With a large population, Indonesia holds tremendous potential for local startups and foreign enterprises looking to break into the market.
Social media and internet usage rates are rising fast, with one survey recording 143.26 million active internet users in 2017 – a 7.9 percent increase from the previous year. Along with a growing middle-and-affluent-consumer class, the country is dominated by young people who are tech-savvy and eager to spend their money on new products and services.
These results are consistent with the findings of a 2018 study, which showed that Indonesia is now one of the world’s fastest growing mobile commerce markets.
The challenges of diversity
Yet Indonesia also presents unique stumbling blocks for business owners and marketers.
For starters, the country’s archipelagic structure means that 265 million people are scattered across 17,500 islands, each one with different tastes and preferences. This level of diversity means that marketing tactics that work in the capital city of Jakarta, for example, may not necessarily work in another urban center like Surabaya.
In fact, McKinsey & Company found that consumer behavior in Surabaya was more likely to be influenced by branding and image compared to the consumer behavior in Jakarta. Consumers in Surabaya are also reportedly twice as likely than consumers in Jakarta to seek recommendations from family and friends before making purchase decisions, particularly when it comes to fast-moving consumer goods (FMCG).
One thing for sure is that more Indonesians are going digital. Growth is especially pronounced in the smartphone space, with 47 percent of the total population regularly accessing the Internet on some kind of mobile device. Of that number, 80 percent use their mobile devices to look for information about products and services.
The Strong Growth of Digital Advertising
The demand for digital advertising, banner ads, video ads, and native ads, will become stronger as more Indonesian have access to internet service through either desktop and mobile devices.
Despite the internet penetration is only 54.68% in 2017, according to The Association for Internet Service Provider in Indonesia, the total number of internet user, nearly 144 million, in Indonesia signifies a lucrative opportunity for digital advertising.
The outlay for mobile ads will account for nearly 50% of total digital ads spend in 2019, reaching USD 312 million. As buying a decent smartphone is no longer a luxurious choice, mobile ads become the very first touchpoint for advertisers to enter Indonesian user’s personal space.
The emergence of more personalized ads on mobile devices is anticipated. More Internet user data will be collected from smartphone use. The next problem for Indonesian e-commerce to solve would be how to harness the user data to drive more conversions.
In addition, ads targeting is going to shift from traditional demographic targeting to advanced behavior targeting. The transformation of targeting approaches will significantly increase the effectiveness of digital ads and drive more transaction.
Micro Influencers Marketing Becomes Popular
Influencer marketing is the next holy grail for Indonesia companies to push sales to another level. By leveraging celebrities’ influence on their huge fanbase, companies have one more secret weapon to stimulate the stagnant growth of revenue.
However, not every company, especially for SMEs, can pay a celebrity millions of dollars simply for a one-time campaign. This amount of money is enough for a startup or small company to run the operation for several months. Actually, turning to a micro-influencer, those owning 50K followers or below, in a specific field are more realistic and more cost-effective. While these micro-influencers may not possess as many followers as popular celebrities, their fanbase is far more focused and more likely to make conversions.
Unlike megastars, these micro-influencers seem much closer to our daily life. The grassroots spirit they represent shows greater authenticity and reliability, which people can easily resonate with. Exactly like friend’s recommendation is always more powerful than what TV stars boast of.
The importance of Influencer marketing is well recognized. With more micro-influencers mushrooming up in major platforms, such as Instagram and Vigo, it’s widely believed micro-influencers will soon become the mainstream in 2019.