The Next Mobile FrontierThe challenges and opportunities for brands in emerging markets

The study was carried out by Ovum on behalf of Upstream, and based on a survey of 4,504 consumers in Brazil, China, India, Nigeria and Vietnam. The survey sample was age and gender representative of each of the markets covered. The survey fieldwork was carried out in February 2014.

Top tier global brands have an enormous opportunity, but also face a number of challenges, when it comes to growth in the emerging markets. This study, offering a wealth of views of consumers in Brazil, China, India, Nigeria and Vietnam - five emerging market powerhouses - indicates that many of the top 20 global brands face gaps in consumer awareness, well below their levels in the mature markets of Europe, North America and Asia. More importantly, besides Apple, Samsung and Coca-Cola, an even greater number of global brands face a challenge to convert their existing brand awareness into willingness to spend on their respective products and services.

One area where global brands are winning the awareness and spend battle is in mobile devices, where Apple and Samsung are by far the most desired brands for consumers for their next mobile device purchase, most often a smartphone. This study indicates that Nokia and Blackberry, the hitherto leaders in emerging markets, look set to have slipped into the second tier of device manufacturers in terms of preference by emerging market consumers, where they are joined by a long list of other North American and Asian brands.

One of the strongest findings of this study is the clear consumer perception of the comparative strengths of global versus local brands. While global brands have many advantages in terms of quality and technology, local brands are considered stronger in local relevance, language, payment methods and overall familiarity.

When one adds to this mix the finding that consumers in emerging markets state that their biggest challenges in buying mobile content are search and discovery of relevant content, in addition to affordability, it is clear that mobile content providers have much work to do to make their offering more attractive and easier to consume. These improvements are essential if content providers are to take advantage of their markets’ potential, given that many consumers indicate strong willingness to use education, utility, health and business information content, in addition to their established use of music, gaming and social content.

Moreover, emerging markets consumers expect global brands to invest in customizing their content to their local markets. However, these expectations are uneven across different mobile content categories: while consumers expect social networks and health services to be highly localised, they are slightly less concerned about the localisation of music and entertainment content, and even less so when it comes to gaming. Nevertheless, the skill of global mobile content providers will be to retain their global brand identity balanced with a customised, local market user experience; as well as develop the capability to provide that content localisation on a massive scale.

ABOUT THE STUDY

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EXECUTIVE SUMMARY

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Device brands: Apple and Samsung battle for supremacyApple and Samsung look set to enhance their lead over other mobile device manufacturers, if the survey findings outlined in in Figure 1 are to become a reality. When asked about the brand of their next device purchase, 32% of consumers choose Apple, 29% prefer Samsung, with Nokia a distant third with a 13% share of responses. The three leading device manufacturers are followed by a tail of device vendors that command a 2-5% share each of the planned device purchases, with the list including HTC, Blackberry, LG, Huawei and Motorola.

There are also significant market, age and gender differences under this high level picture too, especially when it comes to the top three. Apple’s lead is higher than average in the 16-34 segment across all markets (36% of the respondents), with females in general (34%), and in China (41%) in particular. By contrast, Samsung fares better in the 45+ segment (36%); as well as in Brazil and India (36% of respondents in each). Nokia scores higher than average in Vietnam (21%) and India (17%), but less so in Nigeria and China.

Device capability is the overwhelming driver behind consumers’ chosen brand, as outlined in Figure 2, where 46% of the respondents selected functionality of the devices as a key purchasing driver. This is followed by the aspirational aspects of the brand (24%), with affordability and trustworthiness distant third and fourth reasons with 12% of the respondents selecting them. Interestingly, there are very few regional, age and gender differences in the responses to this question, with only slightly higher than average emphasis by the 45+ segment on brand trust and affordability, and correspondingly lower emphasis on these two factors within the 16-34 age groups.

Mobile Devices

Figure 1: Which brand would you like to purchase your next device from?

