TNS GEMS April 2013

April 2013

GemsInsights from emerging markets

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Contents

1 Introduction 3

2 Joining the future for the Mekong 4

3 China and the Chinese - going beyond Kung Fu and noodles 23

5 Is the reverse flow of innovation coming full circle? 39

4 Making the small screen part of the big picture 31

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Chris Riquier CEO, Asia Pacific

Introduction

One of the most exciting things about living and working in the ‘emerging markets’ is the rapid pace of change and the wealth of new opportunities. This is perhaps best exemplified by Myanmar, which really is the newest emerging market.

Since sanctions lifted last year, we have been working with clients to help them to understand the values, attitudes and aspirations of people in Myanmar. We were delighted to receive our formal licence to operate in March and have opened a full service office in Yangon. You can learn more about the opportunity in Myanmar and across the new Mekong sub-region - which includes Cambodia, Laos and Vietnam – in this edition.

We kicked off the year with our Chinese New Year study – building an understanding of how people in China, Hong Kong, Singapore, Taiwan and Malaysia celebrate new year. The holidays are far behind us, but some of the insights into attitudes are of interest beyond this.

The impact of mobile in sub-Saharan Africa has been massive, however people are not actively engaging with brands via mobile, particularly in South Africa. We examine some of the barriers and potential solutions that companies can consider to increase their effectiveness in this area.

Finally, we share a perspective on reverse innovation – and the lessons that ‘mature markets’ can learn from emerging economies.

We’ve been at ESOMAR in Ho Chi Minh this month, talking about some of the opportunities in Myanmar and also discussing the importance of cultural precision when building a marketing strategy. If you’d like to see a copy of our papers, or discuss any of the issues in this edition, please do get in touch.

Kind regards,

Chris Riquier, CEO, Asia Pacific

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http://www.tnsglobal.com/press-release/tns-opens-business-myanmar

mailto:[email protected]?subject=Get in touch GEMS April 2013

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Joining the future for the Mekong - Ralf Matthaes

Opinion LeaderFinding faster growth: New markets




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The Mekong sub-region represents one of the world’s great emerging market opportunities; and one where distinct national characteristics, complex histories and varied stages of development must guide the strategies of brands.

Joining the future for the Mekong




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At a time when brands are seeking to decouple their fortunes from recession-stricken developed markets and find new engines of growth, the countries of the Lower Mekong Basin offer a compelling case for attention. From the South China Sea in the East to the Andaman Sea in the West, via Vietnam, Laos, Cambodia, Thailand and Myanmar, the Mekong sub-region incorporates rich natural resources, genuine emerging markets and rapidly developing urban cultures. It also represents a study in human diversity, with a rich canvas of languages, ethnic identities and religious traditions, and distinct national histories that exercise huge influence over the nature of markets today.

Of all the markets in the region, Thailand has the most familiar dimensions for developed-world brands, with a large, well-established middle class, a zest for living an experiential life, a strong sense of fashion and an appetite for premium products. Thailand has long been the island of relatively stable prosperity in the midst of the Mekong region – and a very attractive one for global brands. However, with the rate of growth slowing and the Thai economy feeling the effects of the global recession through its impact on the tourist trade, those brands must increasingly look to the region’s

more recently emerging markets for the strongest growth opportunities.

In doing so, they will find that the strongest potential for growth lies in those countries where political


change over the past 25 years has played a key role in determining the course of economic development. And the strongest opportunity of all appears to lie with the country where those changes are most recent, and perhaps most fragile.




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Potential unleashed in MyanmarMyanmar’s movement towards democracy during the past three years has resulted in the easing of sanctions previously imposed on its ruling military junta and the unleashing of a likely flood in Foreign Direct Investment (FDI). This is predicted to catapult from just under $1 billion to $20 billion, dwarfing the figure for its larger and wealthier near-neighbour Vietnam and setting Myanmar apart from Cambodia and Laos, its fellow members of the CaLM group of countries, which are often grouped together as Mekong territories in the earliest stages of economic emergence.

Within this group, Myanmar enjoys some significant advantages that help to explain its attractiveness for investors, and which the instability of recent years has not been able to undermine. With oil, gas and gemstones it is hugely rich in immediately exploitable natural resources; a border shared with India and China puts it adjacent to one third of the world’s population

as an ideal trading hub; and despite decades of under-investment and intentional disruption of education by the government, Myanmar has a literate, well-educated population; 18 per cent of the urban population have some grasp of English as a second language.

Yet despite its natural resources and growth potential, Myanmar currently has the lowest income per capita of its region, with huge disparities between rich and poor; 32 per cent of its population live on or below the poverty line, grappling with significant gaps in infrastructure whilst attempting to secure a better future for themselves and their children. With more than half of the population under the age of 30, Myanmar is likely to experience exploding demand for consumer goods in the medium-term future; but for now, very few of those young men and women enjoy disposable incomes, and many are potentially harder for brands to engage than equivalent young consumers in other emerging markets.


32%of people live on or below the poverty line;

18%of the urban population speak some English;

1/2 half of the population are under the age of 30.




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The mobile phone that has extended online access and unleashed entrepreneurial energies across many countries has not been able to wield such influence in Myanmar, due to controlled access and the previous regime’s policy of setting restrictively high prices. Up to 12 months ago, SIM cards were priced out of the reach of all but the very wealthiest consumers, however prices have dropped to 200,000 MMK (approx. U$ 235) for a GSM SIM card and the government continues to move towards opening up the market with invitations to foreign operators to participate expected to dramatically increase access. In the medium-term, it is likely that many of Myanmar’s young consumers will adopt web-enabled smartphones as their first handsets, but for now mobiles still remain out of the financial reach of many.

The bulk of the country’s young population have little to mitigate shortcomings in infrastructure that greatly affect their experience of the world and the channels which brands have available to engage them. Only

two per cent have an internet connection, despite 25 per cent saying they would like to access more news and information this way and 15 per cent saying they would like to own a laptop. TV dominates the media experience, even when the incomplete and frequently interrupted electricity supply means families may have to resort to generators (or rigging electricity supply from the family motorbike) to power their set.

The typical family is Burmese (the ethnic group that dominates Myanmar, representing 68 per cent of the population and 84 percent in the major metropolitan areas) with a very traditional adherence to the tenets of Buddhism. Community and family are hugely important, with duty to others keenly felt and at least two generations typically existing under a single roof. For those who have travelled widely in South East Asia, Myanmar stands out for the way in which the influence of Buddhism extends to all areas of life; and this has a significant role in shaping consumer instincts and attitudes to brands.


68%Burmese people – or Bamar – only compromise 68% of the population;

135Myanmar government officially recognises 135 distinct ethnic groups.

