The proverbial pot of gold, it seems, has shifted from the end of the rainbow to the bottom of the pyramid after the slowdown of 2008-09. At least that?s what marketers have discovered in India. Though bottom-of-the-pyramid (BoP) marketing is not new to India, there is a renewed frenzy to claim the fortunes that can be reaped by marketing to 138 million households, having an annual income between Rs 71,000 and Rs 2.85-lakh. So, from cars to colas, LCDs to laptops?there is everything under the sun for this segment, which demands the best at the lowest price, and is redefining the ways of the market, marketers and manufacturers. No wonder then, there have been a dozen products launched by blue-chip corporations within the quarter.
A dime a dozen
The latest entrant to up the BoP ante is P&G, which, ?making one of the most significant product introductions in Gillette?s history?, has launched the Gillette Guard. Priced at Rs 15 for the razor and Rs 5 for the blade, Gillette Guard is the cheapest offering from P&G?s stable for India in a year when it launched its most expensive razor in the US?the Fusion ProGlide?for which a four-pack manual cartridges sell for $16.99!
As companies are achieving newer lows in price points, striking a balance between quality at the lowest price is no longer a Catch-22 situation. Panasonic last month unveiled its 19-inch LCD at Rs 12,900, with a focus on the rural and the semi-urban market. Manish Sharma, director, marketing, Panasonic India, explains, ?For about Rs 2,000 to 4,000 the consumer can now upgrade from a CTV to an LCD, and there is a great potential in such upgrades.? And, for this combination of price and value, considerable value engineering has been done. This includes a non-glossy look to take care of the high-dust factor, LCDs high on sound and comparatively low on digital add-ons and an inbuilt mechanism to deal with voltage fluctuations. There?s more coming. Sharma confirms, ?We are in the final stages of launching a low-cost refrigerator in the direct cool category. We want to extend this innovation drive to home appliances.? Panasonic hopes to announce the launch in December.
The tested CTV market, too, is innovating to expand its reach. Moon B Shin, MD, LG Electronics India, says given the growing aspirations, the rural market is more sensitive to brands and looks for more reliability. ?We have a rural insight team to encash on the opportunity. Rural consumers are first-time buyers and focus on entry-level products. We believe in packaging our entry-level products well.? The drivers for that are affordability (Rs 5,390) and availability (47 branches, nine regional offices, 63 remote area offices). Shin adds, ?Transition from conventional category to premium category is going to catch pace in rural and semi-urban areas, for which we are coming up with new products.?
Carrying forward its reverse innovation drive, GE Healthcare this month unveiled ?Centricity PACS Reach?, a Picture Archiving and Communication System (PACS) priced at Rs 5 lakh for Tier-II and Tier-III cities, designed and developed at GE?s John F Welch Global Research Centre. The compact, web-deployable, image processing solution can be used from within and outside a healthcare facility and is specifically designed for low-volume diagnostic centres and small private hospitals. Imported PACS systems are available upwards of Rs 50 lakh to Rs 10 crore!
The house of Tatas are taking their innovation wagon beyond the Nano, with Tata Chemicals unveiling Tata Swach Smart Magic in July. At Rs 499, it is the most economical variant of Swach brand of water purifiers. Sabaleel Nandy, head, water purifier business, Tata Chemicals, explains that Tata Swach Smart Magic can be fitted over any home water storage vessel and has a patented Tata Swach bulb, with 3,000 litres of purification capacity. It requires no electricity or running water to operate. Nandy adds, ?Swach started out with Maharashtra and expanded to Karnataka, Delhi, UP, MP and West Bengal. What worked for Swach is the low penetration of water purifiers as a segment and its good looks.?
Tata Motors drove home the point with its newest player in the commercial vehicle segment, Iris, which was unveiled at the Auto Expo-2010. Rs 1.98 lakh, Iris is cheaper than Tata Magic at Rs 2.60 lakh. Says a Tata Motors spokesperson, ?Iris had a soft launch in Jaipur in April. We are garnering the passenger and operative feedback. Based on that, Iris will be launched pan-India this year.? Iris has a BS-3 complaint engine, which means it cannot be sold in the 13 BS-4 cities. Traversing the low-cost path, Mahindra & Mahindra also revealed plans to launch a sub-100 cc motorcycle. As per reports, preliminary work has already begun. Market leader Hero Honda had earlier stated last year that it would explore possibilities to offer cheaper motorcycles in the range of Rs 20,000 to 24,000.
