WE ARE LIKE THAT ONLY(2)

8/7/2019 WE ARE LIKE THAT ONLY(2)

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RAMA BIJAPURKAR

SHE IS ONE OF THE INDIA¶S

MOST RESPECTED THOUGHT

LEADERS ON MARKET STRATEGY

& CONSUMER BEHAVIOR. AVISITING FACULTY AT IIM

AHMEDABAD, AND SERVES AS

INDEPENDENT DIRECTOR ON

THE BOARDS OF INDIA¶S

LEADING COMPANIES.

SHE IS IN FULL TIMECONSULTING WITH HINDUSTAN

LEVER Ltd



CONTENTS

WHAT CONSUMER

INDIA IS� MADE FOR INDIA

� THE MIXED MESSAGES FROM

CONSUMER INDIA� WHY BOTHER WITH CONSUMER INDIA

� UNDERSTANDING CONSUMER INDIA¶S

DEMAND STRUCTURE

� JUST HOW MUCH PURCHASING POWER

DOES CONSUMER INDIA ACTUALLY

HAVE

� SCHIZOPHRENIC INDIA� DEMOGRAPHIC,PSYCHOGRAPHIC AND

SOCIAL DTETERMINANTS OF

CONSUMPTION

WINNING CONSUMER

INDIA� CULTURALFOUNDATION OF

CONSUMER INDIA

� RURAL CONSUMER INDIA

� UNDERSTANDING THE BOTTOM OF

PYRAMID INDIA

� WINNING IN THE INDIAN MARKET



MADE FOR INDIA

µIndia¶ the future growth market of the world«

1991- ECONOMIC LIBERALIZATION

4TH LARGEST GDP ± PPP

POPULATION - OVER 1.15 BILLION

450 MILLION PEOPLE BELOW AGE OF µ21¶



HIGH HOPES & BELIED EXPECTATIONS

The nature of emerging market economies is fundamentally

different.

Emerging markets need not be virgin markets.

Emerging market today are not what the developed markets

were in their infancy.

Countries change around their DNA.



THE MIXED MESSAGES FROM CONSUMER

INDIA

Consumer Demand Journey

� Years of hyped expectation

� The early demand boom

�

The subsequent demand stagnation

The Good And The Bad News!!!!!!!



PERSPECTIVE ON CONSUMER INDIA

A mosaic of tradition and modernity

� India is a confusing market

� India a land of contradictions

� A strange amalgam of old and new



Marketers ask µwhen will India become like someplace else?¶

Truth about India: Consumer India is large, mostly poor, getting less

poor. Rich people are increasing in number and getting richer

Schizophrenic India: 23 languages, geographic and climatic

differences, rich and poor, wide income and developmental disparities.

4 separate economies co-exist from globally competitive infotech

economy to uncompetitive agricultural economy

Hence a common complaint is that doing business in India demands

far greater strategy complexity than any other market of equivalent

size.

WHY BOTHER WITH CONSUMER INDIA?



So why should global businesses bother with Consumer India?

India is a µguaranteed to happen¶ growth story

It has young people and a virgin market

Low country risk: political and social stability

Strong institutions: strong judiciary, legislature

Change confluence: average Indian¶s income is growing, India¶s economic

fundamentals are growing stronger. Rural India is decreasing its dependence on

agriculture, the self employed population is making

India a nation of vibrant achievers

China 2005=India 2015.




India¶s

µtipping Point¶

1.µStrong¶

India

getting

larger2.Changing

shapes of

incomedistribution

3.Stop change in

consumption

comfort and

aspiration

4.Sophisticating

of middle class

consumer

5.Generational

transition 2005

6.Growth of

self -employed

strivers

7.Rural India¶s

metamorphosis

8.Tech comfort

of masses

spreading




RURAL:PERCENTAGE OF EACH INCOME GROUP






Why China and India?

Most global business has stopped asking the question

Should we be in China or India?

They now think in terms of CHINDIA

To describe the to market, which complement each

other and which are both must haves in the portfolio

of any business that consider itself global.



UNDERSTANDING CONSUMER INDIAS DEMAND

STRUCTURE

BRIC report of Goldman Sachs says that in the future, the worlds largest

economies may not be the worlds richest economies.

Marketers in developed economies, however are used to working with an

exactly opposite demand structure- a f ew people consuming a lot each,

adding up to a lot.

Therefore the neither the pricing paradigms nor the cost structure of their

usual tried and tested global business models are asppropriate for Indias

demand structure.



