Wer Like That Only

8/3/2019 Wer Like That Only

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We are like that only

U nderstanding the l ogic of C onsumer I ndia

Deepak Mehta

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Rama Bi j apu rk ar


G t d b F it PDF C t F it S ft


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A recognized thought leader on market strategy

and consumer issues in India. She heads anindependent market strategy consulting practiceand works with several global companies andnon-profit institutions, guiding the developmentof their business-market strategy.

An alumna of the Indian Institute of Management,Ahmadabad.

Ms. Bijapurkar has worked with McKinsey & Co.,MARG Marketing & Research Group, HindustanLever and MODE Services.


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1. Made for India




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1. Made for India

Before 1991

1. Socialist Model failed miserably

2. GDP growth crawled

After 1991

Journey towards Market Capitalism




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Made for India Contd.

Consumer India Source of BeliedExpectation & Frustrating resistance toglobal offerings.

Winner- Nokia, Honda, LG, Samsung

Did not catch up Coke, Pepsi, Mercedes,GE Appliances, Kelloggs, Heinz ketchup




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Made for India Contd.

Reason:

1. Nature of emerging market economics isfundamentally different

2. Emerging markets need not be virginmarkets




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2. The mixed message from

Consumer India

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2. The mixed messages from

Consumer India

1. Eighth largest economy, population abillion, 40% of them are below 21

2. Strategic perspectives on India arechanging, but are still confused

3. The Consumer Demand journey: 1991 till

date

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The mixed messages from

Consumer India Contd.The Lessons Learnt:1. The dangerous delusion of pent up

demand

2. Zigzag economic growth gives zigzagconsumer market growth

3. Income growth does not always keep

pace with supply side renaissance



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3. why bother with Consumer

India?Q: When will India have the per capitaincome & infrastructure of China, thewesternization & per capita consumption

of Brazil, the education levels of Russia,the institutional framework & maturity ofthe US?

Correct Answer: Probably Never

We are like that only!!!


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why bother with Consumer

India? Contd.

The dark cloud & the silver lining:

1. Consumer India is large

2. It is mostly poor, but is getting less poor

3. It has some rich people, increasing innumber, getting richer

4. Consumer India is totally schizophrenic




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India? Contd.A Guaranteed to happen snowball: A guaranteed to happen growth story

Young people, virgin market

Low country risk

Strong institutions

Change confluence

China 2005 = India 2015

p y



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India? Contd. Rural & Urban % of each income group(Graph 1)

Change in Consumer Confidence:

Affordability growth greater than incomegrowth

Increased comfort with borrowing

Decline of the poverty effect- Wealth Effect

p y



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4. Understanding Consumer

Indias demand structure



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4. understanding Consumer

Indias demand structure

1. The great Indian rope trick of numbers

2. Marketing to such a demand structure

3. The premium-popular-discount constructof market structure

4. The breakdown of the premium-popular-

discount construct of market structure


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Consumer Stratification by Income & Expenditure

% ofpopulationby income

percentile

NationalIncomeshare of

each %

Consumptionexpenditu

re share%

GDP percapitaindexed

Top 10% 34.1 30.0 100

Next 30% 36.1 36.6 35

Lowest 60% 29.7 33.4 14



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understanding Consumer

Indias demand structure Contd.The new market structure construct: byvalue orientation

1. The rich- Money for Value

2. The consuming class- Value for money

3. The climbers- Price point buyers

4. The aspirants- The paisa Pack

5. The destitute- Hand to mouth



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understanding Consumer

Indias demand structure Contd.

The Generic Model of the Indian market:

2 largest consumer classes- climbers &the consuming class (75 million householdeach)

Rich 6 million households

Rural market 8 to 10 yrs behind urbanmarket



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understanding Consumer Contd.

Dynamics of future growth:

The destitute transforming in to aspirants

The climbers increasing their per capita

consumption The climbers occasionally using superior

products instead of what they usually use

The consuming class upgrading to better quality

Products/ brands



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5. Just how much purchasing

power does Consumer IndiaActually have?



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5. Just how much purchasing

power does Consumer Indiaactually have?

