Micro-Marketing

It’s no secret that when the iTunes store sells you songs at 0.99$ /song, the Music companies in fact make more profit per song than on sales of entire CDs.

The way this model works is focusing on volume capitalizing on the fact that smaller quantities make up greater profit margins.

In my country (India), this very same model goes into consumer products and has made huge changes in the entire market.

In a country with a population of more than a Billion, where 70% of the population lives in Rural India, the focus for the Indian market has always been value-for-money.

Shampoos, washing powders, liquid soaps, shaving creams and even tea are sold in small sachets, which research has shown ,makes up for upto 70-80% of their total sales (this is consistent across all companies, right from Dabur, the Lever Brothers, to P&G).

It’s unbelievable how successful this model is. Let’s try to analyze the reasons for its success.

Reason 1: Saving is a part of the Indian Population’s culture. Right from an early age, kids are taught to save and spend wisely.(not in a miserly fashion, but wisely) . As a result of this, when there is a perceived value-for-money opportunity in the purchase of a certain product, it becomes a hit.

Reason 2: Companies in reality, tend to make more profits in the long run

200 ml = 120 Rs

6 ml sachet = 3 Rs

So, if one does the math, the companies tend to make greater profits in the sales of sachets.

Reason 3: Low-income groups too have a desire to try out premium products. Since affordability is an issue, they earlier wouldn’t have even considered trying out these premium products. However, the sachet gives them an opportunity to get to know about quality products as well.

Reason 4: Since Indian consumers have a value-for-money mindset, they always like to try out premium products in order to see if it’s really worth the price. The sachet lets them try out these products.

This model is now going beyond sachets too.

Even cell-phone providers such as TATA docomo are providing micro-plans and charging on a per-second basis instead of a per-minute basis. And some other cellphone providers are charging on a per-day basis.

Micro-finance has transformed the world in more ways than one could ever expect.

So this decade has been the decade of the micro and it wouldn’t be wrong to say that the more we try to introduce micro-concepts into different areas of marketing, the higher the chances of success.