Leadership

Global Middle Class to Double in 30 Years

By Jessica Stillman

Updated on: July 10, 2008 / 2:40 PM EDT / MoneyWatch

The Find: The global middle class is set to more than double between 2000 and 2030 offering massive opportunities -- and massive challenges -- to managers at multinational companies.
The Source: "The New Global Middle Class- Potentially Profitable but Also Unpredictable" in Knowledge @Wharton.

The Takeaway: Not only is the number of the global middle class set to skyrocket -- from 430 million at the turn on the millennium to 1.5 billion by 2030 -- their location will change just as radically. Wharton management professor Mauro Guillen notes that the middle class has traditionally been located in Europe, North America and Japan. Then South Korea, Brazil, Mexico and Argentina also developed significant middle-class populations. Now it's China and India's turn. By 2030 93 percent of the global middle class will live in the developing world.

Of course "Chindia" has been much discussed in the business world lately, but more for their role as sources of labor than sources of paying customers. Knowlegde@Wharton argues those roles are two sides of the same coin. Multinationals came to these countries for low-wage workers and in doing so built themselves a vast new pool of consumers:

"Multinationals that have so far viewed developing nations largely as a cheap source of labor, are now poised to benefit again as many of the workers they paid to build their products are increasingly able to afford Western consumer goods."

It's a huge opportunity for companies, but one that presents significant challenges. Among them is pricing. Consumers may be middle class in their own countries but still lack the means of those considered middle class in the West. You want these fledgling consumers to build a relationship with your product, but don't want to cheapen your brand. What to do? In China, Coca-Cola solved this puzzle by pricing its products slightly differently in urban and rural areas:

"Coke is sold in urban areas at only a slightly lower price than in Western markets. As a result, Coke is established as a brand to which new consumers aspire. At the same time, Coke is sold in the countryside for less, but consumers must drink their beverage on the spot and return the bottle to the vendor -- a strategy that saves costs and drives down the price. In addition, bottles are smaller than those in the West."

The long-ish article is jam packed with analysis and anecdotes like the one above. It's well worth a read.

The Question: What's your company doing to attract your share of these 600 million potential new customers?

(Image courtesy quinn.anya via Flickr, CC 2.0)
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