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Small towns lead the league for marketers

05-27-2010 10:06 AM CET | Business, Economy, Finances, Banking & Insurance

Press release from: Ernst & Young India

Mumbai, 11 May, 2010: Ernst and Young today released the report, "The New Market Shehers: Tapping Potential Beyond the Metros" identifying the trends in consumption patterns and marketing spends in small town India. The report provides an insight on how non-metro urban markets are becoming more relevant in India's consumption story and how marketers are restructuring their budgets to take advantage of the new urban consumer.

The New Market Shehers: Tapping Potential Beyond the Metros is the second report from Ernst & Young detailing the consumption patterns in small towns and cities for the benefit of marketers. The earlier report, The Dhoni Effect: Rise of Small Town India, released in March 2008, provided a comprehensive view on developments and trends in marketing spend across the Indian market and how marketing decisions are impacting media spends vis-à-vis actual ground realities which directly indicate market growth for India.

According to Ashok Rajgopal, Partner, Media and Entertainment Practice, Ernst & Young, "We are witnessing an enormous opportunity in the non-metro urban markets with a large consumption base which was only marginally affected by the recession and now has enhanced purchasing power. They have now realised the potential of focusing on these non-metro urban markets which are key drivers for future business growth, with restructuring their budgets and services for making best use of this new and aggressive opportunity"

The New Market Shehers: Tapping Potential Beyond the Metros highlights consumption pattenrs of consumers across Key Urban Towns (KUTs) and Rest of Urban India (ROUI). KUTs, for instance exhibit consumption patterns that are similar to those in the metros and there is an increase in the consumption of premium brands and services in the KUTs.

For the New Market Shehers report, India was divided into four geographical categories — the top six Metros (Mumbai, Delhi, Bangalore, Hyderabad, Chennai and Kolkata); the Key Urban Towns (KUTs), which are the 22 cities immediately following the metros in their market potential, e.g., Amritsar, Surat and Ludhiana; cities in the Rest Of Urban India (ROUI) and the KUTs, e.g., Kota, Jalandhar, Jabalpur and rural India.

Key findings from The New Market Shehers: Tapping Potential Beyond the Metros:

Retail presence in the KUTs and the ROUI through organized retail chains and malls has increased considerably

- Over a 2 year period, the percentage growth in the number of malls in the KUT (55%) was more than twice that of the metros (24%). Consumers in the KUTs
show an increasing preference for the premium products and services of established mass brands.

- For instance, the sale of LCD TVs and wellness services is on the rise in the KUTs. Significant uptake in the leisure and lifestyle spends of consumers in the KUTs.

- Men are utilizing wellness services now more than ever before, not just in the big-metros, but also in tier II and III cities.

- Women in small towns are more willing to pay large amounts for age correction, body sculpting and removing skin imperfections etc. The share of the KUTs and the ROUI in newspaper advertising (by volume of activity) in 2009 was higher than 50% across most categories . For categories such as cellular skincare, oral hygiene, hair care and consumer durables, the advertising share is even higher than 75%. The KUTs and the ROUI comprise more than 50% of total BTL activity in the country.

- BTL activity has grown significantly in non-metros (40% in 2009 vis-a-vis 15% during 2007), as compared to the metros (60% in 2009 vis-a-vis 85% during 2007), which indicates the importance of KUTs.

- 60% of BTL activity is concentrated in the ROUI and in rural India with sectors such as telecom, consumer durables and certain categories of FMCG products.
Mobile advertising is also catching up more effectively in the KUTs and ROUI as opposed to person-to-person marketing with more 500 million mobile users base in these regions.

The metros and the KUTs are driving growth in later-stage consumption (higher transaction value products and discretionary goods), the ROUI are driving growth in early-stage consumption (necessities and products with lower transaction value).

Marketers are taking cognizance of this new urban consumer and are aggressively targeting these KUTs and ROUIs, which has resulted in a focus shift in media spends from the metros to the non-metros. This trend is likely to continue with the changing consumption pattern of consumers, fuelled by greater purchasing power.

Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 144,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

For more information, please visit http://www.ey.com/india.

Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

The Ernst & Young organization is divided into five geographic areas and firms may be members of the following entities: Ernst & Young Americas LLC, Ernst & Young EMEIA Limited, Ernst & Young Far East Area Limited and Ernst & Young Oceania Limited. These entities do not provide services to clients.

This news release has been issued by EYGM Limited, a member of the global Ernst & Young organization that also does not provide any services to clients.

Ernst & Young Pvt. Ltd
Block C, 3rd Floor,
22 Camac Street,
Kolkata- 700016

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