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service 2020: megatrends for the decade ahead7. The rise of the mass affluent and other customer segments

will force companies to find new product or service niches.

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service 2020: Megatrends for the decade ahead

megatrend seven

Megatrend 7

the rise of the mass affluent and other customer segments will force companies to find new product or service nichesBooming emerging market economies have done a lot to raise the incomes of the poor across much of the world, making the ‘middle class’ a synonym for new opportunities, especially in emerging markets.

By 2030, the World Bank estimates there will be some 1.2 billion middle-class consumers globally and overall emerging markets will play a much larger role than today. (Refer Chart 1).

This widening band, a broad classification that hundreds of millions of people in the Asia Pacific especially will join during this decade, is largely an aspirational one, as per capita incomes will remain relatively low in many places. Nevertheless, in the Asia Pacific the growing middle class of consumers was cited by survey respondents as the second most important driver of changing customer expectations by 2020, just ahead of an increase in global competition and tying with personalisation of technology. (Refer Chart 2).

The newly affluent will put new demands on organisations: consumers wealthy enough to want a premium product or experience, but not rich enough to take the full-fat version, whether a first-class airline seat or a truly high-end shopping experience.

This has already led to a rise of new product categories, such as ‘premium economy’ in many airlines, as a means of targeting this middle ground.

Other airlines may keep the same seats, but offer smaller upgrades for small additional charges to bolster their margins, such as better meals, or the chance to select a seat ahead of others. In the coming decade, many other industries will seek to find their variation of this middle ground. Of course, the band of truly wealthy consumers is also widening, challenging organisations to find new ways to cater to their needs, and provide services that stand out from being merely good.

chart 1: asia pacific focusEstimated size of the ‘Global Middle Class’ *

2000 20300

1000

600

200

800

400

1200

430m

1.2bn

56% from Developing

countries in 2000

93% from Developing

countries in 2030

*source: World Bank. ‘Global Middle Class’.

“By 2030, the World Bank estimates there will be some 1.2 billion middle-class consumers globally, and overall emerging markets will play a larger role.”

service 2020

megatrends for the decade aheadIn the future, customers will select those organisations who can demonstrate they know them well and who offer service levels that stand out. Organisations who fail to align their service to meet customers’ needs will risk losing future business.

‘Service 2020’ is an Economist Intelligence Unit report, commissioned and sponsored by BDO. The report, which presents findings covering eight megatrends, explores how successful organisations have built and subsequently sustained excellent client service and, most importantly, provides a blueprint for the prioritisation of service development opportunities.

For a copy of the full report please visit bdo.com.au/service2020 or email at service2020@bdo.com.au

service 2020: Megatrends for the decade ahead

megatrend seven

asia pacific focus by bdo

the middle-class in the asia pacificWith two of the largest developing countries in the world located in the Asia Pacific, the rise in the middle class presents a huge service opportunity for the region. However, it also presents a challenge to companies to treat people individually and make them feel special, while making it scalable. For many, this will become a challenge of providing smart ways to deliver what looks and feels like personalised service, even if it is available to a mass audience. This challenge also extends into virtual channels, was well as physical stores. With the growing middle class being seen as a significant driver of changing customer expectations in the Asia Pacific at 17% (just ahead of increasing global competition at 22%), facing these challenges sooner rather than later will provide companies with a competitive advantage. Compared with the Global results, the growing middle class is significantly more important for the Asia Pacific region. (Refer Chart 2).

To stand out, organisations need to find unique customer service offerings that cater to specific geographic markets and customer segments. New client segments that will pay for enhanced services might lead to the emergence of new services or new delivery models.

27% already use customer segmentation based on actual customer behaviour and/or other qualitative factors. Another 21% use segmentation based on both demographic information and customer behaviour and/or other qualitative factors, and almost 16% use segmentation based on basic demographic information in order to give more specialised service. With almost 30% of respondents saying their service provision is standard for all customers, there is clearly still much room for improvement to take advantage of the trend. (Refer Chart 4).

Just over 47% of organisations say they have a standard service offering but adapt or localise it for different markets. But a further 16% state they have a standard service offering that is used in all markets, and with a further 19% only servicing one geographic area, further consideration of more specific segmentation and expanding into new markets will present greater opportunities in the Asia Pacific. (Refer Chart 3).

chart 2: asia pacific focusQ: “What do you believe will be the main driver of changing customer expectations by 2020?”

Global Asia Pacific

Increasing global competition

0% 20% 30%10%

23%

22%

Some technology which cannot be predicted right now 15%

12%

Growing middle class of consumers in emerging markets/increased per capita incomes

11%

17%

Increasing customer empowerment 11%

8.5%

Personalisation technology 14%

17%

Social media 8%

9.2%

Increasing use of smartphones, tablets and other portable web-enabled devices

10%

9.2%

Other, please specify 1%

0%

Don’t know

1.4%

1%

Increasing outsourcing of service jobs to emerging markets 1.4%

2%

Changing demographics (ie. ageing population in many developed markets) 1.4%

5%

chart 4: asia pacific focusQ: “Do you utilise customer segmentation in order to give more specialised service?”

0% 20% 30%10%

No, our service provision is standard for all customers 29.8%

Yes, we use customer segmentation based on basic demographic information

15.6%

Not applicable 5%

Yes, we use customer segmentation based on both demographic information and customer behaviour and/or other qualitative factors

21.3%

Yes, we use customer segmentation based on actual customer behaviour and/or other qualitative factors

27%

Don’t know 1.4%

chart 3: asia pacific focusQ: “Have you adapted your service provision for the different geographic markets your company operates in?”

0% 40% 60%20%

No, we have a standard service offering that is used in all markets

16.3%

Yes, we have a standard service offering but adapt/localise it for different markets

47.5%

Not applicable as we operate in just one geographic market

19.1%

Yes, each market has its own bespoke service provision based on local customer expectations

17%

Source: Economist Intelligence Unit Source: Economist Intelligence Unit

Source: Economist Intelligence Unit

This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact the BDO member firms in Australia to discuss these matters in the context of your particular circumstances. BDO (Australia) Ltd and each BDO member firm in Australia, their partners and/or directors, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it.

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© 2012 BDO (Australia) Ltd. All rights reserved.

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