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While consultants and companies advise investing in India based on the current and projected size of the middle class, the bogey of the definition and sizing of the middle class hasn't gone away, says Rama Bijapurkar

B2C business in India continue to struggle with defining target markets based on the most logical measure – household income. Every meeting we go to, the target market definition, based on which market potential is calculated and business plans are drawn up, is either hotly debated or accepted with a sceptical shrug of the shoulders by some people in the audience. The definition is based on some income band per households per month or year, and this income band neither makes blindingly obvious sense nor is it standardised across data bases.

There is a slow but definite wave of change happening - one that politicians and marketers would do well to ride on, rather than ignore. Women are on the move in India, inching their way away from being doormats, away from the socially ordained straitjacket that Hindi movies of yesteryear so glorified "yours is not to question why, yours is but to do … and die…in the finest tradition of the adarsh bharatiya nari". I deliberately chose the words "inching their way away from" rather than "marching determinedly towards breaking free", because that is the truth of the matter.

Marketers and retailers in India should believe confidently that they are as well positioned, if not better, than anyone else in the world, to create the new Indian consumer formula, says Rama Bijapurkar

The recent changes in the world, whether in technology or ideology, underline the fact that emerging markets are a great leveler for businesses. They challenge even the most indomitable global champions with a new set of consumer circumstances that they have never encountered before. Emerging market consumers of today have a wider and better set of competitive choices, many of which were non-existent when the developed markets' leg of the race was being run. And the consumption discourse today is totally different too, now that we are far more conscious of dwindling natural resources and ecological threats.

India Inc.'s renewed gung-ho attitude to consumer demand is worrying. Consumer demand in India is like the curate's egg - always good but only in parts. Thank heavens for the many diverse and distinctive parts of Consumer India, and also for the law of large numbers, which generates apparently stable results from a series of random events!

We certainly are not prepared for our consumer economy. Macro numbers tell us Consumer India is a mega consuming monster and a solid economic growth engine. But when we look at corporate results, industry stories or data on consumer behaviour, we set pretty modest parameters about what merits "wow!". Perhaps as suppliers, we lag behind consumers in shrugging off the poverty effect. Perhaps we subliminally realise that such consumption growth without fixing the fundamentals is chaotic, and may one day go into heart seizure. More likely, at an intellectual level, we have not managed to wrap our arms and heads around the enormity of what the Consumer India story actually is: One billion people, at least 80 per cent of whom have steadily rising income; huge confidence based on their own upward mobility in the past decade; and a very keen desire to improve their quality of life. That's why we lose our battle for dreams, fear investing to build scale; and that's why in the broader consumer space, we have only a handful of companies which are of any size of consequence. China 'gets it'. It doesn't have as vibrant a consumption environment, so India's consumers are definitely on its map. With scale, and some say innovative accounting, it has the right price-performance point in some categories, not all, and Indian mass consumption is lapping up "made-in-China to Indian design" chappals, saris, salwar kameez co-ordinates, agricultural sprayers, ganesha idols, watches and much more.

Trying to find a singular explanation of Indian consumer behaviour is exhausting. Because there is none. So too, to try and find a purely consumer based explanation for apparently bewildering patterns of sales across categories or price segments. It takes two to tango and what banks and 2 wheeler and car companies are doing to consumers is a big part of how consumers behave, in response. Consumer India is a hydra headed monster and aggregate demand off take, or aggregate consumer behaviour is just the sum of its many parts. That's why people are always saying "yes… but." to any explanation.

In the new Consumer India, Rama Bijapurkar finds people experiencing continuity with change and the new as well as the old and the remixed happily coalescing into one complex whole

This columnist perpetually wrestles with the question of what the face of modern Consumer India is and will be like. The origins of this anxiety lie in a question witheringly asked, several years ago, by the consumer goods practice leader of a global consulting firm, "Why do you Indians think you are different? Does water flow uphill in India? Do you wear your noses on your ears?" The answer to that was "no, not really", but the answer also was not that we will become just like anyone else in 10 or 20 years' time. How can the reset button be pressed deleting a lot of cultural and social baggage just because the national economy got liberalised and globalised?