Taking a cue from the success of Micromax and Spice in the rural and semi-urban mobile-phone space, leading telecom service providers entered the low-cost mobile handset segment. Vodafone in July unveiled a solar-powered mobile handset, VF 247, for Rs 1,500. It needs eight hours of direct sunlight to be charged and can also be charged in normal interior daylight using ?sun boost software?. To top it all, the phone can support more than eight days of use on standby and four hours of talk time, and comes with an FM radio and torch lamp. Vodafone Essar CEO Marten Pieters reportedly pointed out that the phone would increase mobile penetration in rural India from the current 20%.
Bharti also ventured in the low-cost handset market segment with a range of mobile phones under its Beetel brand last month, at a starting price of Rs 1,700. Vinod Sawhny, ED & CEO, Beetelm says, ?We have launched the range of phones in Haryana, Punjab, Delhi, UP, Uttaranchal and Rajasthan and have recently entered Assam and the seven north-eastern states.? So how does Beetel?s STAR GD305 position itself amidst a flood of low-cost handsets? Sawhny says the model offers an excellent battery life, a camera and dual SIM and smart call divert. Beetel has also launched two more models for the semi-urban markets. The STAR KEYBO GD 405 is a fully loaded QWERTY phone with dual camera, Bluetooth priced at Rs 2,500 and the STAR VDO GD410 offers a digital camera and video recording and play at approximately Rs 2,350.
The mass market is attracting home brands too. Dabur launched Odomos oil at Rs 17 for 40 ml; a 50 mg pack of Odomos cream costs Rs 30. And, it signed on Bhojpuri superstar Ravi Kishan to endorse its chyawanprash brand in Bihar and UP for direct interaction with consumers, dealers and stockists.
Testing waters
Touted as one of the biggest innovations, ChotuKool from Godrej & Boyce is eagerly awaited. For Rs 3,200, the 43-litre cool box, with no compressor, runs on a battery. Tested in Osmanabad district, ChotuKool is available in Maharashtra and Karnataka. Says G Sunderraman, vice-president, corporate development, Godrej & Boyce, ?The launch will be in phases. Innovations go through several iterations. We are still learning!? With the penetration of refrigerators being less than 20% in India, ChotuKool may well be the game-changer. It would be an asset for small businesses like rural retailer, paan-wallah and flower vendors. Sunderraman elaborates that lower-priced products expand the envelope of affordability and hence redefine the market size. ?Development of solutions that address a price point is important, as is also to create breakthrough in the business model that allows innovation in pricing.?
As Geetu Verma, ED-Innovations, PepsiCo India, says, ?As we go deeper with our distribution to towns and villages, these markets will add significantly to our current portfolio. Further there is opportunity in catering to local tastes and preferences that can step up demand.? PepsiCo is working towards piloting its project Asha, developing a beverage and snack priced between Rs 1 and Rs 5. On the intricately linked balance between price and innovation, Verma explains, ?Once you define your end price point, you need to work back from there to define the boundaries within which your production, selling and communication costs will operate. Sometimes you may throw away a great idea if the initial margins are thin. And that may be the end of your price point/reverse innovation! However, our learning is that you need to stay invested in the opportunity with an eye to economies of scale and eventually at the right inflexion point, the business model will become sustainable.?
Trend is the future
Industry watchers feel this trend is here to stay. P Rashmi Upadhya, managing consultant, PwC, says growth in consumer categories in rural India will outpace that of urban India across most categories, especially the under-penetrated segments. For instance, in FMCG, infant/baby care products, ready to eat food/snacks and personal care will lead the growth. Rural penetration for skincare is less than 35% and that for shampoos is less than 50%, indicating huge untapped potential. Ramesh Srinivas, executive director, business performance services, KPMG, says the demand for personal care products grew faster in rural areas than urban areas during January-May 2010. In shampoos, rural demand grew by 10.7% in value terms, while in urban markets, it rose by 6.8%. Toothpaste sales grew by 9.1% in rural markets and by 4.4% in urban markets.
Sanjesh Thakur, associate director, retail and consumer product practice, Ernst & Young, speaks on the trend, ?Companies now are shifting operations near consumption points. Regional brands will go global, but no global brand can afford to not go regional, such is potential.?
