TNS Global: GEMs – Insights from Emerging Markets 1/2010

gems INSIGHTS FROM EMERGING MARKETS

n Yes we can!

n The social dynamics of microfinance and entrepreneurship at the BOP

n Evaluating social mission projects in emerging and BOP markets

n Are you digitally awake to Asia?

n Letter from China

gems : APRIL 2010 Page No. 1

Welcome to GEMs!

It gives us great pleasure to bring you garner a vast amount of experience in studying BOP
consumers. In this issue we bring to you a glimpse of some
the first issue of GEMs – devoted to of the key things we have learnt.
bring you insights and information
from Rapid Growth Emerging In addition to several articles focusing on BOP, this issue
includes an article describing the internet revolution in Asia
Markets. and its implications for marketers. Internet has gone on its
own trajectory in Asia and in many ways Asia has embraced
We realize that it is difficult to provide you with an in-depth Web 2.0 more wholeheartedly than the West.
analysis of consumers in these vast and heterogeneous
markets. However we do hope we are able to provide you Lastly, the words of economists and their expectations of
with some food for thought and also whet your appetite to dig Chinese consumers saving the world by copying American
deeper and learn more. consumers’ spending habits provides a great source of
debate and even amusement, and is the subject of our first
This issue is devoted to consumers at the Bottom of the regular ‘Letter from China’ column!
Pyramid (BOP). Bottom of the Pyramid was a term first
popularized by Dr. C.K. Prahalad – professor of strategy at the We sincerely hope you enjoy reading this issue and look
University of Michigan. Dr. Prahalad said that this group is not forward to your comments and suggestions.
just worthy of charity but can be an attractive, albeit a value
conscious consumer segment.

Dr. Prahalad proposed that offering relevant and attractively
priced products to BOP consumers is actually an act of
engaging them and bringing them from isolation, thereby
marrying the tasks of poverty alleviation and business development.

Researching this target group poses its own hurdles and James Fergusson Ashok Sethi
challenges. The task demands a great deal of sensitivity and Global Director Consumer Insights Director
Rapid Growth and Emerging Markets Rapid Growth and Emerging Markets
understanding of the target group. TNS has been able to James.Fergusson@tns-global.com Ashok.Sethi@tns-global.com

PHOTO: INDIA BY ANUJ ROY


yes we can
Yes we can!
Poonam Kumar, Director of Brand Strategy of Emerging Markets, TNS AP MEA

Bottom of the Pyramid (BOP) was a term first popularized by Dr. C.K. Prahalad – professor of strat-
egy at University of Michigan, who wrote a book called “The Fortune at the Bottom of the Pyramid”.
In this article Poonam shares her experience in developing marketing strategies for this segment
and explains that branding is as important for this group as any other segment.
In three decades, Grameen bank has empowered 40 million These consumers represent a market opportunity that the
people in one of the world’s poorest countries to say ‘Yes we world cannot afford to ignore or neglect from an economic,
can’. Achieved through micro loans of less than USD 10 each, social and human perspective. BOP consumers represent over
Grameen has changed the fortunes of several generations. two thirds of the population in the emerging markets that eve-
What’s more, unlike the struggling banks of the developed world, ryone is hoping will show the way out of the downturn. They
Grameen boasts a recovery rate of over 98%!! form a significant part of the nascent and virgin potential that
must be unlocked to realize the promise in these markets and
Prior to Grameen’s initiative, the world’s poor (over half the are even more critical for long term social stability and prosper-
world’s population) have been regarded as unfortunate victims ity.
who need to be rescued. As a result of Grameen and other suc-
cesses, this mindset has changed. The BOP consumer is now With everyone eyeing the opportunity, much has already been
perceived and explored as not just an economically productive written about the paradigm shifts required in the business
unit, but also as a promising and growing market with a collective model. The need to revisit price-product-quality equations, the
buying potential of USD 5 trillion! need for innovation (that is built from the ground up through
community involvement), the need for capital efficiency and
coarse segmentation, the need for accessibility and affordabil-
ity, and most importantly, the need for education, skill develop-
ment and community building that will empower even the most
timid of them all to say ‘Yes we can’.

