Marketing: India's Rich

The men behind the survey, I. Natarajan and R.K. Shukla, of the NCAER call it the Very Rich Whitebook: A Study of Super-Affluent Indian Consumer, 2001. For the literate non-rich who manage to lay their hands on it, it could well have been called The Essential Guide to Keeping Up With The Joneses. And for marketers keen to position their products at the out-of-reach segment of the market, A Practical Handbook of Selling To The Rich (With Special Observations On The Segregation Of The Obscenely Rich).

The numbers may not seem to warrant this excitement. There are a mere 1.058 million households in India that boast incomes in excess of Rs 5,00,000 a year. That number works out to just 0.61 per cent of the 171.9 million households in the country. What's significant, though, is the growth in the number. Two years ago, when NCAER published the findings of its first-ever survey of the rich, there were just 58,317 households that earned over Rs 5,00,000 a year in Mumbai. This time around, there are 1,58,736 households-a growth of 172 per cent.

There's more than numbers, though, in the five categories (and the several sub-categories) of the rich that BT mined from the survey. And that's the fact that the rich normally tend to be at the vanguard of evolving consumer behaviour. That's what makes the rich a fascinating study. Happy reading, patient reader, and don't forget to keep a bottle of antacid handy.

The Sharmas are based in Jaipur. They moved here a year-and-a-half back when Mr. Sharma was offered the post of regional sales manager of the consumer durable major for which he'd worked for the past four years. The Sharmas had no issue moving. Mrs. Sharma was a lecturer in a local college in Agra (where they were based earlier) and she knew finding a job in Jaipur wouldn't be too difficult. It wasn't. Together, the two of them earn around Rs 6,00,000 a year. The Sharmas have a three-year-old son and aren't really thinking of another child. They'd like to invest for their son's education. Mr. Sharma is confident that his company will want him to move to the corporate office (in Delhi) in the next couple of years. Although he will be eligible for company-provided accommodation, the family likes the thought of investing in a small house. Delhi, they're sure is where they'll settle down. The Sharmas have a car-a company-provided Maruti Zen-and are in no hurry to upgrade...

Families like the Sharmas are common across urban and rural India. The bulk of these households are upwardly mobile: their constituents are far younger than those in other categories and are, therefore, far more likely to move up the earnings-curve. In many ways, the (simply) rich are also at the nether extreme of the aspirations-spectrum. Jostling families like the Sharmas for the prime position in this category are dink (Double Income No Kids) households. Unlike the Sharmas, families in this sub-category are likely to spend more on leisure- and entertainment-activities than on future-looking investments. However, across the category, backgrounds are distinctly middle-class; hence, their desire to dissociate themselves from their roots and move up to the hallowed ranks of the super-rich is high.

Parvenus: The Super Rich
Greater than Rs 10 lakh per annum
Total number of households: 3,20,900

The Shankars are a typical North Indian joint family. Papa Uday Shankar, the patriarch of the household is a retired professor (he taught economics, if that's relevant). He has some land in Uttar Pradesh that his younger brother looks after. His wife is illiterate, but runs the household with an iron hand. They have two sons, Pranav, the black sheep of the family who works for a Non-Governmental Organisation somewhere in a village in South India, and Vipul, a manager with an audit firm. Vipul, 35, his wife, Sonia, a research director at a market research firm, and their six-year old daughter Reshma, stay with Mr. and Mrs. Shankar Sr. The family owns a house in Noida. Vipul drives around in a company provided Esteem; his father owns a Zen. The Shankars can afford it, but they don't retain drivers or any other hired-help. Mama Shankar has already started hoarding gold for the granddaughter's wedding. And Papa S is thinking of a European holiday. The family has also acquired a 29" television (replacing the earlier 21" one), and a washing machine recently.

Parvenus like the Shankars are, much like their richer brethren, an essentially urban phenomenon. There's a lesser probability of finding dink variants here, than among the rich. However, that's more than offset by a higher probability of finding richer versions of the Sharmas-software pros, for example, or young MBAs who've just started a family. The unifying characteristic of this category is consumerism. These customers are in the market for a variety of products and services. Some of these-televisions, household appliances, and cars-are upgrades; the rest-houses, foreign holidays-could be first-time purchases. Social-status is critical to the super rich; much of their consumption is, indeed, driven by this.

