Over the last decade, many multinational brands have rushed in to emerging markets, agog at the potential of billions of new consumers who had been liberated from planned economies and protectionist barriers. Their wealth has generally grown much more impressively than in the US or Europe. They are the next goldmine. But it’s not as simple as we had assumed it would be. There have been as many disappointments as success stories. As the initial euphoria wanes, there is a growing realization that the billions of consumers have not embraced the brands, the products or the modes of messaging these companies have employed. Local competitors are stronger than expected, having the funds and the name recognition to maintain or grow their influence. National pride and cheaply made local goods often supersede the brand equity of a western brand. Competition for the top tier of the market is fierce. And unfortunately, companies have dismissed the roles of history and culture in their strategies for growing their brands in emerging markets.
Most multinationals have traditionally long resisted targeting the local consumer, preferring instead to transplant offerings that were developed for their traditional developed markets. The assumption has been that if we think a certain way about the world, then so goes the rest of the planet. But context and culture have a funny way of changing meaning and purpose. That being said, Three reasons are often cited for the reticence to localizing strategies and messaging. The first is that the mass market for any single emerging economy is not large enough to justify the effort and cost of localization. In other words, there may be a billion potential customers down the road, but there is risk in jumping in at the deep end. Second, multinational managers rationalize, emerging market consumers are growing more affluent by the day and are becoming more like their affluent-market counterparts both in behavior and in purchasing power. Again, if we act and behave a certain way in Cleveland, so do the good people in Bangalore. As such, the belief is that the company is better off offering globally standardized products and waiting for the consumers to evolve towards these. Luckily, with the success of brands like Pizza Hut and Nike overseas, the view is beginning to change. Finally, it is argued that to adapt to local market conditions in every emerging economy will undermine core assumptions about standardization that are fundamental to the success of multinationals. The catch in all this is that these assumptions just don’t hold water.
First, products and brands transplanted from existing, economically powerful markets typically appeal to the affluent or those aspiring to the upper socio-economic echelons. Delving deeper into the consumer base to establish mass-market positions would create the economies of scale necessary to justify localization. And localization along characteristics that are common across emerging markets, allows the costs to be spread over much larger volumes. In other words, while size matters, we need to fundamentally rethink how we structure our cost assumptions.
The argument that emerging market consumers are rapidly becoming more like their Western markets is true, but only to a point. The rate of change is not as rapid as contended. We need to remember that change is not a one-way street – emerging markets influence us, changing the nature of what a brand means on a global scale. Also, we have to bear in mind that what we see as becoming “like us” is derived from our worldview, not theirs. That means it is an interpretation that is filtered through existing cultural norms. Americans and Chinese may both embrace the cowboy image of Coors, but the cowboy image means radically different things in each culture. It is far from certain to what degree Chinese and
Indian preferences will converge with those of Europeans or Americans. It is as most reasonable to assume that they will be driven by cultural norms. That means that to be successful, brands should focus on current needs and cultural patterns, evolving with them as they grow and change.
Consumers in emerging markets tend to shop daily and have 365 opportunities a year to switch brands. That provides more opportunities to message, yes, but those messages have more competition, more distractions and shorter periods to make an impact. Consequently, thinking about how we reach people in emerging markets requires a significant reorientation of how we use media.
The billions of consumers we seek in emerging economies will remain elusive targets unless we are able to rethink how we approach these populations. It isn’t enough to jump into a market and assume people will buy, we need to understand who they are and how they understand make sense of the world.