India’s market size and diversity
demands long-term commitment
Senior Vice President, Strategy Planning
One of the most important insights about India is:
There is no universally applicable and enduring insight.
Let me explain.
Given the size, growth, and complexity of India, “Newton’s Law of Consumer Trends” applies. For every consumer trend, there is an opposite, not necessarily equal, trend. So while many consumers are concerned with preserving tradition, there are also those who desire the new, exciting, and international. Obviously, the same individual consumers could sometimes advance both trends, varying their behavior according to the occasion.
Similarly, 30 percent of Indian consumers are willing to spend more on products they perceive to be “better,” while consumers also trade down for products that do not have image connotations. And while Indian domestic air travel witnessed a high 23 percent increase, twice the growth rate of China’s domestic air travel, Indians still fly less than Chinese and even less than neighbors in Pakistan and Sri Lanka!
Contradictions prevail among Indian consumers. in many categories. While the fast food industry is growing at 25 percent, pizza consumption is growing at only 3 percent annually, far lower than other countries. India contains under-penetrated potential waiting to be unlocked. From a marketing point of view, this represents an interesting paradox with opportunity at both at the top and bottom of the pyramid.
Discretionary spending grows
Traditionally, increasing market penetration has been the biggest driver of growth. But this is set to change. As Indians climb the economic ladder, a mammoth 800 million people, 2.5 times the population of the US, will belong to the consumption class ($4,000 average annual household income) by 2025.
Similarly, the affluent class will expand to 23 million by 2025. With rising affluence, the frequency of purchase and spending occasion will rise in importance. The composition of spending will also change, as discretionary spending will take a larger share, and a higher chunk of income will be spent on looking and living better. Some recommendations:
- Brands need to embrace contradictions
Lakmé, a cosmetics brand, straddles the extremes of contemporary beauty and fashion, and tradition (The Lakmé name is a derivation of the Hindu goddess, Lakshmi). It communicates to each of its consumers with a foot in each world. Lakmé successfully balanced its brand heritage with its contemporary presence, by establishing Lakmé Fashion Week, the brand’s own fashion event, ensuring that the brand is the centerpiece and not an accessory at the event.
- Brands need to adapt and adjust
MasterCard redesigned its business model, letting consumers “push” cash from their cell phones to merchants, making cash transfer simultaneous with the purchase. The brand expects to invest $800 million over the next several years, as India transitions from a cash to a digital economy.
Tapping the unexplored
With 1.3 billion inhabitants, India offers scale. Building scale requires serving the needs and interests of different segments of the population. Consumer spending in emerging cities (population less than 1 million) is growing 14 percent annually. These people have high ambitions, purchasing aspirations, and a strong value-for-money orientation. But they are often constrained by product availability. Consumers in both large and emerging cities desire “the good life.” For brands opportunity lies in helping them achieve it.
- Brands need to meet desire with affordability
Reliance Jio changed the telecom game in India. While the average smartphone price declined to $130 thanks to the Chinese brands, the true potential could be harnessed only if combined with high speed data. In the first six months of launch, Jio (offering free voice and 4G data at $5 for 30GB) acquired 100 million subscribers, rapidly taking market share away from incumbents.
- Brands need to reframe the opportunity
Truecaller, a caller ID mobile app, had captured India’s urban smartphone users. However, as growth plateaued, Truecaller shifted its focus to emerging towns and new smartphone users. By positioning itself as an identifier of opportunities, rather than identifier of calls or spam, Truecaller more than doubled the app downloads in these towns.
There may not be a universal and enduring insight that leads to brand success in India. But the opposite notion seems to be true. Brand opportunities are abundant within India’s complexity and contradiction. Success rewards brands that take the time to find the opportunities and respond in ways that a relevant for Indian consumers.
Brand Building Action Points
1. Bring an open mind
Do not be tied to traditional brand-building assumptions. A master brand strategy is not always the formula for instant success. Brands need to worry less about sharp focus in India and instead learn to stretch and expand across dissimilar categories.
2. Think and act regionally
For international brands, it is useful to think of India as Europe, a large geography with states that are both unified and distinctive.
3. Prepare for a marathon, not a sprint
In India only noodles and coffee are instant. Winning requires preparing for a long distance marathon, bringing in discipline, patience, and a large heart to overcome challenges.