Meet the Ramamurthys. They're based in Chennai. Mr. Ramamurthy is an executive director in an auto ancillary unit; he is 63, but has the option of continuing to work till he is 70-an option that he will probably exercise. His wife is 57, she is the principal of a city-school. The Ramamurthys have one son, Suresh, 27, who works in the US for a software services company, who, they'd like to see marry well. The couple lives in a typical middle-class neighbourhood in an apartment that they own; Mr. Ramamurthy has a company-provided Lancer; Mrs. R, her own Ambassador. They have no plans to upgrade either home or wheels. Their only indulgence is music, but the hi-fi system they own was gifted by their son the last time he came home. The Ramamurthys visit their son once a year and spend a month in the US. That apart, their monthly household expenditure is something that would do a thrifty middle-class housewife proud. The bulk of their earnings goes into retirement-oriented savings and investments.

The Ramamurthys, fortunately for marketers, aren't representative of the ultra-rich (try telling them you're calling them that and they could be scandalised). Unfortunately, though, it's difficult to arrive at any one representative profile (we picked the Ramamurthys because they stand for everything marketers don't like). The sub-categories range from double-income households where both earning members are middle-level executives, to single-income households where the main earning member (often the male) is a first generation entrepreneur. Why, the category could even include large farmers from prosperous agricultural belts in Punjab or Andhra Pradesh. However, the ultra rich do seem more comfortable being well-off than their less-endowed cousins. They've been rich for some time.

The Kohlis, who live in Bangalore where they moved to 15 years ago, are the archetypal career-minded urban couple. Both partners have made it in their chosen careers. He is the CFO of a city-based liquor major; she is the vice-president of a blue-chip marketing company. They have two children: a 13-year-old girl who wants desperately to be a games designer, and a 10-year-old boy. They own the Mediterranean style villa they live in and have three cars. Mr. Kohli uses a company-provided Lancer; Mrs. Kohli, a company-provided Honda; and they acquired a Safari two years back for the frequent weekend trip. They have a live-in housekeeper, a cook, a part-time maid, and a driver. The Kohlis do not believe in accumulating wealth for their children; they'd rather the kids built careers of their own choosing. They are highly brand-conscious, eat out frequently, and try and take an exotic overseas vacation at least once a year (the last one was to Greece).

The profile of the sheer-rich isn't homogeneous; not everyone is like the Kohlis. The category could include joint families where the three brothers together run a stock broking firm in Mumbai, to a nuclear modern family unit like the Kohlis'. Consumption of services could run high among at least some sub-categories. The incidence of multiple-car ownership is high among the sheer-rich; indeed, some of them could own more than one house (this is far more common among the rural sheer rich who, typically, own a town-house apart from a family-seat). Aspirations in this segment rarely have to do with money; they revolve around social-standing and power.

The Chopras are a typical prosperous Punjabi family based in Ludhiana. Papa Chopra is 66 years old, extremely fit for his age, and quite sharp (although he hasn't had the benefit of a formal education). Mama Chopra is dead; has been these five years. Son number 1 Rahul, is 40 years old and helps Papa manage the farm; he is also a gizmo freak (not the type of consumer you would expect to encounter in Ludhiana); his wife Kavita is a graduate but is content to run the household; she also runs to keep fit, but that's another issue. They have a 11-year-old daughter and a 10-year-old son, both of whom study in the best school in Ludhiana. Son number 2, Romi, is 30 years old and runs a small, but lucrative processed foods business. He's just got married to Rashmi, a 24-year-old post-graduate who is considering setting up a boutique in the city. Daughter number 1, Priyanka is 19 years old and studying. Everyone lives together in a sprawling ancestral home. They employ two gardeners, a watchman, a cook, and three odd-job men. The family has three cars: an Astra, a Gypsy, and a Zen. Apart from this house, they own a swank apartment in Delhi's Gulmohar Park area, which Papa Kohli uses whenever he is in Delhi. The patriarch is considering settling down there in an effort to see his family's integration into the capital's smart-set.

