Devangshu Dutta
January 18, 2008
The entertainment business suggests that nostalgia is a very powerful driver of profit.
It is quite clear that retro is “in”. The movie business worldwide is full of sequels, prequels, re-releases and remakes. The music business is ringing up the cash registers with remixes and jukebox compilations. Star Wars and Sholay still have a fan following. ABBA has leaped across three decades, Hindi film songs from 30-60 years ago have been given a skin-uplift by American hip-hop artists, while Pink Floyd is hot with Indian teens along with Akon and Rihanna.
As copyright restrictions are removed from the works of authors long-gone, the market gets flooded with several reprints of their most popular writings. Of course, we know that classic literature survives not just a few years but even thousands of years. Examples include the still widely-read 2,500-year-old Indian epic Ramayana by Valmiki, the Greek philosophers’ works that continue to be popular after two millennia and the Norse legends that have been told and re-told for over a thousand years. Spiritual and religious leaders’ writings are also recycled into the guaranteed market of their followers and possible converts for a long time after their passing away.
On the other hand, the basic premise of today’s fashion and lifestyle businesses is that silhouettes, colours and design-cues will become (or be made) obsolete within a few weeks or a few months, and will be replaced with new ones. This principle is true not just of clothing and footwear, but is applied to home furnishings, furniture, white goods, electronics, mobile phones and even cars. In fact, the fashion business (as it exists) would find it impossible to survive if customers around the world chose only classics which could be used for as long as the product lasted in usable form.
What Fashionability Means for Brands
Other than individual styles or products falling out of favour, as fashions move and as the market changes, it is evident that some brands also become less acceptable, are seen as “outdated” and may also die out as they lose their customer base.
Of course, that some brands become classics is quite apparent, especially in the luxury segment where brands such as Bulgari have survived several generations of consumers, and continue to thrive.
However, the past is of relevance to the fashion sector because, other than planned or forced obsolescence, the fashion business has also long worked on another principle – that trends are cyclical.
Skirts go up and down, ties change their width, and the colour palette moves through evolution across the years. A style formula that was popular in the summer of a year in the 1970s might be just right in another summer in the first decade of the 21st century.
So, the question that comes up is whether the same logic that is applicable to individual products, styles and trends, could also be applied to brands.
The answer to whether apparently weak, dead or dying brands could be brought back to life is provided by brands such as Burberry’s, Lee Cooper and Hush Puppies. Sometimes innovative consumers create the opportunity – as with Hush Puppies in the 1980s – while in other cases (such as Burberry’s, Volkswagen’s Beetle, or Harley Davidson), vision, concerted effort and resources can make the brand attractive again.
The question then is not whether brands can be relaunched – they can. The more important question for brand owners is: should a brand be relaunched. And using the logic of the fashion business, rather than being left to linger and then dying a painful death, could brands be consciously phased-out and later brought back into the market as the trends change?
The Brand Portfolio – Diversifying Opportunities and Risks
These questions are particularly important for large companies, or in times when market growth rates are slow, or when the market is fragmented. Organic growth can be difficult in all these scenarios, and companies begin to look at developing “portfolios” by acquiring other businesses and brands, or by launching multiple brands of their own.
The car industry worldwide has lived with brand portfolio management for long. Even as companies have merged with and acquired each other, the various marques have been retained and sometimes even dead ones have been revived. The companies generally focus the brands in their portfolio on distinct customer segments and needs (such as Ford’s ownership of “Ford”, “Volvo” and “Jaguar”, or General Motors with its multiple brands), and then further play with models and product variants within those. When things go right portfolio strategies can be quite profitable, but the mistakes are especially expensive. Sensible and sensitive management of the portfolio is absolutely critical.
