Lifestyle factors like value and 'coolness' play larger role in purchasing decisions than price in emerging Asian markets
Is the low-end really all about low price‾ Maybe not. Low-income mobile users in emerging markets do not make purchasing decisions based solely on price as many industry officials believe, according to the result of a survey of mobile customers in five Asian markets. The survey concludes that vendors and carriers targeting low-income consumers in emerging markets need to undertake a more sophisticated branding and marketing strategy if they hope to operate successfully in the low-end segment.
The Brand Image Survey of Asia mobile users conducted by IE Market Research, a Vancouver, Canada-based consulting firm, found that low-income consumers actually choose their handset brands on such lifestyle factors as service, reliability, value and degree of 'coolness,' rather than price.
The survey involved telephone interviews of 2,459 wireless users in Japan, China, Korea, Indonesia and India. Combined, the countries have an installed base of more than 675 million subscribers.
'Our survey results broadly question the notion that price is the most important factor in the buying decisions of low-income consumers in emerging markets,' says Nizar Assanie, VP or research for IE Market Research. 'We also think that players like Nokia and Samsung have been able to exploit this thinking to their advantage, while others such as Motorola, Sony Ericsson and Chinese manufacturers have fallen into the trap of thinking that the only way to sell to low-income consumers is through lower prices.'
The survey found that low-income mobile users are much more brand-loyal in emerging markets. In China, India and Indonesia, 59%-65% of subscribers would purchase the same brand handset as their existing brand, a much higher level of loyalty than was found among high-income mobile users. (Only 25%-33% of these users would buy the same brand.)
'We think this higher brand loyalty is because low-income consumers are more affected by advertisements and brand associations,' explains Assanie. 'They are also more risk-averse and want to reduce the risk of dissatisfaction associated with trying a new and cheaper handset brand.'
Assanie adds that low-income consumers in these markets may associate their handset brand with the term contracts offered by carriers, which instills loyalty since the contracts often carry large penalties if customers decide to switch service providers.
A second important survey finding was that in China, India and Indonesia, other 'lifestyle qualities' such as good service, 'coolness' and creativity play into brand strength measurements. This becomes particularly important for international handset makers that can benefit from their perceived quality advantage when battling for market share against low-cost Chinese manufacturers.
For example, the study revealed that Nokia, the market leader, benefits from its association with qualities such as reliability, value, technical advancement and good service rather than simply price. Between 14% and 37% of low-income mobile users associated Nokia with these qualities. In comparison, 10% or less of the respondents associated rival Chinese manufacturer Ningbo Bird with these non-price oriented lifestyle qualities.
'We think that this low brand strength is a reflection of Ningbo Bird's poor sales performance in 2004 and 2005 in the aftermath of price reductions by Nokia and other international players in China,' the report concludes.