tns global: gems – insights from emerging markets 1/2010
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By TNS' Global Rapid Growth & Emerging Markets Insights team - Yes we can! - The social dynamics of microfinance and entrepreneurship at the BOP - Evaluating social mission projects in emerging and BOP markets - Are you digitally awake to Asia? - Letter from ChinaTRANSCRIPT
gems : APRIL 2010 Page No. 1
gemsINSIGHTS FROM EMERGING MARKETS
n Yes we can!
n ThesocialdynamicsofmicrofinanceandentrepreneurshipattheBOP
n EvaluatingsocialmissionprojectsinemergingandBOPmarkets
n AreyoudigitallyawaketoAsia? n LetterfromChina
gems : APRIL 2010 Page No. 2
It gives us great pleasure to bring you the first issue of GEMs – devoted to bring you insights and information from Rapid Growth Emerging Markets.
James FergussonGlobalDirectorRapidGrowthandEmergingMarketsJames.Fergusson@tns-global.com
Ashok SethiConsumerInsightsDirectorRapidGrowthandEmergingMarketsAshok.Sethi@tns-global.com
Welcome to GEMs!
Werealizethatitisdifficulttoprovideyouwithanin-depth analysisofconsumersinthesevastandheterogeneousmarkets.Howeverwedohopeweareabletoprovideyouwithsomefoodforthoughtandalsowhetyourappetitetodigdeeperandlearnmore.
ThisissueisdevotedtoconsumersattheBottomofthe Pyramid(BOP).BottomofthePyramidwasatermfirstpopularizedbyDr.C.K.Prahalad–professorofstrategyattheUniversityofMichigan.Dr.Prahaladsaidthatthisgroupisnotjustworthyofcharitybutcanbeanattractive,albeitavalueconsciousconsumersegment.
Dr.PrahaladproposedthatofferingrelevantandattractivelypricedproductstoBOPconsumersisactuallyanactof engagingthemandbringingthemfromisolation,thereby marryingthetasksofpovertyalleviationandbusinessdevelopment.
Researchingthistargetgroupposesitsownhurdlesand challenges.Thetaskdemandsagreatdealofsensitivityandunderstandingofthetargetgroup.TNShasbeenableto
garneravastamountofexperienceinstudyingBOP consumers.Inthisissuewebringtoyouaglimpseofsomeofthekeythingswehavelearnt.
InadditiontoseveralarticlesfocusingonBOP,thisissue includesanarticledescribingtheinternetrevolutioninAsiaanditsimplicationsformarketers.InternethasgoneonitsowntrajectoryinAsiaandinmanywaysAsiahasembracedWeb2.0morewholeheartedlythantheWest.
Lastly,thewordsofeconomistsandtheirexpectationsofChineseconsumerssavingtheworldbycopyingAmericanconsumers’spendinghabitsprovidesagreatsourceofdebateandevenamusement,andisthesubjectofourfirstregular‘LetterfromChina’column!
Wesincerelyhopeyouenjoyreadingthisissueandlookforwardtoyourcommentsandsuggestions.
PHOTO: INDIA BY ANUJ ROY
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yes we can
Inthreedecades,Grameenbankhasempowered40millionpeopleinoneoftheworld’spoorestcountriestosay‘Yeswecan’.AchievedthroughmicroloansoflessthanUSD10each,Grameenhaschangedthefortunesofseveralgenerations.What’smore,unlikethestrugglingbanksofthedevelopedworld,Grameenboastsarecoveryrateofover98%!!
PriortoGrameen’sinitiative,theworld’spoor(overhalftheworld’spopulation)havebeenregardedasunfortunatevictimswhoneedtoberescued.AsaresultofGrameenandothersuc-cesses,thismindsethaschanged.TheBOPconsumerisnowperceivedandexploredasnotjustaneconomicallyproductiveunit,butalsoasapromisingandgrowingmarketwithacollectivebuyingpotentialofUSD5trillion!
Theseconsumersrepresentamarketopportunitythattheworldcannotaffordtoignoreorneglectfromaneconomic,socialandhumanperspective.BOPconsumersrepresentovertwothirdsofthepopulationintheemergingmarketsthateve-ryoneishopingwillshowthewayoutofthedownturn.Theyformasignificantpartofthenascentandvirginpotentialthatmustbeunlockedtorealizethepromiseinthesemarketsandareevenmorecriticalforlongtermsocialstabilityandprosper-ity.
