Even with the economic setbacks brought about by the pandemic, the global middle class has grown rapidly in recent years. Between 2011 and 2019, the number of people living on $10 to $50 a day grew by 54 million per year on average.
None of this should suggest that the plight of those living in poverty around the world is no longer an issue; in fact, the vast majority of the world’s population still lives on less than $10 a day. But the trend of a swelling global middle class is clear, and companies around the world are beginning to take note. McKinsey has called surging consumption rates in growth economies “the biggest growth opportunity in the history of capitalism.”
The case for being a market creator
While a growing global middle class certainly does represent a great growth opportunity, companies, entrepreneurs, and investors shouldn’t assume that growth opportunities only arrive when consumers ascend to the middle class. A vast population of would-be customers who need and want products and services already exists. We call this group of people “nonconsumers”—individuals who would benefit from buying and using products or services but cannot do so because they are inaccessible due to cost, inconvenience, or other barriers.
In many places around the world, large populations of people are nonconsumers of even basic things like reliable energy, quality healthcare, financial services, and many others. Markets for these products and services have yet to be created, not because nonconsumers don’t want them, but because companies have yet to develop a business model that renders these products affordable and accessible.
This is the other, more immediate opportunity for massive growth, and seizing it depends on finding innovative ways to meet noncustomers where they are, rather than waiting on the sidelines for their incomes to rise. Being the first organization to serve nonconsumers can require unconventional strategies and investments, but in return market creators face lower competition and establish customer loyalty to their brand before future competitors get the chance. So how can innovative companies and entrepreneurs meet potential customers where they are?
First, organizations can identify and reduce barriers to consumption. Every day, money, time, access, or skill-related barriers prevent nonconsumers from buying and using products they want and need. Innovators who can identify and reduce these barriers can unlock oceans of untapped demand where others don’t think to look.
This is just how Sudanese entrepreneur Mo Ibrahim succeeded in bringing mobile phones to the African continent in the late 1990s. At the time, mobile phones were mostly enjoyed by the wealthy, so when Ibrahim launched his mobile telecommunications company on the African continent, many thought he was making an enormous mistake. But Ibrahim realized that just because average Africans hadn’t traditionally been able to afford or access mobile phones, that didn’t mean there was no demand for them.
To address the barriers that had rendered mobile phones inaccessible to average Africans, Celtel developed a simple, pay-as-you-go credit system for mobile service with prepaid scratch cards. This not only reduced costs, but also eliminated the need for phone bills, making buying and using a phone a simple process for first-time customers, many of whom had never previously used a phone of any sort. The company also invested heavily in building infrastructure to reach people in remote areas in order for them to have access to mobile networks. Learn more about Celtel’s innovative business model here.
Another important way innovators can meet potential consumers where they are is by zeroing in on their Jobs to Be Done. Jobs Theory is a powerful framework that helps make sense of why people buy and use the products they do. In short, all people everywhere have “jobs” that arise in their lives, and we “hire” products and services to help us complete those jobs. Identifying people’s Jobs to Be Done requires gaining a deep understanding of what progress means for them in their specific contexts. Unfortunately, individuals and organizations often make the mistake of assuming what people living in different circumstances want or need.
For example, when Tata Motors launched its innovative Nano vehicle, a vehicle specially designed by engineers and marketers to meet the needs of India’s lower-income citizens, the company was met with awards and international acclaim. To the surprise of many, however, the vehicle sold extremely poorly. It turned out that owning a car that was designed for people living in poverty didn’t make for a very aspirational purchase for first-time Indian car buyers, and it was difficult for owners to find parking in narrow streets where they lived or worked. For these consumers, motorcycles and bicycles fulfilled their Jobs to Be Done much better than the Nano. Had executives at Tata Motors better understood what progress really looked like for its potential customers, they might have foreseen that the Nano would be a flop, and they could have instead designed a product that did a better job of helping their customers make the progress they were trying to make in their lives.
When it comes to serving the needs of people living in growth economies, success won’t come from assuming people’s needs or simply repackaging the same products and services designed for consumers in other places and selling them to people who live in totally different circumstances. Savvy innovators need to study the specific Jobs to Be Done of the nonconsumers they intend to serve, and then design products and services around those jobs (read more on this here).
It’s a mistake for companies to sit on the sidelines and wait for growth economies’ populations to become wealthier before deciding to invest in them. Just because people lack the ability to consume existing products and services doesn’t mean there isn’t a potential market for them, and those who are first to develop business models that meet nonconsumers where they are will be the winners of the biggest growth opportunity of the next decades.