Marketers must adjust to big changes in digital penetration in India: BCG study

BangaloreMay 1 2015: Big changes are afoot. As many as 550 million Internet users coming online in India in the next few years. A rapidly evolving universe of connected consumers that is fast becoming older, more rural, and more female. Users who are spending more time with their digital devices—especially smartphones—as they discover new capabilities and content. More people consuming more media online.
What do these changes mean, especially for marketers and media companies? New research by The Boston Consulting Group in a report entitled DIGITAL INDIA: INSIGHTS FOR MARKETERS AND MEDIA COMPANIES provides some answers. We bring you the top line findings

Everybody focuses on the numbers,which are impressive: almost 200 million connected consumers now and another200 million in the next few years. Some estimates put the total number of Internet users in India at as many as 550 million— 40 percent of the population—in 2018. We expect the Internet to contribute $200 billion to India’s GDP (5 percent of total GDP) by 2020.
The Indian connected consumer is already a very different individual (or group of individuals) than he or she w as a year or two ago. And the universe of users only a few years from now will be far more varied in terms of age, occupation, wealth, location, and, importantly, digital sophistication than users today.
The next wave of growth in India’s online population will lead to significant changes in who is using the Internet and how. In 2018, a much larger proportion of Indian Internet users will share the following demographic characteristics:
•• They will be older. In 2013, 40 percent of Internet users were 25 years old or older; in 2018, 54 percent will be 25 or older. Because older users have more disposable income, they will likely transact more online.
•• They will be more rural. In 2013, 29 percent of Internet users lived in rural areas; in 2018, approximately half of users will reside in smaller towns and villages. This shift will open up significant growth opportunities for those marketers and service providers that keep in mind the dynamics of the rural market in India— for example, using online distribution through e-commerce to ensure wider
product availability.
•• They will include more women. In 2013, 25 percent of Internet users were female; in 2018, women will represent a third of all users. The increasing gender parity will have a major bearing on the Internet economy—women control 44 percent of household spending in India.
Three factors—expanding reach, more affordable access, and improved awareness—will be the primary drivers of online growth.
The availability of low-cost Internet- enabled devices will be key to increasing Internet penetration among the lower-income population. Nearly two-thirds of mobile phones sold in India today are Internet ready,
but the least expensive models still cost $60 or more. This is too expensive for many; prices need to come down. 
There are signs that this is happening. For example, Intex Technologies has launched a $33 smartphone (the same price as a feature phone), powered by Mozilla’s new mobile operating system.
Access—the other cost factor—is expected to continue to expand as disposable incomes continue to climb. The proportion of households that can afford Internet connectivity— typically defined as those with more than $3,300 in annual income—is projected to rise from 56 percent in 2013 to 67 percent in
2018. The continuing decrease in data planprices has also helped to make Internet consumption
more affordable.
The third big variable is simple awareness. According to a study on digital consumers in rural areas by market research company IMRB International and the Internet & Mobile Association of India, 70 percent of nonusers are currently unaware of the Internet and the benefits it offers.
The bottom line for businesses is that the Internet in India is no longer a limited-reach or principally urban phenomenon, accessed primarily by young, high-income users. As more consumers have become connected, the user base is both expanding and diversifying to include rural and lower-income consumers
across all age-groups. Companies that overlook this shift risk missing out on a rapidly growing
channel for marketing, brand influence and engagement, and, ultimately, commerce.

“Marketers have an opportunity to engage with consumers in new and powerful ways and to develop new offerings based on clearly identified user groups,” said Nimisha Jain, a BCG partner and coauthor of the report.  “Marketers that fully embrace the changes taking place can go even further and craft offerings that address the personal preferences of microsegments or even individuals, on the basis of data that defines their online behavior.”