Brand successes, like everything else in the BOP segment,
defy the power of dominant logic. Overlooked and ignored by
most marketers as a commodity market, the BOP consumer
demonstrates a surprising and strong preference to buy a
brand over a commodity, as long as the proposition is made
accessible and affordable.

Brands are valued, even loved, as they offer reassurance and
certainty in these consumers’ uncertain lives. And once won
over, BOP consumers reward the brands with unshakeable
loyalty giving early movers a strong competitive advantage.
TNS’ accumulated knowledge and understanding of BOP
consumers has resulted in the identification of 9 pertinent tips
PHOTO: CHINA BY SHAWN WANG to building brand propositions that will succeed among BOP PHOTO: EGYPT BY STEVE HAMILTON-CLARK
consumers.


Yes we can!
Continued from previous page

9 tips to building brand propositions that succeed in BOP markets

one
The brand must be anchored on strong functionality that
two
It is equally important that the brand serves as an emotional
three
Pricing and quality are not tangential vectors. The brand
makes a tangible, measurable difference in the consumer’s anchor – a source of hope, optimism and protection. must combine world class quality to counter hostile infra-
life. This implies that information, education and reasons structure with affordable pricing. The entire brand proposi-
to believe are core to reassuring that their money is wisely tion therefore requires reengineering through innovation on
spent, to building trust and a relationship. product, packaging and delivery mechanisms.

four
Pricing must be empathetic to the consumer’s budget, but this
five
Expertise credentials are as essential as in developed
six
International pedigree, aspirational among the emerging mid-
does not mean that the BOP consumer always buys the cheap- markets. The role of expertise however differs – the need is dle class, is less relevant and cannot be the sole motivating
est brand available. They respond favourably to a demonstration not for innovation and new news, but expertise is required proposition. In markets of China, India and Africa, local brands
of value and are willing to pay incrementally more for it. Family to build trust, visibility and reassurance that they are getting thrive among these consumers and are often looked at for
care propositions also grant permission to spend a little more. the best that their money can buy. inspiration and learning by MNCs.

seven
Protection and Fortification positioning themes – both physical
eight
The proposition does not always have to be about the bare
THE TIME HAS COME FOR
US TO NOW CONSIDER A
DIFFERENT PYRAMID – ONE
and mental – resonate. Enabling clean clothes that get recogni- necessities. Despite, or perhaps because of, the many press- THAT IS INVERTED – BASED
tion and approval, tea that boosts mental and physical energy ing life concerns, a brand that promises fun, surprise, sensorial
directed at either self or family enhance the brand’s appeal. pleasure or a special moment brings cheer and is welcomed
NOT ON INCOME, BUT
Whatever the positioning theme, simplicity, inclusiveness and into the consumer’s life. This is especially needed for non- ON OPPORTUNITY AND
accessibility must be integral to the proposition. essential consumption, but can add value in all categories. GROWTH.

And… yes, we can!
nine
Finally, it is necessary to recognize that although most successes are on affiliative positioning themes, BOP needs to span the
FOR MORE INFORMATION CONTACT:

entire human needs spectrum. Themes about excellence and success have also been leveraged successfully. Brands ventur-
ing into the assertive needs domain have done it effectively through promises of mastery over budget, admiration and envy of
superior homemaking skills, and parental pride and ambition. Rebelliousness and exclusivity however have no place here. Inclu-
sion is important as is meaning and purpose. The promise has to be about empowerment rather than exclusivity; challenges
have to be about changing unfair practices rather than edgy urban rebelliousness, superiority shown with a goal rather than ego
satisfaction.
Poonam.Kumar@tns-global.com


social dynamics
The social dynamics of microfinance and
entrepreneurship at the BOP
Constanza Cilley, General Manager, TNS Argentina

There has been a huge collective action involving millions
of poor people and thousands of NGOs, activists, inter-
governmental organization officials, scholars and other
development experts around the issue of microfinancing
in developing markets. Figures provided by the report
“State of the Microcredit Summit Campaign” constitute an
impressive snapshot that portrays a several fold growth in
the level of microfinancing: from 2000 to 2006.

