Quality: A New Battleground for
Emerging-markets Consumers

A new book by Tarun Khanna and Krishna G Palepu entitled "Winning in Emerging Markets - A road map for strategy and execution" adds to the growing body of knowledge of emerging markets strategy. The book tackles a range of considerations that foreign and homegrown MNCs face when growing in developing countries and offers up examples of companies that have succeeded. The authors identify four economically-diverse consumer groups: global, emerging middle class, local and bottom segments. Interestingly, they highlight the need to devise culturally appropriate and affordable products and services while not skimping on quality.

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The quality of goods and services is often perceived to be less important to emerging-markets consumers than it is to their developed-world counterparts. This is due in part to the assumption that these consumers value low prices above all else. But Vital Wave Consulting's own research suggests that quality is equally, if not more, important to many of these consumers. Interviews with individuals without mobile phones in seven emerging markets revealed durability was the second most important attribute behind design (yet another surprise) in a future handset purchase. Furthermore, these individuals were most likely to choose a retail outlet for its reputation for quality over any other factor. In another study, females in four developing countries were pleased with their mobile carrier due to quality of service above other factors such as the "coolness" of a brand or price. There are several reasons that explain the importance of quality to emerging-market consumers. Technologies such as mobile phones and PCs represent a much larger cash outlay to these consumers and are expected to last longer despite harsher conditions. Also, technology is a symbol of status to emerging-market consumers. Price is a major barrier, though once consumers have decided a technology is affordable to them, they will often stretch their pocketbooks to buy the best product they can afford and will trade up in quality when it comes time to purchase a replacement.

This evidence indicates that foregoing quality in order to offer cheap goods may be sacrificing long-term growth in return for short-term gains in emerging markets. Multinational firms need to carefully balance the tradeoffs between quality and price, features and functionality to offer a high-quality, yet affordable product that serves consumers' most important needs. Achieving the right combination of products and services for emerging markets' diverse consumer base can build perceptions of quality, which is inextricably linked to the long-term development of the brand. Local market research is critical to understanding what drives consumer perceptions of quality and what they're willing to trade-off (i.e., price or extra features) for higher quality products and services, which can then be used to inform strategic product development and marketing for long-term growth.

Also in the news: 

• HP's cloud computing platform enables mServices on low-end phones
• R&D expenditures exploding in emerging markets, especially in India
• Lenovo's challenges in replicating its success outside of mainland China