ROLAND BErGEr STRATEGY CONsULTANTs

STUDY
In-depth knowledge for decision makers
In 2011, household final consumption was growing at a pace of 4.2% in ASEAN, compared with 2.6% for China

China +2.6%

ASEAN +4.2%

Household final consumption (USD trillion)

2.5 tn

Household final consumption (USD trillion)

1.2 tn

UNDERSTANDING MASS AFFLuENT CONSumERS IN SOuTH EAST ASIA

STUDY 3

Understanding Mass Affluent Consumers in South East Asia

cOnTenTs iNTrODUCTiON
Our analysis and methodology

p4

SOUTH EAsT AsiAN MArKETs ArE THE NEW FrONTiErs FOr ECONOMiC GrOWTH
Southeast Asia is one of the world's fastest growing regions

p6

THE RB PROFILER
Understanding mass affluents in Southeast Asia

p 12

TELECOMMUNICATIONS
Rising incomes have led to rising interest for enhanced products and services

p 20

FINANCIAL SERVICES
Banking on client values

p 28

CONCLUsiON
Take advantage by understanding consumers and developing tailored market strategies

p 38

ROLAND BErGEr STRATEGY CONsULTANTs

iNTrODUCTiON

OUr ANALYsis AND METHODOLOGY

STUDY 5

In this study, we reveal how examining consumers' values can help us identify different sub-segments of the "Mass Affluent" consumer segment in three important markets in Southeast Asia: Indonesia, Malaysia and Singapore. Using the RB Profiler, we explain which values drive the purchasing behavior of the different customer groups and provide insights into what sort of people they are made up of. Companies can use these insights to focus their strategies better on capturing parts of Southeast Asia's Mass Affluent market. Southeast Asia is rapidly taking its place among the global economic heavyweights. In the coming years, growth in countries belonging to the Association of Southeast Asian Nations (ASEAN) will outpace the United States, Europe and Japan. Three countries account for 64% of ASEAN's GDP: Indonesia, Malaysia and Singapore. We focus on these three key markets in our analysis. Industries from telecommunications to consumer goods have recognized the potential of ASEAN markets and are currently banking on the region's rapid growth. The World Bank ranks Singapore number one in its "Ease of Doing Business" report. Local populations are seeing their incomes buoyed by growth. In the six largest ASEAN economies, the top end of this powerful group of ever wealthier consumers known as "Mass Affluents" numbers more than 17 million people. Of this figure, 69% live in Indonesia, Malaysia or Singapore, and their number in these countries is growing at double-digit rates every year. Companies operating in the region currently take a very broad approach when targeting Mass Affluents. In an effort to keep up with the frantic pace of growth, they lump the entire category into a single group, assuming that once people reach a certain level of income they all have the same needs and wants. While companies may differentiate between Mass Affluents in different countries, they have yet to take the time to really understand who these Mass Affluent consumers are, what appeals to them, and what characteristics they share across borders. To reach Mass Affluents effectively, companies operating in Southeast Asia need a comprehensive understanding of this group. They must be able to differentiate between the various subsegments of the Mass Affluent market. Mass Affluents in Southeast Asia are not all the same, and they do not demand the same types of products and services. What type of car, bank account or electronic device they buy depends upon factors that

go beyond just their income or where they live. In fact, as consumers' incomes grow, their values drive their purchasing behavior just as much as their demographic profiles. These values inform the choices that they make every day, from how they spend their free time to how they shop. In our analysis of the Mass Affluent market, we use a special tool developed by Roland Berger Strategy Consultants: the RB Profiler. The notable thing about the RB Profiler is that it uses personal values in its customer segmentation. By doing so, it provides a more complete picture of the various Mass Affluent segments in Southeast Asia. Consumers are segmented not just by how much they earn, their gender and where they live, but also by the values that drive their purchase decisions. Firms that fully understand Mass Affluents, their aspirations, desires and needs, can address them in a more targeted fashion rather than using a simple one-size-fits-all strategy. The RB Profiler helps companies identify the most strategically and economically relevant segments of the Mass Affluent market and then gives them the insights that they need to adjust their market strategy accordingly. This puts them in a better position to capture the region's dynamic market growth. Our analysis of Indonesia, Malaysia and Singapore using the RB Profiler shows that, despite the diversity of languages, ethnic backgrounds, religions and cultures, there are four key segments of Mass Affluent consumers that cut right across the region. Four further segments are only found in one or two of the surveyed countries, including just two that occur in individual countries only. What does this mean for companies? Domestic, regional and international firms working in Southeast Asia need to deploy a mix of standardized and tailored market approaches to address the values some shared, some specific to certain countries of the various consumer segments within the Mass Affluent group. In some cases, regardless of the industry, they can use cross-border market strategies to reach the segment with the most potential; in others, they require more tailored approaches to reach individual segments. Using the results of our analysis, companies can thus adapt their market approach to appeal specifically to relevant segments of Mass Affluent consumers. By deploying more sophisticated strategies, companies can target Mass Affluents across Southeast Asia more effectively than in the past.

