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Brand Building Best Practices | Spending: Normally thrifty, Indians today spending more at mid-price level

 

Greater affluence and younger

population drive the change

 

Dia Kirpalani

Director, Strategy

Contract India

Dia.Kirpalani@contractindia.co.in

 

The India we live in today is significantly different from the country we lived in twenty years ago. Our consumption has gone up by more than three times in the past ten years and is set for roughly the same rate of growth in the next ten.

 

And with this growth has come a boom in the mid-price segment of goods and services. For a country of price-conscious consumers, what has enabled this shift upwards from low-price to mid-price?

 

The Indian middle class is growing in size, so it’s not surprising to see a growth in the number of products and services that cater to them. Nestlé India manages its entire basket of brands keeping one differentiating thought in mind. The company believes that the Indian market, which has customarily been represented as a pyramid, is actually shaped like a diamond, with the middle class growing in girth and prosperity

 

Couple growth of the middle class with the fact that India is getting younger. The average in India is around 27, 10 years younger than in the US. And young means hungry, aspirational, ambitious and, importantly, more comfortable with technology.

 

These factors are driving a shift in consumer spending priorities, away from the bare necessities—food, clothing, and shelter—that historically accounted for the largest portion of the Indian household budget.

 

Focus shifts to lifestyle

Indians are spending an increased portion of their income on education, entertainment, and leisure. There’s more of a focus now on being smarter, looking better, eating better, and having more fun. The previous adage of “Work is worship” has subtly shifted to “All work and no play makes Ram a dull boy.”

 

Perhaps more pertinent, Indians are spending on better, higher-priced sub-segments within the same categories. This ranges across the board—from food to white goods. Over a third of Indians are expected to trade up—switch away from buying cheap products and toward buying slightly more expensive products that offer them better value.

 

Fogg deodorants, for example, is priced higher than mass deodorant brands. But consumers still choose it over mass brands because they see value in the product proposition, which is to offer a more concentrated formula that promotes the benefit of more sprays per bottle. Clearly, we are seeing a shift away from price and towards value. But, as the Fogg example illustrates, to project value, brands must create a feeling of differentiation.

 

Daikin air conditioners, available on Flipkart, Quikr, and Amazon, come at a 15 percent premium over basic air conditioner brands and models. But with its claims of superior cooling, energy efficiency, and therefore reduced energy costs, the Daikin brand manages to create a value perception that more than offsets its higher price.

 

Digital expands access

If there’s one thing that has exposed consumers to value alternatives and provided access to a wider range of products and services, it’s the smartphone and e-commerce. E-commerce gives us greater exposure to what constitutes an improved lifestyle in keeping with our greater affluence.

 

The innumerable promotions we receive online encourage us to experiment and overcome our innate thriftiness. This environment gears middle Indians to pay more attention to self-image, comfort, and health and wellness. It challenges brands to gain a value perception in the consumers’ mind, which can be accomplished in several ways, including:

 

-               By product superiority through innovation Like Gillette did with its ProGlide blade that could last up to five weeks, or like Tide demonstrated in its latest #CollarUpWithTide campaign, that emphasizes cleaning power.

 

-               By aligning with a cause Like Tata Tea did with its “Power of 49” campaign, encouraging women, 49 percent of the electorate, to vote and thus shape issues, particularly those that impact women.

 

-               By building premium credibility Like IndiGo airlines did with its young and trendy tone, which reflects its on-board experience.

 

In its iconic “Because You’re Worth It” campaign to empower women, L’Oreal captured the spirit of the new India. People have a stronger sense of self-worth and are more aware of their options for purchasing goods and services. Indian consumers can now more easily afford the trappings of an improved lifestyle. It’s time for brands to up the ante and keep pace with their changing needs and desires, and spending priorities.