84%of people in the main metropolitan cities are Burmese;




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Within the close-knit family environment, it is women who control most decisions regarding finance and spending. And an instinctive cultural rejection of ‘bling’ or the pursuit of status through belongings lends a practical edge to that spending. The most desired items in Myanmar are essential durables, with washing machines and refrigerators topping consumers’ wish lists. Outside of groceries, the dominant item of expenditure is education, the embodiment of hope and a legacy of an adult population who have themselves passed through a structured education system. The proportion of household budgets invested in education highlights the priority that all attach to improving the prospects of their children in a fast-developing future. The speed with which that future is arriving, and the obvious gains that can be rapidly delivered by forthcoming investment, are what make the immediate economic future of the country particularly exciting.





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Myanmar: U Than Kyaw’s storyDinner is U Than Kyaw’s favourite time of day. His family gather for it at 7.30 in the evening, in the home that he shares with his wife, young daughter, two nephews and three nieces, above the traditional convenience store that the family runs. U Than Kyaw adores his wife’s cooking, of course. But that is not the only reason that he enjoys the meal so much. It is a symbol of their shared endeavour: the ingredients bought by him in the traditional wet market in the morning; then cooked by her in the evening as he monitors the vehicles of the taxi business that he runs from their store. Mealtime is also the occasion when the family room is filled with energetic discussion of Dhamma doctrine, the central tenets of Buddhism that, he loves to hear, mean as much to his younger relatives as they do to him.

The Buddhist religion has directed U Than Kyaw’s life ever since his childhood in the provincial upper Myanmar city of Paung during the 1970’s, when the country was still undergoing the ruling military junta’s experiment with centrally directed socialism. One of the most profound impacts of military rule was a narrowing of access to education; so much so that U Than Kyaw was the only one of his six siblings to graduate from University, at the then-capital city Yangon, where he still lives today. He has been determined to make the most of his opportunity ever since, and sees caring for his extended family as a deep personal responsibility. When he fell in love with his wife and gave up his career in the construction industry to help her start a business, he naturally employed his younger relatives to work in the shop.

The traditional store has been the focus of he and his wife’s life together since they married ten years ago. He has helped her to focus on the FMCG products for which they can charge a price

their neighbours can afford, whilst selling enough stock to be confident of making money. They stockpile a months-worth of goods in their back room to guard against price fluctuations and avoid being forced to raise prices. All the same, supporting a family from the convenience store alone would be a challenge. U Than Kyaw used the management skills that he learned in construction to set up a taxi business that he can run from the shop, bringing in much needed extra income.

He would have found balancing the two enterprises a lot more difficult just a year ago. It was then that he was able to buy a second-hand mobile phone from a friend who still works in the Yangon construction industry. When they worked together, the idea of owning a mobile was laughable; the cost of a handset was several times their annual salary. In the last year, with the government altering its policies on the mobile market, the price has plummeted to only six months’ earnings. It is still a lot of money, but being able to stay in touch with his vehicles as they move around the city has helped U Than Kyaw to bring in a great deal more.

It was the extra money and the changing political situation that finally persuaded he and his wife that they could afford to bring up a child of their own. And after nine years of marriage, their daughter was born. Waiting so long means that they do not expect to have any more children; so he and his wife lavish all of their efforts on their little girl. U Than Kyaw is determined that she should become a graduate; giving her the same opportunities that he had – and of course, the same responsibilities to help and support her family as best she can.




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Cultural divides in CambodiaCambodia’s emergence from civil war in 1997 has given it longer to progress down the path of development that Myanmar is now embarking upon. The changes of the last 15 years can be seen in greater income per person, more established infrastructure (especially where mobile is concerned) and more recognisable consumer attitudes than those of its neighbour. However, the differences between Cambodia and Myanmar are not simply a case of countries at different stages of development. They result from clear religious and cultural differences, geographic location and the more damaging impact of recent history upon potential.

The regime of Pol Pot was unfortunately far more effective at disrupting and suppressing educational institutions than those holding power in Myanmar. As a result, the population of Cambodia is significantly less literate and has very limited command of foreign languages. The growth of the last decade and a half has made some wealthy but great inequality persists, with a third of the country remaining in poverty. And that inequality is most keenly felt between the rural

and urban populations. Cambodia’s urbanites enjoy significantly greater personal income and expenditure, as well as significantly increased access to infrastructure. Understandably, those working in agriculture, fishing and forestry, the country’s dominant current industries, express a strong desire to move to more urban-oriented careers around retail and wholesale. Despite this, the dominant share of the economy represented by Cambodia’s rural population means that brands looking to drive growth must embrace the challenges of distributing products and building awareness in these communities.

As in Myanmar, TV remains the dominant media channel through which they can seek to do so; however, mobile phones have the potential to play a stronger role in Cambodia in the immediate future, overcoming patchy electricity supply and opening up new channels of engagement for brands in rural areas. Almost half of the population (48 per cent) expect to increase their spend on mobile in the next year and 61 per cent of web users already access the internet through mobile devices.





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In terms of declared religion, Buddhism appears as influential in Cambodia as it is in Myanmar. That influence though is felt in a very different form when it comes to self-expression and emerging consumer habits. Status is hugely important in Cambodia, closely linked to self-esteem, and providing a different form of opportunity for brands to establish their appeal: 73 per cent of Cambodians say that position and status in society is the most important aspect of their life, and 69 per cent say they like to use brands that show their success.

Cambodian society also differs significantly from Myanmar when it comes to the role of women, with a traditional role in the home more firmly entrenched, both in the attitudes of women themselves and their husbands. Cambodian women are significantly less likely to have received an education than their brothers, husbands and sons (a product both of traditional expectations and Cambodia’s educational shortcomings), but this does not prevent them from asserting strong influence over domestic budgets and purchase decisions. This is particularly true when it

comes to the education of children, something to which Cambodians, like their neighbours in Myanmar, devote a large proportion of household spending. Ambitious mums, willing to pay a premium to get the best for their children, represent a hugely significant segment in Cambodia. A better future, with children who can support them in their ageing years, is seen as the return on this investment.

The challenges of Cambodia appear to have had a substantial impact on the amount of foreign investment channelled towards the country thus far, with total FDI dwarfed not only by Vietnam but also by the amounts promised to Myanmar. Yet although Cambodia does not have quite the resource riches of Myanmar, its oil reserves alone will continue to draw money to the country. Economic growth is proceeding regardless of the lower level of foreign support. And a lack of engagement with the country by international brands provides those that can craft compelling local propositions with strong potential opportunity in relatively uncluttered markets.


69%say they like to use brands that show their success.

73%of Cambodians say that position and status in society is the most important aspect of their life, and




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Cambodia: SaingHy’s storySaingHy rises every morning at six to do chores, dress for work and prepare to get her eldest, 11 year-old son ready for school. She makes the most of the space whilst the rest of the household is still asleep. The flat where she lives is also home to her husband and two sons, her younger sister with her husband and child, plus three employees who work in the tailors shop that she runs from their front room.

Getting her son to school on time means a great deal to SaingHy. The fees at the “Western International School” are the family’s single biggest expense outside of food, but SaingHy firmly believes that education and English are the key to a successful future. She wants her children to have the opportunity to decide their own path in life.

