Tuesday, December 16, 2014

MNCs look beyond statistics to understand consumer mindsets

Jettisoning traditional perceptions about Indian consumers, multinationals are tweaking their research and product strategies to get more out of India
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understanding is a must-have, especially during hard times.

Today, the first thing a company that considers itself truly global does is say goodbye to the practice of dumping products and services developed for one market in its next. South Korean automotive manufacturer Company (HMC) is a case in point. With an investment in the region of Rs 182 crore, the company opened its R&D centre in India in Hyderabad during the economic slowdown of 2009. The reason: strengthen India's position as an R&D and manufacturing hub.

Says Rakesh Srivastava, senior vice-president (sales and marketing), Hyundai Motor India (HMI), "When we entered the country the passenger car segment was largely price-driven. This was the time when owning a car was considered a luxury. Today buying a car is about making a statement and when that happens leading companies must bring state-of-the-art technology and design to its customers at the same time globally." HMI claims that a large chunk of market research work is conducted by its in-house teams.

For Hyundai there was no other alternative really.

"For multinationals, the key to reaching the next level will be learning to do business the Indian way, rather than simply imposing global business models and practices on the local market," write authors Vimal Choudhary, Alok Kshirsagar, and Ananth Narayanan in a & Company article (How multinationals can win in India, March 2012). "It's a lesson many companies have already learned in China, which more multinationals are treating as a second home market. In India, this trend has been slower to pick up steam…" (the article mentions). Yes, they have been slower but it is happening nonetheless.

Coming back to Hyundai, the company has a four-layer market in place. It all starts with a brand track study which assesses Hyundai's performance vis-à-vis other players on parameters like brand connect, product perfection, design finesse, driving pleasure etc. This is followed by an 'acceptor and rejecter' analysis, which takes into consideration customer feedback on what they think about a particular soon-to-be-launched car. In the last couple of years, as part of this leg of research, HMI has paid more attention to understanding customer behaviour in Tier II and Tier III cities. Finally Hyundai takes feedback from industry experts and media on the prospects of the new launch.

All these efforts seem to be paying off handsomely. Today HMI's sales contribution to Hyundai Motor Company is 14.4 per cent. HMI's market share in the passenger vehicles segment has grown from 18.20 per cent in 2012 to 21.90 in 2014 (till November). Indeed, the prolonged slump in the automobile industry did not stop the company from coming up with new offerings for the Indian market. In the last one year or so, HMI has launched four vehicles, namely, Xcent, Elite i20, Grand i10, and SantaFe. Of these, Grand i10 has been developed especially for the Indian market.

Back to basics
That said, setting up with a sprawling research and development facility is not the only thing that will help a company get the most of a market. To quote from the McKinsey article, "To realise India's potential, multinationals must show a strong and visible commitment to the country, empower their local operations, and invest in local talent. They must pay closer attention to the needs of Indian consumers by offering the customisation the local market requires."

Nivea, which still sees itself as a challenger brand in India's Rs 3,400 crore skin care market, follows research practices borrowed from markets where the brand is a clear leader. It conducts regular user attitudinal studies across India to pick up valuable consumer insights. So far Nivea has come up with around eight product innovations aimed particularly at the Indian market-these include Whitening Body Lotion, Men Dark Spot Reduction face wash, Men All In One face wash and Total Face Cleanup, among others. In fact, Total Face Cleanup, launched last year, is testimony to how serious the company is about the Indian consumer. Research pointed out that in India men and women in urban areas visit salons for facial clean-ups once a fortnight on an average. This set of people wash their faces two to three times a day with a face wash. Nivea's is aimed to take care of the scrubbing needs of this target set in the interim period. Says Sunil Gadgil, marketing head, Nivea India, "We are trying our best to customise our offerings for the Indian market. Going forward, we will leverage social media platforms to gain more consumer insights."

Nivea, which doesn't have a manufacturing facility or an R&D centre in India at this point, is looking to set up its first R&D facility in Ahmedabad. Currently, all the products marketed in the country are imported from its manufacturing facilities located across Mexico, Germany, and Thailand. Market research inputs gathered from India are filtered in Dubai before manufacturing specs are laid down.

The onus laid on consumer research is even stronger if the company is operating in a category like food and beverages.

Around 1995, when McDonald's entered India, quick service restaurants (QSR) did not even exist as a category. Amit Jatia, owner, McDonald's India (West and South), recalls how focus groups were conducted around that time. Focus group participants then had no clue about the architecture of a burger or the concept of 'self-service'. At the most burgers were perceived as a snacking item, not as something that can be consumed at the time of lunch or dinner. Says Jatia, "This perception has undergone a sea change since then. Over the next 10 years, as consumer confidence in the QSR format increased, more people walked in to try different items from our menu. We also introduced the burger to many new people by organising birthday parties and family gatherings at our outlets."

