GEMs - Insights from Emerging Markets - February 2012
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GEMs - Insights from Emerging Markets - February 2012

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Recently HSBC ran an advertisement with a message saying that “In the future, there will be no markets left waiting to emerge. By 2050, 19 of the 30 largest economies will be in countries we now ...

Recently HSBC ran an advertisement with a message saying that “In the future, there will be no markets left waiting to emerge. By 2050, 19 of the 30 largest economies will be in countries we now call emerging”. We at TNS well understand this sentiment and recognise the limited lifespan of bringing out a publication focusing on the emerging markets. It is not surprising that as emerging markets unshackle and assert themselves, they will continue their march towards progress and provide better lives for their citizens as well as better opportunities to marketers.

In this issue of GEMS we present to you another set of insights from emerging markets. This time we focus on the BoP (Base of the Pyramid) consumers whose increased consumption could provide the emerging markets with a much-needed cushion against the turbulence in the developed economies. We hope you enjoy the articles.

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GEMs - Insights from Emerging Markets - February 2012 GEMs - Insights from Emerging Markets - February 2012 Presentation Transcript

  • gems INSIGHTS FROM EMERGING MARKETS January 2012 The Evolution of the BoP concept Seeing with New Eyes Dreaming Little Dreams Mobile and BoP Women Maradona and his Mother BoP in China Mobile Technology Usage in Emerging China Letter from Chinagems : Jan 2012 Page No. 1
  • photo by tang yanfeiDear Readers,Recently HSBC ran an advertisement with a message saying However, it is not just the quakes in the developed world which of its Cricket World Cup win, and fervently hopes that nationalthat “In the future, there will be no markets left waiting to emerge. are rocking the emerging markets – other calamities, both man- hero Sachin Tendulkar is not going to make them wait for everBy 2050, 19 of the 30 largest economies will be in countries we made and others precipitated by nature, have been causing to procure the unprecedented hundredth century in internationalnow call emerging”. We at TNS well understand this sentiment the glitches (hopefully temporary ones). Thailand suffered cricket.and recognise the limited lifespan of bringing out a publication unprecedented flooding, not only causing huge suffering andfocusing on the emerging markets. It is not surprising that as losses to the country but also to global companies which have In this issue of GEMS we present to you another set of insightsemerging markets unshackle and assert themselves, they will significant manufacturing bases there. The Indian government from emerging markets. This time we focus on the BoP (Base ofcontinue their march towards progress and provide better lives for failed to push through the much-needed reform for opening up the Pyramid) consumers whose increased consumption couldtheir citizens as well as better opportunities to marketers. the retail sector more liberally to global retail chains – which would provide the emerging markets with a much-needed cushion have resulted not only in increased opportunities for companies against the turbulence in the developed economies. We hope youHowever recent months have seen the emerging markets faltering like Walmart and Tesco, but also improved shopping experiences enjoy the articles.on their growth path. Economists worry that China’s growth and lower prices for consumers, as well as better returns forrate in 2012 may drop below 9% for the first time in more than suppliers and farmers in the country. 2011-12a decade. India’s GDP increase has slid to 6.9% from 9% andfurther decline is expected. Clearly the emerging markets are also However, as usual there are plenty of positives despite thegetting singed by the debt crisis in Europe and the extraordinary hiccups, and confidence in the emerging markets is high. Weinability of the US to move forward to address its economic hope the new year will bring much-needed sanity and stabilityproblems. As the world waits with bated breath for Europe to to the developed markets. 2012 is the Year of the Dragon, andtake decisive action to prevent the break-up of the Euro, and for China and other emerging markets look forward to many moreAmerica to give clear signals on how it plans to limit its borrowing achievements. China hopes to dazzle the world once again with Chris Riquier Ashok Sethiand reduce the budget deficit, the emerging markets cannot but its sporting prowess at the London Olympics. India, so far an CEO, Asia Pacific Head of Consumer Insights Rapid Growth & Emerging Marketscontinue to feel the jitters. under-performer at past Olympics, is still basking in the glorygems : Jan 2012 Page No. 2
  • evolutionThe Evolution of the BoP Concept followed by spends on health and energy. So what makes the BoP an interesting group to target? Apart from the staggering USD 5 Trillion, they are essential to realizing the promise of growth and success in emerging markets – not just as consumers, but as a supplier base and to ensure political and economic stability in these regions. They have cushioned many brands’ fall in recessionary times. They also account for a significant proportion of the population – as high as 75% in India. They represent significant ‘unmet needs’ – something we invest time and money to uncover in developed markets, and which if targeted right yield rewarding results for both the marketer and consumer. Perhaps the most important reason to integrate them into the formal economy is that they are the future middle class in these markets. Asia has added over 1.3 billion consumers to the middle class in the past two decades – the consumers who have lured so many brands and marketers to the East. A successful BoP strategy therefore pays dividends at several levels – first by tapping into the huge immediate potential that has not been addressed by the organized sector, which can then grow into a thriving lucrative middle class market for mainstream products and services. Brands with the first mover advantage have everything to gain. They start and remain ahead of competition, build trust and get rewarded with lifetime loyalty. We have collated a few articles based on our experiences working in this market. We hope you enjoy them.Until 1998, the poor were considered the white man’s burden, experience has created a more sophisticated model that viewsthe needy recipients of charity. C K Prahalad’s path-breaking the poor as innovators, entrepreneurs, producers, consumers,work on the Fortune at the Bottom of the Pyramid excited market creators and much more.marketers around the world into recognizing them as potentialconsumers. Several rushed into headlong ventures to sell to The market is estimated at USD 5 trillion or 2.3 times the GDPthe poor. Some failures have tempered BoP ambitions, as of the UK, spread across the continents of Asia, Africa and Latin Poonam Kumarcompanies recognized that to create a sustainable market, America. A large proportion of this amount is spent on food, but Regional Director – Brand Strategy, TNS APACcreating the capacity to consume is a prerequisite. Today, spends on technology and financial services are rising rapidly, poonam.kumar@tnsglobal.com NIGERIA BY JAMES FERGUSSON, TNS GLOBAL TECHNOLOGY SECTORgems : Jan 2012 Page No. 3
