Sales and Marketing 101 – Know your Market

This short series of articles is related to expats earning a living in the Philippines. I am focusing on sales and marketing, because that is the area of my expertise… It is my trade, and it is where my education focused. I hope to pass on some of that knowledge to readers on this site. Sales, or marketing for that matter, despite what the textbooks might tell you, is not a science, but an art. There are no hard and fast laws or rules, but the influence of marketing is felt throughout the business world. It is my observation that many, if not most, expats who fail in trying to earn a living in the Philippines fail, in part, because they lack an understanding of basic sales and marketing principles. However you decide to earn a living here, you must always remember that without sales, you are not in business.

The other day, I read a posting on FaceBook from an expat who has decided to open a taco stand in a small provincial town. His comment: “My tacos are da bomb! I’m opening a stand since there are none around here. Everyone loved them!!!”

Now, I personally love tacos. I’m a tacoholic, if there is such a thing. I wish him well on his endeavor… I really do. However, his statement raised a ton of red flags for me when I read it. I did not comment on Facebook for a few of reasons: He may have just been making a “spur of the moment” status update; It is not my place to burst his bubble; He may have already done his due diligence (Though my guess is “no”).

Market Research

Market Research

If you start a business, any business, anywhere, you need to know your market:

1. Who will be your customers?

US Citizenship for child

2. Do they want what you have for sale?

3. Can you satisfy an existing need or want, or will you need to create the market?

4. How large is that market?

5. Can you deliver the product or service at a price they are willing to pay, or have the ability to pay?

6. Are the business constraints so great that serving that market is unprofitable?

7. Have others tried, and failed, to enter the market with similar products or services? What will you do differently? (“The definition of insanity is doing the same thing that you did before but expecting different results”)

So, let’s answer the questions above related to opening a taco stand in a small provincial town in the Philippines. The reason behind this exercise is not to beat anyone down or discourage them, but rather to get them to think about a potential venture in sales and marketing terms… A necessity, regardless of the business idea. Fact: In the United States, over 90% of new restaurants fail within the first year. Why would the Philippines, with a different culture, very different business climate, and loads of bureaucracy, be any better? That is really the first question one should ask when considering, “Should I?”

1. Who will be your customers?

Are you targeting expats? Balikbayans? The general public? Are you locating in a mall? In a truck near offices (Lunch crowd)? At a resort? Who visits your location frequently? Are you on the National Road with many busses passing daily? Are you near an airport with lots of travellers?

2. Do they want what you have for sale?

How familiar are local residents with Mexican food? Do they like spicy food (Many Filipinos do not)? Do they even know what a taco is (Growing up in North Carolina in the early 1970’s, tacos were very much “exotic” and unfamiliar there)? Is a taco priced at, say P49, competitive with other, more known, lunch or meal options.

3. Can you satisfy an existing need or want, or will you need to create a market?

If your answers to question number two were largely negative, it may be quite a while before you can generate enough business to become self-sustaining. Needless to say, it will become far more expensive. You will need to create promotions, offering discounts (buy one take one, etc.), coupons, passing out free samples in order to get people to give you a try. Possibly, advertising expenses so that people even know you exist.

4. How large is the market?

A small provincial town will have far fewer potential customers than a large city. So, let’s assume you are targeting the expat population. In the entire country, there are less than 1 million expats of all nationalities. Say half are from Western countries. This half are who would perhaps want tacos, or be familiar with tacos. In a rural town, how many expats are present? A few dozen? They would need to eat an awful lot of tacos in order for you to be profitable. Even in resort areas with lots of foreigners present, will they want to eat tacos? They just travelled half way around the world to eat something they could get down the street at Taco Bell. Yes, the demand may be there, but the potential market is so small that it is not profitable. Since I have written on this site, I have seen dozens of expats state that they would sell “real” pizza, burgers, hot dogs, Mexican food, etc. Most fail miserably. They overestimate the demand and purchasing power of the expat market. No, if you open a business, you MUST cater to a larger market, which means local market, and local tastes. Those tacos that are “da bomb”, may need to have the recipes modified. You may need to offer local variations or varieties. You may need to offer local food too.

