TNS Global: GEMs – Insights from Emerging Markets 1/2010
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TNS Global: GEMs – Insights from Emerging Markets 1/2010

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By TNS' Global Rapid Growth & Emerging Markets Insights team ...

By TNS' Global Rapid Growth & Emerging Markets Insights team

- Yes we can!
- The social dynamics of microfinance and entrepreneurship at the BOP
- Evaluating social mission projects in emerging and BOP markets
- Are you digitally awake to Asia?
- Letter from China

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  • 1. gems INSIGHTS FROM EMERGING MARKETS n Yes we can! n The social dynamics of microfinance and entrepreneurship at the BOP n Evaluating social mission projects in emerging and BOP markets n Are you digitally awake to Asia? n Letter from China gems : APRIL 2010 Page No. 1
  • 2. Welcome to GEMs! It gives us great pleasure to bring you garner a vast amount of experience in studying BOP consumers. In this issue we bring to you a glimpse of some the first issue of GEMs – devoted to of the key things we have learnt. bring you insights and information from Rapid Growth Emerging In addition to several articles focusing on BOP, this issue includes an article describing the internet revolution in Asia Markets. and its implications for marketers. Internet has gone on its own trajectory in Asia and in many ways Asia has embraced We realize that it is difficult to provide you with an in-depth Web 2.0 more wholeheartedly than the West. analysis of consumers in these vast and heterogeneous markets. However we do hope we are able to provide you Lastly, the words of economists and their expectations of with some food for thought and also whet your appetite to dig Chinese consumers saving the world by copying American deeper and learn more. consumers’ spending habits provides a great source of debate and even amusement, and is the subject of our first This issue is devoted to consumers at the Bottom of the regular ‘Letter from China’ column! Pyramid (BOP). Bottom of the Pyramid was a term first popularized by Dr. C.K. Prahalad – professor of strategy at the We sincerely hope you enjoy reading this issue and look University of Michigan. Dr. Prahalad said that this group is not forward to your comments and suggestions. just worthy of charity but can be an attractive, albeit a value conscious consumer segment. Dr. Prahalad proposed that offering relevant and attractively priced products to BOP consumers is actually an act of engaging them and bringing them from isolation, thereby marrying the tasks of poverty alleviation and business development. Researching this target group poses its own hurdles and James Fergusson Ashok Sethi challenges. The task demands a great deal of sensitivity and Global Director Consumer Insights Director Rapid Growth and Emerging Markets Rapid Growth and Emerging Markets understanding of the target group. TNS has been able to James.Fergusson@tns-global.com Ashok.Sethi@tns-global.com PHOTO: INDIA BY ANUJ ROY gems : APRIL 2010 Page No. 2
  • 3. yes we can Yes we can! Poonam Kumar, Director of Brand Strategy of Emerging Markets, TNS AP MEA Bottom of the Pyramid (BOP) was a term first popularized by Dr. C.K. Prahalad – professor of strat- egy at University of Michigan, who wrote a book called “The Fortune at the Bottom of the Pyramid”. In this article Poonam shares her experience in developing marketing strategies for this segment and explains that branding is as important for this group as any other segment. In three decades, Grameen bank has empowered 40 million These consumers represent a market opportunity that the people in one of the world’s poorest countries to say ‘Yes we world cannot afford to ignore or neglect from an economic, can’. Achieved through micro loans of less than USD 10 each, social and human perspective. BOP consumers represent over Grameen has changed the fortunes of several generations. two thirds of the population in the emerging markets that eve- What’s more, unlike the struggling banks of the developed world, ryone is hoping will show the way out of the downturn. They Grameen boasts a recovery rate of over 98%!! form a significant part of the nascent and virgin potential that must be unlocked to realize the promise in these markets and Prior to Grameen’s initiative, the world’s poor (over half the are even more critical for long term social stability and prosper- world’s population) have been regarded as unfortunate victims ity. who need to be rescued. As a result of Grameen and other suc- cesses, this mindset has changed. The BOP consumer is now With everyone eyeing the opportunity, much has already been perceived and explored as not just an economically productive written about the paradigm shifts required