  • innovatingSeeing with New EyesBridging the Cultural Gap When Innovating for the BoPNeed to bridge the cultural gap photo by qian lei, tnS china to understand the filters that the consumer uses to prioritize needs. The value of fulfilling a need is measured in terms of the aspect of life that is positively impacted – for example, growth inThe challenges of researching BoP consumers are brought alive income or social capital is often prioritized over personal comfortperfectly in Marcel Proust’s words about a voyage of discovery or convenience, and there are examples of diverse products thatconsisting of having new eyes rather than looking at new have targeted the need for economic advancement with success –landscapes. ranging from mobile phones to fertilizers to personal care products.It is easy to be overwhelmed by the ‘landscape’ when researching Understanding the BoP grammarthe Base of the Pyramid. The tangible realities – economicdisparities, infrastructure challenges, literacy gaps, issues of access Given that literacy is often poor among BoP consumers,– often take centre-stage in discussions about the challenges marketing or other communication has typically taken recourse toof marketing to and researching this segment. While these are messaging using common language, images and symbols. Thiscertainly significant issues that we need to surmount, they often is particularly true for visual grammar that is commonly applied.mask the subtler socio-cultural gaps that might inhibit our ability to However, visual messaging assumes a shared visual language,communicate with and accurately ‘read’ the BoP consumer. This which, as we are increasingly finding, is not an assumption it isis particularly true when researching rural, geographically remote always safe to make. For example, the idea of traffic lights, withcommunities that have not had access to the same cultural input green standing for ‘go ahead’ and red indicating a ‘stop’ or athat urban consumers have – whether by way of formal education ‘no’, is an urban notion. For consumers who have never seenor informal learning, media or products and services. a traffic light, the colours red and green do not have the same meaning. Using these to convey a message of safety or dangerWe are defining ‘culture’ here as shared implicit assumptions – for example, colour coding bore-wells to mark safe vs. unsafeabout the way the world works. Such shared assumptions are drinking water – is unlikely to have the desired impact.essential for accurate communication and when gathering andinterpreting data. When researching the BoP however, many Visual communicator Laxmi Murthy, who works with NGOs totaken-for-granted notions may not hold, and one of our biggest design communication for rural BoP communities, provideschallenges is to take steps to bridge this gap. several examples of how well-meaning messages have fallen through because they used “simple, everyday symbols” that wereDifferences in need prioritization indecipherable to the audience they were meant for. In the figure below, the tick and cross over the pot of water was meant toTo start with, the very basic notion of consumption and spending communicate the importance of keeping drinking water covered.for satisfaction of specific needs must be viewed differently. However, ticks and crosses are formally learnt symbols, and notGiven the diversity of needs that compete for limited disposable intuitively understood. The tick was decoded as representing aincome, we often find situations where choices and trade-offs are ladle to scoop out water, and the picture had no other meaningbeing made across markedly different categories. The decision beyond this.is not so much “what product do I choose to fulfil this need” but INDONESIA BY FANNIE ASTRIA YULANDARI“which need should I choose to fulfil first”. It is therefore important TNS INDONESIAgems : Jan 2012 Page No. 4
  • Seeing with New Eyes Bridging the Cultural Gap When Innovating for the BoPContinued from previous pageBetter understanding through better research photo by qian lei, tnS chinaMost organizations working with BoP communities recommend prolonged immersions lasting several weeks to build contextualknowledge and circumvent the socio-cultural gaps that can inhibit an accurate assessment of issues. Since this is often notpractical from a commercial market research perspective, we are currently engaged in experimental work to design efficientprocesses that can help bridge some of these gaps. Some of the approaches we are experimenting with include: one two The use of local partners to act as cultural bridges. For Developing a process to understand visual grammar, example, young people who work in the city, or community and identify a common language that can be used to workers belonging to NGOs, can often act as cultural communicate visually. interpreters and help point us in the right direction while gathering data, as well as fill gaps in knowledge to aid in interpretation. three Studying adoption histories across categories to identify common triggers and priorities that influence decisions to adopt a category – with the ultimate objective of being able to arrive at a set of guidelines that help us prioritize BoP needs. photo by Sun ke, tnS chinaBridging the cultural divide is a process of getting ourselves new eyes to explore this terrain – a process that will hopefully enablemore sensitive, more accurate assessment of opportunities in this segment. Anjali Puri APAC Regional Director, Qualitative anjali.puri@tnsglobal.comgems : Jan 2012 Page No. 5
  • dreamsDreaming Little DreamsMadhuri lives in a small village near Agra, in a household of6 members. Her father owns a small piece of land that yields unlikely to succeed. Instead we find that the BoP consumer demonstrates a surprising and strong preference to buy a entire brand proposition therefore requires to be reengineered through innovation on product, packaging and deliverya family income of USD 4,000 per annum. There is enough brand over a commodity, so long as the proposition is made mechanisms.for food, but there isn’t much surplus. Her family, however, accessible and affordable. Brands are valued, even loved,manages to set some money aside to send Madhuri to a college as they offer reassurance and certainty in these consumers’ Pedigree and Expertisein the nearest town. They have had big dreams for her, ever uncertain lives. And once won over, they reward their brandssince they were told by the local school teacher that she was with unshakeable loyalty, giving the early movers a strong Expertise credentials are as essential as in developed markets.a bright girl with significant potential. They believe that with a competitive advantage. The role of expertise, however, differs – the need is not forcollege education and the affirmative action policy of the Indian new news, but to build trust, visibility and reassurance that thestate, she could get a salaried job at one of the mushrooming So what does it take to build strong brand relationships in the consumers are getting the best that their money can buy.BPOs in the city. They believe this because they have seen it in BoP market?the films they watch on the community television