Gems: Claves para comprender las dinámicas de los mercados emergentes (Febrero 2012)

gems : Jan 2012 Page No. 1

gemsINSIGHTS FROM EMERGING MARKETSJanuary 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 China


Dear Readers,

Ashok Sethi Head of Consumer InsightsRapid Growth & Emerging Markets

Chris Riquier CEO, Asia Pacific


photo by tang yanfei

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.

However recent months have seen the emerging markets faltering on their growth path. Economists worry that China’s growth rate in 2012 may drop below 9% for the first time in more than a decade. India’s GDP increase has slid to 6.9% from 9% and further decline is expected. Clearly the emerging markets are also getting singed by the debt crisis in Europe and the extraordinary inability of the US to move forward to address its economic problems. As the world waits with bated breath for Europe to take decisive action to prevent the break-up of the Euro, and for America to give clear signals on how it plans to limit its borrowing and reduce the budget deficit, the emerging markets cannot but continue to feel the jitters.

However, it is not just the quakes in the developed world which are rocking the emerging markets – other calamities, both man-made and others precipitated by nature, have been causing the glitches (hopefully temporary ones). Thailand suffered unprecedented flooding, not only causing huge suffering and losses to the country but also to global companies which have significant manufacturing bases there. The Indian government failed to push through the much-needed reform for opening up the retail sector more liberally to global retail chains – which would have resulted not only in increased opportunities for companies like Walmart and Tesco, but also improved shopping experiences and lower prices for consumers, as well as better returns for suppliers and farmers in the country.

However, as usual there are plenty of positives despite the hiccups, and confidence in the emerging markets is high. We hope the new year will bring much-needed sanity and stability to the developed markets. 2012 is the Year of the Dragon, and China and other emerging markets look forward to many more achievements. China hopes to dazzle the world once again with its sporting prowess at the London Olympics. India, so far an under-performer at past Olympics, is still basking in the glory

of its Cricket World Cup win, and fervently hopes that national hero Sachin Tendulkar is not going to make them wait for ever to procure the unprecedented hundredth century in international cricket.

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. 2011-12


evolution

Until 1998, the poor were considered the white man’s burden, the needy recipients of charity. C K Prahalad’s path-breaking work on the Fortune at the Bottom of the Pyramid excited marketers around the world into recognizing them as potential consumers. Several rushed into headlong ventures to sell to the poor. Some failures have tempered BoP ambitions, as companies recognized that to create a sustainable market, creating the capacity to consume is a prerequisite. Today,

The Evolution of the BoP Concept

NIGERIA BY JAMES FERGUSSON, TNS GLOBAL TECHNOLOGY SECTOR

experience has created a more sophisticated model that views the poor as innovators, entrepreneurs, producers, consumers, market creators and much more.

The market is estimated at USD 5 trillion or 2.3 times the GDP of the UK, spread across the continents of Asia, Africa and Latin America. A large proportion of this amount is spent on food, but spends on technology and financial services are rising rapidly,

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.

Poonam Kumar Regional Director – Brand Strategy, TNS [email protected]


innovatingNeed to bridge the cultural gap

The challenges of researching BoP consumers are brought alive perfectly in Marcel Proust’s words about a voyage of discovery consisting of having new eyes rather than looking at new landscapes.

It is easy to be overwhelmed by the ‘landscape’ when researching the Base of the Pyramid. The tangible realities – economic disparities, infrastructure challenges, literacy gaps, issues of access – often take centre-stage in discussions about the challenges of marketing to and researching this segment. While these are certainly significant issues that we need to surmount, they often mask the subtler socio-cultural gaps that might inhibit our ability to communicate with and accurately ‘read’ the BoP consumer. This is particularly true when researching rural, geographically remote communities that have not had access to the same cultural input that urban consumers have – whether by way of formal education or informal learning, media or products and services.

We are defining ‘culture’ here as shared implicit assumptions about the way the world works. Such shared assumptions are essential for accurate communication and when gathering and interpreting data. When researching the BoP however, many taken-for-granted notions may not hold, and one of our biggest challenges is to take steps to bridge this gap. Differences in need prioritization

To start with, the very basic notion of consumption and spending for satisfaction of specific needs must be viewed differently. Given the diversity of needs that compete for limited disposable income, we often find situations where choices and trade-offs are being made across markedly different categories. The decision is not so much “what product do I choose to fulfil this need” but “which need should I choose to fulfil first”. It is therefore important

Seeing with New EyesBridging the Cultural Gap When Innovating for the BoP

INDONESIA BY FANNIE ASTRIA YULANDARI TNS INDONESIA

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 in income or social capital is often prioritized over personal comfort or convenience, and there are examples of diverse products that have targeted the need for economic advancement with success – ranging from mobile phones to fertilizers to personal care products.

