The Hindu Business Line : Learning from the downturn

Pallav, the economic downturn is really a slowdown, a correction in the earning, stocking, spending and celebrating mindset of the Indian consumer at large. While at the macro level, our GDP growth rates were at a more sober 5.3 per cent overall, this signified a fall from the gung-ho years of successive 8.3 per cent growth. One fine point on this macro number is the fact that rural markets grew faster than urban markets. In the case of several categories such as automobiles, durables and cosmetic care items, urban markets largely declined and rural markets showed growth. At the end of the day, when we aggregate volumes from both, there was some semblance of small growth overall.

In real terms, even though there has been no real recession in macro terms in the country as a whole, in urban markets there has been a real recession, which I call a cautionary recession. This simply means that people had money in hand but postponed the decision to buy, not knowing how the future would pan out in terms of holding on to jobs, securing increments, securing bonuses, and in many cases even retaining the same salary as last year. Being laid off was a big worry as well.

In rural markets, growth remained and spending remained at the level it was.

Brands learnt many things from this downturn. The top 10 learnings from my perspective:

It is important to have a strong rural footprint and not depend too heavily on the urban sales skew. Rural sales are a good hedge when the chips are down in urban.

Redefine value. Don’t get carried away by value that is defined by slick advertising and even slicker retail appeal. Get down to the basics and focus on basic brand appeal. Brand appeal needs to go in sync with value pricing.

Reduce obscene margins that are typically made and taken for granted in categories. Brands must not distance themselves from consumers by building walls of unfair prices. Mass consumer appeal is important. Don’t sacrifice width of appeal and use for depth of margins.

Being in contact with consumers is important. Marketers need to get off the pedestal of television advertising and walk into markets and feel the alien sweat of the sadly alien consumer.

Demand generation is a task that cannot be forgotten and taken for granted. Even older categories of consumer goods and services need to indulge in demand-creation games at the ground level. Demand generation is always fashionable.

Dependence on above-the-line (ATL) advertising needs to be questioned. There is plenty to be done below the line (BTL) if markets are to be made.

God is in the details of branding. Mass branding does not necessarily work. The answer lies in 1:1 branding formats.

Small retail cannot be ignored. It needs to be nurtured if brands have to succeed in India.

The point of purchase is a point of advertising. A point of branding. A point of selling. A point of consumer activation. A point of market research. Indeed, it is the point of everything!

Intermediation in the selling and marketing process needs to be revisited. Distributors do not do enough in the market. One needs to get into the act as a company on its own as well to stay in touch. To stay relevant, original and innovative. Outsourcing of distribution has gone a bit too far.

Is digital marketing the next new thing really? Why?

- Sampath K. K., Chennai

Sampath, I do believe digital is next. Digital is really broad-based. It manifests itself in every electronic medium there is to use. It is all about a nation morphing into a nation of screen-besotted individuals. And the biggest of them is the smallest screen of them all: the mobile phone.

Even as I reply, we have a total telecom connectivity of 490 million phones. Growth per month stands at an average of 14 million phones. This is a dramatic shift in medium access.

The mobile phone is going to be the biggest digital device ever. It is ubiquitous, in every hand. In some hands there are two. It is on 24 X 7. It is kept closest to the heart and it is a device around which a lot of lives revolve.

Add to this digital device of ubiquity every screen there is. The laptop, the desktop, the outdoor LCDs and more. Digital is personal, very intrusive and is visual in its messaging possibility. This is big stuff. A revolution to watch out for.

How do brands work in rural markets? What is the brand rationale at play?
- Shalini Patra, Bhubaneswar

Shalini, rural folk are very brand-conscious. Rural folk trust brands as friends. Most purchases in their purchase basket tend to be unbranded. But when they actually buy brands, they buy with gusto. The brand is seen as a reliable mate. An entity that promises and delivers. The higher price is considered a safety net that assures longevity and performance. Brands are trusted friends. Brands in many ways are a guarantee of quality.

Rural folk do not necessarily have ‘limited’ monies in their hands. Rural folk are really folk with a higher disposal income portion in whatever they have in hand. Rural incomes, largely, are crop incomes. These crop incomes are tax-free.

A person in urban India in the salaried class could fork out as much as Rs 22 out of a Rs 100-income as tax. The rural person has this additional Rs 22 in hand that moves into disposable income. Brands are, therefore, entities that attract the interest of rural folk.

(Harish Bijoor is a business strategy specialist and CEO, Harish Bijoor Consults Inc. askharishbijoor@thehindu.co.in

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