in the business unit, but also as a promising and growing market with a collective model. The need to revisit price-product-quality equations, the buying potential of USD 5 trillion! need for innovation (that is built from the ground up through community involvement), the need for capital efficiency and coarse segmentation, the need for accessibility and affordabil- ity, and most importantly, the need for education, skill develop- ment and community building that will empower even the most timid of them all to say ‘Yes we can’. Brand successes, like everything else in the BOP segment, defy the power of dominant logic. Overlooked and ignored by most marketers as a commodity market, the BOP consumer demonstrates a surprising and strong preference to buy a brand over a commodity, as long as the proposition is made accessible and affordable. Brands are valued, even loved, as they offer reassurance and certainty in these consumers’ uncertain lives. And once won over, BOP consumers reward the brands with unshakeable loyalty giving early movers a strong competitive advantage. TNS’ accumulated knowledge and understanding of BOP consumers has resulted in the identification of 9 pertinent tips PHOTO: CHINA BY SHAWN WANG to building brand propositions that will succeed among BOP PHOTO: EGYPT BY STEVE HAMILTON-CLARK consumers. gems : APRIL 2010 Page No. 3
  • 4. Yes we can! Continued from previous page 9 tips to building brand propositions that succeed in BOP markets one The brand must be anchored on strong functionality that two It is equally important that the brand serves as an emotional three Pricing and quality are not tangential vectors. The brand makes a tangible, measurable difference in the consumer’s anchor – a source of hope, optimism and protection. must combine world class quality to counter hostile infra- life. This implies that information, education and reasons structure with affordable pricing. The entire brand proposi- to believe are core to reassuring that their money is wisely tion therefore requires reengineering through innovation on spent, to building trust and a relationship. product, packaging and delivery mechanisms. four Pricing must be empathetic to the consumer’s budget, but this five Expertise credentials are as essential as in developed six International pedigree, aspirational among the emerging mid- does not mean that the BOP consumer always buys the cheap- markets. The role of expertise however differs – the need is dle class, is less relevant and cannot be the sole motivating est brand available. They respond favourably to a demonstration not for innovation and new news, but expertise is required proposition. In markets of China, India and Africa, local brands of value and are willing to pay incrementally more for it. Family to build trust, visibility and reassurance that they are getting thrive among these consumers and are often looked at for care propositions also grant permission to spend a little more. the best that their money can buy. inspiration and learning by MNCs. seven Protection and Fortification positioning themes – both physical eight The proposition does not always have to be about the bare THE TIME HAS COME FOR US TO NOW CONSIDER A DIFFERENT PYRAMID – ONE and mental – resonate. Enabling clean clothes that get recogni- necessities. Despite, or perhaps because of, the many press- THAT IS INVERTED – BASED tion and approval, tea that boosts mental and physical energy ing life concerns, a brand that promises fun, surprise, sensorial directed at either self or family enhance the brand’s appeal. pleasure or a special moment brings cheer and is welcomed NOT ON INCOME, BUT Whatever the positioning theme, simplicity, inclusiveness and into the consumer’s life. This is especially needed for non- ON OPPORTUNITY AND accessibility must be integral to the proposition. essential consumption, but can add value in all categories. GROWTH. And… yes, we can! nine Finally, it is necessary to recognize that although most successes are on affiliative positioning themes, BOP needs to span the FOR MORE INFORMATION CONTACT: entire human needs spectrum. Themes about excellence and success have also been leveraged successfully. Brands ventur- ing into the assertive needs domain have done it effectively through promises of mastery over budget, admiration and envy of superior homemaking skills, and parental pride and ambition. Rebelliousness and exclusivity however have no place here. Inclu- sion is important as is meaning and purpose. The promise has to be about empowerment rather than exclusivity; challenges have to be about changing unfair practices rather than edgy urban rebelliousness, superiority shown with a goal rather than ego satisfaction. Poonam.Kumar@tns-global.com gems : APRIL 2010 Page No. 4
