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The trend is expected to continue to thrive for the coming decades due to the expanding consumption of the people in various emerging markets, including the most well known countries BRICKS ND other emerging and potential economies Just like the Philippines, Turkey etc. According to the McKinney report, the annual consumption in emerging markets will reach $30 trillion in 2025, which is the biggest growth opportunity in the history of capitalism. 2] Therefore, it is sensible that companies to be aggressive to capture the emerging markets through different marketing means including the traditional advertising as well as other social media platforms. Someone say that marketing in emerging market is all about tapping into the most affluent tier of customers in emerging-market-cities such as Shanghai, ROI De Jeannie ND it can lead to the success of the whole company in the development in emerging markets. However, this idea is unjustifiable and the marketing should also focus on lower tier cities such as Tannin, Hanoi and Mohammedan.
Three reasons with diverse real life examples will be given to explain why it is also significant to have marketing in lower tier cities and to target the lower customer segments. They will be discussed in the following paragraphs in the perspective of market size and growth, level of competition as well as customer needs. First and foremost, the GAP growth in lower tier cities especially the second tier ones s fast. It means they consume more with the growth of GAP. Second tier emerging market cities are the fastest growing economies in the world right now.
Thirteen second tier emerging cities in Vietnam, India and China are projected to experience growth by 10-12% year-on-year. They include Tannin (12. 9%), Dahlia (12. 7%), Changed (1 1 . 7%), Ouzos (10. 5%), Hanoi (10. 2%) and Mohammedan (10. 1%). Their growth rates exceed those of first tier emerging market cities and developed cities like Beijing (9. 4%), Delhi (8. 9%), Iambi (8. 4%), Hong Kong (4. 9%) and New York (2. 4%). 3] under this circumstance, multinationals want to expand the business to these fast growing emerging market cities and they carry lots of marketing campaigns and efforts. Cataracts has over 500 stores in China.
John Culver, the head of China and Asia Pacific, points out that Cataracts will be present in more than 70 Chinese cities in 2015. Most importantly, he cited and admitted that expansion into smaller cities is “most definitely’ a viable way to grow and he is even planning to open stores in tier three and four cities. [4] Hence, we can see that the high growth rate of GAP in the rower tier cities can lead to the increase in the market size of companies due to the surge in the disposable income and consumption of the citizens and it definitely provides a huge opportunity for the corporations to have marketing and distribution in those cities.
Besides Cataracts, insurance companies are also tapping into the lower tier cities in emerging markets. As lower segment customers have increased purchasing power parity, Mainline is now tapping into the second and third tier cities in Indonesia. They mainly promote driving insurance there. The next generation of he middle class, which is projected to grow to 135 million by 2030, will be more geographically dispersed across second and third tier cities outside Java. Therefore, companies see lower tier cities as a huge selling market and opportunity. 5] Besides gaining benefits form the high growth rate in GAP and increased consumption, marketing the lower tier cities and lower segments of customers such as the upper middle and new middle class can facilitate small and medium size companies and entrepreneurs for the business by reducing the keen competitions. Some companies have already started shifting the marketing from the large merging market cities from Beijing, Mambas, Jakarta to lower tier ones like Jasper, Kola in India. [6] Due to the improved living standard and inflation in those first tier emerging market cities, the marketing cost and business cost rise.
Moreover, there is an intense competition among the corporations entering the major emerging market cities and therefore the businesses especially medium sized corporations or corporations without extremely strong brand image are so difficult to stand out in those cities due to the lack of marketing budgets compared to international impasses. So, marketing the lower tier cities mean a lot to entrepreneurs as this is the chance for them to have marketing with a lower production cost and to reduce the fierce competitions as they enjoy the first mover advantage.
It leads them to build the brand awareness and to win the customers’ loyalties. One of the examples is the Japanese fast fashion company UNIQUE is focusing on the development in the lower tier cities in Russia and Indonesia in an attempt to draw the local attention at the early stage and to compete with other well-known brands like Ezra and H&M. 7] Whether carrying marketing in the most affluent cities only and to target the wealthiest customers or to extend the marketing efforts to smaller cities and middle class or even the bottom of pyramid also depend on the industries and types of commodities.
