Are countries lousy market segments?

Global marketers conduct much of their market research for the same reason other marketers do: to cover their backsides. 

In case anyone ever asks, they can whip out the professionally executed study replete with significant significance tests. It shows incontestably (at p<.05) that the reason they altered the packaging, the scent, and the color of the shampoo for the Nicaraguan market was that consumers there were significantly different from those in neighboring Costa Rica. 

Never mind that the additional costs of making, storing, and selling the unique Nicaraguan shampoo wipe out the gross margin.

The global market research industry spends inordinate amounts of time and money demonstrating that national boundaries are an excellent segmentation variable.

But what if they’re not? 

What if consumers are actually more similar across countries than the research shows?

More similar than the research shows? How can consumers be more similar than the research shows? If they were more similar, the research would show it, wouldn’t it?

Actually – brace yourself – it would not.

If you look for differences, you'll find them. Similarities, on the other hand, are elusive.* Our current research methods are biased toward demonstrating differences rather than similarities. Most market researchers know this, but they don't shout it from the rooftops. 
So here's the secret.

If you wanted to test the hypothesis that consumers in Michigan are different from those in bordering Ontario, you could design a study that would give you the answer. In fact, if you had a large enough sample on both sides of the border, you'd know the answer in advance: it would almost always show you that the two populations are different – that is the way significance tests work. 

The significance test tells you that if you were to run the study again and again, 19 times out of twenty you would find these types of differences. And that is taken as pretty strong evidence of difference. But suppose you wanted to examine if consumers in Michigan and Ontario are the same or similar. What test would you use? 

You’re out of luck. The only tests are ones designed to show differences. 

Okay, but surely the lack of difference on a statistical significance test is evidence of similarity, right? 

Sorry, out of luck again (you can’t demonstrate the absence of difference). It only means that no difference was found in this study. This may have been that one study out of twenty where the difference was not found. And there is no guarantee you would not find differences if you ran the study a few more times. 

One outcome of this asymmetry is that findings of cultural differences abound, while similarities cannot even be tested. In other words, consumers may be far more similar than we think across national and cultural boundaries.

Now think about how much time, effort, and money goes into localizing products, positioning, prices, and so on, based on findings of significant difference in market research studies.

Managers are generally not held accountable for the wasted effort of localization – at least they tried, the reasoning goes. And they had the market research to support it!

most recent           table of contents

*Weijters, Bert and Niraj Dawar Testing for Marketing Universals: A Practical Methodological Proposal and Application to a Pan-European Consumer Survey. Working Paper.
See also: Dawar, Niraj and Philip Parker (1994) Marketing universals: Consumers’ use of brand name, price, physical appearance, and retailer reputation as signals of product quality, Journal of Marketing, 58 (2): 81-95.