In the fashion and lifestyle sector, the players who already follow a portfolio strategy are as diverse as the luxury group LVMH, mainstream fashion groups like Liz Claiborne (with brands in its portfolio including Liz Claiborne, Mexx, Juicy Couture, Lucky Brand Jeans) and LimitedBrands (Limited, Victoria’s Secret, La Senza etc.), retailers such as Marks & Spencer (with its original St. Michael’s brand having given way to “Your M&S”, and also Per Una) and Chico’s (Chico’s, White House | Black Market, and Soma Intimates) who wish to capture new customer segments or re-capture lost customers. Some of these companies have launched new brands, some have relaunched their own brands, and some have even acquired competing brands.
The issue is also relevant to the Indian market, whether we consider Reliance’s revival of Vimal, the new brand ambassador for Mayur Suitings, or the PE-funded take over of Weekender. As the market begins evolving into significantly large differentiated segments, branding opportunities grow, and so will activity related to existing or old brands being resurrected and refreshed. An additional twist is provided by Indian corporate groups such as Reliance, Future (Pantaloons) and Arvind that are looking to partner international and Indian brands, or grow private labels to gain additional sales and margin.
The issue also concerns those companies whose management is attached to one or more brands owned by them which may not have been performing well in the recent past, but due to historical or sentimental reasons the management may not like to close down or sell them.
It is equally critical for potential buyers who would like to take over and turn brands around into sustainable profits. This is a real possibility in this era of private-equity funds and leveraged buyouts, where a company or a financial investor might find it cheaper and more profitable to take over an existing brand and turn it around, rather than building a new brand. This is already happening in the Indian market. More interestingly, Indian companies have also already acquired businesses in the USA and Europe, and the potential revival or relaunch of brands is certainly relevant for these companies as well.
When to Recycle and Reuse
Relaunch or acquisition of an existing active or dormant brand can be an attractive option when building a portfolio, or when a company is getting into a new market.
For the company, acquiring an existing brand is often a lower cost way to reach the customers, and also faster to roll-out the business. The company may assess that the brand already has an existing share of positive customer awareness that is active or dormant, and that the effort and resources (including money) needed to build a business from that awareness will be much less than that to create a new brand.
The risk of failure may also be lower for a relaunched brand than for a new brand.
This is because the softer aspects, the hidden psychological and emotional hooks, are already pre-designed. This provides a ready platform from which to re-launch and grow the brand.
From the customer’s point of view, there is the confidence from previous experience and usage, and possibly also nostalgia and comfort of the ‘known’.
‘Age’ or vintage is respectable and trustworthy. This is especially powerful during volatile times or in rapidly changing environments when there is uncertainty about what lies in the future, and makes an existing brand a powerful vehicle for sustaining and growing the business.
On the Downside
However, when handling brands it is also wise to keep in mind the cautionary note that mutual funds issue: “past performance is no indicator of the future”.
In re-launching active or dormant brands, there is also a downside risk. While the brand may have been strong and relevant in its last avatar, it may be totally out of place in the current market scenario. The competitive landscape would have shifted, consumers would have changed – new consumers entering the market, old consumers evolving or moving out – and the economic scenario itself may now be unfriendly to the brand.
Also, the “awareness” or “share of mind” may only be a perception in the mind of the person who is looking to re-launch the brand, and the consumer may actually not care about the brand at all. There are instances where the management of the company has been so caught up in their own perception of the brand that they have not bothered to carry out first-hand research with the target segment to check whether there is actually an unaided recall, or at worst, aided-recall of the brand. They are imagining potential strengths, when the brand has none.
It is also possible that, during its last stint in the market, the brand may have gathered negative connotations – consumers may remember it for poor products or wrong pricing, the trade may remember it for late deliveries, vendors may remember it for delayed payments…the list goes on. In such a scenario, it may be a relaunch may be a disaster.
So how does one know whether to resurrect a brand, or to reincarnate it in another form, and when to just let it die? The answers to that lie in answering the question: what is a brand? And then, what is this brand?
A Critical Question: What is a Brand?
