From Buzz to Bucks Apr 2013 Tcm80-132875

8/11/2019 From Buzz to Bucks Apr 2013 Tcm80-132875

1/21

From Buzz to BucksCapitalizing on Indias Digitally Infuenced Consumers

D I


2/21

The Boston Consulting Group (BCG) is a global

management consulting rm and the worlds

leading advisor on business strategy. We partner

with clients from the private, public, and not-for-

prot sectors in all regions to identify their

highest-value opportunities, address their most

critical challenges, and transform their enterprises.

Our customized approach combines deep insight

into the dynamics of companies and markets with

close collaboration at all levels of the clientorganization. This ensures that our clients achieve

sustainable competitive advantage, build more

capable organizations, and secure lasting results.

Founded in 1963, BCG is a private company with

78 oces in 43 countries. For more information,

please visit bcg.com.

About BCGs Center for Consumer and

Customer Insight

The Boston Consulting Groups Center for

Consumer and Customer Insight (CCCI) applies aunique, integrated approach that combines

quantitative and qualitative consumer research

with a deep understanding of business strategy

and competitive dynamics. The center works

closely with BCGs various practices to translate its

insights into actionable strategies that lead to

tangible economic impact for our clients. In the

course of its work, the center has amassed a rich

set of proprietary data on consumers from around

the world, in both emerging and developed

markets. The CCCI is sponsored by BCGs

Marketing & Sales and Global Advantage practices.For more information, please visit www.bcg.com

/expertise_impact/capabilities/center_consumer

_customer_insight.


3/21

From Buzz to BucksCapitalizing on Indias Digitally Infuenced Consumers

Arvind Subramanian, Nimisha Jain, Shweta Bajpai, and Shruti Patodia

D I

Api


4/21

F Bzz B2

To determine just how digitally inuenced Indias Internet users are when they

are making purchase decisions, BCG surveyed 25,000 Indian consumers on their

online activities in a broad range of product categories.

T S P

Our survey revealed that digitally inuenced purchases represent $30 billion of con-sumer spending in India todayas much as ve times that of e-commerce alone.

This digital impact is expected to grow vefold to $150 billion by 2016.

I O C

Digitally inuenced consumers earn higher incomes, are disproportionately

represented in key product categories, and spend more money on products than

their less-connected peers.

C I D I

To capitalize on this growing market, companies must integrate their online and

oine strategies, engage consumers and build their loyalty, refocus ad spending,

actively manage the Internet channel, mind the gaps in which online activity is low,and optimize the mobile experience.

AT A GLANCE


5/21

T B C G 3

I threshold of a digital revolution. Driven by cheaper mobilehandsets and the spread of wireless data networks, the number of Internet usersin India is expected to nearly triple from 125 million in 2011 to 330 million by 2016.

And although online purchases are just a small portion of commercial activity

today, the numbers obscure a critical fact: the Internets inuence on buying

decisions is growing rapidly. This inuence aects up to ve times more purchasesthan those actually made online. Online activities such as product research and

price comparisons are shaping the preferences of Indian consumers, aecting what

they buy and why. Digital inuence is expected to greatly accelerate over the next

ve years. Whats more, digitally inuenced consumers earn higher incomes, are

disproportionately represented in key product categories, and spend more money

on products than their less-connected peers.

How can companies capitalize on this explosion of high-value online consumers?

And given the prevalence of mobile-only access, what new models of connection

and engagement will be required? To nd out, The Boston Consulting Groups

Center for Consumer and Customer Insight surveyed 25,000 Indian consumers aged

18 to 55 living in 26 locationsthe biggest metropolitan areas and a mix of tier 1,tier 2, and tier 3 cities. Our goal was to understand the nature and extent of digital

inuence on buying decisions. To this end, we explored how consumers use the

Internet during the product purchase cycle. We then examined specic behaviors of

the digitally inuenced users. Our analysis assessed the use of digital technology

across ten touch points within the three stages of the purchase cycle:

Prepurchase. Product research, price research, search for store locations, andsearch for discounts or coupons

Purchase. Online ordering and online payment

Postpurchase. Troubleshooting, customer service, accessory purchase, and postingproduct reviews or comments

We explored the prevalence of digital touch points in 101 product categories, assigning

each category a Digital Intensity Index score (DII) on the basis of the extent to which

digitally inuenced consumers use the Internet in each of the ten touch points of the

purchase cycle. (See the sidebar Whats Your Products Digital-Intensity-Index Score?)

We also looked at how satised digitally inuenced users are with their online

experiences and the importance of digital media relative to other channels during the

Although onlinepurchases are just a

small portion of

commercial activity

today, the Internetsic byig

decisions is growingrapidly.


