Throughout six governments and five prime ministers over the past 15 years, India’s economic policies have been unidirectional toward growth and globalization, making it an attractive destination for investment. In 2007 alone, there were 676 mergers and acquisitions and 405 private equity deals equating to a total value of U.S. $70 billion. Booming service and industry sectors are fueling India’s GDP rise to be the world’s second fastest growing GDP after China. In fact, India’s industrial and service sectors each grew by 16% and agriculture grew by 10% during 2006-2007. And growth rates are expected to outperform its other BRIC (Brazil, Russia, India and China) rivals from 2015 onwards.

As anyone familiar with the often-heated discussion about the business practice of outsourcing knows, services are India’s forte. A highly-educated, technologically adept, English-speaking workforce that costs a fraction of a Western salary focuses on the same services that comprise 60% of the U.S. economy and employ two-thirds of American workers. In contrast, the root of China’s booming growth is in manufacturing, which accounts for only 14% of U.S. output and 11% of American jobs.

Industry analyst Gartner estimated the 2007 global BPO (Business Process Outsourcing) sector at $173 billion, with India standing to generate nearly $14 billion in revenue through a combination of Indian BPO service providers, multi-national corporate offices in India, third-party service providers and BPO subsidiaries of IT service firms. Supporting this impressive growth is the expectation that India will have the world’s largest working-age population by 2050—a time when most other countries anticipate declines.

Diverse, vast and optimistic
India ’s highly-educated service workers are members of the second most culturally, linguistically and genetically diverse geographical entities after the African continent. And while the nation hosts 25 official languages, English is the major language of the people. The population density ranges from as high as 22,000 people per square kilometer in the cities to fewer than 50 people per square kilometer in some rural areas. India has eight of the 100 fastest urbanizing cities in the world, but growth is highly concentrated in a few pockets, contributing to the severe infrastructural challenges that exist in reaching the 700 million people spread across 600,000 remote Indian villages.

As their country’s growth and recent success might suggest, Indian consumers are among the most optimistic. A June 2008 Nielsen Consumer Confidence Index among 48 countries found India to be the second most optimistic country behind Norway with an index of 122 (global average was 88). They are also greatly value-driven, with an expectation that values should be customized and adapted to Indian culture—not an easy task when dialects change every 100 kilometers and almost three-quarters of the population lives in hard-to-reach rural areas. Not surprisingly, the companies most likely to succeed with Indian consumers are those with the highest levels of patience, resilience and local understanding.

Some long-held assumptions about India are slowly changing. The population growth is slowing from an annual high of 2.2% between 1951 and 1980 to a projected 1.5% every year between 2001 and 2010. At the same time, the literacy rate is rising, from a dismal 17% annual growth in 1950 to a respectable 80% annual increase projected for 2010. The notoriously lopsided distribution of wealth is still skewed, but it is getting redistributed.

Transformation in the cities and villages
Product preferences by region in India are as varied as the population. However, with improved communications systems and the entry of popular international brands, there is a sweeping attitudinal transformation in the cities, from simplicity to indulgence, from restraint to acquisition, and from contentment to ambition.

The modern Indian housewife no longer feels guilty about indulging, visiting beauty parlors, shopping in malls and partying. And the dads are encroaching on the youth territory by looking good, dining well, driving powerful cars and using feature-packed cell phones.

Signs of improving lifestyle patterns are becoming visible in rural India as well. In fact, the per capita expenditure there registered a phenomenal 73% growth rate in the five year period from 1999-2004. The 61^st National Sample Survey Organization (NSSO) report found that the most spectacular increase in that time frame was the expenditure on telephone calls per person, which soared 515% in rural India, compared with a 230% rise in urban India. In addition, rural petrol expenditure has doubled (100%), as has taxi and auto rickshaw spending (119%), compared to a 78% rise in urban areas during this period. Spending on beauty products has also seen a rise of about 43%.

Rise of the Middle Class
The average family size in India is 4.3 people, typically living in a 900 square-foot apartment. While virtually all households have TVs and 91% have mobile phones, only about one-fifth own cars or have credit cards.

