OPINION: From sunglasses to smartphones, global manufacturers need to understand the Indian consumer before making asks from the budget

• While Finance Minister Nirmala Sitharaman will push large corporations to ‘Make in India’, it is also an opportunity to remind them that they should make FOR India.
• It is time to move the mindset of the big players from associating this market with cheaper products and instead, bring products that are of great value to Indians.
• Some of the biggest corporations in the world struggle in India because their products were developed, at a higher cost, with another set of consumers in mind.

It is budget time. While Finance Minister Nirmala Sitharaman will push large corporations to ‘Make in India’, it is also an opportunity to remind them that they should make FOR India as well. It is the time to move the mindset of the big players from associating this market with cheaper products and instead, bring products that are of great value & relevance to the highly value conscious Indian consumers.

Some of the multi-billion dollar corporations in the world⁠— even market leaders in their own segment⁠— struggle in emerging markets like India because their products were developed, at a higher cost, with another set of consumers in mind. They could definitely learn from the success of Chinese smartphone makers like Xiaomi and technology platforms like Amazon Prime and Netflix that had to come up with new models for the Indian audience.

Here’s a look at some examples of globally leading brands not making a mark in India or other emerging markets

Luxottica dominates the global eyewear market with an estimated global market share of 85% and annual revenue of $19 billion. In India, however, the firm lays claim to only 15% of the market. Stanley Black and Decker had $14 billion in global revenue last year, yet only $67 million of that (less than 1%) was in India. These are world class companies with some of the brightest minds in the world. They didn’t become the 800-pound gorillas of their respective industries by chance. But they stumble when they come to emerging markets, and they are not the only ones.

Over the past decades, we have observed an interesting phenomenon across industries. And, in each case, the story is surprisingly similar. These market-leading firms start with their own geographies and spend years building an amazing, high-performance product to delight their customers. They spend time to really understand the customers’ needs and to improve their product, often by adding in new benefits and new features. As the product improves, the level of customer delight rises and, often, so does the cost.

Next, they target emerging markets. They analyze the market and realize that their pricing is higher, often by a magnitude, than incumbents in the market. They know their product is better. They then do the natural thing – reduce some features and benefits until the cost comes down. To a point, where selling it makes economic sense. They, then, go to market in a big way by setting up an office, hiring a team, conducting marketing campaigns, and signing distribution deals.

They have some success with the upper-income segment, but the mass ignores them. As a result, these companies are never able to command the kind of market share that they enjoyed in their own markets. They try all sorts of marketing techniques, but nothing works.

What did they miss?

As is often the answer, the problem lies in a lack of understanding of the customer. In this case, these companies fail to adequately understand the behaviors, motivations, and aspirations of the mass customers in the frontier markets.

Instead, as discussed earlier, these firms decide to take out a bunch of features along with the associated costs. But what they fail to realize is that the customer’s jobs-to-be-done haven’t changed, nor how she/he wants to satisfy them.

The difference is that this new customer has a lower ability to pay. She/he still wants all the features – each and every feature. That’s an important point. De-featuring is fundamentally flawed because it eliminates features. The customer never said she/he wants fewer features; just that she/he is not willing to pay as much.

The Chinese and Indian smartphone manufacturers have understood these consumers really well and have experienced huge success as a result. They understood that their consumers want the form factor, touch screen, applications, and cameras that are available in more expensive phones. They also understood the financial constraints that these consumers face. Only then did they design their products. And when their customers saw value, they paid for it. In fact, they paid more than expected - often a full month’s salary for a single phone.

Take another look at the Math




Consider the above graphic. For simplicity’s sake, let’s assume that each unit of performance equates to $1 in cost. Starting with an original product that has a performance level of 50, there are two ways to cut the performance level to 30. One can either remove 2 of the 5 features or decrease the performance of all 5 features to 60% of their original level. It’s often easier to take the first approach and therein lies in the mistake. The mass consumer in these markets, like consumers everywhere, wants all 5 features.

Instead of its home country, if the company had developed the product for the masses in emerging markets from ground up, they would have hit the pinnacle earlier at an aggregate performance level of 30. The product would still have each and every feature, but at a lower level of performance and a lower price.

That’s an important difference. The usual approach to cost reduction is to remove features, when, in fact, customers want all the features. It’s just that these customers are value conscious and their ability to pay is lower. It’s not about de-featuring, it’s about right-featuring.

The smartphone manufacturers discussed earlier strive to hit only a 6 out of 10 in terms of performance but that’s all the consumers want. What they don’t want to do is to give up a feature. They don’t want to sacrifice the ability to take a photograph or listen to music. Like consumers in the developed world, they want it all.

The Indian movie industry, Bollywood, has also figured this out where the majority of the movies target the masses. Each movie is more than 3 hours long and packs in every theme imaginable – romance, drama, action. And don’t forget the songs and dance sequences.

From the outside in, the global audience may look at it with curiosity because these movies are far from a ten on ten but then again, the industry is not aiming for that. It’s aiming for a 6/10, where it tries to cater to the diverse taste of a middle class family, who is willing to shell out the money but want to ensure that every family member is satisfied at a decent level for the price they paid for the movie.

The question then isn’t how we can de-feature. Instead, it’s how we can right-feature and explore what our version of a 6/10 will be.

Authors:
Dheeraj Batra is the Founder & CEO of Propel Labs, a strategy & innovation consultancy that helps large corporations in building the next generation of growth businesses in the frontier markets. Dheeraj was a management consultant and an executive advisor at leading firms including EY, IDEO, and Innosight. He co-founded the award-winning health care financing company, Arogya Finance. He is also an advisor to the GPH board on innovation at J&J. Dheeraj holds an MBA from the Wharton Business School and BS in Computer Science & Finance from the University of Maryland.

Vijay Raju is the Co-Founder of Propel Labs, where he works with global corporations on strategy and innovation focused on frontier markets. Prior to this, Vijay was the Head of Strategy, World Economic Forum Members, Venture Director at Clay Christensen’s Innosight and Technical Director at Crest Animation Studios. Vijay is a Global Leadership Fellow of the World Economic Forum with a Masters in Global Leadership from INSEAD, Wharton, Columbia, London Business School and CEIBS (China). Vijay holds an MBA from International University of Japan and a Bachelor’s in Mechanical Engineering from India.




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