In this article we analyse the link between entrepreneurship
and microfinance, taking Argentina as a case study. Research
conducted by TNS in Argentina shows that:
a. Entrepreneurship is a clear need among the poor and also
has a great potential for their financial progress.
b. When that need is fulfilled through microcredits, it generates
important changes in terms of material progress, development
of social capital and empowerment to the most vulnerable and
powerless sectors of societies.

Entrepreneurship and its constraints
Entrepreneurship to the poor offers a way to improve their liveli-
hood and hence one possible path for material survival. A fairly
significant proportion of the poor are already engaged in entre-
preneurial activities. Results from a TNS Argentina nationwide
survey measuring behaviour and perceptions towards entrepre-
neurship and financial services among Argentine citizens at the
base of the income pyramid shows that 2 out of 10 persons
living in poverty say that they have developed productive busi-
nesses on their own in the past.

The survey also shows that the proportion of ‘potential’ entre-
preneurs is huge and amounts to almost half of Argentine poor.
“Microcredits are a critical tool against
Five out of ten people living in poverty say that they are willing poverty and a wise investment in
to be entrepreneurs and to develop a project of their own in the human capital”
future. Kofi Annan, former UN Secretary-General

Why does this entrepreneurial spirit remain latent and does Gladys, a participant of the microcredit programme, washes cars for a living. She has been able to buy a professional vaccum cleaner.
it not translate into business? The answers obtained by TNS PHOTO: ARGENTINA BY DELFINA ROSELL


The social dynamics of microfinance and entrepreneurship at the BOP

Argentina point to structural-systemic constraints: Almost half of Apart from the direct tangible benefit, the broader and psycho- into macro changes. Companies need to look at this area not
poor Argentines (47%) say that lack of financing is the main ob- logical benefits are significant and most women said that they as charity but as a viable way to generate profits while facilitat-
stacle they face to develop productive projects. Moreover, 74% now enjoy more prominence and respect in household deci- ing economic progress for the consumers at the base of the
think that obtaining a credit or a loan is difficult. Only 3% report sion making than they did before. Microcredit not only provides pyramid. However, approaching this target group and designing
having tried to obtain a financial service as there is a strong financial capital but also builds social capital (which refers to the a product which meets their needs requires a careful under-
perception that their efforts are unlikely to be rewarded. networks, norms of reciprocity and trust that facilitate coordina- standing of their needs and overcoming the barriers and current
tion and cooperation for mutual benefit -Putnam 1995) for the perceptions of banking and financial institutions.
Almost 8 out of 10 individuals express that the main barriers beneficiaries.
for access are banks’ terms and conditions. Accessibility to
the formal financial market is rare for the poor. They voice their Microcredit opportunity * In the year 2006 in Argentina, there were 98 microcredit organisations, 18
discontent towards the high level of income requirement set by The worldwide growth of microcredits should be seen with opti- big and 80 small, with 30,400 clients/beneficiaries corresponding to an over-
all portfolio of $40,100,000. The segmentation line between the two groups
the banks, and also towards guarantor requirements and inter- mism. They generate material, psychological and social benefits or organisations was $200,000 and 400 clients.
est rates. for the poor. But much more can be done by the development
community, donors and companies to translate microcredits ** You can have a flavour of their work at http://www.mujeres2000.org.ar
Clearly this segment of consumers feel intimidated and alien-
ated by the traditional banks - in fact some banks, conscious of
the distance, have tried to create an environment that aims to
differentiate them from traditional banks (an example of this is
“Almost 8 out of 10 individuals
Fiegranpoder, where very loud music welcomes customers and
express that the main barriers for
staff do not wear ties but informal t-shirts). access are banks’ terms and
conditions. Accessibility to the formal finan-
Microcredit in action cial market is rare for the poor.” FOR MORE INFORMATION CONTACT:
Constanza.Cilley@tns-global.com
Clearly microcredits for the poor provide an innovative solution
by linking potential entrepreneurs with financial resources. While
several important barriers need to be overcome to make this
happen, when it does materialise, the results are very gratifying.