1. The myth of Indias Middle class

2. Sleeping Beauty, beauty lies in the eyesof beholder

3. Much poorer when compared to the

middle class in developed countries



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Affluence Layers Based on

Income (NCAER)IncomeClasses

Annualhousehold

income(Rs ,000)

%of IndianHH in each

incomeclass

Two-

whe

eler

CTV

Refriger

ator

Aircon

diti

oner

car

Deprived


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Affluence layers based on

Income Percentiles (IRS)

Rural India

Tier 1 Tier 2 Tier 3 Tier 4

Top Next Next Next

4% 10% 35% 50%

Est. Households (Million) 6 15 51 74

Durable owned

Colour TV (% of tier) 43.1 24.6 8.3 2.2

Refrigerator (% of tier) 3.5 0.8 0.1 0.0

Two- wheeler (% of tier) 40.1 27.7 12.3 4.5

Car (% of tier) 33.3 9.4 6.6 1.7

Own telephone (% of tier) 24.9 14.3 3.6 0.9

Washing machine (% of tier) 3.8 1.7 0.3 0.0

Own PC (% of tier) 1.2 0.3 0.0 0.0



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Affluence layers based on consumptionintensity (IRS Consumption Pyramid)

Layer Name % ofpopulation

HH(Million)/population

RelativeConsnIntensity Index(Million)

Profile% Urban- Rural

Consumption Index *Population

Samriddha 1 Prosperous) 0.5% 1/5 1997=100 96-4 100

Samriddha 2 (Prosperous) 0.5% 1/5 199=100 93-7 100

Sampanna (Well off, not wealthy) 2% 4/20 484=24 89-11 96

Siddha (Achieving, just entering upperclass)

3% 6/30 235=11 76-24 70

Unmukha (upward looking, aspiring,moving beyond average)

9% 19/95 119=6 60-40 113

Saamaanya (Average, Ordinary) 10% 21/105 65=3.2 45-55 68

Sangharshi (Strivers) 35% 71/355 32=1.6 30-70 113

Nirdhana (Poor) 40% 83/415 15=0.75 11-89 62



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Consumption Profile of Layers in consumptionPyramid (IRS)

% of Households in each layer consuming/having

Layer Name

HH/Populat

ion(Mn) TVs Cars

PCs(Interne

t) A CWasm/c 2W

Modernfoods

Shampoo

BankA/c

Samriddha 1 (Prosperous) 1/5 100 71 59 (42) 48 81 65 55 93 94Samriddha 2 (Prosperous) 1/5 100 44 42(24) 26 76 72 39 91 93

Ampanna (Well off, not

wealthy) 1/5 98 24 18 (3) 5 53 69 25 89 87Siddha (Achieving) 1/5 94 10 4 - 30 62 9 85 80

Unmukha (Upward looking,aspiring, moving beyond

average) 1/5 92 2 - - 8 50 1 79 69

Saamaanya (Ordinary,average) 21/105 79 - - - - 30 - 70 54

Sangharshi (Strivers) 71/355 51 - - - - 6 - 69 33

Nirdhana (Poor) 83/415 6 - - - - - - 38 8


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Growth in numbers of HH in

each income group% AAGR 1995-6 to2001-2

% AAGR 2001-2 to2005-6

Annual HHIncome U R Total U R Total

Low -8.5 -2.7 -3.5 -5.8 -5.1 -5.2Lower Middle 0.7 7.6 5.6 0.2 4.1 3.2

Middle 4.8 4.9 4.9 3.1 9.7 6.6Upper Middle 8.4 7 7.8 5.7 6.8 6.2

High 17.3 12.1 15.3 12.5 11.5 12.2

Source: NCAER, MISH Surveys, 2002


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6. Schizophrenic India



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6. Schizophrenic India

IT India (10 Million people & accounts for5% of GDP) & Agricultural India (50 timesmore than IT but only 5 times of IT more in

terms of GDP) Rural India 2 distinctive demand segments

1. Agriculture Rural India

2. Non agriculture rural India



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Liberalizations impact on

Indias SchizophreniaFrom To2 Indias Many Indias

Rich & Poor India (5consuming class) Many shades of rich, not sorich, no so poor

Urban India & Rural Bharat Many oases & deserts withinIndia as well as Bharat

3 economies agriculture,

manufacturing, government

5 economies- agriculture,

manufacturing, government,service & IT



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7. demographic, psychographic

& social determinants ofconsumption


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Socio economic Classification

(SEC) SEC system developed in 1980s by theMarket Research society of India.

