Two separate incidents recently reinforced to me the need to know and understand the customer intimately, and to have the ability to respond to that knowledge with the appropriate product or service.

One was the experience an acquaintance had with the tea-vendor at a Mumbai railway station, who had segmented his tea-concoctions by the train (and its passengers), customizing to their regional tastes.

The second was a music concert sponsored by a well-known motorbike brand. The audience was largely off-target and the event was clearly not successful for the bike brand, though the audience and the band itself had a great time. As the creator of the department store and the American inventor of the price ticket, John Wanamaker’s once said: “I know half of my advertising money is wasted, I just don’t know which half.”

It’s funny, how gut instincts and home-grown wisdom may quote often seem more successful than planning through facts and figures.

This is partly a function of India’s complexity as a country and a market.

Traditional marketing discipline calls for categorizing customers into segments that are similar within themselves, and distinct from each other. It assumes that there are large or at least measurable numbers of distinct groups of customers Within each group, the customers are assumed to behave and buy in similar ways, which are quite distinct from the other groups in the market.

The reality of life, of course, is that in any market, segments are almost always an artificial construct. In fact, it is becoming more difficult to find large segments that are cleanly demarcated – what’s more, in markets worldwide, customer segments have been blurring into each other.

The Indian market takes this complexity to another plane, and savvy marketers know this from personal experience. India as a market is anything but continuous or homogenous. This diversity is brought out by a media-group’s advertisements series on its radio-channel that make the point about India being a country with 145 festivals in a calendar of 365 days. Or as I’ve often heard Kishore Biyani and others say, in India the mix of language, food and culture changes every 80-100 kilometers.

Let’s face it, most mass products that are marketed in the same way across the country, are handled that way due to manufacturing or distribution economics. Some may even be handled uniformly due to the lack of marketing imagination. It is certainly not due to customers across the country being identical.

How well we can understand the dimensions and the differences can mean the difference between success or even survival and abject failure.

Here is an article that describes the benefits and pitfalls of consumer analyses in India. (Slicing The Market)

[Note: With a 6 MB filesize , the download may take a while if you have a slow connection!]

In my view, India and China are two countries that can change companies.

Most analyses of “consumer India” are led by affluent analysts primarily based in the biggest cities. These incomplete analyses are followed avidly also by international companies to draw up their India strategy. Most do not even scratch the surface of the diversity of the country, let alone customize the approach.

There are reasonably large and distinct consumer segments in India–many are alien to most companies based in the developed markets, because they have been extinct there for several decades.

The companies that seem to be succeeding are the ones who don’t come in expecting a billion-plus market (or even a “percentage” of that) hungering for their brand/product just as it is sold in the US or Europe. They are the ones who take the time, and show the patience, to understand the specifics that their target segment in India is looking for.

They are the ones who are prepared to to the extra mile in tailoring their offering to India. Some may even launch new products in India and then take them elsewhere.

If you’re prepared to discard the filter of the history of developed markets when looking at India, then opportunities abound.

Fresh out of a meeting with a large international retailer this morning, I would like to share something that I mentioned to them: that the Indian market is not as large as it seemed to most people 2-3-5 years ago (whatever base figures they may be using to calculate potential market size); neither is it as small as it seems today to brands that entered the market 10-15 years ago.

There are significantly different dynamics at play, which make the Indian market totally different from the growth curve you might have been accustomed to in the history of the US, Europe, or even more recently, China.

However, some fundamental realities remain common on the consumer side:

• Given choices, consumers will choose

• Given better environments, consumers generally will migrate to them

• Given lower prices for comparable products, consumers will compare, and choose not to spend beyond what is necessary

• A better merchandise mix will win out over a narrow / poor mix

The realities of real-estate costs are the same for everyone–whether the retailer is domestic or international. Domestic retailers may have an advantage in being able to move quicker on closing deals but foreign retailers may have deeper pockets to play with.

Politics remain the same as well–China opened its markets to investment by foreign retailers after allowing its domestic retailers to grow in scale; Eastern European countries may raise the occasional stink about the lack of competition when two foreign retailers decide to swap assets; even in their home markets, Wal-Mart and Tesco face determined opposition. In India we’re seeing just another version being played out.

All this, while everyone is mostly fighting for the top-tier consumer. There is a wider market out there, my friends, a very different one that needs to be understood well, together with its implications for your business model.

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.

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.