Indian consumers are getting smart about fulfilling their aspirations. Research shows that while they want a lot more in their lives, they are going about getting those things on the best possible terms and prices.
A study by Boston Consulting Group, Winning Indian Consumers in 2011, observes that consumers are showing a shift from conspicuous to conscious consumption spending. Consumers want to cut spending on non-essential items (74%), shop around to find the best prices (63%), shop more often at discount stores (64%), buy more products on promotion (60%) and defer major expenses that can wait (61%).
This behaviour trend has been triggered by two years of high inflation but, according to Abheek Singhi, partner and director, BCG India, "The conspicuous-to-conscious spending is a longer term trend that will continue," even though 75% of Indians feel that the economy will improve in the future.
Meena Kaushik, executive chairperson, Quantum Research, a qualitative research firm, states: "Smart shopping, stretching one's money and getting great deals have always been part of the Indian consumer's shopping psyche. What we believe is happening is that consumers are more ready to widen their product and brand repertoires, indicating their readiness to experiment, gain a wider exposure and make considered choices."
"It's more of a shifting behaviour of save here to spend there, something that's triggering trading-up and trading-down in buying behaviour," Singhi said. "Trading up happens where the consumer is willing to pay extra premium for a perceived benefit, which can range from emotional to functional though the consumer can normally not differentiate between the two."
Quantum finds that the consumer is straddling parallel need states and is in a perpetual struggle to reconcile these: the self indulgent, pampering, 'living the modern lifestyle' side that comes with money and plethora of branded choices; and the traditional 'middle class' conditioning towards more cautious, planned, guilt free spending.
It's not that Indian consumers are not willing to pay more for products. Trade-ups are happening, finds BCG, in categories such as health, fresh foods and kids. Brand name is another reason to trade up, driven by the increasing importance of social status.
Trading down is happening in discretionary categories such as jewellery, athletic shoes, sporting equipment, entertainment, eating out, leisure travel, and wines and spirits. "More people are buying holiday packages, but they are looking for the best deals on them," said Singhi. "Unless the product is differentiated, people will trade up or trade down in the same category."
Sharda Agarwal, director, Marketgate, pointed to differentiation that can matter: "Nissan Micra, an 'A' segment entry level car, offers keyless entry, a higher order feature that comes with the high end 'C' or 'D' segment cars. As an unexpected feature, the differentiation stands out."
Pointing to a not-so-clear distinction, Srilekha Agarwal, director, Quantum, observed: "Spending is sometimes linked to family honour and there are have-to-have products and brands, the 'right' level of celebrations that announce and preserve family status and honour. Anything less would reflect poorly on the family." In this context, Indian weddings, hospitality, travel and leisure, apparel, jewelry, personal care and home décor could see upped spends.
Rinita Singh, MD, Quantum Consumer Solutions, added: "Conscious is not always equal to a discounted low price and conspicuous is not always a higher price purchase. A discounted designer bag may still be conspicuous consumption for the average middle class no matter how discounted it is, whereas a range of exorbitant skincare products may be a conscious purchase for a top end consumer and not be conspicuous consumption at all."
Singhi pointed to the two kinds of urban consumers who have similar aspirations. "There is the upper income urban consumer who has the money to spend. And there is the low income urban consumer whom inflation is hurting the most. Both want more and are confident of getting more." He said that those brands sitting in the middle - not premium, not mass - are going to be in trouble as consumers trade up or down in the same categories.
The BCG study also observes that consumers looking for deals may also be enthused by the thrill of a good deal - the "paisa vasool" feeling, rather than be driven by need. This has been further fuelled by brands offering more "bargain hunting" sales and offers across product categories.
For the brand, the new dynamic and vigilant consumer means much greater focus on what BCG calls the "last three feet" and what a lot of others call "the last mile" in retail - the space in which shopping consumers make their final purchase decisions and where brands can swing purchase decisions in their own favour.
"Increasingly important now and in the future will be not just big media campaigns to build brands, but promotions and helping consumers choose your brand at the point of sale," Singhi emphasised.
Rajvinder Kohli, VP, Progress Software (India), a US $550 million company that offers last mile digital solutions to enable responsive consumer engagement, said, "There is need for real time consumer information at the point of sale to enable relevant, contextual, targeted brand messages that will effect consumer action in favour of your brand."
The bottomline is relevance, and compelling reasons - and not just one reason - to buy.