Identifying 5 demand classes in India

Marketing in an emerging or a developing market is often an uphill task; particularly if its population and literacy rates are on the negative scale, or the economic data is either of bad quality or is limited to make any meaningful trend analysis.

Thankfully, India as a country is an exception to some extent. Its robust comprehensive census is one of the most respected census operations worldwide, even though the benefits of such a colossal amount of data have been under-utilized for development, by the political system.

Recently I came across some rather interesting facts and / or observations from Rama Bijapurkar, on consumerdemands in India, which are worth noting – especially for developing the foundations of new marketing campaigns:

(image source: insightinstore.com)

  1. India is primarily an “Individually Poor” but “Collectively Rich” country, since proportionally higher consumption takes place at far lower-income levels. Therefore currently “volume” consumption holds more importance than the value consumption – particularly in case of FMCG category and to some extent in case of “fast moving consumer durables”, e.g. mobile phones, footwear, garments, etc.
  2. Indian Consumers could be broadly recognized as 3 broad segments – Premium, Popular and Discount. By volume, these segments roughly represent 10%, 30% and 60% of the population respectively. However, in terms of value, each of these segments are roughly equal to each other.
  3. Thanks to some socialistic trends prevailing till the late eighties and early nineties, the “unorganized sector” and the “unorganized small-scale buyers” have continued to drive consumption to a larger extent. As a result, despite the post-nineties liberalization of Indian economy, the “organized large-scale buyers” – the dream of every retailer – are still far lower than the small-scale unorganized ones.
  4. Indian consumers have successfully bucked the traditional consumption upgrade patterns – i.e. moving from “Popular” products to “Premium Products”. Instead it’s common to see that the premium segment customers gradually “down-trade” to popular products (esp. FMCG), while the popular segment customers, start looking for “premium-quality” products – though not necessarily “premium-priced”. Premium-Popular-Discount segments do not necessarily represent the Rich-Middle-Poor segments respectively.

It’s no surprise then, that the market structure of India is likewise defined in terms of “consumer classes” or groups and not their disposable incomes or other similar metrics. Known as the “Consumer Classes Framework” model developed by NCAER, the 5 broad categories of Indian consumers are:

A)     RICH – consumers of cars, PCs, ACs, etc., particularly the premium and luxury goods.

B)      CONSUMING CLASS – consumers of utility durables and bulk of FMCG products

C)      CLIMBERS – consumers of at least one major durable, and main consumers of popular consumer goods

D)     ASPIRANTS – new consumers / new entrants to consumption; hence have very basic watch, radio, phone, etc.

E)      DESTITUTES – who consume practically nothing; living hand-to-mouth perhaps

Finally it’s also very interesting to note that while any one product might be consumed across multiple classes, the performance price points however within each could be multiple. As a result a Nokia phone might tend to be consumed across the first 4 classes, but each class would have it’s own price points for the brand.

Marketing in India with its myriad layers could be as mysterious as its people, culture and its economy. It’s therefore wise to carefully weigh each available statistic and explore possibilities before taking a campaign decision.

References:

How do customers respond to your Brand?

I have always held a strong belief that Brands behave just like human beings do! As such an interaction of a customer with a brand follows exactly a similar pattern of interaction of one person to another unrelated person.

Let’s say a person X hopes to have a relationship with person Y. Every person does this from his own social behavior status, which could be broadly divided into 3 levels: (a) Acceptance (b) Association (c) Adoption

3 Response Levels (image copyright - one%inspiration)

Preliminary contact / hand-shake happen when each interacting person Accepts the other person’s invitation. This happens quite frequently, regardless of space, time or context. None of the participants have long-term intentions of carrying on; hence the relationship is superficial, and open.

When these persons meet again, there’s an existing element of recognition or identification between them, which breeds conversations, interactions and occasional dependencies. This stage is known as Association. There’s overt / covert liking of each other’s qualities, but linkages are not strong. There’s also a general agreement to meet / interact again, and often this behavior stays for a long time.

At the 3rd level the association solidifies into a firm relationship, which slowly gets deep-rooted. The belief and motivations of one person gets internalized in multiple ways into that of the other person, leading either of the persons to adopt the other’s belief, principles and attitudes. Strong and sustainable bonding is the outcome of such adoption processes.

