Pala Kuppusamy
With a population of 1 billion, India has the world’s second largest consumer base. However, this figure can be very deceptive. Based on the type of product, the actual market can be a small fraction of the larger population. The country’s tremendous diversity in terms of languages, cultures, income and living standards presents a particular challenge for brand owners. India has 14 official languages and over 300 local languages and dialects; consumers range from millionaires to people who make under $5 per day; there is a complex caste system; some of the population lives in cosmopolitan cities while 70% live in rural areas, some in remote villages without electricity. With this background, how does a brand owner form a view about market potential and develop the best marketing strategy?
Niche, mass market brand or generic?
International brands like Unilever, Procter & Gamble, Reckitt Benckiser, Wrigley, Lufthansa, Vodafone, Ford, Hyundai, Volvo, Mercedes, Samsung and Nokia have all seen how India offers opportunities for high growth and/or high profitability. And for some industries such as airlines, telecoms, alcoholic beverages, tobacco, men’s formal clothing, cosmetics, electronics and automobiles, branding works at a national level.
At the same time, the country’s diversities, combined with low spend in rural markets, have made India an unattractive prospect for many international brands. When looking at market potential and the best route in, brand owners need to be aware of the particular features of the consumer market in India that make mass marketing challenging. One-third to one-fourth of the population do not have awareness or access to many of the consumer goods that may be considered common in developed countries. Some products, which in other international markets are considered generic, can be niche in India, and vice versa. Shampoo, for instance, is often considered a generic product. A brand owner might think that 90% of the market could be potential consumers, but in India the number is less than 50%. At the same time, products which are niche in international markets, such as hair oils and sarees, are generic in India.
Logistics and the market
Retail and logistics are by far the largest underserved sectors, especially rural retail such as groceries. Currently, rural markets are served by inefficient, disorganised retail players with a high level of quality issues. Various reports estimate that 25-30% of the country’s agricultural produce is wasted due to poor infrastructure and logistics. A recent paper in the International Journal of Trade, Economics and Finance, suggests that in the absence of proper retailing, storage and other infrastructure, more than 72% of vegetables and fruits produced are wasted every year. And according to a McKinsey report, waste caused by poor logistics and infrastructure is currently worth USD $45 billion, potentially rising to USD $140 billion by 2020. The supply and distribution chain for many food items operates at a very local level, making it difficult for mass market branding to establish itself. Consumers are used to having their milk delivered every morning to the door, often with a newspaper. Chickens (and other meats) are often caught and butchered in front of customers. Frozen foods are uncommon except for ice cream. Most refrigerators are not designed for storing anything more than a quart of ice cream and some ice cubes.
Nonetheless, there is a wide scope for applying expertise, improving efficiencies and delivering value for this mass market whilst maintaining profitability. The model that Sam Walton built in the United States, starting at the tier 2/3 cities and rural areas, will largely apply to India, with a few modifications to products being carried. The cost and logistics model may need to be worked creatively to win this market, which is just waiting for the right solution.
Meeting consumer demand: clothes, restaurants and entertainment
Clothes and jewellery are the biggest retail spend in terms of share of wallet of the large middle class of India. Looking at how the growing middle class in India visits Dubai and Singapore merely for shopping, highlights this pent-up demand. Some clothing stores in India have over 1000 employees working in a single shift, just selling clothes. Many of these stores are not chains, but local standalone stores. Some stores take pride in saying, “We have no other branches or stores.” This is considered a symbol of authenticity. This is one large market where international brands are nearly non-existent.
The restaurant business is also an increasingly significant retail industry, capturing a higher share of consumers’ wallet than ever before. Eating at a restaurant was a remote concept to many families until a generation back, but with higher income and multiple family members working, dining out is becoming a part of urban life, and there is great potential to continue to grow. Recent entrants like McDonald’s and Subway in the fast food market have seen huge growth. Several mid-sized players from Europe are doing well in niche markets in other areas of retail, often with a partner in India (e.g. upscale home improvements, furniture, fittings).
The demand for entertainment is also growing as incomes rise and the proportion of affluent youth increases. With entertainment options limited, both indoor and outdoor entertainment parks have the potential to grow.
In addition, automobile, electronics and telecom sectors have grown at huge multiples in the last decade, and continue to grow at healthy two-digit rates. It is in these markets in particular where the multinational new entrants are performing very well, besides the FMCG majors like P&G, Unilever and RB who made their entries early in the game.
The promise of mobile as a research technique
As products vary across the market and need to be tailored to India, so do research techniques. Some methodologies, like face-to-face (often done as door-to-door), still work well in India. Telephone surveys have reasonable acceptance, while online surveys would fail miserably due to limited reach.
Mobile, on the other hand, is very promising. There are about 30 million PCs and 15 million broadband connections in the country for residential use. Compare this to 900 million mobile phone connections and over 400 million data connections. Mobile provides a reach that no other channel does. Texting and data plans are quite inexpensive in India. An unlimited text plan would cost under £2 per month, whilst a data plan would start at under £3 per month.
Sub £80 smart phones are expanding the user base aggressively. There are different estimates that put smart phone penetration in India anywhere between 12% and just under 20%, but there is an additional cultural factor that needs to be considered. Giving formal feedback on a product is a less known concept in India. Buy-in may be limited initially, but can be overcome with incentives and a brief introduction on why the survey is being administered.
Furthermore, instant gratifications can be considered to attract higher responses. There are various mechanisms available with mobile operators for instant rewards in the form of talk times, SMS credits, data plan credits, etc. Talk time credits can be purchased and rewarded at values as low as Rs. 10 (£0.10).
As commercial SMS texting is expensive in India, researchers can minimise the use of SMS for research by limiting it to inviting respondents to a web link, and to then carrying out a survey over the web link.
If the study is targeting bottom of the pyramid (in terms of social-economic status) and the rural markets, multilingual studies in regional languages are extremely important. A vast majority of the rural population and the lower section of the socio-economic pyramid do not speak English.
Like any other survey methodology, mobile would also have some limitations to the applicability for certain types of research and certain targets. While mobile is not a solution for all research needs in India, it is a better alternative to a PC survey.
Given the huge variation in the market to its growth potential, we see mobile as the most flexible, cost effective and successful research mechanism in India. And if that helps companies win a slice of Indian pie, and bring new products and services to the market, then it’s a winning combination all around.
Pala Kuppusamy is CEO at Research Now Mobile in India.