5.  Can you deliver the product or service at a price they are willing to pay, or have the ability to pay?

Mexican food ingredients are often imported. In provincial towns, many may be difficult to acquire (For example, Filipino sour cream is a much different animal than found in the USA). Things like cheese may be different. The cost to produce your product may be higher than the market is willing or able to pay. For restaurants, a profit margin of 4% – 5% is normal. Costs generally run 30% food, 30% labor, 35% overhead. If you sell a taco for P50, you just earned P2.50, IF your costs are kept low. You will need to sell an awful lot of tacos to earn a living. You can argue, “labor is cheaper here.” Yes, it is. But LPG, electricity, and paper goods are more expensive and can more than offset the labor savings. Additionally, restaurant meals in small provincial towns are very much a luxury… Very few families can afford to spend P500 or P600 on a single meal if they earn only a few hundred per day.

6. Are the business constraints so great that serving that market is unprofitable?

Will you have problems with licenses and permits? Are you competing with other, established restaurants that don’t want you there? Are you competing with the local town big shots or officials? Can you get the required AEP (work permit). Are you even allowed to work there in your own place? Are you familiar enough with the local language to communicate with your customers? Are you prepared for competitors to set up shop next door, selling their own versions? All of these impact sales, how you market your product, and your profitability.

7. Have others tried, and failed, to enter the market with similar products or services? What will you do differently?

Ask yourself “Why” nobody else is selling tacos nearby. Product familiarity (Note that Taco Bell, backed by Pepsi, tried several times to enter this market and failed. Currently, they exist only in a few Manila malls… and they have deep pockets)? Is your taco recipe so good that you can succeed where others failed? Are you a “natural” in business and can read the market? Have you ever worked in a restaurant before? How will you promote yourself, your business, and your product?

This list should give potential entrepreneurs an awful lot to think about. An idea may seem good, but when examined impartially, and with a critical eye, the ideas are not so good from a business perspective. That is why small business loans are so hard to acquire. People fall in love with their idea. Banks show, nor receive, no love. They want to make money from their loan. Every entrepreneur needs to look at their ideas from that same perspective, whether it is making tacos, opening a sari sari, Internet café, or online. These principles apply equally to all.

Post Author: JohnM (207 Posts)

John Miele is a Citizen of the World, having spent time in many locations around the globe. Currently, he finds himself in Manila, but travels throughout the Philippines. John joined the Live in the Philippines Web Magazine in mid-2008.


Comments

  1. Jamie says

    I regularly eat the los angeles street vendor type tacos. The tacos I get are basically chopped up meat (chicken, beef, or pork), on a soft corn tortilla. The tortillas are small, and often are two tortillas with the meat piled on top.

    Although restaurants usually include garnish, the street vendors often have garnish and salsa on the side for customers to use as they like. This means they just get the seasoned chopped meat on the tortillas. This works fine for me. Chopped cilantro and onions may be added to the taco as dictated by taste, as well as green or red salsa.

    This may be the way to go. In fact, I like the idea. I think I may add it to the traditional weekend filipino bar-b-ques we are planning for our sari sari store. I just need to figure out a recipe for good barbacoa, which is my choice for tacos. So we could have the traditional chicken and pork filipino bbq on sticks, and chicken and pork tacos. The meet would do double duty!

    My interest is not in earning an income. If I could break even on the weekend events I would be happy. If not, I would still be happy.

    • John Miele says

      Jamie: Something like that might work… However, you mentioned yourself that you would not be relying on the business for your income. Big difference in terms of investment / risk.

  2. donna west says

    A lot of good “food for thought” in your article. I have some of my own I think. I am not arguing your observations and business common sense. i am just going to bring up a few positive aspects to consider. Most young filipinos today are not eating like their generations before them. American food habits are on the rise around the world. Ask the food critics like Anthony bourdain and Andrew Zimmern. They are seeing the change everywhere they travel. The older generation in those countries is seeing it too. I have read the Philippines population is growing by 6000 a day abd that seems like a lot of younger generation to me. So tacos as popular food in the Philippines may not be too far down the road. Needless to say, it may be a little premature yet and selling a specialty food like tacos should be launched where you can have a very large customer base and it qould take a lot of promotion to get customers on board. the food industry in the philippines is a good business to get into but most people do not realize the time and work involved and that the profit margin is usually only about 10% so that doesnt leave a lot of room for error. business and job opportunities are necessary for the financial improvement of the Phils the way I look at it and no one person can move enough mountains to build a stronger country but anyone willing to try should be encouraged to do so. afterall, Mr. Hershey went bankrupt several times before he finally hit it big with his chocolate. I think the best advice I have is to start small if you are introducing a food into a country where it is not known yet. Dont lay all your money on the line so if your first great idea fails you can pick yourself up and go on with more knowledge and insight and with only your feathers ruffled. and my firm belief still stands that it is best to take your product to the people. If you truly have a product people want or need or are serving very good tasting food at an affordable price people will soon flock to it. competition is good as long as your product and service is comparable or better than your competitions so you dont always have to have a product no one else has. Just do yours a little better. thanks for the article and giving me a chance once again to say it as i see it.

