Consumer Segments in India

CONSUMER SEGMENTS IN INDIA
Sameer Mathur, PhD (http://smathur.com)

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SameerMathur, Ph.D.
Assistant Professor (Marketing)
Web: www.smathur.com
Email:sameer.mathur@mcgill.ca
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BRIC Comparison
BRIC: Individually poor, Collectively Rich
Developed Economies:Individually and Collectively rich

Structure of Consumer Demand
Emerging Markets (India)
Many people consume a little bit each  Large consumption
Developed Markets (USA)
A few people consuming a lot each  Large consumption
Eg: Organized retailing business (SubhikshavsWalmart)
Implication: Differing Price Mechanisms, Cost Structures and Promotional tools

Rich and Poor Consumers
Rich consumers may not necessarily offer higher market potential than poor consumersExample : Two Wheeler Market

Marketing to such a Demand Structure
Market Characteristics:
Large populations with low incomes
Low to moderate penetration levels
Low per-capita consumption levels
Requires innovative strategies by marketers
Example : Shampoo Bottles vs Shampoo Sachets
 Led to expanded user base, lower unit price and additional volume sales

Indian Market Segments (Old)
Three Broad Segments
Premium = High Income Consumers
Popular = Middle Income Consumers
Discount = Low Income Consumers
Segments are equal in terms of value Differ in number of consumers and income levels
Source: Business World Marketing White Book 2006 “Solving the Income Data Puzzle”, Bijapurkar and Bhandari

Industrial and B2B Markets
Unorganised segment :Small scale buyers and small suppliers
Organised Segment:Large scale buyers and large companies
Unorganised Segment > Organised Segment
Tax subsidies and other cost advantages prevent supply and demand segments from matching

Changes in market segments
FMCGs  Popular segment grew, premium decreased
‘Down Trading’  Nature of Indian Consumer: Mean and Stingy
Variation in price-performance combination due to competition created new segments Mild-premium, High-end popular, Super-premium, High-end discount

Changes in market segments

Further changes in market segments
Price-Performance rules are breaking
Reason: Popular and Discount manufacturers upgraded goods quality and have cheaper imported raw material and better equipment
Example: Automotive Sector
Premium: Small yet well equipped Maruti Swift
Popular: High performance TVS Victor
Discount: Superior and Stylish Bajaj Boxer

New Market Structure
Five Consumer Groups
The Rich
The Consuming Class
The Climbers
The Aspirants
The Destitute
Source: ORG-MARG

The Rich and The Consuming Class
The Rich:
Buy luxury goods like cars, PCs and other premium products
The Consuming Class:
Buy Utility Durables like motorcycles, refrigerators, washing machines, regular FMCGs

The Climbers, The Aspirants and The Destitute
The Climbers:
Have at least one major durable – food mixer, television, sewing machine etc.
The Aspirants:
Have very basic goods like a watch, radio, table fan
The Destitutes:
Own and consume practically nothing

New Market Structure
The Rich
The Consuming Class
The Climbers
The Aspirants
The Destitute
Source: ORG-MARG

Value orientation within segments
Benefit-Maximizer class (The rich)
‘Money for Value’ belief – buy top luxury brands
Cost-Benefit optimizers ( The consuming class)
‘Value for Money’ belief – balance benefit and price
Cash-constrained benefit maximizers (The climbers)
Best value with available, limited money – Nirma detergent
New Entrants into consumption (The aspirants)
‘Paisa Pack’ Buy cheap sachets
Not yet into consumption (The destitute)
Do not consume anything

Value orientation within segments

Size of Consuming Classes
Largest consumer classes in 1995:The aspirants and the climbers
Largest consumer classes currently:The climbers and the consuming class (~75 million households each)
Urban India: Value-driven market growth
Rural India: Volume-driven market growth

Different growth levels from each class
Not yet into consumption
The Deep Well
Benefit maximizers
Creation of ‘Anywhere in the world’ market
New entrants into consumption
Value growth via upgrading
The Virtuous Spiral of Demand
Cost benefit optimizers
Value growth via upgrading
Cash-constrained benefit maximizers
Volume growth via more per-capita consumption
Value growth via occasional consumption of luxuries

Sources of market growth
Volume Growth :
‘Destitute’ transforming into ‘Aspirants’
‘Climbers’ increasing their per-capita consumption
Value Growth
‘Climbers’ occasionally using superior products
‘Consuming Class’ upgrading to better quality products
Creation of a super-premium market for the rich benefit-maximizer

Implications for Strategy
Distribution systems
‘Consuming class’: Higher-margin, higher-service, fairly demanding
‘Climbers’ or ‘Aspirants’: Lower margin, high reach, less demanding
‘Community Consumption’ Strategy  Cyber cafes, STD/ISD telephone booths
Small pack with low unit price  Shampoo sachet

Summary
The Rich
The Consuming Class
The Climbers
The Aspirants
The Destitute

Summary
Benefit-Maximizer class (The rich)
‘Money for Value’ belief -- top luxury brands
Cost-Benefit optimizers ( The consuming class)
‘Value for Money’ belief – balance benefit and price
Cash-constrained benefit maximizers (The climbers)
Best overall value with available, limited money – Nirma detergent
New Entrants into consumption (The aspirants)
‘Paisa Pack’ – Cheap sachets, biscuits etc
Not yet into consumption (The destitute)
Do not consume anything

Background Reading

FREE TEACHING
RESOURCES
ON MARKETING
MANAGEMENTATWWW.SMATHUR.COM
OVER 130,000 VIEWS
FROM 96DIFFERENT COUNTRIES
These presentations are part of Sameer Mathur's teaching portfolio.
They are free to view or download for non-profit, academic use.
Disclaimer: These teaching materials have been compiled from multiple, non-creditedsources for non-profit, academic use. Copyright is retained by the original content creators.
SameerMathur, Ph.D.
Assistant Professor (Marketing)
Web: www.smathur.com
Email:sameer.mathur@mcgill.ca
Twitter: @ProfessorMathur
Facebook:Click Here

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Consumer Segments in India

by Sameer Mathur on Jul 17, 2011

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