Those were the days: In the commercial realm there was Raymond Vernon's "product life cycle" theory (PLC) in which the most advanced products would emanate from a highly industrialized nation (like the United States) before being sold as exports to other nations including less developed ones. Eventually, they would even be made there as the "lead" nation moved on to ever-newer innovations.
Unlike ever-decreasing living standards in the US of A, however, there is still lively debate about whether it continues to innovate. That said, it is no longer a given that whatever new products are developed in the USA and other developed countries will eventually "trickle down" to LDCs. For, the implicit assumption underlying PLC is that developed countries remain the most dynamic and cutting-edge of markets. Simply stated, when America and Europe are quite broke, there is not a whole lot of folks to buy all this innovation. It's all a bit Marxist in logic, but hey, I guess he was right about something after all.
Hence, the latest trend given (a) moribund consumer markets in the West and (b) dynamic, fast-growing markets in the developing world is that more innovations are emanating from the latter. What's more, since products coming from LDCs obviously are better attuned to the needs and wants of consumers of more modest means, hard-up Western consumers are increasingly becoming targets for products designed for LDCs and not the other way around as PLC theory and the like would suggest. Let us first remind ourselves of how badly America "existence" stinks before moving on to the opportunity...
But even in one of the world's richest countries the hard-up represent a huge and growing market. The average American household saw its real income decline between 2005 and 2009. Millions of middle-class Americans have been forced to “downshift”, as credit dries up and the costs of college and health care soar. Some 44m Americans live below the official poverty line ($21,954 a year for a family of four). Consumer spending per household fell by 2.8% in 2009, the first time it had fallen since the Bureau of Labour Statistics started gathering data in 1984.In response, marketing to what I call Brokebank Yanks is not an entirely new skill. Firms from both developed and developing nations have become adept at meeting the needs of marginal-income consumers for the longest time, so why not transfer these valuable skills to hard-up America? It is an eminently transferable skill:
Adjusting to this new world can be hard. Companies have long assumed that America would always be a land of mass affluence and upward mobility. But the American economy was undergoing a structural shift even before the 2007 financial crisis, with galloping rewards at the top and stagnation for many of the rest. Some economists expect the malaise to last for years. Few companies have thought much about the implications of this...I guess you might as well make the best of what's around even if America is increasingly becoming a dissipated wasteland. Make no mistake: there is still money to be made if you're smart enough to cater to the American nouveaux pauvres (newly impoverished) as the Economist calls them. Those Brokebank Yanks are legion.
The optimists' complacency creates opportunities for nimbler and gloomier competitors. It also creates an opening for companies from the emerging world, many of which have frugal innovation in their DNA. TracFone Wireless, a subsidiary of Carlos Slim's América Móvil, has sold more than 3m phones in America since 2008 to pre-paying customers. MedicallHome, a Mexican company that provides medical advice over the phone for $5 a month, as well as access to its network of 6,000 doctors, is expanding north of the border. Emerging giants such as India's Tata and China's Haier regard America as a natural market for their frugal products. The bottom of the pyramid is wider than most people realise. Firms that offer ultra-low prices will find themselves as much in demand in Detroit as in Delhi.
