect. They
have the reputation among those that have tried to use them of being outdated,
inaccurate and broken down into specific sectors or areas of 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
incorrect.
Parent company 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 compares to the more enlightened assessment of
the 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
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 but 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 people are used instead of published sources of 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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