Significant Purchasing Power
The purchasing power of the consuming class is greater than their paper incomes suggest. Actual consumption patterns indicate that a large percentage of middle class households evade tax by not declaring major portions of their income. This hidden wealth helps to explain the sustained demand for cars, clothes, cosmetics, entertainment, leisure and real estate. An indicator of actual spending power is that prices for quality products and services are comparable to those in the USA. For example, dinner in up-market Delhi restaurants costs about $40 per person.

Sophisticated Consumers
Understanding the attitudes and aspirations of the different segments of India's consuming class is as crucial to success as is calculating marketplace size. Companies active in a wide range of sectors (consumer electronics, cars, childrenŐs toys, fast food and cosmetics), report that the willingness of the target consumer pool to pay premium prices for brand image had been greatly exaggerated. Price is as important as elsewhere. Further, new entrants simply underestimated the ability of Indian companies to respond quickly to competition. A personal care company tried to carve out a niche as a premium brand (mainly by charging high prices), but without launching its own prestige range. The tactic was resented by the target consumers who were familiar with 'real' premiums from foreign travel and the media. An established Indian company saw its opportunity. It attacked at both ends of the market by launching a prestige brand at double its competitor's price and a lower range at half the price.

Promising Market Prospects The Indian market will continue to grow due to the rising incomes of the ever larger number of middle-class and urban consumers. But despite the high concentration of wealth in urban areas, the rural market,where three quarters of Indian live, is important. For example, the rural market for shampoo is three times the size of the urban. Companies report that rural demand is rising fast. According to the Economist sales of soap by Unilever are growing twice as fast in the countryside as in the cities; Benetton says that 75% of its expansion will be in small towns.

There are huge opportunities for cosmetics companies. The low market penetration of many personal care products leaves room for growth. Current consumption of many products is well below that of more developed countries in Asia. For example, only 4% of Indian women use home hair dyes compared with 42% of their Japanese counterparts.

Service marketing, such as point-of-sale advice and counselling, boosts sales of personal care products. Companies employ trained counsellors to grow sales of premium products and brands in the specialist channel. Counselling, they report, is crucial to overcoming women's lack of familiarity with, and fears about, personal care products such as home hair permanents and colour cosmetics.

Vol. 2.No. 3a. MCMXCIX Copyright © 1999 Diagonal Reports Ltd.