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Brands stand to gain as Asia middle class grows

SINGAPORE -- Global brands stand to profit handsomely as Asia's middle-income group expands and spends more, said marketing guru Bernd Schmitt yesterday.

But first these brands will have to rethink their marketing strategies, said Schmitt, who is the executive director of the Institute on Asian Consumer Insight.

Schmitt, also a visiting professor at Nanyang Technological University, attended the Asia-Pacific Economic Cooperation (Apec) summit in Vladivostok, Russia last week, where he took part in a panel discussion about “the new consumer” in the emerging market middle class.

One conclusion of the panel was that the so-called “middle class” is not a clearly defined group, as it includes a huge section of society, and is actually made up of smaller sub-classes.

“If you've just come out of poverty and have a decent job suddenly, that's very different from somebody who's in the upper middle class, who buys Nike sneakers and iPhones,” he said in an interview with The Straits Times.

But what does hold the middle class together is an interest in certain product categories such as household goods, consumer electronics and cars, he said.

The middle class is also not interested in simply owning goods — they are also concerned about the brands of the goods that they buy.

For companies that want to reach out to this middle class, they will have to discard the old way of marketing goods, Schmitt said.

Since the 1990s, companies have launched one version of their products in developed markets and less high-tech and cheaper versions of the same products in emerging markets. This model of doing business will no longer work, he said.

“The middle class is more and more knowledgeable internationally, and they don't want to have second-rate products.”

Companies would also do well to mimic the strategies of consumer goods companies such as Nike, Puma and Adidas in having one global brand strategy, rather than having market-specific strategies, Schmitt added.

“Traditional cultures are diminishing and the consumer culture has superseded. You still need to be sensitive to cultural factors but equally appealing to customers is a global image, and a global branding strategy also saves costs.”

The panel also discussed whether the Asian middle class was under threat from the slowing global economy.

The conclusion, he said, was that this could be true for the lower stratum of the middle class.

Schmitt said that if people lost their jobs, they may drop out of the middle class. Governments have a role to play in securing employment for such people, he added.

“But if you go to the higher levels of the middle class, they will remain in the middle class, but their consumption habits are changing. They're getting less expensive brands.”

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