Such decisions were never really available to SaingHy herself. She was the second of five children born on the family farm in the Kandal province of Cambodia. Both of her parents worked all day on the farm – and money was scarce. She loved school but was forced to leave at the age of 13 to start learning her craft as a tailor – and helping the family to make ends meet. Despite the fact that her financial support has helped both of her brothers to go to university, she has never been able to learn English herself – something she longs to do. It’s hard to use her mobile phone without a grasp of the language and she longs to travel and learn more about world events. As it stands, she stays on top of world news using a YouTube channel in her native Khmer language, which she can watch on her phone when she goes to bed at night.

After dropping her son off at school at 8am, SaingHy makes time to buy food for the day at the traditional ‘wet’ market. The family has no refrigerator so food must be bought fresh every morning. SaingHy loves to cook – and her meals are famous. Her husband, who works as a security supervisor in Grand Phnom Penh, comes home for the main meal of the day at 12 o’clock. He won’t miss his wife’s cooking.

After lunch, SaingHy takes a short nap with her baby son, for one hour. She believes that napping is essential for health. And she needs it – for this is the only hour between 9am and 7pm when she will not be working in the tailors in the front room. At busy times, she and her staff work through until 10pm to ensure that all of the clients’ shirts are freshly pressed for the morning. Her employees are willing workers, but it frustrates SaingHy that they are not as skilled as she was at their age.

Weekends are hugely important to SaingHy. She and her husband will take their children to the Dreamland Theme Park in the city, walk along the riverside, and stop to eat at the Pizza Company, where there is a playground for the kids. She sees their weekly meal out as a luxury – a well-earned treat for herself and those closest to her. They would be happier if they had more money to spend on days like this – and if her work wasn’t quite so tiring. But perhaps an easier life will have to wait until she finally has the time to learn English.




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Individualism in Laos Independent since 1953 and a single-party socialist republic since 1975, the consumer attitudes of Laos have been shaped by its communist heritage and conservative strand of Theravada Buddhism, but also by its proximity to Thailand and the ease with which Thai influence flows across border points such as the Friendship Bridge. The population of Laos is extremely young (with an average age under 20) and increasingly urban, with major centres such as the capital Vientiane concentrating the Thai influence and resulting in increased interest in fashion brands and premium products with practical value.

The mobile phone is one example of such a product, with mobile phone penetration far exceeding that of Myanmar, and mobiles increasingly taken for granted as an everyday life tool. Phones are also one of a small but growing group of product areas where brands are seen as an important factor in purchase decisions.

In common with other CaLM countries, consumers in Laos rank family harmony as their most important

concern. However, individual ambition and assertiveness are far more strongly expressed than in Myanmar, in particular: work, career, freedom, earning money and educating oneself for future opportunities are all ranked highly as priorities, which very much resembles the consumer sentiments holding sway in Vietnam a decade ago. Educating one’s children, in contrast to Myanmar and Cambodia, comes further down the list. Although choices for entertainment are limited, leisure time appears a more familiar concept than in the other CaLM countries, with sport a particularly strong area of interest for urban populations.

Laos’s emerging consumer attitudes, extensive TV coverage and growing penetration for the internet and mobile phones, offer significant potential for brands seeking growth opportunities. However, this potential remains restricted by income levels and a lack of familiarity with brands and competitive markets. A third of Laos’s population remain below the poverty line and despite substantial natural resources particularly when it comes to tin, copper and hydroelectric power, economic growth is highly dependent on trade with immediate


neighbours. Consumers in Laos are not accustomed to product choice and competition – or to the role of brands in helping to guide their decisions. High-value exceptions to this rule, such as mobile phones and cars, show the potential of brands to play an increased role, but as with other CaLM territories, propositions must first prove their practical, everyday value to consumers with very limited budgets.

1975a republic since 1975.

1953Laos has been independant since 1953 and




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Vietnam: a snapshot of the futureVietnam, with its GDP of $123 billion and substantially increased purchasing power parity, appears to offer a snapshot of the future experience for Cambodia, Laos and Myanmar, especially as the country’s vital economic statistics of 15 years ago showed striking similarities to those of Myanmar today. The desires expressed in Myanmar and Cambodia to live only with immediate family have been fulfilled in Vietnam, where the size of each household has shrunk, fewer members of each home are children – and significantly more of them are active wage earners. The Vietnamese still place great emphasis on family values, however the influence of parents on the attitudes of emerging generations is noticeably reduced when compared to Myanmar and Cambodia.

The influence of religion is also felt far less, with only 40 per cent of the country registered as Buddhists and half classed as non-denominational, a legacy of the country’s communist heritage. Vietnamese also show a greatly reduced tendency to idolise the living when compared to Cambodia and Myanmar, where current politicians dominate lists of “most admired” people. Many Vietnamese have no particular person


that they admire outside their family and those that do are more likely to nominate historical figures such as Ho Chi Minh or successful businesspeople such as Bill Gates.

Women still dominate spending decisions in Vietnam, but this influence is less linked to a life focused solely on managing the household. “Your money is my money, and my money is my money” is the humorous catchphrase frequently used to express an assertive attitude, combining traditional authority on shopping and spending with a role as wage earners.

As household income increases, so too do opportunities to use that wealth for personal satisfaction, entertainment and leisure. Whereas consumers in Cambodia and Myanmar spend most of their spare time sleeping or resting, those in Vietnam are exploring a range of options for leisure activities. Shopping in Vietnam is seen as a social activity not just a necessity, eating out and socialising has overtaken education when it comes to household expenditure and the Vietnamese are far more likely than consumers in Cambodia and Myanmar to spend their leisure time with non-family members.




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In this increasingly social environment, word-of-mouth is an important channel for sharing information and building awareness – and the role of online channels in promoting such word-of-mouth is increasingly established. Although TV still dominates Vietnamese media consumption overall, online is booming, with 53 per cent of the urban population using the internet at least four times a week and social networks particularly popular. Mobile phones, now almost ever-present amongst Vietnamese, have an increasing role to play.

Although it represents a smaller proportion of household expenditure, education remains a priority in Vietnam, with intense competition for limited places in universities and well-regarded international schools. Education remains the key to unlocking improved prospects and greater earnings potential, and as Vietnam feels the impact of the global downturn and consumer confidence slackens, improving prospects is seen as more important than ever. Getting ahead remains a driving force even as the country itself moves forward.





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Vietnam: Nguyen’s storyHer name means “beautiful flower from the highlands”. And this year, Quynh Nguyen decided she should make sure she was living up to it.

It’s not that she worries about the affections of her husband Huy. He is still the same devoted father that he has been since their son Piggy (named for the auspicious year of his birth) arrived two years ago. Huy feeds him, bathes him and takes him to bed. He also helps Nguyen with many of the household chores but draws the line at cooking. Some things remain a woman’s work.

