E&Y Report 1 Effect
E&Y Report 1 Effect
E&Y Report 1 Effect
FOREWORD
The Indian market is witnessing some major changes. More consumers, more buying power and more media reach. Then there is the rise of digital media, the fragmentation of mass media, the growing power of young consumers and that of retail. The bigger change, however, is the leveling out of purchasing power across India that brings into focus the markets beyond the metros. We see a whole new opportunity in non- metro urban markets where the rising affluence levels and changing consumption patterns are opening doors for marketers to service new markets. For instance, the unanticipated growth for male skin-whitening creams in India, now a Rs. 300 crore market, growing at an astonishing 150% p.a. has had most of its growth coming from small-town India. Even media consumption habits across these markets have been changing. The past decade has seen developments like de-regulation of the radio sector, increased reach of television with content being produced specifically for various regional audiences and rising focus of print players towards the tier 2 and 3 cities. This has changed the way media is consumed across the country and increased the consumers exposure to various entertainment options. For instance, English movie channels today have higher viewership in cities of Gujarat than some of the larger metros. Further with improved connectivity, infrastructure and the spread of retail, marketers are looking to capture their share of this growth pie. However, while marketers continue to define the top 15-20 towns as their market, a majority of their investment remains restricted to the metros, though this is gradually changing. This report is an effort to map the trends in marketing spends across the Indian market, given the new address of opportunity and to explore the factors leading to the disparities between marketing focus and spends. We hope that you find this report insightful to explore the opportunities that these emerging markets have in store for all marketers, media players and the industry at large.
March 2008
CONTENTS
Introduction.................................................................................................... 4 The Rise of Small Town India....................................................................... 5 Changing Trends in Media Spends.............................................................. 13 In Conclusion............................................................................................... 21
Introduction
India is one of the fastest growing consumer markets in the world and as more than 300 million consumers spend on cars, mobile phones, food and films amongst others, marketers need to reach, remind, persuade and push them towards their brands. In 2006 Indian marketers spent about Rs 17,356 crores (billings) on advertising, and given around 8 % GDP growth rates, this market can only go up. With the growth of the Indian economy the rising rich and middle class is spreading beyond the metros to Tier 2, 3 and 4 cities. This has accentuated the growth in markets of the Rest-of-Urban-India (ROUI) from beyond the six metros. On sheer affluence, towns like Chandigarh, Ahmedabad, Jaipur, Lucknow, Indore or Pune are threefourths or more of the affluence levels of Mumbai. On growth potential, they do even better. The fact that small-town urban India is very attractive in terms of purchasing power, time spent on media and product consumption, comes across prominently. We like to call this phenomenon, The Dhoni Effect where the rapidly growing small towns of India are taking center stage in marketing strategies of Indias leading brands. Rising affluence levels, increased awareness due to enhanced media penetration, improved physical connectivity coupled with the high aspiration levels have spurred growth in small-town consumer markets to a level similar to that in metro cities of India. This has led to increase in volume of consumption of higher value brands in traditionally conservative markets. The growing affluence levels across ROUI is a testament to the rise in potential of this markets. ROUI is now beginning to accelerate the next phase of growth for marketers due to their relatively low penetration levels and a large relevant consumer base. However, even though the marketers are moving on beyond the metros, media spends are not growing in a similar fashion. For instance, an industry estimate puts spends on the six metros at over 60% of the national spend. This research report explores the current developments and trends in marketing spend across the Indian market. The report focuses on the drivers and factors impacting marketing decisions regarding media spend vis--vis actual ground realities of market growth in India. For the purpose of this research, India was divided into four sections - the top 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 as mentioned on page 8, the ROUI (urban cities other than KUT) and rural India. During the course of the research we met some of Indias largest marketing spenders across categories including FMCG, durables, financial services and media companies amongst others and domain experts such as media planning and buying agencies and advertising agencies besides relying on available published data and in-house media experts.
Source - Interviews with companies across diverse sectors including FMCG, Telecom, Media Distribution, Consumer Electronics, Auto & Banking. July-August 2007
Mar-02
2,567,757 3,858,057
Mar-03
4,439,524 8,248,113
Mar-04
7,941,766 18,222,639
Mar-05
11,018,998 30,047,117
Mar-06
15,860,318 53,339,395
CAGR
57.65% 92.83%
This analysis highlights the fact that rest of India currently is a large, relatively untapped market where investments are required from the marketer to reach out to the consumers. Hence, increased marketing spends would be necessary to ensure increased penetration in these markets. In addition, as the metros and rest of India are at different stages of the product life cycle, the marketing and communication strategy needs for these markets are divergent and would require different approaches from the marketer.
