Today Gartner reported that Samsung has passed Nokia as the world’s largest manufacturer of mobile phones. Samsung seems to be doing everything right. Nokia held the crown as the largest mobile phone manufacturer for 14 years. Does this mean that Samsung will be the dominant company in the industry for as long? Looking to analogs from related industries, I would say no. A position of dominance invites competitors to dethrone the king. As Samsung’s goal has been to unseat Nokia, others will likely seek to dethrone Samsung. As the market changes structure and the barriers to entry fall, the position of king seems an increasingly uncomfortable place to be.

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The other month, I participated in a Singapore Sessions and Harvard Business Review video webinar on “What is the Right Entry Point for Emerging Markets?” I joined Harvard Business Review editor Angelia Herrin, P&G’s Bruce Brown, and Innosight’s Scott Anthony for a lively panel discussion. The full webinar can be viewed here and the executive summary can be found in PDF format here.

We only had limited time during the session to answer audience questions, so in this post, I’d like to address some of the queries we were unable to answer.

Q: Is price leadership the only option to enter emerging markets [with] companies jumping onto a differentiation strategy [later on]? After all, emerging markets have an understanding that imported stuff [is] costlier.

No, quite the contrary, my co-panelist Bruce Brown mentioned, P&G’s SK-II product has been selling very well in the Asian market at a premium position. SK-II is differentiated by its high quality and its technological advantage. We learn from these examples that consumers do not simply and gradually trade-up from lower tier products into higher tier products, but consumers trade-off from one category to another category. That is, they might save on furniture, but spend more on skincare products. These complex demand patterns need to be understood in order to make the smartest entry decisions. Companies who merely chase market size and economic development statistics will find the overhyped middle class in emerging markets attractive. Those same companies may find the middle to be an empty middle. An entry strategy and price premium position allows brands to capture surpluses that can then fund brand differentiation. Hilton captures this surplus through managing two brands, the more upscale Conrad brand and the Hilton in Asia.

Q: Does the increasing purchasing power in emerging markets increase brand loyalty?

Increasing purchasing power in emerging markets does not increase brand loyalty. In fact, the increased availability of information as the market ‘emerges’ makes consumers more promiscuous. The consumers in these emerging markets are being bombarded with numerous products and services at every price point, and they are discerning and sophisticated. It is more important for brands to tap into the consumer’s emotions and really relate itself to the consumer’s daily life ecosystem in order to generate any sort of brand loyalty.

Q: How about B2B market entry strategy? Do these principles hold?

No, they don’t hold for B2B markets. My point was that the emerging middle consumer market is a large opportunity, but the hype in its favor is mostly driven by an economic rationale. Economists forecast the growth in the middle class to double from today’s very small fraction in ten years, growing from the current annual per-household disposable income of $4,000 (urban consumers only) in China. In comparison, the standard of living in developed countries today is about ten times that number; in the US, per-household disposable income is about $35,000. In favor is the number of people in the emerging markets. There could potentially be 400 million people in China in 10 years, or 167 million households — though their disposable incomes will still be around $8,000.

When it comes to economics, I concur with the Danish physicist Niels Bohr who said: predictions are difficult, especially about the future. So, I still caution about relying on economic numbers. First, they suggest to me that while the market sizes are large, disposable incomes will remain relatively small. That’s why I recommended that companies enter emerging markets with a dual strategy, at a more premium position with their Western brand and at the low-tier with an entry through collaborations and partnerships with local firms. This provides at least some form of participation in growth at the bottom of the pyramid.

These ideas, however, do not apply to B2B markets.

Q: Can these entry points be applied to other emerging markets such as Latin America?

Though the research might yield different consumer wants and desires in emerging markets in Latin America compared to Asia, the concept of entering at a premium and tapping into consumers’ wants and desires remains the same. I am very familiar with Latin America, and I believe similar consumption patterns do exist.

As I mentioned during the webinar, in Asia, we are not seeing consumers moving in a simple pattern from the bottom to the middle and then to the premium. Instead, they are willing to spend their income on certain top-of-the-line items, but will spend less on other products. It would be essential in all emerging markets, including Latin America, to see where consumers are trading off.

