The Three Ns of Made for India

Financial Express - 24th March, 2009

Nirma, Nokia, Nano: Market creating products that truly understand the India Consumer.”

Sasta, Sundar, Tikau, the mantra for success in the Indian market, has just got a new benchmark, and a new poster child: The Nano. Nirma took the Indian market by storm, as did Nokia, and as we hope, will Nano. What they all have in common is that (1) they are market creators unfettered by analyses of what the current market size is and what it is forecasted to grow to, (2) they recognise that current product markets are the size they are not because Indians are too unevolved to have desires, but because they don’t have enough money and (3) they start with a potential customer base (and not a current industry size), they define a price and a quality that customers will accept, and then challenge themselves to deliver it profitably. It is here that many companies, especially MNCs fail badly.

They set a challenge price above which they must not go, but they refuse to accept the value processing algorithm that customers have inside their heads, and what features the new age customer will or will not sacrifice, for a lower price tag.

Market creators: I remember once making a presentation to Mr. SM Datta of Hindustan Lever, who called a halt after slide 4 and said “don’t tell me what is, and why it is so; I already know it. Please re-do this presentation and tell me what can be and how we can make it so”. That’s what these market creators do - Nirma saw the potential of a large base of laundry shop users unhappy with what it was doing to their clothes, Nokia saw a large base of people struggling to get to a public phone that works, Nano sees a large base of people who dream of owning a “gaadi and bungalaa:, and want their daughters to marry men who have them.

Market creators think of doing what no one else thinks, about that which everybody sees. It is known to all of us that everyone wants to own a car, travel in comfort, signal status. The worse public transport gets, the more it is stuck in a time warp compared to everything around improving, the more the desperation for personal transport. And everyone will prefer a car to a two-wheeler.

Money Vs desire: The Indian consumer is ready and willing to buy anything that makes life better, provided it is affordable and acceptable. That is the simple fact of the matter. There is no one in India who is “not ready” for a cell phone or a car or an air conditioner. There is no further evolution, education or sophistication needed for consumers to discover the desire for these modern appliances. When pundits say “at per capita income of x, consumption in India will take off”, they assume that no supplier will actually drop price thresholds dramatically. If price thresholds were discontinuously lower, then the potential buyer base and hence the actual sales would discontinuously increase. If price thresholds drop and if average incomes rise at the same time, then the potential consumer base increases even more sharply. That was the Nirma effect (and today even Wheel, the result of Hindustan Lever’s learning from Nirma is a Rs. 2,000 Crore brand, perhaps amongst the biggest in the world). That is the Nokia effect, where already one in four and very soon one in there Indians have a cell pone. Hopefully that will be the Nano effect.

Of course in the entire affordability equation we also need to take the running costs into account, be it electricity for air conditioners or petrol for cars; however the Indian consumer always has some jugaad solution to manage this. There is a very large overlap between two wheeler ownership and car ownership, with the consumer saying he uses the four-wheeler to take his family for special outings or to show off at a family wedding, but uses the two-wheeler for everyday commuting. And prepaid cards and ‘missed calls’ are what makes cell phones affordable other then the steep drop in tariff and handset prices.

Challenge of price & performance: This is the hardest thing of all to do. Stripping quality, doing “no frills” features, in order of offer a low price is suicidal. Most MNCs have learnt that. India has ‘monster consumers’. The Indian consumer, in the late 80s, may have accepted a 65% soda ash detergent powder, and stirred the detergent mixture with a stick to protect her hands. But even in the 90s, the Indian consumer did not want a moped. Young people said that they would rather defer the purchase of their own two-wheeler and struggle with public transport than settle for something so un-motorcycle like. Even a second hand motorcycle was more acceptable.

Today’s consumer is best explained through a scene from the Tamil movie Dashavataaram. In a James Bond-style fight scene, in the small village in Tamil Nadu, the hero throws a walkie-talkie out of the window and it lands in the lap of an elderly, half-demented, grandmother living in the confines of a temple. She looks at it bemused and says “What is this? A swollen cell phone?” Even she knows that a cell phone is supposed to be small, sleek and have a colour screen.

Getting this price-performance (and features) equation rights is indeed the feat of innovation genius that is the Nano. It is a new age car for the new age Indian consumer, who has modest income but monstrous expectations, and it does not say “let them eat cake”, and it does not say “let them know their aukaat.” It says we will deliver value for you and wealth for ourselves through “Made for India”, “Made in India” Innovation.