What are you buying now?

Sachin Arora, 32, who works with an MNC in Gurgaon, has traded his Santro for a Baleno and is now thinking of upgrading from a flat panel display (FPD) to a high definition-compliant TV. He's already run through several mobile phones and queued up to buy an iPhone when it launched.

Arora is the evolving new Indian consumer, who loses no time in junking the old and ringing in the latest every couple of years. He is every marketer's delight.

He is what Lenovo's Rajesh Thadani calls a typical Net Genner. “Net Genners' lifetime purchase value is greater than any previous generation because they generally start earlier and use more,” says Thadani, Director (Consumer Business Unit, HSB), Lenovo India.

Year 2011, many PC and consumer electronics makers are betting, could well be the big ‘refresh' year in India. Good salary increments last year, a wave of new technology products hitting stores and climbing aspiration levels, will prompt consumers who were holding off buys to replace their outmoded appliances and gadgets. As George Paul, Executive Vice-President, HCL Infosystems, says, “Ideally PCs sold between 2006 and 2007 will be coming up for replacement this year.”  According to IDC data, in calendar year 2007, nearly 6.5 million PCs (notebooks and desktops) were sold in the country.

A 5-6-year replacement cycle in PCs is par for the course, but marketers are now further speeding down this refresh cycle through tactical communication strategies. “We run programmes time and again with our channel partners to drive refresh faster,” says Ketan Patel, Country Category Manager (Mobility Business Units), HP PSG India. Buy-backs, exchange programmes and EMI schemes are some of the routes taken. But now, even advertising strategies are being tweaked to influence faster refreshes.

According to HCL's Paul, in the consumer segment PC refresh cycles have come down to four years while in the enterprise segment, they're down to three.

Even the consumer electronics industry is mimicking the PC industry in terms of faster upgrades. Says Y. V. Verma, COO, L. G. Electronics India, “We see an upsurge in the replacement market to about 12 to 13 per cent as compared to the market that caters to consumers buying new products.”

In 2010, according to the Consumer Electronics and Appliances Manufacturers Association (CEAMA) the Rs 35,000-crore durables industry grew exponentially by 12-13 per cent, as compared to last year, riding on advanced and smart technologies making their entrance in the market. CEAMA said big had become beautiful for almost all consumer durables and electronics brands – with consumers upgrading to larger TVs, larger refrigerators and washing machines with greater capacity.

The fact that sales of display category products such as FPDs, LCDs and PDPs - typically bought by replacement customers - rose phenomenally by 45 per cent shows that the upgrade mindset has set in.

And, according to durables makers, it's a trend being seen across all products – TVs, microwave ovens, washing machines, refrigerators.

Says Anant Bajaj, executive director, Bajaj Electricals, “Even products like water purifiers are witnessing a boom in demand.” Interestingly, the upgrade phenomenon is not just restricted to urban markets but tier 2 and 3 cities as well. And marketers are tweaking their offerings to suit replacement needs here. For instance, unlike the metros where large-size LCDs are preferred, consumers in tier 2 cities in upgrade mode want smaller size displays. Players such as LG, Weston and Panasonic now offer LCDs that come in sizes as small as 16 inches to cater to this demand.

So what are the factors driving the Indian consumers to replace faster?

Tech, style and rising aspirations

New technology is a big hook, obviously. Before you can say Plasma, there is 3D HDTV in the marketplace. With an iPad or an iPhone – products that many a customer does not really need - Apple has cleverly stoked desire in customers.

Often software or content too drive hardware change. In the analog age, one would never have changed a TV set so often, but now in the age of high definition, one doesn't want to feel left out of a superior viewing experience or lose out on content. Manufacturers are constantly unleashing new beasts in the marketplace, compelling change. HP's Ketan Patel says newer styles and forms also entice customers to look at products. He cites the case of the new all-in-one desktop that does away with the clumsy wires connecting the conventional two-piece PCs. Earlier, desktops had a larger refresh cycle than notebooks, but now as Lenovo's Thadani points out, the emergence of all-in-ones as a sleeker and stylish alternative to a desktop is enabling a faster refresh of them. “Apart from offering great practical benefits like space-saving and functional flexibility they also offer a novelty factor, thus making them an object of desire,” he says.

According to Alok Agarwal, COO, SW Asia, Cheil, Samsung's advertising agency, it's an interlinked cycle. “The boom in product innovations we are seeing is consumer-linked, often resulting from a user need or feedback.”

Higher usage is also another reason for faster replacements. Earlier a TV would be viewed for two hours a day but today it's on for 4-5 hours, if not more. Ditto with PCs. Lenovo's Thadani says a notebook's replacement by a consumer is driven by the deterioration of the battery with time. “We observe that consumers are also conscious of the look and feel of their PCs and are inclined to switch over to thinner and lighter machines as time advances,” he says.

Companies have also lately been forcing refreshes by playing the green card. HP's Ketan Patel talks about HP's Green Initiative which has been sending out messages on green computing.

HCL's George Paul too talks about highlighting the benefits of changing in terms of lower energy consumption.

Brand consultant Giraj Sharma who works a lot with consumer durables makers sums it up when he says technology obsolescence, boredom, higher income levels and greater affordability, and making a lifestyle statement are all leading to faster replacement cycles.

“Remember, we are in a consumption era so people just want change. And marketers play on this emotion by focusing on aspirations,” he says.

So, if you have an automatic washing machine, the subtle message is why don't you go for fuzzy logic, if a large refrigerator then why not make a lifestyle statement with one that dispenses ice through the door and can be housed in the living room rather than the kitchen.

And herein lies the key to why we are upgrading faster – newer products have always come along, but somewhere along the line, marketers have dropped the durability plank and raised the aspiration quotient so much that it has fuelled the desire to replace.

The communication strategy

Cheil's Agrawal admits that advertising plays a strong role in fuelling the desire to change. “Advertising whets the appetite for replacement forcing customers to ask ‘ Naya kya hai ?' (What's new?)”, he says.

LG's Verma says, “We focus on enhancing consumer lifestyle and our product communication highlights the smart technology of our products. There is no doubt about the durability of the product, but it is all about aspirations.”

Marketers admit there are many fence-sitters who get confused by the constant product innovations and keep waiting for the next one. This is when the replace decision is forced subtly. Says Lenovo's Thadani: “Our overall strategy is to enable this decision by increasing the perceived value of a new PC so as to overrun the value of the refreshable PC.”

He says this is done in various ways and at multiple levels: “Our primary focus is to highlight the significance of the latest technology available and how it can add value to its users, be it speed, mobility, features, security or design. At a more tactical level, our partners run regular exchange offers, which solve the customer's problem from both ends. This is, however, done mostly at a local level and not done nationally.”

However, while the faster refreshes are driving momentum for the marketers, almost all say that in a market like India, the communication cannot ignore the first-time buyer, which is still the bigger chunk. “We have to strike a fine balance,” admits Agrawal. And this, he says, is achieved by mixing campaigns that establish a brand connection with new product campaigns that create awareness about a new technology. “The choice of media helps,” he says. While the replacement customer may be drawn by targeted advertising on premium media vehicles, for the first time buyer, a mass media platform would be used.

But all said and done, with the Indian consumer hitting the refresh button, marketers are clearly in celebratory mode.

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