Looking for the fortune at the bottom of the pyramid

Rama Bijapurkar has a thought provoking article in The Economic Times that points out to the hordes of "me too" followers of the retail explosion hype in India that it sounds just like the bubble days to her. She cautions them from assuming that hitting the right metrics in the "success factors of retail showroom" such as location, square footage etc is enough to bring the customers without some real groundwork being laid in truly understanding the market and then positioning oneself competitively within it.

It seems as though similar hype cycles are happening in the telco and mobile handset markets in rural or BoP India as the focus on the numbers and exponential growth blinds the ‘gold rush’ bandwagon to take the time to stop and really understand this market. I do not refer to the Motorola’s of the world who spent two years developing the Motofone, I’m referring to the standard approach to creating marketing strategy in India or launching new products, something I spent a decade doing in New Delhi for global brands.

I don’t know if this is a trend in North American industries, and this was a question posed to me today by an India based journalist, but it is certainly a pattern in the Indian markets and one that we’re all very well aware of. There is a lemming like tendency to play follow the leader – be it an innovative business model, product or service – wherever there has been disruptive innovation in India there have been myriads of followers. Of course, this is what strategy textbooks call "first mover advantage" implying that competitors will rush in to offer the same product or service with enough variations on the theme to give rise to extreme competition.

This is how India’s market has always played. Let a company take any initiative and there will be numerous players soon after who seek the easy way to fame and fortune, to quote Bijapurkar,

The unquestioned assumption nowadays is that with the
creation of more and more supply, more and more consumer spend would be routed
through modern retail, ensuring a “do nothing, just be there” top
line growth for all. This betting is that supply will automatically create
demand makes me nervous. It reminds me of the mid-1990s when so much new
capacity was created based on this assumption, and so many industries ended up
operating at less than 50% capacity utilisation. We used to joke about the
desperate conduct of many businesses, and say that soon a three-bed room house
would come free with the purchase of a refrigerator!

The question that was raised was that if this is indeed how the market behaves, and it can be extremely rapid in India where even fashions change according to Bollywood movies like a flash, then only those who are constantly evolving and innovating and tweaking their business models, products or services not only survive but are ranked leaders in the fray.

The other driver behind certain trends in the Indian market are rumours of fat-cat foreign companies with an unlimited marketing budget about to enter India, that, in turn would strain the ‘poor domestic brand’ so the idea is to expand fast and furiously now in order to build your brand equity before the market equation changes.

I wonder if this is true of the developed markets as well or do markets exhibit social and cultural differences even when taken as a single entity. What about policies such as democracy and economics? Can one possibly find cultural nuances or differences based on location that aren’t usually accounted for in mathematical equations?

Be that as it may, this is a characteristic of the Indian market that would serve its own purpose when considering the opportunities that lie in the rural segment – I’ll cover some of these in my next post – and any and all strategies that improve the flow of wealth to the bottom in a country like India deserves to be copy catted around as fast as possible!

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