Myth of the Great Indian Middle Class

Student Article

Myth of the Great Indian Middle Class

Myth of the Great Indian Middle Class “Change is not a destination, just as hope is not a strategy.” - Rudy Giuliani (Former Mayor of New York City) As we all know that the Indian market is a huge diversified market which is complex in its nature, heritage, culture & religion. Taking cue from the historical data of Indian Economics, Philosophy, and Culture, we get a detailed understanding of Indian economy and the Marketing challenges faced by the global enterprises who want to expand into India. As India is not an easy market to understand and operate in, companies have to go through different and extreme marketing strategies in order to penetrate the market. Indianized Products India is the 7th largest economy of the world and is expected to take the 4th largest position by the year 2022, but it has a low per capita income. So, global ideas on price performance and margin volume equations are totally ineffective. India is an emerging market. The nature of emerging markets is different. But emerging markets need not be virgin markets. The strategy followed should be to change the products to fit the Indian requirements. This is called ‘Indianized Products’. Indian market today is not what developed countries were in their infancy. Countries change around their DNA. The Indian DNA is so different from the rest of the world that the Indian Market will never become like the markets of the western world. After the economic liberalization of 1991, global companies had to make a 180 degree turn in their marketing ideologies. By throwing its doors open to the foreign world, it created two myths - the great Indian middle class and the great Indian growth story.Twenty-five years after economic liberalization, the economic power of the middle class has not matched up to expectations. India’s economic liberalization in 1991 promised the creation of a robust middle class.“In the early years of reforms in the 1990s, political and business leaders and mainstream media discourses presented sharply inflated figures of a large untapped middle-class consumer market,” says the Routledge Handbook of Contemporary

India. International and domestic businesses scrambled to position themselves for a share of the burgeoning new markets India’s developing middle class would provide after the government started liberalizing the economy. Over the past 25 years, successive governments and analysts, stray voices notwithstanding, have continued to propagate this discourse. It now appears, however, that the economic power of the great Indian middle class may be more a myth than reality. Companies such as Coke, Kellogg, and Seagram were forced to change their business models to fit better in the Indian Market. In the beginning there was a phenomenal demand boom as the Indian market was now exposed to the huge global market. And this short term high demand led to the myth of the ‘Great Indian Middle Class’. Companies like Coca-Cola nearly bankrupted themselves when they fell for this myth. In the beginning of liberalization, the demand will always be high, but as time goes on, the supply of desired goods may increase, but the income

is still limited. But there is also a steady rise in the use of FMCG products and other services as the per capita income is steadily increasing in a developing country. Products may sell, but it will take time and restructuring of the product to capture the Indian market. This may be termed as the ‘Snowball Effect’ where products will grow, but it will take time and the path is meandering. Global ventures need to rethink their ideas and marketing strategies, and come up with plans like ‘Made in India’ & ‘Indianized Products’. Old meets New The Indian market is different and contradictory. It forces the business class to go cheaper but demands the best service out of it. Global business leaders satirically states India as “a bullock cart to business class”. India is a Nuclear Superpower; it has pulled off Green Revolution. But it cannot implement the simplest reforms in the most basic needs. Indian markets can be described as a place where old meets new. Even after struggling a lot with the Indian market, multinational companies still want to enter the Indian market because India is a ‘guaranteed to happen’ story. To survive in the Indian market, the demand structure and the marketing strategies have to be completely different. In the book ‘We are like that only’ the author Rama Bijapurkar describes this unique model as “The Great Indian Rope Trick” which is a perfect symbolism. Studies indicate that the growth that is on its way in the Indian Market will be mostly from the low income households. Here the low income households outnumber high income households by at least 9 to 2. So the new marketing strategies devised are tailor made for the low income household. This segment of consumers is termed as ‘Bottom of Pyramid’(BOP) consumers. One of the first marketing strategies developed in this concept is shampoo sachet. It is a product that is specifically made to supply high end products to low income household which cannot buy the said high quality product and this concept of “Big things come in small packages” was developed. Giant conglomerates like Unilever followed though this strategy and used power bands like Close-Up, Pepsodent, Sunsilk, Ponds, Vaseline, and Lifebuoy etc., to penetrate the BOP. Other initiatives that were targeted to this segment were; Chotu Kool by Godrej, PUR a cheap water purifier developed by P&G etc. In current terms, this BOP is shrinking. Buying a house, installing running water may be considered as a luxury but products such as TV, electrical appliances, gas stoves are no longer categorized as Luxury products for this segment. Premium, Popular and Discount There are three broad segments in the Indian market: Premium, Popular & Discount. Out of the total market share, 10% of the population constitutes Premium market, next 30% is the Popular segment and remaining 60% is the Discount market. On the basis of the given data, Indian consumers are classified into five primary classes: ‘The Rich’, who are willing to pay more amount of money for better services, ‘The Consuming Class’, who want the maximum for value given, ‘The Climber’, who want benefit maximization, ‘The Aspirant’, who has newly entered the market, & ‘The Destitute’, who are not yet into consumption. Rural and Urban India are evolving at different speeds. 28 states are totally different from one another. In order to define the true meaning of ‘my target India’ the global ventures need to understand a huge logic of tradition and modernity. In the case of development in rural areas, it is difficult to expand into, but through the help of the internet, wireless broadband and electricity, providing education opportunities we can now aim to achieve social aspirations and focus on child centricity. Now Non-Agricultural sector is nearly equal to the Agricultural sector in rural India and is continuously developing. This also resulted in “The New Emerging Indian Women” concept by breaking the taboo of playing the role of housewife. Now women are free to choose and live their life for themselves. They can now pursue their dreams like becoming an entrepreneur or even follow their passion and become another person’s role model. One Size Doesn’t Fit All In the end the Indian economy is wild and cannot be tamed by any specific market strategy. Here one size doesn’t fit all. Every product has to go through an extensive examination process for entering and surviving in the tricky Indian market. As stated by the esteemed N.R. Narayana Murthy, Chairman, Infosys Technologies Ltd. "developing economies with India and China in the forefront are set to give the world economy its biggest boost in the coming years." It is estimated that in the next decade almost a billion new consumers will enter the Global market as their per capita income increases. So the huge market potential cannot be ignored by the Global Conglomerates and they need to adapt to the needs and wants of the ‘complex and inscrutable’ Indian market. Garima Singhal and Kaustav Bose PG 1