Education Marketing: Hunting the world’s rich

12/01/2010

The world’s well-off – How many and where are they?

The big question currently bugging education marketers across the world, especially the ones in fee-charging higher education, is if there will be enough well-off people to afford their prices right away? There is of course no straight-forward answer to this. But by looking at certain global wealth statistics you can get an indication about the size of the world’ wealthiest classes, the dream target group of any education marketing specialist. But which way can you tell where there is a higher chance for marketing expensive educational products and actually selling them too?

Consulting companies such as Merill Lynch, Capgemini, McKinsey, Bain & Co. and the Hurun Report from China are delivering annual wealth statistics of different sorts measuring income and asset levels of the better-off in certain countries and world regions. Another method of gathering statistics about high-spending patterns is to study reports from the luxury goods industry to see which regions the makers of the world’s most expensive goods are currently focussing on and how they are faring in different world regions. Yet, luxury goods are only an indicator for medium-term changing spending patterns in certain regions, since education can also depend on other factors than pure local spending habits such as population size, labour-market fluctuations, bank-lending criteria, extended-family savings and in some countries migration trends.

One of the most useful statistics reports giving an overview of global wealth is the Merril Lynch-Campgemini World Wealth Report in its 13th edition in 2009, issued on 24th of June. According to its report about high net-worth indivuduals ( HNWIs, those on more than $1m besides their home and collectable items) the world over, it’s share of the globe’s population is now roughly 0.15% or 8.6m people, down from 10.1m in 2008. They are unevenly scattered around the world with the US still firmly in the lead at about 2.5m followed by Japan and Germany. Spectrem Group puts the number of millionaires in the US at 6.7m but their statistics only measures general wealth not investable assets. However, with China, a new player is fast emering, in 2009 overtaking the UK and now ranked number four country in the world’s rich list. Both consultancies are expecting China to be taking the global lead in 2013, though. Other world regions or countries such as Latin America or Russia are still trailing behind with Latin America now in fourth place behind North America, Europe and Asia-Pacific in the share of the globe’s wealthy and Russia at 97,000 HNWI’s around one fourth the size of the Chinese market with India rapidly closing in on Russia at 84,000 HNWI’s.

Following the world’s luxury makers news and wealth reports from McKinsey, China’s Hurun List and Bain & Co. you can get a similar picture of changing wealth-distribution patterns with East Asia and above all China establishing itself firmly in the lead or even rescueing revenues of luxury-goods producers. The luxury good market share is currently fimly divided between Europe (the leading market globally at 38%), the Americas (33%), Japan and Asia-Pacific (the latter two on a par, both at 12% market share) a report by McKinsey and Bain & Co. says. Yet the growth patterns on luxury spending are a breathtaking year-on-year growth of 15% in Asia-Pacific and 8% in the rest of the world with Europe at only 5%, the Americas currently 0% and Japan in the doldrums with negative growth of minus 6%. Bulgari, a luxury goods maker, issued a press release on October 9, 2009, saying that it’s strongest markets had been Asian economies, especially China. Japan however, had been down for Bulgari by 29% in 2008. However, it will have to be said that luxury goods such as Bulgari hand-bags, or Gucchi sun-glasses are sold in a different way than a potential “luxury” of education abroad. Yet, the term wealthy classes has different faces in various parts of the world.

...and who are they?

The world’s distribution of wealth into different age groups varies from continent to continent and sometimes even from country to country within continents. Whereas in Japan, according to McKinsey as well as Bain & Co. the the percentage of those whose income is higher than around 60,000 euro per is largely based on senior earners between the ages of 45 to 66 (80% of all earners in the target group) it is exactly the other way round in China, where almost 80% of all Chinese earning near 25,000 euro a year are younger than 44. In the US the distribution pattern of younger and elder wealthy is 30% against 70%, similar to most Western European countries where wealth is usually highly likely to be amongst older earners.

