Consumer Marketing Strategy


Thursday, August 23, 2012

A consumer marketing strategy is a kind of plan that businesses pursue to try to maximize profit by matching their products with the individuals who are most likely to buy or use them. A consumer marketing strategy is part of a greater marketing strategy that includes branding opportunities, outreach, product development, multimedia marketing, and other aspects of general marketing. Many businesses are adopting consumer oriented marketing strategies because they are so often useful in leading to higher sales and profits.

There has been an interminable controversy about the dimensions and contours of the middle class in India, the central theme and the target of the new markets of India. It is believed that most of the MNCs are coming to India tempted by the size of the middle class. While different numbers are flaunted by different informed and uninformed agencies and by different tribes of macroeconomists, corporate planners, market strategists, MNCs, international CEOs, consultants, database generators, social activists, one overlooks the fundamental element, the definition of the middle class. In its absence, of the delimitations, the widely divergent numbers are devoid of relevance as an effective indicator of the market place for the market operator.

The liberal number of 250-300 million is not without a basis if one assigns the attribute of all non-manual workers and their families constituting the middle class, which is the widely used connotation. There is also by implication the attribute of education which is moderated by income levels. If the middle class is the class of people who have the purchasing power to go in for the upper-end premium priced globally marketed products like Honda City, Philip's music system, Kellogg's raisin-ladden breakfast cereals every morning, or Ray Ban sunglasses, the size of the middle class is much smaller. On the other hand, if one were looking for the larger number, oft-quoted, it is necessary to define it differently more precisely and meaningfully.

There is another dimensional issue. The head-count of buyers does not delimit the market size. Basically, there are three delimiting elements - spendable purchasing power, time horizon (with changing price levels) and the market awareness level. Devoid of these elements, any number is good for a coffee house Tete-A-Tete or a political or business conclave address; it is no good for the corporate planner, institutional or corporate investor or the market strategist.

The National Council of Applied Economic Research (NCAER), New Delhi, has done some commendable work in studying the market structure of products - both durable and non-durable and lately in identifying the economic status of the consumer classes. As a part of this exercise, NCAER undertook a survey of households in 1986 entitled Market Information Survey of Households (MISH). The objective was to estimate the size and structure of the market for consumer durables and non-durables. The first round of the survey covered a sample size of 500,000 households covering all districts in India. However, since 1989-90, the sample size was reduced to 300,000 households.

Criteria of Economic Status of Consumers by Income Levels in India

If the markets were defined as set out in the foregoing delimitations, there were four major classes:

1. The Affluent: mainly those with high incomes from business (including domestic and international trade, agency and brokerage business), agriculture or property; some professionals such as well-paid lawyers and doctors, architects, chartered accountants, service providers, consultants; top-level executives of business and other organizations; politicians and bureaucrat

2. Total Middle Class: constituting three segments of upper middle, core middle (sandwiched between the upper-end and lower-end segments) and low middle, with purchasing power and styles of living distinctively divergent among them.

3. The Poor: excluding those below the poverty line with very limited purchasing power.

4. The Market Outcasts: those below the poverty line who have practically no purchasing power beyond meeting the basic essentials of life. Many of them live on doles in one form or another, often subjected to a high degree of economic exploitation by other classes.

One could consider bracketing the affluent and the upper middle class as there is a fair amount of commonality in terms of consumption pattern between the two.

Target Markets

As indicated, any income distribution has a time horizon. If one were to look at the immediate market, it is one dimension; if one visualises it at the end of a quinquennial or a decade, it is another with perceptible restructuring between groups.

Admittedly, there are perceptible shifts, from lower to the next higher class category. The shifts are due, among other factors, to the additions of earning members in the family or access to supplementary income sources, such as returns from investments, secondary profession or vocation or other sources - some unethical, even illegal and spurious. These shifts are a complex process and depend on GDP growth, growth of disposable incomes, inflation, disintegration through socio-economic change and earner-mobility and relative demographic changes. While demographic expansion and disintegration of the family and inflation contributes to the expansion of the same or lower income strata, the increase in disposable incomes contributes to the diminution in the same strata and to the expansion of the higher strata.

There are two more parameters:

·         Changing consumer behaviour

·          Market awareness.


The distinction between individual and the family consuming unit is vital and has to be recognised. This is more so in the case of durables. Against 390 mn people in the segments covering the middle class and above, the number of households was 82 mn only. These cover both urban and rural areas. Higher middle and the upper-end affluent classes represented only about 80 mn people or just 18 mn buying units. This could mean, by implication, that the market of high premium products, such as households durables, is limited to the latter number only. The core middle class responds by a large number - 106 mn with 25 mn households.

The affluent have access to all products. The price elasticity is low. Any price is good so long as the product is needed. And it is needed because the perception is that it is needed, not necessarily that it is really needed. The upper middle and the affluent classes are the real targets of the accessories of an emerging lifestyle. The quality is material. In many cases, ego satisfaction via status symbol is the principal motivation.