Even in these enlightened marketing times, many people believe that the brand is the name. They believe that once you advertise a name widely and loudly enough, a brand can be created. Nothing could be further from the truth. High-decibel advertising only informs customers of the name, it cannot create a brand.
If we put ourselves in the customer’s shoes, a brand is an image, comprising of a bundle of promises on the company’s part and expectations on the customer’s part, which have been met. When promises are delivered, when expectations are met, the brand develops an attribute that it is defined by.
The promise may be of edgy design (think Apple), and the customer expects that – when the brand delivers on the promise and meets the expectation the brand image gets re-affirmed and strengthened. However, these attributes are not always necessarily all “positive” in the traditional sense. For instance, a company’s promise may be to be low-cost and low-service (think Ikea, or “low-cost airlines”), and the customer may expect that and be happy with that when the company delivers on that promise. The promise may be products with a conscience (think The Body Shop), which may strike a chord with the consumer.
What that brand actually stands for can only be created experientially. Creating this image, creation of the brand, is a complex and step-by-step process that takes place over time and over many transactions. Repetition of the same kind of experience strengthens the brand.
The brand touches everything that defines the customer’s experience – the product design and packaging, the retail store it is sold in, the service it is sold with, the after-sales interaction – all have a role to play in the creation of the brand.
For instance, to some it may sound silly that market research or how supply chain practices can help define a brand, but that is exactly how the state of affairs is for Zara. Changeovers and new fashions being quickly available are what that brand is about, and it would be impossible for Zara to deliver on that promise without leading edge supply chains, or a wide variety of trend research.
Similarly, it may sound clichéd that your salesperson defines the brand to the consumer, but even with the best products, extensive advertising, and swanky stores, for service-oriented retailers everything would fall apart if the salesperson is not up to the mark. This is indeed a sad reality faced by so many of the so-called premium and luxury brands.
Of course, brand images can be changed or updated, but the new image also needs to be reinforced through repeated action, a process just like the first time the brand was created.
Reviving a Brand: the New-Old Seesaw
Given that a brand is created over multiple interactions and repetitive delivery of certain attributes, it is only natural that the older the brand, the more potential advantage it would have over a new brand. Just the sheer time it would have spent in the market would give an old brand an edge.
An old brand can appear to be proven, experienced and secure, while a new brand could be seen as untested, raw and risky. An old brand may have had a positive relationship with the consumer, but may have been dormant due to strategic or operational reasons. In this case, reviving the brand is clearly a good idea. There is already an existing awareness of an older brand, which can act as a ready platform for launching the same or a new set of products or services. Often, there may be a connection with the consumer’s past positive experience of the brand.
On the other hand, a new brand may appear to be fresh, more up-to-date and relevant, and vigorous, compared to an old one that may be seen as outdated and tired. Certainly, if nostalgia had been all that brands needed to thrive, then old brands would never die and it would be difficult to create new brands.
Clearly, there is no single answer to whether it is a good idea to re-launch an existing or old brand. If you are considering whether it would be a good idea to revive an old brand, or to acquire and turn an existing brand around, ask yourself this:
If the answer is “No” to any of these questions, then one needs to think again. However, if the answers are all “Yes”, then a resuscitation is just what the doctor might have ordered.
Devangshu Dutta
October 16, 2007
BOOK REVIEW: HIDDEN IN PLAIN SIGHT: Erich Joachimsthaler
In the midst of extensive or frequent civil works, fluorescent high-visibility clothing contributes to the invisibility of the individual, and can serve as a superb disguise. Similarly, in the midst of extensive research and in-depth analyses, basic insights can go unnoticed.
Erich Joachimsthaler has plenty of examples in his book Hidden in Plain Sight to drive home the point that attention to stuff that is not so obvious to competition can lead to brilliant success such as Sony’s growth through innovative products (the WalkmanT, for one) that met unexpressed consumer needs. Conversely, an inability to spot this can bring even the leaders down, illustrated once again by Sony’s loss of leadership in mobile personal entertainment to Apple’s iPod.
