This section provides a step-by-step approach for conducting market research. It describes various types of research materials and offers options, tips and techniques for collecting quality data. This section will show the importance of research in developing a marketing plan and export strategy.
Market research is usually made up of the following steps:
Export Market Research
Export market research consists of gathering enough information to make sound export decisions. Research should uncover economic, socio-political and cultural factors that either invite or challenge market entry. Effective research helps a firm to properly select, segment, target and position their product in an international market.
Types of Market Research
There are two types of market research: primary and secondary. First, we will discuss secondary research. Secondary market research uses information that has been previously prepared by others. It has often been prepared with a company like yours in mind. This is especially true in export market research for value-added, consumer-oriented food products. Secondary research often provides useful information at a fraction of the price of primary research.
The U.S. is well known to have the best sources of secondary market research in the world, especially for international trade. The U.S. has multiple government entities which are well trained at researching overseas markets and making the information available to the business public.
The main goal of primary research is to answer specific questions that secondary research has not provided. Market research usually begins with secondary sources, in order to save time and expenses, and is followed by primary research. The need for primary marketing research increases as the market screening process progresses.
There is a variety of ways to uncover marketing research for your firm for free or for a nominal expense. Food Export-Midwest and Food Export–Northeast provide primary marketing research opportunities for U.S. companies in various regions of the world. These two State Regional Trade Groups (SRTGs) can provide assistance at all levels of research, from the most fundamental secondary sources all the way to primary sources, such as having your product samples evaluated in the market or providing you with personal introductions to international buyers.
High quality research is at your fingertips, and this section will show you how to access it.
TIP: “Secondary research is conducted primarily, and primary research is conducted secondarily.”
After identifying a few top markets, you will need to narrow down each into market segments and begin working on the countries with the most potential. A more detailed study of these markets is required in order to prepare a viable export plan.
Most new exporters fail due to a lack of preparation and information. Export market research is crucial to overall long-term success. The minimum market research necessary falls into the following categories:
What Top Markets Share
Top markets usually share certain traits, which include:
Where to Begin
You can start by looking for similar types of customers in the destination market that you either sell to or through the United States, and perhaps similar business practices or language. Over 60% of initial exports from U.S. companies are originally sent to Canada or the United Kingdom, because of the many market similarities. Mexico is also a frequent first destination because of the close proximity and the advantages offered through NAFTA. There is a tremendous amount of marketing information available on these countries that allows for entry decisions to be made more quickly and with more confidence.
The most successful small business exporters are those who stay focused and committed over the long term. It is a matter of economies of scale in your efforts, time and money. If you stray from a top market focus initially, your efforts become diluted and your chances for success often fade.
One definition of marketing is not only to attract but to keep customers. If you start out by attracting too many customers, it may put such a strain on your resources that you become overwhelmed and not really satisfy anyone, thus losing valuable business. Applying modern marketing concepts involves customer retention as much as customer attraction.
An example of a simple step-by-step approach:
What is a Harmonized System Code Number?
Market research often begins with an export statistical analysis. This indicates the volume and value of exports from the U.S. to international markets. Before a statistical analysis can be performed, an exporter must identify the correct “Harmonized System” or “HS” code for his/her product(s). The HS is an international commodity coding system that most countries use to classify their products, thus the term “harmonized” is used. The 6- digit HS is known as the “international level” or “subheading.”
All goods which are imported into another country are subject to duties, which basically depend on:
The 10-Digit HS Code
The Harmonized system is also used to track imports and exports with a more specific category that uses a 10-digit extension. Exports from the United States are classified with a 10-digit extension known as “Schedule B.” The 10-digit HS extension for imports into the U.S. is known as “Schedule A.”
For example, if your company imports an ingredient used in food processing, your customs broker will use the Schedule A number to clear it through customs. If you later export the finished good to another country, the Schedule B number will be used. The Schedule B may differ from the original Schedule A number because it has now become a finished product.
TIP: All exporters should know their HS Code numbers and their Schedule B numbers.
This example will be used throughout the section for you to follow. You may want to print it for reference.
Use of the HS Code
The following are some common uses for a six-digit HS Code:
Locating Your Appropriate HS & Schedule B Number(s)
The U.S. Census Bureau administers the HS and Schedule B numbers. They have a very comprehensive website including an easy-to-use search tool. The website also contains valuable information about international trade issues. Click here to visit the Census.gov website.
If you have trouble locating your number, you can call the trade specialist for assistance, located under “Schedule B FAQS" When using the search engine, be sure to run a variety of searches to determine the number.
Practice Exercise: Search for HS and Schedule B Numbers
Enter 190590 on the search engine in the popup window. You will first see all of the HS 6-digit references listed above, followed by the 10-digit extension into Schedule B. The correct Schedule B number for the products we are using as an example is:
1905901080: “Bread, biscuits, similar baked products, whether or not containing chocolate, fruit, nuts or confectionery, frozen.”