set and have International pedigree, aspirational among the emerging middlealso heard stories of people who have transcended to better Functionality and Relevance class, is less relevant here and cannot be the sole motivatinglives and lifestyles. proposition. In the markets of China, India and Africa, local It is necessary for the brand proposition to be anchored on brands thrive among these consumers and are often looked atMadhuri is 19 years old, dresses and lives modestly like the strong functionality that makes a measurable difference in the for inspiration and learning by MNCs.rest of her family, travels over two hours a day to college, consumer’s life. Functionality, in fact, needs to be put throughattends classes, and spends what is left of her day studying higher standards of scrutiny since the brand often has to survive Providing an Emotive Anchoror helping her mother at home. Unlike affluent teenagers, she hostile ecosystems, withstand stress and is expected to lastdoes not have pocket money, but she is given small amounts longer. Functional relevance is critical, but it is equally important forfor transportation and food. A look into Madhuri’s college bag brands to connect emotively. Lifebuoy’s credibility is built onhowever reveals that she has a tube of Neutrogena moisturizer Any proposition targeted at the BoP competes with a range more than just the Germ Protection platform. It is a protection– which is by no means the lowest priced face cream in the of priorities for a share of their limited income. To succeed, a brand that champions the cause of health and hygiene, hasmarket. It has taken her a month to save money from her small brand must address a real life benefit in the BoP’s lives. Often educated over 70 million Indians and continues to feature aslunch allowance to buy it, but she thinks it was worth the wait this means that brand relationships start with information and one of the most trusted brands year after year.(and the sacrifice of lunch) because she believes it is more education, reasons to believe and reassurance that their moneyefficacious than the cheaper brands in the market. And that isn’t is wisely spent. Brands that have done this have cause to Other emotive themes that offer real life benefits with optimismall! She combines the use of the face cream with a Ponds face celebrate. Unilever’s Lifebuoy commands a premium in rural and hope and resonate with the BoP consumer are:wash bought by her friend. By each of them saving to buy one India by delivering germ protection that has saved and changedproduct and then sharing with each other, they get access to lives. The Nokia story about connecting, empowering millions – Enabling/Empowering – either self or family– enhances thethe required skin care routine to keep their skins soft, glowing sometimes even referred to as a lifeline – in the interiors of India brand’s appeal. For example, a laundry brand that cleansand blemish-free. and Africa is told and retold. clothes that get recognition and approval, or tea that boosts mental and physical energy. Nirma, now a $500 million brand,The BoP’s relationship with brands, like everything else about It is not enough to just be affordable. Pricing and quality are had its modest beginnings with the low income consumer. Withthem, defies dominant logic. Overlooked and ignored by the not tangential vectors when targeting the BoP market. As its promise of whiteness (distancing from brown that symbolizesformal economy, the assumption is that this is a commodity mentioned before, the brand must combine world-class quality, dirt and poverty), it made powdered detergent accessible to lowmarket, all they need is a basic product and that brands are to counter hostile infrastructure, with affordable pricing. The income households. Fair and Lovely, a whitening cream, thrivesgems : Jan 2012 Page No. 6
  • Dreaming Little DreamsContinued from previous page among rural Indian households with daughters of marriageable india by RakeSh Ranjan Singh, tnS india age. Fortification finds resonance as well. Food solutions that ensure immunity against sickness or improve reproductive health, or nutrition that will make the children stronger and better prepared for a brighter future. The proposition does not always have to be about the bare necessities. Despite, or perhaps because of, the many pressing life concerns, a brand that promises fun, surprise, sensorial pleasure, a special moment brings cheer and is welcomed into the consumer’s life. SAB Miller’s Chibuku is targeted at consumers who cannot afford bottled beer – that would be the majority of the population in Zimbabwe, Zambia, Malawi and Botswana. This is especially needed for non-essential consumption, but can add value in all categories. Finally, it is necessary to recognize that although most successes are on affiliative positioning themes, the BoP needs span the entire human needs spectrum. Themes about excellence and success have also been leveraged successfully. Brands venturing into the assertive needs domain have done it effectively through promises of mastery over budget, admiration and envy of superior homemaking skills, enhancement of social stature and parental pride and ambition. Rebelliousness and exclusivity however have no place here. Inclusion 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 Regional Director – Brand Strategy, TNS APAC poonam.kumar@tnsglobal.comgems : Jan 2012 Page No. 7
  • mobileMobile and BoP WomenThe gender gap extra 10 mobile phones per 100 people in a typical developing country leads to an additional 0.59 percentage points of Barriers to addressMarketers of mobile phones and services are, of course, as growth in GDP per person. Indeed, thinking at the micro-level,interested in marketing to women consumers as they are in there are numerous examples of how mobile usage can help Firstly, there are several barriers which impede broadermarketing to men. Hence the relatively lower ownership of the BoP on the route out of poverty. At its most basic, mobile acceptance of mobile phones among the BoP women.mobile phones among women – particularly BoP women – in connectivity can save the costs of travel, and provide businesscomparison to men is an obvious opportunity. A GSMA report people with an essential means of reaching their customers. • Broader-based gender inequalities at the BoP oftenfrom 2010 demonstrated that there is a large gender gap in Mobile connectivity can help the rural poor access up-to-date help explain the lower levels of ownership amongstownership amounting to around 300 million fewer female than information on crop prices, thereby improving their incomes. women. In more conservative cultures, femalemale subscribers. An analysis of TNS’ Mobile Life data from There is a whole specialist sector within the development ownership is frowned upon as it is seen to encourage2011 indicates that this ownership gap will not be narrowing any industry which is now focused on M4D (mobile for development) inappropriate contact between women and mentime soon. Looking exclusively at BoP respondents who don’t – the natural evolution of the ICT4D meme, when it became outside the direct family. On the level of individualcurrently own a handset, we can see that men are intending to clear that Internet access in emerging markets is largely a relationships, men sometimes object to their wivespurchase more quickly