The Programmatic Globe: India

Our head of Global Advisory Services goes deep on the state of programmatic and e-commerce  in India.

Here at Sociomantic, we’re lucky enough to get to work with marketers in over 60 countries, helping them from our 17 offices around the globe to take advantage of the many benefits of programmatic advertising technology powered by local market expertise. In working across these diverse regions, one thing has become crystal clear: when it comes to e-commerce and programmatic marketing, no two countries are alike! And no one has a better view on the differences and eccentricities of these different markets than our VP Global Advisory Services, Lothar Krause.
That’s why we’ve invited him, with support from each of our local teams, to share unique, market-specific insights about the ins-and-outs, the ups-and-downs, the triumphs and challenges of programmatic advertising in each of the countries or regions that we are stationed. Next up: India!

What better way to kick off Diwali, the festival of lights, than by shedding some light on what makes the Indian market a special one for e-commerce and programmatic?  Happy Diwali from all of us Sociomantic — may your new year be filled with new insights!

To better tap into this e-commerce up-and-coming market, Sociomantic set up its Indian base in Mumbai, “The City that Never Sleeps,” in early 2013. Up until a few years ago, India, the world’s third largest economy when it comes to purchasing power parity (PPP) and the fastest growing e-commerce market in Asia, faced several development hurdles caused by technological, governmental and economic constraints. Despite these challenges, the Indian subcontinent has witnessed a tremendously growing number of internet users with a strong affinity to online shopping in recent years, with the Indian eCommerce market scale being evaluated at approximately $16 billion in 2013 alone. Increased spending power, an influx of payment options and smartphone penetration have all been key contributing factors to India’s unprecedented online market growth. Today, many big global e-commerce players are moving in — here are a few of the special characteristics of Indian e-commerce and digital advertising of which they should be aware.

A Young, Dynamic and Rapidly Evolving Market

Today, India is a fast-paced, rapidly evolving market for advertisers and consumers alike. Touted as the world’s next biggest e-commerce playing field for global retail giants and named by Gartner as the fastest-growing e-commerce market in Asia, the Indian subcontinent has evolved into an intelligent marketplace for both local and foreign investors alike. Sparking an expansion and acquisition rat race among key players, the region is poised to reach $43 billion (€33.5 billion) in e-commerce spend in the next five years according to Nomura’s India Internet Report 2014, featured in the Economic Times.

While online shopping is still in its infancy (the internet penetration in India is “only” 19 percent, which equals a whopping 243 million citizens!), this mostly untapped market of nearly 1.2 billion people is now poised to year-on-year growth in internet penetration of 28 percent according to some analysts. Similarly, digital advertising spends, currently projected at INR 2,750 Crores (€350 million) by the Internet and Mobile Association of India’s Digital Advertising Report 2014, are growing by 30 percent annually.

David vs. Goliath – Offline giving way to Online

Over the past four to five years, competition from online bigwigs such as Flipkart, Myntra and Jabong has eaten up significant margins of offline retailers. The corresponding exponential growth in online marketing reflects how retailers across India’s internet space have begun to overshadow, or at least compete heavily with, offline retailers. This has spurred traditional advertisers and sellers to transition themselves to the online domain and strengthen their digital strategies to stay in the game.

While digital advertising is being adopted aggressively in the Indian market, many advertisers still choose to allocate major chunks of their advertising and marketing budgets towards conventional reach mediums such as television, print  and radio. Hence, digital marketing is often deemed as an ancillary channel as opposed to a medium that can drive performance. However, this is now changing as advertisers gain more experience with technologies like programmatic and see the performance that they can deliver.

Furthermore, the Indian market is extremely cost sensitive, especially with regards to marketing investments. As a relatively new means of advertising in this market, digital is far more efficient for advertisers than the established traditional channels, for which there is a greater competition. Leading brands are therefore looking at the digital as a budget-friendly way to drive performance – a significant shift from the traditional advertising models that largely focused on reach.

Consumer is King

Studies like the MasterCard Worldwide Index of Consumer Confidence have ranked Indian consumers as some of the most confident in the world. India’s large and aspiring middle class (75 million households including 300 million individuals) wants products that are value-driven. A shift in lifestyles, economic scenarios, education, and exposure to wider avenues of media and technology have played a predominant role in shaping the way in which the Indian consumer shops. Alongside growing their brand awareness, brands hoping to catch and keep Indian customers must also keep in mind localization, value for money, customer trust and loyalty.

Indians love to shop and hunt for the best possible deals, and bargains and negotiations are the order of the day. Therefore, offers and discounts on online shopping portals are extremely enticing for the Indian consumer. This bargaining culture makes it crucial for e-tailers to tap into deal-driven selling opportunities — especially during the festive seasons and for traditional occasions across the country. Be it Diwali, Dasshera, Christmas or Holi, Indian shoppers will be looking for deals to match the occasion.

The change in consumer purchasing habits caused by this influx of online discounting is also forcing offline retailers to react. Many have to offer more discounts to keep customers attracted, which can result in price wars that eat into their margins.

Another crucial observation about Indian consumers is their preferred method of payment. Here, cash is still favorite, accounting for nearly 90 percent of all monetary transactions in India. Fewer than 12 percent of the nation’s residents own a credit or debit card. This led companies like Amazon, Flipkart and Snapdeal to adjust logistics and infrastructure to accommodate “Cash-On-Delivery” – a consumer-friendly, tailor-made payment alternative that fits the Indian market.

Data-Driven Decision Making

On the whole, most of India’s e-commerce leaders today understand the opportunity of adopting algorithmic advertising technologies and data-driven online marketing. When it comes to implementation of these advertising technologies from the advertiser’s side, we as a partner now see faster results, quicker resolution of issues and a significant improvement in the time taken for overall technical implementation processes from when we first entered the market.

Still, the market as a whole still requires a lot of education and consultation when it comes to putting these programmatic strategies and technologies in place. Therefore ad tech partners must offer extensive services and consultation to clients, in addition to working with industry bodies like the IAMAI to educate the market on the more advanced applications of programmatic marketing technologies.

With clear technical implementation guidelines coupled with constant engagement from a dedicated technical services team, ad tech vendors can help advertisers to develop appropriate setups within their product and technical teams in order to access the data needed to increase optimization of programmatic campaigns, such as untapped CRM data.

Driving Loyalty for Long Term Success

Diana Loriot, our Commercial Director for India, confirms many of these observations about the Indian market:

“On the whole, the increasingly competitive e-commerce ecosystem in India has made advertisers rethink their marketing strategies and investments with an eye towards better aligning themselves with the way Indian consumers shop today. Advertisers realize that they must invest in data-driven, real-time advertising in order to be able to actively engage customers in a highly personalized way across channels. These technologies are enabling them to accelerate customer purchase cycles and increase customer loyalty over time. Loyalty especially will become ever more critical topic as the Indian e-commerce market continues to evolve and competition continues to rise.”

Want to learn more about using programmatic display to drive sales growth and customer loyalty in India? Be sure to reach out to our Mumbai team to learn more.

Check out previous posts in the Programmatic Globe Series:

  1. United Kingdom
  2. France
  3. Turkey
  4. United States