The challenge for companies is to uncover the hidden opportunities by looking into their business from the outside rather than the usual inside-outwards view, and by accurately defining the ecosystem of demand. For most management professionals, this will be harder than it seems.
The exercise begins with the question, “Why didn’t we think of that?” This is intended to remind the reader of how the obvious escapes attention as we sink deeper and deeper into complex analysis and in developing ever more complicated scenarios. And Joachimsthaler sets out a framework that he believes can help larger companies to innovate in a structured way.
Of course, the reader may feel differently, and quote George Bernard Shaw who divided the world into two kinds of people, the reasonable and the unreasonable, and credited innovation to the latter. Or one may agree with Henry Ford who, apparently, felt that customers did not really know what they wanted. He is reported to have quipped: “If I had asked my customers what they wanted, they would have said, ‘A faster horse'”
Yes, at the cutting edge, innovation may seem to be more about the innovator’s creative desire to do something different, and less about “meeting customer needs”. Yet, it is the unmet and, more importantly, unexpressed customer needs, that offer the greatest source of competitive advantage.
This is why innovation seems to spring more from small companies, or companies that are started up around a specific idea that is unique or new. In such a small company or a start-up, typically the founder/innovator/inventor is drawn from the same pool as the target customer. Therefore, while they may be addressing a need they feel acutely, the innovators are unconsciously plugged into their customer’s unmet/unexpressed needs. There are seldom any silos; the whole team is generally focussed on the one problem to be solved.
However, as companies grow larger, functional specialisation emerges — division of labour based on skill-set is deemed to be a more efficient way of doing things. The design folk design based on “trends”, the marketing folk market as they know best, and the manufacturing folk produce to specification and the “demand” generated.
With this speciality of skills taking over, there is a growing disconnect between their efforts to dig for insight and the gold that is “hidden in plain sight”. While data is available in abundance, real knowledge is scarce, and insight just gets buried in well-structured processes and hand-offs between functional silos.
This trend has only accelerated in the past 15-20 years with pervasive information technology that enables the mundane operational process to the most strategic. Never before have management teams been so focussed on information and analyses. As businesses grow, data warehousing and data mining are defined as the competitive cutting edge, pushed along by interested parties (including IT solution providers, but that is another book!).
However, in reality, excessive information is increasingly passed off as knowledge. An inward focus on the management team”s own objectives is often disguised as insight gained on the customer or the market. Functional specialists analyse the market, the latent needs and the gaps in their own way, and if the company is lucky to have some generalists, some of those dots get joined to form a more complete picture.
It is in reminding management of this reality that Joachimsthaler’s book provides a tremendous service. It presents a well thought out model named, curiously enough, DIG – short for Demand-First Innovation and Growth. The three elements laid out sequentially begin with a framework for defining the demand landscape, identifying the opportunity space within it, and then creating a strategic blueprint for action.
Joachimsthaler’s process to define the demand landscape requires managers to put themselves in the customer’ shoes – a process demonstrated with examples from Proctor and Gamble and Pepsi”s Frito Lay. Using the customer’s goals, actions, priorities (there’s the “GAP”), needs and frustrations, demand clusters can be developed and filled out with additional research. The strategic fit between these demand clusters and the brand can then feed into the next steps of identifying the opportunity space.
The filters, or lenses, as the author calls them, are the “eye of the customer”, the “eye of the market”; and the “eye of the industry”. At every step, assumptions and presumptions need to be challenged. Using these lenses, the sweet spot or spots and the growth platforms can be identified, and extrapolated into the strategy. On the downside, the book is clearly about a framework, which may have been best detailed in an article, rather than being stretched over a book.
The author does stress at one point that it is not about “brainstorming”, but about structured thinking. However, he seems to do this in a tone that suggests brainstorming as something vaguely distasteful due to the lack of directional structure.
While examples from the companies studied keep the text alive, yet in places one struggles to correlate the examples with the framework. Indeed, there may well be too much structure to this book, and not enough examples of how inter-disciplinary thinking and functioning can actually produce sustained innovation.
