Introduction Given the complexity of a huge market like India, the segmentation of markets is very much natural. That is, there will be many players trying to cater to the different purchasing powers of people in a particular area. However, there are always low-cost warriors. These are the people who sell the alternate products. When the chips are down and the salary increases or the merit payments are not coming, the anxious housewives happily switch to these brands and expand that particular market. There are some twenty such players in each segment, with almost the same functionality and the small brands rule the local market for extended periods of time.
Be that as that may, the low-cost warriors and small brands do change the entire dimension of the market at certain times. We will discuss some specifics too. In particular, low-cost warriors and local brands a) Provide good choices for the discerning customers b) Milk the cultural context in specific places c) Force the large players to come out with smaller packs d) Force even drop in prices or "more for less" options and e) Provide choices in most "either or" purchases.
Provide good choices for the discerning customers There is a fairly well-known brand called "Ponvandu" in Tamil Nadu. This brand has been occasionally advertised on television too and has been around for at least two decades. There are two other local brands called "Arasan" soap and the third small brand is called "Challenge". For 250 grams, the cost is at least rupees five less than the established multinational brands like Rin from Hindustan Unilever. And even those from P&D like the Tide brand. Yet, in the rural markets, these brands have managed to survive?
This author has even visited homes to find out. The housewives buy the smallest sachet packets of the detergent powder, that retails for Rs. 3 or less and then use these detergents to just wash away the tough strains. The dhobi guys do the same thing. Their cost effectiveness stress forces them to buy these low-cost warriors and manage their lives. Each family had incomes of around Rs. 17,000 only and there are four souls to support. The housewives do not earn anything as they are non-matriculates in most cases. The customers are price conscious and do everything that they can to reduce cost. They did explain that they are prone to buy sachet packets of the major brands but not the big packs as they just do not have the money. This goes for other products too. For example, one housewife said that she brought only a local brand of ice cream, rather than Amul icecream or even Arul icecream, for her six-year-old daughter. During summer, she would set apart some four hundred rupees only for ice cream every month. Their only child would always demand ice cream but is not old enough to understand the difference between Amul or Arul icecream. There are thousands of such customers. They are always price conscious. The Arul icecream retailer did mention that very rarely, he would give small discounts for regular customers. This was done rarely, though. The choices are huge in every product segment.
Milk the cultural context in specific places Come summer, the established brands find it so difficult to sell, in recent times. Guess what? The cheaper and natural choices such as fresh coconut water available everywhere, the fresh sugarcane juice, cucumber juice and what have you, are all alternatives. These are alternatives. They are not even local brands. Yes, there are local brands too. For example, this author had been to a wedding some eight years ago, to a place called Kanadukaththan, a small village near Karaikudi, in Tamil Nadu. This village has mansions maintained by the likes of Mr. A.C. Muthiah, the former CMD of SPIC, and relatives of the former Finance Minister of India, Mr. P Chidambaram. The foreigners get to stay here and experience the Chettinad hospitality. At 7.30 AM, during a small walk, this author walked across to a small retail shop and asked for Pepsi. He was aghast to find it not there. Coke was not available too. Asked what was available, the lady patiently explained that a small local brand called Vincent, was the best selling cool drink, retailing at Rs.7 for a small bottle of 200 ml. The author was stumped by the taste. It was too good. The lady patiently explained that the product was from Thirumaiyam, a small village near to that village, and was the only drink available in some 60 villages and all retail shops there. The entire lot would be sold by evening. It was nothing but the panner soda. Within the next twenty minutes, each and every guest was served the same product and the open invitation was that the guests can have as many bottles as they wanted ( the wedding was held in late March). To this day, the product is reportedly famous in that area. Of course, it might be retailing now for Rs. 10. Quizzing many local people revealed that the dominant Chettiyar community would like only the Panner taste in summer and the multinational drinks were not consumed at all Though this author does not know what is going on in other parts of India, it can be safely assumed that products specific to many cultures are sold like hotcakes and the game goes on and on.
Force the large players to come out with smaller packs The poor and the relatively poor need to be part of the entire market. Reason why a very small pack of Harpic, from a big MNC, now retails at just rupees five. Colgate Hindustan Unilever, Britannia and every single MNC, whether Indian or foreign, has the smaller packs and sometimes brands that sell for less than rupees five. One should not assume that there is no money that is being made here. The economies of scale dictate that the manufacturer would still make a small profit, even on a five rupee pack. The local brands and the availability of options for the customers forces the big players to adopt such strategies. To give one example, it is a big local brand of potato chips. It is very famous in Coimbatore city. It is locally made and is named A1. The shop has the same name as well. There are so many outlets. Alongside this product, in the very next shop, the shopkeeper would talk so much about Bingo, the product of ITC and inform customers that the product is too good. The local customers do not fall for the bait. They would simply smile and buy one packet of Bingo, only if they want to. The smallest packet of bingo retails at Rs.5/. Parle also has a similar offering. Hats off to perfect competition!!
Force even drop in prices or force "more for less" options from big players Yes, the big players sometimes drop prices, more so, if they plan some rise in prices. Even the big Indian brands like Dabur do the same. However, they are also forced to give the 20% extra, or 30% extra to push sales. In a recessionary environment, the customers are spoilt for choice. The manufacturers do not have any choice. The game becomes very complicated when there is a saturation in certain markets. For example, near a large number of small kirana shops, one would find the local guys offering the fresh samosa for as less as five or six rupees. This forces the potato chips guy to even offer some small discount on bulk purchases. The prestigious Saravana Stores of Chennai would offer prices lesser than the printed MRP prices for a whole range of goods and the upper middle classes also shop there. The net savings would even come to around 9% percent for every family. At times, it is 10%. No wonder, such guys laugh all the way to the bank.
Provide choices in most "either or" purchases Look at what had happened in the case of the cool drink called Vincent. Though the customer is forced to buy the local brand, it tastes too good and even fresh customers are hooked to it. Such formidable brands often provide very good choices in "either-or" situations. Yes, the fresh coconut water is another competitor too. It may be not branded, but the guy who sells it finishes his sale, mostly by 10 AM. Thereafter, the competition becomes even more intense, as the customer wants the other choices too. Yes, the choice will be between even fresh lime juice and the branded Coca-cola or even Bovonto, a local brand in some pockets of South India.
Conclusion The low-cost warriors and the local brands shake up so many markets. Only some examples have been described in the aforesaid paragraphs. The game extends to so many products too. It is always a very lively game.