Urban SEC system based on the

occupation & education of the head of thehousehold (CWE- Chief wage earner).

Rural SEC system based on 2 variables-education of CWE & type of structure(pucca or kuchcha).



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The Urban SEC system

An ordinal scale that goes down from A (thehighest scale) to E, with shades in between ofA1, A2 &B1, B2 & E1,E2.

SEC A- CWE is graduate/ post graduate

employed top 10% of Urban Population (6million households or 30 million population)

SEC B- CWE has either education or occupationnot both- double size of SEC A Usually mean

Middle class- comprises of wannabes



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The Urban SEC System Contd.

SEC C CWE Modest education 10th

pass- very junior level position doublethe size of SEC A.

SEC D CWE not finished school aclassic lower- end blue collar worker 14million

U b SEC



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Urban SECEducation Illit

era

te

Up to 4

std.

5th9th

std.

SSC/HS

C

College not

grad.

Grad/Post

Grad

Grad/Post Grad

ProfessOccupation 1 2/3 4 5 6 (7, 9) (8,10)

1. Unskilled workers E2 E2 E1 D D D D

2. Skilled workers E2 E1 D C C B2 B2

3. Petty traders E2 D D C C B2 B2

4. Shop Owners D D C B2 B1 A2 A25. Businessman (NO EMPL /1-9 EMP/ 10+) D/C/B1

C/B2/B1 B2/B2/A2

B1/B1/A2

A2/A2/A1 A2/A1/A1 A1/A1/A1

6. Self employed C D D B2 B2 A2 A1

7.Clerical/ Sales man B1 D D C B2 B1 B1

8. Supervisory level D D C C B1 B1 A2

9. Officers/ Executive Jr. level C C C B2 A2 A2 A210. Officers/ Executive Mid/ Sr. B1 B1 B1 B1 A1 A1 A1



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The Rural SEC SystemTypes of House

Education Pucca Semi- pucca Kuchcha

Illiterate R4 R4 R4

Literate but no formal schooling R3 R4 R4

Up to 4th standard R3 R3 R4

5th to 9th standard R3 R3 R4

SSC/HSC R2 R3 R3

Some college but not graduate R1 R2 R3

Graduate/ Postgraduate (General) R1 R2 R3Graduate/ Postgraduate (Professional) R1 R2 R3



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Relative Purchasing Power AcrossSECs

Plumber cum electrician vs. executive inpublic sector bank- spending habits

Based on consumption not income

Households premiumness index (HPI)1. 8 consumer durables

2. 22 packaged FMCGs

3. 4 services &4. 6 demographic variables

R l ti P h i P



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Relative Purchasing Power

across SECs

0

10

20

30

40

50

60

70

80

90

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

East

West

North

South



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Defining My Target India in terms ofSEC

SEC A+ B Prospering & Spending India about 17 million HH or 85 millionPopulation- High end brand

SEC C+R1 Middle India- 18 million HHor over 90 million Population- BudgetBrand (30% have refrigerator, 40% have 2

Wheeler)



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Defining My Target India in terms ofSEC Contd.

SEC D+ E1+ R2 Mass Market- 37 millionHH or 185 million population- poor state ofpublic transport- high demand of 2 W

(20% have Refrigerator, 25% have 2W) Sec E2+ R3 Poor but consuming India-

discovered by FMCG- Micro pack- 70million HH or 300 million population (37%

have TV, 10% have 2 W, 80% buy dentalhygiene products

P h hi D t i t f



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Psychographic Determinants of

Consumption Resigned- Really Poor

Strivers- Goal is to improve & escape from

hardship Mainstreamers- Middle Majority- security, value

& social acceptance

Aspirer-the wannabes-status & envy r important,

who wants to be perceived as successful Successful Want material success & control


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8 How to read & predict change



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8. How to read & predict changein Consumer India?

