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issue: December 2006 APPLIANCE Magazine

The Open Door
Design Strategies for Emerging Markets

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by Simon Bolton, managing director, Bolton Associates

Design for emerging markets represent billions of potential new customers. However, many companies are failing to deliver success in these markets due to their use of traditional design strategies.

Therefore, when attempting to design for emerging markets, it is important to ask: What factors influence this process? Through research activities at Central Saint Martins in London with Professor Lorraine Gammon, it was found that three primary factors have an influence on design for emerging markets (DEM):

• low incomes and its impact on consumer behavior
• variability in consumers and infrastructure
• low labor costs (make versus buy)

From these observations, DEM may seem a less tricky scenario than initially suggested. However, what became apparent is that understanding consumer behavior in emerging markets is more complicated than many companies anticipate, and traditional economic and business models tend not to work.
What is a middle-class user in emerging markets? It quickly became clear during user research for the Chinese and Indian markets that aspirations levels differ from users in the western world. Middle-class consumers in China basically had three primary aspirations—to own a house, a car and/or a laptop. These aspirations would be quite different to a European middle-class consumer, who may be considering a second home or a second or third car.
It is wrong to assume that consumers in emerging markets do not have money to spend. Many organizations have incorrectly assumed that high savings rates in emerging markets stem from lack of purchasing choice and that if one more choice is available, consumers will increase consumption. However, oftentimes, high savings rates in emerging markets can be attributed to a lack of institutionalized social networks (unemployment benefits, pensions and health care support). Evaluating the level of institutionalized social networks in an emerging market can effectively help organizations position their design strategies accordingly.
In emerging markets, high-profit-margin products appear to be unsuccessful. For example, Cadbury identified that Indian consumers were only willing to pay about U.S. $0.01 for impulse confectionary. Therefore, the confectionary company had to reconsider how it distributed packs so that its product could be broken up by retailers who could sell them in single units.
The ability to communicate new ideas to consumers is much more difficult in emerging markets. Traditional targeted media is not available in a lot of emerging markets, and many organizations have found it difficult to communicate new messages through their established methods. For example, the U.S. has approximately 18,000 magazines for a population of 300 million. Compare this to Brazil, which has around 1,000 magazines for a population of 150 million, and India, which has only 300 magazines for a population of 1 billion. This means that more local methods need to be considered and developed.
High population density, small homes with little storage, lack of refrigeration, and low car ownership means that consumers purchase daily and locally in most emerging markets. Retail environments could therefore be described as fragmented. Typically, many store formats in emerging markets do not allow consumers to browse. Consumers interact directly with the retailer due to retailers often extending credit to customers. Within this context, the retailer’s recommendations carry considerable weight. It is estimated that China has more than 9 million small, independently owned grocery shops occupying less than 300 square feet.
Rapid new product development, continuous product innovation and accelerated obsolescence are unsuited to emerging markets. It has been found that these consumers need stability and reliability due to purchasing patterns and lack of institutional social networks. It is important to understand that many established technologies are unaffordable in emerging markets, but the need for the basic functionality still remains. One appliance company, for example, found it could not sell high-priced fully automatic washing machines in an emerging market. Therefore, the manufacturer introduced twin-tub machines with electromechanical functions rather than electronics.
Successful products in emerging markets need to be based on dependable technologies that utilize local infrastructures. In order to succeed, companies will need to re-evaluate their design strategies, ensuring that they embrace variability and non-standardization within their new approaches.

About the Author

Simon Bolton is an award-winning designer and the managing director of London-based design group Bolton Associates. He is also the course director of Product Design at Central Saint Martins College of Art and Design. If you would like to contact Bolton, e-mail editor@appliance.com


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