Low income consumers in the world's emerging markets want many of
the same things out of life and the same quality in their products
as middle class consumers and differ mainly in their purchasing behaviour,
according to a recent global study by Synovate.
Combining quantitative data with the deeper insights from a qualitative
approach, Synovate surveyed over 8,000 consumers in 14 'Hotspots'
markets around the world to gain a better understanding of their
attitudes, values and purchasing habits.*
The countries examined were Argentina, Brazil, China, Egypt, Hungary,
India, Indonesia, Mexico, Poland, Romania, Russia, South Africa, Thailand
and Turkey.
Synovate Executive Director Consumer Insights, Mike Sherman, said the
results provide an insightful picture of this often neglected market,
showing that a lower income doesn't mean lower standards, just different
priorities.
Low income, high expectations
When it comes to attitudes, low income consumers in emerging markets
have many of the same life priorities, values and brand perceptions
as their middle class cousins.
Health, family and physical security are the top three most important
things in life for more than 80% of low and middle income consumers,
followed by a good home, an education and a good income.
Life priorities
(Top box of 5)
Fifty seven percent of both middle and lower income consumers strongly
believe that the poor are getting poorer while the rich are getting
richer; over half believe that the environment is polluted; and more
than a third think that not everyone benefits from free trade.
One in three respondents from both consumer groups strongly believe
that in five years things will have improved for them.
Beliefs
(Top box of 5)
Brand perceptions between the different income classes are also similar.
Just under two thirds of low income consumers prefer local brands if
price and quality are equal, one third believe local brands are as good
as international brands, and 31% agree that most people don't know the
difference between local and international brands, all responses that
mirror those for middle income consumers.
Furthermore, despite the income gap, low income consumers will use
additional income in a manner similar to those from the middle classes.
When asked how they would use the extra money if given a twenty percent
increase in income, 38% of low income consumers would spend their extra
income, 47% would save or invest it and 15% would pay off debt.
Similarly, 34% of middle income consumers would spend it, 56% would
save or invest it and 10% would pay off debt.
How the lower income group would use the extra money if given a twenty
percent increase in income
Not surprisingly, where the two groups of consumers do differ substantially
is in product ownership. Many more middle income consumers own personal
computers and cars; and have bank accounts and credit cards.
However, mobile phones are no longer the domain of the rich and middle
classes, with over two thirds (67%) of low income consumers owning a mobile
phone, compared to 84% of middle income consumers.
Mr Sherman said the attitudinal data demonstrates that although some believe
that lower income consumers want different quality products to those with
more spending power, this isn't actually the case.
"Synovate's research shows that low income consumers want many of the same
things out of life and their products as their middle income counterparts,
but are constrained by their relatively limited purchasing power.
"This suggests that as their income grows - which is projected to happen
in many of these markets - the lower income consumers will display the
same kind of spending habits as the middle class," he said.
So beyond waiting for the growth, what can marketers do to accelerate this
phenomenon?
Credit and distribution keys to future growth
Using qualitative methods to get a deeper understanding, Synovate found that
the key to future growth in many countries lies in low income consumers'
access to credit, as well as a marketer's ability to understand purchasing
habits and preferred communication channels.
CEO of Synovate Latin America, Ignacio Galceran, said that in markets like
Brazil major retailers were taking this on.
"Brazilian consumers do use credit but 70% do not have the credit history
to qualify for loans or credit cards, so major retailers tend to fill the gap.
This is at very expensive rates - often upward of 70% interest per annum.
"However, if low income consumers are offered credit at a more reasonable
rate, they would spend less on repayments and more on the goods and services
that they want and need, increasing their spending power," he said.
Low income consumers also tend to shop locally and develop a loyal, trusting
relationship with the owner of their small neighbourhood store. This gives
the owners of such stores a unique ability to influence low income consumer
purchasing habits, both through the products they stock and those that they
recommend.
Such word of mouth plays an important role in all product communication.
Many low income consumers are illiterate with little formal education and
while they watch plenty of television, word of mouth recommendations, visual
identity and communication using graphics is vitally important.
Mr Sherman said the research held some crucial messages for marketers,
advertisers and any company wanting to target the lower income consumer.
"The low income market is large, and while not rich, these consumers
are savvy, discerning and in need of affordable solutions that still
deliver the core benefit they are looking for, as well as the quality,"
he said.
"This may mean the same product in smaller, more affordable packaging,
a scaled down version of a product or a product with simplified, less
expensive design.
"Marketers also need to understand that the competition they face in
such a market is not just from other brands within a product line but
from other product categories altogether, as due to budget restrictions,
low income consumers face choices between two entirely different types
of products, rather than choices between brands.
"It's worth noting that this finding does not apply in the same way in
developed markets. Synovate also surveyed the US, UK and Japan for the
purposes of comparison and found that, in these markets, low income
consumers have very different priorities and attitudes to their middle
class counterparts," he added.
*For the purposes of this analysis, low-income consumers are defined
as the bottom quartile of the population and middle-income consumers
are the second and third quartiles.
Note
The above information comes from a survey conducted by Synovate for
its 'Hotspots' series of reports on emerging markets of the world.
For more information about these and other Synovate publications,
please visit
www.synovate.com/publications or email
publications@synovate.com.
