How to discover the affluent?

Consumers in India have always been pretty tricky to double-guess. And business continues to struggle with defining target markets based on the most logical measure -- household income.

Experts have their own definition and they qualify this with labels like super-rich, rich, middle, lower middle or strivers, consuming class, aspirers or affluent, top end of the market or mid-market and so on. These labels, instead of reassuring, often leave one feeling even more anxious. Such classifications are hotly debated or accepted with a sceptical shrug.

The recent National Council of Applied Economic Research (NCAER) report on Earnings and Spendings reveal that, for the first time, Indian households with high incomes outnumbered those in the low category at the end of 2009-10. Today, India has 46.7 million high income households compared to 41 million in the low income category.

In another study (Capgemini-Merrill Lynch World Wealth Report 2010), there are 1.3 lakh dollar-high-net-worth individuals in India compared to less than 25,000 a decade ago. These are individuals who have in excess of $1 million as investible surplus annually. However, the NCAER findings classifies households earning over Rs 1.8 lakh a year (under 2001-2 base price) in the high income category. It is in this paradox that the Indian affluent reside.

Says Santosh Desai, managing director and CEO, Futurebrands India, "The heterogeneity of the Indian consumer makes it difficult for marketers to slot a single group as affluent. A farmer buying a high-end truck is perhaps more affluent than a city slick senior management staff in a large organisation."

Changing colours

The affluent Indian consumers have evolved over the years. They are those who have a large amount of wealth and spending power, which is most likely to be reflected in their high-income profile. In 2006, when The Knowledge Company (a division of Technopak Advisors) produced the first comprehensive study on trends in Indian luxury, it pegged 1.6 million affluent/rich households in India. In 2009, the Nielsen UMAR (upper middle and rich) report put a figure of 2.6 million to households with monthly incomes of over Rs 40,000.

If earlier, the notion of these consumers was that of the scions of the royalty, old Indian business families or film stars; the list now also includes entrepreneurs, farmers, employees in large organisations, traders - both retail and wholesale, agricultural commodity traders, contractors and professionals such as lawyers and doctors.

Geographically too, the Indian urban growth story that until now was driven largely by metros, is now moving beyond, into smaller towns where the affluent profile is fast emerging. "The growing affluence levels, increased awareness due to media penetration, improved connectivity and significant changes in consumption patterns with high aspiration levels of small-town India are compelling marketers to take notice of a new affluent class," says Ashok Rajgopal, partner, media and entertainment, Ernst & Young.

The one commonality, across the class of affluent, that emerges is that these are people who are financially well-enabled. "They may have lacunae in many other areas such as education, geography or health, but the ability to splurge good money over good and bad products alike, distinguishes them," says Harish Bijoor, CEO, Harish Bijoor Consults.

To some, it also means lavishness, comfort, opulence, sumptuousness, or even extravagance. It is these varying factors that are making marketers, advertisers and brand managers alike warm up and reach out to this consumer class.

There has been a gradual increase in spending power which has moved from the metros to the satellite towns around them, over the years. Now it is going further, and the demands of consumers here are different. "The sale of luxury goods beyond the top 15 cities including the metros is an indicator of the shift in affluent buyer destination," feels Desai. Consider Aurangabad, the city in the 'backward' region of Marathwada, better known for its poverty, acute water shortage and lack of industrial development. In April this year, it managed to make many marketers take note of the city when 115 individuals placed orders for new Mercedes cars.

"From a marketer's standpoint, various things are happening. Affluence levels are going up, connectivity to smaller towns has become better, logistics are improving and organised retail is growing much faster in key urban towns and smaller towns," says Rajgopal. This has led to a situation where affluence combined with the availability of products or at least a means to get those products out to those places, is creating the spurt in consumption.

About 22 key urban towns are growing and getting bigger and more affluent according to the Indian Consumer Spectrum of Urban India Report by Indicus Analytics, a research firm.

Marketers are chasing the growing number of affluent in the rest of India because of the potential and the need to tap this segment. "A study of 100 cities' consumption spending by us shows that metros constitute about 30 per cent of the total consumption market," says Laveesh Bhandari, director of Indicus. This indicates that the key urban towns, the rest of urban India and rural India together garner almost 70 per cent. Given the large consumer base of these markets, an increase in share of relevant consumers would imply larger numbers being added in these markets than in the metros.

The affluent tend to be very different from those less economically fortunate. "Affluent households tend to have lifestyles characterised by lesser physical work, greater expenditure on entertainment, less time spent on day-to-day necessities of household chores and occupation," explains Singhal.

Marketers need this lens to view the target market, as it will allow them to communicate better with what is fast emerging as the new future market. They also need to understand the psychographics of this target class and their attitudes toward life.

A few years ago Bijoor's company did a typecasting exercise across nine countries to assess how many types of people exist in different cities (Types were classified by their similar buying behaviour). In New York, they found 14 different types of people. In Boston, they found nine and in Tokyo 11.

In India, the diversity was astounding. In Bhopal, they found 213 types and in Vijayawada 171 types. "This is why marketing in India is regarded much more difficult than fighting for pieces of market share in the West," he says.

With an increase in the sales of LCD televisions and wellness services in smaller towns, companies need to devise innovative strategies. "Advertising could also be different and may need to use local references," suggests Desai, identifying strategies to reach this target audience. While the realities of the affluent beyond the metros may be different from the urban or metro consumer, his expectations and aspirations are the same.

"A marketer has to aim at aspirations, not at realities," suggests Bijoor. Though the complexities of pinpointing the affluent will continue to exist, marketers, advertisers and media planners will continue to face challenges in reaching out to this class. What is clear and evident is the need to focus on innovative ways to be relevant to this growing target group.

(With inputs from Ankit Bhatnagar)