The 86% Solution - PCC - ebook

Most global businesses focus nearly all their efforts on selling to the wealthiest 14% of the world's population. It's getting harder and harder to make a profit that way: these markets are oversaturated, overcompetitive, and declining. The Invisible Market shows how to unleash new growth and profitability by serving the other 86%. Vihajan Mahajan offers detailed strategies and implementation techniques for product design, pricing, packaging, distribution, advertising, and more. Discover radically different 'rules of engagement' that make emerging markets tick, and how European and Asian companies are already driving billions of dollars in sales there. Mahajan shows how to understand and manage lack of infrastructure and media, low literacy levels, and 'unconventional' consumer behavior. Learn how to redefine the 'real' competition; tap into the informal economy and unconventional channels; leverage expatriate word-of-mouth; pool demand to reach critical mass; piggyback innovations on local tradition; and price and package to reflect local realities. As traditional markets become increasingly unprofitable, emerging markets become the #1 opportunity for growth.

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The developed world contains the wealthiest 14% of the world's population. Most global businesses have traditionally focused on selling to those customers, but it's getting harder to make money that way because these markets are over-served and hyper-competitive. The biggest marketing opportunity of the twenty-first century will be to sell to the other 86% of the population who live in developing nations. By selling products into emerging markets, tremendous rates of growth and profitability can be achieved.

The business “rules of engagement,” however, are quite different when you serve emerging markets. It's not just a matter of offering a third-world version of your existing products and services. Instead, there are nine specific characteristics of emerging markets you need to be aware of and nine specific strategies for taking advantage of those market characteristics. At the very least, to succeed in these markets, you'll need to challenge the prevailing business wisdom. Each of these characteristics of emerging markets represent an opportunity to gain a competitive advantage for whichever companies come up with the most appropriate solutions.

In all, the 86% market is such a substantial commercial opportunity that the key question is not whether you should be in this market but whether you can afford not to be.

Key Thoughts

“Can the 86% world stand on its own two feet? The answer is yes. The past 50 years have proven that it can. Entrepreneurs in South Korea, India, China, Mexico, Brazil, South Africa, Egypt and other countries have shown that they can develop solutions for the 86% markets. These markets are spending trillions of dollars on goods and services, and this spending will only increase as they develop. Companies that want to continue to be major firms in a decade or two have to learn to play successfully in these markets. This is an opportunity not to be missed.”

Vijay Mahajan & Kamini Banga

The 86% Market—Demographics

Market Characteristic 1 The populations are youthful and growing

Market Opportunity 1 Think young

Market Strategy 1 Create trends to induce consumption

The aging of the population is an area of great concern for the developed world. This is putting pressure on pension systems, the health infrastructure and the challenge of finding a workforce. The complete opposite is true in developing countries. These markets are literally a fountain of youth. The United Nations estimates that over 100 countries had populations more than 40% made up of those aged 15 to 29 in the year 2000. It is projected that by 2015, India alone will have 550 million people under the age of 20. In 2004, half the population of Nigeria was aged under 15, compared to just 14% in Japan.

Quite simply, the population growth in developing countries will drive world economic growth for the next decade or two. This will become even more self-evident as the youth populations continue to decline in the countries of the developed world. This tremendous growth will generate substantial challenges for the governments of developing nations, but in sync with that trend genuinely impressive business opportunities will also arise.

To take full advantage of the youthfulness of emerging markets:

■ Focus on providing products and services that youth buy—like mobile phones, entertainment, apparel, fast food, music, magazines, etc. The Chinese spend $2.4 billion every year on plastic surgery and other beauty treatments. This shows that individualism and youthfulness are highly valued by the rising generation of Chinese consumers. Cell phones have been adopted by youth much more rapidly than by older customers in the developing world, creating huge markets in every country for associated products like different ring tones, digital cameras, gaming and text messaging services. Similarly, entertainment is also becoming more tightly focused on developing countries, with the Miss World competition being held in Beijing and being won by Miss Peru, with runners up from China, India and the Philippines. Many cable channels now broadcast in the various languages of the developing countries, suggesting that even more growth is likely for the future.

■ Understand who controls the remote