imgbd Wise Advice: Evolve

FMCG multinational provides valuable insights for our business

imgbd You have a world acclaimed premium product that you bring into India, you know there are plenty of affluent Indians who can afford it, but are simply indifferent to your premium offering. You also have a successful low cost option for the masses, which you bring to India in the hope of selling to millions of rural consumers, but to your dismay, you find no takers. What do you do? Pack up and leave? Or evolve your models to become successful?

Gillette did the latter with both its shaving blades - its premium version as well as the low cost variant, and became hugely successful in the Indian market place. The Gillette story has rich lessons for the Indian financial intermediation business - which is unable as yet to convince a majority of affluent savers of the benefits of paid-for premium offerings including comprehensive financial planning and wealth management on the one hand, and find ways of appealing to the huge mass of rural and semi-urban retail savers who continue to remain indifferent to market linked investment products and solutions.

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Tackling the top end of the market

Gillette entered the Indian market in 1984 with an initial focus on catering to the shaving needs of affluent urban males. With global consumers asking for razors that would provide closer shaves in fewer strokes, the company developed the Mach3 product which was introduced in India in 2004. However, the new product did not take off as anticipated and to its dismay, it found a cold response in India to its hot new global product.

Indian men, it appeared, continued to prefer the traditional double-edged razors that were cheaper compared to Gillette's shaver. Gillette Mach 3 was after all 50 times costlier than the low cost options that had flooded the bottom end of the market. Could affluent Indians not afford a Mach 3? No - a closer look at the Indian market revealed that Indian men were not willing to pay a premium for a razor as shaving was not considered significant.

Unlike most product launches where consumers are made aware of a product's existence, Gillette had to convince Indian men to change their indifference towards the importance of shaving. The company created initiatives to spark a debate around shaving. The 'Shave India Movement 2009' campaign asked three controversial questions: Are clean-shaven men more successful? Did the nation prefer clean-shaven celebrities? Do women prefer clean-shaven men? The campaign recruited Bollywood celebrities to support the campaign. Editorials, interviews, discussions and news stories by the media channels discussing the campaign were successful in creating a buzz and awareness for the campaign. Sales of Mach 3 rocketed 500% as a result of the campaign - a significant section of affluent males were successfully influenced by this high decibel 360 degree campaign, to take shaving more seriously. And once they did that, Mach 3 became an obvious choice as it was in fact the best in class. Mach 3 has, since this campaign, successfully entrenched itself at the top end of the Indian shaving market across the country. People are paying a hefty premium - only because the company took the effort of dispelling the indifference towards shaving.

Takeaways for financial planners

If a well-executed campaign can persuade affluent Indians to take shaving more seriously by linking it to aspirational goals like being successful or more attractive to the opposite sex, surely a well-crafted campaign can spread awareness of the benefits of financial planning, by linking planning to financial success. What is needed is to engage in debates, demonstrate through research, get active on social media and rope in prominent personalities who have experienced the benefits of planning to raise awareness of planning and help middle class and affluent families understand why they must engage a planner. Its not as if people don't have money to pay a planner - its just that many are indifferent to the need for planning. We need to learn from Gillette on how to first make the proposition relevant, and then offer our services as effective solutions.

Tackling the bottom end of the market

While Gillette had finally managed to capture the stubble of the affluent Indian male, there was still a huge segment of the population that Gillette had not managed to reach. The company's global strategy for years was to sell cheaper-end U.S developed razors in India but the low-income Indian male could not afford the products offered by the company - even their low cost options.

To capture the low-income segment, the company realized it had to understand the needs and challenges of these customer instead of re-fitting existing cheaper-end razors developed for another market. After research, the company was able to understand that besides affordability, the low-income consumer was also interested in safety concerns and ease of use when it came to razors. Since many did not have running water, they sat on the floor while shaving and traditional double-edged razors caused frequent cuts. The men were usually not daily shavers and managed longer facial hair. With these needs so different from their Western counterparts, the company realized they had to develop a razor specifically for this market to address the shaving challenges of the low-income Indian male.

Gillette made several changes to the Gillette Guard shaving razor for the Indian market. To help customers who grappled with shaving while not having running water, the shaver had easy-rinse cartridges. Lightweight, ribbed handle made shaving safer with a firmer grip. For men with longer facial hair, safety comb tacked the problem of frequent cuts. The shaver even had had a hang hole to allow for easy storage and drying. Since design complexity was reduced, manufacturing required fewer parts to assemble and was cheaper to produce. Manufacturing of the shaver was done locally further helping the company to maintain its lower price model. Instead of using big retail outlets for distribution, the company decided on a network distribution of small local shops where low-income customers were more likely to shop. For advertisements, the company used Bollywood actors to lure the interest of the customers. With these measures, the company finally gained a strong foothold in the Indian market and moved from being a passive observer in the market, to a meaningful player at the bottom of the pyramid as well.

Takeaways for retail fund management and distribution businesses

As an industry, we need to do a lot more work to understand what rural and semi-urban retail savers want and need. What they want may not be what they need. To become relevant in their lives, we perhaps need to first find solutions that give them what they want, and then work towards solutions that address what they need. Gillette re-engineered its product entirely, by taking the trouble to understand the unique circumstances around how a rural male in India typically shaves. We need to make that effort first, then come up with genuinely tailor made solutions, which we then take to this market. Taking our existing range of equity funds or for that matter, taking asset allocation products that we believe best serve retail savers interests, but which perhaps leave them cold and indifferent to our offerings, may not be the best way forward in this segment.

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Content is prepared by Wealth Forum and should not be construed as an opinion of HDFC Mutual Fund.



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