  • 5. social dynamics The social dynamics of microfinance and entrepreneurship at the BOP Constanza Cilley, General Manager, TNS Argentina There has been a huge collective action involving millions of poor people and thousands of NGOs, activists, inter- governmental organization officials, scholars and other development experts around the issue of microfinancing in developing markets. Figures provided by the report “State of the Microcredit Summit Campaign” constitute an impressive snapshot that portrays a several fold growth in the level of microfinancing: from 2000 to 2006. In this article we analyse the link between entrepreneurship and microfinance, taking Argentina as a case study. Research conducted by TNS in Argentina shows that: a. Entrepreneurship is a clear need among the poor and also has a great potential for their financial progress. b. When that need is fulfilled through microcredits, it generates important changes in terms of material progress, development of social capital and empowerment to the most vulnerable and powerless sectors of societies. Entrepreneurship and its constraints Entrepreneurship to the poor offers a way to improve their liveli- hood and hence one possible path for material survival. A fairly significant proportion of the poor are already engaged in entre- preneurial activities. Results from a TNS Argentina nationwide survey measuring behaviour and perceptions towards entrepre- neurship and financial services among Argentine citizens at the base of the income pyramid shows that 2 out of 10 persons living in poverty say that they have developed productive busi- nesses on their own in the past. The survey also shows that the proportion of ‘potential’ entre- preneurs is huge and amounts to almost half of Argentine poor. “Microcredits are a critical tool against Five out of ten people living in poverty say that they are willing poverty and a wise investment in to be entrepreneurs and to develop a project of their own in the human capital” future. Kofi Annan, former UN Secretary-General Why does this entrepreneurial spirit remain latent and does Gladys, a participant of the microcredit programme, washes cars for a living. She has been able to buy a professional vaccum cleaner. it not translate into business? The answers obtained by TNS PHOTO: ARGENTINA BY DELFINA ROSELL gems : APRIL 2010 Page No. 5
  • 6. The social dynamics of microfinance and entrepreneurship at the BOP Continued from previous page Argentina point to structural-systemic constraints: Almost half of Apart from the direct tangible benefit, the broader and psycho- into macro changes. Companies need to look at this area not poor Argentines (47%) say that lack of financing is the main ob- logical benefits are significant and most women said that they as charity but as a viable way to generate profits while facilitat- stacle they face to develop productive projects. Moreover, 74% now enjoy more prominence and respect in household deci- ing economic progress for the consumers at the base of the think that obtaining a credit or a loan is difficult. Only 3% report sion making than they did before. Microcredit not only provides pyramid. However, approaching this target group and designing having tried to obtain a financial service as there is a strong financial capital but also builds social capital (which refers to the a product which meets their needs requires a careful under- perception that their efforts are unlikely to be rewarded. networks, norms of reciprocity and trust that facilitate coordina- standing of their needs and overcoming the barriers and current tion and cooperation for mutual benefit -Putnam 1995) for the perceptions of banking and financial institutions. Almost 8 out of 10 individuals express that the main barriers beneficiaries. for access are banks’ terms and conditions. Accessibility to the formal financial market is rare for the poor. They voice their Microcredit opportunity * In the year 2006 in Argentina, there were 98 microcredit organisations, 18 discontent towards the high level of income requirement set by The worldwide growth of microcredits should be seen with opti- big and 80 small, with 30,400 clients/beneficiaries corresponding to an over- all portfolio of $40,100,000. The segmentation line between the two groups the banks, and also towards guarantor requirements and inter- mism. They generate material, psychological and social benefits or organisations was $200,000 and 400 clients. est rates. for the poor. But much more can be done by the development community, donors and companies to translate microcredits ** You can have a flavour of their work at http://www.mujeres2000.org.ar Clearly this segment of consumers feel intimidated and alien- ated by the traditional banks - in fact some banks, conscious of the distance, have tried to