GLOBAL BRANDS AND INDIAN MARKETS
In this article we are discussing the actual happenings in the Indian Market which is now flooded with Global Brands in consumer goods. and why the earlier conservative Indian buyer is able to buy the goods even at high prices. The buyer is not a fool to pay any price. He is getting his pound of flesh by getting the best quality goods at value for money prices.
Indian consumers were considered to be price sensitive earlier because they were only willing to pay more for high quality product or service.
There has been a vast change in quality of products and services over the last few years due to International brand competition post liberalization. This has prompted the consumer who is now armed with the additional income to spend more.
What makes the buyer to spend more?
* Changing in spending is due to booming markets and real estate, resulting in greater inflow.
* Reduction in direct taxation over the last 2-3 years which has increased disposable income.
* Vast quality of products and services has prompted consumers to spend more.
* Brand value is more important to the fashion and tech-savvy consumer, willing to spend even Rs. 1500 ($40) on denims.
The verdict is the Indian consumer is becoming increasingly price insensitive. Be it price hikes in consumer products, cars, services or an expensive haircut, the consumer has moved from grudge to plunge to indulge.
A large number of people driving home brand new Swifts on Festival days, Sonyâ€™s latest laptop receiving a good consumer response or the business class in airlines going packed, are just few indicators of the change.
A consumer behavioral study conducted by a leading Marketing Consultants reveals that the consumer has become price insensitive and is willing to pay more for quality and service.
Of the 1,341 consumers spoken to under the Consumer Enhancement Behavior Study across nine major metros of India in the first quarter of this year 36% said that they have the fire to go and buy better brands, and to meet that desire they are wiling to pay up to 30% more.
A similar study conducted by the same consultant 2 years back revealed that only 7% of the consumers then were willing to pay more for a quality product or service.
This change has come about in the last 2 years mainly because the inflows with the stock markets and real estate giving good returns and the general feel-good in the economy has increased.
Procter & Gamble Hygiene and Healthcare chairman feels that Indian consumers are value conscious and will remain so for a long time. He, however, added that confidence levels have increased with the booming economy, the stock market boom and more job creations. Moreover direct taxation has proportionately reduced over the last 2-3 years. These factors have psychological fuelled confidence levels, which is why consumers are willing to pay more for the quality of product or service.
It is really spectacular to see how market forces act on the consumers from the fact while the airlines offering low rates to consumers as low as even Rs. 500 an average manâ€™s monthly hair-cut budget has jumped from Rs25 five years back to anywhere between Rs 180-500.
A CEO, of a Mega Store has observed that price elasticity is something which is changing. But this is not across all product categories. Categories like groceries are still not price elastic. Whereas services and products connected to fashion and appearance, consumer durables, are seeing more spends. Consumers do not mind paying Rs. 1,200-1,400 on denims. They have also upgraded their mobile phone or car.
According to a KSA Technopak study, affluent consumers are likely to treble in five years, while more than a million households will earn more than Rs. 4 million ($100,000) per annum in five years.
It appears that the marketers arrived late in latching onto this opportunity. The recent price hikes in the FMCG space being a case in point. It is not that the consumer is price sensitive but the marketersâ€™ inability or insecurity to take price increases rather than the consumerâ€™s non-acceptance to such changes. The market scenario world over including India is fast changing and the marketers must act rapidly in gathering intelligence or information to react suitably to satisfy the consumers. Today low price is not the only criteria.