ROLAND BErGEr STRATEGY CONsULTANTs

STUDY 7

ROLAND BErGEr STRATEGY CONsULTANTs

SOUTH EAsT AsiAN MArKETs ArE THE NEW FrONTiErs FOr ECONOMiC GrOWTH

sOUTHEAsT AsiA is ONE OF THE WOrLD's FAsTEsT GrOWiNG rEGiONs

STUDY 9

Southeast Asia is one of the world's fastest-growing regions. The ASEAN regional economic union was founded in 1967, originally by five nations. Since then, the process of integration has continued, fueling cross-border investment and trade. Today, ASEAN consists of ten countries, all of which have seen significant growth in recent years.
F1 In 2011, ASEAN's population stood at 608 million, just under half

F1

GDP growth in 2012 for ASEAN continues to increase

that of India or China. Currently, ASEAN's GDP is USD2.2 trillion, putting it in fourth position behind the European Union, the United States and China. GDP grew at 4.9% in 2012, with an upward trend.
F2 Unlike in China, where investment is a key growth driver, rising

2012

wages and private consumption are driving growth in ASEAN countries. Per capita GDP is USD3,578, compared with USD5,417 in China. Household consumption expenditure in 2011 grew at a pace of 4.2% across the region, compared with 2.6% in China. In our analysis we focus on three key markets in Southeast Asia: Indonesia, Singapore and Malaysia. In terms of population and GDP, Indonesia is the largest market in Southeast Asia. It has 241 million inhabitants making it more than twice the size of the Philippines, the region's second most populous country and generates USD846 billion in GDP. Singapore has a population of just 5.3 million but GDP of USD260 billion, giving it the highest per capita GDP in the region, at USD49,270. Malaysia, with 29 million inhabitants and USD288 billion in GDP, is the region's wealthiest non-city state in terms of per capita GDP, at USD10,085.

+ 4.9%
Current ASEAN's GDP (USD trillion)

2.2 tn
Note: GDP in current USD Source: Economist Intelligence Unit, IMF

ROLAND BERGER STRATEGY CONSULTANTS

F2

Southeast Asia is one of the world's fastest-growing regions. Today, ASEAN consists of ten countries, all of which have seen significant growth in recent years.

Source: Worldbank, EIU

STUDY 11

57%

57%

35%

34%

Household expenditure as % of GDP 2010 2011

10.4% 9.2% 8.0% 8.2%

4.5%

4.9%

GDP growth 2010 2011 2012

China

ASEAN

ROLAND BErGEr STRATEGY CONsULTANTs

THE RB PROFILER

UNDERSTANDING MASS AFFLUENTS IN SOUTHEAST ASIA

STUDY 13

Today's companies need to understand consumers better than demographics and relationship to the industry in question. ever. As markets in Southeast Asia mature, consumers are less F4 Brands embody specific values, similar to those of consumers. worried about buying basic necessities and are more focused on buying goods and services that appeal to them. Southeast Asian Whether or not a company is aware of its brand values, it attracts consumers, like consumers in other parts of the world, do not consumers whose personal values match those of the brand as make purchase decisions simply based on their age, gender or they perceive it. In other words, a brand is not just created by its income level. Increasingly, when they spend money, their values attributes or what it communicates to its consumers: A brand is determine what they buy and how they shop. Thus, a Mass also the people who buy it. Affluent female consumer who values innovation will opt for a very different brand of car than a consumer who is more concerned When the consumer turns thought into action and actually buys a about society and the environment, even though the two may be product or service, it is the fit between their values and the values the same age and have the same level of income. Consumers are that they perceive the brand to have that matter. Because this increasingly looking for brands that reflect who they are and who process often occurs unconsciously, the consumer's underlying they want to be. values play an essential role both the values that they want to project and the values that they are actually acting on. Part of the A company's success in Southeast Asia today depends on knowing strength of the RB Profiler is that it applies the same methodology these consumers, identifying which of them to target and figuring to both Mass Affluent consumers and to brands. In this way, it is out how to address them positioning their brands precisely in able to establish a close fit between different consumer segments line with consumers' needs. More data is available now than ever and brands. before, but firms often have only a partial picture of the market, or lose their way in a sea of research. Using the information produced by the RB Profiler, companies can identify those segments in Southeast Asian markets that are the The RB Profiler provides full transparency over consumers and most relevant for them. They should then adjust their entire brands. It gives companies a complete picture of the market by marketing approach accordingly, from price and product attributes segmenting Mass Affluents along three dimensions: values, to distribution and branding. demographics and industry-specific data. In so doing, it reveals MASS AFFLUENT CONSUMERS IN SOUTHEAST ASIA VARY which segments of the Mass Affluent market are the most relevant strategically and economically for the company in question. At first sight, Mass Affluents in Southeast Asia appear to share a number of similar characteristics: Their incomes are growing, they The RB Profiler draws on a list of 18 values that research has are spending more and so contributing to growth across the shown to be key factors in consumers' daily purchase decisions. region. But on closer examination, it becomes clear that they in It then generates a matrix, the vertical axis indicating sentiment fact have different desires, needs and aspirations. (from emotional at the top, to rational at the bottom) and the horizontal axis indicating propensity to spend (from minimalism We analyzed Mass Affluents in Indonesia, Malaysia and Singapore, on the left, to maximalism on the right). Values are plotted along segmenting them on the basis of their socio-demographic data, these two axes using multidimensional scaling to reflect RB Profiler values and buying behavior. This involved asking similarities and differences. consumers for basic demographic information, such as their F3 A glance at the RB Profiler matrix instantly reveals the key gender, age, income level and education, then about their habits, lifestyle, attitudes, interests and needs, and finally about characteristics of a consumer's personality, providing a fast, visual industry-specific data such as their brand awareness, spending and intuitive yet detailed understanding. The values shown affect and preferred products. the daily purchase decisions that people make. However, in its final segmentation, the RB Profiler approach also includes In Indonesia, our research took the form of face-to-face interviews variables such as age, income and product use. The end result is with people whose total household monthly expenditure was holistic consumer profiles that reflect consumers' values,

ROLAND BErGEr STRATEGY CONsULTANTs

F3

Key components of the methodology are customized research andtheRB Profiler values system
18 general B2C consumer values in six specific clusters that describe consumer needs and brand values alike

R = rational

E = emotional

= more consumption

= less consumption

Consciousness

Traditional hedonism

Progressive hedonism

THe MeanInG OF VaLUes Moneyism

Total cost: Frugal, buys only the basics, pricesensitive. Smart Shopping: Bargain hunter, likes value for money. Simplicity: Minimalist, understated,

E
Society & Nature Vitality Emotional values Health Tranquility Aesthetics Status Thrill & Fun

avoids waste.