6/21

F Bzz B4

T btt ta t impact f

t Itt it pct

categories, we evaluated each

catgy t bai f f fact,

a w i t xibit bw:

Digital Footprint. The percentage ofby wit Itt acc

Digital Infuence. The percentage ofby w t Itt

during any of the three stages

prepurchase, purchase, or postpur-

caf t byig pc

Digital Buyers. The percentage ofby w ma i pca

Digital Intensity Index Score (DII). T xtt t wic by

the Internet across the ten touch

points of the purchase cycle

WhATs Your ProduCTs dIGITAlInTensITYINDEX SCORE?

The Internets Impact Is Greater in Some Product Categories

Than Others

CategoryDigital

footprint(%)

Digitalinuence

(%)

Digitalbuyers

(%)DII

Air travel 66 42 21 20.6

PCs, laptops, and tablets 59 38 5 13.5

Air conditioners 61 25 6 17.4

Cars 56 22 0 9.3

PC and mobile accessories 63 19 5 20.1

Mobile devices 35 19 2 11.0

Other consumer durables 51 19 5 17.6

TVs 42 19 1 14.0

Refrigerators 42 19 2 13.1

Two wheelers 43 17 0 10.1

Hotel and holiday packages 47 17 5 14.4

Washing machines 48 16 2 12.7

Mobile services andInternet connection

37 11 2 14.1

Health, life, and motorinsurance

31 10 2 17.3

Other nancial services 27 9 1 14.0

Entertainment 33 9 2 15.4


7/21

T B C G 5

Our analysis showed that air travel has

one of the highest DIIs, with six

igitay ic tc pit

including online purchasing. In

contrast, the auto category has one of

t wt dII bca i activity

consists primarily of price and product

comparisons. Product categories with

the highest DII have the most online

activity at it tag f t

purchase cycle, including the prepur-

chase and postpurchase stages. A

product category in which all digitally

ic by cct a t

aspects of the purchase cycle online

would achieve a perfect DII of 100.

The fact that air travel, with the

second-highest digital intensity, has a

DII of only 20.6 shows how much

opportunity still exists to increase the

online activities of Indian consumers.

Source:BCG CCCI Digital Influence Study, 2013.

CategoryDigital

footprint(%)

Digitalinuence

(%)

Digitalbuyers

(%)DII

Direct-to-home satellite TV 27 9 3 21.5

Rail and bus travel 22 8 3 17.3

Small appliances 24 8 1 12.5

Restaurants 32 6 1 12.0

Home decor andbuilding materials

22 6 1 12.5

Auto accessories 32 5 1 12.1

Baby care and pet food 21 5 1 14.5

Books, gis, and onlinecourses

24 5 1 12.4

Perfume 30 5 1 12.1

Apparel, footwear, andaccessories

20 4 1 14.0

Cosmetics 18 4 1 13.0

Health food drinks, nutraceu-ticals, and sports nutrition

19 4 1 12.3

Consumer goods 18 3 1 13.5

Pharmaceuticals and eye care 15 2 0 9.0


8/21

F Bzz B6

purchasing process. The surveys insights can help guide companies as they develop

strategies for reaching and engaging Indias growing base of online consumers.

The Size of the Prize

Estimates of total online purchases in India today range from $6 billion to $10 bil-

lionnot that impressive given the size of Indias population and how quickly

consumer spending is growing overall. But those estimates fail to capture the full

impact of digital technology on purchasing decisions. Of Indias 90 million urban

Internet users, 40 percent report that their online activities inuence what they buy.

Put in terms of nancial impact, this digital inuence aects $30 billion of consumer

spending in India today, as much as ve times that of e-commerce alone. With

growing access and use, this digital impact is expected to grow vefold to $150 billion

by 2016more than the combined revenues of the major retail chains (estimated at

$106 billion) and 20 percent of the total retail market (estimated at $799 billion). (See

Exhibit 1.)

Indias Internet penetration is expected to reach 330 million users by 2016. A

number of factors will drive this growth. For one thing, mobile phones, which many

Indian consumers use, are becoming more aordable. Internet penetration has

reached small towns and rural areas, so online access is more widely available. An

increasingly youthful population and rising incomes will also drive growth. Finally,

government interventions and structural changes such as better broadband and

wireline access will improve penetration. As a result, the Internet is projected to

reach small towns and the low rungs of the economic ladder more quickly than

retail chains will, bridging geographic barriers and feeding the growing appetite for

2012 2016 2012 2016

115 450

30 150

650 1,110 1.7X

225 650 2.9X

3.9X

5.0X

8 50 6.3X

Digital penetration and influencewill increase

...and have a significant impacton consumer spending

Consumer spending ($billions)Population (millions)

Spending by theurban population

Spending by theurban populationwith Internet access

Spending by thedigitally influencedpopulation

Digitally influencedspending

Value of onlinepurchases

Digitallyinfluenced

urbanpopulation

Populationmaking online

purchases

35

11

Populationwith Internet

access12590

35

Population 1,210375

835

Urban Rural

125

330200 130

1,275425

850

60

Sources:BCG CCCI Digital Influence Study, 2013; The Tiger Roars, BCG report, February 2012; BCG analysis.

