Emerging Markets: Why Product penetration can be low!

There is always so much buzz around emerging markets.  With over a billion people in India and China each, it is a cakewalk to take your products there and sell them in no time.  Right!!  Actually the answer is wrong.  Here is why:

Myth 1: Sell at a low price and people will buy.
Companies have tried to take the mainstream products and tried to replicate success in the local countries.  This may work in CPG but not necessarily in consumer software as the needs of software may be different, pirated software may be freely available, packaging may not appeal.  Randomly searching for software in Hyderabad India we found that Office standard edition is being sold well above list price in some cases and at a discount in others although in both cases the products are genuine.

Myth 2: Financing models from the developed markets work well in emerging markets
Financing in these markets may not follow the same pattern.  Lack of Credit rating process, agencies and infrastructure

Myth 3: Software is used consistently across the world
When we first tried to penetrate China, we found the desktop in China looks very different that that in US and Europe.  In iCafes, there was a border on desktop the PC with all types of advertisements on desktop.  The traditional look and feel of Microsoft Windows was conspicuously absent. 

Myth 4: Emerging Markets display a maturity similar to that in the developed world
This can be farther from the truth.  The price functionality relationships are non linear in emerging markets and sometimes defy logic.  Some products are sold at astronomical prices while others are so cheap allowing for gray market reimporting to the developed world - and it is not just cigarettes but also mainstream software.

Myth 5: Promotions works like in the developed countries
Promotions are rarely passed onto end consumers in several cases.  We have seen this to be the case in India, China, and Russia. 

Myth 6: eCommerce pricing is discounted
In some cities in India and in Russia, we have seen a premium pricing for buying through local eCommerce sites.  eCommerce is not mature to a point to provide formidable competition to the brick and mortar facilities

What is the solution?:  A product manager has to do the research with local agencies to understand the exact perceptions of the local market.  This can be fairly inexpensive in countries like Czech republic and Russia, yet can be expensive in countries like India.  One has to work with differentiated product, flexible price points, minimal promotions, and stable distribution channels

Ramesh Yerramsetti is a Product Management Director with Capgemini Sogeti a Global Consulting firm headquartered in Paris France, with offices all over the world.