|About 4 billion people in the world earn $2,000 a year.|
About 4 billion people in the world earn $2,000 a year. Across all of Asia -- whether it be China, India, Indonesia or Vietnam -- product innovation and new ways of thinking make it possible to meet these people's needs ethically, fairly and profitably.
To understand these consumers' routines, we spent more than half a year living with them and listening to their stories. We packaged our findings into two documentaries -- one made in China, the other in India. We also talked to our clients, including Procter & Gamble and Wrigley, all pioneers in this area. We interviewed commentators including corporate strategist and University of Michigan Professor C.K. Prahalad, who holds that we penalize "the poor" when we don't give them the choice to buy high-quality, mass-marketed goods.
Most important, we put real names, lives and faces to the statistics, as all too often we as marketers forget that low-income consumers are everyday people.
Living within one's means
Even though the incomes of these people are extremely low by our standards, they see themselves as average. They are as well off as most people in their villages or towns. Looking at the world from their point of view, the important thing is not that they earn about $2,000 a year but that they can live on $2,000 a year.
Although they are significantly less affluent than we are, in many other respects they are not different. Their aspirations are the same as the ones we have: to raise their children, to live well, to be respected by their peers -- and yes, even for the less affluent, brands are a desirable way to signal their achievements -- to learn and grow, to enjoy the things that people around the world enjoy. Of Chinese consumers earning $200 per month, 84% have a mobile phone and 46% have a home computer.
You might wonder how people with such low incomes generate this free cash. For a start, they don't pay much tax and generally don't pay much (if anything) for housing. Most live in small towns and cities where fresh food in the market is cheap. Child care is provided by a member of the extended family. They can and do spend their money on things that are important to them, affording goods if the right ones are produced for them to buy.
Importantly and probably unexpectedly, these consumers are extremely savvy about what to spend money on and what to save for. One Chinese woman is saving 40% of her money for her child's schooling. In India, a village woman with a cellphone charges others to use it and has a small, profitable business.
The people we interviewed have a strong sense of when and where brands play a role. People often want to buy brands not only for image but as a guarantee of quality.
|In the 1970s, 30% of China's population was below the poverty line. In 2005 that number was just under 3%, according to the UN.|
|Of Chinese consumers earning $200 per month, 84% have a mobile phone and 46% have a home computer.|
The myth is that they are price-conscious, but in reality they are value-conscious. For example, a miner in China wants a mobile phone with multiple functions, including an MP3 player. It costs a bit more, but it will also function as a camera, music player and calendar. In the Philippines, that cellphone is also used for banking transactions, which means you don't need to leave the stall you run to make a three-hour round trip into town.
People are well-informed. On several home visits, we saw that everyone had a TV. On one visit to the house of a Chinese policeman, the father and son were watching recent films and programs on VCD, the grandmother was watching a black-and-white TV in the bedroom and the mother was surfing the internet. Although the internet is heavily censored, commercial content abounds.
People might not be able to write, but they are savvy and entrepreneurial though. Hampered by a lack of formal education, they have lots of street smarts. In India, the Mann Deshi Mahila Sahakari Bank, run for and by women, opened in 1997 with 27 founding members who affixed their thumbprints to loan documents. This did not sit well with the government authorities. The women's response: "We are not book literate, but we are fiscally literate. Give us any math problem, and we will solve it in our heads." The bank got its license and today has 50,000 members. It gives out loans for amounts as small as 10 cents.
Professor Prahalad and others have rightly said the real opportunity isn't in changing the package sizes and price points of the same goods we sell in the West. It's in innovating to meet the needs of people through new or modified products sold at prices they can afford.
Take Vietnam, for example. I am writing this from Ho Chi Min City, where I have seen firsthand how people will change their buying habits if companies make products they can afford. The photographs my husband brought back six years ago after a visit here showed the streets packed with bicycles during the morning rush hour. Today there is hardly a bicycle in sight. Instead, the streets during rush hour are swarming with motorcycles.
Several companies we have worked with have excelled in learning about these consumers and developing new ways to meet their needs. A few examples:
Heinz Complan Family is a nutritional powdered-milk supplement that has strong equity in the Indian market. Our client sells two-serving sachet packs. This packaging innovation enables moms who cannot afford large quantities to give it to their children when they need an extra boost, such as during exams.
|For every $100 earned by an Indian villager in 1990, an urban worker made $82 more. By 2005 that gap had shrunk to $56.|
|India's 700 million villagers now account for the majority of consumer spending in the country -- more than $100 billion per year.|
|The percentage of urban Indians in the lowest income quintile has decreased from 25% to 3% since 2000.|
P&G has had success in China, where people who use tier-one brands represent only 3% of the market and people buying tier-two brands represent 45%. To win with the lower tier, P&G invested significant resources to understand consumers' washing habits, using the findings to build another version of Tide that would uniquely address the market's needs. This was a change from what most multinationals do, which is to take a more premium product and start cutting out the extras to be able to sell the product at a lower price. P&G did not want to do that because it would mean compromising Tide's product standards.
A couple of measures P&G took are particularly important. Packaging, for one, made clear differentiations between the premium and low-priced variants of Tide, so people knew exactly what they would get from each version. P&G also invested in its logistics infrastructure to reach wholesalers and traditional trade, as it can be difficult to reach low-income consumers.
The approach, complemented by advertising that reflected P&G's consumer research, has evolved into long-term success for Tide. The brand has grown steadily since entering the lower-tier market.
In Vietnam, the government wants to encourage women to join the workforce, especially women from small villages and the lower socioeconomic strata. Female students and first-time job seekers moving from the countryside to the cities need to groom themselves to make a good impression in a highly competitive environment. P&G used that knowledge to create a multichannel program (TV, radio, bus events, a website and a music show) to give rural young women grooming tips and other ways to become more confident and successful.
Same hopes, dreams
Such companies have been successful at marketing to Asia's majority because they have taken the time to understand people we rarely see in our daily life and often can't visualize. They have witnessed an active, thriving market. They understand that these people are no different than we are, with the same hopes, dreams, work ethic and entrepreneurial drive.
Big opportunities lie at the bottom of the economic pyramid. Microbanking, distribution systems that employ rural villagers, the internet and cellular connections are at the forefront of microenterprise and economic development. Marketers also need to think in terms of new alliances, new business models and local support to get things done. Product, packaging and pricing innovation -- which can arise only from a new way of thinking -- are key.
By providing low-cost yet high-quality products, we provide dignity and choice and hopefully make these people's lives a little easier. Everyone can prosper.
It starts with putting a face to the statistics.
Tips for winning over Asia's majorityAsian consumers, just like their U.S. counterparts, go for brands that understand their lifestyles.
- Don't think of the $2,000-a-year income bracket as an oddity. It's the average in Asia.
- Understand the informal economy, beyond World Bank and GDP statistics.
- Live with people: Visit homes, go to markets, take local modes of transportation.
- Listen to hopes and dreams and understand true motivations.
- Be human. Be kind.
- Sometimes Western best practices are not local best practices.
- Understand what people want and are willing to pay for valuable products and services.
- Don't just take an existing product and water it down.
- Build people into the DNA of new products and experiences.
- People with limited resources invest in brands they trust.
- Keep it real -- 10¢ can make a big difference in a person's life.
Michelle Kristula-Green is president of Leo Burnett, Asia-Pacific.