New Delhi: Last week, Bharti Airtel Ltd, India’s largest mobile telephony company, set up a special cell under its marketing division called mass-marketing group. The cell has been given the mandate to devise marketing and communication strategies to help the company reach out to the mass market. The move comes at a time when most companies, even those that traditionally sought to tap mass markets, have come around to the opinion that niches, albeit big ones, are far more lucrative.
Coca-Cola, PepsiCo, and several other firms actually declared that there was no such thing as a mass market in the country. “For us, the consumer market doesn’t exist beyond the top 50 million population,” the marketing head of one of the cola companies had told this reporter just a year ago.
That flies in the face of management guru C.K. Prahalad’s bottom-of -the-pyramid theory, which says companies stand to make money, a lot of it, by looking at low-income households. The theory seemed to apply only to companies such as Hindustan Unilever Ltd and ITC Ltd in India. Most others which tried to make money from the bottom of the pyramid failed.
The bottom of the pyramid in India looks quite alluring in terms of its size; it has around 700 million consumers, or 64% of the country’s 1.1 billion population. But numbers can be misleading, as several companies that rushed to India in the mid-1990s will admit.
Most came in on the basis of numbers such as these: 700 million people; a middle class of 250 million. A few returned home disappointed and those which stayed back had to recalibrate business plans. The bottom, where a majority of the population still lives on $2 a day, is far from being a sustainable marketplace. “For us, the consumer market in India comprises the top 5-6 million of the population,” says Andreas Gellner, managing director, Adidas India.
So, who is Bharti Airtel seeking to target through its new mass-marketing division? “The new group will focus on towns beyond the big metros, which have huge potential that has not been exploited as yet,” says Gopal Vittal, the company’s marketing director—he was formerly with Hindustan Unilever Ltd.
According to Vittal, the mass marketing group will look at new acquisitions (of consumers), and strengthen the current customer base through an effective marketing and communication drive. “For most marketers who have (already) exploited the top end of the consumer base, new growth will come from the mass market that has not been tapped fully yet,” adds Hemant Sachdev, group director, marketing, Bharti Enterprises Ltd.
Bottom of the urban pyramid
The real mass market in India has, so far, been confused with rural markets. The mass market that Vittal and Sachdev refer to is not actually rural India, but the one that mainly lives in the 359 towns and 27 state capitals of the country, outside the top eight metros. According to some estimates, around 300-350 million consumers live in urban India. “Call it the bottom of the urban pyramid,” says Harish Bijoor, CEO, Bijoor Consults, a leading marketing consultancy.
Most marketers have, so far, remained focused on the top 50 million of the urban consumers living in big metros, because these were the people who had benefited the most from rising salaries over the past 15 years. “The rest largely remained outside the growth and consumption cycles and hence even marketers, save all-pervasive FMCG (fast moving consumer goods) and basic utility consumer durable companies, didn’t look at them,” says Bijoor.
Now, as the benefits of growth percolate to this class of consumers, marketers are sitting up and taking note. A recent study by The Nielsen Company, a global research and retail audit agency, suggests that the penetration of home loans and personal loans is maximum in the top 359 towns of the country—it calls them emerging India—as against the top eight metros. According to the study, the penetration of personal and home loans in emerging India is 9% and 11%, respectively, vis-à-vis the top eight metros’ 5% and 7%, respectively.
The study also suggests that some 31% of the consumers from emerging India do not mind taking a loan to buy items of comfort against 21% in the top eight metros.
The spurt of spending by non-metro and non-rural consumers is attracting companies to the real mass market in the country. It is safe to call it the real mass market, not only because of its size, but also because of a certain homogeneity in its social and economic background, unlike top-end consumers who are extremely diverse in their consumption patterns.
According to some estimates, the total household income of these consumers is anything between Rs1 lakh and Rs4 lakh a year. And regional and cultural differences notwithstanding, the purchase decisions within this set seem quite similar. “They are all quite price conscious and value for money is the guiding mantra in all purchase decisions they take,” says R.K. Shukla, senior fellow at the National Council for Applied Economic Research, an economic think tank.
Tapping the market
The numbers explain why marketers of all hues are redefining their product mix and revisiting their pricing strategy to become relevant to this group of consumers. There is Tata Motors, with its much talked about Rs1 lakh ‘people’s car’, aimed at the second rung of automobile consumers; there are marketers such as Apple which has reduced the price of Ipods.
Similarly, telecom service providers such as Airtel and Hutch Vodafone have introduced low-priced pre-paid cards (as low as Rs50; one can even buy talk-time for Rs10 or Rs15) to rope in more customers. And equipment manufacturers such as Nokia and Motorola are introducing low-cost handsets as well as reducing the price on their existing premium models. For instance, Moto RAZR, the premium clam-shell phone, is now available for less than Rs10,000. “Today, India has 155 million cellphone users. That is just 14% penetration in the market. Any further growth has to be fuelled by the next level of consumers,” says Lloyd Mathias, director, marketing, Motorola India. “Since the next level of consumers will take time to evolve to that level, marketers are stepping down to their level, to skim their potential,” says Bijoor. McDonald’s, which was perceived as an expensive eating-out option by most mass consumers, brought in many changes in its product mix and pricing to overcome this perception. “We introduced the ‘Happy Price Menu’ for Rs20. Along with the menu, we also localized our brand communication,” says Smita Jatia, COO, McDonald’s India, West and South. And FMCG major Hindustan Unilever Ltd recently launched a smaller 75gm pack of its premium soap, Dove, at a price point of Rs25 to “enable consumers to fulfil their aspirations”, says Ashok Venkatramani, vice-president and category head, skin care, Hindustan Unilever Ltd.