Nguyen wants to make sure that she remains the priority in her husband’s life. She began by curling her hair, polishing her nails; she even bought some expensive Clinique make-up and filled her wardrobe with colourful, sexy dresses. She feels she is becoming a new woman – and it certainly seems to make Huy happy.

Such ideas never occurred to her when she was single, and living in her hometown of Da Lat, a small mountainous city in Vietnam’s south central highlands. But then, when Nguyen was growing up she had no access to magazines to tell her about the fashions she wears today – and no leisure time to spend hanging out with friends and showing off her new look. A lot has changed in Vietnam in the last decade, and not just for Nguyen.

She was born in the late 1970’s after almost two decades of continuous war that had made Vietnam one of the poorest countries in the world. She grew up in an era of economic depression, walking several miles to school through the fields of flowers that Da Lat is famous for, helping her mum with the housework and sewing to earn money and help the family make

ends meet. The degree that she graduated with from Da Lat university helped to give her the skills she needed to become an accountant when she moved to the big city, once she took some additional courses in accountancy and computing. Her mum, a primary school teacher all her life, approved: “It’s a stable job for a woman,” she said. “And you will have time to take care of your husband and the kids.”

In fact, Nguyen’s time at home is quite limited. She works six days a week, from Monday to Saturday, 8pm to 5pm with overtime at the end of the month to secure her salary of US$200. Like many couples, she and Huy need two incomes to pay the bills. They waited until they were both 26 years old to get married, anxious to achieve some financial security first; even so, their wedding, with two parties in Da Lat and one in Ho Chi Minh City, cost 80 percent of their annual income.

When Piggy was first born, Nguyen did not know how to take care of him. For advice she turned to glossy magazines that tell her how yoghurt is good for digestion and sun block is essential for protecting his skin. She also relies on her mother and mother-in-law, who counsel her to bathe Piggy in beer for a beautiful complexion and hair, fit a silver ankle bracelet to protect him from cold weather, and keep a knife under the pillow to ward off evil spirits.Nguyen would like to have a girl baby next. She believes that daughters stay close to their mums, just as she has. But on one matter she is very different to her mother. She wants no more than two kids. The prospect of having three children like her mother or seven like her grandmother is something she can’t imagine. She jokes about how much Clinique she would need to get her look back then.




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Mapping brand opportunitiesAcross these very different territories, each at different stages of market development, a broad arc of opportunities exists for brands. Marketers can choose to target wealthier, freer-spending consumers in Vietnam using both TV and well-established online and mobile platforms; they can engage the youthful population of Myanmar, meeting the challenges of limited infrastructure to build loyalty amongst families that value the guarantee of quality that brands bring; they can offer Cambodians a platform for expressing status, getting ahead and bridging the increasing wealth gap within the country for themselves and their children; and they can seek to link brand choices to consumers’ yearning for individual advancement in Laos. However, to exploit any of these opportunities effectively, brands must carefully adapt their approach to the very particular characteristics of each country.

A key element of such adaptation involves understanding the relative development of different sectors– and the preferences guiding consumer choice in those sectors. The strategy for high-end white-label


goods or personal care products will be different inCambodia, where consumer choices in such areas are often used to express status, than in Myanmar, where product quality and reliability are key. The strategy for

those selling laptops and PCs is very different in all three countries as a result of varying levels of internet access, and the increased penetration of mobile phones in Vietnam, Laos and Cambodia.




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Roughly speaking the countries of the region occupy different but closely overlapping positions in the consumer brand cycle, with the commodity view dominant in Myanmar, brands used increasingly as a reference in Laos and Cambodia, and brand choice used to express personality in Cambodia and Vietnam. Marketers must be aware of consumers’ different feelings towards brands in general and foreign brands in particular, which result in part from these different stages. In Myanmar, the role of brands is limited to guaranteeing quality – and in categories such as personal care or white goods, foreign brands are often perceived to offer greater quality than local equivalents. In Cambodia, the divide between rural and urban environments expresses itself in markedly different views of foreign brands, with rural consumers expressing a strong preference for buying local (potentially due to the language barriers that exist) and urban populations far more motivated to associate themselves with global status symbols. In Vietnam, where increased product quality and reliability across the board is rendering brands’ hygiene role more redundant, a preference for buying Vietnamese where possible appears to be developing. However, this preference shows little sign of eroding the dominance of established foreign brands


over more expensive purchases: Honda remains number 1 for motorcycles (and is seen as a local brand by many); Sony battles it out with Dell amongst laptops and with Samsung when it comes to LCT and plasma TVs; whilst Panasonic is growing rapidly to dominate the market for air conditioners.

Each situation and sector therefore requires a different strategic approach: emphasising and demonstrating the quality of brands in Myanmar; adopting the Khmer language and local cultural references when targeting rural Cambodia in particular; considering the adoption of local brands in Vietnam, or emphasising a brand’s own deep links with the country. In each of these cases, brand propositions must also be carefully tailored to the very different levels of disposable income that exist. Product strategies can be laddered to appeal to different income levels; high-end brands should be carefully and efficiently targeted at those able to afford them but also at those open to expressing status through consumer goods; and ensuring affordability through smaller package sizes and other strategies is an essential for those targeting the upper reaches of the BoP across the Mekong region.




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Within the FMCG category that dominates consumer spending and the personal care sector that represents a potential growing slice of it, global brands must prove their quality to consumers’ satisfaction before leveraging a brand to guarantee it. Price promotions and mass-reach TV advertising offer the most effective strategies for driving product trial, but this must be supported by products that have been developed to appeal to well-defined local preferences. The dominant share of Myanmar household spending that is commanded by MSG flavouring, dried noodles and rice soups is evidence of strongly established tastes that cannot easily be shifted; as is the popularity of traditional beauty care products like Thanaka, and coconut-oil based personal care remedies.

Traditional rules on distributionCarefully engineered, affordable propositions are of limited value if brands cannot ensure the accessibility

of their products to a target audience. They must do so within a distribution environment that remains dominated by traditional markets. Shoppers in Myanmar and Cambodia visit such markets frequently, buying products in small, affordable package sizes and topping up supplies as required rather than conducting large-scale weekly shops. The market is a social setting not merely a shopping exercise. It represents a valued opportunity to converse and catch up and this ensures that it retains its influence as a distribution channel when personal or national wealth increases. The highest earners in Myanmar are more likely to send an employee to the market than they are to visit a supermarket themselves; in Vietnam, shoppers still congregate in traditional retail spaces – and across all countries, western-style malls often appear to be used more as a social gathering space than as a shopping environment. The market rules – and brands ignore this regional truth at their peril.





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Mass-reach and targeted mediaMedia strategies looking to drive large-scale awareness cannot ignore the dominant role played by TV, with sets permanently switched on at home, in shops and in markets. However, gaps in electricity supply mean that near-universal TV ownership does not always translate into universal TV coverage, particularly in rural areas. Outdoor media have an obvious role to play in filling such gaps, and as a result posters fight for room and attention wherever any form of outdoor advertising space is available.