create an environment that aims to differentiate them from traditional banks (an example of this is “Almost 8 out of 10 individuals Fiegranpoder, where very loud music welcomes customers and express that the main barriers for staff do not wear ties but informal t-shirts). access are banks’ terms and conditions. Accessibility to the formal finan- Microcredit in action cial market is rare for the poor.” FOR MORE INFORMATION CONTACT: Constanza.Cilley@tns-global.com Clearly microcredits for the poor provide an innovative solution by linking potential entrepreneurs with financial resources. While several important barriers need to be overcome to make this happen, when it does materialise, the results are very gratifying. TNS Argentina conducted an exploratory satisfaction study* on female beneficiaries of microcredit, living in poor neighbour- hoods in Greater Buenos Aires. Respondents were receiving microcredits from Mujeres 2000** - an NGO. Mujeres 2000** fosters community development, placing the focus on technical assistance and human support. Satisfaction among recipients is high - 96% are somewhat or very satisfied, 94% would recommend the service provided and 96% would renew it. The direct benefits of the credit are clearly driving the satisfaction – allowing the women to develop their business project and as a result attain a certain level of econom- ic stability. Almost all said that they now have a better quality of Family is a key role in Emerging Markets. Maria (back row) also participates in the life than before. microcredit programme. Her husband, grandson and friend have helped her not Weekend groceries fair only to maintain the credit but also to build their house. PHOTO: ARGENTINA BY DELFINA ROSELL PHOTO: ARGENTINA BY DELFINA ROSELL gems : APRIL 2010 Page No. 6
  • 7. Evaluating social mission projects in emerging and BOP markets Raghavan Srinivasan, Managing Director, TNS Indonesia Astiti Suhirman, Business Director Indonesia Studying BOP markets requires a special sensitivity to the target n Taking into consideration BOP market realities (lower SES group as well as the issues involved. In this article, Rags and and literacy) and the children target group. Astiti demonstrate how a simple device of an innovative sticker based diary helped in capturing accurate information on brush- The issues to address in developing the methodology were: ing behaviour in children. This article has been adopted from the n What should we do to enable our respondents to provide paper presented at the ESOMAR Congress 2009, which won real behaviour information? the award for the “Best Methodological Paper.” n What should we do to ensure that the mothers had knowl- edge of children’s behaviour? Behaviour change in social mission projects Social development projects in BOP markets focus on engineer- n What should we do to ensure that it is simple and relevant ing behaviour change in some form or another as their ultimate for BOP market realities? goal. The ‘behaviour’ to be changed varies across projects – from changing food habits to washing hands before eating, and Based on these, the guiding principles we set out were: from brushing at night to condom usage for AIDS prevention. n We must have a record of the ‘interest behaviour’ The target group also varies from general public to specialists (brushing, brushing at night) over a period of time like doctors or business leaders. (one or two weeks) – to ensure that we are measuring ‘regular’ behaviour. The increasing direct engagement of the private sector and n Consumers will tell or record actual behaviour if large MNCs in these projects is bringing with it more stringent we make it easier for them to do so without biases. accountability and rigorous evaluation of real ROI in terms of It is the researchers’ responsibility to eliminate the ‘end behaviour’ to be changed (the equivalent of sales or biases arising out of ‘focused measurement of market share in commercial world). interest behaviour’ – where the respondent knows what is being measured and hence biases come Unilever Oral Care social mission project to operate. Unilever Oral Care is investing substantially in social projects to promote night brushing behaviour among children in the 4-8 n Measurement methodology and tools must years age group, in Indonesia and other BOP markets. The involve both the mother and the child. success of this project would truly be a ‘win-win’ solution for n The ‘behaviour recording’ should ideally not all stakeholders – individuals, society and the private sector. involve any writing. Unilever had wanted to comprehensively evaluate their social n It should not place undue burdens or special mission project in Indonesia in terms of long term benefits due training requirements for any of the stakeholders to increase in night brushing and for optimizing the communica- in the projects – the respondent, the field innovation tion strategy. The research challenge in accomplishing this was: interviewer and the data digitizer. n Innovating a reliable behaviour prediction tool to n Last but not the least, it should be economical measure brushing frequency and night brushing – without and affordable. the ‘claimed’ response biases. PHOTO: INDONESIA BY QUINNY CHAN gems : APRIL 2010 Page No. 7
