Schizophrenic India - Diversity in India Markets

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SCHIZOPHRENIC INDIA DIVERSITY IN INDIAN MARKETS Sameer Mathur, Ph.D.

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Sameer Mathur smathur.com Asst. Professor (Marketing) 2009 – 2013 Ph.D. and M.S. (Marketing) 2003 – 2009

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Agenda

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Sudden shifts in sales patterns and sales volumes can occur – not caused by slowdown in GDP , environmental shocks or consumer confidence. Logic: India’s numerous demand segments - subjected to varying forces and responding differently to the same environmental forces. Logic of Indian Segments

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Plurality beyond 62 socio-cultural regions, 23 languages and diverse food habits, climatic conditions and cultural orientations. More than simply tweaking marketing strategies, products and pack sizes and communication for socio-cultural diversity. For maximum value: Need to develop mindset, strategy and competencies to manage plurality. Plurality of Indian Markets

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Belief ‘Monolith’ mental model One Indian Market Single unified economy, demand driver, consumption pattern and demography Reality ‘Schizophrenic India’ mental model Many Indian Markets Multiple distinct economies, demand drivers, consumption patterns and demography The Correct Mindset

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Drivers of Heterogeneity

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Benefit- Maximizer class (The rich) Cost-Benefit optimizers ( The consuming class) Cash-constrained benefit maximizers (The climbers) New Entrants into consumption (The aspirants) Not yet into consumption (The destitute) Consumer Classes Recap

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28 states in India: Varying Growth Rates: S ome at China’s pace others at Sub- saharan Africa’s pace Varying state governments Varying Literacy rates: 91% literacy in Southern Kerala, less than 50% in Bihar Varying policies: Some are business and investment friendly, others are not and receive less FDI and project loans. Geographic Differences

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Evolving at different speeds. Some parts of rural India may overtake Urban India due to new and better infrastructure, technology and superior retail environment. Market potential and consumption sophistication based on population strata is inapplicable. Urban-Rural Evolution

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Two distinct age cohorts: Children born after liberalization: India’s first free market, capitalist generation who are coming of age and entering the workforce. Post independence generation: Parents of above generation and are brought up with a socialistic, xenophobic outlook. Age Cohorts

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Infotech Industrial Agricultural Government 4 Economies within India

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Global outlook, rich, relatively small, very young and well educated ~ 1.5 million direct employees, ~10 million dependants 5% of India’s GDP Benefits from globalization IT India

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Local in outlook, old and very low on education. 50 times more people than IT India. 25% of India’s GDP. Vulnerable to globalization and WTO directives. Agricultural India

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Shift from old, small-scale, labor intensive factories to modern large-scale, capital intensive ones Eg : Tata Steel and Tata Motors Industrial India

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~ 20 million direct employees, ~ 150-200 million dependants. Two-thirds of organized sector employment –but shrinking segment. Segment is cautious, regular and conducts planned spending with spending spurges after receiving bonuses. Government India

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Businesses need to pursue well organized strategic business units (SBUs). Requires appropriate systems, structure, skills, costs and investment-return profiles. Example : Polyurethane targeted towards low cost rubber footwear consumers as well as footwear exporters for international companies. Strategic Business Units

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Belly of the Market Appropriate quality at low prices. Gradual upgrade in price and quality with market evolution. Major long term opportunity, low initial profitability. Jewel of the Crown World class quality at global prices. Focused target towards international companies in India. Highly profitable, slow-burn approach. Vs. Contrasting SBUs - Generalized

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Hindustan Lever Focus on deeply rural, media-dark, low literacy India Target Market: Bottom 20% of rural India, with 5% of GDP Creates new markets, using well spread infrastructure and network ICICI Bank Focus on developed and well off rural India Target market: Top 1% of rural India, with 5% of GDP Uses strong reputation in urban markets to enter rural markets Vs. Rural Company Comparison

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Belief ‘Monolith’ mental model One Indian Market Single unified economy, demand driver, consumption pattern and demography Reality ‘Schizophrenic India’ mental model Many Indian Markets Multiple distinct economies, demand drivers, consumption patterns and demography Summary

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Summary

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Summary

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Background Reading

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Recommended Reading

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Over 500,000 views from more than 95 countries http://www.slideshare.net/ProfessorMathur/ Sameer Mathur smathur.com http://www.facebook.com/ProfessorSameerMathur/

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