TNS Argentina conducted an exploratory satisfaction study*
on female beneficiaries of microcredit, living in poor neighbour-
hoods in Greater Buenos Aires. Respondents were receiving
microcredits from Mujeres 2000** - an NGO. Mujeres 2000**
fosters community development, placing the focus on technical
assistance and human support.

Satisfaction among recipients is high - 96% are somewhat or
very satisfied, 94% would recommend the service provided and
96% would renew it. The direct benefits of the credit are clearly
driving the satisfaction – allowing the women to develop their
business project and as a result attain a certain level of econom-
ic stability. Almost all said that they now have a better quality of Family is a key role in Emerging Markets. Maria (back row) also participates in the
life than before. microcredit programme. Her husband, grandson and friend have helped her not
Weekend groceries fair
only to maintain the credit but also to build their house.
PHOTO: ARGENTINA BY DELFINA ROSELL PHOTO: ARGENTINA BY DELFINA ROSELL


Evaluating social mission projects in emerging and
BOP markets
Raghavan Srinivasan, Managing Director, TNS Indonesia
Astiti Suhirman, Business Director Indonesia

Studying BOP markets requires a special sensitivity to the target n Taking into consideration BOP market realities (lower SES
group as well as the issues involved. In this article, Rags and and literacy) and the children target group.
Astiti demonstrate how a simple device of an innovative sticker
based diary helped in capturing accurate information on brush- The issues to address in developing the methodology were:
ing behaviour in children. This article has been adopted from the n What should we do to enable our respondents to provide
paper presented at the ESOMAR Congress 2009, which won real behaviour information?
the award for the “Best Methodological Paper.”
n What should we do to ensure that the mothers had knowl-
edge of children’s behaviour?
Behaviour change in social mission projects
Social development projects in BOP markets focus on engineer- n What should we do to ensure that it is simple and relevant
ing behaviour change in some form or another as their ultimate for BOP market realities?
goal. The ‘behaviour’ to be changed varies across projects –
from changing food habits to washing hands before eating, and Based on these, the guiding principles we set out were:
from brushing at night to condom usage for AIDS prevention. n We must have a record of the ‘interest behaviour’
The target group also varies from general public to specialists (brushing, brushing at night) over a period of time
like doctors or business leaders. (one or two weeks) – to ensure that we are
measuring ‘regular’ behaviour.
The increasing direct engagement of the private sector and n Consumers will tell or record actual behaviour if
large MNCs in these projects is bringing with it more stringent we make it easier for them to do so without biases.
accountability and rigorous evaluation of real ROI in terms of It is the researchers’ responsibility to eliminate
the ‘end behaviour’ to be changed (the equivalent of sales or biases arising out of ‘focused measurement of
market share in commercial world). interest behaviour’ – where the respondent knows
what is being measured and hence biases come
Unilever Oral Care social mission project to operate.
Unilever Oral Care is investing substantially in social projects to
promote night brushing behaviour among children in the 4-8 n Measurement methodology and tools must
years age group, in Indonesia and other BOP markets. The involve both the mother and the child.
success of this project would truly be a ‘win-win’ solution for n The ‘behaviour recording’ should ideally not
all stakeholders – individuals, society and the private sector. involve any writing.
Unilever had wanted to comprehensively evaluate their social n It should not place undue burdens or special
mission project in Indonesia in terms of long term benefits due training requirements for any of the stakeholders
to increase in night brushing and for optimizing the communica- in the projects – the respondent, the field

innovation
tion strategy. The research challenge in accomplishing this was: interviewer and the data digitizer.
n Innovating a reliable behaviour prediction tool to n Last but not the least, it should be economical
measure brushing frequency and night brushing – without and affordable.
the ‘claimed’ response biases.