Awareness
Tranquility: Calm, relaxed, values harmony. Health: Desires physical and psychological integrity, committed to staying healthy. Society & Nature: Has high ethical and environmental standards, is socially

Family & Friends

Trendiness

aware, empathizes with others.

Simplicity

Security Protech Service

Traditional hedonism
Vitality: Likes mental and physical fitness, is active and independent. Aesthetics: Likes timelessness and elegance, is design-oriented. Family & Friends: Friends and family are most important in life, is a team player, desires security and warmth with close

Rational values

Smart Shopping Quality

Achievement

social contacts.

Progressive hedonism Total Cost

Thrill &Fun: Risk-taker, adventurous, likes having fun,

Customization

enjoys life. Status: Status-oriented, expressive, attention-seeking. Trendiness: Trendsetter, innovative, stands out from the crowd.

R
Moneyism Traditional performance Progressive performance

Traditional performance
Quality: Values longevity, is reliable. Service: Likes clear information, simplicity and practicality, wants competent advice, values personal service. Security: Plans ahead, is risk-averse.

Progressive performance
Pro-tech: Loves technology, buys seasonal "musthaves", likes innovative products. Achievement: Highperformer, strives for success, seeks challenges Customization: Focuses on individuality, values exclusivity, is flexible, enjoys variety. Source: Roland Berger Strategy Consultants

STUDY 15

F4

By matching the consumer and brand profiles, the RB Profiler can forecast consumer behavior

R = rational

E = emotional

= more consumption

= less consumption

Values that the consumer most agrees with Values that the consumer most disagrees with

CONSUMER "JOHN"
E Society & Nature Health Tranquility Vitality Aesthetics Family & Friends Thrill & Fun Status Trendiness

BRAND PROFILES BRAND A

E Society & Nature Health Tranquility Vitality Aesthetics Family & Friends Thrill & Fun Status Trendiness

CONSUMER "ANDY"
E Society & Nature Health Vitality Aesthetics Family & Friends Thrill & Fun Status Trendiness

NO FIT
+

Tranquility Simplicity

Simplicity

Security Service

+
Protech Achievement

BUY FIT

Simplicity

Security Service

Protech Achievement

BUY

Security Service

+
Protech Achievement

Smart Shopping Total Cost R Quality

Smart Shopping Total Cost R Quality

Smart Shopping Total Cost R Quality

Customization

Customization

Customization

JOHN likes innovative technology, customized products and good service. He is neither a responsible person nor price-sensitive.

BRAND B
E Society & Nature Health Vitality Aesthetics Family & Friends Thrill & Fun Status Trendiness

ANDY is a serious and altruistic person. He is very concerned with society and the environment. The innovative image of Brand A does not attract him it is too irresponsible and

JOHN buys Brand A it is expensive, but stands for innovation and service. He does not like the altruistic image of Brand B.

Tranquility

NO FIT

Simplicity

Security Service

+
Protech Achievement

expensive.

FIT

ANDY buys Brand B it addresses his needs for ecological and social responsibility.

Smart Shopping Total Cost R Quality

Customization

over IDR 2 million (just over USD 209), representing the top 29% of the urban population. In Malaysia, we conducted computer-assisted telephone interviews (CATI) and face-to-face interviews with people whose total monthly household income was over MYR 3,400 (just over USD 1,100), representing the top 28% of the population. In Singapore, we ran an online survey of people whose total annual household income was over SGD 50,000 (just over USD 40,000).

Using our findings, we then defined customer segments or "archetypes" reflecting different combinations of the variables that drive purchase decisions, including demographics, values and industry-specific data. Finally, we narrowed these potential segments down to a manageable number of stable, straightforward, actionable segments that reflected our most important insights.

ROLAND BErGEr STRATEGY CONsULTANTs

FOuR kEy SEGmENTS OF ASEAN mASS AFFLuENT cONSumERS

We identified four segments of Mass Affluents that cut across all three countries, and four further segments that are only found in one or two of the surveyed countries. We call the four common segments "Hedonists", "Traditionalists", "Performers" and "Minimalists". While the size of these segments varies by country, together they represent at least 57% of the total population of each country and no group represents less than 9%. In all three countries, Hedonists are the most common segment, making up 29% of the population in Indonesia and Malaysia and 26% in Singapore. Consumers in each of the four segments share values across borders, despite differences in consumption patterns. Let's look at each of these four key segments in turn.

STUDY 17

E Society & Nature Health Tranquility Vitality Aesthetics Family & Friends Thrill & Fun Status Trendiness Society & Nature Health Tranquility

E Vitality Aesthetics Family & Friends Thrill & Fun Status Trendiness

Simplicity

Security Service

+
Protech Achievement

Simplicity

Security Service

+
Protech Achievement

Smart Shopping Total Cost R Quality

Smart Shopping Total Cost R Quality

Customization

Customization

1 Hedonists
'Hedonists' seek adventure, thrills and fun. They pay attention to price. They want the brands that they buy to convey status and enjoy a good reputation. They are trendy, they like to be on the cutting edge and they are often the first ones to have a new product. While they like customization, they are more focused on quality than other Mass Affluent consumers. Values such as security, health, tranquility and time spent with family and friends are less important to Hedonists than they are to other Mass Affluents. Across the board, Hedonists tend to be younger, are less likely to be married, and tend to earn less than other segments.