than women – thereby meaning that the mobile phenomenon. While the majority of such initiatives are owning phones owing to fears of infidelity.gender gap may even widen further. not, as yet, commercially viable (as a recent paper by Hystra / Ashoka demonstrates), nonetheless it is clear that mobile can -Targeting families rather than individuals with be a powerful tool driving developmental outcomes. appropriately communicated service offers can help allay such fears and help drive uptake. In this context, it is sobering to consider that, as with so many aspects of life at the BoP, the benefits of mobile ownership and • Competing demands on personal income mean that usage are not currently proliferating in a gender-neutral manner. the mobile value proposition and ROI must be clear and compelling Addressing the gender gap -Awareness-raising of the benefits of mobile ownership / usage is a critical first step in driving TNS is currently carrying out a large study for the GSMA uptake. This could be undertaken by an ‘alliance’ of mWomen team which seeks to understand the underlying MNOs, possibly with the support of other relevant needs, challenges and aspirations of BoP women in order to parties (governments, NGOs). scope, from the ‘ground up’, opportunities for mobile services which could help make an impact on BoP women’s lives and • Women in some markets find it awkward to purchaseBeyond commerce work towards reducing the gender gap. or learn about mobile products from men.However, selling phones to women is not just a commercial Full results of the study will be released at Mobile World -Promoting the inclusion of female vendors withinopportunity but also a developmental one. According to leading Congress next year, but using a mix of insights from this and the retail networks of MNOs can help address thiseconomist Jeffrey Sachs, mobile phones and the Internet will other studies (including a publicly available study for Movirtu), barrier .prove to be “the most transformative technology of economic we present below some lessons which may be of interest todevelopment of our time”. Looking at the macro-economic both commercial companies and other actors with an interest inlevel, an oft-cited paper by Waverman et al suggests that an driving mobile uptake amongst BoP women.gems : Jan 2012 Page No. 8
  • Mobile and BoP WomenContinued from previous page Concluding remarks Potential services radio and this provides a source of entertainment for BoP women, they also express a strong interest in and Marketers of mobile phones and services not only have an Secondly, women can perceive and experience some indeed usage of entertainment services via mobile. obvious opportunity to sell their wares to the women at the specific and gender-unique benefits in mobile ownership, BoP, in doing so they will be addressing a major challenge which can act as effective hooks to induce purchase. to the developmental agenda, particularly to the third UN Millennium development goal on gender equality. Hence it not • Children are the main aspirational focus of women at only represents a commercial opportunity, it also addresses the BoP, and services relating to their general welfare, an important development task. As the forthcoming study for health or education will have deep resonance with this the GSMA will demonstrate, under-served BoP women are a group. An example is the SMS-based examination potentially significant market for mobile products and services. results service administered by the Kenya National Capitalizing on this opportunity requires a careful, nuanced Examinations Council, where mothers are able to learn understanding of the priorities of these women as well as the the results of their children’s exams by simply sending social and economic context of their lives. an SMS with the candidate’s number to a simple short code. china by Zhao lotuS, tnS china • Religion dominates the lives of BoP women as an overarching worldview (with the exception of a few countries like China and Vietnam), social network and As data from TNS Mobile Life study, again focused on source of emotional support. Accordingly, services the BoP, demonstrates, BoP women in both Uganda with a religious element would resonate strongly with and India are highly likely to listen to the radio on their this group and could help drive uptake more generally. mobiles, and in Uganda in particular, there is a high In India, this market is already well developed, with level of consumption of mobile games. This suggests religious VAS (value added services) ranging from a opportunities for operators and manufacturers to drive prayer as alarm clock, to an automatic updates service incremental usage by developing and promoting such notifying users of auspicious / inauspicious dates and content and capabilities – and also opportunities for social times for particular activities. sector participants to leverage this interest by creating ‘infotainment’ type services. • Women living at the BoP are usually responsible for all the family housework and child-raising and in addition frequently have to engage in income-generating activities to support their families. Accordingly, their free time is limited. Furthermore, while even many Bob Burgoyne of the poorest households nonetheless own a TV or Associate Director, Technology and Digital Research TNS RMS, Nairobi bob.burgoyne@tnsglobal.comgems : Jan 2012 Page No. 9
  • maradonaMaradona and his MotherThe Importance of Family at the Base of the PyramidMaradona’s loveVilla Fiorito is a slum on the outskirts of Buenos Aires. It is a Blood is thicker than water, but there is of course a rationale behind these strong family ties as well as any cultural display of affection. Official institutions in Latin America such as thepoor and sometimes dangerous neighbourhood like so many government, police, army, law courts and political parties couldsurrounding the Argentinean capital, with its magnificent (and can) often not be trusted, so arriving as poor immigrantsparks and grandiose city centre. It is the birthplace of Diego from Europe, the only relationship people could rely upon wasMaradona, one of the eight children of Diego Maradona Snr, a family. This continues today: a recent TNS Study on Well-beingbricklayer, and his stay-at-home wife Dalma Salvadora Franco. ranks the importance of family well-being higher than anything else.Maradona is an icon in Argentina and a hero for the Argentineanpoor. As for any typical Argentinean, family is the most importantand constant factor in his life. When he played for Barcelonaand later for Napoli, his family lived with him in Spain and Italy.He eventually left Italy, claiming that his family was threatened bythe Camorra, the Neapolitan mafia. Former Argentina World Cup winning captain Diego MaradonaIn his autobiography, Maradona admits he was not always kisses his mother Dalma in Buenos Aires in August 2005. Donafaithful to his (now ex-) wife Claudia, but he refers to her as Tota, as she was known, travelled with Maradona throughoutthe love of his life and even after their divorce they were seen his career and she and her family lived with the former soccertogether on many occasions. Their daughter Giannina is superstar when he played at Barcelona and Napoli in theengaged to Manchester City striker Sergio Agüero, who was a nineties.favourite of Maradona when he coached the Argentine