13.0%

29.1% 31.7%

5.4% 4.0% 3.8%

2.2% 4.3%

0.1% 1.0% 2.5% 2.9%

0.0%

5.0%

10.0%

15.0%

20.0%

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35.0%

Nokia

Samsu

ng

Apple HTC

Sony E

ricss

on LG

Motoro

la

BlackB

erry

Sagem

ZTE

Huawei

Other

(plea

se sp

ecify

)

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The findings from Figure 1 and 2 indicate that the market lead that Apple and Samsung have established in the mature markets of Western Europe and North America looks set to be extended in emerging markets, regions where Nokia, Blackberry and Motorola have traditionally done well. Indeed, in many emerging markets there is a squeeze by Apple and Samsung in the premium, high income segments and at the bottom from low-cost Android device manufacturers such as ZTE and Huawei. This double squeeze leaves other aspiring premium device brands such as Blackberry and Motorola ‘stuck in the middle’ in terms of strategic positioning. They are being perceived as neither the best quality nor the best value brands.

Figure 2: Why would you make a purchase from this particular brand?

High demand for mobile content and applicationsThere is an enormous appetite for mobile content and applications in emerging markets based on the findings. Looking at the future, most growth is set to come from services that are not yet fully available already, such as health services, business, travel, education and e-books; areas where most users not using the services already indicate a willingness to adopt these types of services in the future. As outlined in Figure 3, health mobile content (used by 33% of respondents), education (41%), and travel services (45%) are the mobile content categories set to grow the most in the future.

From a perspective of mobile content usage today, social networking (used by 82% of respondents) edges in front of music (81%) and news (78%), with gaming the distant fourth (65%) as outlined in Figure 3. Mobile content and app usage in the younger, 16-34 age group, is unsurprisingly 10-15% higher than the average, with a correspondingly lower mobile content usage in the 45+ segment. Meanwhile, social networking is not the leading content category across the board: news is the leader in China (90% of respondents) and Vietnam (87%), while music is the leading category in India, with 80% of respondents using the service.

Content and apps usage

12%

24%

46%

12%

4%

2%

0% 10% 20% 30% 40% 50%

It’s a local brand that I trust

It’s a brand I aspire to

I like the functionality of their devices

The devices they o!er are a!ordable

I like their marketing

Other

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These consumer responses underline the massive change in mobile communications and mobile content consumption habits in emerging markets, with social, information and entertainment content services becoming an established consumer habit, especially for young users. In addition, the findings indicate that utility-based services such as health, education, and business have massive growth potential going forward, as an equal or higher proportion of current non-users indicate willingness to try them in the period ahead.

App store usage accelerating

Rapid smartphone adoption in emerging markets is driving strong growth in app store usage, as outlined in Figure 4. One of the most interesting findings in this respect is the fact that emerging markets mobile operators’ app stores - unlike peers in mature markets - score highly, used by 26% of respondents. Google’s app store is currently the most used app store across the five markets surveyed, with 40% of respondents having used it, which is unsurprising given the strong adoption of Android OS based smartphones.

However, the large market differences indicate both the immaturity and the state of flux in which app store usage remains, in many emerging markets. Blackberry’s app store is by far the most used in Nigeria (58%), while Nokia also does well in Nigeria (39%) and India (33%). Google’s app store does better than average in Brazil (45%), India (47%), and Vietnam (44%).

Figure 3: : Content and app usage

46%$

53%$

81%$

56%$

78%$

45%$

82%$

33%$

41%$

65%$

54%$

43%

36%

12%

32%

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43%

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54%

44%

21%

33%

0% 20% 40% 60% 80% 100%

Business/Financial Services

Books

Music

Films/TV

News

Travel Services

Social networking

Health Services

Educational Services

Gaming

Personality/lifestyle

Don’t use now but would like to access in the future

Currently access via mobile device

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Figure 4: : App store usage

Figure 5: : Figure 4: : App store usage

Responses to the question: Do you use any of the following app stores?

Barriers to content usage growth: price and promotions

28%$

40%$

11%$

14%$

11%$

23%$

26%$

16%$

0%$ 5%$ 10%$ 15%$ 20%$ 25%$ 30%$ 35%$ 40%$ 45%$

Apple$App$Store$

Google$Play$(formerly$Android$Market)$

Windows$Phone$Store$(formerly$Windows$Marketplace)$

Amazon$Appstore$for$Android$

BlackBerry$World$

Nokia$Store$

My$mobile$operator's$app$store$

None$of$these$

24%$

35%$

21%$

32%$

18%$

20%$

12%$

23%$

0%$ 5%$ 10%$ 15%$ 20%$ 25%$ 30%$ 35%$ 40%$

I$find$it$difficult$to$find$the$relevant$content$and$apps$on$the$portal/app$store$

