Vol. XVIII, No. 236-A
Saturday, June 25, 2005 MANILA, PHILIPPINES

Tapping OFW markets

By ROBERTO E. DE VERA, Ph.D.
Executive Director
Urban Strategies Group
School of Economics
University of Asia and the Pacific

Companies wanting to bolster their revenues may want to look at the largely-untapped overseas foreign workers (OFW) market. The OFW market consists of households that have a family member working abroad who regularly sends remittances home.

Based on the 2000 Family and Income Expenditure Survey (FIES), 2.7 million OFW households spent P460 billion in 2000. In the same year, an OFW households as spending more each month than the average household, P14,418 versus P9,834.

SALIENT DEMOGRAPHIC DATA

To figure out how to tap the OFW market, firms can start by looking at the demographics of OFW households.

For instance, 1.71 million households are in urban areas; 0.95 million are in rural areas. Since urban areas have higher population densities and better transport facilities, firms could find it cheaper to set up distribution networks -- typically sari-sari, department and convenience stores -- in these urban areas. Moreover, urban households have greater access to email and internet services.

To tap these resources, several local entrepreneurs can offer a "pasalubongs-on-line" service. An OFW can visit their website, browse their on-line catalog, make an order for a TV, and charge it to his credit card; then the firm can get the item from its warehouse and deliver it to the doorstep of the OFW’s family.

Then, taking advantage of the fact that most Philippine cities have urban and rural components, firms can use these distribution nodes as springboards from which to market to the rural OFW households.

OFW households can be found in each region. In 2000,

• 53% (1,408,000) of these households resided in the National Capital Region (NCR) (606,000), Southern Luzon (446,000) and Central Luzon (356,000).
• Another 31% (811,000) came from Ilocos (260,000), Western Visayas (216,000), Central Visayas (144,000), Southern Mindanao (101,000), Cagayan Valley (94,000) and Bicol (90,000).
• The remaining 16% (439,000) originated from Eastern Visayas (74,000), Western Mindanao (63,000), Cordillera Administrative Region (CAR) (60,000), Central Mindanao (48,000), Northern Mindanao (42,000), Autonomous Region of Muslim CARAGA (38,000) and Mindanao (ARMM) (20,000).

This clearly shows that firms will need to craft marketing strategies that cater to the different OFW regional markets.

Age Distribution

In terms of the age distribution,

• 48% of OFW household heads are 36 to 55-years-old;
• 13% are 26 to 35-years-old; and
• 37% are 56-years-old and above.

This information can help firms in formulating marketing strategies for these households.

For example, insurance firms should offer plans to OFWs in the second age bracket because they are just beginning their professional careers, and their benefits and monthly premiums are different from those OFWs in the last age bracket. The latter group are in the final phase of their working life and are looking forward to their retirement years. For sure, plans that allow households to save up for their children’s future tuition payments, will attract OFWs in the first age bracket.

Real estate firms are teaming up with financing institutions to do business with OFW households with heads in the second age bracket, who could easily amortize and eventually own their own houses.

Educational Attainment

In terms of educational attainment, 59% of OFWs have not finished high school, 24% have finished it and 17% have earned a university degree.

This may explain why 55% of OFW households are class D and E households, as defined by AC Nielsen.

This means that 1.46-million OFW households have monthly incomes of P15,000 or less. The rest of the OFW households are categorized in the following income classes:

• 836,000 (31.5%) are earning P15,000-30,000 (Lower Broad C);
• 347,000 (13%) are earning P30,000-100,000 (Upper Broad C and Upper C); and
• 16,000 (0.5%) are earning P100,000 and above (A and B).

Because of undersampling of households in the upper income brackets, their size may be underestimated but the relatively larger samples taken for the rest of the income brackets make their estimates more reliable.

Income

In 2000, OFW households earned a total of P582 billion and 32.3% of it came from remittances. The share of remittances to total OFW household income could range from 23.7% in the CARAGA region to as high as 36.4% in the Ilocos region. The latter has the highest share of OFW households to total households of 32.2%, which is even higher than that of the National Capital Region (NCR) at 27.7%.

Still, out of the P187.7 billion in remittances,

• NCR still got the greatest share at 31.6% (P59.4 billion).
• Southern Tagalog (P35.6 billion) and Central Luzon (P23.8 billion) took another 31.6%.
• The six-region cluster of Western Visayas (P15.4 billion), Ilocos (P14.7 billion), Central Visayas (P8.4 billion), Southern Mindanao (P5.2 billion), Bicol (P4.7 billion) and Cagayan Valley (P4.2 billion) captured 28%.
• The rest of the regions received the remaining 8.8% (P16.4 billion).

Thus, the regional markets can be tapped according to the pecking order of OFW remittances.

Several insurance firms and real estate developers have begun selling insurance plans and housing packages to members of OFW households. Some of these firms have gone on road shows abroad to market these products to OFWs. Some firms are gathering data that gives the provincial breakdown of OFWs in a given country because it would help in the design of advertising campaigns.

For the present, these firms are collecting this information from the hundreds of Philippine regional associations in the various countries. For instance, if an ad agency learned that most of the OFWs in a specific US state come from the Bicol region, then it would craft TV commercials that would appeal to the values and culture of this region. Banks might also want to explore the initiative of an OFW in Saudi Arabia to help his fellow OFWs start their own businesses. This OFW is putting into action the belief that OFWs need to begin to a small business while they are abroad so that, when they return home, this business will be stable enough to provide a reliable source of income to his family. Should this initiative be successful, banks could offer loans these OFWs in order to expand their small businesses.

BEST BETS

The table on this page, which gives the top 29 provinces and NCR districts ranked by the number of OFW households, should give firms a lead on the places to which they could bring their business.

These places captured 79.8% of OFW households in 2000. Excluding four districts of NCR, the top ten provinces consist of Pangasinan, Pampanga, Iloilo, Laguna, Cavite, Cebu, Rizal, Batangas, Bulacan and Negros Occidental.

Firms will surely reap additional revenues should they start exploring the possibilities for their products or services in OFW households in these provinces.

Top 29 Provinces and NCR districts ranked by number of OFW households
Province/NCR district	Number of OFW households (HH)	Share of OFW HH to total number of HH
NCR -2nd District	207,938	28.1%
NCR -4th District	176,208	28.4%
Pangasinan	124,956	27.4%
NCR -3rd District	119,058	23.8%
NCR -1st District	103,443	31.4%
Pampanga	99,359	29.4%
Iloilo	98,122	27.0%
Laguna	96,650	24.9%
Cavite	93,620	25.0%
Cebu	89,849	13.8%
Rizal	82,510	24.0%
Batangas	77,739	22.6%
Bulacan	71,818	17.7%
Negros Occidental	59,827	11.7%
Tarlac	52,290	25.8%
Ilocos Norte	51,359	48.0%
Zambales	50,433	38.7%
Ilocos Sur	49,551	42.9%
Davao del Sur	48,285	13.0%
Quezon	45,756	13.4%
Nueva Ecija	43,988	13.4%
Leyte	38,670	11.4%
Bataan	37,242	33.8%
Camarines Sur	36,179	12.2%
Isabela	35,442	13.6%
Benguet	34,481	27.1%
La Union	34,250	26.7%
Zamboanga del Sur	33,706	8.9%
South Cotabato	29,921	13.2%

Questions and reactions can be sent to the author via email.