Likewise, a customer’s response to a brand also follows a similar pattern:

Acceptance happens when a brand pulls a customer through instant promotions; e.g. “Buy One. Get One Free”; “50% Discount before 30th July”; “More you buy, more points you win.” etc. Garnier may launch a sachet pack of its shampoo variants, to woo customers into using the brand. Many consumer electronics brands also use the method to clear their inventories, by giving “Bundled offers” during festive seasons. Although behaviors vary from brand to brand, customers have a general tendency to claim these deals, with little or no regard to the Brand or its values. Additionally, customers tend to shift the moment another brand offers a better deal.

On a longer term this method follows the law of diminishing returns, and hence should not be used too often, unless the Brand itself symbolizes “Discounts” or “Value”. Many retail stores, have followed this method to great success – by making sure that returns are higher than the inventory cost.

Association happens when a brand pulls customers by appealing to their needs – whether emotional or social or rational. As a result customers start identifying themselves with the brands, and hence differentiation occurs between competing brands. When Garnier promotes Fructis shampoo, it’s appealing a customer’s rational need to have stronger hair. It’s not necessary that the customer, even after using the shampoo, will keep on using it forever. Needs might change, or another brand may offer the same need packaged with another one. The linkages here are not strong; therefore constant interactions and experiences are needed to sustain association and convert into long-term Adoption.

ADOPTION happens when the customer looks forward to the same brand to meet multiple needs. Let’s say that the Garnier Fructis shampoo customer had a few experiences with the brand, and has decided to use other variants of Garnier shampoo that meets her other hair care needs – e.g. shiny hair, damaged hair, etc. PLUS starts looking for Garnier for other grooming needs – e.g. skin care, hair color, eye care, etc. A combination of meeting needs in all the above cases, would makes her believe Garnier’s message of “Take Care”.

Adoption is a permanent and deep-rooted experience between a customer and a brand, especially since a customer’s belief about the brand strongly links with their own belief-system – emotionally, socially and rationally. If Innovation is what a customer looks for, repeated associations and interactions with Apple will definitely believe that the brand stands for emotion.

For a brand to be strong, a combination of all the 3 level processes is perhaps needed in some proportions.  Even though the first 2 levels are temporary, there are many ways to develop permanency through these stages. For example, while using Garnier for hair care, a customer discovers that the brand stands for “No Animal Testing”. This realization may motivate the customer to continue with not only the shampoo brand, but also with other Garnier products.

Therefore for a Branding effort to succeed, strategic efforts are needed to develop the relationship at each level, esp. since, like a relationship between 2 individuals, Branding also is a social process, where change is the element that keeps the relationship fresh.

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7 Clusters to Identify Connected Customers

Ever since the broadband started getting into most of the households all over the world, technology started creeping into our lives like never before! Easy access to internet brought us closer to many sophisticated technological products like never before.

Products like Mobile phones, MP3 players, Cameras and other integrated products are helping us to use technology even more and more every day to connect with our friends, family and even make newer connections. As a result we find ourselves to be an integral part of a connected world.

How are we using this to enhance our lives? The answer: we’re getting more and more close to people, products, technology, environment, politics, etc. through our virtual networks within social media platforms, like Facebook, Twitter, Flickr, Youtube and many others! Technology has become the mammoth homogenizer of the society.

Not all of us however use these networks in equal terms. How would you – the marketer – identify and segment your customers? The answer lies in GROUNDSWELL. Consumers within connected world – esp. by lieu of their participation in social media networks – could be segregated into 7 clusters:

  • Creators (almost 1/4th of the universe)
  • Conversationalists (approx. 1/3rd)
  • Critics (little more than 1/3rd)
  • Collectors (little more than 1/5th)
  • Joiners (3/5th of the universe)
  • Spectators (more than 2/3rd of the universe)
  • Inactives (less than 1/5th of the universe)

Status of a person within the social media network is decided on the level of involvement one has. It starts from an inactive stage and goes thru various stages of the ladder till he / she becomes a creator. For example, an Inactive is one knows about social networks, but has never explored it in any way; a collector on the other hand, uses RSS feeds, votes on websites online and tags web pages / photos; while a creator is in true sense a real contributor to the social media – writer, publisher, participator, contributor, etc. all rolled into one.

Every year, except for the Inactives, every cluster is growing at a steady rate. However, Joiners showed the highest increase among all clusters. In future, you can expect some shifts happening from Spectators towards joiners or above.

Once you have identified these clusters, the next step of a marketer is to devise ways of targeting them or using them to achieve your marketing objectives.

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