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Aiming Lower to Hit the Bull’s Eye

Among the most striking advertisements on Indian television lately has been a series of ads launched by cell phone maker Motorola, advertising their low-end ‘Moto Flip’ model, available for as little as 1,700 rupees ($37). While Nokia, Sony Ericsson and Samsung continue to use music, multimedia, email and camera features to lure consumers in the fastest growing cell phone market in the world, Motorola does a flip and tries to attract consumers with a low cost, stripped-down phone with deceptively expensive looks.

Among the most striking advertisements on Indian television lately has been a series of ads launched by cell phone maker Motorola, advertising their low-end ‘Moto Flip’ model, available for as little as 1,700 rupees ($37). While Nokia, Sony Ericsson and Samsung continue to use music, multimedia, email and camera features to lure consumers in the fastest growing cell phone market in the world, Motorola does a flip and tries to attract consumers with a low cost, stripped-down phone with deceptively expensive looks. While comparative sales figures are not available, it appears that the Moto Flip will find the sweet spot of the contradictorily complex value-driven and status-conscious Indian consumer.

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The size of the Indian middle class is about the same as the total population of the USA. Approximately, 12% of these comprise the upper middle class, referred to as the Consuming class, about 50% are the Climbers forming the belly of the middle class, and the rest 37% comprise the lower middle class, also known as the Aspirants.

The top 62% of the Indian middle class has traditionally been considered the most lucrative of these segments. Not surprisingly, every brand in every product category has targeted this segment. Over the last five years, number of brands advertised across media in India has grown from 14,800 to 75,900. Intense competition for that market segment has resulted in profit erosion for most product categories. So, while consumer durables sales continue to increase in terms of volume, the total value of sales is reportedly falling. For example, a 14-inch television now costs half of what it cost five years ago. With ever increasing brand choices and a host of offers, the consumer in this particular segment is not particularly loyal either. A recent study showed that they sample an average of 6.2 brands a year of a given consumer product as compared to an average of two brands tried by US consumers.

Motorola seems to have realized that there is a big market of ‘Aspirants’, those with limited means and unfulfilled wishes. This constitutes about 150 Million people spread across urban and rural areas. This class spends approximately 67% of their monthly income on groceries and daily household expenses. Cell phones and consumer durables make up 2% of their expenses, while clothes seem to be the only indulgence with 5% of their monthly income spent on them. The data suggests that spend on relative luxuries can go up if the right products are made available to them at the right price.

History suggests that brands who offer consumers a convincing product at an attractive price have been growing rapidly in India. For example, Ghari washing powder made by Kanpur detergents, from the less developed Uttar Pradesh region, is now estimated to have 12% market share and is three times the size of P&G’s Ariel in terms of sales.

Although driven by value for money, lower middle class Indians do aspire for the good things in life. And, for socio-cultural reasons, they are likely to be more loyal to their brand. Word of mouth communication is the strongest in this segment, and nothing sways their choice more than a word of reassurance from someone known. From all respects, to me, this seems to be a more reliable, reassuring, and sustaining market to go after, rather than the more visible and capricious high-end market that most brands seem to be pursuing. Moto Flip’s impact on Motorola’s profitability in India over the next twelve months will point to where the pot of gold in India’s middle class really lies.

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Anupam Mukerji • Bangalore, India • anupam@mmi-india.com • www.mmi-india.com