By Rome Jorge
There will be a billion more middle class people in the world, and they will be nothing like yesterday’s middle class.
Tomorrow’s middle class market will be from South, East, and Southeast Asia, South and Central America, and North and West Africa, unlike yesterday’s middle class who were mostly from secular long-industrialized societies of Western Europe and North America that have declining birth rates and little room for economic growth. Tomorrow’s middle class will be led by women. Many will be Muslim. Most will be urban and mobile. They will prefer local purpose-driven brands tailored to the needs of their culture, gender, and religion. This future is coming up fast.
All this is according to “The Ogilvy & Mather Velocity 12 Report: The Reshaping of Global Growth” released June 2016. The agency states that the research was compiled by contributors and experts such as economist Dr. Sujit Bhalla, chairman New Delhi-based economic research and emerging-markets advisory firm Oxus Investments, and is “based on proprietary research and a variety of best practice client cases.”
New big spenders
The 12 Velocity Markets—the nations with the largest increases in middle class populations—are: India, Pakistan, Bangladesh, Myanmar, Indonesia, Philippines, Vietnam, China, Egypt, Nigeria, Mexico, and Brazil.
The rankings and projections are based on Purchasing Power Parity (PPP) methodology, used worldwide to compare the income levels among different nations. The PPP theory contends that the expenditure on a similar commodity must be same in both currencies when accounted for exchange rate and the purchasing power of each currency is determined in the process. The report contends, “Using a Purchase Power Parity (PPP) measure, nearly half of the world’s top GDPs [Gross Domestic Product, the monetary value of all the finished goods and services produced within a nation, most often used as a measurement of its overall economic activity] come from V12 markets.”
According to the report, the 600 million middle class developed countries had in 1980 will only increase to 750 million, while, for the entire world, the 1 billion middle class in 1980 will increase to whopping 4.9 billion by 2025. The most dramatic increases are in South Asia. In India alone, the 431 million middle class India had in 2015 will balloon to 828 million by 2025, an increase of 397 million.
Urbanity, mobility, and local pride
The “Velocity 12 Report” dovetails with the “World Urbanization Prospects: The 2014 Revision, Highlights,” released by the United Nations, Department of Economic and Social Affairs, Population Division on July 2014, that declares, “Globally, more people live in urban areas than in rural areas, with 54 per cent of the world’s population residing in urban areas in 2014,” “By 2050, 66 percent of the world’s population is projected to be urban,” and citing three of 12 velocity markets, “India, China and Nigeria—together are expected to account for 37 percent of the projected growth of the world’s urban population between 2014 and 2050. India is projected to add 404 million urban dwellers, China 292 million and Nigeria 212 million.”
“For most V12 consumers, digital equals mobile,” notes the “Velocity 12 Report.” With increasing urbanity, sophistication, and mobility comes local pride. The “Velocity 12 Report.” also notes, “Preference for local brands is strongest among Indonesians, Brazilians, Filipinos, Bangladeshis and Indians, with Indonesians and Bangladeshis most likely to purchase domestic brands as part of their weekly shopping patterns.”
Religion, values, and women
The “Velocity 12 Report” also dovetails with “The Future of World Religions: Population Growth Projections, 2010-2050” released by the Pew Research Center on April 2015 that predicts, “If current trends continue, by 2050, the number of Muslims will nearly equal the number of Christians around the world,” and notes that India, the velocity market projected to have the largest increase in middle class, “will retain a Hindu majority but also will have the largest Muslim population of any country in the world, surpassing Indonesia.” Of the 12 velocity markets, Pakistan, Bangladesh, Indonesia, and Egypt, are all already overwhelmingly Muslim, Nigeria’s population is currently half Muslim, and India, China, Myanmar, and the Philippines already have significant Muslim populations.
The “Velocity 12 Report” notes, “Over 90 percent of Muslims researched by Ogilvy Noor said that their faith affected their consumption,” and “Nearly 60 percent of Muslim respondents across the V12 indicated that international brands generally don’t (or only a little) understand or cater to their needs.” The report also proclaims, “The Muslim Futurists have started to apply halal rules to all parts of their activities, creating a Muslim lifestyle.”
There have been news reports that claim Salafism—the ultra-conservative theology within Sunni Islam that guides both theocratic monarchies such as Saudi Arabia as well as jihadi terrorist organizations such as the Daesh (Islamic State of IS)—is the fastest growing movement within Islam. However, such claims currently remain unsubstantiated by verifiable quantitative data and are often based on intelligence agency estimates.
Nonetheless, the changing demographics may bode a turn to conservatism and a move away from liberalism, even for predominantly non-Muslim nations. Birthrates are declining in affluent and secular Western democracies while population growth remains high in Africa, where Christians are currently much more conservative and reject gender equality and other liberal values. “The Future of World Religions” report notes that by 2050, “Four out of every 10 Christians in the world will live in sub-Saharan Africa,” and “Atheists, agnostics and other people who do not affiliate with any religion—though increasing in countries such as the United States and France—will make up a declining share of the world’s total population.”
2050 is 34 years away. Acceptance of values such as racial equality and gender equality changed remarkably during that same amount of time in affluent western societies with large middle class populations. Regardless, today’s generation demand activist brands that promote and align with their values. The “Velocity 12 Report” states, “Brands must start by understanding themselves—and defining the values that they want to impart.”
The “Velocity 12 Report” also states, “Women in the V12 are taking more direct financial control than ever of their lives and the lives of their families. Eventually, they will eclipse men in making the majority of direct and indirect spending decisions,” and “The growth in female participation in the workforce is a key driver in the global economy. Women now account for 40 percent of the formal workforce and 43 percent of the agricultural workforce.” However, the “Velocity 12 Report” also notes, “The majority of female respondents report experiencing discrimination in virtually all settings in their lives.”
Solutions
The Velocity 12 Report warns, “Success in the V12 will not be built upon an oversimplified view of a homogenizing world nor a superficial analysis of a group of markets.”
The “Velocity 12 Report” advises, “Brands have fully embraced the fact that they don’t create themselves. Customers have significant impact on how brands are built, and brands cannot abstain from ongoing interaction… That shift is called Behavior Branding. Behavior branding asks brands to do, not just say,” and “Marketers must re-cast their perception of consumers from being ‘targets’ to being active participants, who expect, and even sometimes demand, a role in marketing activities.”
The “Velocity 12 Report” states, “Success in the V12 markets will increasingly require robust data and personalization strategies. Failing to fully leverage data, and the personalization it can support, will likely result in falling behind the competition and failing to keep up with consumers’ escalating demands. Given the power of cloud technology, even smaller local brands can now leverage data and data mining. Personalization is the promise of the age.”
