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Booming global middle class – meeting their service needs

By Phil Verghis on March 4, 2009

For the first time in history, more than half the world’s population has joined the middle class. This startling development just happened in the past year or two. Why should you care? I believe this development will have a profound impact on service and support leaders all over the world.

Let’s start by defining “middle class.” Most economists agree there are actually two types. One consists of those who are middle class by any standard. Their income is somewhere between the average Brazilian’s and Italian’s (i.e., $12-$50 a day). While this segment is growing fast, they make up only a tenth of the developing world.

The second type consists of those who are middle-class by the standards of the developing world but not the developed (rich) one. This group earns between $2-13 per day. (I’ve always wondered about the significance of $2 per day. It turns out that amount is considered poverty anywhere in the world. $13 is the poverty line in the United States.)

But it is not just how many are rising into middle class status. It’s how quickly the number ‘tips,’ given the nature of the growth curve. Between 1990 and 2005 – just 15 years – China’s middle-class population soared from 74 million to an unbelievable 806 million. India’s middle class boom has just begun, with the middle class going from 147 million to 264 million during the same period. (Source: The Economist)

Now let’s see what this means to service and support professionals.

The single biggest source of profit for many technology companies is now services revenue. With intense pressure from CEOs and CFOs to keep bringing in this lucrative revenue, coupled with strong pushback from customers demanding discounts, many companies view selling services to this growing global middle class a smart strategy for growth.

Good idea, but -
* If you don’t take into account the two types of middle class, you will roll out services and products that a large percentage of them find simply unaffordable.
* Using traditional techniques and metrics to service them could choke earnings and even bankrupt you.

So what can a service and support leader do? Plenty, I believe. If you are serious about making profits under very tough economic circumstances, check out Prof. C.K. Prahlad’s Fortune at the Bottom of the Pyramid. Another valuable resource is one of the most downloaded papers on my own website, my white paper on “Cultural Implications of Service.”

But you probably want to do more than merely survive in this new, supremely cost-conscious world of service and support. What will it take to thrive? We’ll explore that in the next issue of my newsletter, the Verghis View.

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