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Westfall MarketingIndia 1960
Westfall MarketingIndia 1960
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MARKETING is probably the least de- sumption is, of course, even lower-about
veloped aspect of the Indian economy.$54 per person per year-as compared with
It is considered a wasteful activity. Middle-
$1,664 for this country. About $32 of In-
men and salesmen of all types are regardeddian consumption represents cash pur-
as schemers trying to profit at the expense
chases; the rest is consumption of home-
of the public. produced items.2
Retailers' margins in India are extremely The majority of Indians are still living
low, probably about 10 per cent, and whole- in an economy that is only partially mone-
salers' margins are less than half as much. tized. In the villages, where some 85 per
Both figures are well below those in the cent of the population lives, there are still
United States; even so, marketing in India village potters and carpenters who produce
must be considered inefficient. Losses from for all members of the community in return
poor physical distribution methods are un- for a certain share of the harvest. This
doubtedly large, as are losses resulting fromshare has been fixed by tradition and is
the failure of the marketing system to in- not subject to bargaining.
tegrate consumer wants with production Indian shopping habits differ markedly
resources. The greatest waste, however, from those in the United States. In the
probably comes from the failure of market- cities the housewife makes a daily shopping
ing to furnish the force necessary to start trip to buy fruits and vegetables. There are
the economy on a period of growth. no refrigerators except in a few wealthy
homes. A certain amount of grain may be
THE MARKET
stored in earthen jars in the household.
India is only about one-third the size of Shopping for items other than food is
the United States, but has more than twice unusual and so becomes a significant under-
as many consumers-almost 400 million. taking. A day may be devoted to shopping
Virtually all of these consumers have a for a sari or other items of clothing.
very limited income. Gross national prod- Neither the vendor nor the shopper feels
uct is only about $72 per person, one of theright if the sale is made without some bar-
lowest in the world, as compared with $2,- gaining. The vendor usually quotes an ini-
343 for the United States.1 Personal con- tial price well above that at which he is
willing to sell; the buyer offers less than
he expects to pay. Both can then "give" a
* ABOUT THE AUTHORS. Both the authors are
little. In only a few of the finest shops in
professors of marketing at Northwestern University.
They have studied marketing at first hand in a numberthe largest cities is there a one-price policy.
of foreign economies in South America, Europe, and CHARACTERISTICS OF MARKETING IN INDIA
Asia, and had a previous article on marketing in
Importance of Marketing
Venezuela in the JOURNAL OF MARKETING in April,
1958. They have co-authored a number of articles Some idea of the low relative importance
and books on various marketing subjects. of marketing in the Indian economy can be
lFacts and Figures (San Francisco: Inter- 2Second Five-Year Plan: The Framework
national Industrial Development Conference,(New Delhi: Ministry of Information and
1957), pp. 5 and 8. Broadcasting, 1955), p. 12.
11
TABLE 1
three. All sold on credit, but only two had wholesaler is a relatively large merchant.
a published price list. Two manufacturers His expenses indicate why he can operate
sold branded products and did some adver- on such a small margin:
tising, but the annual advertising expendi-
Rent $ 6 per month
ture of the two totaled only about $700.
Wages (4 employees at $12) 48 per month
In the northern region of India there Electricity 1 per month
were fifty shoe-polish manufacturers in Entertainment of customers 12 per month
1956.3 Total production was 1,250,000
Total Expenses $67 per month
pounds, of which about 400,000 pounds were
made by one producer. The other forty-nine The initiative for exchange at the whole-
firms produced an average of about 17,000 sale level comes primarily from the buyer.
pounds each which resulted in sales of about
On their last purchase, twenty-seven out of
$7,000 annually. thirty utensil wholesalers bought from
manufacturers and three from other whole-
Wholesalers Important
salers. Fourteen of the thirty visited the
Wholesalers are standard in most chan- manufacturer to make their purchase, and
nels of distribution in India. Many of the four others sent their orders by mail. In
wholesalers combine their wholesaling func-eleven cases, vendor salesmen called on the
tions with retailing or with manufacturing.wholesaler to make the sale, and in one case
A number of large companies accomplish a selling agent called on the wholesaler.
the physical distribution function of the During the preceding year, twenty-six of
wholesaler without relinquishing title, the thirty utensil wholesalers were visited
through the use of "stockists." These are by salesmen from more than one source,
retailers or wholesalers who perform a but four were not. Three wholesalers had
function similar to the public merchandisebought from only one source during the en-
warehouse. Hindustan Lever (the Indian tire preceding year, but the median number
Lever Brothers firm) often uses stockists. of sources was four.
