Technology has made consumers more powerful than ever, as they search for, source and compare products all over the world within a few clicks or tabs in a matter of seconds. While this has benefited consumer products and services that offered good ‘value for money’ in recent years, consumers have now started to demand much more than value.
In sophisticated European economies for instance, consumers are looking for good value products that are environmentally friendly or originate from companies that have strong social responsibility mandates. In less sophisticated economies like the Asian emerging markets, consumers are also demanding much more than value. For the first time, consumers in markets like India, China and South East Asia are demanding quality and attributes like the ‘organic’ and ‘green’ labels.
Survey shows Asian consumers’ shifting tastes
According to a survey by Global Intelligence Alliance (GIA) among 67 Asian consumer and retail industry professionals in China, India and South East Asia in November 2010, industry players say that on average over 50 percent of Chinese consumers are willing to pay a little more for organic and green food, beverages and personal care products, and approximately 10 percent are willing to pay much more.
The same survey in India and South East Asia produced similar results with a much higher percentage of people willing to pay much more (25 percent in India and 18 percent in South East Asia). On the other hand, the survey also revealed that consumers are less willing to pay more for organic and green household or furniture and fittings products.
Foreign products still preferred
Despite the huge progress that local manufacturers have made in markets like India, China and South East Asia, GIA’s survey in the region reveals an overwhelming majority of the people in these markets believe foreign products are better than local products (93 percent in India, 94 percent in China and 88 percent in South East Asia), while they all acknowledge that local brands are improving in quality.
Reaching deeper to tap new consumers
In order to reach deeper into the emerging markets and to capture this large, hungry consumer base, food and beverage, retail chains, fashion houses, FMCG and other consumer goods companies need to be clever about what markets they target and the products they deliver. The game is no longer about entering China or India but rather being present in hundreds of cities in China and India, and being aware that the cereals and drinks the nearly 16 million people in Shanghai are craving for are not quite the same as the ones nearly 31 million people in Chongqing would like to buy.
Fortunately—for companies and consumers alike—different elements are in place to facilitate the growth. Urbanization rates are rapid in the emerging countries. Logistic companies have developed networks allowing manufacturers to reach into emerging markets. And most importantly, the overwhelming expansion of the internet and other media create demand by delivering product information and making consumers desire all kinds of products, especially foreign ones.
Customization is key
The success stories of companies penetrating new, emerging markets are almost always the result of extensive preparation and customization.
Customize the product: Companies need to adapt their products to the local tastes, preferences, requirements and constraints. In many cases, customization means changing the flavor of a product to cater to local habits. Coca Cola’s Minute Maid Pulpy, a juice drink dense with pulp, is the customized version of the Minute Maid brand specifically catering to Chinese tastes. The product recently became one of Coke’s brands to reach the U.S. $1 billion sales threshold.
Customize the message: But occasionally, innovation has more to do with the image or the message delivered. An example would be Kit Kat’s, “have a break, have a Kit Kat,” slogan. The interpretation given to the slogan in the television advertisements is completely different in each country. In Argentina, they use elements from a popular local joke that would probably be banned or considered completely inappropriate in many other countries. As a result, Kit Kat enjoys a very strong positioning in Argentina’s confectionery market.
Customize the packaging: In other cases, innovation might mean changing the format of a product. An example is India’s CavinKare which in the 70s launched the shampoo sachet, making shampoo affordable for a whole new and very large demographic group. With this simple but extremely clever innovative format, CavinKare positioned its Chik brand way ahead of Unilever and P&G in the Indian market. A decade later, all the shampoo giants were copying the strategy not only in India but all over the world.
When we asked companies about the main challenges they face for 2011 and 2012, 46 percent said competing in the emerging markets is at the top of their list and 38 percent placed targeting new demographic groups at the top as well. Customization of the product, the brand or the format and packaging is the answer to both of these challenges.