Wooing the Middle Class

'While there are multiple approaches to capturing emerging-market consumers, the two critical factors are speed and scale. Our experience suggests that one way multinationals can quickly gain the scale they need is to identify clusters of similar consumers across multiple markets. That approach allows these companies to build revenue and profit streams that are collectively material and justify significant, ongoing capital investments to fuel growth. Another tack is to work at a more local level, gaining scale in specific regions and categories by teaming up with deeply knowledgeable on-the-ground partners. They can help not only in product development but also in distribution and market positioning—the crucial final steps to reaching highly local consumer markets.

All of this is easier said than done, of course, because consumers in emerging markets are extremely diverse. In some ways, they resemble those in developed nations: they are aware of and have a fondness for brands and want access to a variety of products at different prices, including products they aspire to but can’t currently afford. Yet their tastes are often localized, and while they are middle-class in regional terms, they are still not wealthy enough to replace products regularly, because their percentage of truly discretionary income is lower: in China and India, for example, about 40 percent of average household income is spent on food and transportation, compared with 25 percent in the United States.'

- David Court and Laxman Narasimhan, 'Capturing the world’s emerging middle class'


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