The$content$is$o>en$expensive$

I$don't$posses$the$credit/depit$card$details$to$make$purchases$from$them$

I$am$not$aware$of$any$promoFons/offers$that$would$incenFvize$me$to$make$more$purchases$

I$cannot$view$the$content$they$provide$on$my$current$device$

The$content$and/or$site$is$not$in$my$local$language$

Other$

None$of$these$

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Figure 6: : Preferred ways of paying for mobile content

Emerging markets consumers state that their biggest challenges in purchasing mobile content relate to affordability, search and discovery. As outlined in Figure 5, 35% of survey respondents agree that ‘(mobile) content is often expensive’, another 32% are not aware of promotions/offers that would prompt them to buy more content’ and yet another 24% ‘find it difficult to find the relevant content’. Mobile content localisation, language and availability of payment channels (explored in more detail below), are also significant issues for another 18-21% of users. Interestingly, there is a surprising uniformity across age, gender and regional segments when it comes to the views on this particular question.

Service and mobile content providers need to carefully examine and effectively address each of these perceived shortcomings in order to improve the consumer experience of their services, and drive market growth in this segment. Other Ovum research indeed underlines the fact that service providers are yet to develop broadly accepted approaches that consistently address the challenge of marketing, search and discovery. This continues to lead to both missed revenue opportunities, as well as unsatisfied consumers unaware of, or unable to find the content apps that they would like to consume. In addition, content on many traditional mobile content platforms is expensive relative to user incomes, partly due to the immaturity of advertising-funded business models.

Mixed preferences (and means) for buying mobile content

N=4,504; responses to the question: What is your preferred way of buying mobile content?

There is a wide and uneven spread in the answers to the question on preferred ways for paying for mobile content, as outlined in Figure 6. The fact that 20% of the respondents would prefer to pay via their mobile operator (both through a pre-paid account or on their monthly bill), and another 19% selected cash as their preferred payment method is an indication of low banking services and mobile payment penetration in emerging markets, as underlined in Figure 5, where 21% of respondents indicated lack of payment methods as a key issue for them.

12%$

8%$

10%$

19%$

9%$

11%$

19%$

11%$

0%$ 5%$ 10%$ 15%$ 20%$ 25%$

Through$my$mobile$phone$provider,$pre:paid$(PAYG)$

Through$my$mobile$phone$provider,$post:paid$(as$part$of$my$contract)$

Using$my$debit$card$

Using$my$credit$card$

Through$my$bank$account$

Secure$payment$services$such$as$Paypal$

Cash$

I$do$not$buy$mobile$content$

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Figure 7: : Recognition and spend with leading global brands

Global and local brand perceptions

Given the immaturity of banking and payment systems in many emerging markets, the ability to pay for content remains a challenge for many consumers that lack access to credit or debit cards, or even a bank account, as indicated by a significant proportion of consumers that would prefer to pay cash or via their mobile operator. This indicates a window of opportunity for operators to establish themselves as trusted brokers of content payments via their operator billing platforms, or their mobile money solutions.

Global brand recognition: Samsung, Apple and Google lead

Global technology brands such as Apple, Google, Samsung, and Microsoft have the strongest brand awareness score, with 83-88% of the respondents recognizing their brands, eclipsing traditional global consumer powerhouses such as Coca-Cola, Nike and Pepsi which lag behind with brand recognition scores of 70-82%, as outlined in Figure 7. From the content perspective, it is interesting to note that Disney and Amazon are being recognized by only 59% and 56% of the respondents respectively.

The responses to the follow up question on willingness to spend with the recognized brands reveals a second level of insights: Samsung and Apple are again in the lead, with Coca-Cola and Pepsi also scoring highly. At the other end, premium car brands such as BMW and Mercedes, and luxury goods manufacturers like Louis Vuitton remain a purchase option for a small segment of the population.

N=4,504; responses to the questions: Which of the following brand names do you recognize? and: From the ones you recognized, with which ones are you currently spending money with or you wish to spend money with?

