The business world has witnessed dramatic changes over the past decade. Global companies have begun to realise that the centre of gravity has shifted to emerging markets in Asia, Africa, the Middle East and Eastern Europe. Developing economies like India and China are presenting strong potential opportunities for creation of new value and growth, and any company that wants to remain a market leader cannot afford to not focus on consumers in these economies.
With steady economic growth, rising incomes and aspiring consumer class, these regions are slowly emerging as the preferred target areas for design and innovation for global companies. Companies are forced to rethink their product and marketing strategies to come up with innovative solutions that best meet the needs of these expanding markets.
India, with over a billion population, represents the most extraordinary possibilities as a market. However, the country’s huge demographic dividend poses unique business challenges. Geographical and cultural disparities along with evolving consumption needs of the growing middle class, in both rural and urban settings, is pushing companies to come up with tailored design/service solutions and marketing strategies. There is a need for these solutions to be meaningful, relevant and contextual to socio-cultural challenges of the end-consumers. It has thus become imperative to acquire in depth understanding of local needs, gauge socio-economic scenarios, and study and predict consumer trends to devise and deploy relevant solutions and strategies.
Development and strategic thinking must happen from scratch and in tandem with the acquired understanding of local systems; simply adapting or tweaking thoughts, techniques and tools, or solutions that have been successful elsewhere in the world, are not sufficient any more. Cultural assumptions need to be parked, rethought and interrogated to acquire a ‘hyper-local’ understanding and develop solutions in the context of existing consumer behaviours and social networks. “What will be valued locally” is a question that must be answered.
Besides cultural contextualisation, technological relevance holds as much importance. Often, fundamental, technical or other generic factors are not taken into account and end up posing significant challenges. For instance, when John Deere, the US tractor manufacturer, entered the Indian market, it modified its products carefully to suit the price-sensitive Indian consumers. However, one small but significant insight the company didn’t uncover was that the wide turning radius of its tractors that had originally been designed for America’s large farms would not work for small landholdings in India. Local farmers would rather prefer tractors that made narrow turns. It was only after the company took forward this research insight and made suitable design changes that it succeeded in India. It is important to note that, at times, it is the constraints in developing markets that force design breakthroughs.
In a country like India, 70% of the population is spread across villages and a vast majority falls in the so-called economic bottom-of-the-pyramid segment. This makes for a huge market segment albeit with vastly different needs, preferences, constraints and income limitations. While the traditional paradigm of low volume-high margin will not succeed for this segment, it is incorrect to assume that low-cost basic model is the right approach to penetrate this consumer base. Although the spending power of this consumer segment is low and concentrated on basic needs, factors like functionality, features and durability are as critical as cost in decision-making. It is noteworthy that quite a few times complexity works better than simplicity. The valuation of products is extremely unique amongst Indian bottom-of-the-pyramid consumers—the more feature-loaded a product is, the higher is the appreciation. Hence the ability to offer more, along with high functional value, by manufacturing efficiently at the right price is one of the keys to succeeding in emerging markets.
Another way to make sure that solutions are foolproof is that the research process should always be undertaken with inputs from the end-consumer at various stages.
Companies also need to be watchful of consumer lifestyles and trends—how and in what ways are consumer behaviour and preferences getting altered? What is driving people and can this learning be leveraged to come up with meaningful business strategies? This can only be achieved if companies keep their eyes and ears open and tap on to the behavioural changes that may signal ‘needs’ that the consumers haven’t yet articulated or even self-realised.
In emerging economies—where product development might be slow, but things continue to change dynamically—there is often a risk for companies to lose out to faster competition. An agile approach and timely research can ensure that the newly-developed product/service solution doesn’t become obsolete even before it hits the market. Research should be ahead of time and development quick, such that testing could be done in real-time user-interaction studies.
Fundamentally, it is the right set of contextual understanding, strategies, and a focus on learning and adapting that can ensure success for a company in emerging markets. Companies will have to park assumptions, shake and challenge conventional thinking and approaches, and be abreast with consumer trends and behaviours if they are to build effective and sustainable platforms of growth and master the extremities of emerging markets.
The author is head of research & strategy, Tata Elxsi