In a down economy, do you target the rich or the “masa”

Published in Philippine Daily Inquirer, Business Friday, May 2, 2008

The marketer’s daunting task is to have the consumer budget appropriated to his brand

In a depressed economy and prolonged stagflation, business owners generally aim their guns at the affluent market hoping to recover investments quickly.

Buoyed by the population that comprises the middle market as opposed to a small upscale market, not all entrepreneurs are truly prepared to sustain their presence in this market, colloquially referred to as the masa market.

Economic segment defined

Research companies define the AB market to include those with a monthly household income of Php50,001 and above representing 1 to 2% of total urban households. The C market is estimated between 9 to 12% with a monthly household income between Php15,000 to Php50,000.

Economic segment% of total population

Source:  ACNielsen Surviving and Succeeding in Chaos and Crisis, 2004

Economic segment% of total urban Philippines

Source:  TNS World Panel Philippines 2006

Motivations differ

The mid-income market is immediately responsive to goods and services that address basic, physiological needs provided they have been repeatedly convinced of the brand’s value.

In contrast, the affluent is driven to a great extent by social-psychological needs, experience and exclusivity.

This is where the debate in the mind of business owners rests to continue to put money behind a middle income market likely to respond in the long term or aim resources at an affluent market likely to immediately try a new product or service without economic restraint.

Trial is quick among the affluent market, so with retention or continuous patronage assuming an excellent product or service delivery is sustained. Not so with the mid-income market who needs to be convinced to shift consumption while remaining within the same expense budget. That is why brands targeted at the middle-income require huge resources intended to repeatedly remind a broader population of the brand’s value.

While the mid-income is quick to buy products and services responsive to basic needs, they also aspire to acquire symbols of wealth. Thus, it is not uncommon to see this market own the latest Nokia handset model or top of the line Nike rubber shoes.

Brands that appeal to both the physiological and aspirational needs of the broad C income market are more likely to be profitable over time. As the mid-income market improves their economic status (many through opportunities to work overseas), so is their likely new and increasing consumption of products and services that have only been aspired for in the past. For example, not uncommon are overseas workers sporting designer bags like Louis Vuitton or Gucci, ostensibly priced at a minimum of Php35,000 in the local market.

Deep versus small pockets

Common sense tells us that a bigger market is likely to require more marketing resources to reach the segment. Nonetheless, one must also realize that the broader market is more economically challenged than the wealthy market. The good news is – this economically challenged but huge market has some disposable money to spend. The marketer’s daunting task is to have the consumer budget appropriated to his brand.

There is no free lunch. If the marketer is intent to win over this segment, then deep resources must be efficiently and adequately allocated to reach and frequently hammer a brand’s message across this segment. This way, provided the message is meaningful, the market is more likely to try the brand.

Niche markets often have higher profitability for less work. In contrast to extensive advertising and marketing communications budgets generally associated with brands targeted for the mid-income market; the affluent brands must provide for exclusive experience. The affluent are sophisticated consumers. They are able to pay for exclusivity while continuing to demand added value from the product or the buying experience. The money spent on marketing communications is diverted to costs associated with providing an authentic exclusive experience.

Luxury of time

Exclusive brands have the luxury of time reaching out to a small market segment. Because the product or service is aimed at a niche segment who can very well afford to buy and experiment among a multitude of consumer offers, competition is not as steep compared to marketing mid-income brands.

Momentum can be an opportunity loss for the mid-income brands. A good idea may be snatched or copied by another player with adequate or more resources and advertising share of voice if one does not allocate appropriate marketing resources. There is no luxury of time when marketing to the mid-income market whose limited money compels the consumer to think deeply about the brand they will buy. The longer the time one brand spends saving on advertising; and the more time and resources a competitor puts in efficiently building the brand, likely is the success to come to the second brand.

Marketing to the middle-income market is to the avid business owner who is passionate about sustaining the life of his brand and reaching a wider segment of the local market to drive greater profitability. What drives one to reach out to this segment is the huge potential the market is likely to bring as they economically improve their position in life.