Understanding the model itself can be a fairly involved process. The best way to tackle it may be to approach it as a project, and use the DIG framework as a how-to guide for a real problem. If you are a structured, methodical, sequential kind of manager and possibly work in a large company, the book could provide tools to put that thinking to work for innovation in a team. On the other hand, if you are more of a “people person”, you may want to leave this book alone. [For more, here’s the book on Amazon.]
Devangshu Dutta
October 31, 2006
Normal human tendency is to label what one doesn’t understand. And so we call the younger members of society by various names – youth, teens etc. By putting them into categories of age, we claim complete understanding of what they are, what moves them, and what they want, in effect adopting convenient disguise for the fact that we actually don’t have a clue.
My personal favourite term is “tweens”. In my dictionary, tweens are that magical, difficult, weird age somewhere in the region of 10-16 years, give or take a couple of years, when one is not quite an adult to be allowed an opinion, and not quite young enough to be indulged one. I believe that is why rebellion is the hallmark of the tweens and the teens.
Let’s look at the broad segment of the young (under 20) population – about 450 million individuals in India are estimated to be below 20 years of age. 105 million individuals are in the age group of 15-19 years, already in their early years of discretionary consumption. About 112 million individuals are in the 10-14 years segment – within 5 years many of these will be making career choices, and in another 5 years most would have already begun earning and spending. Imagine the power of the tweens and the teens.
However, this is not one homogenous mass of youngsters who think in the same way. Some, of course, will be a typical marketer’s delight – gulping heavily-advertised colas and wolfing down pizzas and burgers at a birthday party with their pals, while demolishing each other on the latest game console. Others may only be aspiring to acquiring a fraction of such a lifestyle in their later years. Many – too many – will not only not have these things, but may not even be able to dream of a lifestyle that looks much different from their parents.
Some are motivated by firang lifestyles, and may look at the earliest opportunity to apply for a student visa in the west. Others are surprisingly loyal to the idea of staying within the country, and actually contributing to progressing it. An increasing number find their “Indian skin” very comfortable to wear, even while moving in rhythm with a semi-westernized lifestyle.
They’ve got a whole bunch of different ideas about relationships. To many, career options are always wide open and whoever works for life in one job may have no other options. Yet, when it comes to personal friends, the buddies from pre-school may still be the ones they hang around with.
Clearly age, then, is not the key differentiating or grouping factor. Neither, it would seem, is income or education. SEC segmentation more or less breaks down when dealing with the youth. There are many, possibly hundreds of segments for a marketer to deal with.
“What’s hot” may change every week – if it’s really hot, it may stay around 3-4 months. RDB ( Rang De Basanti ) was a protest against the society the young are inheriting, and its candle-light march was emulated for many a cause. But Munnabhai is cool today, and Gandhigiri is now the road to follow. On the other hand – are these really two sides of the same coin?
Some very global trends catch on very fast, while others are uniquely Indian.
So how does one make sense of this kaleidoscope? How is a marketer to predict what will appeal to the most consumers? How can we lead the consumers into our store, to our brand counter, to the product that we want to promote?
If I were to pick one learning for the youth market that made – and still makes – youth markers successful, it is the fact that they do not predict fashion and trend. They do not attempt to lead the consumer but follow diligently. They identify the opinion leaders, identify with them, and understand what’s hot with them. Then they place their bets – a lot of them, well-spread out. Sure, not all of them are right, but it’s a whole lot better than trying to predict fashion 8-12 months in advance.
An equally critical step is to let go of the trend even as it is being picked up by others. After all, if you’re really with it, by now you ought to have identified the next hot trend rather than flogging the same horse that everyone else is on.
Here a newsflash, the youth are bright, for all the appearance of vacuity; extremely opinionated, despite the apparent boredom they display; fully-charged up with the current domestic social concerns and a clear view – well-informed or not – of what’s happening around the world.