E | Digital Impact Is Expected to Increase Fivefold to $150 billion by 2016


9/21

T B C G 7

consumer goods among aspirer (annual income of $7,500 to $18,400) and next

billion (annual income of $3,300 to $7,400) households.

As Internet access increases, so does digital inuence and its impact on purchasedecisionsa pattern that repeats itself across product categories, age groups, and

demographics. Contrary to popular belief, digitally inuenced Indian consumers are

not just young, auent city dwellers. In fact, digital inuence isnt a function of

demographics at all, but of digital agethe number of years a person has been

online. Consumers who have spent more time on the Internet are more comfort-

able, engage with a greater range of product categories, and are more likely to

perform commercial activitiesincluding purchasingonline. As penetration and

consumer spending increase, Indias Internet economyjust 4.1 percent of GDP in

2010is expected to reach 5.6 percent by 2016.

Our research also showed that consumers who use the Internet to make buying

decisions spend more than their less-connected peers. For instance, digitally inu-enced consumers are only 16 percent of mobile-phone buyers, but they account for

24 percent of spending in that category, buying products that, on average, are 46

percent more expensive.

Indias Online ConsumersStudies consistently show that Internet penetration drives e-commercea dynamic

that is playing out in the U.S. market, other developed economies, and, more

recently, in China. Now, India is catching up. And since many of the countrys

consumers use mobile phones to access the Internet, the emerging 3G and 4G

networks will make e-commerce faster and easier. According to some estimates, 60

to 70 percent of Indias population has mobile handsets. About 45 percent of onlineconsumers access the Internet only through mobile devices, while another 30

percent use both mobile devices and desktop or laptop computers. Whats more,

Internet penetration is already beginning to reach small towns, less auent con-

sumers, and older members of the population.

Given that the Internet breaks many of the compromises that consumers face in

their traditional oine-shopping experiences, by providing greater convenience,

speed, price transparency, and product informationhighly valued aspects of the

online experiencewe expect that commercial activity and digitally inuenced

buying decisions will grow signicantly in the coming years.

Demographics: Who Is Online?

The demographics of Indian use reveal some unexpected ndings. Indian men are

far more likely than women to be on the Internet (32 percent versus 12 percent) and

more than three times as likely to be digitally inuenced (14 percent versus 4

percent). Those with high income levels are well represented online, but even 18

percent of the lower-income strugglers (whose annual household income is less

than $3,300) have Internet access, and 6 percent are engaged in commercial activity.

Although users in Indias metropolitan areas are generally the most digitally con-

nected (30 percent) and digitally inuenced (13 percent), consumers in the smaller

tier 1, tier 2, and tier 3 cities still report Internet access rates of just under 20 per-

As Internet accessincreases, so does

igita ic a

its impact on pur-chase decisions.


10/21

F Bzz B8

cent. However, their commercial activity is considerably below 10 percent. It should

be no surprise that the best-educated consumers are the most likely to be online (63

percent of those with professional degrees) and to engage in commercial activities

(34 percent). Overall, the Internet has the highest penetration among people 18 to24 years old (48 percent) and the lowest among those older than 54 (6 percent).

Internet use will increase in todays underpenetrated markets, and digital inuence will

grow exponentially as users become more experienced and more comfortable online.

By 2016, 70 percent of Internet users will be 25 years of age or older, and 65 percent

will be from small towns and rural areas. Low-income groups will also have more

online access. Moreover, several trendsincluding a population shi to urban areas,

rising incomes, and growing literacyare converging to increase penetration and use.

Product Categories: Which Have the Most Digital Influence?

Our research revealed that the Internet has a greater impact on some categories

than others at the present time. Although categories such as air travel, computers,automobiles, consumer durables, and mobile phones have high levels of digital

inuence (greater than 15 percent), others, such as consumer goods and cosmetics,

have very low levels (less than 5 percent.) But high digital inuence doesnt always

translate into a high DIIa reection of the extent to which dierent activities in

the product purchase cycle are conducted online.

According to our analysis, India is behind other countries in terms of Internet

penetration, but the degree of digital intensity in certain product categories is

already on a par with the U.S. and China. For instance, although only 32 percent of

insurance buyers in India with online access use the Internet during the purchase

cycle of the category (compared with 69 percent in the U.S. and 67 percent in

China), the insurance categorys DII in India is 17.3comparable to that in the U.S.and in China. In other words, Indias online consumers in the market for insurance

are relatively active at dierent stages of the purchase cycle.