Based on factor weightages all 28 towns were ranked to assess market potential. While expectedly, the metros score highest on the affluence index, KUT are found to be at half or threefourth 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. Further, while the absolute numbers of the relevant population base in KUT as a collective market is much higher than that of metros, it is the high concentration of relevant population in metros that has made them more attractive to the marketers. As detailed below, the analysis highlights the high potential for KUT such as Pune and Chandigarh that rank higher than metros like Chennai and Kolkata. This illustrative example of growth potential of KUT towns is what enables marketers to move beyond the metros to focus on KUT.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
Delhi Mumbai Bangalore Hyderabad Pune Chandigarh Thiruvananthapuram Chennai Jaipur Bhopal Ahmedabad Lucknow Ludhiana Kolkata Cochin Vijaywada Indore Vizag Patna Nagpur Surat Coimbatore Jamshedpur Amritsar Nashik Vadodara Kanpur Madurai
Source: City Skyline of India 2006 by Indicus Analytics, Ernst&Young Analysis, Census 2001
Based on the above analysis, metros account for 30% after total rating of the 28 cities, which implies the growing importance of KUT.
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Exhibit 5: Media reach across metros, KUT and rural areas across 200406
Metro reach
50000 40000 Population ( in 000) 30000 20000 10000 0 2004 2005 2006
Press
TV
Satellite
Radio
Cinema
KUT reach
150000 120000
Population ( in 000)
Press
TV
Satellite
Radio
Cinema
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Rural reach
250000 200000 Population ( in 000) 150000 100000 50000 0 2004 2005 2006
Press
TV
Satellite
Radio
Cinema
Therefore, it is evident that KUT is of growing importance on account of the following: Significant consumption expenditure of KUT vis-a-vis the metros Increasing affluence levels with a larger relevant consumer base Increasing reach of retail and malls Increasing reach of media and favourable media consumption patters
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Exhibit 6 Factors impacting choice of media for advertising Factors impacting choice of Media
Existing clutter level of specific medium within the market Reach of medium across the target group Consumer preference for a specific medium Suitability of medium given the objective of the advertising/ marketing exercise Based on prior experience of the marketer with the success of the medium in a specific market
Source - Interviews with companies across diverse sectors including FMCG, Telecom, Media Distribution, Consumer Electronics, Auto & Banking. July-August 2007
An assessment of the key factors driving media spends across each of the four markets indicates that KUT scores higher on growth and potential given the relatively untapped consumer base. In addition, less media clutter in KUT as compared to metros leads to high media efficiencies. The growth in KUT also indicates that there is clearly an increase in buying power and numbers across the region, however not a necessary shift away from the metros.
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Exhibit 7 - Assessment of key factors affecting marketing spends across metros, KUT, ROUI and rural India The Key Variables
Growth rate of market Maturity Launch expenses Maintenance needs Brand building expenses Media reach Physical reach Media efficiencies Product penetration Media clutter Time spent on media Measurability
Source- Ernst&Young analysis
Metros
High High High High V High High High Medium High High High High
KUT
High Medium Medium Low Medium High Medium High Medium to low Low High Medium to Low
ROUI
High Low Medium Low Low Medium Medium High Low Low Medium Low
Rural
High Low High Low Low Low Low High Low Low Low Low
The marketers confidence in the potential of KUT however, does not seem to translate into actual sales and investments into these markets. While data on marketing spends is closely guarded, industry estimates derived through primary research have been taken as the starting point. Our research indicates that some of Indias top marketers now consciously focus on the top 15-20 towns, yet the media spends remain skewed in favor of the metros. An industry estimate puts spends on the six metros at over 60% of the national spend. The above could however differ depending on the category of products. While KUT has a larger share of consumption spends vis-a-vis the metros (70:30), the ad spends in most product categories are not in the same proportion. As in the case of some of the cola manufacturers, this proportion is as high as 80% in favour of the metros, inspite of metros generating only about 25% of the sales. However this trend is changing. An analysis of the print spends in 2006 and 2007 shows us that even though metros constituted a larger share of the total print spends in both years, ad spends diverted towards KUT grew at a much higher rate than the spends towards metros. This is indicative of the fact that advertisers are cognizant of the growing significance of the KUT in India.
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2.