THE GREAT INDIAN ROPE TRICK OF NUMBERS

Size(million households) 7 18 63 66

Number of Two-wheelers 3.8 4.5 6.4 1.8

(millions)




STRUCTURE

There are 3 broad segments in the Indian market:

Premium

Popular

DiscountHowever there are no formal def initions of these-the rule of thumb is

that the top 10% by income of any population constitutes the premium

market. next 30% is the popular segment and the last 60% is the

discount/mass market.

e.g. Shampoo sachet(for which companies require rentless innovation as wellas cost reduction) HUL.

e.g. Baby diapers




STRUCTURE

Consumer classes framework

The Rich

The Consuming class(value for money)

The Climbers (cash constraints benef it maximizers e.g.NIRMA)

The Aspirants(new entrant e.g. shampoo sachet and loose

packet)

The Destitute



Benef it maximizers

The virtuous

spiral of demand

Creation of anywhere

in thee world market

Destitute

The deep well

New entrants

into

consumptionValue growth via

upgradation

Cash-constrained benef it

seekers

Volume growth via more

per capita consumption;

Value growth via occasional

consumption luxuries

Cost-Benef it

optimizers

Value growth

via

upgradation

Figure: Dynamics of future growth


STRUCTURE



JUST HOW MUCH PURCHASING POWER DOES

CONSUMER INDIA ACTUALLY HAVE

Middle class

Between 200 -

500 millionpeople

Consuming class =

Middle class

Who can afford to consume international products & brands as

much as any global consumer«

Sleeping beauty



MIDDLE CLASS INDIA = SHATABDI EXPRESS



SCHIZOPHRENIC INDIA

India is collection of many discrete islands

Example: IT India & Agriculture India

IT INDIA

10 MILLION PEOPLE

5% OF INDIA¶S GDP

GLOBAL OUTLOOK

INFLUENCED BY US ECONOMY

AGRICULTURE INDIA

50 TIMES MORE POPULATION

THAN IT INDIA

GDP 5 TIMES MORE THAN IT

INDIA

MORE LOCAL OUTLOOK

DEPENDS ON THE RAIN GOD

STILL BOTH INDIA GO HAND IN HAND«



IMPACT OF LIBERALIZATION

FROM

TWO INDIASRICH AND POOR INDIA

TWO AGE COHORTS WITH

SOCIALISTIC IDEOLOGY

3 ECONOMIES-

AGRICULTURE,MANUFACTURING,

GOVT.

TO

MANY INDIASMANY SHADES OF RICH, NOT SO

RICH

FOUR AGE COHORTS WITH

DISTINCT IDEOLOGIES

5 ECONOMIES-

AGRICULTURE,MANUFACTURING,

IT ,GOVT, SERVICE

THE CHANGING FACE OF CONSUMER INDIA



DEMOGRAPHICS,PSYCHOGRAPHIC & SOCIAL

DETERMINANTS OF CONSUMPTION

DEMOGRAPHIC DETERMINANT

� SOCIAL-ECONOMIC CLASSIFICATION.

THE SOCIAL & ECONOMIC FACTORS THROUGH

INTELLIGENT USE OF OCCUPATON AND EDUCATION

³PEOPLE LIKE US AND PEOPLE NOT LIKE US´



PSYCHOGRAPHIC DETERMINANTS

THREE TYPES OF MINDSETS

� ARRIVED- PROGRESS,BALANCE OF CULTURE AND ECONOMIC

CAPITAL.THE INDIA¶S SILLICON VALLEY««.

� STRIVING ± FOCUSED ON IMPROVING LIFESTYLE& MAXIMISING

EARNING ALL TIER 2 TOWNS, LUDHIANA

� ESCAPIST- AWARED ABOUT OPPORTUNITIES BUT NOT

KNOWLEDGEABLE OR ENERGETIC ENOUGH TO WORK TOWARDS THEM ..

