How will 700 million people at the bottom of the pyramid react to the government’s demonetisation programme? How will it impact products, brands, companies that get a substantial part of their sales from this segment? Will it be temporary or will it be a long term impact? - Questions that most of us are grappling in our minds whilst we look at the challenges that we face individually on the account of demonetisation.
I, for one, wouldn’t hazard a guess or claim to have all the answers or even claim to understand in the completeness the complexities and challenges involved in answering these questions.
Yet I make an attempt to try and see how life can possibly get affected amongst this set of consumers by attempting to get into their shoes, hearing some of their views, challenges faced by them currently and how they are coping by prioritising their purchase choices. By no means is this an exhaustive account capturing the complete reality of this segment but just a peek and my own read of the potential scenario to come.
I have picked up various published facts, projections, learnings, insights from various studies and attempted to re-look at the same through the lense of this consumer.
One thing that stands out that most (almost 80%) of the money spent by this segment in primarily on food and food related products & almost all of it through Kirana stores.
Hence I’ve limited my observations to the following categories – FMCG, Pharmaceuticals, Food products, Personal Care, Telecom. These categories contribute almost 35% of India’s Adex, all these categories have extensive distribution structures and their last mile transactions within the bottom of pyramid segment which contributes approximately 40% to their sales is 100% in cash.
The first thing most people within this segment are first trying to secure are the basics of food ie. Grains, Pulses, Sugar, Salt, Oil – things that are non-perishable and can ensure the family does not go hungry. Next in the priority are immediate other requirements such as milk, vegetables where there are multiple examples that individuals have shared about how the vendors have their sales drop. I came across someone who shared an anecdotal piece of how a family had used some of the cash they managed to exchange to buy glucose biscuits and this was their staple food for the past few days. That’s a huge shift in behaviour when it comes to something as basic as food.
The other aspect that comes to mind is that while food is the priority almost everything else seems to have taken a backseat in their minds at least for the time being. So anything that is deemed non-essential in their lives is outside their line of sight completely unless its role gets re-defined as an essential like the glucose biscuit.
This also means that the entire cycle for a lot of products and brands will take a beating that will require re-calibration of the cycle in an unprecedented manner depending on when the cash flow situation settles down.
While that is stating the obvious – the glucose biscuit kept intriguing me and also made me think that this is possibly one of the biggest opportunities for a lot of brands and companies to get out there and make extremely loyal consumers by helping them consume their products in a manner never done before.
What if a brand that is not in the food product category decided to work out a scheme that gives out coupons to purchase other essential products instead of a price off or is accompanied by a free essential product sachet attached or a unique credit offering on the entire portfolio of products of the company. Basically a limited period promo that ensures there is no disruption in the consumption pattern of the product by enabling consumers in this particular segment to continue their lives as close as possible to normal. This opportunity can completely re-define the role of these brands in the lives of these consumers like never before. While I do understand the challenges of logistics, complex financial structures across the chain that are involved, as also the timelines required to pull off something on this kind on a scale across the country. Yet now probably than ever is the time for brands, organisations to look at how they can enable their structures for rapid changes to be prepared for the future.
The cost of disruption on account of demonetisation for brands and companies would be long term basis how the market dynamics play out. It could create entry points for newer players, create new definitions of essentials / non-essentials, restructure the dynamics of channel management, impact consumer behaviour possibly in an irreversible manner. The effects of these changes will be felt for a much longer time than the process of demonetisation itself.
This also is a time when collaboration can become an inherent aspect of a brand, company’s operating DNA, how can they collaborate with other brands, companies, media, technology in enabling some of these initiatives. Thinking aloud can mobile recharges become an alternate currency for payment in these times given the widespread usage of pre-paid mobile how that can be leveraged to ensure that there is no disruption of purchase behaviour and consumption habits. It is an opportunity for brands in the sector of food, household goods, entertainment, communication, technology to look at creating joint projects targeted at this segment in chosen geographies. Speed is of essence and never before has speed mattered as much as it does now both from a human as well as a business perspective.
(The author is CMO, IPG Mediabrands):
(The views and opinions expressed in the article are solely those of the author)