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Entering New Markets: How Market Research Can Inform Product Development

Topic : Customer Centricity, Risk Management

This note discusses how market research can inform and lower the risks associated with new product development done by urban micro-lenders entering rural areas. The note focuses on technical considerations regarding various market research options in situations when one enters a completely new market. The content is based on research work undertaken jointly by the Microfinance Centre for CEE and the NIS (MFC) and its Armenian partner MDF-Kamurj during 2002-2004 within the SEEP Network Practitioner Learning Program.

MDF-Kamurj has taken a strategic decision to enter rural areas due to limited growth opportunities in markets currently being served. As an urban micro-lender, MDF-Kamurj lacked rural market intelligence. MDF-Kamurj is not the only MFI that has faced this challenge. According to MFC 2003 regional microfinance industry mapping, 56% of NGO MFIs from Europe and Central Asia planned to enter rural areas. This is perceived as a major institutional challenge. If urban MFIs are to be successful in serving rural populations they need to better understand rural market needs associated risks. This can be achieved by informing new product development through various market research activities. Market research not only has the potential for reducing operational risks, thus cutting costs of product development and roll-out, but it also inspires the development of innovative solutions.

This note aims to guide the reader through some possible options for market research that can be undertaken at various stages of product development:

Internal preparation
Market research
Concept development
Pilot test
Revision and roll-out

For each option there are considerations related to its purpose, practical application, key methodological principles and lessons learned. These points are illustrated the case study and completed by information on the costs of the research in section 7.

In conducting the project, a holistic approach was taken to experiment and test different alternative market research options in order to generate lessons for the microfinance industry. The note is designed to be a menu of different option, from which microfinance practitioners can draw whatever is relevant for each of them.