2 Traditionalists
'Traditionalists', as the name suggests, value tradition. They are altruistic: They care about society and nature, are willing to pay more for environmentally friendly products, and support companies that are socially responsible. They say that their best experiences are with family and friends. When shopping, they look for friendly staff and aftersales support, plus they are willing to pay for quality. Traditionalists are generally slightly older and married. The group is evenly split between genders. They earn a little more than other Mass Affluents, so price is not an issue for them indeed, they do not consider total cost in their purchase decisions.

ROLAND BERGER STRATEGY CONSULTANTS

E Society & Nature Health Tranquility Vitality Aesthetics Family & Friends Thrill & Fun Status Trendiness Society & Nature Health Tranquility

E Vitality Aesthetics Family & Friends Thrill & Fun Status Trendiness

Simplicity

Security Service

+
Protech Achievement

Simplicity

Security Service

+
Protech Achievement

Smart Shopping Total Cost R Quality

Smart Shopping Total Cost R Quality

Customization

Customization

3 Performers
'Performers' like high-tech products. They are active and do sport to stay in shape. Like Hedonists, they care about the reputation of the brands that they buy, but product design and appearance are important to them, too. They worry less than other segments about cost. In Southeast Asia, Performers tend to be in their early 30s and are more or less equally split between men and women. Apart from in Indonesia, less than half of Performers are married, and they earn less than Traditionalists.

4 Minimalists
'Minimalists' like to keep things simple. They only buy what they need and prefer products that are stripped down to the basics. They care about their health. At the same time, they are constrained by their relatively low incomes and keep an eye on costs. They tend to be middle-aged, and are for the most part married.

STUDY 19

In addition to these four segments, each country is home to a significant number of consumers in other segments that are not found in all three countries. In Indonesia, 18% of Mass Affluents are what we call "Emotionalists": young consumers who combine a need for adventure with a traditional mindset. Some 10% of Mass Affluents in Singapore are "Essentialists": consumers with an average age of 39 who care about spending time with family and friends and like calm environments where they can relax. Some 26% of Mass Affluents in Singapore and 18% in Malaysia are "Maximalists": consumers who like cool products and follow the latest trends. Another 17% of Mass Affluents in Indonesia and 24% in Malaysia are "Status Seekers", individuals who are both attention-seeking and price-driven. We find plenty of regional variation within the Mass Affluent segment. For example, values such as altruism and tradition associated with a greater concern for health, society, nature and vitality matter more to Mass Affluents in Indonesia than in Singapore and Malaysia. Compared to their neighbors, Malaysians are more focused on progressive values such as trendiness, status and pro-tech. Singaporeans, on the other hand, are very focused on service, family, friends and tranquility. Different segments have different desires, needs and aspirations. Consequently, a one-size-fits-all strategy for all middle- and upperincome consumers in the region will be ineffective. Consumers form an emotional attachment to the brands that they buy. Firms that can give their brands the same values as those of their target segment are in a strong position to capture that segment. Companies need to look at the different segments carefully and decide which of their market strategies will work across the region in a standardized form, and which strategies they must tailor to specific segments in specific countries. The RB Profiler can help them understand which segments are the most relevant for their brand. It provides them with the detailed information they need to make the necessary adjustments. Below, we take a closer look at specific markets in Southeast Asia to discover what companies must do to capture relevant parts of the Mass Affluent group.

ROLAND BErGEr STRATEGY CONsULTANTs

STUDY 21

ROLAND BErGEr STRATEGY CONsULTANTs

TELECOMMUNICATIONS

RisiNG iNCOMEs HAvE LED TO risiNG iNTErEsT FOr ENHANCED prODUCTs AND sErviCEs

STUDY 23

Telecom products and services have long been popular across Southeast Asia. People joining the ranks of the middle classes already have smart phones 32% of Mass Affluents in Indonesia, 34% in Malaysia and 74% in Singapore and many have access to the Internet, too. As the incomes of Mass Affluents grow, so does their appetite for enhanced products and services. This trend gives businesses plenty of opportunities to take advantage of rising incomes across the region. Smartphones and tablet computers are two products that the region's newly wealthy are buying in earnest. Capitalizing on growth in telecom markets, however, requires companies to focus on the right segments of both existing and potential consumers.

F6

Overall share of cell phone users with no smartphone, but are planning to buy one in the next six months, i.e. new users
Respondents (%)

InDOnesIa

22%
MaLaYsIa

SMARTPHONES POPULARITY CONTINUES

F5 The RB Profiler distinguishes between those who already have

smartphones and those who want to buy one known as "intenders". To date, Hedonists, Emotionalists, Maximalists and Performers have been the key smartphone buyers. These consumers want to be on the cutting edge of technology and are less concerned about costs. They primarily use smartphones to access social media: Roughly two-thirds of those who own smartphones say that they use their mobile data service for social networking.
F6 In Indonesia and Malaysia, around a quarter of Mass Affluents with

29%
sInGapOre

cell phones do not use mobile data, and only one-third of Mass Affluents have smartphones. In both countries, Hedonists display a high propensity to acquire new smartphones. In Singapore, 74% of Mass Affluents have smartphones, while around one-third of Mass Affluents are planning to buy a smartphone or trade up to another model. Performers, Hedonists and Maximalists are especially likely to do so. Across all three countries, about onequarter of Mass Affluents plan to buy a smartphone some time in the next six months.
F5 Who are the intenders the people planning to buy smartphones?

