Consumption contrasts in Tiger vs. Dragon

Its fascinating to study the contrasts in consumption behaviour in India, vis-a-vis China.

China's been a difficult market to crack for foreign firms. What's interesting to note is the Chinese consumers' reaction of foreign goods. Undercutting prices has not worked for MNC brands. In fact Chinese consumers perceive these brands to be costlier, despite the fact that they really aren't. A Nielsen survey suggests that 'one strategy that has brought success to several foreign firms has been to charge high prices—a surprise, given that earnings in China remain quite low. The report concludes that Chinese believe that foreign brands are more expensive, even when they are not. That suggests that they should aim to compete on quality rather than cost.'

Now this is a marked contrast to what happens in India. Indian consumers may aspire for foreign brands, but aren't enamored by high prices. The mass markets in India don't have a problem sticking to an Indian brand if they find it to be value for money. Foreign brands taking on mass markets in India have been forced to ride the 'low price-good quality' bandwagon. More so because competing Indian firms have been able to deliver on this 'value for money' requirement.

Balakrishna and Sidharth writing in the Hindu BusinessLine identify two key initiatives that are a must for MNCs to crack Indian Markets. One, make products affordable, and two, get your consumer segment right.

They state, 'Foreign companies that entered India lured by visions of a "250-million strong middle-class market" are beginning to realise two key characteristics of the Indian market: India is a low-income market and while it might have millions of consumers, each individually consumes little. Many foreign companies selling branded consumer products and services have been compelled to alter their strategies in line with these two characteristics.

To succeed in the Indian market for both products and services, foreign companies have come to realise that it is necessary to make the products affordable, address the right segment, widen their offerings and adapt their product to Indian needs, and to promote community rather than individual usage.'

India and China with their vast populace remain consumer markets of the future. Yet to successfully tread either markets, MNCs need approaches that are markedly different.

As they say, different strokes for different folks. That's the key.


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