Published on November 26, 2014
Latin America is a fertile and promising land for many foreign businesses thanks to its large customer base. The region also has plethora of natural resources to offer which, together with the demographic changes and favorable macroeconomic and social policies, are pushing Latin America towards becoming an incredibly attractive investment source.
According to Americas Market Intelligence, by 2020 the region is expected to show the GDP of US$ 10,700 billion, representing 9% of the global GDP; and private consumption per capita of US$ 11,143 - a 50% increase on that of 2012.
Brazil, the South American giant and the largest economy in the region, has been experiencing remarkable economic growth and emergence of a new middle class over the past decade. Thanks to these trends, Brazil has secured itself a spot in the Big Four, also known as the BRIC economies club, which also includes Russia, India and China.
Although Brazil has been a long-time favorite of many foreign investors in Latin America, factors such as high inflation and government overspending for the World Cup in 2013 have diverted their investment towards Mexico, Argentina, Colombia, Chile and Peru. These five countries have been showing notable increases in their population’s disposable incomes and major improvements in corporate governance and production diversification. On top of that, governments have been actively investing in their country's infrastructure and introducing innovation policies to boost overall productivity.
Latin America is known for its dynamic cultural mixture of indigenous, Western, African and Asian traditions. This is well reflected in the local arts and music - the inseparable part of Latin American life. Differences across regional customs and traditions should be taken into account when a new product or service is created and marketed. Both local and foreign businesses need to conduct thorough market research in order to adapt and thrive in this dynamic and continuously evolving market.
Many multinationals have already made serious cultural faux pas by applying the one-size-fits-all approach to the entire Latin American region and suffered long-term consequences. The “think globally, act locally” motto is especially relevant in this situation.
The US giant McDonald’s is known for its meticulousness in tailoring marketing messages to customers across the globe. In Latin America, the company modified its #quebuenoqueviniste (#gladyoucame) campaign when launching it in Colombia, Argentina, Costa Rica, Mexico and Chile by hiring the representatives from each country for the national social media content. Being able to tailor marketing campaigns across countries is a time-consuming and daunting task, but will usually pay off and can save businesses from embarrassment in the long-run.
There are also several demographic shifts in the region which will directly reflect on consumer behavior patterns. First, the aging population and the increase in the working age population will create needs for financial services and healthcare to serve the elderly.
With more women joining the workforce the household dynamics will change: there will be increased demand on time-saving household items, processed food and childcare services. Next, the broadening middle class - this group are less price-sensitive and more value-conscious. Moreover, these customers will be more likely to make purchase decisions based on emotional appeal, for instance, based on the way the product highlights or complements their individuality, rather than on the budget constraints. This will fuel business innovations, as companies will be able to focus on improving the service or product quality instead of coming up with the price-reduction tactics. This is where smart product development and branding strategies come in handy.
Finally, similarly to customers in other developing economies, Latin American customers have been gradually shifting preferences towards healthy and environmentally friendly products in the past few years.
Due to the improvements in the mobile and internet infrastructure, Latin America has shown an exponential growth in mobile usage, making it one of largest online audiences in the world giving companies and marketers a new venue to explore. 51% of Latin American consumers use smart phones to help them shop and 38% actually appreciate mobile advertisements relevant to their interests. 94% of Latin American internet users are active on Facebook which is quite fascinating - as the U.S. has only 67% of users registered on Facebook and/or LinkedIn.
Digital Marketing immediately became an essential part of the marketing toolkit facilitating communication between businesses and their customers. However, one should not disregard the importance of traditional media when selecting a channel to transmit the marketing messages, as TV, radio and newspapers are still very popular among Latin Americans of different ages.
As international businesses have been eyeing the Latin American region for their potential new ventures, the role of business to business marketing is as important as ever. After learning about the region's Internet usage statistics, companies spend almost 15% of their budget on online advertisements, reaching almost $US 4.5 billion in expenses in 2012. Social media serves as the communications hub for buyers and suppliers. Almost all companies, big or small, are pressured to create and, hopefully, maintain at least the LinkedIn or Twitter accounts in order to keep up with the competition. The ever changing technological environment together with consumer behavior shifts pose numerous challenges to businesses, thus giving rise to the number of marketing agencies.
These agencies provide expertise and integrated solutions to market research, niche identification and other marketing problems, while incorporating the newest technology in the recommendations.
Overall, the average Latin American customer is becoming more sophisticated as his or her income and expectations increase. Latin America is a great place for companies to apply both traditional and cutting edge marketing practices.
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Sources:Trend Watching, Digital Strategy Consulting, Global Intelligence, LatAm Economy, Americasmi, Mashable, Pulso Social