The core middle class is the real middle class excluding the affluent and the poor. If one were to add to it the 45 mn of the higher middle and 35 mn of the affluent, one gets the size of the market for a large number of affordable products.

The low middle class - basically but not limited by any means to the white collar workers - constituted a large number of 204 mn or about 39 mn households. They had some disposable income for processed or manufactured products. But the purchasing power was limited after normal consumption expenditure on primary products, social expenditure including those for festivals and weddings and some investments, mostly in real estate and jewellery. The poor have practically no disposable incomes except for buying essentials. But this does not mean that they are out of the market for manufactured products. In fact, for some products, they constitute a big source of demand.

Source: NPCS Team



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Ø  Market Study and Assessment

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Project at a Glance

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  •    Plant Economics

  •    Production Schedule

  •    Land & Building

            Factory Land & Building

            Site Development Expenses

  •    Plant & Machinery

             Indigenous Machineries

            Other Machineries (Miscellaneous, Laboratory etc.)

  •    Other Fixed Assets

            Furniture & Fixtures

            Pre-operative and Preliminary Expenses

            Technical Knowhow

            Provision of Contingencies

  •   Working Capital Requirement Per Month

             Raw Material

            Packing Material

            Lab & ETP Chemical Cost

           Consumable Store

  •   Overheads Required Per Month And Per Annum

         Utilities & Overheads (Power, Water and Fuel Expenses etc.)

             Royalty and Other Charges

            Selling and Distribution Expenses

  •    Salary and Wages

  •    Turnover Per Annum

  •   Share Capital

            Equity Capital

            Preference Share Capital


  •    Annexure 1:: Cost of Project and Means of Finance

  •    Annexure 2::  Profitability and Net Cash Accruals


                Expenses/Cost of Products/Services/Items

                Gross Profit

                Financial Charges     

                Total Cost of Sales

                Net Profit After Taxes

                Net Cash Accruals

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                Current Assets

                Gross Working. Capital

                Current Liabilities

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                Working Note for Calculation of Work-in-process

  •    Annexure 4 :: Sources and Disposition of Funds

  •    Annexure 5 :: Projected Balance Sheets

                ROI (Average of Fixed Assets)

                RONW (Average of Share Capital)

                ROI (Average of Total Assets)

  •    Annexure 6 :: Profitability ratios


                Earnings Per Share (EPS)


             Debt Equity Ratio

        Annexure 7   :: Break-Even Analysis

                Variable Cost & Expenses

                Semi-Var./Semi-Fixed Exp.

                Profit Volume Ratio (PVR)

                Fixed Expenses / Cost 


  •   Annexure 8 to 11:: Sensitivity Analysis-Price/Volume

            Resultant N.P.B.T

            Resultant D.S.C.R

   Resultant PV Ratio

   Resultant DER

  Resultant ROI

          Resultant BEP

  •    Annexure 12 :: Shareholding Pattern and Stake Status

        Equity Capital

        Preference Share Capital

  •   Annexure 13 :: Quantitative Details-Output/Sales/Stocks

        Determined Capacity P.A of Products/Services

        Achievable Efficiency/Yield % of Products/Services/Items 

        Net Usable Load/Capacity of Products/Services/Items   

       Expected Sales/ Revenue/ Income of Products/ Services/ Items   

  •    Annexure 14 :: Product wise domestic Sales Realisation

  •    Annexure 15 :: Total Raw Material Cost

  •    Annexure 16 :: Raw Material Cost per unit

  •    Annexure 17 :: Total Lab & ETP Chemical Cost

  •    Annexure 18  :: Consumables, Store etc.,

  •    Annexure 19  :: Packing Material Cost

  •    Annexure 20  :: Packing Material Cost Per Unit

  •    Annexure 21 :: Employees Expenses

  •    Annexure 22 :: Fuel Expenses

  •    Annexure 23 :: Power/Electricity Expenses

  •    Annexure 24 :: Royalty & Other Charges

  •    Annexure 25 :: Repairs & Maintenance Exp.

  •    Annexure 26 :: Other Mfg. Expenses

  •    Annexure 27 :: Administration Expenses

  •    Annexure 28 :: Selling Expenses

  •    Annexure 29 :: Depreciation Charges – as per Books (Total)

  •   Annexure 30   :: Depreciation Charges – as per Books (P & M)

  •   Annexure 31   :: Depreciation Charges - As per IT Act WDV (Total)

  •   Annexure 32   :: Depreciation Charges - As per IT Act WDV (P & M)

  •   Annexure 33   :: Interest and Repayment - Term Loans

  •   Annexure 34   :: Tax on Profits

  •   Annexure 35   ::Projected Pay-Back Period And IRR