India: Brands Need to Tap into the Word-of-Mouth Phenomenon

By September 29, 2014
Keywords : Future of Retail, India, Asia

In India word-of-mouth is a much more dominant channel for obtaining information on brands than in other countries. Retailers and other companies need to refine their marketing strategies in order to take advantage of this unique phenomenon.

India is now the second most populous country in the world, with over a billion inhabitants. While economic growth has been slowing since 2012, now standing at around 5% per annum and estimates indicate that India needs to grow by 10% a year in order to surmount its widespread poverty, this is still one of the biggest consumer markets worldwide. It is also a hotbed of enthusiastic brand advocates: Indian people tend to recommend brands to a much greater extent than most other nationalities. This is among the most recent findings by the Boston Consulting Group (BCG) Center for Consumer and Customer Insight, following a survey conducted among 13,000 consumers in India to try to understand their advocacy behaviour across more than 100 brands in 16 categories. Brand marketers know that word-of-mouth can be key to brand awareness and according to BCG this is especially true in India. In order to study the phenomenon, BCG has created its Brand Advocacy Index (BAI), which measures the correlation between drivers of product recommendation and brand performance across multiple product categories. The BAI is designed to help marketers re-vamp the strategies they use to enhance brand awareness. 

Indian society strongly geared to word-of-mouth

India’s population is characterised by a social stratification system which historically separated communities into thousands of closed hereditary groups called jatis, usually translated as ‘castes’, which are traditionally grouped into four major castes called varnas. Some jatis are however defined less on hereditary clan affiliation than on job functions and/or linguistic groupings. Experts suggest that this community-based structure tends to create close personal ties which in turn facilitate day-to-day conversations about product brands. The BCG report points out that for Indian consumers, the opinions of friends and family are by far the most important information source when they are planning to make a purchase. The survey results show that Indian consumers are much more active product advocates than people in countries such as the US, the UK, France and Germany. For example they are more than three times as likely to recommend a bank as consumers in those four countries and twice as likely to offer an opinion about a mobile operator. Moreover, over half of all Indian consumers make brand recommendations, whether or not they are in fact customers of that particular brand. Typically, fans of luxury cars, for instance, frequently proffer recommendations without actually owning one. Brands clearly need to take account of this ‘offline’ information market fed by word-of-mouth when they draw up their marketing strategy, underlines BCG.

Challenges and opportunities for brands

The kind of social stratification that is widespread in India certainly gives brands something to think about and there are clearly opportunities to shape their marketing approach so as to benefit from the word-of mouth factor. The BCG research finds however that the intensity of individual brand advocacy also depends on income levels. What BCG calls ‘Affluents’ – people with incomes greater than $18,500 a year – recommend on average 40% of the brands they are aware of, while ‘Aspirers (with incomes of $7,500 to $18,400 a year) recommend just 32% of the brands they know. Marketers therefore need to spot the people who have the greatest influence and segment these groups further so that they can identify communities of people sharing the same passions and interests. BCG points out that communities based on shared passions develop strong emotional engagement among their members, an environment in which word-of-mouth advocacy functions extremely well. While trust in the brand and value for money are very important to Indian consumers, BCG also concludes from its survey that the particular attributes of the product or service – such as customer service in the financial sector – are the most important factors driving advocacy. Brands may still struggle to identify the right segments to drive growth, as consumers make their recommendations both off- and online. Nevertheless, focusing on and tapping into word-of-mouth brand advocacy will increase their chances of thriving in the Indian market.

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