    • John Miele says

      Donna: Before serious investment, you must have a plan on how to sell and to whom. The tacos was an example. It is just as applicable if you are selling hardware, lawnmowers, or furniture.

  3. Ricardo Sumilang says

    Speaking of taking your product to the people, I heard about this Mexican guy in Arizona who makes a killing by going around construction sites in his truck at lunch time selling Mexican food. He was a smart guy because he knew construction workers are 99.9 percent Mexican and he knew they all like Mexican food like tacos, burritos, and pupusas. He had a product that his market wants and he sells them cheap enough so that every Mexican construction worker can afford it. Business was booming because he knew his market and he filled the niche. He had it all figured out, or so it seemed, except for one thing. One day, he showed up at one of the construction sites, but he didn’t even get a chance to sell one pupusa that day, or the next and the next. Waiting for him at the site was a sheriff’s squad car from Maricopa County. Rumor had it that he didn’t have a) business license; and, b) he was an illegal.

  4. Jamie says

    Looks like someone went peepee in Jordan’s cheerios this morning.

    John, I always appreciate reading your articles. I was also a business major for my undergraduate studies, and find your analysis valuable and insightful.

  5. says

    Well John I sure enjoy your notes but we know there is one out of the 100 who is having a bad hair day! lol I work with the public every day and there is always one bad apple who is always waiting to throw mud your way. Please duck and continue on your way. as for Jordan smith crawl back into the slime from which you came……..

    • John Miele says

      Don: Yeah, he’s like that mosquito that you just can’t quite squash. Glad you found the article useful.

  6. Roselyn says

    Hi John: Excellent article as usual. I’m planning to retire to the Philippines from my academic position (in the U.S.) in a few years. However, I do plan to open a clothing business in the Philippines. My area of expertise is in fashion merchandising and apparel design. I am eligible for dual citizenship and will apply for my Filipino citizenship a year before my relocation. I am researching the business environment and practices in the Philippines. How will a focus group function in the SWOT analysis? My intended target market will be women (of ages 20+ years and older with a household income of $10,000.00 per year or above). I’ll looking into a location in Cebu City.

    • Roselyn says

      Addendum: Correction – I’m looking into a location in Cebu City. I won’t be relying on the business for my living expenses.

    • John Miele says

      Roselyn: I think that something like that could work… One thing that I have noticed with clothing here is that there is plenty available at opposite ends of the market. Either low end or high end, but not too much in the middle. I think that a boutique type store might do well as an alternative to the SM / Landmark. Focus groups are a good way to determine your strengths and weaknesses, but they can be expensive to do properly. It is due to psychology. Often, people do not give honest answers, so you need a pretty big sample size in order to get reliable data. A friend of mine in the US held focus groups for P&G, and she often had to resort to “bribery” in order to get enough people to participate (free lunches, etc). In fact, large companies will often pay participants, something that I believe skews the answers.

      That said, since you will not rely on the shop for living expenses, it gives you a level of freedom to do what you enjoy. I’ve never mentioned this to anyone, not even Rebecca, I think, but I always wanted to own a small antique store myself… Perhaps in my retirement someday.

      • Roselyn says

        Hi John: Thanks for your analysis. I believe that you are correct on the numbers of respondents needed for the focus group. I’m going to live in Cebu City and run my focus groups for about two years with a demographic study, before deciding if this business will be viable for me. I’ll also test run my own designs to see the most desirable pieces to produce and the price correlations. With regards to an antique shop with your experience in travel, Asian antiques are desirable commodities. With your curiosity in travel and interest in research your adventures will be endless. Thanks again.

  7. PalawanBob says

    Mr Doughnut has a canteen on wheels here in Puerto Princessa City main bus terminal.
    It’s one of those mini Suzuki multi cabs modified (and nicely painted in bright yellow and orange colours) to accommodate a display full of nice looking doughnuts.
    That canteen is there since about one year time, so it means it works.

  8. Lori says

    My husband is from Pangasinan and we want to move there in the future with our son. How do you apply for dual citizenship before getting there? I just need to know the first step to take.

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