First, there are the Hedonists, Emotionalists, Maximalists and Performers who already have smartphones and are planning to buy a new one. However, smartphones also appeal to other segments: Intenders are spread fairly evenly across the different consumer segments. These intenders have quite different needs from those consumers who already own smartphones, with cost being a major consideration. In Singapore, for example, status is

38%
Source: Roland Berger Strategy Consultants, SEA Mass Affluent Study

ROLAND BErGEr STRATEGY CONsULTANTs

important for intenders, while service is not; in Malaysia, customization is important; and in Indonesia, total cost is the main driver. Companies need tailored approaches to capture these different segments: In Singapore, they need to emphasize brands and status; in Malaysia, customization; and in Indonesia, trendiness, status and total cost.

F5

TABLET COMPUTERS NOT JUST TOYS FOR BOYS

Tablet computers also offer great potential for companies wishing to capture parts of the Mass Affluent market in Southeast Asia. Far fewer people in the region own tablets than smartphones, but their appeal is growing beyond niche market segments. Current ownership figures among Mass Affluents are 7% in Indonesia, 15% in Malaysia and 39% in Singapore. Roughly a quarter of non-users intend to start using them in the next six months. Significantly, although current users are predominantly male, many more women in the region say they plan to buy tablets.
F7 Tablets are data-heavy and require consumers to have high data

Values profiles of smartphone users and intenders, overall and per country
Respondents (%)

InDOnesIa

usage plans. As such, they represent a real opportunity for mobile operators. Southeast Asians are now using these devices to do everything that they used to do on their desktop computers, from checking email and surfing the Web to watching videos. In particular, they are using mobile devices to log onto and check their social network accounts on Facebook, LinkedIn and Twitter. The personal values of tablet owners and intenders cut across gender. Those who already own tablets have a value profile similar to that of Hedonists, plus a slight focus on aesthetics in Singapore and Indonesia. They are looking for thrills and adventure, are keen to have fun and are willing to take risks. Cost and other values more associated with Traditionalists are not so important to them. Intenders in Singapore and Malaysia have a value profile that is very close to that of Maximalists. In Singapore, this group represents 16% of Mass Affluents, in Malaysia 24%. They care about status and trends and want to keep up with the latest technological developments. Similarly to tablet owners, these intenders worry little about costs and other values associated with Traditionalists. In Indonesia, intenders represent about 21% of Mass Affluents. Again, they are looking for thrills, like to have fun, and are less worried about simplicity and achievement. Telecom companies keen to boost demand for tablets can therefore deploy a relatively standardized approach with those who intend to buy tablets, emphasizing design and using

Minimalists

Traditionalists

Hedonists

Performers

Status Seekers

43% 38% 39% 36% 32% 24% 20% 20%

23% 17% 19% 14% 5%

Emotionalists

22%

Source: Roland Berger Strategy Consultants, SEA Mass Affluent Study

Total

STUDY 25

Percentage of segment who have smartphones

Percentage of segment intending to buy smartphones

MaLaYsIa

sInGapOre
Minimalists Essentialists Traditionalists Maximalists Hedonists Performers Total 74% 70% 63% 56% 50% 43% 38% 39% 35% 37% 34% 29% 35% 37% 46% 38%

79% Minimalists Traditionalists Maximalists Performers Hedonists Status Seekers Total

81%

83%

57%

28% 20% 16% 8%

29% 22%

29%

15%

ROLAND BErGEr STRATEGY CONsULTANTs

F7

Share of tablet computer users and intenders

Per country and proportion of male/female among users, respondents per country and gender (%)

Overall Men Women

Maximalist values in their advertising. In Singapore, the focus should be on trendiness and pro-tech aspects; in Indonesia, on thrills and fun; and in Malaysia, on trendiness. In all three countries, intenders are not particularly interested in simplicity.

DATA CONSUMPTION AND VALUE PROFILES

In Southeast Asia, the different consumer segments do not subscribe to data plans equally: Performers, Hedonists, Emotionalists and Maximalists are above-average data users compared to Minimalists, Traditionalists and Essentialists. Accordingly, brands need to develop a competitive edge to capture these consumers. The value profiles represented by different mobile data providers vary F8 significantly. As a result, providers do not capture data consumers equally across segments. In the case of one mobile brand in Indonesia, for example, 50% of its customer base owns a smartphone. The company has achieved this by emphasizing values such as modern technology and trendiness values that are shared by Hedonists. The customer base of one of its competitors, however, has only 11% smartphone uptake. This is due to the brand's focus on security and quality and complete rejection of the values espoused by Hedonists. Clearly, in order to capture smartphone data users, mobile providers must take a tailored approach, appealing to those segments that offer the most potential Hedonists and Emotionalists in the case of Indonesia, for example. That means emphasizing values that resonate with the target segments and using brand positioning to attract them.

Handheld tablet computers

sInGapOre

MaLaYsIa

InDOnesIa

43% 39% 36%

15% 13% 16% 7% 9% 5%

Likelihood* of acquiring a handheld tablet in thenext 6 months for non-users

sInGapOre

MaLaYsIa

InDOnesIa

SOCIAL MEDIA IS A MUST

Social media is popular among Mass Affluents, even on cell phones. A large proportion of Mass Affluent mobile users with smartphones use Facebook or other social media websites on their mobile handset: 64% in Singapore, 68% in Malaysia and 68% in Indonesia.
30% 29% 31% 27% 30% 23% 22% 24% 21%

Source: Roland Berger Strategy Consultants, SEA Mass Affluent Study *) Share of non-tablet owners who replied were at least 7 out of 10

Mobile operators ignore these new communication channels at their peril. They should pay special attention to Performers and Maximalists: Both groups are opinion leaders and pave the way for others by writing online reviews of their telecom providers. These two groups, plus Hedonists, are particularly heavy social networkers. Telecom operators must enter into one-on-one communication with them, taking into account the breadth of possibilities offered by social networking sites to engage with existing and potential consumers.