  • 8. Evaluating social mission projects in emerging and BOP markets Continued from previous page The guiding principles set out naturally led us to the innovative Study findings and learnings behaviour measurement methodology - “Daily Activity Sticker We now have over 3,000 weeks of behaviour measurement Diary” data using this methodology and the salient findings are: n Where children and mother together record all daily n The methodology provides reliable behaviour data - activities of their child in our target group. brushing frequency and the proportion of the population n By taking out the appropriate pictorial sticker ‘brushing at night regularly’ obtained from this study was (from a sticker sheet) and pasting it in the daily much lower than estimates or assessments from other activity diary. studies based on ‘claimed’ behaviour. It was also more in line with the ‘tooth paste market size’ in Indonesia. n For one or two weeks. n This social mission project would in the long haul lead to The final diary used for the study was co-created with market development as well - regular night brushing comes consumers in an iterative laboratory considering the many with an increase in brushing frequency. ‘details’, such as: what time slots, what activities, how many stickers for each to provide for, and in what format should it n Realistic behaviour data linked with attitudes can be to ensure easy usage. Our final “Daily Activity Sticker Diary” powerfully guide interventions optimization – it led to was in a daily sheet calendar format to be hung in the main identification of deterrents to night brushing not yet living area. explored in communication. Summary and suggestions Even in the high technology times we all live in, it is possible to develop simple solutions to complex problems that work well in practice in emerging and BOP markets. In the final analysis it is all about starting out with the first principles of good data col- lection and patiently addressing all the issues. The “Daily Activity Sticker Diary” based behaviour measurement methodology we had developed can easily be extended to behaviour measure- ment in other social mission projects (such as general hygiene, nutrition, sexual behaviour) and to commercial marketing issues where reliable behaviour measurement is important.h FOR MORE INFORMATION CONTACT: “Even in these high technology times we all live in, it’s possible to develop simple solutions to complex problems that work well in practice in emerging and BOP markets.” Raghavan.Srinivasan@tns-global.com Astiti.Suhirman@tns-global.com gems : APRIL 2010 Page No. 8
  • 9. Are you digitally awake to Asia? Using research to engage Asia on Asia’s terms Lee Ryan, Regional Qualitative Research Director, TNS AP MEA Bernice Klaassen, Head of Interactive Research, Singapore and Hong Kong The rest of the world is lagging far behind Asia in digital consumer engagement. LEE RYAN and BERNICE KLAASSEN are not sur- “There is the notion that other prised. Western organizations seeking a future in Asia need to find countries and cultures are just the right approach to research if they want to get off first base. playing catch-up – sometimes leap- frogging particular technologies, but Guess what? Emerging markets do not evolve in the same way as west- always developing along a trajectory ern markets. In February 2008, Harvard Business Review predicted set here about the right ideas and online worlds as one of its ‘breakthrough ideas’ of the year. In Asia, products. It is refreshing to have they’ve known about this for some time. When it comes to development American engineers return from of the digital space, Western assumptions about Asia have been slow Japan or China or India and say, to form at best, and, at worst, plain wrong. In the online world, Asia has taken different trajectories to actually go beyond both Europe and North ‘Oh my God! You will not believe America. This has profound implications not only for Western under- what I saw’.” standing of Asia’s developing economies and cultures, but for how it Genevieve Bell, Intel. does business with them. What’s happened? How do we know that the US and Eurocentric vision of the Internet is losing significance? Here’s a clue. 384 million Chinese internet users. There are now more internet users in China than in the