Saturday, January 12, 2013

Business Modelling - India as a Market !

India is supposedly a hot market for the world, and the entrepreneur enthusiast. A rising urban consumer population with increasing disposable income is becoming a target market of choice for many aspiring businesses. Absolute number of consumers in India and especially in the Metro cities, gives a positive shade to any initial discussions about new revenue models.

Innovation in Internet technology and India being a country with a huge pool of IT experienced working class is giving rise to a lot of business ideas at various stages of incubation. E-commerce, Payment Gateway and Mobility related business ideas are discussed at almost every coffee discussions between professionals.

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Quite obviously, almost all of these businesses are targeted at the retail consumers. Starting from global business ideas, which have become successful such as 'The Facebook' and 'Twitter', to smaller business ideas that are sprouting in every Indian city, every business is targeting the retail consumers.

Target Market definition and its true potential builds on a business model. Going by the normal belief that 1 out of every 100 business ideas fail, it is critical that this target market called India is studied and understood a bit more incisively to get business and revenue objectives accurately and realistically.

India is fragmented.

It sounds like a no-brainer, and we tend to get blind by accepting it as a common place argument. We need to go beyond the fact that India is fragmented. It is not about demography. Businesses need to deal with the softer aspects of psychology to ascertain the consumer demand for a particular product proposition.

The need is to delve into the fragments and its associated consumer behavior, attitude and mindsets. India is divided into a rural and urban mindset. Within urban mindset, we have original urbanites, second generation migrants and first generation migrants. Then there is the mindset of highly skilled labour, semi skilled labour, self-employed and marginally employed labour.

Access to media is fragmented. Access to free office Internet, Smart phones, Facebook, Twitter, Television, Radio and newspapers is not homogeneous, and hence information consumed is not uniform. As media is a critical element in forming lifestyle related attitudes, it creates fragments that are not easily comprehensive. Similar is the extent of globalization of the mindsets. Similar is the adherence to religious and cultural beliefs.

India is rigid.

It is bind to its traditions and customs for thousands of years. The best examples of it, are to analyse the long rule of the Mughals and the continual charity / religious work by Christian missionaries. India has stayed a Hindu majority country. Christian missionaries have invested and created schools and hospitals all across the country. 'Don Bosco' and 'St. Mary's' sound like initiatives of the Indian Government. It is unfortunate that Indian Government didn't have the vision to create such brand names for education in the country. Irrespective of these facts, India has stayed bind to its traditions, customs and religions. Parents send their kids to Don Bosco to pursue English education with a chandan, or saffron, or kesar, or kumkum tilak on their heads.

The simple conclusion to draw from this discussion is the fact that changing behavior in India is not so easy. India is an elephant that takes time to analyse and arrive at decisions regarding change. Kellogg's is a classic case of surprise that the top management of Kellogg's got when they entered India in the early nineties. Introducing cereals as breakfast to the Indian consumers met with unexpectedly strong resistance. In the US, corn flakes are had with cold milk, whereas in India, it was hot milk when consumers slowly started accepting corn flakes as their breakfast cereal.

Famous brands such as Mercedes, Coca Cola, Citibank experienced similar surprises because they had been blinded by figures. They all forgot to understand India qualitatively.

India is price sensitive.

Every Sunday, Big Bazaar has a 5% discount. India is one of the country where credit cards are available without any annual fee. A Rs. 2 increase in Petrol prices creates traffic around petrol pumps to save Rs. 50 to Rs. 100. India saves by being price sensitive. There is greater trust on holding Gold for future, as compared to any other savings and investment schemes.

This psycho-cultural trait is pertinent to any revenue model to arrive at a realistic earning potential of a business. Fee income business in India is therefore a doubt. Consumers in India seems to have a belief that they are doing a favour by deciding to buy the product or the service. Fee income, if packaged upfront could face huge consumer resistance. The value of convenience is not realized against the opportunity cost of the service being inconvenient. The consumer benefit of providing convenience therefore has to be looked from the point of gaining consumer acceptance, not as a revenue opportunity from the end consumer. The revenue opportunity exists among intermediaries, and in the supply chain coming together to provide the convenience.

India is a potent B2B market as well.

This fragmented retail consumer base gives rise to immense risk in terms of conceptualizing a business and can therefore lead us to this B2B marketplace. The B2B marketplace in India is comparatively homogeneous and offers equally potent business opportunities. Importantly, it is not a targeted marketplace by one and all.

B2B business is about enabling another business or business processes. The target market for B2B business can be one large corporate. One corporate can make the business profitable and sustainable.

Online Payments as a business opportunity is attracting a lot of entrepreneurs and investors. India being one of the most progressive countries with advanced payment systems like NEFT, RTGS, IMPS, ACH and NFS, transfers of money between bank accounts have become enabled through varied means. With IMPS, mobile payments is a robust reality. With ACH, cash collection and management assumes a new paradigm.

The argument is that online payments business can either be targeted at providing convenience to the retail consumers, or be targeted at businesses to make their payment processes simpler, operation-efficient, cost-effective and audit friendly. And it may be just easier to target businesses. So it is imperative that unlike what is commonly observed, business modelling requires a strategic thought towards B2B potential, apart from focusing on the retail consumers.

Conclusion: 'Business Modelling' is a huge discussion. This blog post is an attempt to give cues to further analyse and arrive at a target market definition that has the maximum business potential. This is not exclusive, and is intended to farther thinking in the direction proposed by the blog.

Comments are welcome. We can add to this discussion for everybody's benefits. I would be glad to answer questions with regards to any confusion or fluidity.

The author has an experience of 12 years in the integrated branding, communication and financial domain involving traditional as well as digital media. He can be contacted at durlov@kuhipaat.in for consultancy and project execution.


1 comment:

  1. Thanks for making things clear. This topic gives me headaches for quite sometime already. I am really glad you shared this information.

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