“I hear people say Indian consumers only want cheap products, making it impossible to build a profitable consumer brand here,” remarked a founder at a startup event. However, this perspective may stem from a misunderstanding of the consumer landscape in India. With a population of 144 crore people, including 120 crore internet users, 30 crore unique UPI users, 28 crore food ordering users, 9 crore online learners, 8 crore income tax filings, and 3.5 crore mutual fund investors, India presents a diverse market.
Analyzing income tax reports reveals that the middle class significantly drives consumption in terms of percentage. While only 0.27 crore Indians earn ₹1 crore or more (growing 50% YoY), 4.65 crore Indians earn ₹5 lakh or more (growing 250% over 2 years). The middle class engages in substantial spending on real estate, education, shopping, and travel.
In the context of a $100 million revenue game in India, there are two options:
Option A → Build a $10,000 Average Revenue Per User (ARPU) for 10,000 Indians.
Option B → Build a $10 ARPU for 1,00,00,000 Indians.
It’s emphasized that a product can’t cater to both ends of the spectrum simultaneously. Many consumer brands find themselves stuck by developing low ARPU offerings and complaining about the lack of market depth. There is no depth for low ARPU, making it essential to choose a specific audience.
The framework to consider includes:
- Build ‘value’ for the right audience, recognizing that not every consumer brand needs to target 10 crore Indians.
- ‘Communicate’ the product value by positioning it either on the lower or extreme higher end, ensuring the target audience deeply understands the product’s benefits and relevance.
- Get them to “experience” the value, as India’s trust deficiency demands genuine proof of a product’s worth before the first purchase.
- Capture the right amount of ‘value,’ making pricing straightforward when the previous steps are well-executed.
Ultimately, the question of who a brand is building for becomes crucial. Asking this question within the team can provide clarity and guide strategic decisions.