In Myanmar and Cambodia, limitations of infrastructure and reduced mobile penetration restrict the potential of online as a tool for driving large-scale awareness. However, the availability of smartphones, tablets and laptops amongst increasing numbers of urbanites in Cambodia (and likely rapid growth in mobile penetration in Myanmar), offers the possibility of targeting luxury brand messaging at these audiences. At the same time, substantial interest in owning laptops and smartphones points to an increasing role for online channels in the near future. In Vietnam of course,

that future is here already – and online and mobile can start to form important elements of marketing


strategies, potentially leveraging the popularity of social media in the country.




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Judging toneThe tone of a brand’s approach in each market can be equally as important as the fundamentals of what it offers. In Myanmar, the strength of traditional Buddhism and rejection of conspicuous consumption mean that brand campaigns emphasising individual assertiveness are likely to prove counter-productive; in Cambodia by contrast, they have far greater likelihood of success. Price promotions are likely to be the most effective strategy for driving trial in any market; however discounting strategies should vary with local cultural nuances: from simple affordability in Myanmar to affording the best in Cambodia, to furthering one’s ambitions in Laos; and exercising prudent, practical frugality in Vietnam.

The theme that resonates most powerfully across the region is education. No matter what their current economic situation, Burmese, Vietnamese, Laotians and Cambodians accept that learning is the key to improving or securing it, whether that education is focused on themselves or their children. Brands and


companies that can offer educational support in the form of free or discounted resources will find a ready audience for such schemes; as will those that can promise increased powers of concentration amongst students. The growth achieved by energy drink brands across the region may owe much to the promise of increasing educational performance in this way.

Aligning brands with the futureGreat opportunity exists in the Lower Mekong Basin wherever brands can align their business mechanics and proposition with local hopes. The aspirations they align themselves with may be simple ones: supporting a family, ensuring a better future for one’s children, helping to earn the all-important respect of a community. However, they are no less powerful for that. With the vast majority of the 77 million plus population under the age of 30, brands that can leverage the media and distribution channels available to build loyalty are likely to be rewarded by strong growth in the region’s rapidly approaching future.




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China and the Chinese – going beyond Kung Fu and noodles - Subhashish Dasgupta

Opinion LeaderFinding faster growth: New markets




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Do a quick poll about China around the dinner table or the office canteen and you will soon discover two things. First, everybody knows something about China. Second, the things that everybody knows about China are largely restricted to dining (sweet and sour, noodles), films (Kung Fu, Jackie Chan) and the fact that China is a unique example of an economic superpower driven by a communist political ideology.

China and the Chinese – going beyond Kung Fu and noodles




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Increasingly China is also the place where everything in the world is made and whether you look at the label of your shirt or behind the battery in your smartphone, it’s very likely that this is exactly what you will find.

All of these influences are very real in helping to paint a picture of China in 2013 – but equally, they produce as incomplete a view of this defining country as that created by Nordic countries being famous only for their Viking ancestors or India being a land of snake charmers, call centres and IT programmers.

Consumer habits both in China itself and the diaspora Chinese markets are rapidly developing, often presenting a contrasting picture in terms of attitudes and priorities. This is prompting brands to take a distinct and individualised approach, and most importantly look beyond established Chinese stereotypes.

In 2009, China supplanted the U.S. as the world’s largest automotive market. More recently, at the end of 2012, a report from Bain & Company revealed that a sustained boom in demand for high-end goods across China has elevated the country to the position

of the world’s largest luxury market. Even in the area of technology devices, China’s mobile phone penetration is almost 100 percent, with close to 40 percent of consumers owning a smartphone. This in itself is fundamentally changing how consumers in China are engaging with brands, especially at the point of purchase.





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The implication of these trends is quite clear for all industries. It is a myth that China, or in fact the region with a significant Chinese population - Indonesia, Malaysia, Singapore or Hong Kong - is in any way ‘emerging’. The opportunity in these markets has very clearly emerged; it is here and it is now. This does not imply, however, that a ‘one size fits all’ approach to consumer engagement can be deployed effectively across all these markets. A recent study by TNS provided a clear indication of the immense breadth of contrasting attitudes and moods among Chinese people in the region, as the Chinese New Year approached. The findings, available at www.tnscny.com, show varying degrees of optimism about China’s place in the world; conflicting opinions on issues from family to finances; and a gulf in attitudes towards culture, history and heritage. These contrasts paint a fascinating and crucial picture of the very different approaches brands need to take to demonstrate real understanding of ‘the Chinese consumer’ across the region.

The findings revealed a strong mood of positivity and confidence, with three quarters of people feeling upbeat about the year ahead. This optimism is

informing decisions about significant investments - in the automotive market, this promises to be a strong growth year with many people across the region planning to buy a new car. Buying a new house is also part of the plan for a quarter of those surveyed, while over a third are making plans to travel to a new country. At the same time, this optimism is tempered by concern over the global economic outlook, its impact on people’s own finances and the need for the country to deal with budget constraints.

The study reveals that the economic outlook is only one of seven areas where Chinese people are seemingly pulled in opposite directions. There are major contradictions which are in themselves an accepted reality of life in Asia – a region with polar opposites of an ageing population which is also growing younger, extreme poverty alongside huge affluence, and modernising infrastructure co-existing with age-old customs.





http://www.tnscny.com

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Reflecting a mixed mood of cautious optimism, our research found that youngsters today are keen to put the money they receive as ‘Ang Bao’ – traditional ‘Red Packet’ gifts at New Year – into bank saving accounts, taking a very different approach to the custom of purchasing treats with these funds. This provides banks with a very real opportunity to tap into cash exchanging hands, through youth-oriented saving and interest schemes. On the other hand, adults are showing a greater inclination to live in the moment, intending to spend the gift money they receive on restaurants, clothes and travel. Aside from gifting Red Packets filled with cash, bestowing presents on friends and family, is now also popular at New Year. Electronic goods feature at the top of the gift list, especially in China and Taiwan, while in Hong Kong, Malaysia and Singapore food gifts are more desirable. Brands need to understand these individual preferences to take a slice of the lucrative New Year gifting market.

Despite a number of new trends emerging, there is still a palpable sense among Chinese consumers of the need to maintain traditional customs. In the case of Chinese New Year, it is still very much a time of coming

together as a family under the same roof, centered on the Reunion Dinner. While the increasing penetration of mobile phones and social networking has prompted some people to adopt these digital channels as a means to convey their virtual wishes, for the majority the tradition of face-to-face greeting, even for the younger generation, remains very much intact. The pre-New Year customs of cleaning and decorating the house, buying new clothes, having your fortunes read or getting a hair-cut continue to prevail among the Chinese, regardless of age, gender or country.