Understanding the BoP grammar

Given that literacy is often poor among BoP consumers, marketing or other communication has typically taken recourse to messaging using common language, images and symbols. This is particularly true for visual grammar that is commonly applied. However, visual messaging assumes a shared visual language, which, as we are increasingly finding, is not an assumption it is always safe to make. For example, the idea of traffic lights, with green standing for ‘go ahead’ and red indicating a ‘stop’ or a ‘no’, is an urban notion. For consumers who have never seen a traffic light, the colours red and green do not have the same meaning. Using these to convey a message of safety or danger – for example, colour coding bore-wells to mark safe vs. unsafe drinking water – is unlikely to have the desired impact.

Visual communicator Laxmi Murthy, who works with NGOs to design communication for rural BoP communities, provides several examples of how well-meaning messages have fallen through because they used “simple, everyday symbols” that were indecipherable to the audience they were meant for. In the figure below, the tick and cross over the pot of water was meant to communicate the importance of keeping drinking water covered. However, ticks and crosses are formally learnt symbols, and not intuitively understood. The tick was decoded as representing a ladle to scoop out water, and the picture had no other meaning beyond this.

photo by qian lei, tnS china


Seeing with New Eyes Bridging the Cultural Gap When Innovating for the BoPContinued from previous page

Anjali PuriAPAC Regional Director, [email protected]

oneThe use of local partners to act as cultural bridges. For example, young people who work in the city, or community workers belonging to NGOs, can often act as cultural interpreters and help point us in the right direction while gathering data, as well as fill gaps in knowledge to aid in interpretation.

threeStudying 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.

twoDeveloping a process to understand visual grammar, and identify a common language that can be used to communicate visually.

Bridging the cultural divide is a process of getting ourselves new eyes to explore this terrain – a process that will hopefully enable more sensitive, more accurate assessment of opportunities in this segment.

Better understanding through better research

Most organizations working with BoP communities recommend prolonged immersions lasting several weeks to build contextual knowledge and circumvent the socio-cultural gaps that can inhibit an accurate assessment of issues. Since this is often not practical from a commercial market research perspective, we are currently engaged in experimental work to design efficient processes that can help bridge some of these gaps. Some of the approaches we are experimenting with include:

photo by qian lei, tnS china

photo by Sun ke, tnS china


dreamsMadhuri lives in a small village near Agra, in a household of 6 members. Her father owns a small piece of land that yields a family income of USD 4,000 per annum. There is enough for food, but there isn’t much surplus. Her family, however, manages to set some money aside to send Madhuri to a college in the nearest town. They have had big dreams for her, ever since they were told by the local school teacher that she was a bright girl with significant potential. They believe that with a college education and the affirmative action policy of the Indian state, she could get a salaried job at one of the mushrooming BPOs in the city. They believe this because they have seen it in the films they watch on the community television set and have also heard stories of people who have transcended to better lives and lifestyles.

Madhuri is 19 years old, dresses and lives modestly like the rest of her family, travels over two hours a day to college, attends classes, and spends what is left of her day studying or helping her mother at home. Unlike affluent teenagers, she does not have pocket money, but she is given small amounts for transportation and food. A look into Madhuri’s college bag however reveals that she has a tube of Neutrogena moisturizer – which is by no means the lowest priced face cream in the market. It has taken her a month to save money from her small lunch allowance to buy it, but she thinks it was worth the wait (and the sacrifice of lunch) because she believes it is more efficacious than the cheaper brands in the market. And that isn’t all! She combines the use of the face cream with a Ponds face wash bought by her friend. By each of them saving to buy one product and then sharing with each other, they get access to the required skin care routine to keep their skins soft, glowing and blemish-free.

The BoP’s relationship with brands, like everything else about them, defies dominant logic. Overlooked and ignored by the formal economy, the assumption is that this is a commodity market, all they need is a basic product and that brands are

unlikely to succeed. Instead we find that the BoP consumer demonstrates a surprising and strong preference to buy a brand over a commodity, so 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, they reward their brands with unshakeable loyalty, giving the early movers a strong competitive advantage.

So what does it take to build strong brand relationships in the BoP market?

Functionality and Relevance

It is necessary for the brand proposition to be anchored on strong functionality that makes a measurable difference in the consumer’s life. Functionality, in fact, needs to be put through higher standards of scrutiny since the brand often has to survive hostile ecosystems, withstand stress and is expected to last longer.

Any proposition targeted at the BoP competes with a range of priorities for a share of their limited income. To succeed, a brand must address a real life benefit in the BoP’s lives. Often this means that brand relationships start with information and education, reasons to believe and reassurance that their money is wisely spent. Brands that have done this have cause to celebrate. Unilever’s Lifebuoy commands a premium in rural India by delivering germ protection that has saved and changed lives. The Nokia story about connecting, empowering millions – sometimes even referred to as a lifeline – in the interiors of India and Africa is told and retold.

