Understanding the emerging middle class

The emerging middle class – those who make or spend between US$2 to US$20 a day – is a vast potential untapped global market.

With an estimated population of over half a billion now, this class of people is expected to touch 3.5 billion by 2030, with 85 percent of the growth in Asia's developing markets like China, India, Indonesia, Myanmar and Vietnam.

As a major new global driver of demand, this emerging middle class is increasingly attracting the attention of multinational corporations (MNCs).

However, few MNCs have managed to successfully tap on this opportunity as they tend to regard this emerging middle class population as similar to traditional middle-class customers.

They are not.

Many MNCs are doing things wrong by trying to “force feed” things locally without really understanding the local needs of consumers in these markets, and without partnering local infrastructure players.

And thus many fail.

Calvin Chu, partner and founder of Eden Strategy Institute, a Singapore-headquartered social consulting and research agency, believes that quality research work is the key to deeply understanding the unique needs and behaviours of this emerging middle class.

Unfortunately such quality research is not cheap.

Whilst many MNCs might comission comprehensive research for large consumer markets in India or China, they often gloss over smaller markets like Indonesia, Thailand or Vietnam, or skimp on rigorousness.

Luckily, the 10 man-odd consulting team of Eden Strategy has the support and interest of the Singapore government to kickstart a one-year, comprehensive survey of the emerging middle class in the region.

Whilst many traditional surveys are done over-the-phone, many of the emerging middle class don't own a telephone landline at home.

“They spend two to three hours per commute to town, and many of these people live in remote areas,” said Calvin.

So one innovative way to do a survey is via SMS.

By partnering with Jana, a global mobile rewards and social marketing company, Eden Strategy can leverage Jana's connections with 237 mobile operators worldwide, and reach 3.48 billion consumers in 70 countries.

They conducted mobile surveys to reach over 4,000 consumers in Indonesia, India, Philippines and Vietnam, and incentivized users to participate for free mobile air time.

Additionally, the study is also being fleshed out with qualitative interviews with businesses and ethnography studies by living with and observing users, which will occur later this year.

“Certain insights can only be gotten when you observe people,” remarked Calvin on why ethnography, whilst costly, was done for comprehensive depth. “People might say things during an interview but you won't know how true they really are till you observe them.”

 

A different way of living

The study, which is still ongoing, brought up many fascinating facets of this emerging market class that surprised the researchers.

For example, in Indonesia, the most important thing in the house is the TV, not a handphone, as he originally assumed, said Calvin.

“Watching TV is a very social activity, where everybody in the family gathers around,” he said. “The TV set reinforces the characteristics of the house.”

He continued by saying that this concept of a house where family can gather is of paramount importance to them.

He has been to houses where people eat off the floor as there is no table, but invariably there is a TV set.

One other example he mentioned was that they spend money on very small servings, often on impulse.

Because the amount of money is small, basket sizes tend to be small.

For example, consumer items like cigarette packs get split into individual sticks for sale at warangs, or small provision shops, which these people patronize.

“When they have money, they will often spend it,” Calvin said. “Many are basically happy-go-lucky personalities that live by the day.”

Image plays a large part in their culture, and even when they cross the street to buy things they are often dressed up.

There's a even term for it, jaim, said Calvin. It's short for jaga image, which translates to watching how you portray yourself in society.

This is why their research has found that skin whiteners are in such high demand by this emerging middle class.

Lighter skin is synonomous with office work, which gives off the impression that they are more cultured.

The one thing that they fear most? Going to hell.

However, they don't refrain from sinful activities, said Calvin.

Instead, they sin alot, but they also pray alot to “counteract” the sins, which was an “accounting policy” that Calvin found a little alien.

In short, in order to build products and services for these people who will be a major economic and political force in the future, one has to take the effort to really understand them.

Highlights of insights:

Asia's emerging middle class