We are like that only:

understanding the logic

of Consumer India
by
Rama Bijapurkar
Contents
1. Made for India
2. The mixed message from Consumer India
3. Why bother with Consumer India
4. Understanding Consumer India’s demand structure
5. Just how much purchasing power does Consumer India actually have?
6. Schizophrenic India
7. Demographics, psychographic and social determinants of consumption
8. How to read and predict change in Consumer India
9. Cultural foundations of Consumer India
10. Young India, woman India: a closer look
11. Rural Consumer India
12. Understanding the ‘bottom of the pyramid’ Consumer India
13. Winning in the Indian market
About the author
‡ One of India’s most respected thought leaders on
market strategy and consumer behaviour
‡ Acclaimed for her unique 360 degree insight on
consumers and creative thinking on new products and
new business models for emerging markets
‡ Consultant for an impressive list of companies from
established Fortune 500 corporations to interesting
Indian start-ups
‡ Independent director on the boards of some of India’s
leading companies and visiting faculty at the Indian
Institute of Management, Ahemadabad
Made for India

‡ India is undeniably an important future growth market of the world (it

has the 4th largest gross domestic product or GDP in the world in
Purchasing Power Parity), it is young (it has 450 million people below
the age of 21) and it is just beginning its consumption journey
‡ Until 1991, the government was in charge of business. After the
economic liberalisation of 1991, India made a 180 degree turn in its
economic ideology
‡ However severe restrictions existed even then including severe
restrictions on the operations of MNCs. Hence global brands were few
and far in India.
‡ Since then there has been a jump in GDP growth rate and a spurt in
national income. Consumer confidence and aspirations have been
upbeat as they are seeing visible improvements in their lives
‡ There is now a lot more to buy, it is cheaper and better than ever
before. However, ‘consumer India has been the source of belied
expectations and frustrating resistance to conventional global offerings.
Nokia wins. Coke and Pepsi struggle. Honda wins. Mercedes struggles.
MTV localises. Nike limps along. Etc.
Lessons for new entrants
‡ The nature of emerging market economies is fundamentally
different. India is large in size but small in terms of per capita
income. A fundamental rethink around appropriate ‘made for
India's propositions is needed, which must replace the
conventional wisdom of ‘global standard’ benefits at ‘global
equivalent’ prices.
‡ Emerging markets need not be virgin markets: There already
exists in India an array of home grown options in many
categories offering tough competition to new entrants. Robust
brands were built in India to compensate for the primitive
products they represented. This raised the bar for new entrants.
Also a sophisticated sales and marketing system existed that did
its best to innovate and develop whatever consumption it could
from the markets.
‡ Emerging markets today are not what the developed markets
were in their infancy
The Mixed Message for Consumer India
‡ Consumer India coexists in many centuries and at many levels of affluence.
‡ Global businesses are cautious about what India really holds for them
‡ The consumer demand journey
‡ Good news: Consumer India is a market where average per capita incomes have
increased more than 5 times since 1991. The market is high on consumer
confidence and aspiration which believes that its ok to spend today because
tomorrow will be better.
‡ Bad news: the slowdown that may happen now will be because of too much
demand with the groaning infrastructure causing poor quality supply.
‡ A perspective on consumer India: a mosaic of tradition and modernity
‡ A ‘bullock cart to business class’ economy; land of contradictions with different
levels of intensity and different forces of globalization; India belongs to too
many centuries
‡ The notion that as GDP per capita increases, all countries will demonstrate a
predictable pattern of market structure and consumer behaviour has been
disproved.
‡ Hence it is imperative to define your own India-figure the market in the context
of your business strategy and develop a mental model of what ‘my target India’
is.
Why bother with Consumer India?
‡ Marketers ask ‘when will India become like someplace else?’
‡ Truth about India:
‡ Consumer India is large, mostly poor, getting less poor. Rich
people are increasing in number and getting richer
‡ Schizophrenic India: 23 languages, geographic and climatic
differences, rich and poor, wide income and developmental
disparities.
‡ 4 separate economies co-exist from globally competitive
infotech economy to uncompetitive agricultural economy
‡ Hence a common complaint is that doing business in India
demands far greater strategy complexity than any other market
of equivalent size.
Why bother with Consumer
India?
‡ So why should global businesses bother with
Consumer India?
‡ India is a ‘guaranteed to happen’ growth story
‡ It has young people and a virgin market
‡ Low country risk: political and social stability
‡ Strong institutions: strong judiciary, legislature
‡ Change confluence: average Indian’s income is
growing, India’s economic fundamentals are growing
stronger. Rural India is decreasing its dependence on
agriculture, the self employed population is making
India a nation of vibrant achievers
‡ China 2005=India 2015. Author predicts that India will
have the same per capita income that China has in
2005 after 8 years.
 •The coming together of a diverse set of economic,
demographic and social change waves-point towards
the fact that a brave new market is here.
•Evidence shows that strong India continues to grow
steadily and is here to stay.
•The changing shape of income distribution suggests
growth in both rural and urban incomes which in turn
should herald a consumption boom
•With a rise in aspiration,
sophistication of the middle
class, liberalisation, being
a national of self-employed,
comfort with technology
and rural India going beyond
agriculture are more
reasons to bother with
Consumer India