It is not enough to just be affordable. Pricing and quality are not tangential vectors when targeting the BoP market. As mentioned before, the brand must combine world-class quality, to counter hostile infrastructure, with affordable pricing. The

Dreaming Little Dreams

entire brand proposition therefore requires to be reengineered through innovation on product, packaging and delivery mechanisms.

Pedigree and Expertise

Expertise credentials are as essential as in developed markets. The role of expertise, however, differs – the need is not for new news, but to build trust, visibility and reassurance that the consumers are getting the best that their money can buy.

International pedigree, aspirational among the emerging middle class, is less relevant here and cannot be the sole motivating proposition. In the markets of China, India and Africa, local brands thrive among these consumers and are often looked at for inspiration and learning by MNCs.

Providing an Emotive Anchor

Functional relevance is critical, but it is equally important for brands to connect emotively. Lifebuoy’s credibility is built on more than just the Germ Protection platform. It is a protection brand that champions the cause of health and hygiene, has educated over 70 million Indians and continues to feature as one of the most trusted brands year after year.

Other emotive themes that offer real life benefits with optimism and hope and resonate with the BoP consumer are:

Enabling/Empowering – either self or family– enhances the brand’s appeal. For example, a laundry brand that cleans clothes that get recognition and approval, or tea that boosts mental and physical energy. Nirma, now a $500 million brand, had its modest beginnings with the low income consumer. With its promise of whiteness (distancing from brown that symbolizes dirt and poverty), it made powdered detergent accessible to low income households. Fair and Lovely, a whitening cream, thrives

Page No. 6


Dreaming Little DreamsContinued from previous page

among rural Indian households with daughters of marriageable 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 [email protected]

india by RakeSh Ranjan Singh, tnS india


mobileThe gender gap

Marketers of mobile phones and services are, of course, as interested in marketing to women consumers as they are in marketing to men. Hence the relatively lower ownership of mobile phones among women – particularly BoP women – in comparison to men is an obvious opportunity. A GSMA report from 2010 demonstrated that there is a large gender gap in ownership amounting to around 300 million fewer female than male subscribers. An analysis of TNS’ Mobile Life data from 2011 indicates that this ownership gap will not be narrowing any time soon. Looking exclusively at BoP respondents who don’t currently own a handset, we can see that men are intending to purchase more quickly than women – thereby meaning that the gender gap may even widen further.

Beyond commerce

However, selling phones to women is not just a commercial opportunity but also a developmental one. According to leading economist Jeffrey Sachs, mobile phones and the Internet will prove to be “the most transformative technology of economic development of our time”. Looking at the macro-economic level, an oft-cited paper by Waverman et al suggests that an

Mobile and BoP Women

Barriers to address

Firstly, there are several barriers which impede broader acceptance of mobile phones among the BoP women.

Broader-based gender inequalities at the BoP often • help explain the lower levels of ownership amongst women. In more conservative cultures, female ownership is frowned upon as it is seen to encourage inappropriate contact between women and men outside the direct family. On the level of individual relationships, men sometimes object to their wives owning phones owing to fears of infidelity.

-Targeting families rather than individuals with appropriately communicated service offers can help allay such fears and help drive uptake.

• Competing demands on personal income mean that the mobile value proposition and ROI must be clear and compelling

-Awareness-raising of the benefits of mobile ownership / usage is a critical first step in driving uptake. This could be undertaken by an ‘alliance’ of MNOs, possibly with the support of other relevant parties (governments, NGOs).

• Women in some markets find it awkward to purchase or learn about mobile products from men.

-Promoting the inclusion of female vendors within the retail networks of MNOs can help address this barrier .

extra 10 mobile phones per 100 people in a typical developing country leads to an additional 0.59 percentage points of growth in GDP per person. Indeed, thinking at the micro-level, there are numerous examples of how mobile usage can help the BoP on the route out of poverty. At its most basic, mobile connectivity can save the costs of travel, and provide business people with an essential means of reaching their customers. Mobile connectivity can help the rural poor access up-to-date information on crop prices, thereby improving their incomes. There is a whole specialist sector within the development industry which is now focused on M4D (mobile for development) – the natural evolution of the ICT4D meme, when it became clear that Internet access in emerging markets is largely a mobile phenomenon. While the majority of such initiatives are not, as yet, commercially viable (as a recent paper by Hystra / Ashoka demonstrates), nonetheless it is clear that mobile can be a powerful tool driving developmental outcomes.

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 usage are not currently proliferating in a gender-neutral manner.