The Chinese consumer – with a burgeoning sense of optimism and desire to build a strong future, underpinned by the juxtaposition of traditional family values and the benefits of technology and progress - presents opportunities to marketers across a range of categories. And by tapping into these underlying attitudes of the Chinese consumer, brands will be able to develop marketing strategies that enable them to realise these new opportunities. While these strategies will be dependent on individual objectives, brands can learn a great deal from companies which are already successfully riding the trends in the Chinese market.


What do you think is the overalloutlook of the year of the Snake?

42%Excellent/Very good

27%Fair/Poor




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Checklist:

Buy something nice for myself

Invest it

Travel - Internationally

Donate it

Deposit it into a bank

Spend it on food and beverages

Eat at a nice restaurant

47%

32%

15%

8%

66%

20%

16%

24%Buy clothes and accessories

How do you plan to spend your red packet money?

Focus on new customer acquisition: For brands looking to convert new customers, China’s tech-orientated youngsters are a good place to start. Desire for new gadgets, coupled with a desire to invest money into savings, has generated strong growth for mobile commerce in China, with young people showing the greatest usage of mobile banking and propensity to adopt the service. Mobile banking strategies targeting the smartphone-savvy young consumer group in China are most likely to succeed and also generate positive word of mouth. Banks in China need to ensure that mobile and face-to-face touchpoints deliver a consistent experience.

Attract brand ambassadors: As mentioned, the automotive sector continues to witness rapid growth and evolution, and China’s economic optimism presents a significant growth opportunity for manufacturers, particularly with so many people planning a new car purchase in the year ahead. However, as a vast and disparate market, there are very different influences in the car-buyer’s path to purchase. In a market where family remains so influential, there is a heavy reliance on the advice of friends and relatives, as well as on

social media when buying a car for the first time. Manufacturers need to understand how to mobilise customers and fans to become brand ambassadors,


integrating their approach with the surging uptake in new technologies by providing customer support and practical advice for new drivers via social media.

Eat sweet dumpling 55%

29%

11%

28%

46%

28%

14%

Watch TV

Send gifts to loved ones

Spend quality timewith loved ones

Visit bazaar andnight markets

Eat at a nice restaurant

Attend lantern exhibits

What do you do on this day?




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Adopt new GTM approaches: In a sharp contrast to more mature Western markets, brands need to understand that quick action is critical. The average car purchase period in China is far shorter than previously thought, with 40 percent of consumers deciding on a make and model within one month. Manufacturers cannot afford to wait, and need to engage quickly with a compelling brand story. Getting a good deal is extremely important to Chinese buyers but at the same time, manufacturers must ensure promotions don’t undermine the brand image; in the region, dropping prices aggressively can be negatively interpreted. The speed of decision-making, rules governing discounts and the great influence of online media create market dynamics in China unlike any in Europe or the US.

General Motors is investing heavily in this area by adopting China’s ‘commercialisation model’, which quickly brings new products to the market. GM President Kevin Wale said in a recent interview: “What China does better than anyplace else in the world is to innovate by commercialisation, as opposed to constantly researching and perfecting the theory, like in the West. When the Chinese get an idea, they test

it in the marketplace. They are happy to do three to four rounds of commercialisation to get an idea right.” This innovative approach to innovation itself is one that works in China, in a way that would fail in many other


parts of the world. The flexibility has been instrumental to making GM the top-selling foreign automaker in China, despite entering the market later than other global players.




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Tell a compelling story: Mobile phone manufacturer Motorola broke with the norm of using traditional media in 2011 and developed a successful viral video campaign to raise consumer awareness and interest in the highly durable Motorola Defy. The viral video, which showed a man being spun around in an industrial washing machine with his phone, which emerges from the wash still working, debuted at the same time as the product launch and registered close to 1.5 million views on YouKu. This interest ballooned further when people performed their own ‘tests’ on the durability of the Defy, including boiling the phone. Consumer-generated content at its best!

Success in China, among Chinese consumers, is not a matter of taking a global product or marketing strategy and modifying it. As revealed by the findings around Chinese New Year, this is a region and an ethnic group which, in a continuous state of progressive evolution, co-exists with deep customs and traits grounded in centuries of tradition. Success is unlikely


if not impossible without a brand being comfortable existing and thriving in this contradiction. There is still much to know and learn about China and the Chinese population, continuously challenging every marketer to look beyond the stereotype. Marketing successfully to the Chinese population requires an acute understanding of the region’s key drivers and motivations.

China may be the nation of noodles and Kung Fu, but it is at the same time a nation only just realising the potential that can be brought to bear through its booming infrastructure, fast-growth car market, mobile phone-domination and deep desire for luxury. Complex the market may be; but brands who fail to navigate it will miss a truly unmatched opportunity.




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Making the small screen part of the big picture: Understanding how South African internet and mobile phone users interact with brands online - Kambe Mwaba

Opinion LeaderConnected world




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Making the small screen part of the big picture:

In spite of having increased Internet access through mobile phones (particularly smart phones) and being highly engaged with online activities such as social media, South African Internet and mobile phone users are not interacting with brands online to the extent seen globally.




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South Africa Global average

Internet penetration

Internet accessvia PC / Laptop

Internet accessvia mobile

Social mediaengagement


In Sub-Saharan Africa, the mobile phone screen has become more viewed than the television screen or PC screen; and more people have access to a mobile phone than to clean drinking water. In the last three years, the mobile phone has emerged as the primary means to access the Internet on the continent mainly due to cheaper and faster Internet access, more advanced and affordable smart phones and general lack of access to laptops or PCs.

With the mobile Internet powering uptake of applications and social media in South Africa, brands have more ways than ever to reach and interact with their consumers. However, while South African Internet users are highly engaged with each other online, interaction with brands is still limited, with one of the lowest incidences in the world of consumers who comment about brands online and almost two-thirds saying that they do not want to engage with brands via social media.


Internet access and usage in South Africa vs. Globally




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Mobile phone ownership and OS market share in South Africa (%)

Mobile phone ownership and OS market share in South Africa (%)

33

19

48

60

10

8

33

2

13

Source: TNS Mobile Life 2012 South Africa Report (Note: Excludes ‘Don’t Know’ responses)

Basic feature phones

SmartphonesAdvanced feature phones

BlackBerry(OS) Windows Phone 7 or higher Windows Mobile 6.5 or lower

Android Symbian OthersiOS(Apple)Basic feature phones

Advanced feature phones Smartphones

Blackberry (OS) Windows phone 7 or higher Windows phone 7 or lower

AndroidISO (Apple) OthersSymbian




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Why the resistance?There are several technological barriers that hinder mobile Internet usage and online engagement overall in South Africa. Data costs in South Africa are relatively high, and many people accessing the internet through their handsets have limited air time, and so would rather use it for actual conversations. Added to this, internet speeds are still slow, and the two-second rule applies, where internet users lose interest if the content is not downloaded within seconds. In addition, there are a multitude of handsets and operating systems, which means that many users are open sites that do not fit their screens or are difficult to navigate.

