technopak consumer outlook

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Top Ten IndiaConsumer Trends2008

a q u a r t e r l y r e p o r t b y t e c h n o p a k FEBRUARY’ 08 / VOLUME 2

India is at an exciting tipping point in its socio-economic progress that makes it the cynosure of global investor’s eyes. Several reasons drive this intense speculation and interest in India - a rapidly growing economy propelled by a de-ageing demographic profile, greater affluence, rapid urbanisation, the growth in nuclear families and a self-confidence rarely seen in the so-called developing nations.

Each of the above factors (and many more supporting factors) has far-reaching implications for marketers and investors interested in India. These are large scale, sustained and measurable influences that shape people's behaviour and attitudes and ultimately, their consump-tion

We at MindScape have termed this phenomenon as the 'India Boom'.

This document uses our extensive Body-Of-Knowledge on this vibrant economy along with some recent and rigorous analysis of the micro changes that we see impacting the future of consumerism in the coun-try to provide you with some indicators of what you will doubtless see unfolding over the next decade in this diverse and unique country.

The Knowledge Company (TKC) - Technopak's consumer and market intelligence division - has interacted with consumers across the coun-try, analysed data generated by its various consumer studies, Technopak's BOK and from other reputed sources to compile these trends for you.

The TKC consumer studies analysed include India Luxury Trends, India Consumer Trends and The Social Values Monitor.

Our focus in this document is urban India, the metros and Class 1 towns.

Overview

c o n t e n t s

© Technopak Advisors Pvt. Ltd.

‘Consumer Outlook’, a quarterly feature is an effort by the MindScape Team to explore the multifarious changes in the Indian consumer’s mindset.

With this report we have attempted to provide insight into the trends and opportu-nities the changing Indian consumer offers. During the course of this year we will be publishing reports on various aspects of the industry with a specific focus on the diverse opportunities for investment.

TREND 2Rural India gets a Makeover 02

TREND 1Blurring Socio-Economic differences 01

TREND 3The Rise of the Boy-Genius 03

TREND 4Multi-faceted 04

TREND 5Giving Sphere 05

TREND 6Renting Ownership 06

TREND 7Mobile World 07

TREND 8Expert Kids 08

TREND 9Shades of Green in Cinema 09

TREND 10Preserving the Past 10

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Blurring Socio-Economic differences

As India grows economically, a number of forces are coming together to make the needs and desires and aspirations of its people more convergent.

We recently concluded a small series of interviews and photo-sessions with 15 families in Delhi and Bangalore from SEC A, B, C, D and E. What is amazing is the convergence of aspirations and beliefs. They all believe in the power of education and also believe that girls should be educated as well as boys. They believe that education is necessary for women, as they should have the capacity to be economically independent if needed. They all believe that the future is very bright for their children, if they themselves have managed to have such a good life.

The changing income demographics, age profile and macro environment are visible in the growth in consumption of prod-ucts. Families across SECs are using branded soaps and powders, branded shampoos and detergents. All the families had 21 inch colour televisions. SEC A, B and C all owned cars or 2 wheelers. They all owned 165 litre refrigerators.

Technopak’s India Urban Consumer Trends Report for 2006 – 07 covered SECs A, B and C. The difference between SEC A and Sec B spends is just Rs. 25000 a year. The categories of products they spend on and the percentages of income they spend on is more or less similar across SEC A, B and C.

The only grouse, and that too a common one across all five SECs, was that all the families felt the pinch in terms of money, and all of them sought different ways in which to make more.

In such a consumer scenario, it is difficult to justify the typical definition of the target consumer as SEC A only. While Sec A provides easy wins, SEC B is not far behind and SEC C too is aspirationally ready to subscribe to the same products and lifestyles. What would make it easier for these consumers to fulfill their aspirations is to include them by design in the target audience definition from the start and then develop the products or marketing programs.

Marketers need to move beyond SEC A to SEC B and C not only in terms of targeting but also in basic product development, in order to harness the huge opportunity that today is largely untapped.

MindScape Viewpoint...

Trend 1

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The chasm between India's flourishing cities and bleak rural hinterland is narrowing.