While 91% of households own a mobile phone today, wireless phones are a new phenomenon to many users. Sixty-one percent of Indian mobile subscribers are first-time buyers, according to Nielsen Mobile. Unlike other markets where mobile use is more gender-balanced, males make up 70% of the mobile subscriber universe in India. Multimedia usage tends to be slightly lower than in other parts of the world, too. Sixty-three percent of Indian mobile users use text messaging, while just 7% download ringtones, 3% download music, 3% browse the web, use email or instant messaging, 2% download wallpaper or images and 2% send multimedia messages. 

Household savings are low at 13% of annual income, and are mainly used to meet emergency needs and cover healthcare and education costs. Risk aversion in India is high as 84% have not taken loans, and while 71% of Indians own properties, only 9% have a mortgage and only 11% have invested in equities. Land and properties account for 51% of wealth, with 30% in cash and deposits.

Despite Westernization, Indian values hold true and the country is very family-oriented as evidenced by a Nielsen Global Survey that reported fully 87% of Indians believe that marriage is for life and think that parents should be married for the healthy upbringing of children. The Indian consumer is open to rational symbols of trust, but instinct and cultural conditioning steer them toward age-old codes when forced to choose.

Know thy consumer
India is a highly value-centric market, which is why shoppers look to smaller package sizes to indulge in affordable luxuries. For example, Nielsen reports that tiny sachets account for approximately 60% of shampoo sales; three-quarters of the autos sold in India are small cars, and between eight and nine million subscribers a month sign up for call rates of 2.5 cents a minute.

Despite the size of the package, Indian consumers won’t drive big volumes for a product that hasn’t done its homework on the customs and product preferences that are indigenous to the country. For example, breakfast cereal was once an alien concept to the Indian consumer as the first meal of the day was typically characterized by variety. In order for Kellogg’s to effectively enter the Indian market, they promoted not only the product, but the very notion of eating cereal for breakfast. Once flavors were adapted to the Indian palate, they succeeded in ushering a shift in Indian breakfast habits.

Consistency is the key in communicating with the Indian consumer. Indian dairy and food product manufacturer Amul has mastered iconic advertising beyond par, managing to capture the mood of the nation and bestow heritage status on its products. Similarly, Pepsi has consistently targeted the youth market in its advertising, and the brand now stands for all that is young and dynamic. Celebrity endorsements are a very common tool in India, particularly if you snag a film or cricket star; the top 10 product categories accounted for 40% of the volume of celebrity ad endorsements in 2007.

You are not where you live
The bad news is that in a country with 28 states, seven union territories and more than 500 districts, conventional techniques that segment consumers based on where they live will not work. In India, heterogeneity is the norm even at the district level. But at the same time, it is infeasible to devise separate strategies for each micro market based on similar consumer segment structures.

Utilizing a multilevel segmentation approach that uses one variable to segment consumers and geographies, Nielsen developed a segmentation scheme that yields a robust solution. To demonstrate the capability, Nielsen examined data on 23 financial products owned by nearly 30,000 respondents from all 88 of India’s socio-cultural regions. The research found that consumer segments could be characterized as follows:

• 53% are basic investors, holding savings bank accounts and life insurance policies
• 15% are liabilities led, with credit cards, debit cards and loans
• 12% are novice investors
• 12% are assets led, holding land and property, gold, silver and chit funds
• 8% are evolved investors, with mutual funds, shares, bonds and company fixed deposits

Consumer segments were then distributed among eight socio-cultural region segments to reveal a virtual color-coded map that exposes where each type of investor lives. In-depth consumer targeting by type, rather than by their location, is a powerful methodology for focused micro marketing strategies and one of the best ways to begin to understand these complex, ambitious and successful consumers.

Combine the old with the new
Today’s Indian consumers are aspiring to improve the quality of life and make a statement. They are embracing entertainment and enjoyment, self enhancement, status, freedom, instant gratification, performance and connectivity. The best way to reach consumers in this new and emerging India is with irreverent, casual, surprising and bold brands that meet recent needs, but still embrace Indian traditions.

There are some key ways in which India is exactly the same as any other market in the world: knowing the consumer, mastering retail distribution, and efficient, effective communication are the three cornerstones of success here and everywhere.