Witheveryoneeyeingtheopportunity,muchhasalreadybeenwrittenabouttheparadigmshiftsrequiredinthebusinessmodel.Theneedtorevisitprice-product-qualityequations,theneedforinnovation(thatisbuiltfromthegroundupthroughcommunityinvolvement),theneedforcapitalefficiencyandcoarsesegmentation,theneedforaccessibilityandaffordabil-ity,andmostimportantly,theneedforeducation,skilldevelop-mentandcommunitybuildingthatwillempowereventhemosttimidofthemalltosay‘Yeswecan’.
Brandsuccesses,likeeverythingelseintheBOPsegment,defythepowerofdominantlogic.Overlookedandignoredbymostmarketersasacommoditymarket,theBOPconsumerdemonstratesasurprisingandstrongpreferencetobuyabrandoveracommodity,aslongasthepropositionismadeaccessible and affordable.
Brandsarevalued,evenloved,astheyofferreassuranceandcertaintyintheseconsumers’uncertainlives.Andoncewonover,BOPconsumersrewardthebrandswithunshakeableloyaltygivingearlymoversastrongcompetitiveadvantage.TNS’accumulatedknowledgeandunderstandingofBOPconsumershasresultedintheidentificationof9pertinenttipstobuildingbrandpropositionsthatwillsucceedamongBOPconsumers.
Yes we can!Bottom of the Pyramid (BOP) was a term first popularized by Dr. C.K. Prahalad – professor of strat-egy at University of Michigan, who wrote a book called “The Fortune at the Bottom of the Pyramid”. In this article Poonam shares her experience in developing marketing strategies for this segment and explains that branding is as important for this group as any other segment.
Poonam Kumar, Director of Brand Strategy of Emerging Markets, TNS AP MEA
PHOTO: CHINA BY SHAWN WANG PHOTO: EGYPT BY STEVE HAMILTON-CLARK
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one9 tips to building brand propositions that succeed in BOP markets
Thebrandmustbeanchoredonstrongfunctionalitythatmakesatangible,measurabledifferenceintheconsumer’slife.Thisimpliesthatinformation,educationandreasonstobelievearecoretoreassuringthattheirmoneyiswiselyspent,tobuildingtrustandarelationship.
twoItisequallyimportantthatthebrandservesasanemotionalanchor–asourceofhope,optimismandprotection.
three
four five six
seven eight
Pricingandqualityarenottangentialvectors.Thebrandmustcombineworldclassqualitytocounterhostileinfra-structurewithaffordablepricing.Theentirebrandproposi-tionthereforerequiresreengineeringthroughinnovationonproduct,packaginganddeliverymechanisms.
Pricingmustbeempathetictotheconsumer’sbudget,butthisdoesnotmeanthattheBOPconsumeralwaysbuysthecheap-estbrandavailable.Theyrespondfavourablytoademonstrationofvalueandarewillingtopayincrementallymoreforit.Familycarepropositionsalsograntpermissiontospendalittlemore.
Expertisecredentialsareasessentialasindevelopedmarkets.Theroleofexpertisehoweverdiffers–theneedisnotforinnovationandnewnews,butexpertiseisrequiredtobuildtrust,visibilityandreassurancethattheyaregettingthebestthattheirmoneycanbuy.
Internationalpedigree,aspirationalamongtheemergingmid-dleclass,islessrelevantandcannotbethesolemotivatingproposition.InmarketsofChina,IndiaandAfrica,localbrandsthriveamongtheseconsumersandareoftenlookedatforinspirationandlearningbyMNCs.
ProtectionandFortificationpositioningthemes–bothphysicalandmental–resonate.Enablingcleanclothesthatgetrecogni-tionandapproval,teathatboostsmentalandphysicalenergydirectedateitherselforfamilyenhancethebrand’sappeal.Whateverthepositioningtheme,simplicity,inclusivenessandaccessibilitymustbeintegraltotheproposition.
