The World Is Poor: And the Meek Shall Inherit the Mall
Emerging markets like Brazil, Russia, China and India—and the emergent consumers that stoke them—are blazing new and unique ways to market their goods and services. The trends emerging from developing countries are becoming increasingly important in influencing corporate strategy in the developed world. But relatively few companies here in the west act on the trends coming from “over there,” and if any are actually acting on them, then they are doing so in an overly timid—and therefore ineffectual—way.
In a recent study, eight out of 10 C-level execs consider the growing number of consumers in emerging economies to be an important trend for global business. Six out of 10 think is will have a positive impact on their companies’ profits. But only three in 10 say that they are doing anything to address the trend.
This is a dire mistake because not only are these execs losing out on tapping a burgeoning market overseas, they are neglecting innovative ways to reach their existing consumers at home who are increasingly resistant to traditional marketing methodologies. If we were to take a relativist global outlook, it would be clear that the marketing that we do in the developed world essentially revolves around selling products and services in a hemispheric marketplace where it’s fairly easy to motivate the typical consumer. There is more than enough wealth to go around for thousands of brands to get snatched up by an enthusiastic consumer who has the deepest pockets in the world. We got it good here.
But what about the majority of the world, which is composed of much poorer nations? Marketing in the developing world is a tough job, and marketers “over there” are coming up with unique, innovative and outright exemplary marketing strategies. It’s imperative that we know about them, simply because there is a large stratum of consumers in North America that are so resistant to mainstream brands and are so stingy about major purchases that marketing to them may mean looking for examples from the Third World.
A growing number of consumers who don’t (or can’t) eagerly translate traditional marketing into purchases—for instance, a percentage of students and the low-income youth underground who are frequently un(der)employed and media-cynical—are many times more affluent than the average Nigerian or Chilean, but their lagging propensity to purchase imposes a need for some creative marketing.
In Brazil, buying a vehicle is extremely price-prohibitive. In response, Brazilians have come to rely on pooling money with other buyers to form a consórcio. A number of buyers pool small payments and at the end of each month a lucky winner is chosen by lottery to use the car for the month. If enough people chip in, two cars may be distributed, one by chance and the other going to the person who contributed the most that month.
What a great idea for distressed North American automakers when marketing to the student consumer or first-time buyer. A car for this psychographic is a refuge from parents and pressure; it’s newfound mobility and freedom, as well as the prime catalyst for entering consumer society and growing up. But purchase price, insurance costs and maintenance of a car are also huge financial strains. As bundled services and payment options have become a commodity among car suppliers, a fearless marketer can take these operations to the next level with a consorcio-type model, and the first to respond to them will be the youth demographic—because it’s new, simple, peer-based and potentially viral.
These types of purchasing incentives are almost ideal for a young consumer in the U.S. who has no financial or credit history but a title to a second-hand car, and for the mobile and connected young adult market that wants to eschew costly cell charges and fixed lines, not to mention their parents who are confounded by their monthly statements. The consorcio model—a form of crowd-sourcing that sees groups of strangers coming together to perform a common task—could be an ideal way for struggling car manufacturers like GM and Chrysler to reinvigorate their business through innovative pricing mechanisms based on social networks and psychographic tribes. Nokia, for instance, is producing phones with multiple address books for as many as seven users per phone. The inspiration behind this was the notion of consorcio—or the pooling of resources—that is a prevalent practice in hyper-markets like Brazil.
Furthermore, consumers in the developed world are increasingly becoming brand atheists and purchase resisters. Every day it gets harder and harder to successfully persuade them, while new and differentiating ideas and executions from marketers are slow in coming. These ideas, insights and executions are increasingly coming from hyper-developing markets. In short, the low-end, emerging marketplace in the ideal source of innovation and insight for businesses going forward in a brand new marketplace.
More than half of all cell phone users now live in developing countries, making it the first electronic technology to garner more users in the Third World than the First. Farmers in Botswana and Uttar Pradesh alike are using their mobile phones to access micro-loans and their bank accounts. In the slums of Dharavi and Sao Paulo, a single mobile phone acts as a bank branch for thousands of new consumers. In the Philippines, South Africa and Kenya, money can be sent by text message between two people. They’ve been doing business through SMS for years now. But this type of service has just reached the US market. For centuries, the world’s consumer markets have followed the lead of the most advanced nations. Poorer ones emulated and imitated. Yet today, it is the poorer hyper-developing markets that are dictating the pace of change and the introduction of paradigm-shifting technologies.
For instance, an Indian company called Basix sends its field reps into slums and villages to scout for prospects. They help them fill out a rudimentary application, then use a digital camera, scanner and printer to create a smart card that displays the consumer’s image and a biometric fingerprint. To make a deposit or withdrawal, the consumer can visit thousands of agents in the community who use a special mobile phone to access account information on the consumer’s smart card. If it’s a withdrawal, the agent enters the amount on the mobile phone, gives her the money and prints out a receipt. When the consumer wants to send money back home to a remote village, the mobile phone is used to activate an agent near the village who then personally delivers the money to the family.
