Let me begin by wishing cat.a.lyst a very happy first birthday. May this newspaper continue to delight practitioners and students of marketing with its many new insights, provocations and points of view. For me, it has been a real pleasure to write a fortnightly column here, which discusses consumers, brands, retail stores and marketplaces. If there is any specific area you would like this column to cover over the next year, do let me know.
Alongside cat.a.lyst , my infant nephew Vikram, who lives in Rochester, US, also celebrated his first birthday recently. His mother (my younger sister) reports that Vikram recently spoke his first two words, and these were “Apple” and “iPad”. I heard this with considerable disbelief, but my sister asserts that this is absolutely true, that she heard the words very well. And if so, this first birthday episode is testament to the growing power of marketing and brands in our lives. How much the times have changed!
A lot has actually changed for Indian marketers in just one short year, since cat.a.lyst was born in its new avatar last January. Fortunately, many of these changes carry positive implications, particularly if marketers act on them. So read on, and then decide what your brand or business should do.
Inflation has fallen sharply Just a year ago, inflation (as measured by the consumer price index) was raging high, at nearly 9 per cent. Such high inflation of consumer products, including food and fuel, meant that consumers had to spend increasingly more money each month, on essential products. This left many Indians, especially the middle and upper middle class, with far lower disposable income to spend on non-essentials, including consumer durables such as cars and refrigerators, or discretionary expenditures such as foreign holidays.
Today, the situation has changed dramatically. Consumer price inflation has rapidly cooled to less than 5 per cent, following a steep drop in global oil prices and lower food costs. Wholesale price inflation is nearly flat. Prices of petrol and diesel are actually significantly lower than last year in absolute terms, and food prices have also stabilised. All this means that the consumer now has relatively more income to spend (and even splurge a little, perhaps) on discretionary items. In addition, lower inflation also has a second order effect: consumers anticipate lower future erosion of their real savings, and are therefore more comfortable spending for their current needs.
Marketers of all discretionary products can smartly leverage this positive sentiment in many ways, to catalyse consumer demand. In addition, FMCG marketers can also focus on the premium products in their portfolios, thereby reversing some of the downtrading to cheaper brands, which is likely to have occurred during earlier periods of high inflation.
Interest rates down too At this time last year, interest rates were ruling firm. The Reserve Bank of India had indicated its resolve to keep rates high, until inflation had come fully under control. In contrast, this year, the RBI has actually triggered a reduction in interest rates by 25 basis points, and it has done so even ahead of the normal cycle. This means that interest costs and EMIs on consumer loans of various kinds – housing loans, loans for purchases of cars and television sets, and such – are on their way down.
Lower EMIs will encourage consumers to avail themselves of these loans and make their purchases. Pent-up demand will come to the fore, since many of these loan-driven purchases had been deferred by consumers during earlier periods.
For instance, if your old car is overdue for replacement by two years and is looking jaded, chances are pretty high that you will seize the lower EMIs now on offer and buy your new vehicle this year.
This trend will only strengthen, since further reduction in interest rates is expected soon, after the Budget in February.
For real estate companies, consumer durables marketers and their ilk, this is the time to press rather hard on the accelerator. They have to highlight to consumers the significant savings on account of lower interest costs, and encourage them to buy. Marketers who discover the most interesting and compelling methods of unlocking the pent-up demand are likely to win big time.
Online shopping is really big A year ago, India had less than 10 million online shoppers. Over the past 12 months, 35 million Indians are reported to have shopped online — an astounding increase of over 250 per cent. And this number is projected to further grow rapidly to 100 million online shoppers, by 2017. Over the last year, Indians have flocked like never before to e-commerce sites such as Amazon, Flipkart and Snapdeal to buy their favourite brands, primarily drawn by discounts and deals. Here is a personal illustration. My wife, a conservative shopper who has always enjoyed browsing in solid brick bookstores, made her first online purchase of books last year, driven by the lower prices on offer, and the safety arising from paying cash on delivery. I have no doubt millions of shoppers are considering a similar switch.
For marketers of various diverse products, ranging from apparel to electronics to residential apartments, this dramatic change in consumer buying behaviour necessitates a fundamental rethink of how and where to sell. For every category, developing some kind of meaningful online sales presence appears inevitable. For some categories, such as low-value electronics or fashion apparel, e-commerce is, in fact, likely to make all the difference between future success and failure.
A digital revolution upon us Just a year ago, I don’t think many of us would have heard of taxi apps called Uber and Ola. Today, these digital apps are very well known, and are actively disrupting the traditional taxi industry in our own country. Whoever thought the digital world would help us flag down a taxi in Mumbai or Bengaluru? This was also the year when sharply targeted digital marketing, including twitter and SMS campaigns, played a key role in shaping the outcome of our national elections. Over the past 12 months, the population of digitally enabled smartphones in India has doubled, to more than 300 million — thus delivering huge overall increase in mobile connectivity to the internet. Lakhs of Indian consumers have, over the past year, begun spending more time on their digital devices (laptops, tablets, smartphones) than they spend on traditional media such as television.
For our marketers, the digital writing is finally on the wall, and in really big letters. Digital is the way to go, to communicate and connect with consumers, to engage with and respond to them. Facebook, Google, Twitter, Instagram, YouTube, Linked-In and other such social media are the hotspots of the new age. Marketers who master them will win.
And finally, an upbeat India Only a year ago, many Indians felt our country was drifting through a phase of policy paralysis. Today, within a short span of a few months, Indians are, in general, feeling far more optimistic and proud of their country. This is the result of a Government which enjoys a resounding majority in Parliament, a strong and highly visible Prime Minister focused on economic development, and several initial policy steps, all of which appear to be in the right direction. Optimism plays a big role in shaping consumer behaviour. Marketers can leverage such sentiment, and they can also play a constructive role in shaping optimism and a spirit of positive nationalism, even as they market their wares.
All these are big changes for marketers within a single year. So may I end by remarking that this newspaper has lived up to its wonderful name, because a catalyst is, by definition, a harbinger and agent of transformation and change. Many happy returns of the day!
Harish Bhat is Member, Group Executive Council, Tata Sons. He is also author of Tata Log: Eight modern stories from
a timeless institution. These are his personal views. firstname.lastname@example.org