Thepropositiondoesnotalwayshavetobeaboutthebarenecessities.Despite,orperhapsbecauseof,themanypress-inglifeconcerns,abrandthatpromisesfun,surprise,sensorialpleasureoraspecialmomentbringscheerandiswelcomedintotheconsumer’slife.Thisisespeciallyneededfornon-essentialconsumption,butcanaddvalueinallcategories.
nineFinally,itisnecessarytorecognizethatalthoughmostsuccessesareonaffiliativepositioningthemes,BOPneedstospantheentirehumanneedsspectrum.Themesaboutexcellenceandsuccesshavealsobeenleveragedsuccessfully.Brandsventur-ingintotheassertiveneedsdomainhavedoneiteffectivelythroughpromisesofmasteryoverbudget,admirationandenvyofsuperiorhomemakingskills,andparentalprideandambition.Rebelliousnessandexclusivityhoweverhavenoplacehere.Inclu-sionisimportantasismeaningandpurpose.Thepromisehastobeaboutempowermentratherthanexclusivity;challengeshavetobeaboutchangingunfairpracticesratherthanedgyurbanrebelliousness,superiorityshownwithagoalratherthanegosatisfaction.
THE TIME HAS COME FOR US TO NOW CONSIDER A DIFFERENT PYRAMID – ONE THAT IS INVERTED – BASED NOT ON INCOME, BUT ON OPPORTUNITY AND GROWTH.
And… yes, we can!
Yes we can!Continued from previous page
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social dynamicsThere has been a huge collective action involving millions of poor people and thousands of NGOs, activists, inter-governmental organization officials, scholars and other development experts around the issue of microfinancing in developing markets. Figures provided by the report “State of the Microcredit Summit Campaign” constitute an impressive snapshot that portrays a several fold growth in the level of microfinancing: from 2000 to 2006.
Inthisarticleweanalysethelinkbetweenentrepreneurshipandmicrofinance,takingArgentinaasacasestudy.ResearchconductedbyTNSinArgentinashowsthat:a.Entrepreneurshipisaclearneedamongthepoorandalsohasagreatpotentialfortheirfinancialprogress.b.Whenthatneedisfulfilledthroughmicrocredits,itgeneratesimportantchangesintermsofmaterialprogress,developmentofsocialcapitalandempowermenttothemostvulnerableandpowerlesssectorsofsocieties.
Entrepreneurship and its constraintsEntrepreneurshiptothepooroffersawaytoimprovetheirliveli-hoodandhenceonepossiblepathformaterialsurvival.Afairlysignificantproportionofthepoorarealreadyengagedinentre-preneurialactivities.ResultsfromaTNSArgentinanationwidesurveymeasuringbehaviourandperceptionstowardsentrepre-neurshipandfinancialservicesamongArgentinecitizensatthebaseoftheincomepyramidshowsthat2outof10personslivinginpovertysaythattheyhavedevelopedproductivebusi-nessesontheirowninthepast.
Thesurveyalsoshowsthattheproportionof‘potential’entre-preneursishugeandamountstoalmosthalfofArgentinepoor.Fiveoutoftenpeoplelivinginpovertysaythattheyarewillingtobeentrepreneursandtodevelopaprojectoftheirowninthefuture.
Whydoesthisentrepreneurialspiritremainlatentanddoesitnottranslateintobusiness?TheanswersobtainedbyTNS
The social dynamics of microfinance and entrepreneurship at the BOPConstanza Cilley, General Manager, TNS Argentina
“Microcredits are a critical tool against poverty and a wise investment in human capital”
KofiAnnan,formerUNSecretary-General
Gladys, a participant of the microcredit programme, washes cars for a living. She has been able to buy a professional vaccum cleaner.PHOTO: ARGENTINA BY DELFINA ROSELL
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The social dynamics of microfinance and entrepreneurship at the BOPContinued from previous page
FORMOREINFORMATIONCONTACT:[email protected]
Argentinapointtostructural-systemicconstraints:AlmosthalfofpoorArgentines(47%)saythatlackoffinancingisthemainob-stacletheyfacetodevelopproductiveprojects.Moreover,74%thinkthatobtainingacreditoraloanisdifficult.Only3%reporthavingtriedtoobtainafinancialserviceasthereisastrongperceptionthattheireffortsareunlikelytoberewarded.