In another ingenious invention for the mobile phone industry, Ugandans routinely use the shared village phone as a banking center and microfinance hub. The practiced is called “sente,” an innovative way to use prepaid airtime as a way of transferring money from place to place. Moreover, it doesn’t require any banks or financial institutions, which are rather tenuous in African nations. Here’s how sente works: I want to send $5 to my mother back in the village. I buy a $5 prepaid calling card and then call the village phone operator. I don’t use the card to make this call. Instead, I read the village operator the code on the card. The operator loads $5 on to her phone, and gives my mother the money, minus a small commission. These village “phone ladies” are not only revolutionizing the way mobile technology is used in their countries, they are also driving economic growth. For instance, Grameen Phone used its innovative village-phone program to become Bangladesh’s largest telecom provider, with annual revenue well over $1 billion.
In early 2007, The Economist reported that a Ghana-based company called TradeNet launched an eBay-type service for agricultural products that connects 12 countries across West Africa to let buyers and sellers transact business through SMS. A Luxembourg-based company called Millicom is taking lessons learned from operating in seven African countries from Chad to Mauritius. The company has innovated to the point of selling pre-paid seconds instead of minutes. That’s right. You can by 23 seconds of talk time, if you wanted. Millicom has also wholly innovated the way that these minutes…er, seconds…are sold by turning street vendors into its service providers through simple SMS. In a Wall Street Journal interview, Millicom’s CEO Marc Beuls simply declared: “We’re selling minutes like Coca Cola is selling soft drinks.”
Millicom’s e-Pin technology allows a customer to pay cash to a street vendor, who then sends a text message to Millicom with the buyer’s phone number and minute request. By selling less calling cards, Millicom has significantly reduced reload costs, which it then passed on to its customers. More interestingly, anyone who has a cell phone can become a Millicom vendor. The company allows its customers to send a text message requesting that minutes be transferred from their phone to another’s. It’s like a minute donation, the terms of which can be worked out among the parties. Similarly, the company’s “share balance” program allows a customer with no more minutes left on their account to send a free text message to a friend asking for more. The receiving customer can send a text message to Millicom to transfer minutes to their friend’s phone.
Taking the notion of micro-financing a bit further (well, actually a lot further), EA Games announced in early 2008 that it’s forthcoming blockbuster game title Battlefield Heroes will be completely free to download. The company will instead source revenue from micro-transactions such as the sale of in-game items like helmets or beards that enhance and customize the game’s characters and, therefore, the game-play experience of the consumer. In a similar innovative leap, Rockstar Games released its hotly-anticipated title Grand Theft Auto IV with more than 200 songs licensed for the game, the largest soundtrack of any videogame ever released. But more importantly, Grand Theft Auto IV is also the first videogame that allows its players to tag songs that they hear in the game to be purchased online at a later time. If a player likes what he hears when rolling through Liberty City – a fictional version of New York – he can use his game controller to buy it from Amazon.
In the same vein, to produce and bring to market the first-ever $2,500 car, India’s Tata Motors had to discover ways of removing superfluous costs in every aspect of the car’s design. The result – the Nano – is a feat no other car company in the world has been able to accomplish.
Accordingly, the Ford Motor Company announced in 2008 that it will move its small car development hub to India. According to The Boston Globe, global car makers like GM, Suzuki and Hyundai are moving their design and engineering operations to India—“not because the engineers are cheaper, but because they better understand the needs of developing world consumers.” And if gas prices stay this high (at present, a gallon of gas at my station is $3), these needs will to be isolated in developing markets. They will be in high demand all over the world.
The Nano is a tectonic shift for the auto industry. Tata has not only created a car that will inexorably transform personal transportation for millions—if not billions—of emerging consumers. It has thrown the gauntlet to the rest of the world. Tata has produced its calling card, one that is far more significant than the fact that it bought the venerable Jaguar and Range Rover brands from The Ford Motor Company in 2008.
The emerging countries—those that are still fundamentally comprised of poor people—are the new frontiers for brand breakthroughs and businesses paradigms. The advertising and marketing industries must recognize this playing-field shift or risk becoming obsolete. Furthermore, they need to recognize the impending shift at home, too. For instance, according to the Congressional Budget Office in Washington, 28 million people in the US will be using government food stamps to buy essential groceries in 2008. This number is the highest ever for the program, which was introduced in the 1960s. Would it be safe—or sage—to say that marketers in the U.S. need to understand the poor more than ever before?
“Brand New World: How Paupers, Pirates and Oligarchs Are Reshaping Business.” is available on Amazon.com. Max Lenderman is executive creative director at GMR Marketing, part of the Radiate Group. He can be reached at [email protected].
