Serving The Squeezed Middle

06 Dec 2017|Added Value

From a global perspective it appears that we have never had it so good.

The world is becoming more affluent; in two to three years we will reach a remarkable tipping point where the majority of its 7 billion inhabitants will live in ‘middle class’ or ‘rich’ households. It is estimated this worldwide income bracket, with its increasingly discretionary spending, will contribute $10 trillion to the global GDP by 2020.

So far, so rosy, and yet closer reveals a different picture: Just as we see emerging markets rise out of poverty, we are also witnessing a more complex phenomenon in the US and large parts of Europe where the middle class has actually been dwindling. 2015 was the first year on record where Americans in the middle-income bracket didn’t make up the majority of the US. The difference between the average income of the richest and the poorest 10% has increased significantly over the past 25 years. And while some people are doing better, many others are faring less well.

In the US, ‘Generation Z’ is expected to be the first do be less well off than its parents. Burdened with student loan debt, suffering lower wages and facing poor job prospects, a record number (49%) of young Americans identify with the working or lower class.

A similar phenomenon exists in Spain and Italy and in the UK, where the middle class remains one of the smallest and poorest in Europe.

The political implications of this shift have been discussed ad nauseam; less so the implications for brands and businesses, some of whom are marketing more accessible and affordable products to help make ends meet. We have seen the rise of private label retailers like Aldi, Lidl and Trader Joes. We also see brands like Warby Parker and Casper creating new business models to make expensive wearables and durables more accessible.

Other pioneering initiatives seeking to bridge the growing socio-economic divide across four core pillars of access, are worth highlighting. They represent significant opportunities to help the emerging and middle classes, in both developed and new markets, move up the ladder and improve their quality of life.

Some of the strategies that have been designed for developing countries are now taking root in developed markets. Others, leveraging start up thinking and capital in the US, are having their greatest impacts in the small villages and sprawling cities of the global south.

 

1. TECHNOLOGY

You may have seen the joke about the new base of Maslow’s hierarchy, more fundamental than food and clothing: it’s Wi-Fi. Of course the joke makes us smile because there is so much truth in it. Access to technology has become the gateway to opportunity. Without it, populations can easily be left behind as they struggle to stay up to date and connect. Yet there are millions of people, even in New York City, who don’t have access to high-speed Internet.

LinkNYC helps fill this gap by installing superfast, free Wi-Fi, device charging and phone call portals throughout New York City. Gone are people camped out in old-style telephone booths; replaced by people plugged into, searching or calling friends from these sleek new stations.

 

2. EDUCATION

Education has always been the stepping stone to progress and the digital revolution has only reinforced its importance. Five years ago, computer giant Dell launched Youth Learning, a global computer hardware and literacy program that  today, directly impacts more than 560,000 underserved youths, providing them access to technology and education across 15 countries.

GE and Microsoft have just announced their commitment to support Massachusetts-based not-for-profit edX with the goal of helping students to fast track their careers by gaining knowledge in the most cutting edge fields including Data Science, Cybersecurity and Artificial Intelligence. edX, a collaboration between MIT and Harvard, provides global access to quality education by connecting learners to the world’s best universities and institutions, with pricing based on income to ensure their programmes are accessible to all.

Tech companies are not the only ones getting in on the education game. Starbucks’ College Achievement Plan, launched in 2015 with Arizona State University, offers qualifying employees full tuition coverage to earn their bachelor’s degree while providing the company with a steady stream of young talent. Their more recently launched Pathway to Admission programme helps employees who don’t yet have the qualifications for admission to college, fill in their gaps, all tuition free.

 

3. FINANCE

There is a lack of financial literacy and proper access to credit in both emerging and developed countries. Vodafone has been tackling this issue in developing countries in the global south with M-Pesa, offering financing services with more competitive loan rates and a phone-based money transfer service. Heralded as the doorway to a formal financial system, M-Pesa has strengthened the flow of income to developing nations and their people.

Financial start-up So-Fi was launched recently to help US students who often gradute college with little financial know-how and large amounts of debt and consequently struggle to get loans. So-Fi bases its loans on education, employment trajectory, and spending habits and history. This affords well-deserving young professionals the chance to receive loans where they otherwise would have been denied at a bank with more traditional lending requirements.

 

4. HEALTH

Providing affordable access to health care services has always been challenging; yet new waves of innovation are beginning to find solutions.

Shift Labs recently secured FDA approval for their DripAssist Infusion Rate Monitor which radically reduces the cost and complexity of correctly administering IV infusions. The AA battery-powered device is portable and has been used in more 24 countries.

The newly launched Nurx app is giving women in the US greater control over their family planning choices by allowing them to get free or affordable and stigma-free birth control, with or without insurance, delivered straight to their door without a visit to the doctor.

 

The recession of the last decade has meant many people who were accustomed to a comfortable standard of living are having to cope with living on less.

As the gap between the rich and the poor continues to widen, the most ingenious brands have an ever-increasing role to play in making the complex more accessible and the costly more affordable.  In so doing they can carve out an important place in the market while improving the day to day reality and quality of people’s lives.

Written by Leslie Pascaud, Executive Vice President Branding and Sustainable Innovation, Kantar Added Value.

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