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The myth of a national market

The myth of a national market
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First Published: Sun, Nov 15 2009. 09 02 PM IST
Updated: Sun, Nov 15 2009. 09 02 PM IST
There is perhaps no creature in the economic landscape that is as difficult to understand as the consumer, and even more so in troubled times such as these when the world economy is in turmoil.
There was a time when marketing experts innocently believed that all consumers would behave in similar and predictable ways once they climb the income ladder. This belief was most famously expressed in a much-cited article published in the May-June 1983 issue of Harvard Business Review by Theodore Levitt: The Globalization of Markets.
In that article, Levitt predicted that world markets would become more homogeneous, a convergence of consumer behaviour. It was a well-argued and convincing argument, but the reality that emerged after the rise of globalization was very different: consumer behaviour continued to be prey to cultural norms and local realities. This is the world of the Maharaja Mac and the tandoori pizza.
But are national markets homogeneous, especially in large countries such as India and China? An article in the latest issue of the McKinsey Quarterly says that the battle to win Asian consumers should be fought “cluster by cluster, city by city”.
“To be effective in Asia, consumer companies must think regionally but sell locally: They do better by focusing on urban clusters than by conceiving of an entire country as one market,” writes Todd Guild, director in McKinsey’s Tokyo office.
Indian retailers have already got a sense of this, which is why the merchandise they display depends on which city or even suburb a store is located in. But cities in a country such as ours are great melting pots, as immigrants pour in and change them irrevocably. Understanding these dynamics will perhaps be as important to companies selling consumer goods here as traditional issues such as pricing and promotion.
As consumers in the US and other rich countries continue to be weighed down by the pressure of falling asset prices, stagnant median wages and job losses, it is Asia that is being seen as the next great consumption engine. But understanding the new Asian consumer will require a lot of research, deep thinking and failed experiments.
India: one market or many? Tell us at views@livemint.com
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First Published: Sun, Nov 15 2009. 09 02 PM IST