Many of us have trouble picturing exactly who the members of the Great Indian urban middle class are. Though we talk about them all the time, it still is like pornography “know it when I see it but can’t exactly describe it”. When visiting western businessmen talk, with a gleam in their eye, of investing in India because of the growing middle class, one is a bit worried about what images they carry in their heads about this group. The trouble is that our consumer base is so variegated, that even field research, away from meeting rooms, provides every kind of anecdotal evidence, to confirm any kind of mental picture that anyone might have, on any count.

“We should envision villages smartly and not assume that they are at a lower evolutionary stage.”

By Rama Bijapurkar & Rajeev Shukla

The recent media attention paid to the rural economy would make it seem as if the rural consumer is a different Indian altogether. But this is not such an open-and-shut case.

In the first of our two-part article on Wednesday, we had concluded that the rural economy isn’t as isolated from the urban downturn or from the vicissitudes of agriculture as most would imagine. Here we address the issue of the nature of the rural consumer, etching out a mental model.

“Growth in the hinterland is neither insulated from the rest of the world nor any different from it.”

There is a worrying groundswell of optimism that rural consumers will come to the rescue of an Indian economy which is in the midst of a sharp slowdown. This optimism may be misplaced.

We examine two issues. One: How safe and insulated is rural consumption, both from the travails of the world around it and from its own special sources of volatility and shock?

"'Back home' was always going to be a problematic place. And not just because it was not one place."

I was an army brat, which meant that everyplace-and no place-was my permanent home address. In fact, all it took for me to think of someplace as "home" was some rickety mes furniture, and a school that I could go to. Geography was never a part of what constituted "home". But that didn't mean we were allowed to grow up with an "I am just an Indian from anywhere" sort of identity. The sacredness of the "native place" was always invoked by my parents and our battle-axe family retainer, to explain to us kids why we had to bother to get fluent in Telugu-a language that our friends made fun of, even though my dad assured us that it was known as the Italian of the east.

Marketers need to change their mental models of the nature of village economy and rural consumers

By Rama Bijapurkar & Rajesh Shukla

Consumer demand in India is the aggregate of the demand of several mini-consumer Indias, each with its own distinctive demand pattern, its own degree of exposure to different environmental forces and its own response to these forces. And like a kaleidoscope, with every jerk, the pieces regroup, and a new picture emerges.

There is a whole new market opportunity that threatens to grow for the next five years, and become a big money spinner - the commuting market. More and more people in more and more cities, are stuck in ever increasing traffic and commuting longer and longer hours each day. The fact that there are a lot of unfulfilled consumer needs is glaring at us, and the suppliers haven't even got there yet! This market is up for grabs for anyone who has the competence to translate these needs into crafting imaginatively designed and distributed products that can make the customer's life better.

A staggering 45% of our population is below the age of 19. Born after 1984, this is our post liberalization generation. Even the oldest of them would have been a mere 7 years old in 1991, when liberalization happened. 6 out of 10 households have at least one member who is from the liberalization generation. This is the first non-socialist, market economy generation, growing up in the thick of the information revolution, the connectivity boom, coalition politics, IT enabled everything and the rise of the service economy. And as this age cohort wends its way through life, it will be shaping, or rather re shaping markets, and the fortunes of marketers.

Consumer demand is now no longer about undesirable habits of rich folk but about driving GDP growth. Being morally purified, it now attracts a great deal of discussion and analysis, especially as we run up to another budget, a key theme of which is about stimulating consumption. Yet most of the discussion and analyses are totally supply sided and product-centric and obsessed with WHAT is being spent on, rather than on WHO is spending and how they decide to. Consumer demand is about how much people choose to spend, on what their consumption ability, aspiration and priorities are, in turn determined by their world view and life stage and socio cultural group.

At my last two speaking engagements, people said they were surprised by my non-optimism (read that as 'gung ho' ness) about what's happening in Consumer India. One of them was on whether values in India are changing (answer: some changes, mostly morphing change, "this as well as that" compromises, new ways of doing old things; let's not confuse changes in ritual with changes in religion). The other was about what I saw as the latest in Consumer India, viewed through the economic - demographic - consumption lens. I said that none of the data that I had seen had fundamentally changed my view of the past few years that it was forging ahead on the consumption track, with all lights green and no stop signs visible; But though full throttle, it was a large mass moving at a modest speed with modest and modestly increasing acceleration; few rich getting richer and increasing in numbers, lots of poor getting less poor) The speaker after me, from the largest market research agency in India said the he totally disagreed with my characterization of upwardly creeping, slow burn consumption.

