Marketing in Indonesia: Understanding the Indonesian consumer
Nestled amongst Southeast Asia's burgeoning economic landscape, Indonesia is fast emerging as an epicenter of vast untapped opportunity and economic growth, beckoning businesses to explore this rich, untapped growth potential with expansion inside its borders.
With a fast-growing economy expected to be the fourth largest by 2050 and a projected GDP of USD 10.5 trillion, Indonesia offers fertile ground for enterprises seeking to extend their footprint and a lucrative landing zone for entry into the APAC market.
However, amidst the allure of this dynamic market, it is paramount for businesses to carefully discern the nuanced intricacies of Indonesian consumer behavior with a fine-toothed comb to chart a course toward sustainable success in this exciting Asian market.
To provide a healthy overview of what makes the average Indonesian consumer tick, here are six salient tips to help you understand the base motivations that drive Indonesian consumer behavior. If you are a marketer or business with a vested interest in this region, the following guide will help you get into the right mindset at the beginning stages of thinking about your target personas.
Let's get into it!
1. Embracing the Collective Mindset
First of all, a big kahuna. This first point is crucial to understand as it will most likely involve a foreign marketer or business (especially if they hail from a Western country) having to adapt to an entirely new consumer mindset than what they have, one, been brought up in as a consumer themselves and two, will mostly likely contradict how they were educated as marketers in Western higher education.
Like most other Asian cultures, Indonesia is a collectivist culture. For a quick and dirty explanation of what that is: a collectivist culture prioritizes group needs and social harmony over individual needs and is characterized by strong conformity to societal and cultural expectations of the individual.
These values play intrinsic roles in shaping Indonesian consumers' behaviors, patterns, and attitudes and significantly impact their purchasing decisions.
Decision-making processes are intricately woven within the threads of consensus in Indonesia, with recommendations from friends, family, and greater social and cultural ambassadors wielding significant influence on an individual's purchasing decisions all the way from the awareness stage to eventual conversion and loyalty.
Understanding and aligning with this collective mindset is paramount, shaping the design of customer journeys and sales funnels and selecting which marketing channels to utilize in order to resonate authentically with Indonesian consumers.
2. Navigating Price Sensitivity
Despite rapid gains in Indonesians' average purchasing power within the last couple of years, the average monthly salary for Indonesians still hovers around IDR 4,000,000 to IDR 5,000,000 (approximately USD 280 to USD 350).
Depending on the product or service being marketed in Indonesia and the desired target audiences’ socioeconomic level. A careful consideration of price sensitivity must be embraced when entering the Indonesian market. In a landscape marked by extreme price consciousness, Indonesian consumers are highly adept at navigating the digital realm in search of value-driven propositions.
Indonesian social media influencers who specialize in deal hunting and finding in-demand products for super low prices are a big deal in the country, with some reaching hundreds of thousands of followers.
Price comparisons and bargain hunting are pervasive behaviors, underscoring the importance of strategic pricing and impactful marketing promotional campaigns when going to market. Customizing pricing strategies to align with competitor benchmarks and leveraging targeted promotions are essential tactics to capture the attention of price-sensitive consumers and foster brand loyalty in Indonesia.
3. Championing Local Products and Brand Image
Indonesians are proud and patriotic toward their country, and this attitude extends to their homegrown brands and services.
Indonesian consumers exhibit a strong affinity for homegrown products, driven by deep pride in their cultural heritage despite the aspirational "pull" that international brands (especially beauty, health, and fashion) still have on the local collective mindset.
International companies expanding into the country often overlook this trust for local brands, but this strong affinity for local Indonesian brands still holds sway over the majority of consumers in 2024.
Global companies can utilize this to infuse their offerings with local-style branding and imagery that resonates with Indonesian sensibilities. Foreign businesses can forge deeper connections with their target audience by embracing a local identity and crafting compelling narratives that celebrate Indonesian values.
4. Harnessing the Power of Digital Influence
Digital is big in Indonesia. How big?
Indonesia has 212 million internet users out of its 276 million population.
The country has 167 million active social media users, the third highest in Asia, after China and India, and the largest amount in Southeast Asia.
TikTok has 109.9 million users over the age of 18 in Indonesia, that's the second largest user base in the world after the United States.
Indonesian e-commerce company Tokopedia used Instagram to double its sales for certain products and increase its product page views by 67%.
Social media advertising makes up 41% of the country's total digital advertising expenditure.
Yeah, it's safe to say that digital, specifically social media, is a big deal in Indonesia. And for any aspiring business marketing its products or services in-country, a competitive digital strategy and effective social media footprint are absolutely essential for success in the country.
There are no ifs or buts; it's sink or swim. If you're not going to dedicate proper resources to effective digital marketing in Indonesia, then you may as well call it a day now.
Against the backdrop of a completely digitized landscape, Indonesian consumers flock to online shopping channels and social media platforms as primary sources of initial product or service awareness, discovery, and engagement. Leveraging the influence of social media influencers, who are perceived as trusted confidants, emerges as a potent avenue for brand advocacy and consumer engagement for marketers and businesses to tap into.
As businesses navigate the digital terrain, prioritizing influencer partnerships and embracing digital-heavy omnichannel marketing strategies are essential to seize opportunities and drive consumer engagement in 2024.
5. Catering to Aspirational Desires
Luxury brands, seen as aspirational objects of desire for all socioeconomic classes, are big business in Asia, and Indonesia is no different.
Indonesia's growing middle class is fueling a surge in demand for luxury goods, with international brands expanding their presence in the country's major cities.
In 2024, the Luxury Goods market in Indonesia is projected to generate a revenue of US$1,806.00m. With an expected annual growth rate of 3.67% from 2024 to 2028,
Bags account for 62% of online transactions in Asia, with Balenciaga, Fendi, and Longchamp topping the brand list in Indonesia.
There has also been a notable shift in buying trends, with a 30% increase in pre-owned luxury goods sales. Chanel, Hermes, Louis Vuitton, and Prada top the brand list in this category, particularly in the sale of bags and shoes.
This national obsession with the attainment of aspirational products from foreign countries can actually be utilized by any marketer or business, no matter the cost or perceived value of the product or service they are marketing.
To put it bluntly, anything that arrives into Indonesia from a foreign country and labelled as a foreign brand is immediately perceived in the eyes of the average Indonesian customer as "exclusive" and "valuable".
As a quick case example, certain local Indonesian supermarkets such as Grand Lucky, Kem Chicks, and Ranch Market have specifically tapped into this particular local mindset with great success. These local supermarkets have one common denominator in that they each market a unique value proposition to their customers of offering a more premium shopping experience and offering "exclusive" imported international products such as olive oil and cheeses (a lot of the time, these imported brands would be considered every day or even economy brands outside of Indonesia) to middle-class Indonesians.
Catering to the aspirational mindset of Indonesian consumers and the local perception that anything considered "foreign and imported" is an exclusive and highly desired item, even if it is a low-cost product, is a key strategy to keep in mind when conducting any marketing endeavors in the country.
6. Respecting Local Traditions and Religious Beliefs
Deeply rooted in tradition and faith, Indonesian consumers deeply revere cultural heritage and religious principles. This necessitates a highly nuanced approach that respects and integrates local customs into product offerings and business marketing communications.
With Indonesia's status as the world's largest Muslim-majority country, adherence to Halal standards and consideration of Islamic traditions and culture is imperative, underscoring the importance of cultural sensitivity when planning and conducting all consumer engagement strategies within the country.
Certain consumer goods sectors, such as alcohol and contraceptive companies, need to be extremely prudent in how they market their products in Indonesia to avoid consumer backlash.