ISME

Explore - Experience - Excel

Velocity 12 Markets- A summary report from Ogilvy and Mathar and its implication in Indian Market

Velocity 12 Markets- A summary report from Ogilvy and Mathar and its implication in Indian Market                                                                                                          By   Dr. Shampa Nandi



 A very recent report (June, 2016) of O& M has identified Velocity-12 market comprising the fastest growing middle class consumers with a population of more than half of world population. This study defined middle class as those with annual income of $4000 to $40000. The rapid expansion of global trade, technology transfer and urbanization has added 2 billion new middle class customers. New strategies need to be considered by the marketers to approach this large emerging market because of the growth as well as the speed of growth. This pool of large middle class customers not only different in terms of their lifestyles but they will be having significant impact on politics, as well as on economy of a country. Twelve countries are considered as velocity 12 markets as per the growth potential in 2015-2025. They are–
Country
Present no. of middle class customers (in million)
No. of new middle class customers are joining (in million)
India
431
397
China
768
187
Pakistan
63
59
Indonesia
139
50
Bangladesh
22
37
Nigeria
33
28
Egypt
56
25
Philippines
43
21

Vietnam
30
19
Brazil
140
19
Mexico
93
13
Myanmar
13
13
Why “Velocity 12” market is different from previous middle class markets?
All these markets are mostly concentrated towards Southeast Asia, Africa, and parts of Latin America. Not only that, they are from diverse ethnic, cultural, lingual and religious backgrounds. This expanding middle class group is –
·         Mostly dominated by women and young consumers.
·         Urbanize faster than the other parts of the globe.
·         Most of them are tech savvy, connected with internet
·         A large number of Islamic populations will be joining in this group.
·         Digital marketing will play a vital role in influencing them as most of them share views and brand discussion through social media.
·         Rather than individual countries, prominent cities will pop up in terms of invention, entrepreneurship and investment.
·         Social issues like child health and safety, better work life, financial equalities, environment & cleaning up pollution, ending ethnic discrimination, rooting out corruption are some prioritized areas in those countries for the next decade.
Why the word “velocity” is being used?
O&M has used the term velocity to describe the growth of middle class consumers which is much more than the normal economic growth. It also refers the speed of changes in the billions of consumers in their social life, lifestyles as well as the social structures. Market optimism will be visible considerably in China, India, Bangladesh, Pakistan and Indonesia. It is not a small segment will change, but a large majority comprising of educated and high income group can feel the lifestyle changes at a much faster pace, which will be even noticeable outside the velocity 12 markets. Velocity 12 market will result in more economic equality throughout the world. The reason is, in the two heavily populated countries, China and India with nearly 3 billion citizens, the wage growth rate is estimated about 6.3% – four times that of the west. The percentage of population living in absolute poverty (Living on $1.25 per day, defined by World Bank) is going to be reduced to 23% from 44%.
Velocity12 market-what it means to companies?
A huge amount of population joining the middle class will definitely lead to more business. The velocity 12 market will be dominated by educated independent women, children, tech savvy consumers; as well as by first generation entrepreneur. Demand for branded products will be in upward trend as branded items are symbolising social status. Large accessibility and possibility of foreign trips, for education and business purposes will mobilize more affluence and create more market. Market demand for both foreign brands and local brands will be growing. Foreign brands normally preferred by affluent class in most of these “velocity 12” countries, as they are perceived as high quality products. With more foreign exposures, people’s sentiments toward their own culture will be increasing. This new trend will be very much visible in their consumption pattern. Popularities of foreign brands in technological product categories continue to grow. The exception is China, where many national brands have already captured the market. In non-technological categories local brand will gain a strong preference, especially Indonesia, Brazil, Philippines, Bangladesh and India. In fact the O&M study shows percentage of consumers in those countries, preferring local brand to foreign brand is double. The underlying principle for any company (local or global) to capture market is to understand the local preference. Entertainment, education, travel tourism market will get a big push as there will growth in disposable income. Smart phone, tabs and digital devices continues to have a growth trend as entire world wants to stay connected including velocity 12 countries. Companies should involve consumers in brand building and consider them not only loyal customers who recommend to others, but also build strategies to get contribution from them with the help of social media, self-service technologies, company’s websites and other online forum.
India as a Velocity 12 market
·         Home grown opportunities– A trend of coming back to India leaving a lucrative job in west to start a new venture at home. As all of them comprise well of segment, it will act as a flux to the market.
·         Rely on mobile phone & growth of digital marketing-—Not only checking mails, or SMS, but getting sophisticated services as well as buying or selling, mobile apps are the new gateway of business. In one year the growth of internet user in India has gone up to 400 million from 300 million. Digital technology is playing a major role in transforming Indian economy, society and business. A recent study has shown Indian ecommerce industry has grown eight times from 2012 to 2016.
·         Urbanization& Urbangea—a large amount of migration to cities creates more challenges for cities in terms of sanitation, housing, infrastructure and growth. Parallel to that urban agglomeration, a megacity connected to surrounding satellite town called as Urbangea is the new trend in India. NCR (national capital region) is a perfect example of that. Same time, more number of small cities is popping up creating huge scope for organised retails.
·         Role of women as entrepreneur or activist- More number of women are adding up in workforce and emerging  as small or medium entrepreneur which help them to have more amount of financial controls in their lives. Almost 91% of Indian women believe that career opportunities have improved in recent era than ever before. With the advancement of their career path, or with financial independence, Indian women still rooted with culture and are continuing to play a vital role in fulfilling the needs of family and household. Though portrayed as confident, assertive and ambitious, most of them trying to maintain a balance between modernity as well as traditional practices. A mixture of traditional Ayurvedic brands will make good business along with modern Indian and foreign brands. With more financial control, many women are taking a lead role to raise voices against harassment, violence both using traditional and social media.
·         Cultural & religious velocity- India is a country with diversity in term of religion, culture, and ethnicity. Most of the brand should focus on understanding the culture, which should have a dominant role in advertising, brand promotion. It’s a country where people’s affinity towards its culture, family traditions is much higher than some other V12 countries. Though there is a shift in cultural values in V12 countries but the pace of change differs. Brands are encasing both culture and cultural shifts to tap the market. Cadbury has made a campaign based on “Transforming Cold Saas-Bahu relation to a more jovial warm” which became very popular. On the other hand “Titan” projected bran ambassador “Katrina Kaif” as to get married once a woman is ready, not for any other reason is a classic example of cultural shift.
Conclusions
The O& M report has reported that “emerging market” is an out-dated term as already there is a tremendous growth in those markets, making them already emerged. Treating the new billions of middle class customers, emerged as “Velocity 12 market” as the common middle class consumers in the west will be a big mistake for the marketers as this “velocity 12 market” is a social synchronisation of people of diverse backgrounds originated from different countries. As per the report al
most half of the world’s GDP will come from this velocity 12 market considering ppp (Purchasing Power Parity) as an index. A new task and challenge is waiting for the marketers to grab the huge opportunity by evolving fast, making a brand more customer centric, culture driven and most inventive.

Reference: Ogilvy & Mather (June2016), “The velocity 12 markets.”
X