Understanding the Emerging Middle ClassSeptember 02, 2011
Emerging Middle Class (EMC) consumers represent the next driver of demand for multinational companies. Depending on the income definitions used, there are over three billion EMC consumers expected by 2020, with China and India alone accounting for one billion then. EMC consumers make an income of USD2 – 50 per day usually from working in the informal sector, and with rapid urbanization are just starting to exercise their spending power.
Some companies starting to target the EMC with low-cost products and services do not experience success as affordability alone does not meet the growing expectations of the EMC consumer.
The EMC consumer works within a budget constraint for the same performance expectations.
In our work helping companies better meet the needs of the EMC in China, we have found that the EMC consumer responds better to clever trade‐offs in product features that do not compromise core functions, such as electric bicycles that provide locomotion without the expense of a motorcycles, or no‐frill CT scanners that self‐pay patients can afford.
We have also learnt that new business and distribution models are required at the last mile to bring the products into the hands of the consumers, whether they are for pre‐paid mobile access in Africa, village‐led microloans in Bangladesh, or local entrepreneur networks providing affordable photo printing in India.
The EMC consumer is socially‐mobile and yearns to associate herself with international brands, but also expects them to be localized to her tastes such as with green tea Oreos in China. For instance, Wahaha Group established its leadership in China’s beverage market by appealing to consumers’ sense of family and nation, promoting food safety, nutrition, and child health as a local company. As such discretionary purchases involve relatively larger proportions of the EMC consumer’s income, the EMC consumer also needs products to last longer, thrive in harsher environmental conditions, consume less energy, have the ability to be upgraded or upcycled, and offer more meaning to her life.
Traditional approaches to designing market entry, such as performing large-scale, statistically-valid quantitative surveys with the EMC consumers, importing lower range products into the target market, investing in marketing campaigns, and appointing large local companies as distributors, may not be sufficient to engage the hearts, minds, and wallets of the EMC consumer.
Instead, we have found greater success immersing teams into the homes, workplaces, and points of purchase of these consumers, so they can identify better with our team members and trust us enough to share their true concerns and aspirations. We adapt anthropological tools such as ethnographic observations of their culture, habits, and workarounds, to identify localised insights on the aspects where globally-designed products may not be suitable. We have found, for instance, that word-of-mouth marketing through local entrepreneur networks or community chiefs have much greater impact than above-the-line advertising. Tapping into our partnerships with local social enterprises, non-profit organizations, impact investors, and development agencies, has also helped co-create bespoke business and distribution models for the EMC.
The world of the EMC consumer is rapidly going mainstream, and the companies who are willing to truly immerse themselves in that world will reap the fruit of this wave.