Addressing the gender gap

TNS is currently carrying out a large study for the GSMA mWomen team which seeks to understand the underlying needs, challenges and aspirations of BoP women in order to scope, from the ‘ground up’, opportunities for mobile services which could help make an impact on BoP women’s lives and work towards reducing the gender gap.

Full results of the study will be released at Mobile World Congress next year, but using a mix of insights from this and other studies (including a publicly available study for Movirtu), we present below some lessons which may be of interest to both commercial companies and other actors with an interest in driving mobile uptake amongst BoP women.


Continued from previous pageMobile and BoP Women

Bob BurgoyneAssociate Director, Technology and Digital ResearchTNS RMS, [email protected]

Potential services

Secondly, women can perceive and experience some specific and gender-unique benefits in mobile ownership, which can act as effective hooks to induce purchase.

• Children are the main aspirational focus of women at the BoP, and services relating to their general welfare, health or education will have deep resonance with this group. An example is the SMS-based examination results service administered by the Kenya National Examinations Council, where mothers are able to learn the results of their children’s exams by simply sending an SMS with the candidate’s number to a simple short code.

• 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 source of emotional support. Accordingly, services with a religious element would resonate strongly with this group and could help drive uptake more generally. In India, this market is already well developed, with religious VAS (value added services) ranging from a prayer as alarm clock, to an automatic updates service notifying users of auspicious / inauspicious dates and times for particular activities.

• 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 of the poorest households nonetheless own a TV or

radio and this provides a source of entertainment for BoP women, they also express a strong interest in and indeed usage of entertainment services via mobile.

As data from TNS Mobile Life study, again focused on the BoP, demonstrates, BoP women in both Uganda and India are highly likely to listen to the radio on their mobiles, and in Uganda in particular, there is a high level of consumption of mobile games. This suggests opportunities for operators and manufacturers to drive incremental usage by developing and promoting such content and capabilities – and also opportunities for social sector participants to leverage this interest by creating

‘infotainment’ type services.

Concluding remarks

Marketers of mobile phones and services not only have an obvious opportunity to sell their wares to the women at the BoP, in doing so they will be addressing a major challenge to the developmental agenda, particularly to the third UN Millennium development goal on gender equality. Hence it not only represents a commercial opportunity, it also addresses an important development task. As the forthcoming study for the GSMA will demonstrate, under-served BoP women are a potentially significant market for mobile products and services. Capitalizing on this opportunity requires a careful, nuanced understanding of the priorities of these women as well as the social and economic context of their lives.

china by Zhao lotuS, tnS china


maradonaMaradona’s love

Villa Fiorito is a slum on the outskirts of Buenos Aires. It is a poor and sometimes dangerous neighbourhood like so many surrounding the Argentinean capital, with its magnificent parks and grandiose city centre. It is the birthplace of Diego Maradona, one of the eight children of Diego Maradona Snr, a bricklayer, and his stay-at-home wife Dalma Salvadora Franco.

Maradona is an icon in Argentina and a hero for the Argentinean poor. As for any typical Argentinean, family is the most important and constant factor in his life. When he played for Barcelona and later for Napoli, his family lived with him in Spain and Italy. He eventually left Italy, claiming that his family was threatened by the Camorra, the Neapolitan mafia.

In his autobiography, Maradona admits he was not always faithful to his (now ex-) wife Claudia, but he refers to her as the love of his life and even after their divorce they were seen together on many occasions. Their daughter Giannina is engaged to Manchester City striker Sergio Agüero, who was a favourite of Maradona when he coached the Argentine national team.

However no woman has been more important in Maradona’s life than his mother. She died on 19th November 2011 after a short illness. Maradona was in Dubai at that time and desperately tried to fly back to see her in time, but was too late. Dona Tota was 81 years old.

It is all about family

Maradona’s love for his family is typical for Latin Americans and even more important for those at the Base of the Pyramid (BoP). Admittedly, family is important in any culture and any social class, but only football stars coming from the slums of Argentina and Brazil would bring their whole family to Europe to make their millions; and when these close relationships get strained (for example by divorce), they often return homesick, as Manchester City’s Carlos Tevez has recently demonstrated.

Maradona and his Mother The Importance of Family at the Base of the Pyramid

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 the government, police, army, law courts and political parties could (and can) often not be trusted, so arriving as poor immigrants from Europe, the only relationship people could rely upon was family. This continues today: a recent TNS Study on Well-being ranks the importance of family well-being higher than anything else.

Former Argentina World Cup winning captain Diego Maradona kisses his mother Dalma in Buenos Aires in August 2005. Dona Tota, as she was known, travelled with Maradona throughout his career and she and her family lived with the former soccer superstar when he played at Barcelona and Napoli in the nineties.