Almost8outof10individualsexpressthatthemainbarriersforaccessarebanks’termsandconditions.Accessibilitytotheformalfinancialmarketisrareforthepoor.Theyvoicetheirdiscontenttowardsthehighlevelofincomerequirementsetbythebanks,andalsotowardsguarantorrequirementsandinter-estrates.
Clearlythissegmentofconsumersfeelintimidatedandalien-atedbythetraditionalbanks-infactsomebanks,consciousofthedistance,havetriedtocreateanenvironmentthataimstodifferentiatethemfromtraditionalbanks(anexampleofthisisFiegranpoder,whereveryloudmusicwelcomescustomersandstaffdonotweartiesbutinformalt-shirts).
Microcredit in actionClearlymicrocreditsforthepoorprovideaninnovativesolutionbylinkingpotentialentrepreneurswithfinancialresources.Whileseveralimportantbarriersneedtobeovercometomakethishappen,whenitdoesmaterialise,theresultsareverygratifying.
TNSArgentinaconductedanexploratorysatisfactionstudy*onfemalebeneficiariesofmicrocredit,livinginpoorneighbour-hoodsinGreaterBuenosAires.RespondentswerereceivingmicrocreditsfromMujeres2000**-anNGO.Mujeres2000**fosterscommunitydevelopment,placingthefocusontechnicalassistanceandhumansupport.
Satisfactionamongrecipientsishigh-96%aresomewhatorverysatisfied,94%wouldrecommendtheserviceprovidedand96%wouldrenewit.Thedirectbenefitsofthecreditareclearlydrivingthesatisfaction–allowingthewomentodeveloptheirbusinessprojectandasaresultattainacertainlevelofeconom-icstability.Almostallsaidthattheynowhaveabetterqualityoflifethanbefore.
Apartfromthedirecttangiblebenefit,thebroaderandpsycho-logicalbenefitsaresignificantandmostwomensaidthattheynowenjoymoreprominenceandrespectinhouseholddeci-sionmakingthantheydidbefore.Microcreditnotonlyprovidesfinancialcapitalbutalsobuildssocialcapital(whichreferstothenetworks,normsofreciprocityandtrustthatfacilitatecoordina-tionandcooperationformutualbenefit-Putnam1995)forthebeneficiaries.
Microcredit opportunityTheworldwidegrowthofmicrocreditsshouldbeseenwithopti-mism.Theygeneratematerial,psychologicalandsocialbenefitsforthepoor.Butmuchmorecanbedonebythedevelopmentcommunity,donorsandcompaniestotranslatemicrocredits
intomacrochanges.Companiesneedtolookatthisareanotascharitybutasaviablewaytogenerateprofitswhilefacilitat-ingeconomicprogressfortheconsumersatthebaseofthepyramid.However,approachingthistargetgroupanddesigningaproductwhichmeetstheirneedsrequiresacarefulunder-standingoftheirneedsandovercomingthebarriersandcurrentperceptionsofbankingandfinancialinstitutions.
*Intheyear2006inArgentina,therewere98microcreditorganisations,18bigand80small,with30,400clients/beneficiariescorrespondingtoanover-allportfolioof$40,100,000.Thesegmentationlinebetweenthetwogroupsororganisationswas$200,000and400clients.
**Youcanhaveaflavouroftheirworkathttp://www.mujeres2000.org.ar
“Almost 8 out of 10 individuals express that the main barriers for access are banks’ terms and conditions. Accessibility to the formal finan-cial market is rare for the poor.”
Family is a key role in Emerging Markets. Maria (back row) also participates in the microcredit programme. Her husband, grandson and friend have helped her not only to maintain the credit but also to build their house.PHOTO: ARGENTINA BY DELFINA ROSELL
Weekend groceries fairPHOTO: ARGENTINA BY DELFINA ROSELL
gems : APRIL 2010 Page No. 7innovation
StudyingBOPmarketsrequiresaspecialsensitivitytothetargetgroupaswellastheissuesinvolved.Inthisarticle,RagsandAstitidemonstratehowasimpledeviceofaninnovativestickerbaseddiaryhelpedincapturingaccurateinformationonbrush-ingbehaviourinchildren.ThisarticlehasbeenadoptedfromthepaperpresentedattheESOMARCongress2009,whichwontheawardforthe“BestMethodologicalPaper.”
