HOW do you understand the market for your products in a country as large and diverse as Indonesia? This is a question many companies are struggling to answer as their competitors ramp up advertising budgets.

Thanks to strong domestic demand, a resources boom supporting exports and a financial system hardly touched by the global crisis, Indonesia’s economy is growing strongly.

Growing per capita income has given rise to a middle class with significant purchasing power. And the increasingly sophisticated tastes of Indonesian consumers are encouraging enterprising companies to offer a multitude of new products and services. According to AC Nielsen research, television advertising spending alone jumped 25per cent in the third quarter of last year to reach US$1.5billion (S$1.8billion).

Understanding consumer behaviour in Indonesia’s multicultural environment, however, is not easy. Trying to map one’s distribution network in a nation where vendors can be found on almost every street corner is near impossible. In 2002, Unilever asked AC Nielsen to find out just how many fixed retail outlets sold the Dutch multinational’s consumer goods. The answer was 2.4 million.

Market research organisations have been operating in Indonesia since the 1970s. But it was not until the Asian financial crisis in the late 1990s that the industry really began to take off. “We expected a downturn, but it (turnover) actually increased,” notes Mr Sjafril Djalal, the head of the Indonesian Market Research Association (Perpi). Established in August 2007, Perpi works to raise industry standards and to represent the interests of its members.

Mr Sjafril estimates that turnover in Indonesia’s market research industry reached US$102 million in 2010. Growth has averaged around 14 per cent per annum in recent years. The sector is open to both foreign and local players, with companies such as AC Nielsen and Taylor Nelson Sofres competing with local enterprises such as Deka Marketing.

Like their counterparts in most other countries, market research companies operating in Indonesia make their money from custom research (as in the case of the Unilever study), and by selling generic reports that focus on a particular industry segment.

Industry sources say it is possible to get a good idea of consumer preferences for most product categories with a sample size of no more than 2,000. That sounds like a tall order in a country of 240million people. But with around half of the population living on less than US$2 a day, sampling the whole country is hardly necessary for many products.

According to Indonesia’s Department of Statistics, there are about 70,000 villages in Indonesia. Each of them has been categorised as urban or rural based upon factors such as access to urban facilities, population density and percentage of non-agricultural economic activity. Using this information, market research companies employ an approach called multi-stage random sampling. This involves randomly selecting kecamatan (sub-districts), choosing units within them, and so on before selecting specific respondents.

A typical survey involving about 500 respondents in Jakarta alone can cost up to 250million rupiah (S$35,000), depending on the length of the questions and the depth of the analysis required.

The psychological profile of the Indonesian consumer, says Deka Marketing’s Ms Irma Malibari, follows the pattern observed in most other Asian countries. Indonesians tend to be very conservative, purchase the same products as their friends, and are generally reluctant to try new things.

This certainly seems to be true of cheap, mass market products. Despite dominating the market in most other Asian countries, Colgate has been unable to dislodge Unilever’s Pepsodent from its position as the brand of toothpaste traditionally preferred by most Indonesians.

Deka Marketing says that young, urban and upper middle-class citizens tend to be the new adopters. Consisting of around 10 per cent of the population, they have been quick to adopt social media and are willing to try new things. It is through them that foreign companies have an opportunity to break into the local market.

Perpi prohibits its members from carrying out political opinion surveys. It is not difficult to see why. Numerous political consultancies have emerged in Indonesia in recent years, and many publish the results of opinion polls that critics accuse of bias or lacking professionalism.

It is understood that many such consultancies employ students untrained in interview techniques. Some organisations also lack systems designed to ensure the quality and integrity of the data.

Perpi is a member of Esomar, a global association of market researchers, and has adopted its code of conduct, which includes respecting the privacy of respondents and (in the case of telephone surveys) allowing the caller’s number to be displayed.

Indonesia can be a difficult market. But for those willing to take the plunge, it is good to know that there are organisations striving to provide a level of service that meets global standards.

(C) Singapore Press Holdings Limited