For example, Lever arranges for the mer- Selling effort is very limited among In-
chant to stock Lever soap and vanespati dian wholesalers. The traveling salesman
(hydrogenated oil). Title to the merchan- scarcely exists; in the utensil survey none
dise remains with Lever. The dealer will of the thirty wholesalers had a traveling
sell the stock for cash, at a price set salesman.
by One wholesaler received calen-
Lever, to any customer who presents him- dars from a manufacturer and sent them
self. He deducts his charge for the service
to retailers as a promotional device. None
and forwards the balance to Lever. of the others had any promotional mate-
Among thirty household utensil whole- rials. Twenty-eight of the thirty utensil
salers in Punjab State, the median annual wholesalers gave 30-day credit, and twenty-
sales volume was approximately $4,000 in six admitted to bargaining on prices with
1957. Fourteen of the wholesalers had no their retailer customers.
employees, and only one had more than
three. Wholesale margins are low as com- Retailers
pared with those in the United States. The Retailing in India differs in many re-
utensil wholesalers have margins on variousspects from that in Western countries. Self-
items that vary from 1.5 to 4 per cent.service is not feasible because of the pil-
Wholesalers' margins on soap are 3 to 4 ferage problem. In many of the better stores
per cent. One bicycle wholesaler buys casesin large cities, the goods are kept locked
of six bicycles at $140 per case and sellsbehind glass or mesh doors which have to
them at $23.25 each for a total of $139.50. be unlocked every time a sale is made. In
The only profit is made by selling the cratestores in which sales people other than the
to a furniture company for $1.40. Thisowner wait on customers, two different em-
Boot Polish, Small-Scale Industry Analysisployees are used to prevent stealing. One
and Planning Report No. 9 (New Delhi: Min-employee writes the sales check and another
istry of Commerce and Consumer Industries, accepts the money. There are no department
1956), p. 6.
stores in the standard sense, but there are
TABLE 2
MADRAS STATE RETAILERS CLASSIFIED BY TYPE OF BUSINESS AND SALES VOLUMEa
utensil dealers studied, purchases were Fiji, for example. On the other hand, In-
made every two to three months by most; dians have a philosophic outlook on life
the median distance to the source was be- which tends to make them less interested in
tween 100 and 125 miles, considerably far- materialistic things-at least as compared
ther than the typical wholesaler traveled to with the typical U.S. citizen. Their thinking
make his purchases. In the small town of in this respect is similar to that in Europe
Lonavla, about 70 miles from Bombay, most in the Middle Ages.5 As a result, the busi-
retailers go to Bombay to buy. One hard- nessman seeking a profit is considered un-
ware retailer goes to the city twice a month, worthy, and this is particularly true for a
a 6-hour round trip, to buy from a manu- merchant who takes an aggressive approach
facturer. Another has a monthly train to selling something which he did not make
ticket to Bombay, and has his son go al- but which will bring a profit to himself.
most every day to make small purchases Thus, the initiative for exchange typically
from a wholesaler. No salesman has ever comes from the buyer's side. At the same
called on either retailer. time Indians are great bargainers and, once
negotiations are started, will strive to make
WEAKNESSES IN INDIAN MARKETING SYSTEM a sale and secure a price advantage.
The Indian village of the past was not a
Demand Creation
market economy. Each person performed
There is little demand creation effort in his job, largely determined by his caste,
India. Although there are branches of some and shared in the village's produce on the
of the top U.S. advertising agencies in In- basis of a complete system of shares. There
dia, such as J. Walter Thompson Co., there was no market valuation of either the serv-
is little advertising. ices of the artisans or the produce of the
There are good reasons, however, for this. farmers.6 In such an economy there was no
National advertising is impossible. There place for selling. The attitudes developed
are some fifty-one dialects spoken by one over centuries of this type of economic
or more million people each. No one lan- thinking cannot be changed quickly. Since
guage is spoken by more than about 50 mil- approximately 85 per cent of all Indians
lion of the almost 400 million population. still live in villages and many are still liv-
Only about 15 per cent of the population is ing partially in a communal system, this
literate in any language. lack of understanding of a market economy
There are no communication means by is a major factor.
which the advertiser can reach any large Under the circumstances, American de-
proportion of the people. Newspapers are mand creation methods cannot be directly
confined to the major cities, where less than and immediately transplanted to India. The
20 per cent of the population lives, and asuccess of a few promotional efforts adapted
majority of them are in English. Radio to the local situation, those used by Hindu-
reaches only a small segment because there stan Lever, for example, indicates definitely
is no electricity in most of the villages, and that demand can be created.
few people can afford radios. In addition,
Indian radio is controlled by the state and Transportation
does not use commercials. Radio Ceylon Transportation difficulties are a barrier
does permit commercial messages and is to effective marketing. The transportation
beamed over much of India, but its system of India is a mixture of the ancient
audience is limited. There is no television. and modern. A bicycle made in Madras may
A more fundamental problem in using
modern demand creation methods lies in Marquis W. Childs and Douglass Cater,
Ethics in a Business Society (New York:
the character and culture of the people. On
the one hand, Indians have shown them-Harper and Brothers, 1954), p. 12.
selves to be natural merchants; in many6Walter C. Neale, "Reciprocity and Redis-
tribution in the Indian Village," in Karl
countries to which they have emigrated they
Polyanyi and others, Trade and Markets in the
have become major factors in the country's
Early Empires (Glencoe, Illinois: The Free
internal trade-Burma, South Africa, andPress, 1957), pp. 218-234.