52%

43%

51%

48%

35%

61%

23%

14%

16%

16%

37%

31%

13%

21%

32%

8%

39%

12%

36%

10%

85%

87%

82%

83%

68%

88%

75%

66%

67%

59%

76%

64%

38%

56%

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48%

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0%# 10%# 20%# 30%# 40%# 50%# 60%# 70%# 80%# 90%# 100%#

Apple

Google

Coca Cola

Microsoft

McDonald's

Samsung

Toyota

Mercedes-Benz

BMW

Disney

HP

Gillette

Louis Vuitton

Amazon

Honda

H&M

Pepsi

American Express

Nike

Ikea

Respondents recognising brand

Respondents spending or wishing to spend money with the brand

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Figure 8: Global versus local brand perceptions

Global versus local brand perceptions

Emerging markets consumers have judiciously clear and distinct perceptions of the strengths and weaknesses of global versus local mobile content brands. Local brands are considered better in their stronger local relevance, language, payment methods and overall familiarity, as outlined in Figure 8. By contrast, global brands are strongly considered to provide the highest value and most up-to-date content as indicated by 70% of the respondents.

N=4,504; responses to the question: Which of the following apply to you when you consider mobile content and apps from local and global brands?

For mobile content providers and aggregators, these findings underline the need to provide a carefully constructed blend of both global and local mobile content in order to meet rapidly growing consumer expectations for richness and diversity, as also indicated by the findings in Figure 4.

56%

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69%

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0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Their content is more relevant to me

Their content is in a format suite to my device

Their content is familiar and easy to understand

Their content is in a language I understand

I trust these brands

I can pay for purchases in a way that suits me

They keep me up to date with the latest developments

Their content is best in the market

Local Brands Global Brands

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Figure 9: The importance of localisation for different content types

Global brands need to localize content

Overall, emerging markets consumers uniformly expect almost all content to be localised. However, as outlined in Figure 9, those expectations are uneven across different content categories: while consumers expect social networks and health services to be highly localised, they are slightly less concerned about localisation of music and entertainment content, and even less so when it comes to gaming. These responses would not come as a surprise to content providers – news, health, and social networks have a high importance in local context for end users - whereas gaming, and other entertainment content categories have a broader, often universal global appeal. The skill of mobile content providers will be to address the level of localisation that exactly matches the needs of the given target market.

N=4,504; responses to the question: How important is it for global brands to provide localized content from the categories below? Average rating on a scale of 1-4, where 1 is unimportant and 4 is very important.

3.13

2.34

2.88 2.92 3.07

2.92 3.02

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1.00

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News

Gaming

Music

Enter

tainm

ent

Social N

etwork

s

Financ

ial S

ervic

es

Health

Ser

vices

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Figure 10: Preferred ways of receiving promotions from trusted brands

CONCLUSION

Ways of reaching out to emerging market consumers

N=4,504; responses to the question: What would be the best way for you to receive product information and promotions from trusted brands?

Figure 10 shows that service providers still have a powerful promotional channel in SMS and pre-paid recharge notification messages, especially in the context where many people access social networks via SMS alerts on feature phones. However, Figure 11 also underlines the changes in user expectations and behaviour driven by the growth of smartphones, which in turn has led to rapid growth of mobile email and social communications.

Emerging markets are undergoing a period of change that is pregnant with both challenges and opportunities. This study indicates that Apple and Samsung look set to extend their mature market lead in emerging markets, where Nokia and Blackberry have traditionally done well. Indeed, in many emerging markets, Nokia, Blackberry and Motorola face a squeeze by Apple and Samsung in the premium, high income segments and at the bottom from the low-cost Android device manufacturers such as ZTE and Huawei.

This study underlined that the use of mobile content, boosted by an increase in smartphone usage, has grown to become an established consumer habit for the majority of emerging markets consumers.

16%

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6%

38%

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TV Phone calls SMS Banner adverts in

mobile apps

Email Top up notifications

Social networks

e.g. Facebook,

Twitter

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Moreover, it is clear that utility-based mobile content services such as health, education and business news have enormous growth potential going forward. In addition to music, news and gaming services have already achieved high penetration in the space of just a few years, especially with younger users.

The use of app stores has climbed at a rapid pace in emering markets. However, this study indicates that app store usage remains at a transitional stage, with the app stores of mobile operators, Google, Apple and Nokia all battling for mindshare and usage.

Most importantly, the survey indicates that the industry still has substantial room to enrich its mobile content proposition in emerging markets. The ability to purchase remains the biggest barrier for mobile content and app growth in all of the markets surveyed, followed closely with the perceived inadequacy in the promotional, search, and discovery experience for many users. This rapidly growing, yet still immature market, points to a massive opportunity for a whole host of players in this rapidly growing space.