8 How to read & predict change



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8. How to read & predict changein Consumer India

1. Force = Mass Acceleration

2. Chage Confluences*

3. Morphing change vs. Molting change

4. Mixed verdict**

5. Continuity with change***

6. Creeping trends & Ripple Effects

7. This as well as that****

9 Cultural foundation of



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9. Cultural foundation ofConsumer India

9 Cultural foundations of



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9. Cultural foundations ofConsumer India

Force of Liberalization

Pragmatism replaces Nationalism

Technology driven cultural change- ICE

(Information Technology, Communication& Entertainment)

IC =E (IT Power, Communicationrevolution, connectivity leap ,an explosionof Exposure to the world


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10 Young India woman India: a



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10. Young India, woman India: acloser look

10 Young India woman India: a



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10. Young India, woman India: acloser look

A young market still waiting to happen

Understanding youth demographics

A pressure- cooked generation

Indian, not Wannabe Western*

Pragmatism is the key



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Profile of 12 to 19 yr old in IndiaLabel of attractiveness tomarketers

SEC Size of town/citylived in

No. in millions/% oftotal

Rich Brats A1 Top 23 cities 0.9/ 0.5

Creamy Layer A Top 23 cities 2.2/1

Consuming Class A, B Top 23 cities 5.1/3

Stretch a - bit A, B All Urban 12.0/7

Urban Lower-Middle C All Urban 11.0/6

Urban Poor D, E All Urban 33.0/18

Rural Consuming Class R1 Rural 4.5/3

Rural Marginal Consumer R2 Rural 132/70

Liberalization Children: A



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Liberalization Children: APowerful Market Force

0-2 3-4 5-12 13-15 16-19 20-24 25-34 35-54 55+yrs yrs yrs yrs yrs yrs yrs yrs yrs

24 21 52 28 31 35 53 71 42

% of households who have a family member aged

Source: Indian readership Survey, 2006



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The Woman Consumer In India

Working Women Facts- 23 % Housewivesin Urban & 42% in Rural

The conservative working woman

The home entrepreneur

The changing housewives

The change wave of womanism




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11. Rural Consumer India

11 R l C I di




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11. Rural Consumer India

A Market in transition ready to be shaped

Ready to be shaped, but why so fewtakers

The changing structure of the ruraleconomy: beyond Agriculture

1. 2001-2, out of Indias NDP ofRs.1,062,400 Crore, the share of ruralIndia was 52% contd.

R l C I di




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Rural Consumer India Contd.

2.Rural is much more than agriculture; it has athriving & growing manufacturing & servicesector.

3. Per capita income has grown at the same pace

as that of Urban

4. The top quartile of rural India are high spenders

5. Pent up demand for goods as well as servicelike education, communication & medical

treatment.


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Profile of Villages




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Profile of Villages

Distribution of Villages

PopulationNo. ofVillages % of total villages

Less than 200 92,541 15.6

200-500 1,27,054 21.4

501-1000 1,44,817 24.4

1001-2000 1,29,662 21.9

2001-5000 80,313 13.5

5001-10,000 18,758 3.2

Total no. ofvillages 5,93,154 100

Hardly any shops inthese 220,000 villages

17% of villages accountfor 50% of rural

population & 60% ruralwealth

12. Understanding the bottom




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gof the pyramid Consumer India

12. Understanding the bottom




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gof the pyramid Consumer India

Why bother about the Bottom of thePyramid

Large Value- 650 million people- earnsless than a dollar a day- but collectivelyaccount for 30% of national income.

A dollar a day per capita is a reasonableincome in India.

Why Bother about the Bottom




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yof the Pyramid Contd.

Sensible investment for the future

Guaranteed income growths

Favorable change in social attitudes Poor but not backward any more

Characteristics of the BOP




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Consumer

1. They have all kinds of Productivity devices thathelp them earn more

2. They do complicated value processing, havecomplicated financial models*

3. They innovate their own product solutions tomake them Value- right**

4. They are technology embracers not rejecters

A generic framework for understanding Low-




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g gIncome Consumers better

Segmenting low-income consumers

Understanding spending power & patterns

beyond Annual Income Improving buyer power

Understanding value processing & budgetbalancing

13 Winning in the Indian market




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13. Winning in the Indian market

13 Winning in the Indian Market




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13. Winning in the Indian Market

Creating blockbuster relevance- Do notwait for electricity rather marrying LED,

Solar energy & nano tech Creating perceived value advantage

Getting the business economics right*

What MNCs do differently in their




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approach to the Indian Market? Ask the right question

Eschew value arrogance

Recognize & accept :

1. India is multi-tiered & multi- layered market &needs a multi- pronged strategy

2. Emerging markets are not the way developedmarkets were in their infancy

Forget the thresholds of Income above whichconsumption takes off




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