•Beyond market potential: the triple whammy potential of India: huge demographic-economic
opportunity; global cost cutting opportunities; the ‘disruptive’ innovation capability of talented
scientists and managers
Understanding Consumer India’s
demand structure
‡ BRIC report of Goldman Sachs says that in the future, the world’s largest
economies may not be the world’s richest economies. Being individually poor but
collectively rich differentiates emerging market economies from developed ones
‡ Author says that in India, consumption has ‘taken off’ at far lower income levels
than what is thought to be the magic per capita income level. But the averages
marketer is not able to innovate and profitably serve demand structures that are
characterised by large populations with low incomes, low to moderate
penetration levels and low per capita consumption levels
‡ There are 3 broad segments in the Indian market: premium, popular and
discount. However there are no formal definitions of these-the rule of thumb is
that the top 10% by income of any population constitutes the premium market,
next 30% is the popular segment and the last 60% is the discount/mass market.
However a translation of data reveals that the 2 segments are roughly equal in
terms of total value, though they differ vastly in terms of the number of
consumers in each and their respective income levels.
‡ In markets that have historically favoured small producers, the ‘unorganised’
small-scale buyers are far greater in number than the large-scale, organised
sector buyers. In India, a lot of small buyers buying low-priced equipment or
services can and do create a market as large in value as that created by large
buyers. The former is the ‘unorganised’ segment while the latter is the
‘organised’ segment. Many large companies define their target market and
report market share in terms of the organised sector and miss the point that
there is a market, perhaps much more valuable, at a lower price-performance
point.
Understanding Consumer India’s
demand structure
‡ Initial assumption was that the a large part of the popular
market would migrate to the premium end and the popular
segment would eventually die.
‡ But in categories like FMCG, the reverse happened. The popular
segment grew with richer consumers also opting for it.
‡ The paradigm of premium-popular-discount=rich-middle income-
poor is now quite irrelevant
‡ The New Market Structure Construct: by value orientation:
‡ NCAER has clustered Consumer India into 5 types of consumer
groups: the rich, the consuming class, the climbers, the aspirants
and the destitute.
‡ What is interesting is that while the same durable is being
consumed across the consumption classes, the performance price
points within them are many.
 •The value orientation-based
consumer market structure

•The NCAER study shows that

The 2 largest consumer classes are
the climbers and the consuming class,
with about 75 million households each.

•Dynamics of future growth:

There is constant value growth as
there is a virtuous spiral of demand
as each class graduates into the next
 Just how much purchasing power does
Consumer India really have?
‡ GDP per capita number would suggest that purchasing
power isn’t much. However averages about India are
misleading and reality is quite different.
‡ Myth of India's middle class: an idea that was
packaged and sold to the world as a sales pitch for
FDI in the early mid 1990s. After lying dormant from
2000, the idea is resurfacing.
‡ However there is no unique or universally accepted
definition, it is much poorer when compared to the
middle class in developed countries.
‡ How to think about the purchasing power of Consumer
India: must abandon debate about size and affluence
of Indian middle class. Must replace model of a
monolithic middle class with a multi-layered model of
people.
Just how much purchasing power does
Consumer India really have?