From the side of internet users, many do not know what it actually means to interact with brands online and are highly resistant to the idea, as they assume that it just means that companies will try to “spam or scam” them. The majority of people can’t fathom why they would let brands into their personal online space, particularly social network websites, e-mail or instant messaging applications. One respondent in the research mentioned that “it would be like talking on the phone to your mother and suddenly an advert pops up in the conversation trying to sell cheap flights.”

Reasons for potential brand befriending online (South Africa Vs. Globally)


To get more information about a brand

To bene�t from a promotion / special offer

To support a brand I enjoy

To seek for promotions or special offers

To connect with a brand I like

To follow my friends who are already fans

To use speci�c apps promoted by the brand

To bene�t from a promotion / special offer

To seek for promotions or special offers

To follow my friends who are already fans

To get more information about a brand

To support a brand I enjoy To connect with a brand I like To use speci�c apps promoted by the brand




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Another challenge is that brands make incorrect assumptions about why consumers choose to engage with them. According to the 2011 TNS Digital Life Survey, the main reasons why people join brand communities on social networks are self-serving (e.g. to get a freebie or enter a competition) or functional (e.g. to receive customer service or more information), and less likely to show their support or loyalty for brands.

What can brands do?Possible strategies to increase engagement online are as follows:

Think mobile for digital strategiesGiven that the majority of Internet users are accessing via mobile, it important to ensure a good user experience – whether the site is accessed via mobile browser, or app. While smartphones are on the rise, it is important to remember that the vast majority of South Africans still own basic feature phones. Given the high income inequality in South Africa, the country has the characteristics of both a developed and emerging market sitting alongside

one another. Smartphone owners in South Africa are usually in a higher income bracket, younger (65% are under 30 years) and more tech-savvy than feature phones users, and therefore tend to be more open to brand engagement through the mobile Internet. Brands need to determine which of these markets they are targeting and adapt their mobile platform accordingly.

Also important to note is that mobile Internet is often used when ‘on the go’, which is quite a different experience to using a PC or laptop at a desk. Considering the context when designing for mobile is crucial to ensure that mobi sites are easy and quick to navigate and quickly provide the basic information such as product prices, shop address and contact numbers.

Know thy consumerMany brands are in a hurry to be online without giving thought to who they want to talk to and why. The key for brands, however, is to understand their target audience and what their consumers want from the brand (e.g. win something, receive


interesting updates, etc). When you understand your target market and their needs you may realise that a particular channel, such as social networks, may not always be the right approach and that an alternative online method may be a more appropriate way to interact with consumers that will actually achieve business results.




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Tell them HOW, tell them WHYGiven that many are not aware of or do not see the point of engaging with brands online, it is therefore essential for brands to tell consumers how and why they need to engage with them. This includes telling consumers where they can engage with the brand online (e.g. Facebook or Twitter) and creating this awareness through traditional offline channels (such as television or radio) given that many people in South Africa are still highly influenced by them. Brands then need to also give consumers convincing reasons or incentives to interact with the brand in their communication, which take into account the needs of their target market (e.g. to find out about promotions or specials) and are based on the brand’s objectives (e.g. to boost sales, increase awareness, build stronger relationships and loyalty, create an online community, etc).

Actually engage with consumersMany brands make the mistake of setting up an online brand community and leaving it at that. However it is just not about gathering numbers, but actually engaging with your consumers. This could

involve responding quickly to queries, addressing criticism graciously, showing you care about and understand your consumers, and having a sense of humour. If users don’t feel like they are getting any value from the relationship, they may just end it. While there are significant technological and

attitudinal challenges for brands to overcome in order to fully engage with their consumers online, effective online engagement presents a powerful opportunity for brands to influence the attitudes and behaviour of their consumers, build loyalty, drive purchase and ultimately grow their brands.




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Brands in South Africa that are making the small screen part of the big picture

First National Bank (FNB) offers first mobile banking applicationFNB (First National Bank) was the first bank in South Africa to offer mobile banking through an application for smartphone or tablet devices. The FNB Banking app was launched in July 2011 and includes numerous features such as allowing customers to make payments, transfer funds, view account balances and more. It is available for free download for the major mobile operating systems namely iOS (Apple), Blackberry and Android. There are currently over 250,000 active clients using the banking app with 40,000 new users every month. In February 2012 (six months after launch), FNB had seen over R2 billion in transactions go through the application.

“The FNB App created demand for Apps in Banking with most of our competitors having launched their own versions of an App, confirming the need for mobile App technology in the banking industry”.

“According to Farren Roper, Head of FNB Connect ISP and Business Operations,




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Soccer Laduma top mobile site in South AfricaSoccer Laduma is the biggest sports publication in South Africa. It began as a print publication in 1997, but has now spread to web and mobile and has full social media integration across Facebook and

Soccer Ladum online user base

Mobile site

Website

Mobile site

Website

Mobile site Website

Twitter. The publication has experienced phenomenal growth of their mobile and social media platform, with statistics from February 2012 showing that they hold the position as the third largest mobile site in South Africa - about three quarters of their 400,000

online user base is from mobile. Much of the brand’s success stems from their ability to remain relevant to their target market (who are mainly lower income) and ensure that their mobile site is functionally on par with its web counterpart.

Source: Prezence Digital 2012




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Is the reverse flow of innovation coming full circle? - Sam Curtis

Opinion LeaderFinding faster growth: New products & services




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As so-called ‘emerging markets’ take the lead in innovation, what are the implications for the global economy?

Is the reverse flow of innovation coming full circle?




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The idea of ‘reverse flow of innovation’ is not new - and is well documented in Dr. Vijay Govindarajan and Chris Trimble’s book, “Reverse Innovation”. However it is contrary to the popular and traditional belief that innovation happens in developed markets and is then adopted or adapted by emerging markets. We refer to ‘reverse flow’, when innovation originates in emerging markets and has a strong and often disruptive impact on developed markets, and there are three factors at play when considering the potential for reverse innovation to impact on business:

� The reverse flow actually has a long history and has resulted in genuine disruption in several powerhouse industries

� We are now at a critical juncture where the reverse flow is gaining momentum and is set to explode

� This has fundamental implications for the global economy and how international businesses structure themselves and where they invest




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DisruptionThe highest profile historical example of the reverse flow comes from Japan as it rebuilt itself from the catastrophic effects of war. Innovation in car production meant that by the 1980s, Japan had replaced the US as the world’s largest car manufacturer, with cars which were cheaper and more reliable than anything the US could produce. Japan, of course, ceased to be an emerging market even before this term was coined. In the 1980s and 90s, South Korean companies like Hyundai, Samsung and LG started selling their own brands globally, often being first to market with innovative products - rather than just the cheapest products.

More recent history is littered with examples of disruptive innovation. Huawei is now one of the world’s largest patent applicants. Mobile finance has exploded out of the M-Pesa service in Kenya and the industry is set for strong growth globally. The concept

of micropayments first emerged in Asia. Netbooks emerged from Taiwan, originally intended to sell cheaply in emerging markets but became a success due to trends in portability and cloud services in developed markets.