Spread across 650,000 villages, with an average population of 1,100, villagers were long imagined by city dwellers as primi-tive, impoverished and irrelevant, something to drive past on the way to somewhere else. That is no longer the case. Improving lifestyle patterns are becoming visible in rural India, with the per capita expenditure registering phenomenal growth rate compared with urban areas. In 1990, for every $100 earned by an Indian villager, an urbanite made $82 more. Today, the difference has dropped to $56.

A new prosperity is sprouting in rural India, with tens of millions entering the pressure-cooker-and-television-owning class and tens of thousands becoming sippers of Scotch, owners of premium tractors and drivers of multiple sedans.

Rural India is witnessing a significant increase in expenditure across categories ranging from telephone calls per person to tuition and education fees, petrol expenses, taxi and auto rickshaw expenses and what not. The dependence on private tutors and coaching centres has also seen a dramatic rise.

According to the 61st National Sample Survey Organisation (NSSO) report (July 2004-June 2005) the proportion of rural households incurring expenditure on telephones has jumped from 5 per cent to 32 per cent, while there has been an improvement from 25 per cent to 63 per cent in the urban areas. Rural petrol expenditure has doubled (100.4 per cent), while taxi and autorickshaw expenditure has more than doubled (119.2 per cent) in rural areas and risen by around 78 per cent in urban areas during this period

The number of households owning cars, motorcycles and television sets has been increasing significantly in recent years. Giving an 11-year data span, the report shows that the number of rural households possessing cars or jeeps has grown by 400% between 1993-94 and 2004-05. The number of people owning motorcycles or scooters recorded a 300% jump during the 11-year period.

Life in rural India is also experiencing a new beginning with BPOs opening up in the interior parts of the country. In a village in Karnataka, Sai Seva Business Solutions has opened a BPO unit in partnership with HDFC Bank, which provides opportu-nities for people to lead a life where they can balance their family business and professional chores.

This initiative is bound to pave the way for lifestyle and aspiration metamor-phosis in rural areas. Changes in consumption, perception and attitude among the rural mass is on the cards with rising disposable incomes.


Trend 2

Rural India gets a Makeover

The Rise of the Boy-Genius

It’s the freeze-face generation, a society that wants to look forever young and good. It is all about persistence of youthful behavior into adulthood i.e. 40-year-old men and women who look, talk, act, and dress like people who are 22 years old. It’s not a fad but a phenomenon that looks to be permanent.

Social roles have become less fixed in modern society. We are expected to adapt to change throughout our lives, both in our personal relationships and in our careers, and immaturity is especially helpful in making the best out of enforced job changes, the need for geographic mobility and the requirement to make new social networks.

A childlike flexibility helps in navigating the modern world, with such people more likely to change jobs, learn new skills, and move to new places. But, this is coupled with short attention span, frenetic novelty seeking and an emotional & spiritual search for roots!!

Since modern cultures favor cognitive flexibility, ‘immature’ people tend to thrive and succeed, and have set the tone of contemporary life: the greatest praise of an elderly person is to state that they retain the characteristics of youth.

Video games, casual wear, hello kitty, comics, cartoons for all ages- Parents as friends, friends from all ages, everything is happening with the audience with forever young mindset.

Brands like Lay’s, Apple, Puma, and Xbox are tapping into this trend with much success. Alpenliebe is one brand which has successfully leveraged and showcased the child in the consumer.

Companies such as Unilever, P&G, Garnier and L’Oreal have long identified the Peter Pan within us by creating and selling anti-ageing creams, wrinkle-removal pastes, facials, hair-colors, etc

As Indian marketers would say it’s not about youth but about youthfulness!!!

Marketers and communication experts need to take note of psychological neoteny. And, more importantly, understand how to satisfy this ‘pursuit of novelty’ as people stay younger longer, maybe forever.


Trend 3

There was a time when children and adults believed in the concept of ‘Focus’ and doing one thing at a time but excelling in it. Today the situation has turned around to one in which most people are engaged in multiple activities at the same time. In countries where all the choices are readily available, children use between four to six media (for example, television, radio, computer and books) a day. This is built around other activities like playing games and hanging out with their friends.

