Brands should look beyond India's main cities

14 May 2010

NEW DELHI: Advertisers hoping to make progress in India should look beyond the biggest cities in the country, according to new research by Ernst & Young.

The business services firm compared consumption habits in six of India's premier cities – Mumbai, New Delhi, Bangalore, Hyderabad, Chennai and Kolkata – with its 22 biggest up-and-coming urban centres.

It found that its sample as a whole generated 70% of all urban consumption in the Asian nation at present, including 27% that was directly attributable to the six top-tier markets assessed.

With regard to the retail sector, the report stated that the number of modern chains and shopping malls in cities such as Mumbai and Hyderabad had increased by 24% in the last two years.

However, this rate of growth stood at an even more impressive 55% for the next tier of cities, which have attracted a variety of companies seeking to expand their reach.

More specifically, residents in this latter group of cities have been largely unaffected by the recession, boosting discretionary purchase levels and demand for branded, premium goods such as LCD TVs.

By contrast, shoppers in the country's most densely populated conurbations are focusing more on necessities and low-value items at present.

More than 50% of urban adspend is dedicated to the cities that featured in Ernst & Young's analysis, with the six biggest areas seeing their share of this figure fall from 85% in 2007 to 60% in 2009.

Overall, 60% of total advertising expenditure in India is invested in smaller cities and rural regions, which are often targeted by firms in the durables, telecoms and FMCG categories.

"Marketers have now realised the potential of focusing on these non-metro urban markets," said Ashok Rajgopal, partner, media and entertainment practice, Ernst & Young.

"Considering that media rates are much lower in non-metros, the shift in volume of marketing spends is even more significant."

Mobile advertising is also gaining ground across India, as the potential audience for this channel continues to expand having already reached 500 million people in the cities studied by Ernst & Young.

Data sourced from Afaqs/Livemint; additional content by Warc staff