Saturday, January 03, 2009

Selling to Indian Consumer

My role, in this new year, will change significantly. By definition, what I do is international business development for my company, a B2B affair involving building partnerships with and offering franchise to other business people. However, as a part of our ongoing commitment to our content partners, it seems that I shall have to focus, even if for a limited time, on how to sell our services to the Indian consumer. This is quite different in scope and focus, but I must admit that I am going to enjoy it - doing something what I did before, but with the advantage of hindsight.

No doubt, Indian consumers have changed a lot, since I left the country in 2004. Or, has it? The change that we see today - in physical evidence in sprouting shopping malls in every city and availability of global brands. The psychological proof is in the changing habits, of eating takeaway food, of eating out, of sending one's children to expensive schools etc. Five years ago, I used to say that all the investment in creating a 'cool' ambiance for training is useless, because most of our students went to a state school and never expected an airconditioned classroom - and was never ready to pay a premium for one. This is different now, though the prospective students still come from state school backgrounds, because the Private Training business is three decades old, and many people have attended these institutes and benchmark every entrant in the market against those benchmarks. So, the general consensus is that the Indian consumers have now started moving up the value chain.

I am not sure how far this is true. Because certain things do not change in India. For example, outcome centrality. What we have in this country is an imposed education system, one which teaches science, mathematics and English, but under-emphasise our literature, culture and sense of identity. Community plays hardly any role in the education system, and the education system keeps us away from the community. This is fundamentally different from most other countries, where formal education is meant to connect, not to disengage, one with his/her community and culture. This is where Lord Macaulay did a brilliant job - in creating, perpetually, legions of Indians who do not connect to the community any more and start disliking their fellow citizens after going to school. This education was fundamentally outcome centric, focused on getting a degree and finally a job, preferably in Civil Service. This outcome centrality persisted through generations, and was reinforced by the expectations of parents and social norms. So, private training programmes which are not identifiably outcome centric - like those which helps people improve their English but does not necessarily guarantee them a job - are not the most popular in the market. And, this hasn't changed an iota over the last 15 years I kept track.

I have often been told by Indian marketers that the Indian consumer is 'value maximizer'. That roughly translates to - they want big bang for their buck. But then, who does not? In my personal experience, Big Bazaar is a huge hit, because it is a discount retailer. But, so is Shopper's Stop, the high end clothing retailer. It is wrong to assume that Big Bazaar is successful because it connects to Indian psyche, while Shopper's Stop has gained from the cash-richness of the top end of the Indian middle class. Shopper's Stop is indeed as Indian as Big Bazaar, and both have gained from the new found wealth of Indian Middle class, though Big Bazaar is decidedly downmarket and Shopper's Stop stocks premium brands. I think the question here is the one I posed above: Do the consumers want to pay for a better experience and how much?

I have heard this view that Shopper's Stop and Big Bazaar has two distinct clientele. Indeed. But then there is a huge overlap, and I belong to the middle ground. I do shop at the both the places, and so does scores of others I know. So, does the Indian consumer want to pay for a better experience?

On the face of it, it seems that they do, as Multiplexes are generally putting old movie theatres out of business, and trendy eateries charge a handsome premium to offer a pleasant experience. My answer is that India is in the middle of a huge consumption churn, and millions of people are joining the consuming class every year and moving up the ladder. Our old provider state economy created sufficient capacity for the middle-of-the-road spender, but did not leave much for the rich and the aspiring. So, today, the facilities for the aspirational rich are coming up, providing the physical proof for progress. For example, Mainland China, a very popular, very good but fairly expensive restaurant in Calcutta runs full capacity today, which is indeed a sign of prosperity. On the other hand, Ballygaunge Dhaba, a popular, reasonably priced eatery in Calcutta, is running full capacity too, but no one else seems to notice - as they always ran full capacity. On a closer look, however, you will notice many middle aged executives in Mainland China who were regulars at the Dhaba when they were younger; the Dhaba acquired a new clientele now.

In my experience, most global companies have difficulty with India as they don't understand it, and do not want to make the effort to understand it either. Their business plans are mostly based on stereotypes developed from dated literature. Their aspirations are based on '1 Billion people' mystic. I have told people that companies come to India seeking a huge multiplication effect - several times the population of Europe attracts them - but then face a puzzle of division and segmentation unlike any other country in their experience, and falter. The key to understand this is that India is almost a sub-continent, much bigger and more diverse than what one will understand as a country. It represents a matching level of complexity and demands a level of analysis, understanding and effort. Logically, if the business expectation out of India is little and the company does not find it fit to allocate enough resources to this business, they are better off exiting the market in the first instance. Especially in services, where local champions always have a much greater advantage in terms of culture-fit solutions and relationship networks. And, consequently, the only way to sell successfully in India is to create an Indian company, an independent entrepreneurial outfit which is not subservient to diktats from the Head Quarters, except in terms of resources and business practise templates, which are to be tried for adoption but should not be taken in blind faith.

The other question is whether one should do business in India at all. The obvious answer is - it depends. Obviously, no global enterprise can be built without India today. But then India is not an easy game, and the organization should clearly define its strategic perspective first. I know the question to ask. Before I ask why the company wants to be in India, I ask why the entrepreneur is in business. If I hear, for making money, I know that the entrepreneur is essentially looking for a short and sweet way to profit, not an anomaly in business, but India may not actually fit that perspective.

So, selling to Indian consumer is complex. If one asks how complex, this is my try: The market place is complex with various segments - cultural, psychological and historical - and it is in a state of churn. It is a time in India where the social mobility is at its peak, and we are redefining ourselves. Selling to Indian consumer is, therefore, about not where he comes from but where he wants to go: Something that can not be achieved without clearly understanding India itself. So, that's the solution - an India strategist, as against a global development czar, someone who analyzes the country, understands the nuances and comes up with micro-strategies. I am quite excited to have this opportunity thrown at me.

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