PHOTO: INDONESIA
BY QUINNY CHAN

Evaluating social mission projects in emerging and BOP markets

The guiding principles set out naturally led us to the innovative Study findings and learnings
behaviour measurement methodology - “Daily Activity Sticker We now have over 3,000 weeks of behaviour measurement
Diary” data using this methodology and the salient findings are:
n Where children and mother together record all daily n The methodology provides reliable behaviour data -
activities of their child in our target group. brushing frequency and the proportion of the population
n By taking out the appropriate pictorial sticker ‘brushing at night regularly’ obtained from this study was
(from a sticker sheet) and pasting it in the daily much lower than estimates or assessments from other
activity diary. studies based on ‘claimed’ behaviour. It was also more in
line with the ‘tooth paste market size’ in Indonesia.
n For one or two weeks.
n This social mission project would in the long haul lead to
The final diary used for the study was co-created with market development as well - regular night brushing comes
consumers in an iterative laboratory considering the many with an increase in brushing frequency.
‘details’, such as: what time slots, what activities, how many
stickers for each to provide for, and in what format should it n Realistic behaviour data linked with attitudes can
be to ensure easy usage. Our final “Daily Activity Sticker Diary” powerfully guide interventions optimization – it led to
was in a daily sheet calendar format to be hung in the main identification of deterrents to night brushing not yet
living area. explored in communication.

Summary and suggestions
Even in the high technology times we all live in, it is possible to
develop simple solutions to complex problems that work well in
practice in emerging and BOP markets. In the final analysis it is
all about starting out with the first principles of good data col-
lection and patiently addressing all the issues. The “Daily Activity
Sticker Diary” based behaviour measurement methodology we
had developed can easily be extended to behaviour measure-
ment in other social mission projects (such as general hygiene,
nutrition, sexual behaviour) and to commercial marketing issues
where reliable behaviour measurement is important.h

FOR MORE INFORMATION CONTACT:

“Even in these high technology times
we all live in, it’s possible to develop
simple solutions to complex problems
that work well in practice in emerging
and BOP markets.” Raghavan.Srinivasan@tns-global.com Astiti.Suhirman@tns-global.com


Are you digitally awake to Asia?
Using research to engage Asia on Asia’s terms
Lee Ryan, Regional Qualitative Research Director, TNS AP MEA
Bernice Klaassen, Head of Interactive Research, Singapore and Hong Kong

The rest of the world is lagging far behind Asia in digital consumer
engagement. LEE RYAN and BERNICE KLAASSEN are not sur- “There is the notion that other
prised. Western organizations seeking a future in Asia need to find countries and cultures are just
the right approach to research if they want to get off first base. playing catch-up – sometimes leap-
frogging particular technologies, but
Guess what? Emerging markets do not evolve in the same way as west- always developing along a trajectory
ern markets. In February 2008, Harvard Business Review predicted set here about the right ideas and
online worlds as one of its ‘breakthrough ideas’ of the year. In Asia, products. It is refreshing to have
they’ve known about this for some time. When it comes to development American engineers return from
of the digital space, Western assumptions about Asia have been slow Japan or China or India and say,
to form at best, and, at worst, plain wrong. In the online world, Asia has
taken different trajectories to actually go beyond both Europe and North
‘Oh my God! You will not believe
America. This has profound implications not only for Western under-
what I saw’.”
standing of Asia’s developing economies and cultures, but for how it Genevieve Bell, Intel.
does business with them.