Behaviour change in social mission projectsSocialdevelopmentprojectsinBOPmarketsfocusonengineer-ingbehaviourchangeinsomeformoranotherastheirultimategoal.The‘behaviour’tobechangedvariesacrossprojects–fromchangingfoodhabitstowashinghandsbeforeeating,andfrombrushingatnighttocondomusageforAIDSprevention.Thetargetgroupalsovariesfromgeneralpublictospecialistslikedoctorsorbusinessleaders.
TheincreasingdirectengagementoftheprivatesectorandlargeMNCsintheseprojectsisbringingwithitmorestringentaccountabilityandrigorousevaluationofrealROIintermsofthe‘endbehaviour’tobechanged(theequivalentofsalesormarketshareincommercialworld).
Unilever Oral Care social mission projectUnileverOralCareisinvestingsubstantiallyinsocialprojectstopromotenightbrushingbehaviouramongchildreninthe4-8yearsagegroup,inIndonesiaandotherBOPmarkets.Thesuccessofthisprojectwouldtrulybea‘win-win’solutionforallstakeholders–individuals,societyandtheprivatesector.UnileverhadwantedtocomprehensivelyevaluatetheirsocialmissionprojectinIndonesiaintermsoflongtermbenefitsduetoincreaseinnightbrushingandforoptimizingthecommunica-tionstrategy.Theresearchchallengeinaccomplishingthiswas:
n Innovatingareliablebehaviourpredictiontoolto measurebrushingfrequencyandnightbrushing–withoutthe‘claimed’responsebiases.
Evaluating social mission projects in emerging and BOP markets
n TakingintoconsiderationBOPmarketrealities(lowerSESandliteracy)andthechildrentargetgroup.
Theissuestoaddressindevelopingthemethodologywere:
n Whatshouldwedotoenableourrespondentstoproviderealbehaviourinformation?
n Whatshouldwedotoensurethatthemothershadknowl-edgeofchildren’sbehaviour?
n WhatshouldwedotoensurethatitissimpleandrelevantforBOPmarketrealities?
Basedonthese,theguidingprincipleswesetoutwere:
n Wemusthavearecordofthe‘interestbehaviour’ (brushing,brushingatnight)overaperiodoftime (oneortwoweeks)–toensurethatweare measuring‘regular’behaviour.
n Consumerswilltellorrecordactualbehaviourif wemakeiteasierforthemtodosowithoutbiases. Itistheresearchers’responsibilitytoeliminate biasesarisingoutof‘focusedmeasurementof interestbehaviour’–wheretherespondentknows whatisbeingmeasuredandhencebiasescome tooperate.
n Measurementmethodologyandtoolsmust involveboththemotherandthechild.
n The‘behaviourrecording’shouldideallynot involveanywriting.
n Itshouldnotplaceundueburdensorspecial trainingrequirementsforanyofthestakeholders intheprojects–therespondent,thefield interviewerandthedatadigitizer.
n Lastbutnottheleast,itshouldbeeconomical and affordable.
Raghavan Srinivasan, Managing Director, TNS Indonesia Astiti Suhirman, Business Director Indonesia
PHOTO: INDONESIA BY QUINNY CHAN
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“Even in these high technology times we all live in, it’s possible to develop simple solutions to complex problems that work well in practice in emerging and BOP markets.”
Evaluating social mission projects in emerging and BOP marketsContinued from previous page
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Theguidingprinciplessetoutnaturallyledustotheinnovativebehaviourmeasurementmethodology-“DailyActivityStickerDiary”
n Wherechildrenandmothertogetherrecordalldaily activitiesoftheirchildinourtargetgroup.
n Bytakingouttheappropriatepictorialsticker (fromastickersheet)andpastingitinthedaily activitydiary.
n Foroneortwoweeks.
Thefinaldiaryusedforthestudywasco-createdwith consumersinaniterativelaboratoryconsideringthemany ‘details’,suchas:whattimeslots,whatactivities,howmanystickersforeachtoprovidefor,andinwhatformatshouldit betoensureeasyusage.Ourfinal“DailyActivityStickerDiary”wasinadailysheetcalendarformattobehunginthemain living area.