Multi-tasking is not a new phenomenon. Children have always been able to engage in other activities like playing with friends, eating, doing homework, and so on, while they are using media. The technologies available today give them more ways to do it (including the ability to do two things at once on the same technology, like internet and IM).

The ability to follow two topics more or less simultaneously requires a fairly advanced level of cognitive and memory coordi-nation. It is therefore not surprising that, in the US, teens report more accompaniments to their media usage than younger children. And certainly, adults should be better able to multi-task than teens, which is good news for employers.

Multitasking would have a very interesting effect on the human brain. Neuroscience tells us that men have traditionally been good at focus while women excel in multitasking because of their superior verbal ability which also creates more connec-tions within the brain. To a generation born in an age of multiple activities, these particular gender differences may not apply since they are all creating more connections from the start.

As a result of multi-tasking, cognitive patterns are changing. The makers of the television series West Wing found, for instance, that people are more receptive and take in more information when it is delivered rapidly and in short sentences. That accounts for the somewhat breathless pace at which dialogues were delivered and events occurred in that television show.

All communication media need to re-look at changing cognitive patterns and tailor their communication to the new ways in which the human brain is processing information.


Trend 4

Multi-faceted

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Giving Sphere

Find us one high-profile billionaire who's not deeply into 'giving' right now. In fact, whether it's giving away your riches, your time, or sharing your (content) creations with total strangers, giving is the new taking. Sharing is definitely in and so are the varied platforms being utilized for the same right from iTunes, You Tube and blogs to you name it.

SlideShare, just one such initiative in this direction, is the world's largest community for sharing presentations on the web. It has been witnessing one of the highest numbers of clicks on the web.

A growing number of people are sharing digital music on MP3 players and other music devices using freely available software and internet services.

The enthusiasts are borrowing heavily from another personal broadcasting phenomenon called podcasting, in which digital recordings are posted on a web site for download to a variety of music players, including desktop PCs and portable gadgets.

Powered by the bottom-up nature of sharing and collective action, it's exemplified by such developments as the barn-raising methodology of Wikipedia; group efforts like tagging; open source systems; Wi-Fi; open API's in ecommerce sites like Amazon, eBay, and Google; RSS; the spontaneous connectivity of Apple's Rendezvous; and dozens of other dots that are being connected to fulfill the original promise of sharing.

Sharing has also enabled consumers to receive movies and music bypassing all channels of distribution and has also enabled them to buy piecemeal.

MTV invests millions of Dollars a year on research about youth, their media, their music and other aspects of their multi-tasking lifestyle and shares it as an open source with their brand partners, agencies and the industry at large so that every-one can learn together.

Indian mothers are not left far behind in the race of sharing their experiences, and hundreds of Indian mommy bloggers share everything, from being first time moms to recommending home remedies for successful cure of colds.

While web-based companies like Google and Yahoo are cashing in on this trend, old economy firms are yet to find any meaningful way to make use of the phenomenon.

Marketers can leverage social networks to build brand awareness, in large part by leveraging the word-of-mouth impact of the network. Emerging products and brands provide the opportunity to exploit the “novelty” factor motivating viral marketing.


Trend 5

The Renting Ownership concept has undergone a great degree of transformation in recent times compared with its origins a few decades ago. Increased demand for leisure travel, real estate ownership and unique lifestyle experiences have fueled the development of a variety of new renting ownership offerings. The wealth and lifestyle preferences of the affluent is a significant factor in this increased demand.

Club Privada has come up with a unique timeshare scheme which offers members timeshare yacht ownership through their gold and platinum memberships. The club’s innovative business model gets you access to a fully crewed and maintained luxury yacht and the lifestyle that comes with it for a fraction of the traditional cost. You don’t have to put up with the burdensome costs associated with owner-ship like maintenance, berthing and insurance and it definitely is a better alternative to unreasonably expensive boat charter.

Club Privada also offers a range of Fractional Ownership programmes. Fractional Ownership is an equitable business model that allows a number of people to co-own a luxury boat without any of the hassles of maintenance and management.