Certain nuances drive the online evolution of product categories:

Prepurchase Research Needs. Consumer durables, electronics, and other high-involvement categories have a lengthier prepurchase cycle owing to the need to

gather information on features, warranties, and prices. As a result, the Internet

plays an important role during the prepurchase decision-making process.

Ease of Delivery. Intangibles that dont require physical deliveryfor example,

air travel, insurance, direct-to-home satellite-TV subscriptions, and other servic-estake o faster online.

Oine Availability. Indian consumers generally visit traditional retail stores forcosmetics, personal-care items, and other consumer products that are widely

available in standardized formats. Even though this standardization and product

familiarity would make online purchasing easy, consumers prefer buying these

products oine because of the convenience and immediate gratication.

Products in less penetrated categories such as sports nutrition see higher

online-purchasing activity because theyre not as readily available oine.

Itagib tat t

require physicaldeliveryfor exam-

ple, air travel, insur-

ance, direct-to-homeatit-TV bcip-

tions, and other

victak faster online.


11/21

T B C G 9

Repeat Transactions. Consumer online activity is growing in insurance, utilities,direct-to-home satellite-TV subscriptions, and categories that involve frequent

repeated purchases or transactions such as bill payment and premium renewal.

Commercial Activities: What Are Consumers Doing Online?

Most of Indian consumers online activity involves the prepurchase stage of the

product purchase cycle. (See Exhibit 2.) Although some purchasing does happen

online, postpurchase activitiessuch as product support and service and posting

product reviewsare very limited. Heres what Indian consumers are doing online

in each phase of the purchase cycle.

Prepurchase Stage.Among Indian consumers, the most common Internet-based

commercial activitiessuch as product research and price comparisonsoccur in the

prepurchase stage. In fact, among digitally inuenced consumers, the Internet rivals TV

as a source of information for big-ticket items such as automobiles, computers, and appli-

ances. This digital inuence is especially evident in relatively high-priced-productcategories such as automobiles, laptops, consumer durables, and home theater equip-

mentproducts that have long purchase cycles or require a signicant investment.

Indian consumers view the transparent data found online as more unbiased and

trustworthy than what they might hear from in-store salespeople on commission. Its no

surprise that online research is less important for consumer goods and other inexpen-

sive, well-known items.

The most popular sites for online research are company websites and third-party

comparison websites. Indian consumers choose among these on the basis of what is

lacking in their oine-purchasing experience. In most cases, insurance agents and

auto dealers sell only one brand, so gathering information on product features,

pricing, and warranties for multiple brands can be time consuming and involve alot of legwork. For categories such as these, online research through third-party

comparison sites and online forums is far more convenient and ecient. However,

for appliances and other product categories available through multibrand channels,

company websites are the favored source of information: they generally have more

details on specic products than would any single salesperson in a store. Indian

consumers become aware of these sites through search results and TV ads or

though family, friends, and colleagues.

Online product reviews have not yet taken o in India, mostly because there arent

enough sites yet that oer them, so critical mass is lacking. Social media are popu-

lar but drive only about 25 percent of commercial consumer trac. Most people in

India look to Facebook and similar sites for entertainment, not product informationor advertisements. They want to connect with friendsnot be sold something

and likes dont lead to commercial activity.

Purchase Stage.Few Indian consumers actually buy on the Internetin large part

because certain concerns are holding them back. Across all categories, the biggest

issues are delivery problems, lack of trust , and the inability to see and feel a prod-

uct. Despite these concerns, some product categories are generating more online

purchase activity than others. For instance, intangibles that consumers dont need

to touch or try on or that dont require packing and shipping are more likely to be

Ti igita icis especially evident

in relatively high-priced-product

categories.


12/21

F Bzz B10

Accessingpurchasecoupons Ordering

Makingpayments

Searchingfor infor-

mation onproduct

use

Arrangingfor productservicing

andrenewals

Searchingfor

accesso-ries andadd-ons

Postingreviews

andcomments

online

Searchingfor

storelocations

Searchingfor

priceinforma-

tion

Searchingfor

productinforma-

tion

Air travel

Entertainment

PCs, laptops, and tablets

Direct-to-home satellite TV

Air conditioners

Rail and bus travel

Cars

Small appliances

PC and mobile accessories

Restaurants

Mobile devices

Home decor and buildingmaterials

Other consumer durables

Auto accessories

TVs

Baby care and pet food

Refrigerators

Books, gis, and onlinecourses

Two wheelers

Perfume

Hotel and holiday packages

Apparel, footwear, andaccessories

Washing machines

Cosmetics

Mobile services andInternet connectionHealth, life, and motorinsurance

Consumer goods

Other financial services

Pharmaceuticals andeye care

5%10%11%20%21%30%> 30% < 5%

Health food drinks, nutra-ceuticals, and sports nutrition

Digitally influenced buyersconducting this activityonline (%)