Other Schedule B numbers on the search under 190590 include all of the goods listed above. Schedule B numbers consolidate various appropriate products under the HS into more specific categories. That is how the frozen products were separated from the products which are not.
Once you have determined the appropriate number or numbers for your products, you are ready for the next step, which is to obtain statistical data. At this point it is important to clarify what the Schedule B number has to do with export statistics and marketing research.
The Shipper’s Export Declaration
Customs Form CF-7525-V is known as the Shipper’s Export Declaration, or “SED”. It is an export document required by the U.S. government, before any shipment valued over $2500 leaves the country. There are some exceptions. Shipments to Canada do not require the SED, because we obtain our export statistics from them. It is required, despite the value, on any shipment requiring an export license and on those shipments to embargoed countries, such as Iran, Syria, Cuba and North Korea, and those that travel through Canada on their way to the ultimate destination.
It can be submitted by the exporter online through the same Census website where the Schedule B numbers are located. It might be difficult for many exporters to complete entirely though, because some of the key information may be unavailable to them until the shipment leaves, especially if they are using the services of an international freight forwarder.
The forwarder offers SED preparation as a service and files it online through his/her access, rather than through Census. In either case, be sure to obtain a copy of the SED for each export shipment that requires it, as it is a legal record of export. For a look at the SED, including instructions on how to prepare it click here.
A review of the SED indicates many key elements of the export transaction such as loading pier, vessel, and mode of transport, carrier and country of destination. For marketing research purposes, boxes #22, #24 and #26 are most relevant. This is where the Schedule B numbers, the units and the weights are placed as well as the value (the sales price).
This information is captured by Census and then released later in search databases so an exporter researching a market can evaluate what markets are importing most of their products over a given period of time by value and weight. Since most food products are measured by weight, you could divide the weight by the value and get an estimate if your product’s price is competitive within the market, as the value on the SED is the commercial invoice sales price. The weight expressed in the HS is metric. To convert kilos into pounds, multiply kilos by 2.2046.
“BICO” reports are another source of statistics for analysis. BICO stands for Bulk, Intermediate and Consumer products, and are separated into these categories based on the value-added amount into the product exported. The breakdown is as follows:
The reports can be sorted from very broad to specific categories. You can sort anything from commodities, such as grains, to value-added cheese, breakfast cereals and pancake mixes. In the commodity group area you are able to review all of the products listed in each part of the BICO, and then click on the product category to open up the products under the Schedule B numbers. You also can sort by calendar year, country or geographic region.
The Food Export Helpline™: Top Product/Market Evaluation
If you would like help locating your HS codes and Schedule B numbers, more specific export statistics, or customized secondary marketing research for your company, you may want to register for The Food Export Helpline™. Food Export-Midwest and Food Export-Northeast provide this free service which is designed to supply you with one-on- one support in your export efforts.
Support from the Food Export Helpline™
Whether you have only one question or are in need of ongoing assistance, the Food Export Helpline™ service can help. Support includes a wide variety of export-related topics “from connection to collection,” including:
Most of these services will be discussed in more detail in later sections. For now, one of the services provided by The Food Export Helpline™ is a Top Product/Market Evaluation. Based on your company’s HS or Schedule B numbers, a detailed analysis of exports can be prepared along with comments and explanations of current export market trends. This will give you a good idea about which countries are importing products like yours.
What You Have Learned So Far
After reviewing that report, consider what you would have learned so far with this secondary marketing research, about the export potential of these products.
This analysis has proved invaluable to many exporters in building their market research base. It will lead you in the next step in your research, which is to further investigate the markets that interest you based on the data. It will also help you utilize other Food Export-Midwest and Food Export-Northeast services.
Generally, when there is enough volume of exports to a specific country or region, adequate secondary market research is available. As market research reports are quite expensive to produce, they are not done on products which have little current potential or where there may be significant constraints in the form of regulation, tariffs, non-tariff barriers or economic and political upheaval.
Always check the validity of secondary marketing research. When collecting research, make note of who actually conducted the research and for what particular purpose. Private marketing research is often of high quality, but also quite costly. Some “free” marketing research conducted by private parties may be biased, and not in your best interest to make business decisions on. The best source of secondary marketing research for value-added and consumer-oriented food and agricultural products is made available by the USDA, Foreign Agricultural Service.
Secondary Research from the USDA, Foreign Agricultural Service
The FAS website is the largest source of export assistance for food and agricultural products in the United States. Because of its size, many valuable sections will be examined more specifically throughout the sections to come, but right now the focus will be on using the site to research markets.
Attaché Reports are provided by the Agricultural Trade Offices (ATOs). They are often published annually or semi-annually, on a schedule. More than 25 types of reports are published. Many reports are based on specific products including commodities. The value- added, consumer-oriented food exporter usually focuses on about half of the reports on a regular basis. Reports can be sorted in a variety of ways, including daily reports, reports by country, or reports by product or industry. Search Attaché reports here.
