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Step Up to Serve Customers as They Become More Affluent and Educated

Feb 2, 2008
We live in an age of galloping increases in affluence for those who already are affluent. That trend is often hidden by small changes in the average numbers.

There are several causes for the booming wealth expansion among the affluent. First, in many countries the number of people with more education that can be employed in the global marketplace is rapidly growing. These people earn higher incomes and are more likely to start successful businesses and make good investments.

By contrast, the number of people who do not have the skills to compete globally is also growing rapidly. These people, unfortunately, see their incomes dropping in proportion to their fellow citizens. As a result, average incomes in a country may be little changed while dynamic shifts within those averages are happening.

Second, global demand has meant that those with global skills find their skills enjoying more demand due to communications technology. Your MRI scan may be read by someone in Russia, India, or a country you cannot even spell before your local radiologist even looks at it. As a result, incomes in lesser developed countries for those with education and skills are being pulled rapidly upward toward the world averages.

Third, a higher percentage of people are involved in nonagricultural entrepreneurship than has occurred before. That increasing percentage is partly due to communist and socialist companies embracing some aspects of capitalism as an economic incentive system.

It's also partly due to shifts in cultural norms so that it's considered more acceptable to make money from commerce today. The advent of management as a discipline after World War II (thanks to Peter Drucker) means that more people have training and skills for creating and expanding organizations than ever before. Charitable organizations are also emphasizing practical education for beneficiaries more than previously, and much effort is going into facilitating the development of entrepreneurs from among the ranks of the poor. Many are copying the success of the Grameen Bank in this regard.

This expanding affluence doesn't mean that these individuals are now dollar millionaires. More often, more affluence means that educated consumers are seeing discretionary income grow at a rapid enough rate to expand their ability to pay for higher quality services and goods.

In the past a poor family might save for years to purchase a sewing machine to make some clothes that can be sold commercially. Such a family today is much more likely to have borrowed money inexpensively to buy that first sewing machine and has by now expanded into a local shop employing eight sewers each working on a separate machine to serve rapidly growing demand.

Such a family may be interested in purchasing samples of higher quality fabrics and clothes than are available locally in order to create better designs and versions of their own products. Clearly, there will be a demand to surf the Internet to see pictures of new items from around the world. As a result, Internet cafes are springing up in more places so that local people can gain a global access to better knowledge, services, and products. Someone in the family may also want to take trips to fashion centers to see what the new items there look like.

The expansion of affluence can often be breathtaking. We recently heard the story of an entrepreneur in the Indian countryside who started as a street vendor of consumer products and then shifted to renting cell phones by the call. Very quickly, she turned instead to selling prepaid cell phone cards because everyone seemed to own a cell phone. From there, she opened a small store where she sold a wider variety of goods.

Now she's expanding into various services that her increasingly affluent neighbors can afford to purchase for the first time. In the process, she has gone from being poor to being middle class. All of this happened within five years.

Traditionally, global companies have assumed that their developed world step-up offerings will work well for anyone anywhere. Increasingly, that's a bad assumption.

The belief that goods produced in a developed country are better made is becoming increasingly suspect. Designs that are more in tune with a local culture, in particular, can make an item speak more eloquently to a newly affluent purchaser.

For entrepreneurs heading smaller enterprises, increasing affluence is a golden opportunity. They can focus on step-up products while demand is relatively small and feel confident that those with large, established branded businesses will probably ignore the local opportunity for some time to come.

If the small entrepreneurs do their jobs well, they can limit the existing bargain-basement supplier to being the choice for ordinary use while establishing a classy reputation for themselves as providers of what's right for those who are getting ahead in life and want to show off a little.

Aid organizations have a similar challenge. They are used to being confronted by a mass of displaced people (whether by war, famine, or natural catastrophe) and treating these people like troubled children who need tending.

More often, displaced people will include substantial numbers of those with the knowledge and skills to help organize and implement relief efforts. Rather than ferry in an army of relief workers at great expense, risk, and difficulty, aid organizations would do well to figure out how to self-organize those they want to help and can so that those in need can quickly and efficiently help themselves.

Governments with faltering educational programs are seeing local entrepreneurs increasingly taking on the key tasks of literacy, language, and numeracy training. Governments would do well to either duplicate these successful innovations or make it easier for poor families to access those resources.
About the Author
Donald Mitchell is an author of seven books including Adventures of an Optimist, The 2,000 Percent Squared Solution, The 2,000 Percent Solution, The 2,000 Percent Solution Workbook, The Irresistible Growth Enterprise, and The Ultimate Competitive Advantage. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at

http://www.2000percentsolution.com .
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