Uncovering New Opportunities

Marcelo Ballve

Greater connectivity and the increasing spend of lower-income consumers are attracting attention in Latin America from marketers and research companies looking for growth.

Latin America proved surprisingly resilient during the 2009 economic crisis and last year, the region’s main economies recovered well: Brazil grew 7.5% in 2010, according to the IMF. Having consolidated and internationalised in the last five years, the regional market research industry is now well positioned for the opportunities ahead.

Research executives and ESOMAR members in the region say they are looking closely at lower-income populations, fast-growing countries, and in particular online research since technology take-up has proceeded so quickly.

One IBOPE Mídia study published by the research association ABEP in Brazil found that online coupon sites in the country had reached a monthly audience of 13.2 million in December, and e-commerce sites 30 million.

“The whole online area is seeing very important growth in our countries,” says Manolo Barberena, founder of Pearson in Mexico, part of the Kitelab research group. “For example, in Mexico we already have roughly 75 million cell phones, and more and more of those are traded in for smart phones – one reason why internet penetration is growing quickly.”

Because Mexico currently has surprisingly low internet penetration – (27% of the population of 110 million according to the Mexican Internet Association – the country trails even its Latin American peers in this statistic) there is real short-term catch-up potential.

In Argentina, with about a third of Mexico’s population, internet penetration is at 64%; in Colombia it is 49%; and in Brazil it’s 38%.

Online research
“Online research will grow as internet penetration increases and the technology reaches new social strata,” says Alicia Martín del Campo, CEO and founder of Qualimerc and ESOMAR’s Mexico representative. “There’s also more interest in measuring the impact of social media. Latin America lagged in adopting social media, but growth has been extremely rapid, attributable to our great appetite for maintaining and strengthening interpersonal ties.”

The technology industry’s new giants are taking notice of Latin America’s internet potential. In 2010 and 2011 alone, Groupon, Facebook and Google all announced investments in growing Latin American operations.

The digital audience measurement company comScore announced in March that Latin America’s internet population increased 15% in 2010. 113 million people aged 15 and older accessed the web either from home or at work. In Mexico, the growth rate was even higher at 21%. Colombia, Brazil, and Venezuela also saw growth above 20% for the year.

“Advertisers and publishers are just beginning to realize the tremendous potential that exists for this channel throughout Latin America,” says Alejandro Fosk, comScore senior vice president for the region.

Disconnects
However, there remain millions of Latin Americans in the region’s middle and lower-middle classes who don’t access the internet. In some countries, research providers are hampered by a lack of phone penetration, let alone internet penetration.

In Bolivia, the International Telecommunication Union estimated in 2008 that only 11% of the population accessed the web. Not surprisingly, in Bolivia and among lower income consumers, face-to-face interviews in homes still dominate the research landscape. Online research in these markets limits itself to high-income or professional niches, and even so remains rare.

“It would have to be a very specific segment,” says Ipsos APOYO Opinión y Mercado country manager in Bolivia Violaine Felten. But online is making inroads. In Central America – where countries vary widely in penetration rates (from 10% for Nicaragua to 44% for Costa Rica) – online data collection is becoming more common as internet cafes and mobile technologies help bridge connectivity gaps, says Jorge Martín Frech, managing director at Caribbean and Central American specialist Mercaplan. He adds that CAWI is becoming more common.

Some researchers believe the real reason for comparatively low levels of online research in the region may not be internet penetration rates but resistance amongst old-line research buyers and providers. “As young talent ascends to decision-making positions in research departments at client companies and at research providers, it will mark a before and after in investments in online research,” says Pablo Sánchez Kohn of Netquest Mexicana.

”In three years or less online should take off in Latin America and approach a level closer to the global average. Netnographic techniques are already yielding insights for online researchers in Latin America, and researchers may use made-in-Latin America support tools such as the semantic video, text and image analysis software offered by Argentine start-up Keepcon,” Sánchez Kohn comments.

One research multinational which made a large bet on online Latin American research in recent years was Ipsos, which acquired Livra and its panel of one million Spanish and Portuguese-speaking panelists in 2008.

Search for growth
Brazil and Mexico still account for over two-thirds of market research turnover in Latin America. But international research buyers are looking beyond Latin America’s largest economies for opportunities so research studies in more far-flung markets are in demand too.

Colombia’s growing and increasingly professionalised research industry boasts a new association named Ágora, created in February of this year with 16 founding members. In addition, Peru is an economy that has attracted a great deal of attention recently for its investment grade designation, high growth (9.8% in 2010) and burgeoning middle class.

“Our markets have become attractive, and that has created a demand for information,” says Rolando Arellano, president of Arellano Marketing and ESOMAR representative in Peru. “The multinationals which are entering many of our countries for the first time have important information needs to understand the market, shape their products and attain their goals more efficiently.”

With global companies entering countries like Peru, adds Arellano, local companies have begun to feel the pressure of outside competition, and also have upped research consumption.

In Bolivia, another Andean economy that has grown steadily in recent years – an average 4.4% GDP growth between 2005 and 2010 – local clients are driving research turnover growth, says Felten of Ipsos.

“Between 2006 and 2010 our business from local clients more than doubled,” she says. “And local clients are becoming more daring in terms of the type of studies they commission.”

But Latin America has always been an area of cultural and economic diversity, and not all economies are in boom mode. Felten’s predecessor at Ipsos Bolivia, Luis Garay Langberg, who was country manager there for 13 years, now heads Ipsos operations in Puerto Rico.

In that Spanish-speaking Caribbean Island of four million inhabitants, unemployment is still high and the economy is still in recession as a result of its close ties to the sluggish U.S. However, Garay believes that across the LatAm region MR will continue to benefit from “market growth superior to the GDP growth of each individual country.”

New clients, new consumers
For many researchers in the region, the most exciting prospect is the emergence of lower-income consumers. These are working-class households emerging as powerful drivers of corporate growth as they climb income brackets and begin to access branded products, financial services and communications technology.

“The traditional middle classes are being supplanted by the new popular classes in terms of potential for generating business opportunities,” says Ilan Lechter, general manager of Colombia-based Lechter Americas. Because this emergent middle class accounts for as much as 75% of the population in some countries, these still poorly understood consumers will drive market research opportunities going forward, adds Lechter, whose company is also part of the Kitelab group.

Arellano, of Arellano Marketing in Peru, agrees that researchers and their clients still have a long way to go in understanding the emergent middle class in Latin America.

Until recently, many of these consumers lived in a world apart from the formal economy and did their buying and selling in street markets and other informal settings.

“Now, studies are beginning to be commissioned to understand them better, to identify their needs, and discover attendant opportunities,” says Arellano.

Among the industries that Latin American researchers identified as being likely sources of growth in the coming years are financial services, pharma and telecommunications. Presidential elections in Argentina and Peru this year, and in Mexico and Venezuela in 2012, are creating opportunities for public opinion research.

In sum, it may be that the consolidation, internationalisation and blistering growth of Latin America’s research industry may enter a mature phase in coming years. Perhaps double-digit growth will not be the norm for every country’s research companies. But for those practitioners on the lookout for opportunity, the deals will be there.

“The global research industry bet big on Latin America five years ago,” says Lechter, “and they have been proven right.”

Marcelo Ballve spoke to Ian Lechter general manager of Lechter Americas, Columbia; Rolando Arellano president of Arellano Marketing and ESOMAR representative Peru and Violaine Felten, country manager at Ipsos APOYO Opinion y Mercado, Bolivia.