We’ve seen some successes in the Indian market, with a few companies being at the forefront of trying to understand and cater to the youth with offerings that are innovative and promotions that talk to them in their language. And yet, most companies are still working at them in the same mould as they were a decade ago, while others are simply trying to transplant strategies that worked in another country.
The largest market opportunity in decades is going a-begging. What’s going to be your platform to make the connection? What’s the relevance of your message? Unless you’re listening to the youth, they’re unlikely to be listening to you.
Devangshu Dutta
August 31, 2006
Mall Mania, Mall Madness – alliterate as you will – it’s a phenomenon that is certainly taking over the newsprint, airtime and, quite possibly, your neighbourhood.
A study published in 2005 estimated that by 2007 over 360 shopping centres would be operational around the country, with approximately 90 million square feet. A meagre increase of 0.08 sq. ft. in per capita shopping space doesn’t seem like much in a country of a billion-plus people.
But most of it is concentrated around the big cities – Delhi and Mumbai account for more than half of the total space projected, with the other metros and mini-metros such as Bangalore, Pune, Hyderabad etc. taking the total up to 90% of the space.
One may argue that money (real estate development) is only following the money (consumers) – after all, there are more consumers and higher incomes in these major urban centres.
But why would mall developers expect Delhi’s consumers to suddenly switch en-masse to shopping in Gurgaon, where 6 malls are already active in a short distance of about a kilometre, 3-4 more under hectic construction in the same area and several more scattered around that suburb? Or why do Mumbai’s developers expect people to drive several kilometres from the suburbs on a regular basis to the centre of town to grace only their shopping centre? It is only such expectations that can explain the gold rush mentality that is overpopulating certain areas with shopping centres and malls.
While per-capita availability of A-grade shopping real estate looks really low, in certain areas we foresaw oversupply, with developers thinking in terms of “property” rather than as retail space managers.
Most shopping centre developers have carried out only cursory studies on the customer catchments that their tenants will be expected to live-off. As a result, conversion of footfall into sales is low for the tenants, except for food-courts, which are benefiting from the window-shoppers rounding off a day or an evening of roaming the malls with a meal. There is a lack of differentiation in product and service offer between the shopping centres and, with nothing distinctive on offer, repeat visits and – more importantly – repeat purchases are a challenge.
Developers in smaller towns seem to be following the same model, scaling up space or scaling it down based on the capital cost vs. expected capital gain and tenancy income. They are pitching for much the same brands as tenants as the developers in the bigger cities.
There is competition for customer traffic between the shopping centres and large stores (such as Mumbai’s newly opened Hypercity, across the street from InOrbit Mall, both developed by the Rahejas), between the shopping centres and the traditional high street, and between large format stores and speciality malls.
For the most part shopping centre development in India in the recent years has been seen as an aspiration to be fulfilled – hence, the most important factors have been the size of the shopping centre, quality of fixtures, marquee tenants who can provide the glamour or the legitimacy). The focus has been more on the “positioning”.
The business will begin maturing and will begin taking developmental leaps forward when centres are seen as commercial infrastructure to be planned with the end-consumer in mind, and to be serviced over a certain lifetime.
Until then, we can look forward to announcements of many hundreds of shopping centres, the launch of a few hundred, and the conversion of many of those into uses other than as shopping centres within a few months or years of their launch. And for investors also it might be a game of Roulette rather than Patience.
Devangshu Dutta
May 18, 2006
When I am at the receiving end of expectations, business plans and such like, of companies that are looking to ride the current retail boom in India, one thing stands out, and scares me the most: the opening slides, paragraphs or pages that are devoted to the “opportunity presented by India’s booming middle class and its rising income”.
In the previous part to this column (“The Case of the Missing Millions“, 27 April 2006), we concluded that for most international companies looking at India, the potential target market was in the region of 18-19 million people, or over 3 million households. When international companies look at the “middle class” they may be looking at annual household incomes adjusted for PPP in the region of US$ 40,000 (Rs. 5 Lakhs, in absolute terms, not adjusted for PPP), and this population number is what appears on the radar.