‡ While income is understated and does not measure the real

thing, it is perfectly usable for grading the population based on
its relative purchasing power and to compare the growths and
declines of various income groups over time. In India,
consumption is like maternity-a certainty, income is like
paternity-matter of inference
‡ Forecast for 2005-6 to 2009-10: in the next 4 years, rich
households will continue to increase equally in both urban and
rural areas. A rural middle income boom is also forecast. Along
with this, a predicted fall in population growth rate (more in rich
households) will make the rich, richer in terms of disposable
income.
‡ If this is accompanied by a drop in price thresholds, then there
will be substantial market growth for products and services
across the board.
Schizophrenic India
‡ Define ‘My Target India’:
‡ Consumer India has 5 consumer classes-’benefit maximizers’;
‘cost-benefit optimizers’; ‘benefit point constrained cash
minimizers’ ‘cash constrained benefit maximizers; ‘destitute’
‡ Urban and rural India are different worlds evolving at different
speeds.
‡ 28 states are totally different from one another.
‡ Now there are 4 age cohorts with 2 distinct consumption
ideologies and shades in between: India’s pre-independence
generation, first post-independence generation: both with
socialist ethos. Now children post liberalisation and the next
generation confident about its new path
‡ 5 economies: agriculture, manufacturing, government, services,
IT
‡ The good news is that there is plenty of choice for creating
competitive advantage by defining ‘my target India’
innovatively.
Demographics, psychographic and social
determinants of consumption
‡ SEC A1-Tip of India iceberg
‡ SEC A,B-’prospering and spending India’
‡ SEC C+R1-’middle India’
‡ SEC D+E1+R2-’mass market’ India
‡ SEC E2+R3-’poor but consuming India’
‡ The self employed as a distinct consumer class
‡ Psychographic: According to a study by Rediffusion
DY&R, Consumer India can be divided into the
‘resigned’ ‘strivers’, ‘mainstreamers’, ‘aspirers’, and
the ‘successful’.
‡ Ethnicity-several companies have chosen to consider
ethnicity as one of the many variables in their
operational marketing strategy. Advertising often has
a single concept but executed for different cultures.
How to read and predict change in
Consumer India
‡ In Consumer India, a large mass of people moving with a very
small acceleration unleashes a large force of change.
‡ A slight change in rural income brings in its wake a huge market.
‡ Consumer India changes occur not only to the consumer intrinsic
world but also on the supply side.
‡ ‘mixed verdicts’ and ‘continuity with change’ cause much
frustration-both are typical of morphing change.
‡ Anyone wanting to read change in India must be prepared for
mixed verdicts, which are the hallmark of everything Indian,
from economy, polity to markets and consumers.
‡ Looking for mega trends is a futile exercise. The thing to look
out for are creeping trends. The change in employment patterns,
blurring boundaries between India and Bharat, creeping income
levels, increase in literacy, rise of ‘womanism’ are examples of
creeping trends in India.
How to read and predict change in
Consumer India
‡ Predicting future change: the analogy trap
‡ Analogies need to be thought through. Global warming, health
hazards from fast food etc are all available in real time to
nascent market consumers as they are to developed market
consumers. Hence it is essential to painstakingly construct future
cultural contexts from first principles, by studying age cohorts,
cultural drivers of change and by understanding the process of
change and the DNA of the society that is changing.
‡ DNA of Indian society: this as well as that
‡ The dominant logic that there would be a sharp battle between
tradition and modernity was buried. Consumer India adopts a
‘this as well as that approach’
‡ Hence the future of India must be thought of in terms of co-
existence, fusion, loosening of rigid structures and new ways of
doing old things.
Cultural foundations of Consumer India
‡ Of the 3 foundations of consumer
behaviour-psychological, social and
cultural-the last one is the hardest
to see and decode-and is critical for
CEOs and strategists.
‡ The emergence of discontentment is
an important cultural shift
‡ Pragmatism replaces nationalism is
another shift that is marked with
opportunity
‡ The force of the ‘ICE’ wave:
technology-driven cultural change
‡ There is a rush to catch up with the
rest of the world. HiTech is seen to
be the solution to create low-cost,
wide scale high quality products and
services that will enable businesses
to get a share of the Indian as well
as global market.
‡ ICE is Information Technology,
Communication and Entertainment-
converging to shape a new India.
‡ IC2=E2: where I is IT power; C2 is
communication revolution and
connectivity leap; E2 is explosion of
‘exposure to the world’
Cultural foundations of Consumer India
‡ Resultant cultural changes in Consumer India:
‡ Tech-led democracy, reducing power distance: with the arrival of the internet,
even poor people understand that there is a way to be heard and seen. This
results in increased bargaining power and a general move from accepting status
quo to demanding rights.
‡ Other cultural themes that are here to stay:
‡ Empowerment and enablement: the new demand is for strengthening the poor to
effectively compete for opportunities by giving them education etc. The focus on
enablement is the changed discourse of NGOs who seek partnerships for
financially stable models
‡ Negotiation: modernity is nothing but negotiated tradition. Other related themes
are adjustability, adaptability, ‘this as well as that’, synthesis, hybrid models
‡ Hybrid models: the emphasis is always to make do, cobble together and manage
to create the appropriate solution at an affordable price
‡ Contextual morality and ideology: solutions are all-round accommodation,
adjustment and collusion with detachment
‡ Social legitimacy of aspiration: today, unlike earlier, a whole range of
aspirations are socially legitimate from becoming a movie star to Ms Universe
‡ Child-centricity: in India child-centricity is because of the hope and expectations
that children need to be indulged today so that they cab take care of their
parents in their old age
Cultural foundations of Consumer India

•India changes in a morphing way

coupled with the hybrid mix of
Western and Indian behaviour.