Western multinationals have been taking advantage too. GE sells Indian and Chinese made medical devices in Western markets. France’s Danone started a joint venture in Bangladesh with Grameen Bank, where it agreed to build local microplants that produced one-hundredth of the amount of yogurt of a standard Danone facility, in part due to the lack of refrigerated storage, but just as cheaply as the larger plants.

Growth in the global economy - and in Western multinationals - is becoming increasingly reliant on the breakthrough innovations coming out of these economies, and this trend will only magnify in the future.

In the 1980s, Japan had replaced the US as the world’s largest car manufacturer.




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The tipping pointI have no doubt that we are now at a tipping point that will lead to the exponential increase in the reverse flow of innovations. This is being driven by many factors, including:

Size (and growth) mattersDoes it seem right to classify the second, sixth and tenth largest economies in the world as emerging? The economies of China, Brazil and India have emerged! The size of these economies encourages investment in all areas, including innovation. This includes capital investment from the state into growth industries and infrastructure, as well as increased foreign investment. Foreign Direct Investment in India in the 2011-12 fiscal year was $47bn, up from $35bn in 2010-11, despite uncertainties in the global economy and local political instabilities.

27.5bnUS Dollars,

31%increase in foreign direct investment in India, to

in 2012despite uncertainties in the global economy.




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The talent gap is closingAccording to the OECD, China is second only to the US in absolute numbers of population with a tertiary education, with Brazil in 7th place and Mexico at 11th. The potential for what education can achieve as a driver of innovation in these markets is mindboggling. There are also a rapidly increasing number of students from these markets studying abroad, many of whom come back home equipped with the best of Western education and an understanding of local needs.


Digital lowers the cost of entryDigital opens the door for innovators to emerge from anywhere. They do not need enormous investment to develop their ideas into products. Digital has no geographic boundaries so the potential for start-ups to gain rapid scale across markets is huge. Israel is one of

the best exponents of this with 5,000 active start-ups at the start of 2012 – with a small local economy, these companies think global from the off. Sitting in Silicon Valley is no longer a pre-requisite for an internet-based company to be successful.




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Frugal innovationCompanies in the developed world are accustomed to developing premium new and innovative products which are often packed with the latest technology, the most advanced features and targeted at the upper end of the market. Companies in emerging markets, on the other hand, are trying to make products affordable to a wider target, and focus on how they can offer a no-frills, functional and efficient product which can break through the price barrier. Tata Nano from India is an obvious example. The need for such frugal innovation is most pronounced for companies in the emerging markets as they need to expand their user base to grow their bottom lines. Expectedly, therefore, these markets will lead this important area of frugal innovation. In developed markets, high unemployment and decreasing incomes may drive consumers to more ’value for money’ products.


The no-frills, functional and efficient Tata Nano, from India




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ImplicationsThe implications of these changes are vast and profound but I would like to touch briefly on what it means for the companies I am working with in London.

The first implication is one of structure. If London-based companies want to tap into the innovations coming out of emerging markets, then the best way to do this is to actually be there. Many large multi-nationals now have innovation hubs based in these markets - Fortune 500 companies have well over 100 R&D centres in China alone.

The second implication relates to investment. M&A functions of multi-national companies need to have their eyes trained on start-ups in emerging markets. With Instagram costing Facebook $1bn, surely there is better value to be had within emerging markets? M&A functions can take greater risk, based on lower capital investment.

Thirdly, established companies in markets such as the UK offer emerging market multinationals, and state investment arms, something very attractive – access to affluent consumers and new markets. The China Investment Corporation was established in 2007 to manage China’s foreign currency reserves and their assets have grown to $410 billion by 2011. These entities are using these funds to acquire companies and their technologies in developed markets – as was seen in the case of China Investment Corporation acquiring 10% of Heathrow Airport Holdings in November 2012. Companies in developed markets are now exposed to increased competitive pressure (both from increase competition for consumer spend and a threat of acquisition).

The process of reverse innovation is gaining pace. It may not be that long before the reverse flow is the established flow and we will witness the majority of the innovations originating from the emerging markets.


410bnChina’s foreign currency reserves and their assets have grown to $410 billion at the end of 2011.

10%of Heathrow Airport Holdings was recently acquired by the China Investment Corporation.




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Ralf is a certified Market Research trainer as well as a Board Member of CanCham and the ESOMAR representative for Vietnam. He holds a double honours degree from Wilfred Laurier University in Canada.

About TNS TNS advises clients on specific growth strategies around new market entry, innovation, brand switching and stakeholder management, based on long-established expertise and market-leading solutions. With a presence in over 80 countries, TNS has more conversations with the world’s consumers than anyone else and understands individual human behaviours and attitudes across every cultural, economic and political region of the world.

TNS is part of Kantar, one of the world’s largest insight, information and consultancy groups. Please visit www.tnsglobal.com for more information.

Get in touch If you would like to talk to us about anything you have read in this report, please get in touch via [email protected] or via Twitter @tns_global

About the authorsChinese New Year - Subhashish DasguptaSubhashish Dasgupta is the Automotive Director for TNS South East Asia and responsible for multi-country automotive projects in the Asia Pacific region.

Subhashish’s career in market research and marketing spans more than 13 years in both Asia and Europe. During 2008-2009, he was working in the Stakeholder Management practice at TNS Infratest in Germany consulting clients across multiple sectors. Prior to this position, he headed the TNS Automotive practice for India, leading teams across projects focused on product planning, branding and dealer development.

Subhashish has two post graduate degrees with an MBA specialising in Marketing and Marketing Communication.

Making the small screen part of the big picture: Understanding how South African internet and mobile phone users interact with brands online - Kambe MwabaKambe Mwaba is Research Executive at TNS in South Africa. She joined in 2010 after completing her degree in Business Science Marketing at the University of Cape Town. She works on the South African Breweries (SAB) client team and is mainly involved in quantitative adhoc studies.

Her passion for the growth of mobile internet and applications in emerging markets resulted in two awards in 2012 at the Southern African Marketing Research Association (SAMRA) conference for her research paper “Making the small screen part of the big picture: Understanding how South African internet and mobile phone users interact with brands online”.

Is the reverse flow of innovation coming full circle? - Sam CurtisSam Curtis has worked for TNS for six years and is currently a Global Director in the Retail & Shopper practice.

Sam has worked on global projects throughout his career, especially in the areas of mobile, digital and brand positioning, which has involved extensive experience researching consumers in developing economies.

Joining the future for the Mekong - Ralf Matthaes Ralf Matthaes is Regional Managing Director at TNS, based in Vietnam, Cambodia, Myanmar, Laos. Ralf has been with TNS for 18 years during which time he has established TNS Vietnam in 1996, has opened offices in Cambodia and is in the midst of establishing the Myanmar operations. Prior to coming to Vietnam in 1994, Ralf served as a policy analyst for the Provincial Minister of Finance for Ontario, Canada.




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