You can also subscribe to have daily reports e-mailed directly by clicking here. Subscribers will receive every report released each day.
Note: Although there is an obvious interest in obtaining the most recently published secondary data available, don’t overlook the fact that reports from six months or even 1-2 years earlier have relevance. Older reports offer an opportunity to review past trends and changes in markets when analyzing similar reports published on a bi-annual or annual basis. Often, there have been no major changes in a market, so the previous reports are still relevant.
Frequently Used Reports
The most frequently used reports for businesses with value-added, consumer-oriented food products are:
How to Use This Information
As you can see, there are a variety of reports available to build a market research base from. Many more useful reports are available on the FAS website as well. Information from FAIRS, Exporter Guides, Promotion Opportunities reports, Market Development reports and specific product reports should be incorporated into your market research. Depending on a product’s end use, sector reports should also be utilized. The information gathered in these reports serves as the building blocks of a strategic export plan.Other Resources
Resources from FAS
The FAS website is a huge portal and this section will only cover a fraction of the information available. In addition to the BICO and Attaché reports, here are a couple of other worthwhile sites.
FAS Worldwide Magazine
On the front page of the site you will notice a picture of the current cover of FAS Worldwide magazine, which lists the highlights of that edition. Beneath it is a search engine to select specific topics as well as the magazine index that goes back to 1996. The articles are current snapshots of market developments and can be used to supplement larger reports. Click here to go to the search engine for FAS Worldwide magazine.
The commodity information includes a focus on processed foods including high value- added products. The site allows you to isolate all of the reports that might pertain to a certain industrial area, which includes wine and organics as well as consumer-oriented products. There are also valuable insights into meat and dairy products as well as tropical fruits and vegetables. Click here to go to the Commodity Information area of the FAS website.
Resources from Other Agencies and Countries
Resources from Other Agencies
“Export.Gov” is the U.S. government export portal that assembles free international trade information from most Federal Government agencies and makes it available through one location for easy access. It has information on the basics of export, trade leads, counseling and advocacy, trade events, export finance, shipping, pricing, quoting and documentation as well as market research. Access the Export.gov site here.
Resources from Other Countries
Foreign governments are not typically in the business of helping other countries market their products. However, there are a couple of exceptions worth exploring.
Japan External Trade Organization
The Japan External Trade Organization (JETRO) is the official trade organization of Japan, with a history of bringing Japanese and American companies together for 45 years. JETRO is a nonprofit, Japanese government-supported organization dedicated to promoting mutually beneficial trade and economic relationships between Japan and other nations.
Canada’s Agri-Food Trade Service
Our neighbors to the North have also produced a tremendous amount of marketing research for value-added food products, which often serves as a compliment to that prepared by the U.S. Not all of it is accessible, but what is available is quite helpful. You can sort the information by product category or by country. The Canadian perspective on U.S. food markets is included as well, since we are an export destination for Canada. You can access the Agri-Food Trade Service website by clicking here.Food Export-Midwest and Food Export-Northeast
Food Export Association of the Midwest US and Food Export USA-Northeast (Food Export-Midwest and Food Export-Northeast) offer a combination of market research opportunities. Secondary research is available through the Food Export Helpline™. Research provided by the Food Export Helpline™ is customized to each company. It can also help you select appropriate marketing activities and prepare you for the events in advance.
Market Builder – Primary Marketing Research
Food Export-Midwest and Food Export-Northeast help companies establish distribution in foreign markets through the cost-effective Market Builder program. This program is divided into two segments: MarketScan and RepFinder.
MarketScan provides customized and comprehensive research to help you decide if your product can be successful in a market. MarketScan takes your product to actual importers who purchase American food products and gains feedback on your product’s taste, appearance, packaging and labeling. While obtaining this information, your product is compared to other regional and imported brands similar to your product. The service provides a final report which includes a list of potential importers/ distributors with complete contact information for further market development and follow-up.
The second segment of Market Builder, RepFinder, actually introduces you to importers in a market. RepFinder sets up appointments with qualified importers, provides an interpreter, assists in travel plans and provides follow-up consultations on your trip.
Market Builder is currently offered in various markets. Please click the link above to learn more.
For more detailed exporting information relative to your specific business please register for our Food Export Helpline™ service. There are always specific issues and questions that are unique to your company, products, and export markets. With the Food Export Helpline™, you’ll speak with an industry expert who’ll put his more than 20 years of experience to work for you. There are no canned answers, only insightful, customized advice specifically for you.
Click here for the Food Export Helpline.
Or, register for our Market Builder program. This service provides customized, in-market research to help you determine if a market is right for your product. Exporters can find new distributors or importers, receive valuable feedback about their product and gain industry insights on topics such as the distribution process and import regulations and restrictions for 18 international markets.