The middle class watch

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In recessionary times like this, one can never figure the ways of the middle class consumer right, except that (s)he is extremely value conscious and so on.  Yet for most businesses that harp on “high volume, low margin” model, it is the principle catchment category given the sheer size.

Neither rich nor poor, it stands out by its sheer variety in terms of background, profession and income levels.  With that change their aspirations and lifestyles.  This is precisely what lures foreign investors (both portfolio and strategic) and businesses such as high street retail to capitalize from emerging markets like India and China.  Here’s the Economist version.

In essence, the middle class mind works like a radar, picking up on signals from near and far, tending more towards free market and democracy.  They are not entirely risk averse and they are not afraid of breaching barriers to entry.  Closer home we have Narayana Murthy of Infosys and Kishor Biyani of Future Group to lean on. These value-for-money attitudes transform countries and economies. With its aspirations and capacity for delayed gratification, the middle class is more likely to invest in education and other sources of human capital, which are vital to prosperity. For years, policymakers have tied economic success to the rich (“trickle-down economics”) and to the poor (“inclusive growth”). But it is the middle class that is the real motor of economic growth.

Now the middle class is at risk as globalization goes into reverse they may well be hit harder than the rich or poor. They’ve learned to borrow and enjoy life and so are hurt by the credit crunch. They have houses and shares, so their wealth is diminished by falling asset prices. That’s roughly 2.5 billion sharing that plight and one never knows how their minds will work when their hopes are dashed.

May be, they could survive a downturn in the short term. But a prolonged crash might well undo much of the progress the developing world has lately made towards democracy and political stability. It is hard to imagine the stakes being higher.

It pays to track the direction of the middle class thought process.  If you are an entrepreneur, that’s a critical segment you can’t afford to ignore.  That’s where you should focus your business intelligence resources now that you’ve pretty much nothing else to do as people walk more on the road than into your store 😉

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