US, and Asia is already accounting for over 40% of the world’s global online population. And it is not just about the number of people going online in Asia, it is also what they do when they are online. In Asia, social networking participants have taken such websites to a dif- ferent level. Instant messaging has never been such a hit in Europe and North America that it has been in Asia. Confined by their own languages and using their own cultural preferences for communicating, Japan, Ko- rea and China have created their own versions of the social web. These three nations are evolving in different ways to gain and keep their own internal market advantages. Compared to the US and European social media, companies struggle to monetize their social media applications; in Korea and China, QQ and Cyworld are already profitable. This makes it difficult for the US and Eurocentric global players to see a way in. Cultural constraints, online openness What are the reasons for these differences? Technology is overcoming local constraints. Everybody was aware of the social and cultural codes gems : APRIL 2010 Page No. 9
  • 10. Are you digitally awake to Asia? Continued from previous page that inhibit behaviour in Asia. Nobody predicted that the advent of online worlds would tap into a desire for expression that lies “So how do we keep up beneath. with this fast-paced digital In their personal lives, Asian online users have grasped the freedom environment, both from a and anonymity offered by the internet and taken it way beyond the experience of Western cultures. Today, 40-50% of online Asians are research and business involved in user-generated content, compared to just 10% in the perspective? It calls for West. The whole development of web 2.0 is much faster in this part of the world. There is substantial evidence that Asian consumers a careful, three-pronged are more comfortable expressing themselves online. approach: observation; So how do we keep up with this fast-paced digital environment, conversation; interaction.” both from a research and business perspective? It calls for a care- ful, three-pronged approach: observation; conversation; interaction. Engaging the new consumer First, Observation. This is about ‘listening’, getting close to what online spaces where people congregate as their people are saying and doing online through research: creating avatars or online persona to chat, create and a ‘virtual closeness’ through buzz-monitoring software that can trade. It is a prediction of what we are only just analyse user generated content semantically. TNS Cymfony allows beginning to see in Europe and the US. Gartner clients to track consumer generated content in real time. Consulting predicts that by 2011, 80% of active Internet users will have an avatar. Second, Conversation. In Asia, due to cultural constraints, the traditional focus group is not effective online. TNS Incubator is a Just because the online world is following an web 2.0 research tool that enables clients to have different types evolutionary path that Western marketers did of conversations and engage consumers differently. Developed in not predict, this is no time to be averse to the Asia, it has immediate relevance to what consumers are doing here, metaverse. Fear not. The right kind of approach online, today. to research will provide the entitlement to some of the answers. Third, Interaction. Participation cannot happen without the first two stages. This means going further than a classic agency relationship; clients and research agencies are now collaborating and co-creat- FOR MORE INFORMATION CONTACT: ing with the new consumers. To engage consumers, clients need to ensure reciprocity. Consumers’ time and attention must be earned and rewarded. Activities such as contests and competitions help to change the type of interaction between brands and consumers. The new reality Truth is, Western marketers have no time to come to terms with the Internet as they think it is. The next version is already born in Asia where consumers are making the ‘metaverse’ a reality: multiple Lee.Ryan@tns-global.com Bernice.Klaassen@tns-global.com gems : APRIL 2010 Page No. 10
