Indiantelevision.com Team

(19 March 2008 10:30 pm)

MUMBAI: With the growing rich and middle class spreading beyond the metros, the face of the urban market place is changing, says Ernst & Young in a recent report entitled "The Dhoni Effect: Rise of Small Town India."

Released today in Mumbai, the report underlines the current developments and trends in marketing spend across the Indian market, and focuses on the factors impacting marketing decisions regarding media spend vis-à-vis actual ground realities of market growth in India.

"The Dhoni Effect" identifies a phenomenon where rapidly growing small towns of India are taking center stage. The research highlights the growing affluence levels, increased awareness due to media penetration, improved physical connectivity and significant changes in consumption patterns with high aspiration levels of small town India that are compelling the marketers to take notice of the needs of this growing marketplace.

For the purpose of research India was divided into four sections - the six metros (Mumbai, Delhi, Bangalore, Hyderabad, Chennai and Kolkata), the Key Urban Towns (KUT) which are the twenty two cities for the purpose of the study. The Rest of Urban India (ROUI) constitutes urban cities other than KUTs.

The Indian urban growth story till now has been driven largely by metros, which is now moving beyond metros into other towns that comprise the ROUI. As of 2001, 33 per cent of India's urban population was located in the top 8 cities (including the 6 metros) which also had 40 per cent of its disposable income. However, the concentration of the urban rich and middle class is expected to spread across to the KUTs and ROUI.

According to Ernst & Young partner (media and entertainment practice) Ashok Rajagopal, "We are witnessing a whole new opportunity in the non-metro urban markets where the rising affluence levels and changing consumption patterns are opening doors for marketers to service the new aggressive opportunity. Indian marketers are remapping their marketing spends to align itself with this paradigm shift in marketing focus."

As per the report, metros constitute about 30 per cent of the approximate Rs 74,000 billion consumption market of 100 cities. The consumption expenditure of these cities (KUT, ROUI and a few very small towns) constitute 70 per cent of the expenditure of 100 cities.

The metros score highest in the affluence index, KUT are found to be half or three fourth levels of the affluence of the six metros. While individual KUT towns do not score as high as metros, in terms of relevant population, the high scores on future growth potential push up the KUT in the overall ranking. Hence, the analysis highlights that high potential for KUT such as Pune and Chandigarh that rank higher than metros like Chennai and Kolkata.

A new direction taken by marketers in allocating funds that has been highlighted through this research is that a significant amount of money goes into below-the-line (BTL) marketing. The average BTL spends across marketers met during the course of the research was closer to 40 per cent against about 15 per cent just three years earlier.

Ernst & Young national sector leader (media and entertainment practice) Farokh Balsara says, "Traditionally, concentration of media spends in metro markets is a well-established reality and the opportunity being lost by keeping the focus on these markets at the expense of these small towns, is the challenge for the marketer. Clearly a realignment of media spends towards small-town urban India is the need of the day. Investment in these future growth areas would definitely reap benefits in the years to come"

The key challenge for marketing beyond metros, especially in Tier3, Tier 4 towns and rural India, has traditionally been logistics. Recent investments and developments in infrastructure and connectivity have brought the marketer in closer contact with KUT, ROUI and rural areas.

The report also brings to the fore a slight disconnect in terms of which cities are growing faster/spending more and where the advertisement spends are going. However, this is gradually changing as marketers realise the shift in consumption spends. For the marketers, the factors affecting choice of media and allocation of marketing budgets are largely dependent on the combination of selected market, nature of product/service offering, and the stage of the product life cycle of the offering.