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 | EVERY MARKET AN EMERGING MARKET
The first world/third world gap is closing. As the World Bank's 2007 Global Economic Prospects report noted, " Global income has doubled since 1980, 450m have been lifted out of extreme poverty since 1990 and life expectancy in developing countries is now 65 on average."
Not too long ago, developed countries ran surpluses, while developing ones ran deficits. Now, the picture is largely reversed: many developing nations run surpluses and export capital while developed ones have racked up huge deficits. The centre of economic gravity is shifting from West to East.
For many firms, emerging markets are where the future lies. But how you define "emerging" is very important.
Most commonly, it's taken to mean developing rather than developed parts of the world. They're seen as poor and unsophisticated, and suckers for "cheap and nasty" offerings that no one else will buy.
Professor C.K. Prahalad, one of the astutest strategists around, was one of the first to point out that there are billions of people "at the bottom of the pyramid" who could be customers for lots of stuff. The trick, he said, was not to dump a lot of junk on them, but rather to customize whatever you sell to meet their specific needs. This insight got plenty of attention from global firms in search of growth.
But if the "bottom of the pyramid" was an attractive new market segment, it wasn't the only one. For as incomes and education rose in many parts of the world, the middle class exploded with hordes of affluent new shoppers. Demographic shifts saw more women earning money, and more ageing people with money to spend. And at the same time, new media and new branding efforts were changing buyers' behaviour and encouraging them to experiment and flaunt what they bought - and in the process, keep moving the marketing goalposts.
Result: markets everywhere are a today complex mix of rich consumers and poor ones, of branded goods and commodities. All are served by smart local companies ... and being torn apart by lethal foreign invaders.
Much of what we though we knew about serving these markets is no longer useful. The game has changed in the past decade - and even more so in the past year or so.
For some time, buyers of everything have been learning that just as quality should be pretty well a "taken-for-granted" fact, so could low price. They been satisfying their needs with a portfolio of products and services, some bearing names like Louis Vuitton, Max Mara, Prada, Tumi, or Samsung, and many with names you've never heard of, but offering "good enough" design, feel, durability, and so on - often at rock-bottom prices.
More recently, the spread of financial trouble has had a dramatic impact on customer behaviour. Collapsing asset prices and rising joblessness have forced shoppers to save rather than spend. Companies serving them have had to do the same. So prices and costs have become more important than ever. Buying down is the new norm. “Frugality” is today’s reality.
A study of US shoppers by the CMO Council shows that an alarming number of "loyal" customers are abandoning their favourite brands and hunting for bargains instead. So recent hype about the importance of building brands and brand valuation is now in doubt. This is an age of vicious price wars, with much worse to come.
Radical changes are under way in even the richest, most developed parts of the world. They present both opportunities and deadly threats to virtually every business. And the one thing you can be sure of is that the situation will get more challenging.
Today, there's no shortage of new market possibilities. But as Thomas Friedman warns in his book The World Is Flat, we're all on the same level playing field. So just as there's an abundance of new customers, there's also a rapidly growing number of new competitors. And all are acting in strange new ways that can knock you out of the game.
So how will you compete tomorrow? Which customers should you focus on? What do you need to learn about them (what do they value?... how, when, and where do they shop?... what media do they use?... what influences their decisions?) How should you reach them? What should you promise them? What kind of business model do you need to capture and keep them?
The markets you’re familiar with – the ones you think are “developed” – are in flux. Nothing will ever be the same again. Every market is now an emerging market. We're all feeling our way into the future.
WHAT"S YOUR NEXT MOVE?
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