STUDY 27

F8

Providers do not equally manage to capture "data customers" Value branding is key Example of Indonesia
Share of customer segments in customer base per provider in Indonesia [%]

Share

Brand 1

Brand 2

Brand 3

Brand 4

Brand 5

HeDOnIsTs
29% 26% 33% 30%

12%

eMOTIOnaLIsTs
13% 18% 15% 15% 9% 15% 12% 10% 7% 7% 19% 16% 7% 6% 10% 18% 27% 29%

19%

44% High mobile

perFOrMers

27% 19% 7% 19% 19% 4% 6% 9%

data users

TraDITIOnaLIsTs

MInIMaLIsTs

12% 17%

16%

sTaTUs seeKers

Consumers with smartphones

29%

39%

50%

11%

44%

Source: Roland Berger Strategy Consultants, SEA Mass Affluent Study

ROLAND BErGEr STRATEGY CONsULTANTs

STUDY 29

ROLAND BErGEr STRATEGY CONsULTANTs

FINANCIAL SERVICES

BANKING ON CLIENT VALUES

STUDY 31

Consumers in Southeast Asia have a complicated relationship with banks, and one that is rapidly changing. Due to sociological factors, a lack of infrastructure and slow economic development, many consumers historically made do without a bank account. The Asian financial crisis in the late 1990s increased consumers' wariness of banks, and in some countries trust in domestic banks' ability to protect their money remains low. Across the region, banking operations remain dogged by inefficiency. Few branches exist in rural areas, and branches in urban areas are overcrowded: Customers must stand in line for long periods of time, and then face lengthy approval processes before getting access to products such as bank cards and loans.
F9 Major differences exist between countries. In Singapore, for

F9

Bank account penetration per country

Respondents (%)

sInGapOre

95%
18-24 year olds who don't have a bank account

example, the Mass Affluent segment is already fully banked with a mature offering and on average 2.2 banks per customer. In Malaysia and Indonesia, the market is maturing fast: In Malaysia, 89% of Mass Affluents have a bank account, with an average of 1.6 banks per customer, while in Indonesia, 82% have a bank account. Both countries offer room for growth through increased penetration, especially among the large young population: Around one-quarter of Mass Affluents in Malaysia and Indonesia aged 18-24 do not have a bank account. Banks in the region should view this as an opportunity to capture the remaining Mass Affluent consumers who are not banked yet. However, banks cannot simply rely on riding the wave of increased penetration among Mass Affluents. Growth in revenue from Mass Affluents will also have to come from increasing consumption of banking and insurance products, in line with the segment's growing income. Cross-selling will also be pivotal. When targeting the wealthier part of the Mass Affluent segment, banks should focus on Maximalists and Performers, stressing the technologically savvy, status-flattering and trendy aspects of their offer. However, this approach will not appeal to Traditionalists, who in Singapore are just as wealthy as Maximalists and in the same age band on average. For them, banks should offer a value proposition that stresses quality of service, security and peace of mind. Hedonists have two or three times less financial assets than Maximalists or Performers, so their focus is on buying cheap. They are nonetheless an attractive segment for banks, who can target them with appropriate financing solutions for their consumer desires and thrill-seeking behavior.

5%
MaLaYsIa

89%
18-24 year olds who don't have a bank account

25%

InDOnesIa

82%
18-24 year olds who don't have a bank account

25%

Source: Roland Berger Strategy Consultants, SEA Mass Affluent Study

ROLAND BErGEr STRATEGY CONsULTANTs

F10

Views on areas that banks should improve

The one thing banks should improve ... (%)

Competition in the banking industry is set to grow. Banks should court those customer groups, who are likely to act as their ambassadors. Thus, in Singapore, 67% of Performers and 59% of Traditionalists recommend their banks to others, compared to an average of just 49% for Mass Affluents overall. Likewise in Indonesia, 69% of Traditionalists and 65% of Emotionalists recommend their bank to others, compared to 59% on average.
Singapore

Indonesia

Malaysia

51%

Banks that understand what makes their customers tick are well positioned to overcome some of the challenges in the region. For example, online banking is one way to get around problems with operational inefficiencies. Customers who manage their banks accounts from their desktop computer, tablet or cell phone do not need to worry about making frequent trips to the branch or long wait times once inside the branch. In Singapore, more than half of Mass Affluents consider online banking a key factor in their choice of provider, compared to 37% in Indonesia and 32% in Malaysia. Performers and Maximalists in Singapore log into their bank accounts at least once a week from their desktop computers or tablets, while Traditionalists tend to use their cell phones. In Malaysia, Traditionalists and Maximalists value the ability to log into their accounts using all three options: desktop computers, tablets and cell phones.
25% 17% 9%

26%

23% 14%

13%

13%

Time to approve/deliver products

Staff know-how and competence

In-branch waiting lines

As in telecommunications and consumer goods, social media is becoming a deciding factor for consumers of financial services. Between one-third and one-fifth of all consumers in the three countries examined expect their bank to communicate with them through social media. The trend is particularly strong in Indonesia, where more than 80% of Mass Affluents use social media more than once a week, 25% of them spending more than 2 hours a day on such sites. Status Seekers and Hedonists have the highest use of social media with regard to looking for information and opinions about financial services providers. Thus, 50% of Hedonists and 43% of Status Seekers in Indonesia turn to social media to find out what other people think about such companies or to give their own opinion, compared to 32% on average for the entire Mass Affluent segment. In Malaysia, 31% of Hedonists and 36% of Status Seekers do so, compared to 29% for the entire segment. Banks that engage with social media and develop their presence there thus stand a better chance of capturing these segments. Of course, tailoring your marketing to appeal to customer values should not be a substitute for dealing with poor operational efficiency. Irrespective of their value profiles, customers in all
F10

