I have been going back and forth about writing on this subject for the past few months but I couldn’t put it off anymore. Especially not after seeing examples where well-established, respectable companies wanting to capitalize on emerging markets by globalizing their products have made seemingly naive assumptions about users elsewhere in the world. The result? Products failed to sell in these different consumer markets due to the fact that the company's presumptions were sorely misplaced. The products were essentially out of context at a social and/or cultural level, therefore, inappropriately for the user markets they aimed to capture.
Sure, many of us would
assume that larger corporations, with their vast experience and resources, would have sophisticated research techniques in place. R&D facilities within their subsidiaries would understand the local user's needs, translate them into areas of opportunities, and introduce products that not only address those needs but could easily be incorporated into their lifestyles. We would
expect that someone may already have asked questions like "
Is this product going to meet the needs of the consumers in Asia the same as it will meet the needs of the consumers in America? Yes? No? What are the differences and similarities?”But just like in our assuming so, these companies too made a grave mistake in presuming that their products would sell just as well in new emerging markets just as they may have elsewhere. They assumed their products would sell like pancakes – but unfortunately, forgot to ask the simple question
“Do my users even eat pancakes? More importantly – do they top them with maple syrup and whipped butter, and eat them using the same fork/knife utensils like users elsewhere do?”While given the the fact that trying to "please everyone" can be suicidal, it should not be taken as a convenient excuse in failing to have a deeper understanding of the consumer market one is going to be introducing products to. Wouldn't a wiser approach then consist of sending out 'cultural probes' before deciding which features can be realistically incorporated, even if it is at an incremental level? At least then, instead of looking like a company that had been gravely misinformed or clueless, they can at least be able to state with conviction that they made an informed decision: "We were aware of X and Y, but due to Z, we deliberately chose to go this specific route and only incorporate features D and F into the product for the time being."
I'm interested in hearing thoughts that others would like to share regarding this matter. Below, there's a list of some examples along with their referenced articles and article highlights which may provide some ammo in jumpstarting the discussion.
Apple's iPhone, an Indian Flop, Prepares for Chinaby Mehul Srivastava in BusinessweekApple, often considered a shining advocate for design and how it brings value in delivering a cool, edgy product that users love, too is guilty of having made the presumption that users elsewhere in the world would share the same enthusiasm – only to be proven wrong despite two years after its launch of iPhone in the Indian market and possibly again in China. Let's briefly go over a few points as to why this happened:
- Price Point: Three iPhones equals one car.
"The iPhone is also priced far beyond the reach of even many middle-class Indian consumers. Even though iSuppli, the El Segundo (Calif.) market research company, estimates iPhones cost less than $175 to build, both Apple and Airtel stuck to the approximately $700 price for the phone in India, vs. $199 with a two-year AT&T (T) contract in the U.S. In India, then, three iPhones equal one Nano, the $2,000 car that Tata Motors (TTM) launched in India just two weeks ago. An Apple spokesperson in London, Bethan Lloyd, said in an e-mail that pricing and tariff issues are decided by local partners, not Apple. Apple declined to make executives available for an interview."
- Phone Plan: Prepaid/Pay as you Go vs. Contract.
"For Airtel and Vodafone, subsidizing the phone has not been an option. The vast majority of Indian users have prepaid accounts, and even with the few regular contracts out there, high-end users generate just about $30 a month in call and data charges. Add to that the fact that the iPhone is easily unlocked and used on rival networks, and the carriers decided the AT&T model in the U.S. just wouldn't work in India. (In Europe, where iPhone sales have been lukewarm, many carriers reached the same conclusion.) "
- Competition & Pricing are simply the beginning. Indians just use their phones differently.
"According to Sanjay Gupta, the chief marketing officer of Airtel's mobile business, Indians just use their phones differently. With spotty data coverage and slow download speeds on non-3G networks, the iPhone just doesn't dazzle the way it does in the U.S. Also, Indian customers like to forward text messages; Nearly 70% of them do that at least once a day, says Gupta. Until recently, the iPhone didn't allow users to do that. "It's a big functionality issue," says Gupta. 'The device is being judged as a phone, not as a data device.' "
- Local partners have different goals.
"Another difficulty for Apple in India: Local partners don't necessarily have the same goal of selling lots of iPhones. Airtel, for instance, doesn't seem to mind that Indian consumers haven't embraced the gadget, since associating with Apple has helped the carrier in other ways, says Gupta. "For us, it allowed an association with iPhone as a brand," he says. 'And that's definitely made us happy.' "
With the points mentioned above, it is difficult to fathom whether Apple had asked themselves these questions before launching the iPhone and gone ahead with the launch anyway despite the consequences. Perhaps Apple wasn't arrogant in assuming that the momentum of hype the iPhone had gathered would be enough to push it into these emerging markets. Perhaps Apple deliberately took a more Microsoftesque approach where the product is released despite its shortcomings, feedback is gathered from users - both pleased and disappointed, lessons are learned, and then relevant modifications are integrated within future product generations as opposed to allotting money/time/resources beforehand and missing out on on capitalizing with the current version of the product altogether.
