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February 27, 2012
India
I have just left Delhi and am en route to Ho Chi Minh City. Having spent three days in Mumbai and Delhi meeting government officials, business executives, and NGO leaders in conjunction with the launch of our Trust Barometer, I wanted to give you a sense of the mood.
1) “Down-trading” Is Declining—Consumers are migrating to higher priced products. Unlike in 2008-9, the current slowdown in the economy (growing only by 7% instead of 9-10%; Europeans and Americans read this and weep) is not causing a return to private label. One executive said that the challenge for consumer products manufacturers is “to make the unaffordable into affordable” through packaging (for example, sachet-sized products). Indian brands are challenging multinationals by offering “affordable quality.” In some cases, the Indian brands cost only 10 percent of their multinational competitors. One example is hair color (India is the only market in the world where men buy more than women); the largest selling SKU is priced at 12 rupees or 25 cents US.
2) The Global Strategy for Indian Brands—Indian companies are growing by going to comparable developing markets, including Indonesia, Africa, and certain markets in South America such as Argentina, Uruguay, and Peru. This is exactly what Chinese companies—for example, Huawei—are doing in technology.
3) Distribution—There are eight million retail outlets in India, nearly twice as many as the 4.5 million in China. Major companies such as Hindustan Unilever are in five million of those outlets.
4) Three Products in Every Home—Bathing soap, detergent, and matches for cooking on kerosene stoves. The goal of every marketer is to appeal to the bottom of the pyramid, the biggest market in India by far, to get them to buy packaged goods.
5) Marketing Promotion—Television is the best way to reach consumers. In prime time more than 200 million people are watching, but there are 300 TV stations to choose from (some national, others regional or local) so audiences are dispersing. You reach housewives in daytime and families at night. According to a leading advertising executive, newspapers are not effective unless there is a major announcement (a new product launch, for example). Billboards are a very important way to reach rural populations. So too is radio. A big advantage for television is that the ads can be dubbed in more than 20 local languages. According to a consumer products executive, PR is growing in importance (I loved hearing that) especially when “believability is important.” Marketing, he said, is going beyond celebrity endorsement or price promotion to focus on product attributes.
6) More on Media—Four types of television channels are emerging: sports, music, news, and entertainment/movies. These supplement the longstanding general-interest broadcasters. In this digital age, newspapers (36,000 active ones) are struggling with their business model. For print, the old model works well—high circulation via a low price on newsstand (two rupees). But in digital, the price per ad is so low that papers cannot succeed on ad revenue alone. But the Indian consumer won't pay for digital content. Hence the conundrum. Note: The journalists are incredibly smart, well prepared, and give tough interviews.
7) Building Boom—In Mumbai, there is substantial construction, particularly in the Bandra Kurla area near the domestic airport and away from the historic center. Nonetheless, the city’s infrastructure continues to be quite inadequate despite the completion of a bridge that is a short cut from the international airport to city center. Near Delhi, Gurgaon now hosts most of the area’s companies in a long stretch of glass towers dubbed “cyber city.”
8) Low Trust in Government—A series of very public scandals has sapped confidence in government; a serving minister went to jail, a first in the sixty years since independence. The prime minister got into a public spat with a leading NGO while I was here, suggesting that the NGO’s anti-nuclear stance was being supported by contributions from an American NGO (flatly denied by the head of the local NGO on TV this morning). The paralysis in central government is causing the 25 states and 8 Union territories to go their own way. Gujarat was cited as one state on the move, attracting investment, improving living standards of its residents.
9) High Trust in Business—Many of the leading companies are run by founders or their family members (Tata, Bharti, Godrej). This works well in India’s personality-driven culture. There has been no scandal in the banking sector, which is quite controlled by government. Business is seen as creating jobs and prosperity.
10) Women in India—Only one-third the number of women have wage-paying jobs as men (10% versus 36%). A leading NGO representative said that the key to solving the issue of violence against women is inclusion, meaning that the country must get those at the bottom of the economic pyramid into the economy. This is a challenge given that 54% of the people are still involved directly or indirectly in farming, often on a subsistence level. She went on to say that education of girls is the number one priority, which will ultimately help delay marriage, reduce the number of children per family, create more equal relationships, and decrease the prevalence of disease.
I leave India impressed with the progress in frugal innovation and the excellence of the executives running businesses. I observe a profound shift away from the legacy British Fabian socialist orientation of reliance on a big and beneficent government to a very practical, get-it-done mentality that is more like the old American West.
Posted by Edelman at February 27, 2012 8:10 AM |
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Comments
That's a really well written summary of all the essentials one needs to take into consideration while marketing in India.
Posted by: Gurpreet Singh Modi at February 27, 2012 4:46 PM