A new direction taken by marketers in allocating funds that has been highlighted through our research is the significant jump in the investments going into below-the-line (BTL) marketing. Across the board, marketers are spending anywhere between 10-50 % of their total budgets on direct marketing, events, activation and other BTL activities depending on the nature of the product / service and market of choice. The average BTL spends across marketers met during the course of the research was closer to 40 % against about 15 %, just three years earlier. One reason of course is mass media fragmentation and therefore less bang for the above-the-line (ATL) buck. The other more important reason however is the pressure on brand managers for a better return on marketing investments made. This rise in BTL is resulting in a better connect with small-town India because a larger portion of the increased BTL is going to KUT as per marketers. In the metros, BTL is used because the clutter in mass media is too high and getting audience attention is difficult. The logic for using BTL in KUT, however, is different. Even though media options are limited in many KUT, yet because consumers are looking for new products or services, BTL gets a more than proportionate response. In existing product categories BTL in KUT has helped push up revenue contributions.
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is the likelihood of sales. As the consumption patterns in KUT change, slowly advertisers are likely to follow.
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Case Study: English vs Vernacular Divide in Print ` Exhibit 8: Comparison of English and vernacular daily advertisement rates in select cities MPV Rank
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
MPV Value
Town
Publication
Language
Eng Mar Eng Eng Ben Eng Tam Eng Eng Tel Kan Eng Guj Guj Mar Mar Guj Guj Hin Hin Hin Hin Hin Hin Tam Tam Hin Hin Mal Mal Hin Hin Eng Tam Tam
Readers (000s)
1670 800 1984 2074 3061 746 1219 914 821 1584 620 586 1449 1185 1167 903 758 635 324 751 1140 829 464 306 220 99 191 591 483 254 457 253 84 152 361
B& W rates
1990 900 1530 1500 970 640 306 1175 610 210 210 1380 401 337.5 600 240 158 135 192 306 451 475 306 270 58 75 120 253 172 115 185 181 310 44 100
Color Rates
2190 2190 1605 1600 1746 1152 428 1750 850 420 255 1400 681 465 1200 480 267 187.5 309 504 902 815 504 390 150 180 506 344 230 370 362 425 200
1000 Mumbai
The Times of India - Mumbai Maharashtra Times 790 Delhi Hindustan Times-Delhi Times of India-Delhi 613 Kolkata Ananda Bazar Patrika The Telegraph 363 Chennai Daily Thanthi - Chennai The Hindu - Chennai 258 Hyderabad Deccan Chronicle - Hyderabad Eenadu - Hyderabad 255 Banglore Prajavani - Bangalore Times of India-Bangalore 221 Ahmedabad Divya Bhaskar - Ahmedabad Gujarat Samachar - Ahmedabad 207 Pune Daily Sakal - Pune Lokmat - Pune 124 Surat Divya Bhaskar - Ahmedabad Gujarat Samachar - Surat 95 Kanpur Amar Ujala - Kanpur Dainik Jagran - Kanpur 94 Jaipur Dainik Bhaskar - Jaipur Rajasthan Patrika - Jaipur 87 Lucknow Dainik Jagran - Lucknow Hindustan - Lucknow 71 Coimbatore Daily Thanthi - Coimbatore Dinakaran 70 Indore Dainik Agniban Dainik Bhaskar - Indore 67 Kochi Malayala Manorama - Kochi Mathrubhumi - Kochi 59 Bhopal Dainik Bhaskar - Bhopal 53 Chandigarh Dainik Bhaskar - Chandigarh Tribune 50 Madurai Daily Thanthi - Madurai Dinamalar - Madurai
Source- Note -Ranking of cities is based on the MPVs (Market Potential Value), as enumerated by the RK Swamy Guide to Urban Mkts. Readership figures are sourced from NRS 2006. All Ad-rates are in Rs.per Sq cm. Cost per Thousand Readers (CPT) is: Ad-Rate/Total Readership in 000s. Everything is indexed back to Times of India-Mumbai.