What’s happened?
How do we know that the US and Eurocentric vision of the Internet is
losing significance? Here’s a clue. 384 million Chinese internet users.
There are now more internet users in China than in the US, and Asia is
already accounting for over 40% of the world’s global online population.
And it is not just about the number of people going online in Asia, it is
also what they do when they are online.

In Asia, social networking participants have taken such websites to a dif-
ferent level. Instant messaging has never been such a hit in Europe and
North America that it has been in Asia. Confined by their own languages
and using their own cultural preferences for communicating, Japan, Ko-
rea and China have created their own versions of the social web. These
three nations are evolving in different ways to gain and keep their own
internal market advantages. Compared to the US and European social
media, companies struggle to monetize their social media applications;
in Korea and China, QQ and Cyworld are already profitable. This makes
it difficult for the US and Eurocentric global players to see a way in.

Cultural constraints, online openness
What are the reasons for these differences? Technology is overcoming
local constraints. Everybody was aware of the social and cultural codes


Are you digitally awake to Asia?

that inhibit behaviour in Asia. Nobody predicted that the advent
of online worlds would tap into a desire for expression that lies “So how do we keep up
beneath. with this fast-paced digital
In their personal lives, Asian online users have grasped the freedom environment, both from a
and anonymity offered by the internet and taken it way beyond the
experience of Western cultures. Today, 40-50% of online Asians are
research and business
involved in user-generated content, compared to just 10% in the perspective? It calls for
West. The whole development of web 2.0 is much faster in this part
of the world. There is substantial evidence that Asian consumers a careful, three-pronged
are more comfortable expressing themselves online.
approach: observation;
So how do we keep up with this fast-paced digital environment, conversation; interaction.”
both from a research and business perspective? It calls for a care-
ful, three-pronged approach: observation; conversation; interaction.

Engaging the new consumer
First, Observation. This is about ‘listening’, getting close to what online spaces where people congregate as their
people are saying and doing online through research: creating avatars or online persona to chat, create and
a ‘virtual closeness’ through buzz-monitoring software that can trade. It is a prediction of what we are only just
analyse user generated content semantically. TNS Cymfony allows beginning to see in Europe and the US. Gartner
clients to track consumer generated content in real time. Consulting predicts that by 2011, 80% of active
Internet users will have an avatar.
Second, Conversation. In Asia, due to cultural constraints, the
traditional focus group is not effective online. TNS Incubator is a Just because the online world is following an
web 2.0 research tool that enables clients to have different types evolutionary path that Western marketers did
of conversations and engage consumers differently. Developed in not predict, this is no time to be averse to the
Asia, it has immediate relevance to what consumers are doing here, metaverse. Fear not. The right kind of approach
online, today. to research will provide the entitlement to some of
the answers.
Third, Interaction. Participation cannot happen without the first two
stages. This means going further than a classic agency relationship;
clients and research agencies are now collaborating and co-creat- FOR MORE INFORMATION CONTACT:
ing with the new consumers. To engage consumers, clients need to
ensure reciprocity. Consumers’ time and attention must be earned
and rewarded. Activities such as contests and competitions help to
change the type of interaction between brands and consumers.

The new reality
Truth is, Western marketers have no time to come to terms with the
Internet as they think it is. The next version is already born in Asia
where consumers are making the ‘metaverse’ a reality: multiple Lee.Ryan@tns-global.com Bernice.Klaassen@tns-global.com