Study findings and learningsWenowhaveover3,000weeksofbehaviourmeasurementdatausingthismethodologyandthesalientfindingsare:
n Themethodologyprovidesreliablebehaviourdata- brushingfrequencyandtheproportionofthepopulation‘brushingatnightregularly’obtainedfromthisstudywasmuchlowerthanestimatesorassessmentsfromotherstudiesbasedon‘claimed’behaviour.Itwasalsomoreinlinewiththe‘toothpastemarketsize’inIndonesia.
n Thissocialmissionprojectwouldinthelonghaulleadtomarketdevelopmentaswell-regularnightbrushingcomeswithanincreaseinbrushingfrequency.
n Realisticbehaviourdatalinkedwithattitudescan powerfullyguideinterventionsoptimization–itledto identificationofdeterrentstonightbrushingnotyet exploredincommunication.
Summary and suggestionsEveninthehightechnologytimeswealllivein,itispossibletodevelopsimplesolutionstocomplexproblemsthatworkwellinpracticeinemergingandBOPmarkets.Inthefinalanalysisitisallaboutstartingoutwiththefirstprinciplesofgooddatacol-lectionandpatientlyaddressingalltheissues.The“DailyActivityStickerDiary”basedbehaviourmeasurementmethodologywehaddevelopedcaneasilybeextendedtobehaviourmeasure-mentinothersocialmissionprojects(suchasgeneralhygiene,nutrition,sexualbehaviour)andtocommercialmarketingissueswherereliablebehaviourmeasurementisimportant.h
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The rest of the world is lagging far behind Asia in digital consumer engagement. LEE RYAN and BERNICE KLAASSEN are not sur-prised. Western organizations seeking a future in Asia need to find the right approach to research if they want to get off first base.
Guesswhat?Emergingmarketsdonotevolveinthesamewayaswest-ernmarkets.InFebruary2008,Harvard Business Reviewpredictedonlineworldsasoneofits‘breakthroughideas’oftheyear.InAsia,they’veknownaboutthisforsometime.Whenitcomestodevelopmentofthedigitalspace,WesternassumptionsaboutAsiahavebeenslowtoformatbest,and,atworst,plainwrong.Intheonlineworld,AsiahastakendifferenttrajectoriestoactuallygobeyondbothEuropeandNorthAmerica.ThishasprofoundimplicationsnotonlyforWesternunder-standingofAsia’sdevelopingeconomiesandcultures,butforhowitdoesbusinesswiththem.
What’s happened?HowdoweknowthattheUSandEurocentricvisionoftheInternetislosingsignificance?Here’saclue.384millionChineseinternetusers.TherearenowmoreinternetusersinChinathanintheUS,andAsiaisalreadyaccountingforover40%oftheworld’sglobalonlinepopulation.AnditisnotjustaboutthenumberofpeoplegoingonlineinAsia,itisalsowhattheydowhentheyareonline.
InAsia,socialnetworkingparticipantshavetakensuchwebsitestoadif-ferentlevel.InstantmessaginghasneverbeensuchahitinEuropeandNorthAmericathatithasbeeninAsia.Confinedbytheirownlanguagesandusingtheirownculturalpreferencesforcommunicating,Japan,Ko-reaandChinahavecreatedtheirownversionsofthesocialweb.Thesethreenationsareevolvingindifferentwaystogainandkeeptheirowninternalmarketadvantages.ComparedtotheUSandEuropeansocialmedia,companiesstruggletomonetizetheirsocialmediaapplications;inKoreaandChina,QQandCyworldarealreadyprofitable.ThismakesitdifficultfortheUSandEurocentricglobalplayerstoseeawayin.
Cultural constraints, online opennessWhatarethereasonsforthesedifferences?Technologyisovercominglocalconstraints.Everybodywasawareofthesocialandculturalcodes
Are you digitally awake to Asia?Using research to engage Asia on Asia’s terms
“There is the notion that other countries and cultures are just
playing catch-up – sometimes leap-frogging particular technologies, but always developing along a trajectory
set here about the right ideas and products. It is refreshing to have American engineers return from Japan or China or India and say, ‘Oh my God! You will not believe
what I saw’.” GenevieveBell,Intel.
