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Understanding BRIC’s Emerging Middle Class

Increasingly, the emerging middle class in BRIC countries - Brazil, Russia, India and China (and sometimes South Africa, BRICS) - is becoming one of the most important international customer bases for companies.

Over the past decade in Brazil, about 20 million people joined the middle class, which now comprises about 50 percent of the country's population.[1] Russia's middle class population has also more than doubled in the same time period.

While China's middle class population only represents 10 percent of its entire population, that group has increased from 10 million to 83 million people over the past decade. China's middle class is expected to climb to 1 billion individuals by 2030, making up 72 percent of the country's projected future population. The only exception to dramatic growth is India, which classified 9 million citizens - 1 percent of its total population - as middle class in 2010.

“Enabling customers to pay in their local currencies can significantly expand sales possibilities, and finding a partner that can help facilitate these transactions can assist both company and customer.”

— Seth Zalkin, managing partner of the Astor Group

It's incumbent on any business "to tap into these markets" because those in the emerging middle class in BRIC countries have "voracious appetites for buying products," says Seth Zalkin, managing partner of the Astor Group, an investment banking advisory firm that has offices in both New York and Rio de Janeiro.  

Connecting with a New Foreign Market

So how does a company tap into this powerful demographic? Zalkin says businesses need to understand the cultural differences within a country before trying to market to a specific customer base. "You need to have an understanding [of what] people are looking for," Zalkin says. "It takes some time to understand how things are being sold."

For example, in Brazil, since there are so many poorer consumers, it has become common for people to purchase goods on a payment plan, sometimes making a purchase over 10 payments. "That makes expensive products more affordable to the masses," he says. This payment structure is important for foreign companies to understand when they are coming up with pricing and building a business brand in Brazil, Zalkin says.

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Part of tailoring one's pricing strategy may be enabling customers to pay in their local currency, and then converting that money into the business's domestic currency. With the help of a trusted online foreign exchange service, businesses can quickly and easily convert currency and take advantage of favorable exchange rates.

"Enabling customers to pay in their local currencies can significantly expand sales possibilities, and finding a partner that can help facilitate these transactions can assist both company and customer," Zalkin says.

Targeting a New Foreign Market

Oftentimes, foreign companies try to market their existing, high-margin products to a small segment of higher-end international customers in emerging markets, says Niraj Dawar, professor of marketing at the Richard Ivey School of Business with campuses in London, Ontario; Toronto, Ontario; and Hong Kong. For example, "The Apple iPhone is priced at the top of the market and still only has a 7 percent share of the smartphone market in China, and much smaller in India," he says.

Instead, Dawar suggests that foreign companies consider creating and marketing products designed and priced especially for countries' burgeoning middle class.

New Opportunities

With a growing middle class in BRIC countries, there are plenty of opportunities. However, it's important for international businesses to look beyond just selling goods or services to this growing customer base, says Thomas Moore, deputy assistant secretary at the U.S. Commercial Services' Office of International Operations.

Since the U.S. government has been focusing a lot of attention on infrastructure development in emerging economies, Moore says there are opportunities in this field. "Oftentimes, opportunities for smaller companies are as suppliers to the larger main contractors performing project design, management and integration," he says. For example, there is: 

·      Airport development in Brazil and Turkey

·      An intelligent transportation project in Belo Horizonte, Brazil

·      Port development in Cartagena, Colombia, which includes opportunities for IT systems

·      Geothermal development in Indonesia

"What we're looking at is trying to figure out niches that can be filled by U.S. companies," he says. "[The U.S. government] is looking at projects where small-medium companies can find opportunities."

[1] Americas Quarterly, Middle Class Growing in BRICs and Latin America, Nov. 12, 2012

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