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Home >Topic >Kerala-floods >Liberalization | The freedom of choice

Since the start of liberalization, India has shifted from a sellers’ market to a buyers’ market. In just 25 years, the number of brands of apparel and accessories has increased 30-fold (see chart 1), television brands have doubled and automobile manufacturers have increased from just four in 1991 to more than 10 today. Brand proliferation in India is only set to increase. China today has more brands than India in most consumer categories.

Not only the number, but also the variety of brands has increased significantly over the past 25 years. The lowering of trade barriers from 1991 eased the way for multinationals to enter, or, in some cases, return to India. Global brands now available include Coca-Cola, McDonald’s and Kellogg’s. In addition, new products from increasingly competitive local companies have given Indian consumers the freedom to evaluate and choose from a large variety of domestic and international brands.

Consumers’ point-of-purchase choices have also expanded. Twenty-five years ago, the most common place for Indian consumers to shop was in a neighbourhood mom-and-pop store. Today, there are large and small retail chains, malls, speciality stores and exclusive brand stores. In recent years, online channels have grown rapidly, providing an even larger set of choices. And in the next 15 years, more people in India will come online than in any other country in the world.

This expansion of choice of brands and retail channels isn’t even the entire story. Factors including increased competition, better quality of players, economies of scale and higher consumer awareness and education have fundamentally improved the price-value proposition in most categories. Computers, air-conditioners and televisions cost as much or less today as they did in the 1990s and have significantly improved performance and features (see chart 2).

The upshot of this continued expansion of choices is that the consumer is making many more decisions today than what the simple proliferation of brands would suggest. It is important for companies to understand what works and what does not in this context.

The context of expanded choices and multiple decisions is causing at least three substantial shifts in consumer behaviour.

First, consumers in India are buying more brands in each category. We call this repertoire behaviour. This is true across categories—whether food, personal care or home care—as Bain studies in China and now India have established. Increasing brand and channel proliferation will further enable repertoire buying. Brand loyalty, as we have traditionally known it, is dying.

Second, rather than planning and deciding on the brand in advance, consumers now typically make decisions about their brand choices at the time of purchase in the store. This implies that consumers have a set of brands they are willing to consider for purchase, but understanding brand choice drivers at the store becomes critical.

Third, Indian consumers are increasingly discovering, evaluating and interacting with brands online as opposed to only at physical retail locations. According to the Bain-Google fast-moving consumer goods (FMCG) study in 2015, as much of 35% of consumer purchases will be digitally influenced by 2020. This does differ across categories, but the shift will touch nearly all categories (see chart 3).

What do these behaviour shifts mean for companies? No longer can companies depend on consumer loyalty to their brands. Companies will need to find ways to influence brand choice at the time of purchase, making their brand memorable and visible from among a huge and increasingly viable set of brand choices available to the consumer.

How can companies do this? We see three key strategies playing out:

First, companies need to recognize that “penetration is all that matters" and focus on increasing household penetration, rather than trying to drive higher share of the wallet. Bain’s analysis of consumers in China, Indonesia and now India shows that leading brands outperform peers in household penetration far more than in share of the customer wallet. This is true across most categories, regions and consumer segments. Companies must, therefore, aim to get their brand into the consumer’s consideration set and make it easy to remember and recall. The mantra is brand salience through reach and repeat at scale, and distinctiveness through brand memes and story.

Second, companies need to find ways to be in as many stores as possible and influence brand choice at the time of purchase. Widespread physical availability, larger share of shelf space and attractive shelving displays and in-store activities will help brands become visible to shoppers. Companies such as Unilever run programmes to ensure the right assortment and displays in stores. The need is to confront the shopper on as many purchase occasions as possible.

Third, companies should fully incorporate digital as an integral part of marketing and sales. Digital is no longer a question of “whether" but “how fast". In India, we have already seen offline packaged consumer goods makers launch new, premium products exclusively via online channels, boost sales through digital channels and engage with consumers far more extensively than in the past. For example, Coca-Cola launched Coke Zero in India exclusively on Amazon.in for two weeks before its offline release.

These shifts in consumer behaviour call for making marketing choices and resource allocations that are substantially different from conventional priorities. As brands and channels proliferate, every brand marketing dollar needs to be scrutinized on how it is being spent: increasing penetration or loyalty, distinctiveness or differentiation, salience or positioning.

Evidence-based answers to these choices, as we have seen in our work with leading brands, will help companies win with today’s Indian consumers and the future shopper.

Joydeep Bhattacharya is a partner with Bain & Company and leads the firm’s consumer products and retail practices in India. Nikhil Prasad Ojha is a partner with Bain & Company and leads Bain’s strategy practice in India. He is the co-editor of the Mint-Bain series, 25 Years of Reforms.

Next week: Health is wealth? The changing nature of India’s challenges and opportunities.

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