First-generation entrepreneurs, families that have been in business for decades, upstarts who've made it big thanks to killings on the market, tech-nerds, rural land-owners... the list of sub-categories that fall under the larger grouping of the obscenely rich is almost endless. Apart from few exceptions, there's little to distinguish individuals in these households from the rich in developed countries. However, the obscenely rich crave exclusivity in what they buy (and where they buy). Ergo, only the most premium of brands are relevant to them.

10 tips on marketing to the rich...
...and the super-, ultra-, sheer-, and obscenely-rich

1. Don't ignore the profitable niche. In absolute terms, the number of the rich may seem small, but it's one that increases rapidly. As B.V. Pradeep, Head, (Market Research), Hindustan Lever Ltd, puts it: ''We cannot overlook consumers at the top-end as their numbers are growing. They represent a lifestyle which, while it may not be emulated, often sends out cues (to other segments).''

2. Never assume the customer can't know. Market-segments could surprise you with their adoption of consumer-habits considered 'premium'. Says Dipankar Gupta, Professor of Sociology at Jawaharlal Nehru University: '' You will not find people completely alien to nuances of lifestyle as they were 10 years ago. Everyone is aware of fads; they may reacting to them though cheaper variants, but their influence is visible.''

3. Don't be driven by customer stereotypes. If you're the type of marketer who is keen to pigeonhole customers, you could be in for a rude awakening. Explains Varsha Dalal, Executive Director, Baccarose, a company that vends high-end perfumes and colour cosmetics: ''In our minds, we had created an image of a subdued, God-fearing south Indian, but Chennai was a surprise.''

4. Value matters, especially in premium offerings. Those myths about the Indian fetish for value are all real. Avers B.V.R. Subbu, Director (Marketing & Sales), Hyundai: ''If consumers here can see the logic for paying a premium, they will.''

5. The rich have a different spending-hierarchy. As the household's income increases, the proportion of it that is spent on household products tends to reduce. Their involvement-level with household products like soap, detergents and foodstuff comes down, and their out-of-home activities increase.

6. Social acceptance and status are powerful hooks. The rich (especially the recently rich) crave these. Points out Anand Halve, Brand Consultant, Chlorophyll: ''Many display all characteristics of the suddenly affluent. Often, status is sought through finding daughters-in-law who are 'convent-educated' and dabble in art, boutiques, and the like-things that add to the family's (social) profile.''

7. A premium offering doesn't stay that way for ever. Incomes are forever on the rise; so are customer expectations. Thus, to truly retain its premium positioning, a company has to constantly redefine what it means by premium-much like Mercedes Benz India. Three months ago, its most-premium offering was the E-Class (Rs 33 lakh); today, it is the S-class (Rs 59 lakh).

8. Consumers across income-groups could have similar definitions of premium (at least for certain categories). Thus, both the sheer-rich and the rich could define the premium, in terms of shaving systems as the Mach 3. Better still, both could be using it. However, the same won't obviously hold true for something like cars (or even watches).

9. Avoid generalisations. Not every double-income household that falls into any one of the 'rich categories' buys packaged foods. Indeed, most of them may have cooks who do not usually believe in using such products.

10. Understand the linkages. In general, the rich crave 'specialist' products and services; are keen on personal grooming; and place some degree of importance on health and fitness.

METHODOLOGY

The National Council of Applied Economic Research (NCAER) used a multi-stage stratified sample design for this survey. For rural India, from every district, two villages were selected. All households in these sample villages, totalling 88,199 formed the rural sample. For urban India, the Market Information Survey of Households (MISH) was used. In all, 1,82,799 households in urban areas were surveyed. Apart from information on consumer goods, MISH collects data on household income. In 1998-99 the income classifications were: low-up to Rs 35,000 per annum; lower middle-up to Rs 70,000; middle-up to Rs 1,05,000; upper middle-up to Rs 1,40,000; high-over Rs 1,40,000. However, despite a large sample size, it has not been possible to extend the MISH-derived income distribution beyond Rs 1,40,000 a year to give estimates at higher income levels. The principal reason is the small cell sizes. "But we attempted a theoretical model approximating the empirical frequencies obtained through MISH with a theoretical distribution," says Mr. I. Natarajan. This theoretical distribution was extended for the desired income ranges.