Richard Michon, Ted Rogers School of Management, Ryerson University, Toronto

Expanding Direct Marketing in Emerging Markets:
Methodological Approach and Cultural Value Analysis

Richard Michon, Ted Rogers School of Management, Ryerson University, Toronto

Atul Tandon, CEO, Tandon Institute, Bellevue, WA

Summary

Nonprofits engaged in direct marketing in high income OECD countries are now looking for new revenue sources from emerging markets. The popular press is full of horror stories of firms that were lured by emerging market size, growth and new wealth. Their initial research was often limited to economic data and failed to identify success factors associated with product-market specificity. This research examines a methodology to identify direct marketing fundraising opportunities in overlooked or emerging countries. It studies three major dimensions: 1) market capacity to give, 2) direct marketing infrastructures, and 3) propensity to give. The study is based on the experience of a major nonprofit with DM fundraising activities in some 25 countries on five continents.

Capacity to give: Research on philanthropic market size and capacity to give is a necessary but insufficient prerequisite. The initial research followed Cavusgil’s (2004) methodology for developed market potential indicators. Macro-economic data were extracted from the World Bank Development Indicators at the urban household level. Income deciles and quintiles are used to estimate potential annual donation thresholds, and remove unviable markets.

Country Infrastructure: Nonprofits must also be able to reach people and engage in direct marketing activities. Country infrastructure data are available from Michigan State University's Market Potential Indicators for Emerging Markets and from the World Bank. Freedom and human right indices are provided by the Heritage Foundation and Freedom House. Euromoney rates countries on political, social, and financial stability. A multi-criterion model helped eliminate markets that did not meet minimum values.

Propensity to give: A large gap has been observed in OECD countries between official development assistance (ODA) and private philanthropy. The Hudson Institute’s Global Philanthropy Index compares private donations and to ODA. Some countries with strong socio-democratic traditions rank high on ODA and relatively low on private philanthropy (e.g. Sweden, Luxembourg, Norway, Netherlands, and Denmark). Nations with liberal economies perform much better on private philanthropy than on ODA in percentage of their GNI (e.g. the UK, the U.S., Canada, New Zealand, Australia, Ireland, and Switzerland). Anglo Saxon countries are more inclined toward private donations while continental European countries favor public interventions (Salamon et al, 2004).

Brooks (2006) looked at donations and helping behavior in the U.S. and in other countries participating in the International Social Survey Program that now includes some 40-plus nations. He observed that “generous” donors are politically to the right (conservative) and have strong family values. These donors value personal entrepreneurship and are skeptical about governments’ interventions into economic life and income redistribution. Finally, they are regular churchgoers, irrelevant of denominations. Values identified by Brooks are available for most emerging countries in Inglehart’s (2005) World Value Survey. A logistic regression model was used to score countries on their propensity to give.

Findings: Nonprofits already raise substantial income from Australia, Canada, Germany, New Zealand, South Korea, Switzerland, Taiwan, the UK, and the US. These countries were flagged as reference targets. The logistic regression analysis isolated the most significant predictors for charitable donations, correctly classified all target countries, and identified other markets with similar profiles.

Countries were ranked according to their capacity to give (potential market), their propensity for private philanthropy, and plotted on a joint space map. Markets located in the top quadrant scored well on both counts and should receive priority attention. Countries like China, South Korea, and Taiwan are found among the top ones. Some nations have smaller potential markets but display good predispositions for private donations. Lithuania, Croatia, South-Africa, Estonia, and Hungary are well positioned emerging economies.

Discussion: Findings from the World Value Survey obtain theoretical support from Max Weber’s Protestant Ethic and the Spirit of Capitalism. First-tier traditional countries for fundraising are of Protestant tradition. The Protestant ethic gave birth to a renewed form of capitalistic entrepreneurship and economic growth. Many people in those countries reject the idea that governments are responsible for income distribution and universal social safety net. They have a net preference for private charities and a tendency to support religious causes.

Emerging countries opting for capitalistic economies may be sharing some of these values. Weber noted that economic wealth and utility maximization were the consequences of ethical habits. Some Asian countries appear as highly promising countries for charitable fundraising. Fukuyama (1995a) observes that Confucianism advocates the same personal values that are best adapted to modern capitalist success. “It can be said that Confucianism … has been functionally equivalent to Protestantism in Western societies (Lew, Choi & Wang, 2011)”

In closing: Direct marketing expansion in emerging markets must be anchored on shared cross-cultural values. The market mapping methodology helps help managers set development priorities and allocate resources.

For further information contact:

Richard Michon, PhD
Ted Rogers School of Management, Ryerson University
350 Victoria Street
Toronto, Ontario M5B 2K3
Phone 416 979 5000 ext. 7454
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