This applies especially for those living at the Base of the Pyramid, as they have fewer career options and need their family for survival and happiness. The happiest day of their life is invariably the day they got married or became parents.

Family as marketing theme

Consequently, family, protection and fortification are very important marketing themes when communicating with the BoP and can be used successfully as positioning themes. Family orientation and family care resonate – clean clothes that get recognition or approval, or yoghurt that boosts mental or


Maradona and his Mother Continued from previous page

physical capacity. Many Latin American companies are successful in selling their products and services to the BoP, as they often understand the target group and their focus on the family better than their multinational competitors. Let’s look at three interesting examples:

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 have access to credit; and many were self-builders with a high waste of materials.

CEMEX addressed all of this with Patrimonio Hoy, a program of microcredit in materials and construction consultancy to build a 4x4 metre room in 70 weeks and to freeze prices for 2 years. Most importantly, the credit was given to the female head of the household and family was used as an important marketing theme: building a home for your family. As families had little that they could offer as collateral, the company worked with social collateral - the loan was guaranteed by two friends or family members. Patrimonio Hoy delivered US$135 million in extra sales and has subsequently been rolled out in many countries including the Philippines and Egypt.

Habib’s: first restaurant visits for BoP families

By targeting the BoP, Brazilian fast-food chain Habib’s has become the biggest Arabian fast-food chain in the world and the second biggest fast-food chain in Brazil after McDonalds. The strategy of offering low-cost fast-food combined with a well-structured logistic network has proven

Wander MeijerGlobal Head International [email protected]

itself extremely successful in Brazil. Not only was Habib’s the first fast-food chain to approach the BoP market by offering accessible prices, it also gave these people the opportunity to go out with family and friends, being one of the few options of entertainment available for them.

Pirulo: Largest ice cream chain in Buenos Aires, ice cream accessible to all

Carlos Flores (owner) understands his customers owing to his background: he considers himself a graduate from “the University of the Street”. Pirulo has shops in zones where other ice cream shops dare not venture because of security issues. It has non-traditional and cheap promotions such as attracting the neighbourhood kids with a loud and brash siren. Pirulo has a franchise system that delivers volume to consumers and practices corporate social responsibility as it gives free ice cream to retirement homes and kindergartens, which also shows the importance the company places on Word of Mouth marketing.

Having business success at the Base of the Pyramid means really talking to consumers by referring to their values and

traditions such as their child excelling in school, a clean home and a mother’s pride and ambition. It’s a long time ago since Maradona lived in a slum: he now lives in a wealthy Arab city – but it’s a safe bet that he will return to his family and roots as often as he can.

aRgentina by delfina RoSell, tnS aRgentina


BoPBase of the Market in China

BoP (Base of the Pyramid or Bottom of the Pyramid) is not a term that is often associated with China. China has come to attract the world’s attention through its ballooning middle class and luxury market, hence becoming known more for its top than its bottom! However the BoP in China, as elsewhere in the world, can be an attractive market – and is a segment that needs to be looked at not just from a philanthropic point of view, but also as a business target.

Defining the BoP

The term “Bottom or base of the Pyramid” is used in a number of different ways and has been subject to different definitions and interpretations. We need to be careful not to confuse this group with those that economists often refer to as living below the poverty line, who do not have the wherewithal of basic existence. The target group that we are referring to is really more the “lower middle” of the pyramid – those who have the money for essentials and a little more. The World Resources Institute* defines the BoP as those consumers who have an annual income of less than US$3,000 (on a 2002 purchasing parity basis, or roughly $8 a day). Within this group around 1 billion live in extreme poverty, earning less than $1 a day and often struggling to make ends meet. However, above this level, 1.6 billion earn $1-2 a day, spending largely on essentials, while another 1.1 billon earn around $2-8 a day and have significant discretionary income. China has made huge progress in eliminating poverty, and hence the size of the lowest segment of the BoP group has reduced significantly. However the sizes of the middle and upper segments of the BoP groups in China are substantial – according to The Boston Consulting Group and the World Economic Forum analysis based on information from the World Resources Institute, in 2009 nearly 500 million Chinese

BoP in ChinaThe Second Largest Luxury Market in the World

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.)

Who are the BoP in China?

The BoP of China are a heterogeneous lot without the dominance of any one particular group (for instance agricultural workers, as in other emerging markets like India). There are several segments of consumers in China who can be classified as the middle or upper BoP. These include:

Rural peasants working on small parcels of land (according • to the National Bureau of Statistics the per capita disposable income of rural Chinese in 2010 was RMB 5,919 a year, that is less than US$1,000 based on current exchange rates)

Over 200 million migrant workers from rural areas who • work in urban factories, construction sites and provide low-skill services to the urban residents. Their wages range from RMB 1,000 to RMB 3,000 per month, putting them squarely in the upper segment of the BoP

Unskilled workers, factory workers and petty traders in • cities with wages similar to those of migrant workers

A growing population of retired people over 60 years • old, living on modest pensions (China is greying rapidly – according to the 2010 census over 22% of Shanghai’s population is above 60 years of age)

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 choice of products and brands.