nationalteam.However no woman has been more important in Maradona’s lifethan his mother. She died on 19th November 2011 after a shortillness. Maradona was in Dubai at that time and desperatelytried to fly back to see her in time, but was too late. Dona Tota This applies especially for those living at the Base of thewas 81 years old. Pyramid, as they have fewer career options and need their family for survival and happiness. The happiest day of their life isIt is all about family invariably the day they got married or became parents.Maradona’s love for his family is typical for Latin Americans andeven more important for those at the Base of the Pyramid (BoP). Family as marketing themeAdmittedly, family is important in any culture and any socialclass, but only football stars coming from the slums of Argentina Consequently, family, protection and fortification are veryand Brazil would bring their whole family to Europe to make their important marketing themes when communicating with themillions; and when these close relationships get strained (for BoP and can be used successfully as positioning themes.example by divorce), they often return homesick, as Manchester Family orientation and family care resonate – clean clothes thatCity’s Carlos Tevez has recently demonstrated. get recognition or approval, or yoghurt that boosts mental orgems : Jan 2012 Page No. 10
  • Maradona and his MotherContinued from previous page physical capacity. Many Latin American companies are successful in selling their products and services to the BoP, itself extremely successful in Brazil. Not only was Habib’s the as they often understand the target group and their focus first fast-food chain to approach the BoP market by offering on the family better than their multinational competitors. accessible prices, it also gave these people the opportunity Let’s look at three interesting examples: to go out with family and friends, being one of the few options of entertainment available for them. CEMEX: building a home for your family After the 1994 financial crisis, the Mexican cement company CEMEX saw its sales dropping dramatically. In trying to find new ways to grow its business, it looked at the BoP – 60% of Mexico’s population. It started with a group of people from CEMEX who went to live in poor neighbourhoods to understand local customs and needs from these customers better, how they build and improve their houses – ‘immersion’ in research terms. They discovered that a BoP family needed 4-6 years to build a 4x4 metre room; did not Pirulo: Largest ice cream chain in Buenos Aires, ice have access to credit; and many were self-builders with a cream accessible to all high waste of materials. Carlos Flores (owner) CEMEX addressed all of this with Patrimonio Hoy, a understands his customers program of microcredit in materials and construction owing to his background: he consultancy to build a 4x4 metre room in 70 weeks and to considers himself a graduate freeze prices for 2 years. Most importantly, the credit was from “the University of the given to the female head of the household and family was Street”. Pirulo has shops in used as an important marketing theme: building a home zones where other ice cream for your family. As families had little that they could offer as shops dare not venture collateral, the company worked with social collateral - the because of security issues. It aRgentina by delfina RoSell, tnS aRgentina loan was guaranteed by two friends or family members. has non-traditional and cheap Patrimonio Hoy delivered US$135 million in extra sales promotions such as attracting traditions such as their child excelling in school, a clean and has subsequently been rolled out in many countries the neighbourhood kids with home and a mother’s pride and ambition. It’s a long time ago including the Philippines and Egypt. a loud and brash siren. Pirulo since Maradona lived in a slum: he now lives in a wealthy has a franchise system that delivers volume to consumers Arab city – but it’s a safe bet that he will return to his family Habib’s: first restaurant visits for BoP families and practices corporate social responsibility as it gives free and roots as often as he can. ice cream to retirement homes and kindergartens, which By targeting the BoP, Brazilian fast-food chain Habib’s has also shows the importance the company places on Word of become the biggest Arabian fast-food chain in the world Mouth marketing. and the second biggest fast-food chain in Brazil after McDonalds. The strategy of offering low-cost fast-food Having business success at the Base of the Pyramid means Wander Meijer combined with a well-structured logistic network has proven really talking to consumers by referring to their values and Global Head International Research wander.meijer@tnsglobal.comgems : Jan 2012 Page No. 11
  • BoPBoP in ChinaThe Second Largest Luxury Market in the WorldBase of the Market in China belonged to the middle BoP segment and another 300 million to the upper BoP segment. (Note: other studies classify these groups as in the lower end of the middle income group.) Targeting the BoP in China, therefore, calls for different strategies for different segments, as they differ on a number of parameters which would impact their consumption and choiceBoP (Base of the Pyramid or Bottom of the Pyramid) is not aterm that is often associated with China. China has come to of products and brands.attract the world’s attention through its ballooning middle class Who are the BoP in China?and luxury market, hence becoming known more for its top BoP Consumer Needs in Chinathan its bottom! However the BoP in China, as elsewhere in The BoP of China are a heterogeneous lot without the The BoP in China is also marked by some distinctivethe world, can be an attractive market – and is a segment that dominance of any one particular group (for instance agricultural characteristics, which makes it somewhat unique. To start with,needs to be looked at not just from a philanthropic point of view, workers, as in other emerging markets like India). There are near universal literacy and a well-built infrastructure ensures thatbut also as a business target. several segments of consumers in China who can be classified the BoP in China lives a relatively more connected and aware as the middle or upper BoP. These include: existence. Secondly, there are 112 television sets for everyDefining the BoP • Rural peasants working on small parcels of land (according 100 rural households, which ensures that even disadvantaged consumers are relatively well-informed. Thirdly, the BoP to the National Bureau of Statistics the per capita consumers in large parts of the world are caught in the midst ofThe term “Bottom or base of the Pyramid” is used in a number disposable income of rural Chinese in 2010 was RMB political and social strife which further compounds their miseryof different ways and has been subject to different definitions 5,919 a year, that is less than US$1,000 based on current and hinders access to products and services. However theand interpretations. We need to be careful not to confuse this exchange rates) environment in China is relatively stable and does not pose angroup with those that economists often refer to as living belowthe poverty line, who do not have the wherewithal of basic additional barrier to the improvement in the living standards of • Over 200 million migrant