Lee Ryan, Regional Qualitative Research Director, TNS AP MEABernice Klaassen, Head of Interactive Research, Singapore and Hong Kong
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onlinespaceswherepeoplecongregateastheiravatarsoronlinepersonatochat,createandtrade.ItisapredictionofwhatweareonlyjustbeginningtoseeinEuropeandtheUS.GartnerConsultingpredictsthatby2011,80%ofactiveInternetuserswillhaveanavatar.
JustbecausetheonlineworldisfollowinganevolutionarypaththatWesternmarketersdidnotpredict,thisisnotimetobeaversetothemetaverse.Fearnot.Therightkindofapproachtoresearchwillprovidetheentitlementtosomeoftheanswers.
“So how do we keep up with this fast-paced digital environment, both from a research and business perspective? It calls for a careful, three-pronged approach: observation; conversation; interaction.”
Are you digitally awake to Asia?Continued from previous page
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thatinhibitbehaviourinAsia.Nobodypredictedthattheadventofonlineworldswouldtapintoadesireforexpressionthatliesbeneath.
Intheirpersonallives,AsianonlineusershavegraspedthefreedomandanonymityofferedbytheinternetandtakenitwaybeyondtheexperienceofWesterncultures.Today,40-50%ofonlineAsiansareinvolvedinuser-generatedcontent,comparedtojust10%intheWest.Thewholedevelopmentofweb2.0ismuchfasterinthispartoftheworld.ThereissubstantialevidencethatAsianconsumersaremorecomfortableexpressingthemselvesonline.
Sohowdowekeepupwiththisfast-paceddigitalenvironment,bothfromaresearchandbusinessperspective?Itcallsforacare-ful,three-prongedapproach:observation;conversation;interaction.
Engaging the new consumerFirst,Observation.Thisisabout‘listening’,gettingclosetowhatpeoplearesayinganddoingonlinethroughresearch:creatinga‘virtualcloseness’throughbuzz-monitoringsoftwarethatcananalyseusergeneratedcontentsemantically.TNSCymfonyallowsclientstotrackconsumergeneratedcontentinrealtime. Second,Conversation.InAsia,duetoculturalconstraints,thetraditionalfocusgroupisnoteffectiveonline.TNSIncubatorisaweb2.0researchtoolthatenablesclientstohavedifferenttypesofconversationsandengageconsumersdifferently.DevelopedinAsia,ithasimmediaterelevancetowhatconsumersaredoinghere,online,today. Third,Interaction.Participationcannothappenwithoutthefirsttwostages.Thismeansgoingfurtherthanaclassicagencyrelationship;clientsandresearchagenciesarenowcollaboratingandco-creat-ingwiththenewconsumers.Toengageconsumers,clientsneedtoensurereciprocity.Consumers’timeandattentionmustbeearnedandrewarded.Activitiessuchascontestsandcompetitionshelptochangethetypeofinteractionbetweenbrandsandconsumers.
The new realityTruthis,WesternmarketershavenotimetocometotermswiththeInternetastheythinkitis.ThenextversionisalreadyborninAsiawhereconsumersaremakingthe‘metaverse’areality:multiple
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The magic eightEightisaluckynumberinChina.TheopeningceremonyofBeijingOlympicscommencedontheeighthdayoftheeighthmonthof2008at8.08.08pm.Thecarnumberplateswithafeweightsgoforthousandsofdollarsinauctionsandtheconsumerwillwillinglycoughupasignificantpremiumtoacquireamobilephonenumberwhichisfestoonedwithacoupleofeights.
Eightisalsothepercentagebywhich,theeconomistsbelieve,theChineseeconomymustgrowtoprovidejobstothemillionsofstudentsgraduatingfromUniversities,ortheruralfolksmigratingtothecitiesinsearchofabetterlife.Thefirsttwoquartersof2009weredifficult–Chinacouldonlymusterupa6.1%GDPgrowthinQ1of2009andjustmissedthemagicmarkofeightinQ2witha7.95growth.HowevertheQ4figurescameat10.7%andthewholeofChinaheavedacollectivesighofreliefwhenoverallgrowthof8.7%wasannouncedfor2009.
Clearlythemagichasbeenachievedwithalotofstimulus-theChinesegovernmentistryingtospendfourtrillionyuaninstimulatingtheeconomy.Moneyisbeingpouredintobuildingroads,bridgesandsomeincomegeneratingactivities.Exportscontinuetobeachallenge,thoughtheEconomistspredictthatChina’sexportswillreturntogrowththisyear–butareunlikelytotouch2007levelsinthenearfuture.AcontributingfactoristheAmericanconsumerwhomayneverreturntothefrenziedshoppingtheypreviouslyexhibitedtothedelightandeconomicgrowthofthewholeworld.