VILLAGES OF INDIA



ETHNICITY

� DIFFERENT CULTURE SHARING SAME

GEOGRAPHY

� EXAMPL

E:E

KTA KAP

OOR- BALAJI

TELEF

ILMS



HOW TO READ AND PREDICT CHANGE IN

CONSUMER INDIA

FORCE OF

CHANGE

MOLTING CHANGE

MORPHING CHANGE

MIXED

VERDICT

CONTINUITY

WITH CHANGE



THE DNA OF INDIAN SOCIETY



CULTURAL FOUNDATION OF CONSUMER

INDIA

Liberalizations impact on India's culture

From Towards

Genteel poverty

Contentment and stability

(e.g. Hindu rate of growth)

to Learning to earn more

to Striving to keep up with other(e.g. if

china/Korea even Indonesia can, why can¶t we)

Swadeshi to International(e.g. Striving to make world

class goods which can find export markets)

Self reliance(No matter what the price to be paid) to Efficiency(If its cheaper to buy don¶t

make it)

Isolation/aloofness to Exposure to/interaction with rest of theworld

Soft options(doing the popular things) to Biting the bullet(doing what has to be

done)

Obeying authority(e.g. government dictates) to Freedom of choice(e.g. a free market

economy)



RURAL CONSUMER INDIA

Rural India is a potential market that is seeing significant income

growth and employment diversity for the 1st time in its history.

However it is important for companies to understand how best to

segment it, define µmy target Rural India¶, and shape business for it.

Changing structure of rural economy: beyond agriculture.

Per capita rural income has grown at the same pace as urban between

1993-1994 and 2000-2001.

Top quartile of rural India have been discontinuously higher spenders than

the average.

There is considerable pent up demand for goods and services.



UNDERSTANDING THE ³BOTTOM OF

PYRAMID´ CONSUMER INDIA

A business model that can give the consumer allthat they want, at price they want , and still beprofitable ,serving the BOP consumer is seen to

be a part of Corporate Social Responsibility andhence essential and noble , but not part of mainstream business.

³so is there really a fortune at the Bottom of theIndian pyramid for anyone to seriously bother with it?´





Why bother about the ³Bottom Of The Pyramid´ consumer India?

Large value

650 million people

Contributing 30% of national income and 20% of India¶s saving

Total income of BOP consumer India is 1.4 times that of

malayesia,1.6 times of Singapore ,equal to that of south Africa and

90% of Hong Kong

A dollar a day per capita is reasonable income in India.

Sensible investment for the future

Guaranteed income growth

Favorable change in social attitude





Characteristics of BOP consumer

Poor but not backward anymore

They value all kind of productivity devices that help them earn more

e.g. The sales of Two wheelers went up due to availability of public

transport

Poor consumers do complicated value processing , have complicated

financial models.

Poor consumers innovate their own product solutions to make them³value right´ e.g. Missed calls

Poor consumers are technology embracers not technology rejectors.





Understanding spending power and pattern beyond

µAnnual Income¶

Improving buying power

Opening a set of thrift stores

Offering credits

Understanding value processing and budget balancing





Suicidal moves by global companies in serving low income

consumers

Reduce the price by reducing performance

Reduce styling and offer old and obsolete product

³The consumer , as always the wiser rejected all of it´



WINNING IN THE INDIAN MARKET

Mostly organizations financial expectations fromIndia are based on the fact that it is a nearly US$1trillion economy with 1 billion people mostly

young.They forget ,however ,that India is large market madeup of many poor consumers, and insist of deployingtheir tried and tested global strategy, one designed for far richer market with different consumer psyches .

India requires the development of new and innovativestrategy.




Three big factors to getting it right for Indian market

Creating blockbuster relevance

e.g. Waiting for electricity to reach the villages is not the answer .Instead,

the pressing need for lighting through solar energy or nano-technology

at a lower cost before electricity get there.

Creating perceived value advantage

Getting the business economics right

A fundamentally different demand structure from that of the developed markets

A consumer base which expects high functionality at low cost

A patchy ecosystem where all elements of what is needed to support a business arenot equally well developed.

³Strategies which represents µNext Practice¶ rather than µBest Practice¶.´




What Can MNCs Do Differently In Their Approach To Indian

Market?

Don¶t ask µWhen will this market be ready for my ³global´

strategy?', but µWhat is the right strategy to unlock the potential

of this market, given my competencies and comparative

advantages?

e.g. Health care company in the business of making glucometers to

measure the blood glucose level of diabetes

e.g. Johnson and Johnson,e.g. Kellogg's




Recognize and accept the emerging market are not the way

developed market were in their Infancy

e.g. poor rural Indians are not queuing up to buy a black ±

and-white television rather than a color one, or willing to settlefor old styling motorcycles or wait for landline phones before

they µ graduate¶ to cell phones.

The µGlobal vs. Local¶Power struggle

The most persistent business battles being fought in India is

not between competitors in the market place, but between

MNCs head office in the U.S. or Europe and local managers in

India.

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WE ARE LIKE THAT ONLY(2)

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