workers from rural areas whoexistence. The target group that we are referring to is really the target group. work in urban factories, construction sites and providemore the “lower middle” of the pyramid – those who have the low-skill services to the urban residents. Their wages rangemoney for essentials and a little more. The World Resources While we need to acknowledge these important differences, we from RMB 1,000 to RMB 3,000 per month, putting themInstitute* defines the BoP as those consumers who have an also need to recognize the common elements that they share squarely in the upper segment of the BoPannual income of less than US$3,000 (on a 2002 purchasing with the rest of the world. They also have low and fluctuatingparity basis, or roughly $8 a day). Within this group around 1 • Unskilled workers, factory workers and petty traders in incomes and are first-time consumers of many products. Mostbillion live in extreme poverty, earning less than $1 a day and cities with wages similar to those of migrant workers importantly they are disadvantaged both in terms of affordabilityoften struggling to make ends meet. However, above this level, and access but are desperately looking for opportunities for1.6 billion earn $1-2 a day, spending largely on essentials, while • A growing population of retired people over 60 years enjoyment of meaningful products and services and a betteranother 1.1 billon earn around $2-8 a day and have significant old, living on modest pensions (China is greying rapidly quality of life for themselves and their children.discretionary income. – according to the 2010 census over 22% of Shanghai’s population is above 60 years of age) Marketing to the BoP in ChinaChina has made huge progress in eliminating poverty, andhence the size of the lowest segment of the BoP group has With such a large and heterogeneous target group, any blanketreduced significantly. However the sizes of the middle and advice about how marketers should tackle this group is fraughtupper segments of the BoP groups in China are substantial with risks of over-generalization. However we give here a few– according to The Boston Consulting Group and the World points which we feel marketers will do well to employ as theEconomic Forum analysis based on information from the underpinnings of their strategy.World Resources Institute, in 2009 nearly 500 million Chinese china by liu Siyi, tnS chinagems : Jan 2012 Page No. 12
  • BoP in ChinaContinued from previous page consumers. In fact the pioneer brands are often rewarded Feature-rich bundles at an as the largest number of mobile phone users in the world. by the BoP using their names as the category names. While economical price. To start with, marketers often The Chinese government sees the Internet as an important brand-building efforts need to clearly hinge on the tangible feel that the BoP needs to be served with basic products economic development tool to empower the people in rural and remote areas. Internet access in rural areas of product qualities, the BoP consumer is not immune to and services which do not have the value-added features China is expected to continue to increase exponentially. emotional appeals. Of course, the specific appeals need to and bells and whistles attached to products marketed to The Internet will also provide consumers with access to hinge on emotions that the BoP target group can identify middle-income consumers. This will be a wrong strategy for more products and services. E-commerce in China has a with – emotions revolving around protection of family, China and the BoP consumers. High levels of literacy and distinctive flavour and unique characteristics, marked by a dreams of a better life and specifically aspirations for their exposure ensures that their familiarity with what is available profusion of websites and group buying options, offering children. and what benefits are on offer is high. In fact it is often seen that products popular with the BoP in China are feature- extremely cheap and competitive products to consumers. china by liu Xiaoning, tnS china packed but compromise on aesthetics and certain other This would imply that marketers cannot ignore “digital” features or associations which the middle class consumers when marketing to the BoP in China – and e-commerce, may desire. An example of this is the “shanzhai” phones social media and online word of mouth all need to find a (country-made phone models, which are feature-rich copies place in their strategy. of iPhones and other high-end phones at a fraction of the cost) which are extremely popular with this segment. Develop a local retailing strategy. The large format, organized trade model is already Balance of mass media and local accessible to certain segments of the BoP in China and media. The BoP in China has a complex relationship will increase rapidly in the future. However the retail chains with mass media – particularly television. The reach of which see lower-tier cities and BoP consumers as their television is very high, and the advertising of a product on the next target need to customize based on local conditions. television imparts it with a certain threshold level of credibility. The store’s opening hours, for example, need to fit the However, the living environment of the BoP consumer offers people’s life-style and work schedules. A supportive in- many opportunities of reaching them through local media store environment which helps in product selection and and channels (particularly outdoor ones). Local media will trained staff who can demonstrate the product features in often have advantages over the national media in terms of the local dialect play a huge role. cost and the ability to reach the consumers in their natural environment. Given this, it is not uncommon for brands to Branding with life values. Unlike the rely heavily on local media, but also make an occasional common perception, BoP consumers value brands presence on CCTV (the national television network) so and show a brand loyalty that can often surpass what *The Next Billions: Unleashing Business Potential in Untapped Markets, World is exhibited by mainstream consumers. Intrinsically Economic Forum, January 2009. that they can claim “advertised on CCTV” in their local advertising! less experimental, risk-taking and flirtatious, the BoP consumers tend to stick to their chosen path and the Digital is relevant for the BoP also. chosen brand if their product experience has been China is home to the largest number of Internet users as well satisfactory. Of course, powerful branding can further Ashok Sethi Head of Consumer Insights enhance the experience and create a bond with the Rapid Growth & Emerging Markets ashok.sethi@tnsglobal.comgems : Jan 2012 Page No. 13
