Winning The Indian Consumer

Group 6

Brief
MNCs who are able to understand the need of untapped $ 400 billion consumer market will have the advantage.
Expanding Middle Income household Rising Income

Spending Power
Youthful population Rapid urbanisation

specialty-player strategy catering to small segment of GLOBAL INDIANS Now targeting ASPIRING INDIANS the much bigger and faster growing middle-income segment. Indians demands high value at low price.

Two keys to serving Indias giant middle segment successfully: To know the consumers need. To know the countrys rapidly changing consumer landscape

Tailoring products and pricing to the budgets and tastes of these consumers.

Indian Economy

India moved from being the 10th Largest in the world 1991 to 4th Largest in 2012 (PPP)
Expected to grow @ 7% despite of on going challenges for 2005 -2025 Indias GDP growth Trajectory over past 50 years GDP has grown in each successive Decade while variability of growth has reduced

Attained the distinction of becoming the 3rd largest economy in the world (next only to United
States and China) in terms of PPP in 2011. The Economic liberalization in 91 marked a turning point In Last 2 decades, rising income levels has given rise to famous Indian Middle Class

Expansion of economy, rising income levels Changing Consumer beliefs & behaviors led to increase in consumption

Impact of Economic Downturn of Consumer market:

After slowing to 6.7% in the year ended 31 March 2012, Indias economy grew 5% in the
following yearthe slowest pace in a decade. Uncertainty hurt Consumer confidence: Job Insecurity, Inflation & Borrowing Cost Sales of durables such as electronics and automobiles have declined for eight months in a row.

Contrary Report :
Crisil Ltd :The retail market is estimated to grow 14-15% this year, higher than the 10% growth

seen in 2012-13.
Close to 20% Indians are expected to increase their discretionary spending in the next 12 months (BCG). Some 34% of Indian consumers are expected to trade upBCG study. Over the past few years, they have stepped up the pace of launches, added more premium products to their range and expanded deeper into the hinterland. They are also offering more discounts and freebies.

Contrary Report
Classic approach by companies :
segmenting consumer by income

Consumer buying behavior is not only impacted by Its level of income but also where they live, education, occupation their exposure to the world, languages they speak Its important to understand how they consume and shop.

So companies selling in India need to ans many questions: how to segment consumer ? What is the size of these segments? What do people consume? How do buying preference vary across segments? how do people shop today? How is this to evolve in future

Why India Matters

The Indian Opportunity
Unpredictable growth in Middle Class

A Golden period for a number of economies

China & India develop their potential as economic powerhouses of Future Rising average income level among the Indian middle class are driving aspirational consumer behavior Seek out Higher quality products, better healthcare & more sophisticated services. By 2030 India is projected to the house the worlds largest middle class consumer market Surpassing both china & US.

Indias Income Pyramid

The Affluents : Income above $18,500 , well educated, mid to large business or good jobs.
Sufficient to allow significant indulgence The Aspirer's Income btw $ 7400 - $18500,educated , mid sixe or stable jobs. Sufficient to live comfortably as well as indulge a little

Next billion income between $3300 - $7400, have basic education, small business low paying
jobs. Income level allows to sustain a basic lifestyle Strugglers income less than $3300, illiterate with limited education, manual labor jobs based on wages

Rurbanization:
The distinction between rural and urban consumers is blurring. Rural consumers have aspirations similar to their urban counterparts and, hence, the term Rurbanization, according to BCG. Past three years, Marico, has seen its revenue from the rural markets increase from 34% to 38% of overall revenue.

It plans to expand rural coverage by 40-45% in the next year and drive higher
growth from these markets, said by Sameer Satpathy, executive vicepresident and business head, consumer product business at Marico Ltd.

What India Spends on ?

The Indian consumer market is poised to grow 3.6 times between 2010 and 2020, faster than most other emerging markets. Food, housing, transport are 3 top categories in India, accounting for 65% of consumption Education & leisure, apparel, consumer durables, communication & health are other major categories 25%. Change in income leads to change in consumption.
Significant variation in consumption basket across markets

Global Brand in India at Indian Price

In spite of the volatility, the bumps, the India growth story is still heading in the right direction. The opportunity is clear and it is a market where everyone wants to win. It is the uniqueness of this market that makes it stand out and organizations have to adapt to this

uncommon India in order to make a mark.