E | Most Online Activity Involves the Prepurchase Stage of the Purchasing Cycle


13/21

T B C G 11

bought online. For a handful of product categories such as air travel, vacation

packages, and direct-to-home satellite-TV subscriptions, our survey respondents

reported a fair amount of online activity in the order and payment stages. Overall,

however, online purchasing is a small percentage of total commercial activity.

The reasons for this are threefold. First, electronic payments are not yet popular in

India, because few people have credit cards. Even among cardholders, paying cash for

purchases through traditional channels is still the method of choice. However, most of

these purchases are preceded by online research. Second, the shortcomings of Indias

infrastructure can present delivery problems and other logistical challenges. And

third, well-entrenched behaviors take time to change. As Indian consumers become

more comfortable on the Internet, their reluctance to make online payments will

likely fadeas it has for consumers in the U.S., Europe, and Chinaover time.

BCGs survey dispelled many common misconceptions about Indian consumers.

Contrary to the popular belief that online purchases are driven only by discountsand special oers, our research showed that convenience and variety are just as

important to Indian consumers. (See Exhibit 3.) Discounts are important to some

consumers, but the benets of convenience and assortment are a powerful pull

especially given the growth of the working class and the fact that todays families

Most users are from

metropolitan areas.

Most users are 18 to 25years old and affluent.

34% of Internet users are fromsmaller urban areas (tier 2, tier 3,and tier 4 cities), and 25% are fromrural areas.

57% of urban users are older than25 and will make up 70% of theurban Internet population by 2016.

45% of urban consumers withaccess to the Internet use onlymobile devices to connect.

Discounts drive 30% of onlinepurchases, but convenience(37%) and variety (29%) are alsocritical.

Search engines drive traffic morethan 40% of the time.

The impact of social media islimited, driving just 25% of traffic.

Among urban Internet users,40% engage in digital activity atsome point in the purchaseprocess, and 13% purchaseonline.

Mobile Internet activityis small and irrelevant.

Most online users arediscount driven.

Deals and discountsdominate online sales.

Social media create apositive buzz. Internetusers spend most oftheir time on socialmedia.

The commercial impactof the Internet isoverstated.

E-commerce is verylimited.

Common belief Reality

Who is online?

How do usersaccess theInternet?

Why are Indianusers online?

What drivesonline traffic?

What impactdoes the

Internet have?


E 3 | BCGs Research Dispels Many Common MisconceptionsAbout Indian Internet Use


14/21

F Bzz B12

are smaller than those of earlier generations. Because of these changes, more

Indian consumers value the eciency, convenience, and home delivery that online

buying oers. (See Exhibit 4.)

Furthermore, consumers are willing to pay an online premium for authentic prod-

ucts that are not readily available at retail stores. For instance, Healthkart.com

conrms that, given the growing popularity of bodybuilding in India, niche and

hard-to-nd products such as protein supplements for tness enthusiasts sell briskly

on its website.

As to the preferred mode of payment for online purchases, credit cardholders and

noncardholders alike prefer to pay cash. In fact, 60 percent of online buyers who

have credit cards paid cash on delivery (COD) for their most recent purchases

Spends 40 to 50 hours per weekon the Internetat work and onhis own time

Accesses the Internet on hismobile device during his dailycommute, checking news andsports, watching videos, andsearching for information

Helps me get things when I needthem

Saves a lot of time

Can buy things not availableelsewhere

Convenience of getting productsdelivered to the doorstep: no needto spend time going to the mall

Customization: can checkavailable choices and orderaccordingly (especially whenbooking seats for shows)

Apparel, hair care products,perfume, movie and event tickets,shows, gis, flowers, mobileaccessories

Property searches, makingmedical appointments

Madhuresh Srivastav, 25, Mumbai

Works for a multinational

Single, lives alone

Disha Bhatnagar, 27, Noida

Works for a multinational

Married, with a 6-month-old child

Rahul Singh, 23, Varanasi

Student, pursuing a mastersdegree in engineering

Single, lives in a hostel

Spends 15 to 20 hours per weekon the Internet

Mostly study-related work, e-mail,downloading music and movies,searching for information

Mostly books, educational andfiction

Sportswear, including clothing,footwear, and sunglasses

PC accessories such as a pen driveand hard drive

Good deals: actively searches forpromotions

Does price comparisons, searchingfor cheapest available option: pays20% to 30% less than market price