Customers in lower segments or in lower tier cities expect less in the shopping experience than the most affluent tier customers. So, some goods and sectors like luxury products including Jewelry and high-end skin care and make up products can carry marketing in both first tier and second or third tier cities as the emend in those lower tier cities surge rapidly due to the increase in the purchasing power. The Body Shop has expanded to smaller cities in India since 2010 such as Bangor, Locknut and Surgeon. Cities and towns including Nagger and Opal are also their target markets.
They launched a popular marketing campaign called “Love Your Body’ in those areas to draw attention to offer skin and makeup consultation and products at reduced prices. [8] Moreover, adoptions of some products after understanding their specific consumer behavior are needed to target different segments of customers in order to obtain a good sale. Take the Jewelry industry in China as another example, Chow ATA Book, which is the dominant Jewelry player in China puts much effort to promote in the second, third and even forth tier cities.
Up to now, tier three and four cities represent 40% of the store network and it is still expanding. [9] They mainly sell gold products instead of modern diamond ornaments in the small cities as the consumers tend to be traditional and conservative about weddings. [10] Therefore, marketing in lower tier cities can bring unprecedented and unimaginable opportunities for the businesses if adoptions are carried according to he local cultures. All in all, companies should focus both on the affluent tier cities markets as well as the low tier cities markets at the same time in order to maximize the market size and profits.
It is the only way to strive for the long-term sustainable development since the first tier markets and upper class consumer markets would be saturated in a short period of time due to the cut-throat competition in various industries. Therefore, tapping into both first and lower tier cities can diversify the company’s risks. [1 1] Someone may argue that it is inefficient to carry marketing campaigns and remissions in lower tier cities and to target the bottom of pyramid.
Social media marketing is blossoming and most of the youth rely on social media and various online platforms to obtain information. A portion of marketers thinks the Internet penetration rate of lower tier cities and towns are far lagging behind the first tier cities so it is hard to deliver the brand image and to raise their awareness. However, the thought is not accurate. The average Internet access rate of lower tier cities is only slightly behind that of the affluent tier cities. In 2011, China’s Internet access in ire 5 cities was at 53%, not far behind the 61% figure in tier 1 cities.
According to the Media Research Director of Syncopate in China, the Internet consumption figures for lower tier cities seem to be a bit lower than those seen in tier 1 cities on average, however the true picture is there are vast regional differences by tiers and cities. For example, Punning, a tier 5 city in Gudgeon province, is very strong in online mobile (51 and the Internet consumption (61%), even higher than that of tier 1 cities (25% and 51% respectively). Managing, a tier 4 city in Chuan province, is also very strong n the Internet consumption (50%) with the reach above that of Changed (48%), the capital city of Chuan. 12] In terms of overall online social networking activities, 30% population from tier 1 cities have visited a social networking site (SANS) in the past month, while 18% and 10% have done so in tier 5 cities and rural areas of China. Hence, companies can still make good use of the online platforms to do marketing campaigns and to deliver information to customers in lower tier cities. Another reason leads to companies’ hesitation of having marketing in lower tier cities s the lack of infrastructure and resources.
The transportation and highways are not as well established as those in affluent cities. Also, there is an insufficient skilled labor. But a long-term opportunity appears for the businesses, which target the low tier cities. Emerging countries governments understand people in low tier cities are highly potential in terms of the consuming power, they invest a lot in upgrading the infrastructures Just like the highways, railways and airports. Multi-modal International Cargo Hub and Airport was being constructed at the poorly known city of Nagger in central India in 2010. 3] Under this development and improvement, corporations need not worry about the barriers of distributions of products to the low tier cities and low customer segments. In conclusion, marketing in emerging market is not all about tapping into the most affluent tier of customers in emerging-market-cities. Both marketing in first tier cities as well as lower tier cities can bring profitability to the businesses as targeting the lower tier cities customers and the middle class including the upper middle class and the new middle class can lead the companies to the sustainable development for he coming decades.
This marketing strategy works especially well for the industries selling material goods without the need of superior shopping experience such as the car industries and clothing industry. The lower tier customers now are experiencing the growth of GAP and consumption so they have extra money to purchase products with brands to enhance the living standards. Also, being the first mover to market the lower tier cities can assist the expansion of entrepreneurship in an attempt to reduce the keen competition in the first tier cities.