Synovate survey shows rich insights into low income consumers
5 December 2006
HONG KONG — 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
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 believes that in five years things will have improved for them.
Beliefs
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 2,000 consumers in 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 income counterparts," he added.
Notes
* 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.
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 reports, please go to www.synovate.com/hotspots.
Curiosities
- The purchase of a mobile phone gave low income consumers in South Africa so much more than a way to call people. In many cases, this phone ownership gave people their first permanent address, helping to create a sense of identity.
- 22% of low income consumers would put additional savings under their bed; only 65% would trust it to a bank.
- Low income consumers are more likely to be illiterate than their middle class counterparts, making visual communication a vital consideration for marketers. One international baby food manufacturer had to rethink packaging that featured a picture of a baby. Many illiterate consumers often think the picture shows the contents of the jar - clearly not the case here!
Contact(s) for this press release
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Linda Collard
Director, Marketing Communications |
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9/F Leighton Centre |
Telephone: +852 2830 2588 |
Synovate, the market research arm of Aegis Group plc, generates consumer insights that drive competitive marketing solutions. The network provides clients with cohesive global support and a comprehensive suite of research solutions. Synovate employs over 6,000 staff across 62 countries.
For more information on Synovate visit www.synovate.com.