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AGENDA
Brief economic history of India Why is consumption going to increase Consumer Indias demand structure Segmentation of Indian markets Young consumers Women consumers Rural consumers Bottom of pyramid consumers Winning in Indian markets
Our markets are large in overall size but small in per capita income/ consumption the global price performance points and margin volume equations do not work here
there needs to be a fundamental rethink of global standard benefits at global equivalent prices. With more than half the population in the emerging markets - the definition of global needs to be pegged differently There needs to be a newer way of thinking- beyond developing just cultural sensitivities
There is a range of offering available in every category The distribution is fairly deep with over 5 million small retailers The brands are quite entrenched
India is like an experienced hire where as China, Russia, and most of South east Asia is like a fresher hire
as a market is not what developing markets were in their infancy. India markets has its own nuances.
COMPANIES MUST NOT ASK WHEN WILL INDIA BE READY FOR THEIR GLOBAL BEST PRACTICE STRATEGY?
AND MUST ASK
INDIAN MARKET?
C K Prahalad
Large population more than 1.1 billion and growing at 1.6% - we are adding equivalent of one Australia every year. 70% of our population is rural and remaining 30% urban Average family size is 5.There are 155 million rural families and 55 million urban families. We are mostly poor but we are getting less poorer. GDP per capita has risen from $120 in 1990 to $1000 today. People below poverty line has dropped from 36% to 22% today. Indias rich are increasing in number and getting richer as well. Indian consumer is totally Schizophrenic - a state characterized by the coexistence of contradictory or incompatible elements India is merely a geographic expression (Shashi Tharoor).
60%
50%
40%
30%
20%
10%
0%
1995-96
2001-2
2005-6
2009-10
35%
30%
15%
Lower
10%
5%
Actual penetration of goods has increased for every product category There is increased consumer confidence in the past 15 years in the 1990s the average house hold saw a 2.4 times increase in nominal income over late 80s Affordability growth in many categories has been more than the income growth due to sharp drop in prices, increase in performance, falling interest costs and easier consumer credit. Connectivity, communication and literacy levels in India has leapfrogged and that has created a rampant rise in aspiration There is increased comfort with borrowing
A large enough consumption base exists today to create a springboard for more consumption. The market penetration is not linear
The middle class urban and rural consumers are joining the consumer bandwagon creating a segment that is popularly called the mid price segment. More and more companies are offering premium styles at mid price points - for example budget hotels (Mahindra resorts), budget airlines (Indigo), Budget apparel brands (Pantaloon), prepaid cards, low priced handsets (micromax), hypermarkets.
Generational transition
The pre independence generation -these are people who have been influenced by Gandhian values of simplicity, honesty, selfdisciplined, self reliance and prudent for them imported goods and consumption have negative connotation (less than 10% of population)
Salman Rushdies Midnight children those born after independence but before 1970 - these are people who have seen the era of shortages and licence raj a lot of them fled India - for them excess consumption has negative connotations they are unhappy consumers (about 26% of population). Midway children those born between 1970 and 1985 they were young enough during liberalization to adapt to the new positive world view they are guilty consumers (about 30% of population) Today most households are run by this generation. These two segments has experienced life before and after liberalization. They enthusiastically push their children to opportunities they never had. They consume almost in a childlike manner- Indias youth market sometimes is found amongst 40 and 50 year old adults They are very value focused, will not waste money, are perennially guilty about consuming and need rational and function based reason to spend.
Generational transition
India has moved from a govt job mindset (till the 80s) to a self employed mind set. Only 10% of the jobs in India are in organised sector. Today 90% of rural households and 60% of urban households are headed by self employed person. They represent the main stream market. they use products much more to signal success and adopt products like mobikes and cell phones that improves their productivity/ profit
In the future industries like banking, education and healthcare are expected to penetrate in the rural hinterlands due to this technology penetration.