Managing aspirations: Setting a price point as design criteria

This Economic Times article highlights one of the most fundamental issues in entering the Indian marketplace. Any experienced Indian marketer will tell you that Indians are some of the most value conscious consumers in the world. What I found interesting is not only the articulation of this characteristic, but also the need to set the price point for a product or service as part of the design criteria. That is, considering the final costs and margins as essential elements in the product development lifecycle. Worth looking at for other bottom of the pyramid segments and emerging markets.

Here are some tasty titbits,

In segments like durables, many of these products are targeted at the lower end. The ‘India price’ is among the lowest price points at which a product is sold anywhere in the world. However a more serious issue is incorporating features that excite customers while maintaining a reasonable price line.

While the top level of consumers in India pose less of a problem, and are similar to their counterparts elsewhere in the world, those at the lower end want at least some of the features that are de rigueur in more expensive models.

K Ramachandran, CEO – India, Philips, agrees, “Even people who are at the second and third tier economically are very aspirational. They won’t buy a cheap product but want the best at an affordable price — not just functionality but looks, convenience, reliability and the brand.”

Price is almost never the starting point of product development but plays a very significant role.

[…]

In the case of durables, Rakesh Sharma, head – domestic appliances and personal care, Philips says that after the consumer insights generation process there’s always a price point which becomes sacrosanct: “As the concept gets realised, we find some elements are more powerful while others are merely good enough — the price may change but remains within a bandwidth.”

It’s interesting to note that one can’t just sell cheap stripped down products anymore to the ‘aspirational’ segment Neelakantan brought up in the previous post. There’s evidence that economic growth in India won’t be a top down approach – but a bottom up filtering through ambition and perseverance. Sure, the trickle down theory espoused by Jagdish Bhagwati still applies, in that, as overall wealth increases in India, it will bring up the level across all socioeconomic segments.

Veg_shop

But in terms of motive power, ‘fire in the belly’, aspirations, stories of young men struggling under adverse conditions to gain admission in the IIT’s – the idli seller and the illiterate rickshaw wallah’s son – and thus raise their family’s standard of living, embody what is truly driving India’s engine of growth. This is a far cry from China’s rural population and the strictures under which they live.

Neelakantan covers this spirit in his post I’ve linked to earlier, on mobile phones, mopeds and microentreprenuership. And BusinessWeek’s article has an interesting snippet on a pavement vegetable seller, much like in photo, choosing to invest in a high end phone to increase his business opportunities.

Jeevanlal Pitodia is equally smitten with Nokia. The 27-year-old Bombay fruit vendor used to spend his days pounding the pavement in the city’s alleys, hawking oranges, apples, and bananas. Last September, Pitodia ponied up $56 for his first handset, a simple but sturdy Nokia 1100. Now he sits under a colorful beach umbrella, earning as much as $10 a day taking orders by phone for both himself and nearby vendors. "I tried many phones, but Nokia is the most user-friendly," says Pitodia. "I am the only one in the footpath with a mobile," he says proudly.

Interesting to me, is that it’s not the brand that is the story here, but what the phone itself is doing for the ‘aspirant’.

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