Source: Roland Berger Strategy Consultants, SEA Mass Affluent Study

STUDY 33

three countries send a very clear message to banks. When asked about the one thing their banks should improve, more than 50% of Mass Affluents in Singapore said in-branch wait times, compared to almost one-third in Indonesia and just under 20% in Malaysia. The second most common area for improvement is the time taken to approve and supply products, cited by 30% in Indonesia, 25% in Malaysia and 12% in Singapore. These expectations are shared across customer value profiles and banks: None of the major banks performs significantly better than the others. Again, this indicates clear room for differentiation. The third most commonly mentioned area for improvement is staff competence. Mass Affluents want to deal with employees who are knowledgeable. This will be especially important as banks develop more targeted and better differentiated offers, as they will need people on the front line who can match appropriate offers to target segments. Our investigation found significant differences between countries and players here. Thus, over 20% of Mass Affluents in Malaysia mentioned staff competence as the most important area for improvement, compared to just 12% in Singapore and under 10% in Indonesia. Most banks in the region currently have under-differentiated brands. When it comes to matching brand values to client values, bank brands are much less differentiated than consumer goods brands. To some extent, this lack of differentiation is understandable: Scale is important for efficient banking and most banks in the region have been targeting as many potential customers as possible. Exceptionally, however, some banks have managed to associate their brands clearly with one or two specific value profiles. This is not something that all banks can do, nor should they attempt to. Niche players and banks with small market shares should select a particular segment of Mass Affluents and align their brand with it. Larger banks that are pursuing all segments should tailor specific offerings to the different customer value profiles, and adapt their marketing and communication appropriately. Alternatively, they could create subbrands appealing to specific value profiles.

F11

How consumers judge their bank

Importance of different criteria (% versus average population)

Recommendation Satisfaction Trust

HeDOnIsTs

perFOrMers

MaXIMaLIsTs

18% 19%

12%

3%

2%

-2%

-1% -4% -6%

essenTIaLIsTs

TraDITIOnaLIsTs

MInIMaLIsTs

10% 7% 4%

-3% -7%

-2%

-4% -10% -14%

Source: Roland Berger Strategy Consultants, SEA Mass Affluent Study

ROLAND BErGEr STRATEGY CONsULTANTs

isLAMiC bANKiNG

Southeast Asia is home to many Muslims: They make up 88% of the population in Indonesia, 60% in Malaysia and 15% in Singapore. Here, Islamic banking banking that is based on the principles of Sharia Law using risk-sharing loan models to comply with rules prohibiting lending money with interest plays an important role. Our investigation reveals that Islamic banking products are important to one-third of Mass Affluents in Malaysia and Indonesia. However, only a small proportion of these consumers actually have such products: 17% in Malaysia and just 5% in Indonesia. The gap between the number of people who want to buy Islamic banking products and those who have such products indicates that banks are missing a key opportunity here. Improving their Islamic banking products and targeting offers toward this population would help them capture an important segment of the market. Once again, this is an area where consumer value profiles and data on consumption behavior can be very helpful. In Malaysia, for example, Minimalists place great importance on Islam-compliant products. However, these same consumers have a low affinity with online news and marketing, so banks offering such products should advertise them in the traditional media instead.

F12

Ratio of Muslims in Indonesia and Malaysia who buy Islamic products (%)

InDOnesIa

88%
Muslims Muslims who buy Islamic products

5%

MaLaYsIa

60%
Muslims who buy Islamic products

Muslims

17%

STUDY 35

INSURANCE: EXPLORING NEW CHANNELS

Insurance has much in common with banking when it comes to value profiles. Thus, consumers' value profiles have a direct influence on which products they hold. Insurance shows even greater potential for growth than banking in Southeast Asia. This is due to the low current rate of penetration of insurance products among Mass Affluents. In Indonesia, for instance, only 18% of Mass Affluents have health insurance, 16% life insurance and less than 10% motorbike insurance. In Malaysia, 24% have health insurance, 24% life insurance but only 9% property insurance. Singapore is something of an exception. Its penetration rates for insurance products are closer to those of more developed markets. Nevertheless, it still shows some potential for growth in life insurance (currently held by 76% of the population) and health insurance. Non-life also shows some potential. In the past, Singaporeans like many Asian consumers have shown far less appetite for this type of product. Thus, only 42% of Mass Affluents in Singapore have property insurance, although nearly 100% own property. Restrictive government policies on car ownership, including high duties and the requirement for vehicle owners to acquire a very expensive Certificate of Entitlement, explain the low penetration rate of car insurance compared to developed markets, at just 42%. Our findings on the intention to buy among Mass Affluents in the three countries reveal significant growth potential, both from signing up new customers and selling additional products to existing customers. Intenders are most interested in health insurance: In Singapore, 68% of Mass Affluents, a large number of them aged 45 and over, say that they are looking to buy a new health insurance product in the next year. This compares to 32% in Indonesia and 15% in Malaysia.

