PwC says that, globally, businesses are now looking at the ‘next four billion’ markets for growth, especially given the slowdown in growth in mature economies. This group, which includes India, China, Indonesia, parts of Africa and Latin America, is where over four billion of the world’s seven billion reside. To date, many businesses have traditionally focused on the middle and upper middle income tiers of those markets.
According to PwC’s calculations, the GEM market already accounts for 2.3 billion people around the world and is growing fast as more people emerge from poverty. The report shows that, globally, the GEM will represent annual spending power in excess of US$6 trillion by 2021.
PwC global consulting leader Tony Poulter says his company’s research shows that once company has established itself in the emerging middle, customers will carry their loyalty with them as they continue to increase their income.
The report suggests companies seeking to succeed in this challenging environment, should consider three main factors:
Value propositions: Companies must develop nuanced understanding of the aspirations and tradeoffs of customers in this segment and develop solutions to meet these needs. While low-cost is important, solutions must be positioned beyond that. Companies must also design “platform” products which can be customised to cater to the wide diversity of the GEM.
Innovative business models: Companies need innovative business models and processes to address this segment profitably, to overcome institutional weaknesses and gaps – in everything from credit systems to supply chains. The report argues that while smart technology-based reach is essential to penetrate this market, businesses must still focus on offline interventions and on achieving scale from the beginning.
Shift in mindset: Companies need to adjust both in their external approach to the market, and internally. Often this requires strong leadership presence, bold approach that embraces disruptive solutions, and willingness to adopt new values and metrics to drive growth and measure success.
