The Challenge of Emerging Markets: The Philippines

The Challenge of Emerging Markets: The Philippines

We recently launched our product in the Philippines, and by all accounts it has been a successful launch. There were months of planning and preparation leading up to this launch. Yet, even though we consider the launch a success, we still continue to be surprised at the challenges these types of markets present.

These challenges highlight the nature of expanding into a developing, emerging market. And we're not just talking about obvious difficulties like outdated infrastructure or language barriers. These would be formidable enough to surmount by themselves. But here we want to talk about some of the less obvious challenges that you will need to consider before launching a product in an emerging market.

We launched our text message advertising service in the Philippines in August. Although we had a flood of new users and saw a 500% increase in usage,  we weren't sure whether we could generate any revenue in this market. We were trying a Pay Per Click method of advertising, but we did not know how Filipinos would respond to it. Would we find advertisers who understood PPC well enough to commit?

We launched our text message advertising service in the Philippines in August. Although we had a flood of new users and saw a 500% increase in usage,  we weren't sure whether we could generate any revenue in this market. We were trying a Pay Per Click method of advertising, but we did not know how Filipinos would respond to it. Would we find advertisers who understood PPC well enough to commit?

Unique and Different Folkways

Folkways are defined as the ways of living, thinking, and acting in a group. They are typically behaviors, beliefs and concepts peculiar to a culture. What's important to know about folkways is that they serve as unconscious guides to conduct.

Thus, before you enter an emerging market, you need to understand the folkways of the culture you're entering. In the Philippines, we've learned that these ways of thinking, these mindsets that Pinoys have, strongly influenced how they interacted with our product (and we learned this the hard way)!

Pinoy vs. Filipino

One example is just that -- the use of the word "Pinoy" to describe themselves. Many Filipinos prefer to call themselves Pinoys and not Filipinos, and the term connotes a certain sense of pride. It's similar to how Iranians refer to certain aspects of their culture as "Persian" and not "Iranian".

Understanding how a culture identifies itself is important for trust and user adoption, we've found. If the peoples of a culture think you are just there to capitalize off of them, and not to actually serve and benefit them with your product, of course they are going to be suspicious. This will negatively impact how they interact with your product and your growth in that market. But by using the term "Pinoy" in our marketing messages, we showed that we were at least trying to understand Filipino culture. This goes a long way to giving your brand credibility.

Guilty Until Proven Innocent

Another example of a Pinoy folkway is that many Filipinos have been scammed by online services. As a result, many Pinoys will want to be sure your business is not a scam of some sort before they will even engage. Whereas in the U.S., if you went to a job interview and asked the interviewer, "Is this company legitimate?", you'll probably wind up offending the interviewer; in the Philippines, this is a very common question to ask.

Remember, many scams originate from emerging markets precisely because these are economies where people are less well off. These regions have economies that are, quite frankly, struggling in some fundamental ways. That makes them great places for business expansion, but it also makes them prime targets for fraud and illegal dealings. You need to understand going in that you're an outsider who's not going to be trusted until you prove it.

Digital Acuity

When we launched our text message advertising service in the Philippines, we didn't know exactly how it was going to turn out. This was both a new market and a new revenue model, based on a Pay Per Click style of advertising. We had already solved the CPM-based advertising model, and that was doing very well. But would PPC text message advertising work in the Philippines?

One thing we needed to take into account was the level of digital knowledge of our Pinoy users. If you're going to launch a technology successfully in an emerging market, you really need to understand how well your target market understands that technology. There may need to be an education process that happens as part of your launch strategy.

Here's one example: we needed to know was how fast people's internet was (we just assumed, wrongly, that their internet works like ours does). Many Filipinos live in regions with very poor internet signals -- so poor, in fact, that it takes them a long time to even open up a web page. We would be having conversations with Pinoys on Facebook Messenger, for instance, and all of a sudden the person would drop out of the conversation. They he would reemerge an hour or two later. When asked, "Where did you go?", he would reply, "Sorry! I lost my internet connection!"

Land of the Unbanked

We also needed to check for basic things like whether Pinoys had PayPal accounts and knew how to use PayPal. How hard is it to get a PayPal account in the Philippines? We didn't even ask the question before launching, and that hurt us. It turns out it's harder to get a PayPal account in the Philippines than in many other countries. In fact, we found that a large percentage of Pinoys had never even heard of PayPal!

Assuming that everyone there could use PayPal represented an American-centric bias that hindered us.

Moreover, whereas in the U.S., most everyone has a bank account, the same is not true in emerging markets like the Philippines. Lots of Filipinos don't have bank accounts, which makes using services like PayPal or Stripe quite difficult. So, if your product relies on digital wallets or online banking services like these, you may run into some challenges in emerging markets.

Don't Neglect the Culture

Aside from the common issues of pricing, language barriers and regulations, these cultural issues are equally important to deal with when launching a new product in an emerging market. You have to really take time to understand things like how the people transact business, how well they understand your industry, and what the dominant cultural patterns are in order to be successful.