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B&W CPT
1.2 1.1 0.8 0.7 0.3 0.9 0.3 1.3 0.7 0.1 0.3 2.4 0.3 0.3 0.5 0.3 0.2 0.2 0.6 0.4 0.4 0.6 0.7 0.9 0.3 0.8 0.6 0.4 0.4 0.5 0.4 0.7 3.7 0.3 0.3
Color CPT
1.3 2.7 0.8 0.8 0.6 1.5 0.4 1.9 1.0 0.3 0.4 2.4 0.5 0.4 1.0 0.5 0.4 0.3 1.0 0.7 0.8 1.0 1.1 1.3 0.0 1.5 0.9 0.9 0.7 0.9 0.8 1.4 5.1 0.0 0.6
Readers (000s)
100 48 119 124 183 45 73 55 49 95 37 35 87 71 70 54 45 38 19 45 68 50 28 18 13 6 11 35 29 15 27 15 5 9 22
B&W rates
100 45 77 75 49 32 15 59 31 11 11 69 20 17 30 12 8 7 10 15 23 24 15 14 3 4 6 13 9 6 9 9 16 2 5
INDEX AGAINST TOI MUMBAI Color B&W CPT Color Rates CPT
100 100 73 73 80 53 20 80 39 19 12 64 31 21 55 22 12 9 14 23 41 37 23 18 0 7 8 23 16 11 17 17 19 0 9 100 94 65 61 27 72 21 108 62 11 28 198 23 24 43 22 17 18 50 34 33 48 55 74 22 64 53 36 30 38 34 60 310 24 23 100 209 62 59 43 118 27 146 79 20 31 182 36 30 78 41 27 23 73 51 60 75 83 97 0 116 72 65 54 69 62 109 386 0 42
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By comparing English and vernacular daily ad rates across different towns, the language divide can be seen to exist in reality. Throughout the country, the same reader of an English and vernacular daily is more expensive to reach through the English daily. Our analysis indicates that on cost per thousand, every vernacular paper studied is roughly half to three-fourths of the benchmarked English daily from Mumbai. While vernacular and regional media is growing at a fast pace and gradually acquiring more prominence, the gap continues to remain across English and vernacular language media and a change in mindset would be essential before the gap can be completely eliminated.
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In Conclusion
With the growing rich and middle class spreading beyond the metros, the face of the urban market place is changing. Growing affluence levels and significant changes in consumption patterns of the KUT are compelling the marketers to take notice of the needs of this growing marketplace. The key factors affecting the choice of new markets are large relevant consumer base, increasing affluence levels, consumption growth, increased physical reach and increase in media reach and media consumption trends. The fact that KUT is very attractive in terms of purchasing power, media access and product and consumption comes across prominently. For instance, when assessed on affluence levels, towns like Jaipur, Cochin, Surat or Chandigarh measured up to three-fourths or more of the affluence levels of Mumbai. In response to the market shifts, marketers that have traditionally been focused on the top 10 15 cities for substantial share of their business are now carefully spreading out to the markets in KUT in search of the next growth opportunities. 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. Till recently, most KUT have suffered from lack of presence, and / or sub-optimal quality of local media. This is changing with developments like de-regulation of radio sector, rise in regional and vernacular dailies and increased presence of regional / regional television channels across markets. We expect that in line with these developments, marketing spends will also get realigned overtime. The analysis further suggests that the other constraints limiting marketing spends in KUT include; Limited tracking tools: Limited measurement tools for judging media effectiveness beyond metros reduces the marketers inclination to invest in media in KUT without gauging the value of the same. Volume Markets: As the KUT have traditionally been price-sensitive, volume-driven markets, marketers have relied on price promotions over advertising spends. However, as the consumption patterns change, slowly advertisers are likely to follow. Decision makers bias: Skew towards decision-makers market, which leads to a disproportionate focus on metros by media planners and marketers. Prevailing consumer mindsets: Current high premium on metro markets and English language, due to aspirational value of metros for KUT.
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One of the new directions taken by marketers in allocating ad spends that could be indicative of changes that can be expected in the future is a growing share of BTL in the total marketing spend. The average BTL spends across marketers met was closer to 40 % against about 15 % of marketing spends, just three years earlier. While in the metros, BTL is used because the clutter in mass media is too high and getting audience attention is difficult in KUT, since media options are limited BTL gets a more than proportionate response from the inquisitive consumers. BTL could therefore be one of the factors that could better harness the marketing and media needs of KUT where marketers can use BTL effectively instead of focusing only on traditional media planks which may not be as readily accessible. 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 KUT is the challenge for the marketer. Thus the primary task for the marketers would be to ensure that they can invest in the new and emerging markets and start moving away from current biases that may exist in favor of metro markets. Measurable media solutions could be one of the factors that could ensure that media spends follow the growth potential in these markets. Perhaps that more than anything else, could bridge the gap between potential markets and spends.
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