  • technologyMobile Technology Usage in Emerging ChinaUntapped opportunityWith a population over four times that of the United States andover 100 cities with 1 million people or more, the commercialopportunity of China speaks for itself and is not really a secret.However when most multinationals think China, their focus isoften limited to larger Tier 1, 2 and occasionally Tier 3 cities.However half the urban population of China is in small townsand cities (smaller than tier 3), and 50% of China’s population isclassified as rural, which would include a significant BOP (Baseof the Pyramid) population. Not only is this population relevantand potentially profitable, they are also using technology in waysthat are sometimes even more sophisticated than what is seenin developed markets.Many companies fall into the trap of thinking that China’s BOPconsumers in rural areas and small towns are unsophisticatedand out of touch with the latest technological developments.However from our extensive experience in researching smalltowns and rural areas of China, it is clear that the marketersignore this group at their own peril and at the risk of missing asubstantial growth opportunity.Technology sophistication china by Xin tina, tnS chinaOur extensive research indicates that technology usage in lower among this huge consumer base is one that exists for lower tier cities in China – whilst Apple is strongly desired intier and rural China is quite sophisticated with strong reliance companies of all verticals, and one that should not be missed. Tier 1 China, it is almost completely unknown in rural China.on mobile devices (both smartphones and feature phones) Technology products are evaluated and accepted primarily forevident in communication, social media consumption and for TNS research indicates that small-town China is ready for their functionality, with brand image coming as a secondaryinformation searches as part of the path to purchase. The e-commerce and mobile-based marketing strategies. The key consideration. As consumers in these markets typicallysophistication of usage rivals Tier 1 cities such as Beijing and is for businesses to develop digital strategies to take advantage face greater economic constraints, they look for brands thatShanghai, although the devices consumers are relying on differ. of this enthusiastic adoption of technology. represent trust, reliability, and functionality. In the consumer mind, well-known international brands typically represent theseFrom Mobile Life data (a TNS Syndicated study), it is clear Local flavours, local brands attributes, indicating that international device manufacturersthat when desire and demand exist, the technology will follow, should invest a greater focus on value, trust and reliability (ratheror more likely leapfrog that of developed markets to satisfy Whilst global brands such as Samsung, Nokia, LG, Motorola than image and status) in marketing and communicating todemand. China has reportedly surpassed the U.S. to become and even Apple are predominant in Tier 1 China, it is local lower tier consumers.the world’s largest market for smartphones in the last quarter, brands which lead the way in smaller cities and towns.and this increase is not being driven solely by Tier 1 and Tier 2 Furthermore, the fundamental role of brands is different is Despite the trust invested in international brands, manymarkets. The potential to capitalize on the growth of technology lower tier cities. Brand decisions appear less aspirational in local Chinese brands (Huawei, ZTE and Taiwanese Dopodgems : Jan 2012 Page No. 14
  • Mobile Technology Usage in Emerging ChinaContinued from previous pagefor example) offer mobile devices with features and intuitive china by huang gang, tnS china china by Xin tina, tnS chinafunctionality comparable to their global counterparts – oftenutilizing the same (Android) operating system. With brand imagetaking a back-seat in decision making for these consumers,local partnerships in these markets gain importance.Mobile vs. PC for InternetThe role of the mobile in small-town China exists in balance withother digital and communication media, particularly that of thePC. Without a range of additional devices in the household,the PC fulfils entertainment functions, typically providing fasterspeed and a superior visual experience on its larger screen thanthe mobile phone. i-Cafes are utilised for heavy bandwidthneeds (advanced gaming and movies etc.) or as a PC substitutefor mobile-only owners. A substantial barrier to PC usage thatremains is the absence of Wi-Fi within houses, resulting in thePC often being inaccessible – stored in a bedroom of thehouse where other family members sleep, watch TV, or retire social networking, and basic gaming. Through these behaviours news sites, and games is huge. To effectively capitalise on this,for rest. As Wi-Fi connections and 3G availability increase in consumers are bridging the gap between ‘dumb-phone’ usage however, integration of brand communication in entertainment-these cities, the utility of the PC will increase, however with and ‘smartphone’ adoption. As smartphones penetrate these based digital media is key.these infrastructural developments, the rise of the tablet (a markets further with lowered prices and increased availability,currently unknown quantity) is also expected owing to its strong advanced usage will ensure rapid uptake. Brands must ensure that to reach consumers in China’s lowerentertainment functionality. tier cities, social media strategies are tailored to the mobile Evidence of this smart use is evident from the fact that QQ platform. From TNS’ Digital Life study it is clear that earnedWhilst PCs are strongly favoured for entertainment and (a service similar to MSN in China) is omnipresent, with both media (i.e. consumer-generated positive word of mouth in socialmultimedia, mobile – a device that has the advantage of always consumers and SMEs – it is not only used for personal reasons media) holds strong credence in China, and consumers arebeing with consumers and always being on – is favoured such as communication with friends and gaming with friends, most commonly looking to offer advice or share their opinionsfor communication, social, and business usage. SMS, but also from a business perspective whereby SMEs connect with communities – providing a functional platform to allowsocial networking, and instant messaging dominate digital with suppliers and share advice with their communities. this kind of strong consumer-generated content via mobile willcommunication across rural China, and these are predominantly Brands in a wide range of relevant categories such as apparel, place brands ahead of the curve in small-town China. This is asaccessed via mobile phones. homeware, furniture, ICT and consumer electronics have an relevant for the BoP as for other consumers, as word of mouth opportunity to connect with consumers and develop a strong has always been a powerful influencer for this segment.“Smart” users – not necessarily brand community via a much-used channel. Such digital“smart phone users” strategies will however fail without a functional mobile solution that is viable for both smartphones and feature-phones.Although smartphone penetration is still low in small-townChina, the incidence of ‘smart users’ is increasing. Users An opportunity that exists here for all brands lies in digital Fiona Buchananare gaining sophistication via their feature-phones. They are strategy development. The potential to connect with consumers Sector Development Manager Global Technology Sectorengaging with advanced functionalities such as Internet surfing, through user-generated videos, downloaded media, online TV, fiona.buchanan@tnsglobal.comgems : Jan 2012 Page No. 15
