Book - Brand Building an Marketing in Key Emerging Markets by Dr. Niklas Schaffmeister

Brand Building and Marketing in Key Emerging Markets – Part XI

Expansion along city clusters

Welcome back to our series on the 25 strategies that will support your brand building and business development activities in key emerging markets. Today we want to explain how you can build your brand much more effectively by expanding along city clusters. Some of them are larger and more dynamic than nation states in Europe or North America.

China, India and Brazil are countries with continental geographic proportions. Applying a one-size-fits-all approach hardly makes any sense. If you want to seize the best growth opportunities, a strategy focusing on city clusters makes perfect sense. A country-level operational strategy would not take into account the vast diversity and unequal development within these huge countries. But top tier cities are only one possible target if you want to accelerate growth. Moving beyond the well-known large cities into rapidly evolving growth centers in the “hinterland” of the country is another option within this cluster strategy.

By the end of the next decade Mumbai´s economy is expected to be larger than Malaysia´s today. But even then Mumbai will only represent five percent of India´s national economy. The country´s 14 largest cities will contribute almost a quarter to the national economy. And China, by that time, will have roughly 150 cities with at least one million inhabitants each. But these sizable local markets display a huge variability.

Understanding the Variances of Target Countries

The art of expanding along city clusters begins with researching and understanding the variances of the target countries and concentrating on the most promising ones. It is not difficult to effectively identify these clusters. They can be groups of cities aligned by a particular industry structure, by demographics, comparable consumer behavior or geographic proximity. The possibly biggest benefit of concentrating your resources on city clusters is the opportunity to exploit scale and existing distribution networks in order to achieve faster and more profitable growth. Moreover, if you succeed in certain clusters, you might be able to build critical market share and transfer your success story into other regional cluster markets.

China has several well-known city clusters. The province of Shandong, for example, counts 21 cities among China´s 150 largest. That puts it into the top five city clusters within China. Xi´an, Chengdu, Chongqing, Wuhan and Suzhou are additional epicenters of city clusters within China. One way to identify the most promising cluster for you would be to establish the existing level and future growth of income. Are consumers just starting to buy their first cars? Are they beginning to upgrade to import or luxury products? How many middle-class households do they have, and what do the latest reliable forecasts tell you about the expected income growth? Are they migrating into product categories that belong to your segment?

Moving Along Defined Criteria

Another critically important consideration is whether your cluster is homogenous along the criteria you have defined. One well-known example are the neighboring Chinese tier-one cities Shenzhen and Guangzhou. In Guangzhou, people speak Cantonese, they are mostly locals and they spend a lot of time at home with their families. In Shenzhen, most people are migrants from other parts of the vast country, and they mostly speak Mandarin. Putting both cities into the same cluster would confront you with the necessity to apply completely different campaigns. The media campaign for your brand would be totally different in both places, to begin with. Once you have decided for one or more specific city clusters, you need to keep in mind how many submarkets you want to target. The more submarkets, the more difficult it might be to be as effective as you want. Always keep national differences in mind.

Viewing the Country as a Mosaic of Markets

In India, the same number of clusters – or submarkets within a cluster – can be a much larger challenge because of poor infrastructure, the more informal distribution and retail networks and the lower grade of urbanization. Covering the ten most promising Indian states with the highest expected growth until 2030 would include more than 3,000 towns and over 300,000 villages. Nevertheless, large and successful corporations like Hindustan Unilever (HUL) have rolled out their own city cluster oriented campaigns. HUL´s is called “winning in many India´s” (WIMI). Initially, HUL broke up India into four regions and then added a fifth region. The company stopped seeing India as a homogeneous country and has started to view it as a “mosaic of markets.”

To discover more inspiring examples of how to engage your target group through storytelling order your copy of Brand Building and Marketing in Key Emerging Markets @Amazon or @Springer