F13

Traditionalists 78%

Overall penetration of life insurance per country and segment

Performers 79% Hedonists 67% Essentialists 73% Minimalists 76% (% of respondents)

Maximalists 77% Traditionalists 50% Performers 22%

sInGapOre

Minimalists 19%

Status Seekers 20%

Hedonists 20%

Maximalists 30%

MaLaYsIa
Traditionalists 22%

Hedonists 14%

Emotionalists 20%

Performers 18%

Source: Roland Berger Strategy Consultants, SEA Mass Affluent Study

InDOnesIa

Minimalists 8%

Status Seekers 10%

Overall 16%

Overall 24%

Overall 74%

ROLAND BErGEr STRATEGY CONsULTANTs

To capture these new customers, insurance companies should diversify their acquisition channels. For example, selling life insurance products through banking networks known as "bancassurance" has become a popular strategy in recent years. The Indonesian market in particular has attracted much attention from international insurance companies, with leading players competing to strike a deal with the largest Indonesian banks. In Malaysia, the trend is also well established among major players, and it is growing strongly in Thailand, too. Our investigation reveals that Mass Affluents are prepared to buy insurance products through other distribution channels than agents, the traditional and still the most popular channel. For example, in Malaysia, 47% of respondents who plan to buy health insurance would be prepared to do so at a branch of their bank, as would 55% of those who plan to buy car insurance. In Singapore and Indonesia, too, many Mass Affluents would consider buying insurance at their bank. In Indonesia, for example, 40% of those who intend to buy health insurance would be happy to do so at their bank. Our investigation also revealed some surprising distribution channels. In Malaysia, 35% of respondents would consider buying health insurance at a physician's practice or clinic, for instance. In Singapore, the Internet is gaining ground as a distribution channel. Thus, 22% of Mass Affluents who plan to buy health insurance would be prepared to do so online, as would 38% of those planning to buy vehicle insurance. Auto dealers are also considered acceptable distribution channels for vehicle insurance in all three countries: More than one-third of respondents would be happy to buy their car or motorbike insurance there. As the Southeast Asian insurance market matures, it is likely that consumers will be increasingly willing to buy insurance products through alternative channels. Different customer value profiles favor different distribution channels. Insurers should therefore consider both channel preferences and customer values when devising their marketing strategies. This will enable them to effectively target consumer segments and boost sales of their products.

F14

Overall penetration of insurance products per country

Respondents (%)

Indonesia

Malaysia

Singapore

74%

74%

50% 42% 36%

24% 18% 16%

24% 20%

7%

5%

Accident

Health

Life

Source: Roland Berger Strategy Consultants, SEA Mass Affluent Study

Car

STUDY 37

F15

F16

Situations in which respondents would subscribe to a car or motorbike insurance contract

Respondents (%)

Situations in which respondents would subscribe to a health insurance contract

Respondents (%)

54%

56%

43% 35% 37% 34% 36% 33% 26% 19% 19%

43% 36% 35% 31%

35%

18%

16% 8% 9%

16%

5%

3%

4%

At the office of an insurance agent

At the office of an insurance agent

At the clinic or doctors

At the bank branch

At the bank branch

Over the internet

Over the internet

At car dealers

ROLAND BErGEr STRATEGY CONsULTANTs

CONCLUsiON

TAKE ADvANTAGE bY UNDErsTANDiNG CONsUMErs AND DEvELOpiNG TAiLOrED MArKET sTrATEGiEs

STUDY 39

Mass Affluents in Southeast Asia are a fast-growing group who are driving consumption across the region. Their appetite for everything from clothes to automobiles is expanding on a daily basis. But they do not all want the same things: Indeed, their needs, desires and aspirations differ substantially. To capture these new consumers, companies need to understand them and develop tailored market strategies. This means looking at every aspect of these consumers: their values, their demographic data, and their relationship with particular industries. The RB Profiler is a valuable tool here. In our investigation, we used it to segment Mass Affluents in Southeast Asia for three variables: values, demographics and industry-specific data. We identify four key consumer segments found in all three countries investigated: These segments cannot be targeted with a single approach across the region. In addition, we identify four additional segments occurring in just one or two of the countries: These segments require a country-specific approach. With the help of the insights generated by the RB Profiler, companies operating in the region can identify the consumer segments within the Mass Affluent group that have the greatest relevance for their brands. They can then adjust their go-to-market approaches to appeal to precisely these segments. By balancing standardized approaches across segments with more tailored strategies within certain markets, companies will put themselves in a strong position to take advantage of Southeast Asia's growth.

ROLAND BErGEr STRATEGY CONsULTANTs

AUTHOrs OF THE sTUDY

Philippe Chassat Partner philippe.chassat@rolandberger.com Damien Dujacquier Principal damien.dujacquier@rolandberger.com

Dorit Posdorf Principal dorit.posdorf@rolandberger.com

Benjamin Cistecky Senior Consultant benjamin.cistecky@rolandberger.com

Charmain Tan Consultant charmain.tan@rolandberger.com

CrEDiTs
Page 2: Nafise Motlaq, onasia Page 6/7: Hans Zaglitsch, agefotostock, Avenue Images Page 20/21: Stephen Morrison, dpa, picture alliance Page 28/29: Joakim Leroy, agefotostock, Avenue Images

SOUrCEs
World Bank IMF Economist Intelligence Unit

STUDY 41

ROLAND BErGEr STRATEGY CONsULTANTs

For more information, please visit: www.rolandberger.asia If you have any questions, please contact us at: RBSEA_marketing@rolandberger.com Roland Berger Strategy Consultants Pte. Ltd. 50 Collyer Quay, #10-02 OUE Bayfront, Singapore 049321 Phone +65 6597 4530, Fax +65 6597 4531 PT. Roland Berger Strategy Consultants Sampoerna Strategic Square, South Tower Level 30, Jl. Jendral Sudirman No. 45 Rt 003 Rw 004, Karet Semanggi, Kec. Setiabudi, Jakarta Selatan 12930, Indonesia Phone +6221 29930 814, Fax +6221 29930 965 Roland Berger Strategy Consultants Sdn. Bhd. 39th Floor Menara Standard Chartered, 30 Jalan Sultan Ismail 50250 Kuala Lumpur, Malaysia Phone +603 2203 8600, Fax +603 2203 8601

MAY 2013

STUDY 43