The QSR chain realised early on that localisation will be key in India. One of McDonald's early efforts in this area was the introduction of the hugely-popular Mc Aloo Tikki burger in 1997. This was followed by the development of the McPuff, Chicken McGrill, McVeggie and most recently McPaneer Royale. Over the years many of these local innovations have also been introduced in many new markets. McPuff, for instance, is now sold in West Asia, Aloo Tikki is sold in Singapore and McVeggie in Malaysia and a few European markets.

The latecomer is king 
Ankur Bisen, senior vice-president, retail and consumer products at Technopak, says that over the last five years there has been a steady increase in the number of pilots undertaken by multinationals and homegrown companies to get a complete picture of the Indian consumer. "The main reason behind this is a change in the attitude of senior leadership of some of the leading organisations who now step out of their offices more often to bond with their Indian customers," says Bisen. Recently when Miami-based QSR chain Burger King launched its first outlet in Delhi, the company's entire leadership team including the CEO, CIO, CMO, and key investors, among others were seen managing queues and helping customers selecting food items from its menu.
Decoding the modern Indian consumer: Siddharth Shekhar Singh
It is common to paint all Indian consumers as ‘value-conscious’. Since economic development has brought about significant changes in the lifestyle, aspirations, and behaviour of the Indian consumer, is it still justified to consider them as value- conscious?

Government controlled economy, low incomes, limited options, and a culture that looked down upon unnecessary consumption, all helped create value consciousness among Indian consumers. With economic growth and liberalisation post 90s, both income and consumption have seen tremendous growth and diversity leading to the rise of many segments of consumers in India. And not all are value-conscious. For example, while Micromax has become a leader in the value-conscious cellphone segment in India, Samsung still dominates the higher-end smartphone market.

The Indian consumer is changing fast. Diverse, sizeable, and changing segments do not allow easy characterisation in a small space. While large segments of consumers remain value conscious, many other factors are re-defining the Indian consumer. Following are five important tones:

Large and young population: Our young population provides opportunities to create new brands. Young consumers growing up with new brands will create new market leaders. Existing brands face the challenge of becoming irrelevant in the minds of new consumers who think and act differently.

Individualistic with high aspirations: Consumers today aspire high and are willing to work for it. Individualism is increasing and traditional family structures are threatened. High aspirations mean being equally ambitious for their society and country as well. Therefore, Indian consumers are more willing to contribute to social causes.

Increasing confidence: Dreams of earlier generations were limited to necessities. People generally bought what they could pay for in cash. Confident of their country, their abilities, and their future, the new generation of consumers is able and willing to work hard and take risks for their aspirations.

Growing consumerism: While consumerism represented moral degradation earlier, the new generation aspires to consume more without such inhibitions. Our vibrant media and exposure to the western culture has played a key role in this change. The growth in sales of luxury products testify this change.

Tech-savvy: Indian consumers are becoming more tech-savvy. Even in smaller towns and rural areas, consumers are beginning to understand and use new technology. This has opened opportunities to create value even in hitherto difficult-to-reach markets.
Siddharth Shekhar Singh
Associate professor, Marketing, Indian School of Business

While McDonald's took advantage of the lack of competition in its early years, Burger King entered India's Rs 5,500 crore (as of 2013) QSR category at a time when every third street-corner eatery proudly boasts of being the best burger-maker in town. To get its pre-launch homework spot-on, the company roped in global consulting firm McKinsey to conduct a comprehensive market assessment exercise. The burger chain was pleasantly surprised to discover that India still has one of the lowest eat-out rates in the world with consumers stepping out only four times a month. In Singapore, a market not far removed from India, consumers eat out almost once every day. Burger King also found out that burger QSR chains account for only 2 per cent of the overall QSR pie in India, which is 17 per cent of the largely unorganised foods business.

Says Uma Talreja, chief marketing officer, Burger King India, "Rather than focusing on how we can outdo the competition as part of our market research, we chose to invest in understanding what taste means for Indian consumers." A user attitude study was conducted in eight markets across the country by focusing on 35 groups of prospective customers. A common thread ran across all these groups: they like their burger spicy. At one level this may seem obvious, but understanding what 'spicy food' means made the research worth every penny spent on it. For instance, spicy could mean hot or with loads of spices or a mix of both. Burger King's food scientists worked on these insights to come up with the right flavour. "Today consumers can differentiate between what's cheap and what's value for money," adds Talreja.

Similar to the path followed by McDonald's, Pizza Hut and Domino's in India, local innovation will be crucial to Burger King's expansion strategy in the country. For instance, Burger King's signature hamburger sandwich Whopper has been modified here by replacing beef with lamb patty to suit the Indian palette. That apart, Chicken Tandoori Grill and King's Melt are two new items on the local menu. A group of food technologists, external chefs and vendors came together to create the new recipes over a period of nine months. The final nod was given by the regional headquarters.

The next big challenge for Burger King is to see if customers who are sampling its entry-level burgers would try the other items on its menu. This will be done by following those who walk in with great loyalty programmes and neat rewards - things that have stopped paying off in the Western markets but are just beginning to gain momentum back home.

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