BoP Consumer Needs in China The BoP in China is also marked by some distinctive characteristics, which makes it somewhat unique. To start with, near universal literacy and a well-built infrastructure ensures that the BoP in China lives a relatively more connected and aware existence. Secondly, there are 112 television sets for every 100 rural households, which ensures that even disadvantaged consumers are relatively well-informed. Thirdly, the BoP consumers in large parts of the world are caught in the midst of political and social strife which further compounds their misery and hinders access to products and services. However the environment in China is relatively stable and does not pose an additional barrier to the improvement in the living standards of the target group.

While we need to acknowledge these important differences, we also need to recognize the common elements that they share with the rest of the world. They also have low and fluctuating incomes and are first-time consumers of many products. Most importantly they are disadvantaged both in terms of affordability and access but are desperately looking for opportunities for enjoyment of meaningful products and services and a better quality of life for themselves and their children.

Marketing to the BoP in China

With such a large and heterogeneous target group, any blanket advice about how marketers should tackle this group is fraught with risks of over-generalization. However we give here a few points which we feel marketers will do well to employ as the underpinnings of their strategy.

china by liu Siyi, tnS china


BoP in ChinaContinued from previous page

Ashok Sethi Head of Consumer InsightsRapid Growth & Emerging [email protected]

Feature-rich bundles at an economical price. To start with, marketers often feel that the BoP needs to be served with basic products and services which do not have the value-added features and bells and whistles attached to products marketed to middle-income consumers. This will be a wrong strategy for China and the BoP consumers. High levels of literacy and exposure ensures that their familiarity with what is available and what benefits are on offer is high. In fact it is often seen that products popular with the BoP in China are feature-packed but compromise on aesthetics and certain other features or associations which the middle class consumers may desire. An example of this is the “shanzhai” phones (country-made phone models, which are feature-rich copies of iPhones and other high-end phones at a fraction of the cost) which are extremely popular with this segment.

Balance of mass media and local media. The BoP in China has a complex relationship with mass media – particularly television. The reach of television is very high, and the advertising of a product on the television imparts it with a certain threshold level of credibility. However, the living environment of the BoP consumer offers many opportunities of reaching them through local media and channels (particularly outdoor ones). Local media will often have advantages over the national media in terms of cost and the ability to reach the consumers in their natural environment. Given this, it is not uncommon for brands to rely heavily on local media, but also make an occasional presence on CCTV (the national television network) so that they can claim “advertised on CCTV” in their local advertising!

Digital is relevant for the BoP also. China is home to the largest number of Internet users as well

as the largest number of mobile phone users in the world. The Chinese government sees the Internet as an important economic development tool to empower the people in rural and remote areas. Internet access in rural areas of China is expected to continue to increase exponentially. The Internet will also provide consumers with access to more products and services. E-commerce in China has a distinctive flavour and unique characteristics, marked by a profusion of websites and group buying options, offering extremely cheap and competitive products to consumers. This would imply that marketers cannot ignore “digital” when marketing to the BoP in China – and e-commerce, social media and online word of mouth all need to find a place in their strategy.

Develop a local retailing strategy.The large format, organized trade model is already accessible to certain segments of the BoP in China and will increase rapidly in the future. However the retail chains which see lower-tier cities and BoP consumers as their next target need to customize based on local conditions. The store’s opening hours, for example, need to fit the people’s life-style and work schedules. A supportive in-store environment which helps in product selection and trained staff who can demonstrate the product features in the local dialect play a huge role.

Branding with life values. Unlike the common perception, BoP consumers value brands and show a brand loyalty that can often surpass what is exhibited by mainstream consumers. Intrinsically less experimental, risk-taking and flirtatious, the BoP consumers tend to stick to their chosen path and the chosen brand if their product experience has been satisfactory. Of course, powerful branding can further enhance the experience and create a bond with the

consumers. In fact the pioneer brands are often rewarded by the BoP using their names as the category names. While brand-building efforts need to clearly hinge on the tangible product qualities, the BoP consumer is not immune to emotional appeals. Of course, the specific appeals need to hinge on emotions that the BoP target group can identify with – emotions revolving around protection of family, dreams of a better life and specifically aspirations for their children.

*The Next Billions: Unleashing Business Potential in Untapped Markets, World Economic Forum, January 2009.