Gets regular e-promotions: haspurchased products if a good dealis offered

Spends 40 to 50 hours per weekon the Internet

Official work, social networking,entertainment, informationsearches, shopping

Baby products, gi vouchers, skincare products, movie tickets,travel, and accessories such asbags, jewelry, and watches

Booked test-drive for car on theInternet and pays all bills online

Internet as an informationencyclopedia, supplier ofeverything

A better variety of baby cots, thanthe limited selection in shops;shopping in stores requires a lot oftime (working schedule does notallow)

Everything under one roof

Variety for everything

My comfort zone

Entertainment

Social networking

Easy to compare

Convenience

DiscountsAssortment

Consumerprofile

Internetbehavior

Onlineshoppingand otheractivities

Reasons

for usingthe Internet

Keybenefits

Convenience


E 4 | Indian Consumers Value What Online Buying Oers


15/21

T B C G 13

largely because Indian consumers dont trust the online business to actually send

the goods they buy online, to send the correct order, or to make sure that the goods

will arrive undamaged.

One of the most commonly cited barriers to e-commerce adoption in China was the

lack of a satisfactory payment method, especially because few consumers used

credit cards. Taobao.com, Chinas enormously successful online marketplace, re-

solved the problem for most shoppers with its innovative Alipay escrow accounts,

now the most common payment method for all e-commerce platforms in China. Tao-

bao, JD.com, and other successful online players have addressed delivery concerns

and low levels of condence in product quality by using local courier companies and

distribution centers. Until similar solutions make their way to India, however, online

consumers will likely continue to research products and make brand choices on the

Internet and complete the purchase transaction at a brick-and-mortar store.

Postpurchase Stage.Few of Indias consumers are actively engaging in postpur-chase commercial activities such as troubleshooting, seeking service, and posting

online reviews. This holds true across most product categories, with the exception

of insurance and direct-to-home satellite TV subscriptions (whose renewals and

payments are made online), autos (for which queries are resolved or accessories

purchased), and a very limited number of durables. Postpurchase online engage-

ment has a long way to evolve, although the benets of convenience could easily

overcome traditional habits and mindsets at this stage as well.

Understanding Indias DifferencesTo capitalize on the rise of digital inuence in India, companies must understand

the countrys unique commercial environment, which diers from other rapidlydeveloping economies such as China and from developed economies such as the

U.S. and Europe. Key dierences include the following:

The Devices Used for Internet Access. Given the low price points and portability ofmobile phones, far more Indian consumers access the Internet using these devic-

es than laptops or PCs. Even in less urban tier 4 areas, mobile Internet use is 15

percent, close to the 20 percent penetration rate in metropolitan areas. In

contrast, PC- and laptop-based Internet use is only 9 percent in tier 4 areas

compared with 25 percent in metropolitan areas.

Category Dynamics. Good online portals and sources of information are still

emerging in many product categories. And products themselves dier in theirrelative online popularity. Case in point: in India, e-books are far less common

than in the U.S. and Europe, because few people have e-readers such as the

Kindle. Furthermore, there are so many languages spoken in India that content

would be highly fragmented. Even regular online sellers of traditional books

would be challenged to manage the range of inventory needed to meet Indias

various language needs. And because of the countrys large black market for

pirated reprints, bestsellers are inexpensive and widely available. Other e-com-

merce categories that are popular in the U.S., such as apparel and toys, are

dominated by unbranded local suppliers in India, impeding online sales.

Given the low price

pit a ptabiity

f mbi p, famore Indian consum-

ers access the Inter-

net using thesedevices than laptops

or PCs.


16/21

F Bzz B14

Method of Payment. Given the low penetration of credit and debit cards and theaversion to making online payments due to security and trust issues, COD is in

India to stay. It will be a long time before Indian consumers embrace online

payment.

Because of these dierences, the online pioneers that succeed in India may be very

dierent from todays e-commerce powerhouses such as Amazon.com and Taobao.

In fact, the market is so new, consumer product companies that seize the opportu-

nity in time could build defensible positions against those pure e-tailer market

leaders.

For a preview of how quickly Indias e-commerce market could develop, consider

how e-commerce exploded in China in just the last ve years, driven by accelerat-

ing Internet penetration in cities and rural areas alike and the growing use of

mobile devices. Today, Chinanow, with more online shoppers than the U.S.is

expected to become the worlds largest online retail market by 2015. In 2010,Taobao alone sold more than Chinas top ve brick-and-mortar retailers combined.

Today, India is at a similar tipping point, its e-commerce market about to break out

and rapidly accelerate, driven by increasing Internet penetration, cheap mobile

devices, and growing consumer demand. Forward-looking companies are taking

action now to capitalize on the markets potential.