•In the past, abstemiousness was

a lauded virtue. However this idea
Was probably a detour caused by
the Gandhian and Nehruvian way of
life. Hindu culture is probably the
only one that prays blatantly to
a goddess of Wealth.

•Indian consumers are far more

satiated with the ‘do good’ products
and it will be some time before
the ‘feel good’ products find their
place in his/her purchase priorities.
Young India, woman India: a closer
look
‡ Growth levers:
‡ Rise of ‘generation next’
‡ Expected changes in homes
as a result of ‘the new,
emerging Indian woman’
‡ Expected increase in
consumption and
consumption sophistication
of rural India as both its
income and exposure
increase
‡ Youth market: errors in judgment:
Indian youth does not comprise a
brand-aware and consumption-
obsessed market waiting to happen.
Also the youth in India is not
identical to the youth all over the
world. Not enough research on
defining a modern Indian youth
Cultural foundations of Consumer India

‡ The Woman Consumer:

‡ The conservative working woman:
continues to play the traditional
role at home
‡ The home entrepreneur: running
‘home businesses’
‡ The changing housewife: in India the
increasing number of working
women is not driving change as
much as the increasing number of
housewives who have acquired the
‘working woman’ mindset
‡ Forces of change:
‡ Education
‡ Outdoor work
‡ Role models
‡ Television
Rural Consumer India
‡ Rural India is a potential market that is seeing significant income
growth and employment diversity for the 1st time in its history.
‡ However it is important for companies to understand how best to
segment it, define ‘my target Rural India’, and shape business
for it
‡ Changing structure of rural economy: beyond agriculture
‡ Rural has a thriving manufacturing and services sector
‡ Per capita rural income has grown at the same pace as urban
between 1993-4 and 2000-1
‡ Top quartile of rural India have been discontinuously higher
spenders than the average
‡ There is considerable pent up demand for goods and services
Understanding the ‘bottom of
the pyramid’ Consumer India
‡ The size of the BOP market is 650 million people, who
individually earn less than a dollar a day, but
collectively account for 30% of the national income, a
little over 33% of consumption expenditure and a
little over 20% of India’s savings.
‡ A dollar a day per capita is a reasonable income in
India
‡ Sensible investment for the future as brand emotions
tend to stick when the poor graduate to the rich and
securing the loyalty of 400 million consumers
‡ The BOP is rising fast in terms of absolute quantum of
income earned
‡ Favourable change in social attitudes. Hunger for
knowledge and information is extreme
Understanding the ‘bottom of
the pyramid’ Consumer India
‡ Characteristics of the BOP consumer:
‡ Poor but not backward
‡ They value all kinds of productivity devices that help them earn more
‡ Poor consumers do complicated value processing
‡ Poor consumers innovate to make products ‘value-right’
‡ Poor consumers are technology embracers
‡ A generic framework for understanding low-income consumer better:
Segmenting low-income consumers: age, education and occupation
segments combined into a ‘spell length in low income’ variable or how
long the household or individual is likely to remain in the low-income
group
‡ Understanding spending power and patterns beyond ‘annual income’:
example, borrowing practices which opens up opportunities for thrift
stores etc and understanding value processing and budget balancing.
Winning in the Indian market
‡ Building a business in line with India’s large GDP and
population requires winning in the mass market.
Argument by companies that they will run a small and
profitable operation in the class market and wait till
the mass market gets rich enough is deeply flawed.
This is because mass markets do not sit around
waiting till they get rich enough.
‡ 3 factor to getting it right for the Indian market:
‡ Creating blockbuster relevance by defining business
arenas in ways that make them relevant to the
aspirations and problems of most Indians.
‡ Creating perceived value advantage for consumers
who have modest incomes but are not backward
‡ Getting the business economics right
Winning in the Indian market
‡ What MNCs should do differently:
‡ Recognize and accept that India is a multi-tiered and multi-
layered market and needs a multi-pronged strategy
‡ Recognize and accept that emerging markets are not the way
developed markets were in their infancy
‡ Forget about thresholds of income above which consumption
‘takes off’
‡ The ‘global vs. local’ power struggle: Consumer India requires
the creation of new solutions, rather than the transplanting of
strategies from other markets. It requires companies to leverage
their core competence, things that they are very good at doing,
and apply it to new markets-to create winning ‘made for India’
solutions.