The "ICE age Indian consumer" is now a mandatory topic at most marketing conferences and meetings. There is a disturbing mental model that seems to be embedded in the popular view - that of a person who is Internet savvy, cell phone and broadband happy and hangs out at interesting sites both real and virtual. Often the word ICE and Netizen are used interchangeably. The dominant logic seems to be that this is a small yet significant number; so what if it is just the tip of the Consumer India iceberg, its growth rates are astounding and this will soon gather critical mass and define the mainstream consumer. Sounds scarily like the Great Indian Middle Class story, revisited!

Middle and Upper income India, the bulk of which is urban, has grown well above the national average in terms of number of households and the quantum of income growth. With this growth, two of the three of the "roti, kapda and makaan" trinity have happened. The Kapda boom is happening. Clothing expenditure and behaviour of this target group has definitely changed and is vibrant with experimentation. Of course, the old and the new co exist very comfortably, but the rigid structures of traditional clothing have definitely changed, be it at weddings or the work place. The Makaan buying boom has happened and the "where in my life cycle do I buy a house" notions have completely changed. The average age of the home loan taker has dropped by ten years almost, in less than a decade, and we could be in a rolling mortgage, perennial home up gradation cycle, just as folks are in developed countries. However, the Roti or the food boom has not happened yet - or has it?

In my previous column, I had wondered why the processed food ready to eat / ready to cook market had not blossomed, despite consumer conditions being fertile in terms of changing attitudes and lifestyle. I had concluded that it was due to suppliers not being able to get their product performance - price equations right, so as to create greater value for the consumer compared to existing traditional options and still be financially viable.

Thinking about it some more, I am coming to the conclusion that the "in-home convenient eating" market has also happened, only we don't notice it because it's format is different from branded packaged retort packs!

It is the same question that everyone is asking - why are demand patterns so illogical, why do usual predictors of good or bad demand like monsoons or consumer confidence or low GDP growth not apply across the board to all categories? Ask some sectors about recovery and they say, "well its already beginning to happen" and ask others and they are seeing very slow change, if any at all. Why are car and two wheeler and telecom and air conditioner markets growing, but FMCG markets groaning, and that too in a year where GDP growth was quite low? And if the reason is rural market not having money because of poor performance of agriculture, then where did the money come from? The rural market has behaved in a very prima donna-ish manner - it boomed, then it busted, and now it favours some categories and not others. The urban consumer markets are also an enigma - the eternal see saw between 'upgrading' and 'downtrading' consumer behaviour. Obviously all this flip-flop n consumer demand patterns affect B2B businesses as well, because their health is only as good as the health of the sectors they serve.

It is now well accepted that there are two answers to the question "what is the market size and the appropriate market strategy for the Indian market" One is the low pain - low gain answer and the other is the high pain - high gain answer. The low pain - low gain answer is to size and target the top of the iceberg (from 'tip' of the iceberg many companies have inched their way downwards to the 'top' of the ice berg!) comprising well off consumers (still far poorer than consumers in most other parts of the world). The game can then be played with comfortable cost and price structures, using obvious, familiar, proven business models and product designs. The good news is that unlike a decade ago, this game is reasonably sized and has the assurance of sustained growth.

Everyone is heaving a sigh of relief that the dark clouds of sluggish consumer demand are finally lifting. However, the mood in corporate corridors is one of qualified optimism. There seems to be a consensus that while there is a clear resurgence in consumer demand, the heady growths that we saw in the first half of the nineties will never return - happy times are here again, but the golden days are gone forever.

Corporate India has been acutely aware that they must keep a close watch on their marketplace, since change is in the air. Yet, despite constantly being on the look out, many companies have been caught unawares by the changes that actually happen in their market place. Every time they looked, it seemed like it was business as usual, and suddenly, one day, it became a totally different world, with dramatic shifts in market structure and definite changes in consumer behaviour, causing them to suddenly scramble and gear up, post facto. "When did we blink", is the question often asked, and the answer is never obvious.