For years, we have used the term ‘emerging markets’ to describe new, fast-growing economies—but it’s time to update it to language more fit for purpose. These societies aren’t playing catch up; they’re becoming leaders in many areas.
In Ogilvy’s Velocity 12 report, we identified 12 ‘velocity markets’: nations whose mobility transcends GDP growth, and is embodied by rapid evolution in social attitudes and lifestyles which will help propel further change. The term ‘velocity’ reflects the fact that many of these markets will continue to evolve faster than people expect, transforming into majority middle-class markets over the next decade.
Velocity markets are already shaping the future
Velocity markets are defining a number of future growth areas. For example, experts suggest that Asia could become the world's leading region for smart city development, with demand for smart cities expected to increase largely due to increasing environmental challenges, energy unpredictability, and the strain on infrastructures. The world’s largest mega-cities (those with above 10 million inhabitants) are in Asia, meaning this region is facing and will solve the challenges of mega-urbanisation.
Major progress in biomedical research is also taking place in velocity markets. In 2015, China's biomedical research teams ranked fourth globally for the total number of new discoveries published in six top-tier journals.
Asia is also driving ecommerce and cashless societies. Thanks to the tremendous growth of Baidu, Alibaba and Tencent, Chinese consumers have their lives fully integrated with digital platforms. As Alibaba expands through acquisition, it will be a powerful model for development in other parts of the world, such as South East Asia.
Velocity markets will inform global policy
Change is increasingly driven by leaders in the biggest velocity markets, who have an expanded sense of their role in the world. At a time when North America is seen to have turned inward, key leaders are stepping forward as champions of greater integration and globalisation. China’s ‘One Belt, One Road’ initiative is projected to transform global trade and become the world’s largest platform for regional collaboration.
Speaking at Davos, Chinese President Xi Jinping’s right-hand man, Liu He, described China’s efforts to open its financial markets and spread globalisation over the past year, while Indian Prime Minister Narendra Modi warned against climate change, terrorism and the backlash against globalisation as the three most significant challenges facing modern civilisation. Modi is also pressing on with India's Look East policy, designed to cultivate economic and strategic relations with ASEAN and bolster its standing as a regional power, an approach welcomed by countries such as Thailand, which have their own growth engine policies.
These points simply illustrate the macro trend; velocity markets are creating growth with and among each other, in addition to trade with 'developed' markets. The US, Europe, and Japan will increasingly have to find their role in these increased ties between the velocity markets.
Velocity markets are characterised by empowerment
The greater social participation and change enabled by economic growth and the emergence of a new middle class is driving a generational shift in interests, lifestyle, and outlooks. Women in velocity markets are becoming empowered as consumers, social commentators and activists, thanks to an increase in education for girls. Going forward, women will act as the key social instigators and entrepreneurs, with purchasing power bridging cultural, religious and demographic divides. Look to women as a key audience of growing influence and direct purchasing power.
The Muslim middle-class consumer is also on the rise in a variety of segments of the economy, including beauty (the Muslim beauty market is expected to reach $52 billion globally by 2025, with halal cosmetics already accounting for more than 10% of the global halal market) and tourism (Muslim travellers spent $155 billion in 2016, representing 13% of total global travel expenses). Yet research also shows that many Muslim consumers do not feel that companies sufficiently recognise them in their communications or product offers, presenting huge growth potential in the future.
Marketers need to be ready to interact with these socially connected consumers, who are far from “emerging market” newbies when it comes to brands. People in velocity markets are embracing technology as a tool to accelerate further change in their lives, and are fully connected to a global grid of commerce, influence, and social interaction. So, while they are diverse, they live in a world that has levelled the global marketing playing field. As a result, middle-class consumers of the coming decade will have a more accelerated and sophisticated understanding of their options than prior generations of middle-class consumers, plus a megaphone for expressing their tastes and opinions.
Velocity markets will demand more of brands
The emerging middle-class in these velocity markets represents a social tapestry of greater ethnic, linguistic, cultural and religious diversity than previous generations of middle-class consumers in the West. Rather than seeing them as emerging markets and emulating a development pattern of other countries, marketers need to understand the uniqueness and diversity of these markets, which will continue as a central facet of their national characters.
The end of the emerging market mentality signals the start of truly capturing the velocity market opportunities of the future. It’s time to recognise and embrace the degree to which velocity markets will increasingly lead the world, not follow it.
Kent Wertime is co-CEO of Ogilvy & Mather Asia-Pacific.