Capturing Indias Digitally InfluencedIndias digitally inuenced consumers are a high-value and rapidly growing market

segment. To gain a greater share of their business, companies must understand how

these consumers make purchase decisions, and reach them more eectively by

combining traditional and digital media. According to the insights from our survey,this means taking action on a number of fronts.

Integrating Online and Oine Strategies.Our research shows that online

activities drive oine behavior. Although Indian consumers arent buying much

online yet, they are actively researching products, comparing prices, and making

brand decisions. Until consumers are more comfortable purchasing on the Internet,

companies should use their websites and mobile apps to drive shoppers to their

oine stores. For instance, Standard Chartered oers a mobile app that helps

consumers nd its bank branches, ATMs, and cash deposit machines. Retail chain

Shoppers Stop recently drew in customers with a mobile app that launched an

end-of-season sales ad. The app included an augmented-reality feature that oered

a real-world view of the stores physical environment through computer-generatedvideos and sounds. Given the preponderance of Indian consumers who research

products online but buy oine, companies that set themselves the broader goal of

using the Internet to drive overall market-share gains rather than merely to expand

online sales can steal a march on pure e-tailersand even sidestep the disinterme-

diation threat that consumer goods companies are wrestling with in other large

e-commerce markets.

Engaging Consumers and Building Their Loyalty.Digital technology gives

companies an opportunity to reach out and connect directly with consumers in ways

Consumer product

companies that seizethe opportunity in

tim c bi

fib pitiagainst pure e-tailer

market leaders.


17/21

T B C G 15

that were not possible in the past. Providing consumers with what they needinfor-

mation, hard-to-nd products, more convenience, a sense of community, a source of

entertainment, the best selection, lower pricescan be an eective way to create

buzz, attract business, and build loyalty. At the same time, digital listening andcapturing consumer data can generate valuable customer insights, lead to more

attractive products, and reveal new ways to engage and sell to consumers. For

instance, Saola, Indias leading health-food brand, started a digital campaign, Heart

OK Please, urging people to go online and share their own stories about unhealthy

lifestyles. The campaign generated a get-healthy movement among consumers,

encouraging them to sign up for cholesterol tests and expert advice and providing an

opportunity for the brand to engage directly with consumers.

Online promotions and discounts are other ways to engage consumers and turn

them into customers. Third-party websites that oer good bargainssuch as

Snapdeal.comcan be a good way to increase oine sales using online triggers.

Refocusing Advertising Budgets.Most companies spend most of their ad budgets

on TV spots. But our research showed that for Indian consumers who are online

and digitally inuenced, the Internet rivals TV as a source of brand awareness for

many product categories. Online advertising and websites can be high-impact,

cost-eective ways to reach target consumers. The cost per contact is substantially

lower than for traditional media, and the ability to provide additional information

on products and services is much higher. Cosmetics company LOral launched its

new Maybelline Clearglow BB cream through a global online-only campaign last

year, creating online buzz in India and across the world with its Women Take

Forever (WTF) and Dare to Go Nude campaigns. As a result, the company sold

75,000 units of the cream in just one montha record for Maybelline.

Actively Managing the Internet Channel.Companies should integrate digital

strategies into their marketing plans, carefully thinking about how the Internet ts

into the whole. The online channel oers a wide range of ways to reach consumers:

corporate websites, third-party websites, online communities, Internet search and

display advertising, online videos, and social media. Manage third-party websites

the same way youd handle key retail accounts oine and company websites as you

would an exclusive brand store. For some productsthose with niche markets, for

instancethe Internet and third-party websites can be eective in achieving

greater reach into small towns and greater scale by providing access to more

consumers overall.

Many multinational companies in a broad range of industries are recognizing theimportance of the online channel and have set up teams specically to manage

their digital activities. Nokia, for instance, has a team that tracks the brands online

image, oversees digital advertising, and manages relationships with third-party

e-commerce sites.

Minding the Gaps.Of the many potential digital touch points in the purchase

cycle, only those related to prepurchase activities such as product research regularly

engage Indias consumers today. The purchase and postpurchase steps of the cycle

represent relatively untapped opportunities to reach consumers, and companies

For Indian consumers

who are online andigitay ic,

the Internet rivals TV

a a c f baawareness for many

product categories.


18/21

F Bzz B16

with an eye to the future should be looking for ways to address these gaps. For

instance, Eureka Forbes set up an online service system for buyers of its water

puriers and vacuum cleaners. Customers who need service ll out an online

application. Unresolved problems are automatically escalated up the ranks of thecompanys service sta.