  • 11. LETTER FROM CHINA Why Chinese consumers spend less and save more Ashok Sethi explores the challenges confronting China’s consumers as the developed world looks to them to drive demand required for a return to economic growth. The magic eight The other barriers to consumption Eight is a lucky number in China. The opening ceremony of Beijing Owning a house ranks among the most important desires for a Chinese. Olympics commenced on the eighth day of the eighth month of 2008 at The idea of living in rented accommodation is alien and unacceptable. 8.08.08 pm. The car number plates with a few eights go for thousands of Traditionally Chinese have liked the idea of stability and the state provided dollars in auctions and the consumer will willingly cough up a significant that by allotting life long accommodation, which you keep even after premium to acquire a mobile phone number which is festooned with a retirement. With state housing gone for most, the Chinese are rushing to couple of eights. buy apartments. The strong demand coupled with a relatively controlled supply has made the cost of housing disproportionate to the consumers’ Eight is also the percentage by which, the economists believe, the income. Today the average per capita annual urban disposable income Chinese economy must grow to provide jobs to the millions of students in Shanghai will buy two square meters of an apartment. Additionally graduating from Universities, or the rural folks migrating to the cities in Chinese need to cough up 30% of the price as down payment. search of a better life. The first two quarters of 2009 were difficult – China could only muster up a 6.1% GDP growth in Q1 of 2009 and just missed On the other hand social norms today make the idea of continuing to live the magic mark of eight in Q2 with a 7.95 growth. However the Q4 figures with the parents after marriage as nearly inconceivable (no pun intended) came at 10.7% and the whole of China heaved a collective sigh of relief and no self-respecting woman will accept a man’s hand in marriage un- when overall growth of 8.7% was announced for 2009. less the hand holds the keys to an apartment (according to a recent poll only 18% of mothers are willing to let their daughters marry a man who Clearly the magic has been achieved with a lot of stimulus - the Chinese rents his home!). With low starting salaries even for University graduates, government is trying to spend four trillion yuan in stimulating the economy. parents need to bear the burden of saving for the down payment. High Money is being poured into building roads, bridges and some income mortgage payments in relation to the income further reduces the spend- generating activities. Exports continue to be a challenge, though the ing ability of the consumers. Economists predict that China’s exports will return to growth this year – but are unlikely to touch 2007 levels in the near future. A contributing Secondly, while impending marriage of the child brings a substantial factor is the American consumer who may never return to the frenzied financial burden for the family, the university education before that is also shopping they previously exhibited to the delight and economic growth of a formidable expense. As China moves towards becoming a market the whole world. economy, the cost of education has been increasing steadily. Today for an average family the cost of providing a university education may take Consumer up as much as one-third to half the disposable income of the family. Even Economist say (softly in China and more shrilly in the West) that the Chi- school education costs are going up as more Chinese consider the idea nese consumer must spend more to compensate for the loss of exports of sending their child to expensive private schools. and redress the global imbalance. Replacing American consumers who previously sustained the global economy with their profligate consump- Thirdly the average Chinese consumer is value driven. Products receive tion of Chinese goods - enabling Chinese Consumers to save as much as a microscopic scrutiny and intensive comparison and valuation. Prices one-quarter of their incomes. Hence the critical question now is whether are compared thoroughly and promotions and deals welcomed enthusi- the Chinese consumer will spend more and save the global economy. astically. While there is a trend of premiumisation, it is not universal and applies more to products of visible consumption which can make the The traditional reason given for the Chinese consumer to save a large pro- consumer look good and successful. portion of their income is that many do not enjoy social security and need to set aside for their retirement and possible medical expenses. Secondly, Hence while the Chinese consumer will gradually spend more, and culturally Chinese are considered to be thrifty and savings driven. While consumption as a proportion of the Chinese GDP will move up from its these factors – whether cultural or structural – do contribute to the Chi- uniquely low level today, the movement is going to be gradual unless nese households stashing away a large proportion of their income there significant changes are made to make housing and education more are other social and emotional reasons driving this behaviour. accessible and affordable and the consumer regains the confidence of PHOTO: CHINA BY HOLLY ZHANG continued prosperity. gems : APRIL 2010 Page No. 11