The 1.2 Billion People Trap

I always laugh when I get an email or phone call from someone telling ME how big of an opportunity India is for XYZ… Part of me wants to puke on their business plan, but part of me does believe India has vast opportunity if an idea is executed correctly.

Most of the conversations go like this “I was in India for 2 weeks and everyone has a BlackBerry or iPhone…wow 1.2 billion people, if I capture 1% I’m golden…” or “there is a large captive audience if we streamline service XYZ.”

Let’s examine each thought process in detail. The person in the first example probably stayed at a 5 star hotel and dealt with people that most likely are high earners.  That is not the real India, this individual is going to be shocked at how small the actual target audience is.

The second assumption is someone looking at a problem from a US/European point of view and applying it to India. An example would be mobile phone networks in India, right now India is adding 10 million new mobile users a month.  Mobile operators are not concerned about retaining customers or streamlining customer interactions, instead their biggest issue is their infrastructure cap-ex spending.

For ANYONE looking to start a business or expand their current business in India, I would highly recommend the book “We are like that only” from Rama Bijapurkar. It will get you to start thinking about your REAL market size opportunities and not fall into the 1.2 billion population trap.

Rama highlights 3 types of consumers in India based on income distribution: premium (10%), popular (30%) and discount (60%)…yes, most Indians are “value buyers.” When I hear Ferrari, Gucci or some other high end product is coming to India, you can assume it’s going to be a loss leader for many years to come.

Chapter 7 is where the action really starts with the SEC codes, what are SEC codes? Socio-economic codes (SEC) is a way to classify and segment the entire 1.2 billion people running around India. Those folks who want to sell Ferrari’s and Gucci bags will be bummed to find out their target audience is classified as SEC A1 which contains only 2 million households and 10 million people…what a let down.

Rama is very quantitative driven with her research and I was hoping for more actual case studies. However, the book is a must read for anyone looking at India or wants a PhD in number crunching India’s social graph.