Decoding Indian Consumers

In this blog, I will be discussing in detail the different types of Indian consumer segments. I will also explain why understanding this framework is important for aspiring entrepreneurs. Additionally, I will discuss the three paths that have helped people in India achieve social and economic mobility.

Do you know? The sum of all the money consumers spend in India to buy goods and services is around 60% of India’s 3.4 trillion dollar GDP. Indian consumption is such a large market space; many have tried to become successful entrepreneurs, but only those who understood the different consumer segments and their needs in the market were able to make a mark in the Indian consumer space Indian Consumer Segments can be broadly divided into three categories which are India 1, India 2, and India 3.

India 1 constitutes approximately 12 crore people with a per capita income of around 10L. India 2 constitutes approximately 10 crore people with a per capita income of around 2.5L. India 3 constitutes approximately 120 crore people with a per capita income of around 1.25L.

Even Within India 1, there are two segments, India 1 Alpa with 2.5 crore people with a per capita income of around 30L. India 1 Beta with 9.5 crore people with a per capita income of around 5L.

So, Why is it important to understand these different customer segments?

Due to varied Income levels among 3 India, the amount of a household’s income left over after taxes and necessary expenses is high among India 1, this discretionary income gives more purchase power to India 1. Almost 50–60% of the consumption is done only by India 1.

India 1 purchases around 100k Items, India 2 purchases around 10k items, and India 3 purchases around 1k items.

Remarkably, a small percentage of users drives a disproportionately large portion of certain industries’ activities. For instance, 1% of Indians make up 45% of all flights, and 6.5% of people account for 44% of transactions in online UPI payments.

This is the reason STARTUP companies like CRED, DUNZO, OLA, and ZOMATOE, and many others started with the India1 customer segment as their Target because they are the most monetizable users & regular transactors with a more digital presence.

Premiumization and massification of Luxury are the key approaches to winning India 1. Experts say that the pattern is clear in India 1, If Your product and Go-To-Market Strategy are Good, then it is more likely to be Successful in India 1.

Does it mean Startups should focus only on India 1? Answer is No

Its founder’s vision & choice, they can cater products or services to any consumer segment they want but They should understand the paying capacity of different consumer segments and they need to have unique insights regarding why customers will pay for a certain product or service.

To gain unique insights, they need to understand the different types of Consumer needs and find how they will cater solutions to different consumer segments.

Products like Flipkart & Paytm have succeeded in both India1 and India2 By working on offline features, modes of payment, and vernacularization.

A good example of payment is Dream 11. It has used a micropayment strategy to monetize users from different segments selling its product from 10 to 25K rupees catering to all the consumer segments of the country.

A good example of vernacularization is Sharechat.

If your product is catering to a universal need, such as basic needs or connecting to another person or financial security then it might work on all segments including India 3. A good example would be WhatsApp. Finally, By understanding the different consumer segments & their needs, You can build tailored products with better market fit, smart pricing, and precise marketing.

Three “E”s which acted as traditional axes of advancement

1st E is Education: Having acquired advanced knowledge in one’s specialization, industry, and business in the past made individuals more skillful and high-paid employees. 2nd E is Exams: Successfully clearing exams like UPSC, JEE, TNPSC, etc., played a pivotal role in helping people achieve social mobility. 3rd E is Entrepreneurship: Initiating and cultivating one’s own business ventures in the past empowered individuals to create wealth, drive innovation, and attain economic mobility on their own terms. Hope you find this helpful. Please feel free to share your thoughts & feedback in the comment section.

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https://www.linkedin.com/in/isanthoshgandhi

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Sources & References

1. Blume IVC Report 2023 https://blume.vc/reports/indus-valley...

2. India 1 https://medium.com/hackernoon/india1-...

3. India 2 https://sajithpai.medium.com/india2-e...

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