The growing tendency among Indians to buy second homes, often in places of tourist interest, is further boosting the concept of condo hotels. Condo hotel is another trend in renting ownership. Buying a holiday home throws up issues of maintenance and return on invest-ment for the owners.

In a condo hotel model, individual owners can use their holiday home for certain duration and for the rest of the year place their unit in organized rental programmes run by the developer/operator of the condominium complex. The developer/operator takes charge of the maintenance and coordinates the renting out of the apartment to travelers. RCI is one such company which is already in talks with Indian builders and hoteliers to introduce this concept in India.

India’s affair with rented frills is soon going to go beyond yachts and condo hotels!!!

Marketers need to be cognizant of the fact that renting books and movies is now history, it’s time to satisfy the craving for luxurious products of both the haves and the have nots.


Trend 6

Renting Ownership

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Mobile World

With mobile phones users cutting across geographies and socio-economic classes, mobiles represent a media channel that is growing-up with the next generation of primary consumers.

Brands like Dove, Herbal Essence and ICICI Lombard have been successfully using mobile phones to their advantage but now even multiplexes and cineplexes have joined the race. Multiplexes once thrived on viewing experiences but are now talking about viewing conveniences as well.

In our opinion the classic 3 region theory aptly fits here i.e. in the case of U.S.A the internet boom came much before the mobile phones hence you find online taking centre stage over mobile phones, in the case of Europe both internet and mobile mushroomed together resulting in similar usage and growth patterns. When it comes to Asia, we were the only market to be blessed with mobiles before the internet, resulting in the dominance of mobiles over online.

This has resulted in India adding 5 Million subscribers every month to its kitty, resulting in the mobile phone subscriber base crossing the 200 Million mark in October 2007 itself and expected to reach 400 million+ by the year 2011.

Mobile service providers want to cash in on this rising subscriber base and have indeed added the local touch by getting into regional language messaging and simplified rentals.

With our lives revolving around mobile phones, significant numbers of young people across Asia invest money and time to personalize their devices, using their phones to communicate - not just calls and text, but their individuality and tribe membership. The trend is a Pan-Asian phenomenon with phone straps in Bangkok to designer phones in Malaysia, phone cover jackets in Japan and ring back tones in China. Any guesses on what is going to be a hit with Indians?

The mobile phone is set to become a complementary extension of online community platforms. The mobile phone and community sites are already being used, separately, as tools for youth to organize among themselves. This presents an opportunity for the two tools to merge.

The mobile phone is set to become a complementary extension of online community platforms. Marketers need to rethink their strategies and move from an Online strategy to an ‘Mline’ strategy.


Trend 7

Kids as a consumer segment have not been tapped to their full potential by media and the marketing fraternity. Kids are perceived to have insignificant influence on purchase decisions in non-conventional categories.

However, the reality is kids today are exposed to global media, making them more savvy and better informed. Most kids turn to the televi-sion to meet their information needs and to word of mouth and their interaction with peers. They are emerging as an important target segment in non-conventional categories like holidays, mobile phones etc.

Better education levels, media explosion, rising affluent levels and increasing interaction with technology are all resulting in kids being much more informed than their adult counterparts, resulting in credibility being built for them in the eyes of their parents.

What is interesting to observe is the evolving role of kids in the Indian household- from a time when these children use to pester their parents in order to fulfill their desires they have now donned the role of consultants acting as encyclopedias or ready reckoners with information readily available at their finger tips on anything under the sun. Kids have moved from pester power wielders to Influencers to emerge as Consultants with most children having expertise across categories.

Parents are also cognizant of the fact that their kid’s advice is informed and not ad hoc, hence the desire to act on the same instantly or at least includes it in the consideration set when going out to shop.

Parents are giving their kids advice due credit when it comes to selecting holiday destinations, buying household durables or mobile phones and cars for the family.

Marketers need to keep kids at the centre stage when crafting their strate-gies for both conventional and non-conventional categories.


