People moving into urban middle class will drive growth over next decade
Brands can help them trade up to quality and innovation
Associate Vice President, Strategy Planning
Vice-President, Strategy Planning
For years, marketers have hyped the great Indian middle class as the segment with the greatest purchasing power. But there are many “Indias,” and demographic classifications do not account for millions of people who do not fit neatly into a particular segment, but rather are in transition.
A recent report by Goldman Sachs calls for a new focus on the “urban mass,” a sizeable segment of perhaps 130 million people, or three times the estimated size of the urban middle class. This segment earns Rs 200,000 ($3,200) per year on average and is expected to drive up consumption levels over the next few years. This income level is below the $3,650 to $7,300 per year earned by members of India’s middle class.
People in this “urban mass” aspire to rise into the middle class. The group includes college graduates working for small- or medium-sized businesses or government, as well as blue collar and migrant workers.
Reaching members of this “urban mass” group can be challenging for brands. A pure price equation doesn’t always excite them. They are trading up from access brands and unbranded goods to brands that offer quality and innovation—whether in service, aesthetics, brand experience, product, or packaging—all at an affordable price. Key factors driving this trading-up trend are:
1. Mobile Connectivity
Mobile connectivity is a great equalizer. Access to the Internet combined with the availability of cheap, feature-rich smartphones has opened up a world of opportunities for these aspirants to the middle class.
For instance, they may drive taxis for Uber or Ola and potentially earn as much as Rs 60,000 ($960) a month, putting them in the top 1 percent of India’s earning population. Many value the flexible working hours and are looking to start their own fleet, which they can rent by the day. When buying a car, they look for a brand’s ability to provide fuel efficiency and flexible financing options. A partnership between the Tata Group and Uber Technologies Inc. provides the financing required for car ownership to fulfill micro-entrepreneurship ambitions.
Moreover, many migrant workers are on WhatsApp or Facebook and send money home on payment apps. They are influencers within their community—educating their friends and family about brands and technology as well as the opportunities for using online platforms to earn more.
2. Improved job skills
Online platforms from Babajobs.com (jobs marketplace) to Flipkart (e-commerce) to Faasos (food delivery) and Ola (taxis), are training drivers, deliverymen, tradesmen and customer service representatives about the importance of grooming, cleanliness, and appropriate business behavior. The key message for these workers is that they represent not only themselves but also a brand. Hence, it is important that they invest in apparel and personal care products that help them look and feel good.
Brands like Vini Cosmetics address this need, marrying innovation with value. Vini launched Fogg, a deodorant with a basic USP of long-lasting fragrance, guaranteeing 800 sprays from a single bottle. Today, Fogg is a market leader in deodorants, a category where most products are competitively priced. Similarly, Pro-Ease, a brand of sanitary pads by RSPL Limited, promises 90 percent more absorption than ordinary pads, and a pack of six is available for Rs 35 ($0.50). The market leader’s base variant comes at price of Rs 34 for a pack of eight pads, but doesn’t offer as much absorption, which makes it a less economical buy.
3. Rising aspirations
People in the “urban mass” see the middle-class experience up close and want to partake. They don’t want a life of servitude for their children; they want a taste of what it is to be served. At McDonald’s, for example, pricing is at the heart of the business model. However, McDonald’s also continues to invest in the dining experience, which is often what motivates “urban mass” consumers to choose McDonald’s. They derive incremental value from eating a budget meal in an attractive, air-conditioned environment that has a certain “cool” vibe.
4. The democratization of fashion
Walk down any busy road in any Indian city and you will find hawkers selling everything from jeans to bras. With so many options, fashion brands hold little sway. Yet brands like Big Bazaar, Brand Factory, and Max stores are making branded fashion accessible. Big Bazaar’s FBB revamped product line is now as aspirational and aesthetic as those of department stores. The brand has moved beyond clothing staples, such as shirts and trousers, to cater to more evolved needs, offering sportswear, loungewear, linen and fusion ethnic options.The selling strategy is both driving volume with affordable price points as well as with quality and imagery.
5. Emotional branding
If Bollywood has remained the gateway to a world where everything is larger than life and stunningly spectacular, then the world of brands isn’t far behind. There is an inherent value attached to the portrayal of an escapist world that exists only in dreams. Brands across categories, from footwear to banyans (men’s undershirts), now peddle imagery that is glossy, glamorous, and aspirational. Bollywood star Salman Khan is a spokesman for Relaxo Footwear, a budget brand of slippers and sandals. Manikchand, a mass brand of chewable tobacco uses the tagline “Oonche log, oonchi pasand” (“Classy people, classy taste”). These examples cue a surreal world that pushes the emotional value of low-priced products in the eyes of the consumer.
Brands need to take a closer look at the “urban mass” demographic as it transitions toward the middle class and drives consumption over the next decade. Savvy marketers have already sensed an opportunity to dramatically drive sales by helping “urban mass” consumers trade up from access brands and unbranded goods, while still playing the volume game.
Many of these marketers are smaller companies and regional brands promoting more than just a low price. They are offering product innovation and quality, a positive customer experience as well as appealing aesthetics and imagery. Category leaders cannot afford to be complacent.