In recent years, offering very different product categories under one brand umbrella has become increasingly popular. Xerox expanded its core brand from copiers to computers. General Electric also sells financial services. We can book rooms in luxury Versace hotels, or surf the Internet with Ferrari notebooks. We can even wear shoes or watches from Caterpillar, Porsche or Jeep.
In order to increase sales, many international companies are building up a differentiated brand portfolio in the major growth markets, consisting of a brand for the upper market and separate brands for medium and lower segments. This strategy, which is based on many brands, is mainly found in the consumer goods sector and has proven to be very effective if properly implemented. In countries such as China, where regulations often require joint ventures in the development of domestic brands, companies are occasionally forced to develop additional brands for political reasons.
Business in growth markets has become increasingly important for multinational companies over the past decade. However, many companies are focusing too much on the premium segment when expanding into new markets, neglecting the large mid-market segment. Western managers like to underestimate how much purchasing power there is between the top ten percent of the population, the “super-consumers”, and the lower-income consumers in rural areas of the respective hinterland.
The major growth markets are more like continents than individual countries. Hundreds of languages, regional traditions, tastes and customs make them a huge conglomerate of markets. A “one size fits all” approach is doomed to fail here. However, it makes much more sense and is strategically more appropriate to concentrate on important regional areas or city clusters as a brand in order to find a starting point for the best growth opportunities. The leading cities are only one possible destination. Rapidly growing centers in the “hinterland” are another promising option within the framework of the cluster strategy.
The major growth markets are more like continents than individual countries. Hundreds of languages, regional traditions, tastes and customs make them a huge conglomerate of markets. A “one size fits all” approach is doomed to fail here. However, it makes much more sense and is strategically more appropriate to concentrate on important regional areas or city clusters as a brand in order to find a starting point for the best growth opportunities. The leading cities are only one possible destination. Rapidly growing centers in the “hinterland” are another promising option within the framework of the cluster strategy.
The dynamics in major growth markets can hardly be surpassed. Many things change at the same time. International brands and new local champions battle it out for market share. Entire development leaps in electronics, cars and Fintech turn markets upside down. Moreover, there are consumers who learn quickly, who are not really loyal and feel confident enough to try out lesser-known brands at an early stage. This makes customer loyalty a problem. Traditional brand loyalty campaigns often fail in the major emerging markets. This is also due to the fact that consumers climb up the premium ladder quickly. They are constantly raising their expectations and want to showcase their new status.
Most companies are convinced that their brand has fully exploited its potential. But far from it: the brand can only score maximum points in the target group if its tradition, its promise and its unique history are well known. The most general definition of a brand is: “The consumer’s idea of a product or service”. So it’s not just about knowing and recognizing, it’s above all about associative connections. Clearly, this is the big moment of storytelling.
Colorful advertisements, television ads and tourism: foreign influences in the major growth markets are getting ever stronger – and they are leaving a clear mark on the perception of local consumers. In addition, the economic opening up of these markets through their WTO entry and bilateral trade agreements are flushing more and more Western brands onto local shelves. The more respected the country of origin, the greater the propensity to buy. Sometimes the foreign brand origin proves to be an important factor in the international brand development.
Without a deep understanding of local culture and myths, hardly anything works in the major growth markets, even if the rest of the preparations are perfect. Whether it´s about gods, festivals and colors in India, Chinese legends and Confucianism, or infectious joie de vivre and folk tales in Brazil: those who do not internalize the cultural DNA of the target markets and coordinate their own marketing accordingly will run into a wall. From Chinese philosophy to Hindu mythology, the extremely diverse future markets offer endless analogies to link a brand with the prevailing symbols, beliefs, tastes and myths. Niklas Schaffmeister (Managing Partner Globeone) and Florian Haller (CEO Serviceplan Group) explain the four factors that are especially important for this undertaking.
As a result of rapid social and economic change all over the world, individualism is on the rise everywhere, especially in large growth markets, which up to now were characterized by a rather collectivist mentality. The drivers of this change are better income and an expanding middle class in large parts of the world. Consumers are enjoying to finally catch up with Europe and North America. They want to make inspiring and fascinating experiences. They want to make up for what was once an impossible dream. Along with disposable income, demand and the strive for independence are growing. This means that emotional factors are increasingly coming into play on top of purely functional aspects as a factor for consumption that is aimed at demonstrating social status, individual taste and being part of the “global village”. The level of individualism, though, still varies from country to country. Successful brand differentiation must therefore address these factors, if international brand development is to succeed.