The Washing Machine that ate my Sari/Lungiby Apala Chavan, Douglas Gorney, Beena Prabhu, Sarit Arora in Interactions MagazineWhirlpool Corporation designed a single, stripped-down washing-machine platform for emerging markets. Dubbed the “World Washer,” it was launched in countries like Brazil, Mexico, China, and India with slight feature and cosmetic styling modifications to reflect local tastes of each market. Whirlpool was able to understand a few cultural elements such as in China, for instance, washing machines sat in the living room and were like a status symbol. Then despite having these cultural insights, why did the washing machine end up doing so well everywhere else but in India, especially South India? Only after noticing how abysmal the sales were in South India, Whirlpool dispatched a team to figure out what went wrong and here is what they learned:
- Re-labeling the “Delicate” cycle as “Sari Cycle” was not enough.
"They finally realized what was going into the machines-traditional South Indian clothing such as lungis, dupattas, mundus, angavestrams… and, of course, saris. Little more than sheets of very fine cotton or silk, six to nine yards long, the garments were getting caught, entangled, and shredded in the millimeter-wide gap between the machine’s agitator and drum."
- Shooting one’s self in the foot with generalizations.
"Because its designers did not broadly, deeply, and fundamentally understand specific target markets, the World Washer failed to live up to its name. The basic mistake Whirlpool made-in a variant of not understanding its target market-was to assume that needs are the same across emerging markets. The World Washer had been given a single, generalized, emerging-market reference point by designers with limited understanding and direct experience of the customs and modes of dress in South India. They did not ask the right questions of target users-if they talked to them at all. So critical details, like the thickness and dimensions of the clothes that would be washed, went unnoticed."
- A single millimeter changed an entire business model
"That single millimeter forced Whirlpool to completely restructure their business model and abandon their joint venture, in addition to designing a new washing machine for India. It took the company years to recoup their losses and regain significant market share in the subcontinent."
Despite having region-specific cultural insights which were integrated into overall cosmetic styling and features, the actual effectiveness of those functions in context with what they would be washing clearly hadn’t been tested. The good news is that Whirlpool fared much better in the long run when it came to catering the needs of their region-specific consumers though it proved to be an uphill battle to recapture certain markets and for people to regain that trust within their brand. In fact, their incident prompted other multinational companies to literally go the distance in understanding their users at a deeper level for successful product-localization.
Additional ExamplesA few additional examples of why culturally/socially-sound contexts are not just limited to product features, but permeates through to relevant price points that reflect the spending behaviors within emerging markets as opposed to mature developed markets.
- One India? No. Many Indias. (Markets & Submarkets)
"While navigating the Scylla and Charybdis of design for more than one developing economy, designers also need to remember that segments within markets differ. Rama Bijapurkar, author of Winning in the Indian Market, has discussed that there are many Indias. “What confounds people about India is that everything you say about it, the opposite is also true. There are five-star hotels and abject poverty. That reality has forced corporations to reinvent their pricing-strategy formulas in emerging markets-and often to re-reinvent them. Newly affluent consumers in emerging markets are an attractive niche, but overall standards of living remain lower than in the West, gaps between the rich and the very poor notwithstanding. Even high-end shoppers have different spending behaviors than in developed markets. Marketers and product designers cannot ignore affordability.”
- Proctor & Gamble Diapers: Premium < Affordability.
"When Procter & Gamble introduced disposable diapers into the Brazilian market, it went in with its top-end model, which failed to sell. Only after offering a less-sophisticated diaper, half the price of the top-end version, was the company able to grow the market."
- Good bye, Levi Strauss, we found cheaper jeans with similar/better quality.
"With its booming economy and particularly price-sensitive market, India has taught some of the most prominent multinationals just how elusive the upper end of emerging markets can be. Levi Strauss brought its American jeans to India in 1995, not only designed but also priced as is-$65. They were considered exorbitant, especially compared with generic jeans that seemed to offer equivalent quality. After three miserable years of rampant counterfeiting and flat sales, Levi had to change its pricing and design strategy."
- Affordability without compromising on Product Quality or Performance Reliability.
"Affordability is a double-edged sword, however. Lo barato sale caro, goes the saying in Latin America-”what is cheap ends up being expensive.” If not designed with sensitivity to the market, low-cost products may strike target users as low-quality compromises and detract from the company’s brand appeal. That appeal, regardless of price, is in the confidence it inspires. With limited incomes, “emerging consumers” are more cautious than their counterparts in the West; they would rather pay more for quality than risk product failure. The relative financial loss from an underperforming product would be far more serious."
- Tone down on the ‘Featuritis’
"For users in emerging markets, streamlining or eliminating complex features, without reducing core quality, results in a more attractive and affordable product-particularly when features are added with careful consideration of the market context. ‘Getting the right product at the right price is the biggest challenge,’ says FutureBrands CEO Santosh Desai. ‘The usual approach is to strip the product of features until a semblance of affordability is attained. The trouble is that the emerging consumer, for whom every act of discretionary consumption is an act of sacrificing something essential, is looking to be seduced rather than patronized.’ For that reason, mobile phones loaded with games, music, and other extra features appealing to the U.S.A.’s youth-driven market have not succeeded in emerging markets. Feature creep, driven by the seemingly limitless appetite of developed markets for add-ons and customization, has no place in emerging market design."
Got any more examples that you think would be good to share? Please forward them on over!
