The Hindu Business Line : Culture is just the icing

Consumer behaviour is largely a matter of the lifecycle stage in a nation's economy at a given point in time and not, as is commonly believed, owing to culture.

IN THE mid-1980s, a leading Indian hair-dye manufacturer commissioned a top market research agency to profile its customer base in Lucknow. The company claimed that its local market share of black hair-dye was in excess of 90 per cent. But, surprisingly, the research results revealed that only 20 per cent of black hair-dye buyers bought this particular brand.

It turned out that the black hair-dye was popular among farmers in the city, who bought it in bulk from wholesalers to colour their buffaloes. Apparently, black buffaloes fetch a much better market price!

Numerous attempts to understand the Indian consumer better have spawned a number of deep-seated beliefs within organisations. One of the most common is the view that the behaviour of the average Indian consumer differs from those in many other nations — owing to a "uniquely Indian" cultural value system.

An oft-cited example pertains to the stereotypical Indian customer who would rather re-fill a ballpoint pen or repair a refrigerator than throw it away and buy a new one like his Western counterpart. Well, let's see how far that's true. An article in Fortune's July issue talked about the introduction of disposable blades in the US in the early 20th century: "When a former bottle-cap salesman named King Camp Gillette started selling safety razors with disposable blades in 1903, people weren't disposed to throw things away. The very idea of discarding something without reusing or repairing it ran counter to American notions of thrift."

This snippet runs counter to our current perception of how consumer behaviour has evolved in many developed economies. Human memory is typically myopic and focuses only on the recent past.

Yet, a look at the US economy of the early 1900s reveals similarities with today's Indian economy as does Japan in the post-Second World War era, South Korea in the 1970s or Singapore in the 1980s.

This also holds true for many of today's industrialised economies. Management guru C. K. Prahalad (of the University of Michigan) argues that an economy truly takes off once a country's per capita income hits a "sweet spot", which he defines as approximately $10,000 in PPP (purchase power parity) terms. Thus, consumption behaviour is largely a function of per capita incomes and the price of a coveted good and, in most cases, is not significantly influenced by national or socio-cultural considerations. Purchase patterns change as incomes rise and competition drives prices down.

India is no different. For instance, coffee in a Barista outlet costs a dollar, ITC's ready-to-eat dhals are priced at $1.50, weekend movies at PVR cineplexes are between $3-12, shirts at Arrow showrooms costs upwards of $40. These are international prices paid by Indian consumers.

As income levels have increased Indian consumption patterns have changed, and seem to be converging to international models. In addition, as competition drives prices of common services down such as in the mobile telephony or aviation sectors, demand will naturally pick up.

Thus, mobile phone penetration is growing rapidly, as is airline travel.

Further, while the current evidence is largely true only for a narrow band of urban consumers, recent purchasing patterns outside metros indicate that this may also be true for income levels further down the pyramid.

Increasing rural per capita incomes and a look at the evolution of consumer behaviour in the South-East Asian countries, for instance, signals that a slow change may be taking place. Thus, it seems that two forces are primarily at play.

The first is availability. Telecom services across India were largely absent until the late 1980s when the PCO revolution put a phone within walking distance of India's citizens. The second is affordability, as evidenced by the current mobile phone revolution. Coupled with design specifications that emphasise ease-of-use, the convergence of these factors is providing the Indian consumer with new choices in almost every category.

Thus, a look at business history over the last century reveals that consumer behaviour is largely a matter of the lifecycle stage a nation's economy is in, at a given point in time. A comparison of most economies at a similar developmental stage shows that consumers share common characteristics, unimpeded by other considerations.

Does this mean that cultural differences have no role at all? No, it does not. Clearly culture is important, but its role is far more limited than previously imagined. Further, most consumers across countries demonstrate unique socio-cultural traits that differentiate them. India's rich and unique heritage means that companies need to engage in a slightly different manner than they do in the West.

However, this is no more different from the changes that these companies would make when targeting consumers in other countries or when Indian companies go to Western markets. Human characteristics — such as wishing to be entertained, talk over the phone or travel to new geographies — are common across nationalities.

Customs and traditions are simply the icing on the top. Inherent human similarities across countries may just be stronger than any perceived cultural variations.

(The author is with Hewlett-Packard Research Labs India. He may be contacted at sarin@hp.com)

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