Trend 8

Expert Kids

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Pester Power Influencers Consultants

Shades of Green in Cinema

It's official. Hollywood has gone green. The movie capital of the world has discovered that the environment sells. Green stories bring in big green bucks.

Movies in the Hollywood have taken on themes of environmental concerns, receiving both critical acclaim and mainstream popularity. These shades of green in the cinema are and will be major factors in pushing forward the green movement in Asia.

The most recent is The 11th Hour, a feature film documentary created, narrated, and produced by Leonardo Dicaprio on the state of the environment, released in 2007.

Indian consumers are increasingly becoming environment conscious and their interest in preserving the environment is visible at a pan India level; right from banning use of polythene bags to using recycled products for manufacturing slippers, sandals, home accessories like cushion covers, tablemats, pen stands and other decorative items is taking centre stage in lives of Indian consumers.

Even leading fashion designers are giving messages through their shows to conserve mother earth, rolling out eco-friendly clothing lines and creating bags made out of recycled plastic, the glamorous fashion fraternity seems all set to protect the planet.

Interest and concern for environment has resulted in directors like Mike Pandey taking the initiative of providing this offbeat genre of movies to Indian audiences- Vanishing Giants is one such film shot all over India to capture the plight of Asian elephants, which also happened to win Green Oscar for the same.

What’s interesting to note is that shades of green have gained mainstream acceptance within Hollywood but only continue to excite a niche section in India.

Marketers need to invest in cause marketing to leverage the relationships consumers have with causes into increased purchases and brand loyalty.


Trend 9

• An Inconvenient Truth

• Happy Feet

• Ice Age 2: The Meltdown (Most profitable movie released worldwide in 2006)

• March of the Penguins

An interest in the history, heritage and roots of modern concepts has fueled music, fashion and design trends so far this decade. Consumers have been digging back to discover how things started. Interestingly, the search for roots is combined with the rising growth of technology and an increasingly self-focused world.

Consumers are starting to blog and create websites to keep themselves and other people in touch with their roots. On the one hand we have websites like indian-heritage.org constantly keeping us tied with our roots and on the other hand we have websites like Indiatravelite.com and iloveindia.com keeping us informed of our age old traditions. A recent book by an NRI Tamilian author actually details out the story and the rituals associated with each festival in the Hindu calendar and has proved to be wildly popular.

Indian hotels and restaurants are not left far behind in leveraging the rising consumer interest in heritage- boutique restaurants with historical and classic themes are the in thing- be it the Awaadh food festival in the Maurya Sheraton or the Lucknowi cuisine in The Taj or Mughalai in The Hyatt, it’s all happening here right now.

Bollywood couldn’t be far behind in leveraging this trend as evident from recent box office hits like Hanuman and Bal Ganesh, Krishna etc, which combine the excitement and fun of cartoons with the traditional stories of India. NDTV’s channel 9X is airing a new version of Ramayan, made by the same producer who made the DD version, and this is one of the few programs that is doing well in the face of the K soaps and reality shows on television.

Associating with the roots as a concept cuts across age groups and classes, something which marketers should leverage.


Trend 10

Preserving the Past

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MindScape is the strategic consumer insights division of Technopak Advisors. Drawing from Technopak’s unmatched understanding of industry, retail environments, Indian and global markets, MindScape is uniquely placed to integrate present and future business strategy with best practices in consumer insights. MindScape was set up to cater to the growing business need for foresight into how consumers and shoppers are likely to evolve, what they will want tomorrow and how best to translate this ‘buyer desire’ into business wins. MindScape’s mission: To catalyse business growth through consumer insight.

MindScape offers a bouquet of innovative services: o Shopper Insights, in partnership with Envirosell o Trend forecasting o Design and Product Insights, in partnership with Foley Designs o Market and Consumer InsightsMindScape has an in-house intelligence wing, The Knowledge Company, that conducts its own studies to understand and analyse consumer behaviour, to constantly add to MindScape’s Body of Knowledge.

In order to learn more about MindScape and how we can add value to your business, please contact:Preeti Reddy [email protected] Balasubramaniam [email protected] Narendra [email protected] Prabhakar [email protected] Maithani [email protected]

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