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technologyMobile Technology Usage in Emerging China

Untapped opportunity

With a population over four times that of the United States and over 100 cities with 1 million people or more, the commercial opportunity of China speaks for itself and is not really a secret. However when most multinationals think China, their focus is often limited to larger Tier 1, 2 and occasionally Tier 3 cities. However half the urban population of China is in small towns and cities (smaller than tier 3), and 50% of China’s population is classified as rural, which would include a significant BOP (Base of the Pyramid) population. Not only is this population relevant and potentially profitable, they are also using technology in ways that are sometimes even more sophisticated than what is seen in developed markets.

Many companies fall into the trap of thinking that China’s BOP consumers in rural areas and small towns are unsophisticated and out of touch with the latest technological developments. However from our extensive experience in researching small towns and rural areas of China, it is clear that the marketers ignore this group at their own peril and at the risk of missing a substantial growth opportunity.

Technology sophistication

Our extensive research indicates that technology usage in lower tier and rural China is quite sophisticated with strong reliance on mobile devices (both smartphones and feature phones) evident in communication, social media consumption and for information searches as part of the path to purchase. The sophistication of usage rivals Tier 1 cities such as Beijing and Shanghai, although the devices consumers are relying on differ.

From Mobile Life data (a TNS Syndicated study), it is clear that when desire and demand exist, the technology will follow, or more likely leapfrog that of developed markets to satisfy demand. China has reportedly surpassed the U.S. to become the world’s largest market for smartphones in the last quarter, and this increase is not being driven solely by Tier 1 and Tier 2 markets. The potential to capitalize on the growth of technology

among this huge consumer base is one that exists for companies of all verticals, and one that should not be missed.

TNS research indicates that small-town China is ready for e-commerce and mobile-based marketing strategies. The key is for businesses to develop digital strategies to take advantage of this enthusiastic adoption of technology.

Local flavours, local brands

Whilst global brands such as Samsung, Nokia, LG, Motorola and even Apple are predominant in Tier 1 China, it is local brands which lead the way in smaller cities and towns. Furthermore, the fundamental role of brands is different is lower tier cities. Brand decisions appear less aspirational in

lower tier cities in China – whilst Apple is strongly desired in Tier 1 China, it is almost completely unknown in rural China. Technology products are evaluated and accepted primarily for their functionality, with brand image coming as a secondary consideration. As consumers in these markets typically face greater economic constraints, they look for brands that represent trust, reliability, and functionality. In the consumer mind, well-known international brands typically represent these attributes, indicating that international device manufacturers should invest a greater focus on value, trust and reliability (rather than image and status) in marketing and communicating to lower tier consumers.

Despite the trust invested in international brands, many local Chinese brands (Huawei, ZTE and Taiwanese Dopod

china by Xin tina, tnS china


Fiona Buchanan Sector Development Manager Global Technology [email protected]

Mobile Technology Usage in Emerging ChinaContinued from previous page

for example) offer mobile devices with features and intuitive functionality comparable to their global counterparts – often utilizing the same (Android) operating system. With brand image taking a back-seat in decision making for these consumers, local partnerships in these markets gain importance.

Mobile vs. PC for Internet

The role of the mobile in small-town China exists in balance with other digital and communication media, particularly that of the PC. Without a range of additional devices in the household, the PC fulfils entertainment functions, typically providing faster speed and a superior visual experience on its larger screen than the mobile phone. i-Cafes are utilised for heavy bandwidth needs (advanced gaming and movies etc.) or as a PC substitute for mobile-only owners. A substantial barrier to PC usage that remains is the absence of Wi-Fi within houses, resulting in the PC often being inaccessible – stored in a bedroom of the house where other family members sleep, watch TV, or retire for rest. As Wi-Fi connections and 3G availability increase in these cities, the utility of the PC will increase, however with these infrastructural developments, the rise of the tablet (a currently unknown quantity) is also expected owing to its strong entertainment functionality.

Whilst PCs are strongly favoured for entertainment and multimedia, mobile – a device that has the advantage of always being with consumers and always being on – is favoured for communication, social, and business usage. SMS, social networking, and instant messaging dominate digital communication across rural China, and these are predominantly accessed via mobile phones.

“Smart” users – not necessarily “smart phone users”

Although smartphone penetration is still low in small-town China, the incidence of ‘smart users’ is increasing. Users are gaining sophistication via their feature-phones. They are engaging with advanced functionalities such as Internet surfing,

social networking, and basic gaming. Through these behaviours consumers are bridging the gap between ‘dumb-phone’ usage and ‘smartphone’ adoption. As smartphones penetrate these markets further with lowered prices and increased availability, advanced usage will ensure rapid uptake.