Coca Cola India's Rural Strategy - Based on Availability, Affordability, Acceptability

Availability: - Hub and spoke distribution: hubs to small towns to villages Affordability : - 300 ml bottle often shared by 2 people, 20 cent price too high 200 ml bottle introduced at Rs. 5 (10 cents) per bottle Acceptability: - Extensive marketing efforts tailored to village culture (participation in weekly

markets, etc.)
Result: in 2 years (2001-2003): - Rural penetration: 9% " 25% 35% volume from rural market

Educating The Consumer

There are barriers to build these markets The lack of knowledge & awareness as to what are these products and what do they do. Indians respond to a brand with a strong shelf presence and bold graphics. Kelloggs has made such an impact with its packaging that other cereal brands have repackaged their products to achieve a similar look and strengthen their own shelf presence.

The detergent Tide and personal care brand Dove have also been agents of change
in retailing. Indeed, this is a country of change, whose manufacturing base now extends to China

and where use of new media and out-of-home advertising is on the increase.
Eg: Washing machine, beauty care products,

Design To Cost
In market where demand exist selling an appealing product is not difficult Instead of C + P = P C=PP A design to cost approach can shave as much as of 30% off a products Cost. Reflects the Trade off by Consumer between the Product Performance & Price. Benefits Both Sides : Consumer :Better Price utility equation Company: Better Cost margin Other way : using Indian contract manufacturers.
Manage there product quality Capital spending costs at indian levels Setting up their plants

Traditional Trade vs Modern trade

The preference for modern trade increases with income.

Share for modern trade from next billion consumer is very low due to lack of sufficient acess in tier 3 & 4 These consumer have shown high levels of modern trade adoption in other categories such as

apparels
Mom n pop stores for grocery shopping, main reason being location Traditional Trade :High on trust worthiness, credit facilities offered, can bargain and believed more reasonably priced

Modern trade : high on product freshness, product quality, product range & ease of locating
products.

Consumers prefer traditional trade

for more frequent purchases, modern trade preferences increase with increase in income.

Indian apparel market to grow over 4-fold to $200 billion: Report

The Indian apparel market will grow over four-fold to attain a staggering size of $ 200 billion by 2025

the combined size of Chinese and Indian apparel markets will become bigger than that of the US and European Union
as the per capita spend on apparel in these two developed markets will rise at a much slower rate

India one of fastest growing markets for Vodafone India emerged as one of the fastest growing market for British telecom giant Vodafone in the first quarter as new customer additions and higher data traffic saw revenues grow by nearly 14%. India revenues stood at Rs 9,933.4 cr (1,091 million pounds) during the quarter ended June 30.
Content Source: www.investmentcommission.in& TNN

Shopping Behavior

Food and Groceries

Trading up tendency increases with rising income levels, especially in food Purchase frequency drives format preference, not product freshness Shopping is often a group activity, not limited to only the housewife Brands are critical till the consideration stage, but reduce in importance for actual purchase The last three feet at the store is the moment of truth: Key purchase decisions are taken at the store

Consumer Durables Desire to keep pace with changing lifestyles is the key trigger for purchase decision Brand predecision varies across product categories Purchase is a highly planned and researched decision, the primary objective of the store visit is to execute the purchase

Organized retail is preferred for more expensive product categories

Online shopping still at a nascent stage lack of awareness is the key barrier

Desire to keep up with changing lifestyle is the primary purchase driver across most consumer durable categories

Apparels

Driven by occasion, rather than functional need

Quality & brand image are key criteria Large opportunity for private store labels Stores need to tailor value proposition to focus on specific consumer segment

Statements associated with Store format It has attractive offers , Convenient location, Large number of

brands available
Wide assortment within the brand, Appealing store layout & ambience, Helpful & knowledgeable sales person Reasonably priced , Allows negotiation, Convenient payment options

Customize fit to suit the requirement, Store manager / sales

agent build personal relationship, Making & Quality is good

Conclusion: reaching the market

The India market is brand conscious and ready to purchase products that meet both consumer needs and aspirations. Local companies are as yet better placed to understand their consumers but global brands with an Indian presence are in no way

disadvantaged.
Indians appreciate the quality and prestige of international brands but it is down to those brands to hone their product offers to the

complex diversity of Indian consumers.

If this is achieved, brands and retailers can flourish in this fertile market