Consumer Economistsay(softlyinChinaandmoreshrillyintheWest)thattheChi-neseconsumermustspendmoretocompensateforthelossofexportsandredresstheglobalimbalance.ReplacingAmericanconsumerswhopreviouslysustainedtheglobaleconomywiththeirprofligateconsump-tionofChinesegoods-enablingChineseConsumerstosaveasmuchasone-quarteroftheirincomes.HencethecriticalquestionnowiswhethertheChineseconsumerwillspendmoreandsavetheglobaleconomy.
ThetraditionalreasongivenfortheChineseconsumertosavealargepro-portionoftheirincomeisthatmanydonotenjoysocialsecurityandneedtosetasidefortheirretirementandpossiblemedicalexpenses.Secondly,culturallyChineseareconsideredtobethriftyandsavingsdriven.Whilethesefactors–whetherculturalorstructural–docontributetotheChi-nesehouseholdsstashingawayalargeproportionoftheirincomethereareothersocialandemotionalreasonsdrivingthisbehaviour.
The other barriers to consumptionOwningahouseranksamongthemostimportantdesiresforaChinese.Theideaoflivinginrentedaccommodationisalienandunacceptable.TraditionallyChinesehavelikedtheideaofstabilityandthestateprovidedthatbyallottinglifelongaccommodation,whichyoukeepevenafterretirement.Withstatehousinggoneformost,theChinesearerushingtobuyapartments.Thestrongdemandcoupledwitharelativelycontrolledsupplyhasmadethecostofhousingdisproportionatetotheconsumers’income.TodaytheaveragepercapitaannualurbandisposableincomeinShanghaiwillbuytwosquaremetersofanapartment.AdditionallyChineseneedtocoughup30%ofthepriceasdownpayment.
Ontheotherhandsocialnormstodaymaketheideaofcontinuingtolivewiththeparentsaftermarriageasnearlyinconceivable(nopunintended)andnoself-respectingwomanwillacceptaman’shandinmarriageun-lessthehandholdsthekeystoanapartment(accordingtoarecentpollonly18%ofmothersarewillingtolettheirdaughtersmarryamanwhorentshishome!).WithlowstartingsalariesevenforUniversitygraduates,parentsneedtobeartheburdenofsavingforthedownpayment.Highmortgagepaymentsinrelationtotheincomefurtherreducesthespend-ingabilityoftheconsumers.
Secondly,whileimpendingmarriageofthechildbringsasubstantialfinancialburdenforthefamily,theuniversityeducationbeforethatisalsoaformidableexpense.AsChinamovestowardsbecomingamarketeconomy,thecostofeducationhasbeenincreasingsteadily.Todayforanaveragefamilythecostofprovidingauniversityeducationmaytakeupasmuchasone-thirdtohalfthedisposableincomeofthefamily.EvenschooleducationcostsaregoingupasmoreChineseconsidertheideaofsendingtheirchildtoexpensiveprivateschools.
ThirdlytheaverageChineseconsumerisvaluedriven.Productsreceiveamicroscopicscrutinyandintensivecomparisonandvaluation.Pricesarecomparedthoroughlyandpromotionsanddealswelcomedenthusi-astically.Whilethereisatrendofpremiumisation,itisnotuniversalandappliesmoretoproductsofvisibleconsumptionwhichcanmaketheconsumerlookgoodandsuccessful. HencewhiletheChineseconsumerwillgraduallyspendmore,andconsumptionasaproportionoftheChineseGDPwillmoveupfromitsuniquelylowleveltoday,themovementisgoingtobegradualunlesssignificantchangesaremadetomakehousingandeducationmoreaccessibleandaffordableandtheconsumerregainstheconfidenceofcontinuedprosperity.
Why Chinese consumers spend less and save moreLETTER FROM CHINA
Ashok Sethi explores the challenges confronting China’s consumers as the developed world looks to them to drive demand required for a return to economic growth.
PHOTO: CHINA BY HOLLY ZHANG