Clearly, this less than a tenth of the figures around which many new businesses are being launched in the hottest retail market globally (as global comparative studies are stating). 200 million, 300 million – take your pick – they’re all in the mythical range!
So is it time to put out a missing persons alert for the hundreds of millions of so-called “middle class consumers”, on whose back the current retail boom is to be built?
Hang on – the trick is in changing the frame of reference. Let’s first define what the characteristics of the middle class should be.
In my opinion a good starting point is a simple one – look for a segment that is on the middle of the income scale.
Most marketers and their reference guides live in a high-income urban India paradigm (read, Mumbai, Delhi, Bangalore). Passing out of even a second-tier business school today, starting salaries can easily be over Rs. 20,000 a month. When you get into the middle-management segment, metropolitan salaries in the private sector can easily be Rs. 35,000 – 50,000 a month. This may not sound like much money when you live life from the Delhi-Mumbai-Bangalore paradigm, but trust me, it is still a very large sum of money as you go further down the list of cities and towns in India. In those towns and in semi-urban and rural India, the rupee goes a much longer way.
However, the income scale can be defined subjectively by different people.
So, to this evaluation I would add one other important attribute – this middle segment should be a substantial proportion of the total population. Clearly, a population that is only 2 to 3 per cent of the total is still very much at the narrow tip of the pyramid. We definitely need to move further down the income scale to find the real middle class.
The next annual household income range defined by NCAER is Rs. 2 Lakhs to Rs. 5 Lakhs. Now it starts to get interesting. In this income segment we are talking about approximately 9 million households or a little under 50 million people. An income of Rs. 2 Lakhs (US$ 4,500 in absolute terms) is equivalent to a little over US$ 16,000 by PPP, which is well below middle-class standards in developed economies. However, in India an income of Rs. 16,700 per month brings a number of aspirational and discretionary purchases within reach. This size of population is about the same, or larger, than many countries in Europe and will grow to 70-80 million by the end of the decade.
However, as far as my criterion of significant proportion is concerned, this still doesn’t cut it – we’re still only in the range of 6 per cent of the total population. We need to move further down the income scale, to the Rs. 90,000-200,000 annual household income range.
Bingo!
NCAER identifies this segment as having over 41 million households – that is over 225 million people – about 22 per cent of the total population. Large towns (population of over 500,000) have about 30 per cent of this population, while rural India has about half of this income group.
Earning between Rs. 7,500 a month to over Rs. 16,000 a month, this is the population that, in my opinion, is the real growth engine for the great Indian retail dream. This population has discretionary income, and yet it spends with discretion, if you will pardon the pun. It is a population that is only just beginning to be touched by cashless spending, a population that is beginning to appreciate the comforts and conveniences of modern retail, and its power as a driver of markets. It is possibly more firmly rooted in Indian traditions than aspiring to move to western standards. It is a population that is probably discovering the benefits of investing as much as it is the joys of spending thus reducing the free cash available.
Many brands are ending up planning for the 150-200 million real middle class population, while offering products and prices that are more appropriate for the ersatz “middle-class” of 15-20 million.
Consumer markets are structured around obsolescence, replacement and repeat purchases. If your product fits well within the price-value equation for repeat purchases, you have a winner. If you don’t, then what you get is a bunch of occasional purchases from most of your consumers, with long replacement cycles (or even, no repurchase).
The end result is the sales plateau that is the characteristic of so many brands in India.
If you want to volumes, prepare a product and price offer that makes sense to the real Indian middle class. The small shampoo packs make sense, the “chhota recharge” on the mobile phones makes sense. Does your product?
The missing millions aren’t really missing – they’re just invisible through our Delhi-Mumbai-Bangalore upper income blinkers. It’s time to take off the blinkers.
