The middle-class is an emerging market for businesses globally which implies the rise of the ‘global citizen’. The global citizen is the one who is the sovereign in the market. The demand for the food and services including the imports are increasing with the increase of population and mainly the consumption by the new middle class making the segment the kings of the market. Indian middle class is said to be at 475 million by 2030.
How are the companies able to define who fall in the middle-class category? The middle-class is defined through purchasing power, perceptions, attitudes, and learning. The growth of middle-class consumers was witnessed during the period of 1991-2015. In the year the 1930s, when India opened up the domestic market for the world economies, there was a substantial growth of this class through an increase in foreign direct investments and private capital investments. During the liberalization period in the 1930s, the middle-class accounted to be 30 million, and the class is said to grow to 475 million by 2030. An appalling growth in 100 years from liberalization.
The growing middle-class will be leading to higher product differentiation and branding due to the penetration of foreign firms into the domestic market along with rapidity of demand. India today is one of the biggest markets for major international companies and the expansion of consumption will only boost the targets and profits of the companies operating in the domestic market. McKinsey Global Institute tagged India as the “bird of gold”. Hence, it can be rightly said that India holds valuable golden resources and consumers form an integral part of those resources for companies.
Speaking of a brand which is known to every Indian, is Cadbury Dairy Milk. The brand from the United Kingdom is running from 114 years and is known as the best confectionary during festivals to be shared among family and friends. “Saath samandar paar” was a famous dance number from a Bollywood movie which released in the early-90s. Dairy Milk capitalized not only on the song but also on the portrayal of the middle-class in the best way. The advertisement which aired on T.V showed a woman and her mother-in-law bonding over the chocolate and later dancing in their “gully” (mofussil town). Prashant Peres, director of marketing at Mondelez India added that the shift of positioning of the chocolate brand was due to the larger shift of consumption. The reason for using 90s music for the background score was the shift in the brand’s consumer age group to 25-34 years. The idea of a new brand campaign was to position the brand for the age group of 25-34 and the middle-class consumers.
A famous line is given by a successful entrepreneur and visionary Brijmohan Lall Munjal, “Don’t dream if you can’t fulfil your dreams.” He began his business during the partition. Along with his family, he set up a business of manufacturing cycles which provided the poor people with a means of transportation. Thirty years later, Hero understood the power of middle-class and provided affordable and superior technology transport to millions of Indians. Today the company is world no. 1 Two-wheeler Company.
What constitutes the middle-class?
The middle-class consumer is said to be rational and practical. Of course, a consumer who splurges on a Gucci bag, Christian Louboutin heels, latest model of Ferrari, and gifts a Ferrero Rocher box for a new friend’s birthday at school does not fall in this category. But, there are two sides to the coin, a middle-class customer (on the basis of income) may still splurge on expensive items if the customer finds it to be practical and durable. The middle-class is a segment that is based on personal perceptions and not the economics of income distribution. The perceptions of the people towards the product and services are important. For instance, TATA Nano never wanted to be perceived as the car for the small town buyers. It wanted to cater to youngsters. The rising young population who is whimsical to own a car was the target segment. Unfortunately, the target from the youngsters shifted to the cars owned by the rural people because the ad showcased a father returning home to his eagerly waiting daughter in a rustic location, seemingly a village. Therefore, perceptions of the people become mandatory for capturing the market. Another example of the power of the middle class is seen in the Apple v/s OnePlus scenario. Tim Cook started to believe that his premium brand which occupied a large share of the Indian market started to weaken with the entry of OnePlus. Now Apple has taken measures to stabilize prices, reduce import duty thereby reducing costs, offer discounts and price cuts to the potential consumers in order to drive affordability for the “middle-class” consumers. Upasana Joshi, Associate Research Manager at IDC India, made a statement specifying the premium mobile brand’s intention to target the middle class. Tim Cook intends to create an ecosystem for the Indian middle-class customers in order to compete with affordable brands like OnePlus, Xiaomi, Vivo, Oppo, and Samsung.
India’s middle class share the same notion of having a standard of living within their means and have upward mobility. Today the consumers in India want a world-class product, quality, quantity, affordability, and these demands are driving the global companies to make a place for Indian middle-class.
This article is written by Harsha Sheelam, along with Prof. Chandrashekar Goud.