Where in the World Is the Market? The Income Distribution Approach to Understanding Consumer Demand in Emerging Countries

Abstract

Finding, measuring and capturing market opportunities in emerging countries are critical tasks for multinational consumer goods companies. Central to these tasks is the need to collect and analyze income distribution data within a globally coherent framework and to move beyond income metrics based on national averages.

This article describes a new framework and dataset that achieves this goal and demonstrates how income distribution data, combined with consumer and marketing data, can be incorporated into simple demand models such as the Bass diffusion model or the Golder-Tellis affordability model to understand market dynamics. Our analytical effort is the first example of income distribution data being used to assess market opportunities in emerging countries.

We find that demand models based on the number of people within various income brackets at national or local levels are superior to models based on average income. We further find that combining income distribution data with pricing, marketing spending, consumer behavior and distribution coverage data makes it possible to measure which factors drive demand at the brand level - even in hard-to-analyze countries.

Keywords: consumer goods, global income distribution, marketing, predictive analytics

JEL Classification: M20