At the same time, there definitely are differences between the Asian and Latin American markets. For example, in Asian countries like China, the Western concept or ideal of “the middle class” does not exist, nor is belonging to it necessarily a desirable thing. However, in Latin America, the concept of the middle class does exist. There is an understanding among consumers about who belongs to the middle class and who does not. In Latin America, membership to the middle class is largely desirable and also aspirational.

As mentioned in the webinar, culture and context trumps everything. But the constant in all emerging markets is that you will never win by making an ‘average’ product for an ‘average’ consumer. Consumers in all markets want premium (or the perception of premium) products, not ‘average’ ones.

- Erich Joachimsthaler

Last week, Pepsi nationally launched its latest soft drink offering – Pepsi Next, a 60 calorie soda with 60% less sugar.

We think Pepsi Next could be in for a rough ride – the ‘mid-calorie’ cola is a tweener – neither full sugar nor diet – and consumers will have trouble figuring out how to categorize it. Read More »

With overstimulated consumers, growing investments in innovation, and an economy in recovery mode (fingers crossed), taking a fresh look at your customer experience in-store and online, and with your brand in general, is paramount to staying relevant with your target audience—and winning.

Some brands are making great strides with this approach: Nike Stores not only sell shoes, but also offer experiences and the ability to create your own. eBay opened a pop-up store in London last Christmas. And PepsiCo changed the landscape of vending when it unveiled a system by which consumers are able to gift drinks to friends via social media. Finding a truly successful store that only sells products—a retailer that is only online or even a vending machine that only sells soda—is rare these days. Read More »

Professional sports have long used technology to monitor, analyze and improve their performance. In soccer, pro trainers use telemetric data to analyze the performance of the team using Adidas’s XP product. In the leisure sports segment, even the average runner has become part-bionic man, using a step counter tracking distance, speed, and how today’s compares to yesterday’s. And Adidas, again, is moving in on this market, with the MiCoach for the leisure segment, such as amateur football, and connecting it to the iPod, iPhone and other computers.

Nike, which has long held sway over both pro and amateur sports gear, has debuted its latest tech gadget, FuelBand. The product sold out even before its launch and is making a huge splash in the tech world. But with so many companies vying for this market, what is really new about FuelBand? Read More »

Earlier this week, I attended the BRITE ’12 Conference at Columbia Business School where I heard speakers including professors from Columbia Business School, CMOs from top companies, and colleagues in the consulting world. During the two-day conference, three thoughts struck me the most.

Having an Explicit Purpose is the New Black
In this day and age, brands need to have a sense of purpose. It’s no longer enough for a product to be a good value and of good quality. Brands need to tap into a higher sense of purpose for real engagement with consumers. Companies need to evolve beyond great products to great products that have a social purpose. A perfect example of this is TOMS Shoes. It’s a for-profit company with a higher purpose. You do good and enjoy a great product, tapping into consumers’ desires, but also stroking higher needs.

This sense of purpose is important for brands on another level, as well. Not only are purpose-driven brands more engaging for consumers, but also purpose-driven brands resonate with employees. Companies with highly-engaged employees are consistently shown to deliver a better customer experience which leads to higher EPS.

I would go a step further though and keep in mind that when talking about purpose to remember while it is a necessary component for brands, it is not sufficient. You can create all the meaning you want with consumers, but still need to get traction with the basics – like distribution, salespeople. Virgin Cola did a great job of tapping into the purpose of the brand, but failed on the execution side and was ultimately doomed.

Use Social Media as a Source of Competitive Advantage
Of course, you can’t talk about branding without mentioning social media. Big media companies are losing power, because consumers are becoming media companies, opening up new streams of information 24/7. This opens opportunities to take what is created and curate what is important about and to the brand. Brands can build up the loyalty of consumers by being an aggregator of content.

