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THE broader South Asian region (not just India) will be the epicentre of future middle-class growth - paving the way for one billion new middle-class consumers to emerge who will "change the shape" of the world, says Ogilvy & Mather (O&M).
In a research paper titled The Velocity 12 report, O&M identified 12 "velocity" markets that would be key to middle-class consumer growth over the next decade.
Centred principally in India, but inclusive of Pakistan, Bangladesh, Myanmar, Vietnam, Indonesia, and the Philippines, and extending up to China - and to Egypt, Nigeria, Mexico, and Brazil in the other direction - the Velocity 12 markets represent an arc of future growth, the report said. "Over the next decade, these 12 markets will be the source of the next billion middle-class consumers, which will create a critical tipping point as the middle class move from a minority to the majority of the local population in many of these markets."
The report was based on a study of 3,600 consumers in these 12 markets. It addressed a range of social, cultural, technological and lifestyle trends that companies would need to know, both to size the prize for their brands and to figure out how to capture it, O&M said. This included identifying the key role that women will play as social change agents and entrepreneurs, with purchasing power crossing cultural, religious and demographic divides.
O&M chairman Miles Young said the V12 ranking went beyond traditional economic and banking indices, and was based upon measures of middle-class growth in terms of income, rather than assets, using a Purchasing Power Parity (PPP) methodology - a measurement widely accepted by the IMF, the UN, and the World Bank - to equalise the purchasing power of different currencies. The ranking also assessed markets based upon the velocity of growth and change - an increasingly important factor that some companies have grossly underestimated so far in their global growth plans, Mr Young said.
Noting that the term "emerging markets" is now "outdated", the report said the V12 markets required a new "lexicon of growth". Emerging markets accounted for only 10 per cent of global trade in 1970; today, it's a 30 per cent share - and expected to grow to over 40 per cent by 2050. And using the PPP measure, nearly half of the world's GDP comes from these markets.
Mr Young noted that the Velocity 12 research showed the world as it would be in the not too distant future. "A billion new middle-class members will literally change its shape. It will become, for instance, much more orientated to South Asia, especially India. Most Western businesses simply are not used to thinking this way . . . 'Velocity' better describes the real transformation in these markets (than the term 'emerging market')," he said.
The report noted that over three- quarters (77 per cent) of consumers in these countries agreed that lifestyles were changing faster than they had ever experienced before. This was broad-based, with little variation by gender. Agreement was especially high across China (89 per cent), India (86 per cent), Bangladesh (86 per cent), Pakistan (87 per cent), and Indonesia (86 per cent). But the study found those living in the Philippines were notably less likely to agree (62 per cent) about lifestyle changes.
All V12 countries (apart from Egypt) expect the next decade to, on balance, bring more positive changes than negative ones with 91 per cent Chinese respondents saying they expect positive change, 88 per cent in Myanmar, 83 per cent in Bangladesh, 78 per cent in India, 73 per cent in Nigeria and 73 per cent in Indonesia.
V12 consumers identified a number of diverse social issues as important to their countries' future. Topping the list overall were quality-of- life issues, such as a child's health and the environment. At the same time, priority issues for V12 consumers also included creating better economic conditions, attracting investment, and addressing economic inequality.
A vast majority of women (85 per cent) anticipated improved career and business opportunities in the coming decade. That number spiked to 94 per cent in Pakistan, 92 per cent in Bangladesh, and 91 per cent in India. Similarly, 83 per cent of women believe that they have more opportunities than before to start their own business. The optimism that women expressed extended beyond their careers: some 79 per cent indicated that they have more money to buy things than ever before.
At the same time, women have been using social media to shift mainstream opinions on a variety of societal and family issues. The report noted that V12 women would be a potent source of social change over the next decade. They were more socially connected than men in some countries, and becoming better educated. As women in the V12 enjoyed increased financial participation and control, they were using their newfound voices in social media to press for change on a host of topics, from women's issues to the environment, the report added.
For most V12 consumers, digital equals mobile. There are various reasons for that, starting with the simple practicalities of lower cost of entry, lack of space in V12 homes, ease of connection, and the way technology is being introduced to remote areas and urban locations.
The O&M report added that the combined benefits of mobility, location technology, big data and increased automation would translate into unprecedented power to conduct commerce as well as aspects of government and society in new ways.
Consequently, digital technology would generate social, economic and cultural changes in the V12 in the coming decade that will outstrip the impact it has already had over the past 25 years, it added.