Meet the new middle class

By 2030, the number of people who belong to the global middle class will have grown to a staggering 4.8 billion. What is more, four out of five of those people will live outside Europe and the USA. Harnessing this new purchasing power will come down to asking the right questions. Has the global economic crisis changed established markets? How can you encourage growth in emerging markets while still maintaining a foothold in those that would appear to be saturated? Can your product portfolio be optimized to meet changing consumer demands? The answer to all of these questions lies in frugal products: simple products that meet basic needs.

Across practically all industries, companies are beginning to understand the vast market potential of frugal products. It’s not just emerging markets waiting to be tapped, either. Financial crises, recessions, stagnating household incomes, and high unemployment are increasingly shifting patterns of demand in the USA and Europe. "When companies meet the needs of these people with frugal products, they could also be pre-empting potential rivals from emerging countries—effectively protecting their established home markets against competition," says Michael Zollenkop, Partner at Roland Berger and co-author of the study.

The new middle class

Simply removing certain functions from mature and established products is not enough, however. If a company wants to design a successful frugal product, it must begin from the ground up. In this study, we walk you through the right strategic and operational levers, explain why Renault’s Dacia Logan was a success, and reveal the four different market and competitive positions that lay the cornerstones for lucrative product strategies.

To help you succeed in the low-end and mid-range market segments of the future, we conclude with a look at how to avoid common obstacles and show how adopting a systematic, tailor-made approach right from the outset can maximize profit outcomes when targeting the new middle class.