Enriching The Consumer Base
The Economic Times - February 2001
The traditional marketing paradigm is about extracting money resident within the consumer base ('capturing customer surplus' is perhaps a more politically correct phrase.) However, watching growth aspirations of companies outstrip the growth in purchasing power of the Indian consumer base, I do believe that the time has come for companies to adopt an additional marketing paradigm - that of enriching the consumer base. The idea is that companies, individually or collectively, should invest significantly in feeding the goose that lays the golden eggs, or to use a more rural market analogy, put nutrients back into the land that they reap from, even though they are not in the animal feeds business or in the soil nutrients business. The idea also is that companies should accord the 'enrich' activity the same seriousness as the 'extract' activity - as a key element of the marketing strategy, and not just something that is relegated to the corporate PR department.
How is this approach different from market development programs that most companies have? Typically, such programs are fairly short term and tactical in approach and are still very much in the 'extract' mode rather than in the 'enrich' mode. They typically focus on the narrow agenda of facilitating the use of the company's product (example: driving schools to enable people to learn how to drive, arranging for loans so that households can buy consumer durables), or in educating the user about how to use the product (cooking demos, farming demos etc.) Even where there is a long term view, the perspective is still narrow focused. Example: "lets start educating them on my products when they are still in medical school", rather than on improving the career prospects and earning power of the young doctor.
Distribution expansion is another popular market development tool. While this provides a fresh growth spurt each time it is done, eventually all good things must come to an end and the incremental benefit-cost ratio starts diminishing. A look at penetration levels by income group of most categories shows a market where phase 1 of readily available demand has been captured. The big growth promise for the future lies in the villages and with the lower income consumers. How does one convert this promise into actual potential? How does one convert a near consumer into an actual consumer? Here are some thoughts.
I read a newspaper report last week about a consumer goods company using the existing mechanisms of women's self help groups "to be effectively used as distribution channels", "an unusual attempt at tapping the rural consumer". In addition, if this company used some of its unparalleled capabilities and considerable financial clout, it could enrich its customer base considerably and reap the benefits in years to come. It could leverage its distribution and logistics skills to set up many more women's self help groups, stand guarantee for them with banks, and help with a collection system; it could use its market access and marketing training skills to help them establish sustainable businesses. If you ensure their livelihood, a good part of the benefit will come to you, in the form of a sales annuity!
Other variations on this enrichment theme can be vocational training offered by auto companies for unemployed young people to become drivers and mechanics (this goes well beyond short training and certification programs). Pushing this thought further, anyone who is a serious 'youth marketer' would know that out of 156 million 12 to 19 year olds in India, 32 million are urban poor and 110 million are rural poor, and the real growth bonanza for youth brands will come from enriching them. Instead of restricting themselves to community development in the vicinity of their bottling plants or sponsoring cricket matches, can the Cola majors work with appropriate partners to improve the chances of poor youth finding a means of livelihood? This is not about socialism or philanthropy, but about ensuring future market growth. Similarly, personal transportation majors can enrich their customer base by being the architects of better public transport solutions in villages. (It is a fact that the more the public transport availability, the more the commercial activity and then an increased consumer felt need for personal transportation)
The ICE phenomenon in the hinterland is really about the power that people see in communication and connectivity and relevant education, all of which they see as enablers to avail of the opportunities to earn more. A company based in Chennai has developed and piloted a low cost telephone and Internet access system that can provide connectivity to villages and empower people in their endeavour to earn a better living. This is a powerful consumer enrichment weapon, but it can only have impact if an appropriate and extensive distribution and collection system can be set up and run by a team which has experience in rural markets. A formidable task, but known territory for many of the larger consumer goods companies. Wiring up villagers may not make good business sense for telecom companies or ISPs, but it does for consumer goods companies, because it fundamentally alters the character of the consumer base, for the better.
Enriching the consumer base is not about good corporate citizenship. Nor is it about linking brands to social causes in a gimmicky kind of way. It is about stimulating market growth using the paradigm of enlightened self interest. Will the pain of enriching the customer base ensure that the gain will eventually accrue to the company / brand? Yes, because a well done enrichment program can result in owning a customer community and lock out competition for many years, through building meaningful relationships, which after all, is the essence of branding. Getting a special tax break on enrichment activities could help start the process off!