  • letteR fRom chinaChinese consumers in 2012 confounded by more food scares - the most horrifying of which was the alleged recycling of used cooking oil from sewers nextAs the world is shaking off the hang-over from new year festivities to the restaurants. Consumers were also scared out of their witsand slowly ambling back to work, the Chinese still have a few by feeding of clenbuterol to pigs, which results in lean meat butweeks before the year of the rabbit sprints off and the mighty can cause nausea, dizziness and heart palpitations in peopledragon is ushered in. The developed world has seen a miserable who eat animals that were fed with it. We can be sure that theyear and this has been a difficult year for the Chinese too. Inflation consumers are going to demand the highest level of food safetyhas been consistently high - the consumer price index increase from manufacturers in 2012.finally being reined down to under 5% only in November, economyis slowing down - and the Shanghai Composite index has lost more PM2.5 detector on the roof of thethan 20% of its value since the beginning of the year. However 2012 American Embassyis the year of the dragon - which is as propitious and auspicious asthey get. With furrowed brows and much on their mind, the Chinese The health concerns of the consumers were not just confinedlook back at 2011 with reflection and look forward to 2012 with to what they ate, but also the air they breathed. The number ofoptimistic anticipation. smoggy days in Beijing and other big cities seem to have increased in recent times. Consumers complained that the official reports onSlow train coming air pollution were not accurate when they saw the results of the air pollution monitor that the American Embassy installed on its roofWhile in 2010 the nation witnessed a devastating fire in a 28 storey in Beijing. The Americans also measured PM2.5 particles (particlesbuilding under renovation in Shanghai in which 58 people lost their in the air with a diameter of less that 2.5 microns) which somelives, in 2011 it was the Wenzhou train crash which resulted in scientist believe are actually more harmful than the larger ones.similar protestations and lament at a preventable tragedy. China has The government now has agreed to report PM2.5 in their pollutionbeen on the fast track in developing the largest fast train network reports and hopefully the citizens can breathe more freely and lookin the world, with trains running at speeds of up to 350 kms an forward to cleaner air in 2012.hour. The “gao tie” high speed train service between Shanghai andBeijing was inaugurated around the middle of the year and now Rousing out of callousnessconsumers can do this journey of 1300 kilometers in just over 5hours. However, the euphoria over this undoubtedly extraordinary The Chinese have often felt that, preoccupied with the pursuit ofachievement was short lived, when two high speed trains collided money, there is certain degree of callousness that has overtaken(though on a different route) taking many lives with it. The Chinese the country and we often ignore injustices around us and hesitatecitizens were aghast and protested vociferously against suspected to extend a helping hand. It took the tragic death of 2 year oldflouting of safety standards and lack of transparency. Transparency Yueyue that roused the collective conscience of the nation andis something the Chinese are likely to demand more and more in the Chinese took to upbraiding themselves for the thickness2012 - whether it is from the government or the companies who try of their skin. The two year old was run over by two vehicles into sell to them. Foshan, Guangdong and ignored by passerby’s till a cleaning lady took notice. It is believed that a major factor which restrains theSwill oil and other food horrors helping hand is the fear that the rescued may turn into an accuser, as it has occurred in a few cases in the past. Several prominentA few years ago the Chinese encountered the “melamine tragedy” professors from leading universities offered to compensate their- in which unscrupulous middlemen adulterated milk with the students and cover their liabilities if they were ever sued by thechemical. Hundreds of children developed stones in their kidneys subjects of their help. 2012 should see more sensitive hearts andand a few lost their lives. This year the consumers continue to be more willing hands in China. china by han hettie, kantaR health chinagems : Jan 2012 Page No. 16
  • Letter From ChinaContinued from previous page Bad news for entertainment In 2011 the authorities thought they need to protect the consumer from too much entertainment and also too much advertising. Firstly in March Chongqing television decided to go totally “ad-less”. In October, the State Administration of Radio, Film and Television (SARFT) decided to limit each of the country’s 34 satellite channels to a maximum of 90 minutes of entertainment content from 7:30 pm to 10 pm every day. The remaining time, it was suggested, should be filled with news and programs to uplift the moral standards of the viewers. And most recently the officials announced that the government would impose a ban on advertisements in the middle of television dramas starting in 2012, though the ads will appear in the beginning and the end of the programs. The marketers and the advertising industry feel that they can cope up with it – though some experts feel that it may drive more consumers and more advertising to the digital medium. China’s own heaven Largely an atheist nation, and not believing in the existence of heaven or hell, the Chinese have created their own heaven in space. Tiangong-1 or “Heavenly Palace -1” space station module was successfully launched this year. Subsequently Shenzhou VII spacecraft gloriously docked with the space station and returned back to earth in one piece. It is believed that this is a china by li yanping , tnS china strategy to compensate for the possible decline in Chinese exports, by opening up a new revenue stream by renting space in the Chinese “heaven” to the religious departed from the West. china by li yanping , tnS china Marriage for love In its attempt to foster greater love and reduce commerce in marriage, the Supreme Court made it clear that a home purchased before marriage is the personal property of the person who bought it. In case of divorce, the registered owner will keep the house but needs to compensate the partner if he or she contributed to any mortgage payments and any other expense which increased value in the property. The amendment to the marriage law was largely seen as rational, though views were divided on whether it will discourage fortune-hunting and result in a greater number of marriages being founded on the solid rock of love. Naked marriage and other dressing downs Confounded by rising cost of marriage, a new trend of naked marriage took shape in 2011. Contrary to what is suggested by the name, the nuptials do not take place in a state of undress; the “nakedness” is merely figurative and indicates that the couple took the plunge without the usual extravagant preparations and expense which accompany the occasion. The phrase caught the fancy of the citizens and they quickly coined other things that you can do with a similar degree of unpreparedness or vulnerability - such as naked resignation (resigning without another job) or naked examination (showing up for the test without adequate preparation). 2012 should see more the Chinese showing more willingness to break away from the herd, and follow their own hearts and minds.gems : Jan 2012 Page No. 17
  • CHINA BY XU YUE, KANTAR ITP CHINAgems : Jan 2012 Page No. 18