LETTER FROM CHINA

Why Chinese consumers spend less and save more
Ashok Sethi explores the challenges confronting China’s consumers as the developed world looks to them to
drive demand required for a return to economic growth.
The magic eight The other barriers to consumption
Eight is a lucky number in China. The opening ceremony of Beijing Owning a house ranks among the most important desires for a Chinese.
Olympics commenced on the eighth day of the eighth month of 2008 at The idea of living in rented accommodation is alien and unacceptable.
8.08.08 pm. The car number plates with a few eights go for thousands of Traditionally Chinese have liked the idea of stability and the state provided
dollars in auctions and the consumer will willingly cough up a significant that by allotting life long accommodation, which you keep even after
premium to acquire a mobile phone number which is festooned with a retirement. With state housing gone for most, the Chinese are rushing to
couple of eights. buy apartments. The strong demand coupled with a relatively controlled
supply has made the cost of housing disproportionate to the consumers’
Eight is also the percentage by which, the economists believe, the income. Today the average per capita annual urban disposable income
Chinese economy must grow to provide jobs to the millions of students in Shanghai will buy two square meters of an apartment. Additionally
graduating from Universities, or the rural folks migrating to the cities in Chinese need to cough up 30% of the price as down payment.
search of a better life. The first two quarters of 2009 were difficult – China
could only muster up a 6.1% GDP growth in Q1 of 2009 and just missed On the other hand social norms today make the idea of continuing to live
the magic mark of eight in Q2 with a 7.95 growth. However the Q4 figures with the parents after marriage as nearly inconceivable (no pun intended)
came at 10.7% and the whole of China heaved a collective sigh of relief and no self-respecting woman will accept a man’s hand in marriage un-
when overall growth of 8.7% was announced for 2009. less the hand holds the keys to an apartment (according to a recent poll
only 18% of mothers are willing to let their daughters marry a man who
Clearly the magic has been achieved with a lot of stimulus - the Chinese rents his home!). With low starting salaries even for University graduates,
government is trying to spend four trillion yuan in stimulating the economy. parents need to bear the burden of saving for the down payment. High
Money is being poured into building roads, bridges and some income mortgage payments in relation to the income further reduces the spend-
generating activities. Exports continue to be a challenge, though the ing ability of the consumers.
Economists predict that China’s exports will return to growth this year
– but are unlikely to touch 2007 levels in the near future. A contributing Secondly, while impending marriage of the child brings a substantial
factor is the American consumer who may never return to the frenzied financial burden for the family, the university education before that is also
shopping they previously exhibited to the delight and economic growth of a formidable expense. As China moves towards becoming a market
the whole world. economy, the cost of education has been increasing steadily. Today for
an average family the cost of providing a university education may take
Consumer up as much as one-third to half the disposable income of the family. Even
Economist say (softly in China and more shrilly in the West) that the Chi- school education costs are going up as more Chinese consider the idea
nese consumer must spend more to compensate for the loss of exports of sending their child to expensive private schools.
and redress the global imbalance. Replacing American consumers who
previously sustained the global economy with their profligate consump- Thirdly the average Chinese consumer is value driven. Products receive
tion of Chinese goods - enabling Chinese Consumers to save as much as a microscopic scrutiny and intensive comparison and valuation. Prices
one-quarter of their incomes. Hence the critical question now is whether are compared thoroughly and promotions and deals welcomed enthusi-
the Chinese consumer will spend more and save the global economy. astically. While there is a trend of premiumisation, it is not universal and
applies more to products of visible consumption which can make the
The traditional reason given for the Chinese consumer to save a large pro- consumer look good and successful.
portion of their income is that many do not enjoy social security and need
to set aside for their retirement and possible medical expenses. Secondly, Hence while the Chinese consumer will gradually spend more, and
culturally Chinese are considered to be thrifty and savings driven. While consumption as a proportion of the Chinese GDP will move up from its
these factors – whether cultural or structural – do contribute to the Chi- uniquely low level today, the movement is going to be gradual unless
nese households stashing away a large proportion of their income there significant changes are made to make housing and education more
are other social and emotional reasons driving this behaviour. accessible and affordable and the consumer regains the confidence of
PHOTO: CHINA BY HOLLY ZHANG continued prosperity.


TNS Global: GEMs – Insights from Emerging Markets 1/2010

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