Is the Indian Consumer Willing to Pay More for better Customer Experiences?

Posted by Amrita Bhattacharyya | 14 Dec 2012
customer satisfaction

Customer engagement in India is fundamentally different from customer engagement in mature markets.  Unlike the mature markets that are plagued with stagnant growth rates and a saturated pool of customers,the Indian economy has had healthy growth and a seemingly endless supply of new customers.  The expanding middle class and the emerging affluent[1] with higher levels of disposable income have fuelled an unprecedented growth curve for Indian businesses.  However circumstances are changing – the IMF recently reduced the growth estimate for India down to 6.1%[2] from the revised growth rate of 6.8% announced earlier in the year.  While still growing at a healthy rate compared to the mature economies, India is now facing a slowdown.

The questions smart businesses are asking themselves:

  • What can we do differently to maintain our revenue streams and profit margins in the soon-to-be-new normal?
  • Will the traditional approach of focusing business strategy on customer acquisition still work during the slowdown or should the focus be on retention of the most profitable customers?

The answer is not quite simple.  The typical Indian consumer is a discount shopper.  Bargain hunting is a favourite national sport, second perhaps only to cricket.  So it is not surprising that the predominant strategy of customer acquisition and retention has been based on pricing.  To drive greater customer loyalty, retailers are investing in building company and coalition loyalty programs with some success.  As Shopper’s Stop[1] discovered, even their most loyal customers time their purchases to Sales.  Shopper’s Stop now allows their most loyal customers to pick a Personal Sale Day of their choice every year and offers them discounts for that one day.

customersIn mature markets, differentiation based on pricing and product alone is no longer a sustainable strategy. Several companies have beaten the economic odds by offering differentiated customer experiences.  Research conducted by RightNow[1] (now part of Oracle) last year revealed that 86% of customers are willing to pay more for greater customer experience.

The billion dollar question is – Is the Indian market reaching that stage where the Indian consumer is willing to pay more for better customer experiences? 

Forward-thinking companies across service-based industries in banking, telecom, hospitality, airlines, and insurance are already anticipating such an eventuality. They have started leading the curve on the customer experience management in anticipation of a changing consumer landscape in India.

In the banking industry, where product offerings are largely standardized, Indian banks are now seeking differentiation through service experience. Standard Chartered Bank, India’s largest international bank, launched India’s first instant online credit card approval solution, which enables a customer to apply for a card online and receive an “Approval In Principle (AIP)” almost instantly. The experience here being remarkably different from the manual, paper intensive, and intrusive approval processes in place today at most banks.  ICICI Bank’s (“Hum Hain Na”) and Union Bank of India’s (“Good people to work with”) takes a different approach by focusing on trust, dependability, and superior quality of service as differentiators. In the airlines industry, Indigo Airlines has outstripped their competition with emphasis on customer experience with on-time arrivals, easy walk-on ramps, a well-groomed westernized crew, modern menu, and more.

One Indian company that has demonstrated that the Indian buyer is willing to pay more for customer experience is Tanishq.  Established in 1995 as a high-end branded jewellery retailer, Tanishq has become the most valued jewellery brand in India.  Through a differentiated customer experience – well designed exclusive retail showrooms, complementary nation-wide service, and a generous loyalty program – Tanishq has persuaded a lot of Indians to leave their traditional jewellers and go with Tanishq despite higher prices.

Much like their global counterparts, the Indian middle class is well informed, social, and influential.  However, traditionally, the Indian customer has been conditioned to be less demanding of the experience delivered.  Therein lies the opportunity to surprise and delight prospects and customers.

Offering differentiation through experience will have greater impact on Indian customers compared to their western counterparts, who are accustomed to high levels of service delivery and have even greater expectations, thereby increasing brand loyalty. Certain segments of the customer base might even be willing to pay more for a white-glove treatment. The key to sustaining profitability during economic uncertainty will be to identify the right target customers and defining the right experiences.

Differentiated customer experience as a source of revenue?  That is an idea whose time has come for the Indian markets.

[1] Indian middle class: the emerging affluent, LiveMint.com Posted: Thu, Mar 15 2012
[2] Mint, 17-07-2012, Emerging Markets Get a Wake-up Call, Asit Ranjan Mishra
[3] As presented at the Loyalty Summit, February 2012, Mumbai
[4] RightNow Customer Experience Impact Report 2011

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3 Responses to Is the Indian Consumer Willing to Pay More for better Customer Experiences?

  1. Amrita says:

    Thanks for the comment. You bring up an important point. I agree that Customer Experience depends on the vertical. I also agree that at the very high end hotels, customer experience delivered is probably superior or at least equivalent to comparable hotels in the mature markets. Part of this is cultural, a combination of our fuedal past and our values “Atithi Devo Bhava”(Guest is God). I wonder if that is the same for mid to lower tier properties. However, I question your comment about airlines in India. My experience has been uniformly disappointing with Economy travel and slightly better with Business and First Classes. Apart from stalwarts like Singapore Airlines, there is remarkable uniformity in customer experience across the world.
    But focusing for a minute on the broader landscape of customer experience in India, I have found most customer facing resources to be uninformed and under trained to support the products and services they handle. So except for a selected few that are standouts I believe that there is a lot of ground to be covered in terms of efficiency and effectiveness.

  2. Anil Pillai says:

    Two quick comments. The assumption that the Indian shopper is significantly discount driven is not entirely true. Yes,it is a widely held belief,but backed with little empirical data.
    Secondly, differentiation customer experience as a source of revenue, this entirely depends on what that differentiation delivers on ,towards enhancing the brand’s marketing mix.
    Both the above observations come as an outcome of deep engagements we have with customers in India on Customer Experience.

  3. Amrita says:

    Hi Anil,
    Thanks for the comments. I believe that the Indian market is at the point of inflection in terms of customer experience. We are nearing critical mass of customers that are starting to look beyond the price point. These customers are likely to pay more for ease of doing business, richer experiences, and superior engagement. However companies are still lagging behind designing and delivering differentiated customer experiences to their customers. The large majority of companies are primarily focused on customer acquisition (and related customer experiences) and less so on other parts of the customer lifecycle. Companies that recognize the inflection point and reorganize their businesses accordingly will be the ones left standing as the Indian economy grows and matures.
    I would be very interested in hearing more from you regarding research, case studies, and examples of Indian buying behaviour that counters the generally held belief of the Indian customers being primarily value driven, excluding the ultra HNI segment of course.

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