This would also mean that in China as compared to the rest of the world, education marketers will increasingly have to target a younger wealth base whereas in the rest of the world, the money-making deciders are usually in the parent or even grand-parent target group. This would naturally mean that marketers for education, despite having to market to a young target group to trigger the original idea of studying abroad, would find their customers’ senior stakeholders i.e. parents to be much younger well-offs (and maybe harder to convince) than conservative and older parents of richer classes in other parts of the World. Yet, this could also mean that younger parents may be choosier about their children’s education choice, may have been abroad themselves and may be very difficult to judge from a marketers point of view and thus turn out to be more sophisticated shoppers and more fickle in general. So marketing to the wealthy may also get a turn-around soon, especially when word-of-mouth amongst parents may not be as important any more than convincing the younger parent generation about education selections for their children. And also, the numbers of billionaires and ultra-HNWIs is changing the world over, despite heavy lossess in 2008, poised to grow especially in threshold economies of Asia, Russia and to a smaller extent Latin America at still only about 1,000 in a global total again in 2009. However, are new wealthy class of sorts is coming up for marketers, those earning a beyond a certain income threshold or even those earning a salary abroad but sending money home?

New middle classes and international migrants, the new wealthy of sorts?

Despite the thinking of many marketers that there is only real wealth to be tapped into, there are also new social classes coming up that can increasingly afford education abroad by saving or by putting money together to send a child abroad. If you consider someone who earns between $12 and $50 a day as middle-class in Western world terms (this is roughly the average income ceilings of Brazil and Italy respectively), your picture suddenly changes when you move to emerging economies such as Brazil, China or India, where through a generation of savings or families putting money together wealth of new sorts is suddenly created. The World Bank estimates this class to have been around 400m-strong in 2005, but expects it to grow to about 1.2bn by 2030, a generational jump that may make a difference to many education marketers too. Also, new lending tools such as online-based peer-to-peer lending (like Qifang in China) are increasingly popular to fund studies, although there, loans only average around $400 so far. Another source of money is increasingly being used for study-abroad namely money sent over by migrant family members who are earning their monthly wage in a rich-country currency and keep sending it over or saving it for the education of a familiy member to come to the same country. Numbers of migrants are better researched than pure income statistsics and are thus easier to come by.

Both OECD and World Bank put the numbers of people working abroad and sending money home at about 200m globally, with a lot of movement not actually between rich and poor countries but between the poorest and the less poor. Yet the flow of money estimated by the World Bank comes in at around §328 billion with India raking in a whopping $52bn alone, more than foreign direct investment to the whole country. Asia itselfs rakes in about $160bn a year, Latin America coming in as the second-biggest region at almost $60bn and Europe and Africa together coming in at about $55bn and the rest of remittance money loosely scattered all over the world. So, in some countries such as India, Mexico, China and Poland with a big diaspora population, there is rising potential to also find families who only recently got richer than the other locals around them. And a lot of migrant-sending families weren’t dirt poor either before sending abraod a member of their family. Although education may have already been on the agenda for the original migrant, it will definitely be on the agenda for family members depending on the migrant’s remittances and it will most likely be the intention of the money-sending person too. But it will have to be said that, at 3% of the whole global population, the migrant population of the world has remained stable for years despite increasing volumes of people going abroad, the OECD said in a report in June 2009. And migrants also suffer from unemployment faster than local workers and are often dependent on visa regimes of their host country that allow them to be easily sent home once economies turn upside down. Yet, migrants and new middle classes are the new rich of sorts.

How will educators get their hands on the money?

There are numerous ways of tapping into the wealth of the world, especially now that wealth is not evenly distributed amongst age groups all over the world. Whereas it may have just been enough in the 1990s to know a high-class education agent with connections in his social class (which may still be somewhat true in some European, Eastern European and even Asian markets) this may change with the change of wealth distribution. If it sufficed to talk to an over-50-year-old millionaire about the choice he would have for his children years ago and just wait for word of mouth to spread amongst the same people, this may no longer be the case with younger well-offs who already have their own epxerience abroad or even a migrant-dependent family who already know how things are in the richer parts of the world. Marketers should never underestimate the power of existing knowledge and this also includes improved language knowledge of younger parents who can read news and information themselves rather than getting all their information just through agents.

It means that now the trigger may have to be first pulled amongst the younger generation which again means talking to the students in schools and universities themselves and then only starting to engage their maybe-wealthy parents or even the extended family of the new middle classes. Also, tapping into the migrant markets closer to your institution at home may work but could be a bit more difficult to organise. But just by hoping to tap into the rich or newly rich by knowing an agent who comes from that class and then waiting for word of mouth to spread in the same circles, education marketers may be missing a lot of the market or may even end up being overtaken by events.

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