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The web and consumption in emerging markets

With the ongoing worldwide recession many companies have put their hopes in emerging markets but for some the results have not lived up to their expectations, are taking much longer than thought or seem imperilled. The view from the web can help us put things in perspective and find specific opportunities for the right product mix and distribution channels.

Will China’s consumption take off? Will Brazil shrug off its recession? How can we grow more in Mexico? These are pressing matters for companies that have invested in emerging countries and now depend on them for their results. Seen from the perspective of the connected consumer we can see several opportunities:

What’s our customer’s experience as a consumer?

Closed, State led, corporatist economies left behind consumers, who made do with what was available locally, whether it was good or bad. The moment the economy opens and / or consumers are exposed to other possibilities thanks to the web, they leave old, stale brands behind to embrace what’s better or simply different.

The opportunity for multinational brands is to earn customers’ trust by offering choices which are clearly better than what they are used to, which represent the state of the art they can aspire to, or the best at their budget. This is a serious advantage when the competition is used to being a monopoly that treats its customers as barely tolerated pests.

[boxright]In some cases consumers would prefer national brands for patriotic reasons, in others anything foreign is automatically considered better, and brands will need to navigate these cultural peculiarities with care. For instance while many Mexicans would prefer to buy a national product they also traditionally thought of “made in the US” as synonymous with “better”, not because US products were the very best but because national products were so very bad; with the opening of the economy in the 1990s Mexican consumers have learned that the very best might come from other countries and that there are also bad US products, while many national brands were bought or disappeared altogether. The opportunity lies in earning our customer’s trust, and while some segments will buy national or foreign products regardless of their actual quality, the vast majority appreciates what’s done well.[/boxright]

The risk for multinationals is to repeat the same patterns as the local competition and become part of the oligopoly. We might be the biggest ice cream producer or the biggest eyeglasses manufacturer in the country, with healthy economies of scale and stupendous control of our supply chain, but it doesn’t mean our consumer appreciates o even understands our product – which means an opening for other brands.

How can the web help?

  1. We can draw up a comparison with our competitors along our customer’s journey in terms of satisfying her needs, beginning with the basics of safety, hygiene, identity, and establish which specific value drivers our brand can own.
  2. We need to take stock of our customer’s online journey, how it is exposing her to new products, prices and other consumers’ experience, as her purchase decision is increasingly being taken before she even steps into our traditional channels. We need to establish how much traditional marketing and distribution channels contribute to the sales funnel and trim them accordingly.
  3. We need to use the web to be part of our customer’s conversation.

What’s our customer’s probable evolution as a consumer?

All economies have undergone an evolution in terms of consumption, and we can apply this experience to new markets. Customers have gone from conspicuous consumption (Bling! Cheap clothes!) to utilitarianism (Why do I have so many pants?), from conformity with what’s available locally to higher expectations (Customized fit, lower prices, durability, worker’s conditions), from mere transactions to participation (I would buy these pants again if they were available in grey).

The opportunity is to segment our customers according to their expectations, depending on this experience with consumption, their disposable income and aspirations, and adapt our value for each of these segments. A good example is how Audi and other car manufacturers have adapted their models to have more rear seat space in China, but there are many more opportunities beyond luxury.

We can then anticipate our customer’s probable evolution to adapt when some segments outgrow their original expectations, others are saturated or suffer external shocks (such as China’s fight on corruption and its effects on luxury goods used as gifts).

How can the web help?

  1. We now have a medium through which our customers can tell us directly what they are looking for, what they are and are not finding, how much they are prepared to pay for it. This is an invaluable tool for our segmentation and product mix as we can take the guessing out of the equation.
  2. The web can also help us deliver much of this value, from recommendations based on up to date profiles, previous purchases and what others are buying, to group purchases, to the pre purchase of special runs.
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Non premium and the web

We previously saw how the web is changing the notion of a premium product, but what if our strategy implies not being a premium provider? For instance premium might have negative connotations for our customers if we serve a segment within a specific income bracket, being synonymous with “expensive”, “a luxury we can’t afford”, and might make our customers avoid our stores or our products.

In the same vein Apple might have found that growth prospects in the smartphone market are better for sub $300 USD products or phones with bigger screens, none of which it was offering at the time.

The change in expectations still applies and we still need to use the web to respond to our customers, as their experience with our products begins online before they visit our physical store. Our customers may not be thinking “premium” but will appreciate answers to their queries, help in finding the right product, finding it more quickly, understanding the product attributes more important to their needs, the options required to achieve their objective – all of which works to our advantage to stop competing mainly on price. As a mass medium the web may provide us with the opportunity to compete on the experience surrounding our product at an affordable cost for a low or medium market segment.

The other side of the coin is that what might have seemed like premium before may not be premium in our customer’s mind anymore, and the difference between what they expect and what they are (or aren’t offered) will be perceived as a hassle, as inefficient.

The change in expectations might even have implications in the way our customers use our physical stores, for instance if during their online experience they grows accustomed to finding products quickly and following a certain logic (sports apparel>men’s>training>shorts) without having to ask for assistance, and our store’s organization doesn’t make sense to them (new>diving equipment>last season’s>women’s.

The perception of being a premium provider may work against us and it’s a great sign if we can adapt to our customer’s expectations by changing our positioning; but we need to go further and not fall for the trap that would take us from a particular disposable income to generic lower priced products, particularly when our customer’s expectations are changing through their use of the web, and when we have the opportunity to differentiate ourselves in a cost effective way by making our customer’s experience more productive, fun and less risky.