MARCH 2, 2003
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Q&A: Kunio Sebata
The President and CEO of the $3.8-billion Hitachi Home and Life Solutions Inc tells BT Online about what it's like to operate independently in India, the company's past relationship with the Lalbhai Group in the air-conditioner market, its faith in joint ventures and its current plans for India.


Q&A: Eran Gartner
As Vice President (Operations), Bombardier Transportation, Eran Gartner, outlines what would make his company such a hot pick to build Bangalore's mass transit system. It isn't just about creating a network and vanishing, he claims, it's also about transferring modern technology to the local operations.

More Net Specials
Business Today,  February 16, 2003
 
 
What's On Her Mind?
That's exactly what the BT-Indica Consumer Confidence Survey seeks to answer. What she intends to buy, how much she plans to save and where she sees prices moving.

What's on her mind is in her shopping bag. Or will soon be. How she feels-confident, unsure, apprehensive-has some bearing on how much she spends, on what and when, and how much she saves.

Which is why marketers look at measures of consumer confidence closely. Going purely by the math of the BT-Indica Research Index of Consumer Sentiment (BT-IRICS), consumer confidence is up a whopping 36 per cent since August 2002. In absolute terms, consumer confidence was a mere 12 then, on a total of 100. Today, it is 16.6. The index (taking 12 as equivalent to a base point of 100) has moved up to 136.

Ergo, consumers feel better today, than they did in August 2002, but 136 doesn't really translate into a feeling of happiness-far from it.

Inside The Consumer's Mind
Numbers, Still...
Pushing The Envelope
Pink Slip Terror
How We Did It

Marketers, those weathervanes that register the slightest turn-of-breeze are aware of this change: "The mood of optimism has grown," says Oscar Braganza, President, Food World Supermarkets, "but it isn't a euphoric movement but a slow gentle one."

There is a rational explanation for the lifting of the gloom: fears of an Indo-Pak war have receded; the economy hasn't imploded like it was supposed to; the Sensex has moved up since last year's lows; the latest reshuffle in the Vajpayee government has strengthened the reforms lobby; even the drought ended up being a near-drought.

Far From Good

Yet, the absence of bad news is not good news. Thus, while pessimism-scores on a host of parameters are down, optimism-scores have barely inched up.

A sampling: The proportion of consumers that feels it will be worse off financially next year, as compared to this year is down 10 per cent, but the proportion that feels it is better off is up a mere 2 per cent. And the proportion that believes businesses have it bad today is down 16 per cent, from 51 per cent in August 2002 to 35 per cent.

The result of this is a there-but-not-yet-consumer: her expectations have gone up but as Soumitra Choudhary, Chief Economist at rating agency ICRA puts it, she "is confused". That's evident in the spend-save equation: the proportion of consumers advocating spending less is up 8 per cent, but that of those that believe it is time to save more is up a mere 2 per cent.

28% believe real incomes will grow this year. And a significant proportion of consumers believe this si the right time to buy a house or a consumer durable

Still, saving and spending aren't mutually exclusive black-and-white options: there's a growing swathe of grey in the consumer firmament, the undecideds, their numbers up a significant 6 per cent.

Their caution is perfectly justified. Finance Minister Jaswant Singh's budget could either reinforce the growing confidence of consumers or nip it in the bud. And paranoia over job security and rising prices rules large.

Businesses, of course, are confident that most consumers believe the worst is over and that the slightest positive sign from the finance minister will trigger a spurt in demand. "There is huge retail money waiting to pour into equities," gushes Jigar Shah, Vice President at brokerage K.R. Choksey. But only if the budget does away with taxes on dividends and long-term capital gains. There are other variables, yes, but in the near-term horizon, it is fears over what Big B holds that influences consumer behaviour. "The wait for the budget is the only thing keeping consumption in rein now," explains Soumya Mohanty, Senior Vice President, Indica Research.

The Worst Is Over

Businesses would like to think otherwise. "Barring a war in Iraq, and only if that leads to an increase in oil prices, consumer confidence doesn't look like facing any reversals," says Shripad Nadkarni, Vice President (Marketing), Coca-Cola India. Marketers, then, are gambling on growth, the consumer's reluctance to break out the bubbly be damned.

Their reasoning: even a one-point increase in the consumer confidence index means things are changing for the better. "All indications point to an inflexion point in consumer confidence," says Dalip Sehgal, Executive Director (New Ventures & Marketing Services), Hindustan Lever Limited. "If January sales hold out, the market will be in a hugely positive frame of mind."

However, marketers would do well to remember that consumer confidence, as measured by BT-IRICS is up since August 2002. On an absolute scale, with zero signifying complete lack of confidence and 100 signifying complete confidence, it stood at 12 in that month. With that as the base, BT-IRICS has moved up to 136 points. That is a significant increase, but only when compared to August. In absolute terms, the consumer is still not very confident. The worst may be over, but it is going to take a while before consumer confidence reaches the level marketers would like to see it at.

The Lag Effect

It takes time for an increase in consumer confidence, a mere blip on the graph, to translate into demand and, consequently, higher sales. Food World's Braganza claims sales of impulse products (as opposed to need-based ones) are up. A significant proportion of consumers believe this is the right time to buy a house or a consumer durable and an impressive 28 per cent believes real incomes will grow this year. That, by itself, should reflect in climbing sales graphs. But only in the right context.

Marketers could provide that context if they focus on innovations instead of depending on promotions.

A freebie, especially an attractive one, could result in an immediate increase in sales but the phenomenon is likely to be temporary. For sustainable long-term sales growth, there's nothing quite as effective as the old fashioned marketing ploy of providing an innovative solution to a consumer problem. Or catering to a very real need. Companies have been loath to do this.

A short-sighted focus on the next-quarter's financial results has caused them to place an undue emphasis on promotions. If consumers haven't gone out and bought televisions or refrigerators, then, it is partly because companies haven't really given them enough reason to.

Jaswant Singh could help. He has already articulated his desire to put more money in the wallets of the working class and housewives. If, on March 1 he is perceived to have done so, expect a further increase in consumer confidence.

Even something as inconsequential (from the macro-economic perspective, that is) as a good performance by India in the Cricket World Cup could lead to an increase in consumer confidence.

And if Singh comes through on February 28, and India on March 23, expect BT-IRICS to go through the roof. It could even zoom from the negative part of the scale to the positive. Forget consumer confidence, that would be sheer consumer delight.

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