Evidence of this smart use is evident from the fact that QQ (a service similar to MSN in China) is omnipresent, with both consumers and SMEs – it is not only used for personal reasons such as communication with friends and gaming with friends, but also from a business perspective whereby SMEs connect with suppliers and share advice with their communities. Brands in a wide range of relevant categories such as apparel, homeware, furniture, ICT and consumer electronics have an opportunity to connect with consumers and develop a strong brand community via a much-used channel. Such digital strategies will however fail without a functional mobile solution that is viable for both smartphones and feature-phones.

An opportunity that exists here for all brands lies in digital strategy development. The potential to connect with consumers through user-generated videos, downloaded media, online TV,

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news sites, and games is huge. To effectively capitalise on this, however, integration of brand communication in entertainment-based digital media is key.

Brands must ensure that to reach consumers in China’s lower tier cities, social media strategies are tailored to the mobile platform. From TNS’ Digital Life study it is clear that earned media (i.e. consumer-generated positive word of mouth in social media) holds strong credence in China, and consumers are most commonly looking to offer advice or share their opinions with communities – providing a functional platform to allow this kind of strong consumer-generated content via mobile will place brands ahead of the curve in small-town China. This is as relevant for the BoP as for other consumers, as word of mouth has always been a powerful influencer for this segment.

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Chinese consumers in 2012

As the world is shaking off the hang-over from new year festivities and slowly ambling back to work, the Chinese still have a few weeks before the year of the rabbit sprints off and the mighty dragon is ushered in. The developed world has seen a miserable year and this has been a difficult year for the Chinese too. Inflation has been consistently high - the consumer price index increase finally being reined down to under 5% only in November, economy is slowing down - and the Shanghai Composite index has lost more than 20% of its value since the beginning of the year. However 2012 is the year of the dragon - which is as propitious and auspicious as they get. With furrowed brows and much on their mind, the Chinese look back at 2011 with reflection and look forward to 2012 with optimistic anticipation.

Slow train coming

While in 2010 the nation witnessed a devastating fire in a 28 storey building under renovation in Shanghai in which 58 people lost their lives, in 2011 it was the Wenzhou train crash which resulted in similar protestations and lament at a preventable tragedy. China has been on the fast track in developing the largest fast train network in the world, with trains running at speeds of up to 350 kms an hour. The “gao tie” high speed train service between Shanghai and Beijing was inaugurated around the middle of the year and now consumers can do this journey of 1300 kilometers in just over 5 hours. However, the euphoria over this undoubtedly extraordinary achievement was short lived, when two high speed trains collided (though on a different route) taking many lives with it. The Chinese citizens were aghast and protested vociferously against suspected flouting of safety standards and lack of transparency. Transparency is something the Chinese are likely to demand more and more in 2012 - whether it is from the government or the companies who try to sell to them.

Swill oil and other food horrors

A few years ago the Chinese encountered the “melamine tragedy” - in which unscrupulous middlemen adulterated milk with the chemical. Hundreds of children developed stones in their kidneys and a few lost their lives. This year the consumers continue to be

confounded by more food scares - the most horrifying of which was the alleged recycling of used cooking oil from sewers next to the restaurants. Consumers were also scared out of their wits by feeding of clenbuterol to pigs, which results in lean meat but can cause nausea, dizziness and heart palpitations in people who eat animals that were fed with it. We can be sure that the consumers are going to demand the highest level of food safety from manufacturers in 2012.

PM2.5 detector on the roof of the American Embassy

The health concerns of the consumers were not just confined to what they ate, but also the air they breathed. The number of smoggy days in Beijing and other big cities seem to have increased in recent times. Consumers complained that the official reports on air pollution were not accurate when they saw the results of the air pollution monitor that the American Embassy installed on its roof in Beijing. The Americans also measured PM2.5 particles (particles in the air with a diameter of less that 2.5 microns) which some scientist believe are actually more harmful than the larger ones. The government now has agreed to report PM2.5 in their pollution reports and hopefully the citizens can breathe more freely and look forward to cleaner air in 2012.

Rousing out of callousness

The Chinese have often felt that, preoccupied with the pursuit of money, there is certain degree of callousness that has overtaken the country and we often ignore injustices around us and hesitate to extend a helping hand. It took the tragic death of 2 year old Yueyue that roused the collective conscience of the nation and the Chinese took to upbraiding themselves for the thickness of their skin. The two year old was run over by two vehicles in Foshan, Guangdong and ignored by passerby’s till a cleaning lady took notice. It is believed that a major factor which restrains the 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 prominent professors from leading universities offered to compensate their students and cover their liabilities if they were ever sued by the subjects of their help. 2012 should see more sensitive hearts and more willing hands in China. china by han hettie, kantaR health china

letteR fRom china


china by li yanping , tnS china

china by li yanping , tnS china

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 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.

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.

Letter From ChinaContinued from previous page


CHINA BY XU YUE, KANTAR ITP CHINA