The $10 Trillion Prize. David Michael
turned to us for advice on innovation, market access, distribution, and consumer understanding. Throughout The $10 Trillion Prize, we draw on a valuable resource: the proprietary consumer-tracking studies produced by BCG’s Center for Consumer and Customer Insight. Across Asia, the center has conducted some five hundred consumer insight projects over the past ten years. The flagship is an annual global consumer sentiment survey of twenty-four thousand people in twenty-one countries.
We also build on the insights drawn from our prior work on consumer needs, including research that we published in the books Trading Up: The New American Luxury (2003); Treasure Hunt: Inside the Mind of the New Consumer (2006); and Women Want More: How to Capture Your Share of the World’s Largest, Fastest-Growing Market (2010).
In Trading Up, for example, we identified the trend among middle-class Americans to buy more expensive goods in a handful of product categories and to become expert in the art of consumption—looking for technical, functional, and emotional benefits in products and services. Over the past two years, we have traveled throughout China and India and seen many parallels. Chinese and Indian consumers are also hungry for product information—they want to understand the back stories of products and their creators. They are allocating their budgets to achieve a visible level of affluence in many categories of goods and cutting corners in others to achieve necessary savings. The Chinese and Indian consumers are ambitious and dream big. They understand technical and functional differences and love to “ladder up” emotionally. They love to tell their friends about their shopping adventures and to celebrate their purchases.
The $10 Trillion Prize is based on both qualitative and quantitative consumer research. We studied Chinese and Indian consumers in their homes, meeting their families and discussing their current and anticipated lifestyles. We probed them about their diets, their purchases, their histories, and their hopes and dreams. Readers will get to know the new generation of consumers, including the brilliant student we call “Mr. Number 19” because of his ranking on the highly competitive entrance exam to the Indian Institutes of Technology; the determined thirty-three-year-old woman from Shanghai who already makes more than fifty times as much as her parents did and still wants more; and the fifty-nine-year-old rural Chinese woman with three years of formal education who has built her home brick-by-brick and constructed a garage for the car she would like to buy one day.
Readers will also get to know the new generation of corporate titans—Chinese and Indian entrepreneurs who are thriving by meeting the needs of the newly affluent consumers—including Frank Ning, who runs Cofco, one of the world’s biggest food processing companies; Adi Godrej, chairman of the Godrej Group, one of India’s biggest consumer goods conglomerates; and Anand Mahindra, vice chairman and managing director of Mahindra & Mahindra, India’s major manufacturer of tractors and low-cost—and now global—sport utility vehicles.
The Promise of the Book
The $10 Trillion Prize is written for leaders who need a better understanding of the consumers in China and India. It carries ten key messages:
1 For the first time, we calculate the size of the prize: the $10 trillion that Chinese and Indian consumers will be spending on goods and services in 2020. Over their lifetimes, Chinese children born today will consume nearly thirty-eight times as much as their grandparents did, while Indian children will consume nearly thirteen times as much as their grandparents did.
2 We describe the driving spirit of the consumers: their ambition, their energy, their confidence, their optimism. As a young Chinese woman told us, “I want two houses—a house in the city and a house in the country. I want two children. And I want to send them to school in America. I want beautiful clothes, a handsome, educated husband, and time to enjoy it all.”
3 We stress the need to segment and target these consumers—not only by income but also by region, city, rural community, and gender. The great engine of change is the rising middle class: by 2020, an astonishing 320 million increasingly affluent households whose nearly one billion members will be following their dreams and, in so many ways, emulating Western consumers. In addition, there are the millions of poor, now moving beyond survival, as well as the superrich (more than 1 million households), now joining the global elite. But it is not enough to divide consumers by class. To survive in the big city, you need more income, more hustle, and a tolerance for long commutes. As we will see, middle-class consumers in a megacity such as Beijing or Mumbai can exhibit altogether different patterns of behavior than those in smaller cities. You need to understand these consumers, personify them, and cater to their individual needs.
4 We recommend the adoption of a paisa vasool—literally, “money’s worth”—strategy. Chinese and Indian consumers will be hungry for material goods over the next decade. They will want more than they can afford. Their income growth will be substantial, even if they will still end the decade earning only 10 to 25 percent of Western incomes. They will want goods with full features, luxury elements, and reliability. To serve these consumers, you will need not only raw material and packaging innovations but also a comprehensive, low-cost business model. And these will be transferrable to other markets because consumers around the world will want products that do not compromise on features, ingredients, design, or value.
5 We urge the importance of “local, local” customization. These consumers need to have products and services that are tailored to them—and them alone. If they are rich or poor, if they are urban or rural, if they live in a big city or a little city, if they live in the north or the south, if they are educated or illiterate—all of these factors matter and require refinements to the product and the way it is designed, packaged, and sold. China and India are markets with heterogeneous populations demanding locally customized products.
6 We identify the accelerator mind-set. Speak to entrepreneurs in China or India, and they talk of their ten-by-ten strategy of growing tenfold in ten years. If this sounds extraordinary—even unattainable—in the West, it sounds perfectly rational in the East. Today, in China and India, there is a determined, can-do attitude, and the word impossible is not one commonly heard on the lips of business leaders. Strategy is as they see it: a big-picture vision, colossal dreams, and no limits on opportunity. They do not feel beholden to anyone or bound by textbook business rules and the constraints of commonly held business logic. They start with a clean slate, focus on a specific opportunity, scale up or refocus as needed, learn by doing, and drive relentlessly forward.
7 We introduce the notion of a boomerang effect. The impact of more than two billion consumers wanting more—more foodstuffs, water, housing, transport, luxury goods, education, and health care—will be inflation in supply-constrained commodities, price volatility, scarcity of some resources, and hypercompetition to meet consumers’ needs. The boomerang effect will spread far beyond China and India.
8 We warn of the hit-the-wall scenario. What if China and India do not continue on the path of marvelous straight-line growth? Political instability, natural disasters, bursting asset bubbles, rotten and corrupt institutions, the failure of government entities to invest in the future—each of these could cause projections of growth to veer dangerously off course, with cataclysmic consequences for China, India, and the companies that are pinning their hopes on the new and dynamic generation of consumers. This is why we say that it is important to factor these risks and hazards into any scenario planning process. It is important to be alive to the possibility that the story of “Asia Rising” could change into the story of “Asia Uprising.” The successful future development of China and India depends upon the ability of their leaders and citizens to solve many difficult challenges.
9 We portray the left-behinds—millions of people who, for all the success of the Chinese and Indian economies, remain disconnected and disgruntled with their lot. For now, they offer limited commercial opportunities, but they could offer the prospect of a second wave of growth as the Chinese and Indians pursue policies to foster social harmony.
10 We maintain that there is no inevitability about the decline of the West. We are profoundly optimistic—yet, we think, measured and realistic—about the opportunities in China and India and the positive impact on the global economy, on companies, and on individuals. It was not so long ago that political commentators and historians were talking about the triumph of