It?s the small-town customer who?s calling the shots and how. Consumption patterns in the smaller cities and towns of India are increasingly mirroring that of the top six metros, forcing marketers to acknowledge the purchasing power of the new urban consumer, says consultancy firm Ernst and Young?s new report titled ?The new market shehers: Tapping the potential of emerging markets?.
The report underlines what marketers have known for sometime – it?s the towns and cities dotting the countryside that?s driving growth. The report says that key urban towns (KUTs) comprising the top 22 cities outside the metros, and cities in rest of urban India (ROUI) comprising 39 cities and 5,094 towns account for over 70% of urban consumption today. A few years ago, the top eight cities accounted for almost 40% of the country?s domestic expendi- ture. Today, the six metros account only for 27% of the country?s urban consumption.
?We are witnessing enormous opportunities in non-metro urban markets, which were only marginally affected by the recession and now have enhanced purchasing power,? said Ashok Rajgopal, Ernst & Young, partner, media and entertainment practice, at the release of the report earlier this month.
Consumers in the KUTs show an increasing preference for premium products and services of established mass brands. In the case of consumer durables and fast moving consumer products, it is the ROUI that is driving growth, as they are still relatively under-penetrated. Thus, whereas the metros and the KUTs are driving growth in higher transaction value products and discretionary goods, the ROUI is driving growth in early-stage consumption – necessities and products with lower transaction value. Malls?the ultimate symbol of rising disposable incomes and changing lifestyles-have fuelled this growth making available new products and services to the consumers in tier 2 and tier 3 cities. The percentage of growth in the number of malls in KUTs was 55%, more than double that of metros, which stood at 24%, over the last two years.
Marketers are increasingly targeting these regions with a clear shift in advertising spends and volume towards non-metro urban markets. The KUTs and ROUI command 40-50% of urban advertising expenditure, up from 30-35% in 2007, says the report.
Above-the-line (ATL) media spends in the KUTs and the ROUI equal or exceed those in the metros in the low and mid value categories. Higher value categories are still metro dominated. Yet, there is a definite uptake in the share of KUTs and ROUI in overall ATL spends. Around 60% of BTL activity is concentrated in the ROUI and in rural India – especially in sectors such as teleom, consumer durables and certain categories of FMCG (fast moving consumer goods) products. Hindi and regional print media score high on reach and measurability and are most cost-effective in reaching the small-town consumer, as compared to English dailies.
The message in this: Marketers should deploy a combination of upselling and new customer acquisition strategies across urban India, with the focus more on high-end product selling in the metros and the KUTs and acquisition of customers in ROUI. As non-metro urban customers gain in importance, marketers should customize the content of their messages to appeal to such customers.
Local language ads reflecting the cultural nuances of the target group is the key here. Marketers need to revaluate the concept of paying a premium for their metro target audiences.
Therefore, the marketing mix deployed should also be optimized, keeping in mind its content, purpose and cost effectiveness in reaching its target audience.