Optimizing the Mobile Experience.Many Indian consumers browse on their

mobile devicesnot laptops or desktop computersso the user experience is

somewhat constrained. Companies can attract consumers and build loyalty by

creating a website thats convenient and easy to use. Moreover, the mobile screen is

small, so its important that content be managed and presented in a way that

optimizes the format. In the absence of proven mobile-advertising models, compa-

nies that can use the mobile experience to drive oine sales have yet another

opportunity to outpace pure e-tailers and independent information portals.

Many companies are realizing the importance of capitalizing on mobile devices anddigital media. For instance, Indias ICICI Bank has a user-friendly mobile-banking

interface that provides easy one-touch access to common transactions such as

recharging prepaid mobile phones, utility bill payments, and funds transfers. As a

result, the banks mobile-banking transactions grew 60 percent in volume and 98

percent in value from February through August 2012.

Fueled by growing Internet penetration, Indias expanding base of online consum-

ers presents an enormous opportunity for forward-looking businesses that can

understandand eectively capitalize onthe countrys distinctiveness and

unique challenges. The six strategies outlined above are a good starting point.

T , digital and mobile technologies have transformed theproduct purchase cycle and how companies market their brands. Although lateto the game, India is rapidly catching up. Today, the countrys e-commerce numbers

tell only part of the story. Far more important is the bigger picture: the relationship

between online activities and oine sales and the powerful inuence that the

Internet has in shaping the brand preferences and buying decisions of Indian

shoppers. Moreover, the DIIs of the various product categories show just how much

opportunity still exists for increasing the online activities of Indian consumers.

Companies that dont act now to create an online presence, build their brands, and

engage Indias consumers risk missing out on a fast-emerging market with enor-

mous untapped potential.

Indias expanding

ba f i c-sumers presents an

enormous opportuni-

ty for forward-lookingbi.


19/21

T B C G 17

About the Authors

Arvind Subramaniani a pat a maagig ict i t Mmbai c f T Bt

Ctig Gp. h i t a avi i Iia f t m Center for Consumer and Customer

Insight. Y may ctact im by -mai at [email protected].

Nimisha Jaini a picipa i BCG nw di c. Y may ctact by -mai at

[email protected].

Shweta Bajpaii a pjct a i t m nw di c. Y may ctact by -mai at

[email protected].

Shruti Patodiai a ctat i BCG nw di c. s i a tpic xpt f t m Center

for Consumer and Customer Insight. Y may ctact by -mai at [email protected].

AcknowledgmentsTi ac wa p by BCG Ct f Cm a Ctm Iigt, wic it -

gat cm a ctm iigt ac it tatgy vpmt. sva BCG cag

ap t tgt piig ti ac igita ic. T at w ik ttak na Aja, davi da, Bia Gaag, Iia Gaga, Taap Gai, ra Jai,

Gaav Jia, Vit Kma, Gaav Mata, Amitab Ma, Ap sa, Abk sigi, a

ha l. siki. davi C. Mica, t gba a f t Gba Avatag pactic, a Miki T -

aka, t gba a f t Maktig a sa pactic, t ti t a pvi va -

ab icti.

spcia tak a g t Mata Cam f itia icti, a w a t t mmb

f t itia, ig, a pcti tam, icig Kati Aw, Gay Caaa, Aga

diBattita, ey Fima, a saa stait.

For Further ContactIf you would like to discuss this report, please contact one of the authors.


20/21

To nd the latest BCG content and register to receive e-alerts on this topic or others, please visit bcgperspectives.com.

Follow bcg.perspectives on Facebook and Twitter.

The Boston Consulting Group, Inc. 2013. All rights reserved.

4/13


21/21

Abu Dhabi

Amsterdam

AthensAtlanta

Auckland

Bangkok

Barcelona

Beijing

Berlin

Bogot

Boston

Brussels

Budapest

Buenos Aires

CanberraCasablanca

Chennai

Chicago

CologneCopenhagen

Dallas

Detroit

Dubai

Dsseldorf

Frankfurt

Geneva

Hamburg

Helsinki

Hong Kong

Houston

IstanbulJakarta

Johannesburg

Kiev

Kuala LumpurLisbon

London

Los Angeles

Madrid

Melbourne

Mexico City

Miami

Milan

Minneapolis

Monterrey

Montral

MoscowMumbai

Munich

Nagoya

New DelhiNew Jersey

New York

Oslo

Paris

Perth

Philadelphia

Prague

Rio de Janeiro

Rome

San Francisco

Santiago

So PauloSeattle

Seoul

Shanghai

SingaporeStockholm

Stuttgart

Sydney

Taipei

Tel Aviv

Tokyo

Toronto

Vienna

Warsaw

Washington

Zurich

bcg.com

Documents

From Buzz to Bucks Apr 2013 Tcm80-132875