Also, all this social and mobile media is creating lots of data and opening another opportunity to use that data to really understand what’s going on in the market. The CMO from American Express explained that it’s really important to listen to consumers and said they use their datasets as a competitive advantage. With social media providing plenty of data for marketers, companies that will succeed in the future will be the ones that navigate this data-scape to gain a competitive advantage.

A Brand is not a Brand is not a Brand
Winning in products is different from winning in services. For service brands, there are many more touchpoints and considerations. I may enjoy Haagen Dazs ice cream; but my only touchpoint is during my consumption. Meanwhile, if I fly on Delta, I am constantly in contact – from buying a ticket on their website, to when I check in at the airport, to the actual flight itself and beyond. Each of those experiences is an opportunity to fail my expectations.

Services also tend to be more emotionally driven. After consuming a Haagen Dazs, I may get emotional satisfaction, but it lasts an hour at maximum. It’s a short experience. A flight, though, is a full day affair that can affect me for the rest of the trip. A bad check-in experience can ruin my flight, and I might stew on it the entire time I’m away …. or at least I check into my hotel for another round of experiences with my hotel brand.

Lastly, brands need to deliver consistency and it’s harder to be consistent in delivering experiences and services than creating an ice cream that’s mostly automated by machines with a much smaller margin of inconsistency.

The biggest takeaway of all, though? Brands need to create trust. And while we have a lot of new tools at our disposal, including social media, the key is to never lose sight of the importance of the human element in building trust and relationships with consumers.

Zappos does this brilliantly by not only leveraging technology to recommend products, but also consistently delights its customers with extraordinary human interactions. A perfect example is their use of Twitter, which doesn’t feel like a corporate company, but a chatty, casual interaction with a friend. Trust is a valuable thing and when Zappos was hacked in early January 2012, they took immediate steps to alert their customers and set up a system for inquiries. A potential brand-tarnishing disaster was averted because the brand promise of Zappos was never in question.

Before a brand gets to such a crisis, they need to ask themselves if they are in a position where their customers trust them enough to stick with them. Every brand needs to ask the defining question to their consumers: Do you trust me?

- Jorge Aguilar, Associate Partner

Facebook unveiled the new Facebook Timeline for brands yesterday among pomp and circumstance, much of it warranted. With Facebook Timeline, brands finally have a way to bring their business to social media rather than just adding social media to their businesses, opening the door to real and meaningful interactions with consumers.

The key things that make this possible are 1) a new format that incorporates design thinking, 2) the ability for brands to customize their pages to fit their message, and most importantly, 3) ability for brands to make their pages personalized and relevant to consumers. Read More »

Last week, Vivaldi Partners Group CEO Erich Joachimsthaler spoke with Harvard Business Review editor Angelia Herrin and Innosight’s Scott Anthony and  P&G’s Bruce Brown in a Singapore Sessions webinar.

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Vivaldi Partners Group CEO Erich Joachimsthaler will be speaking with Harvard Business Review editor Angelia Herrin and Innosight’s Scott Anthony and  P&G’s Bruce Brown in a Singapore Sessions video webinar streamed live, at 12:00 EST tomorrow. They will be discussing “What is the right entry point for emerging markets: targeting customers at the bottom or the middle of the pyramid?” If you are able to join us, you can register here. Below is an article on the topic by Erich Joachimsthaler that has been republished from Harvard Business Review’s Sponsored Webinar Report.

Much has been said about the historic shift from the developed West toward the fast-growing middle class of the emerging markets, particularly China and India. Numerous companies turned their attention to Asia in the belief that the vast numbers of consumers and their rising spending power would translate into enormous market opportunities. It is easy to see why, especially when in the West, the rise of the middle class in the 1960s unlocked hugely profitable market opportunities. Read More »

Our top-rated ads included “Sketchers: Go Run,” “Volkswagen: Dog Strikes Back,” and “Doritos: Man’s Best Friend.”

Like 110 million other people, we here at Vivaldi Partners watched the Super Bowl. However, our perspective went beyond the fun factor of the ads. We rated the Super Bowl Ads on three different values on a scale from 0 to 5.

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