India is on the threshold of a digital revolution. Driven by cheaper mobile handsets and the spread of wireless data networks, the number of Internet users in India is expected to nearly triple from 125 million in 2011 to 330 million by 2016. And although online purchases are just a small portion of commercial activity today, the numbers obscure a critical fact: the Internet’s influence on buying decisions is growing rapidly. This influence affects up to five times more purchases than those actually made online. Online activities such as product research and price comparisons are shaping the preferences of Indian consumers, affecting what they buy and why. Digital influence is expected to greatly accelerate over the next five years. What’s more, digitally influenced consumers earn higher incomes, are disproportionately represented in key product categories, and spend more money on products than their less-connected peers.
How can companies capitalize on this explosion of high-value online consumers? And given the prevalence of mobile-only access, what new models of connection and engagement will be required? To find out, The Boston Consulting Group’s Center for Consumer and Customer Insight surveyed 25,000 Indian consumers aged 18 to 55 living in 26 locations—the biggest metropolitan areas and a mix of tier 1, tier 2, and tier 3 cities. Our goal was to understand the nature and extent of digital influence on buying decisions. To this end, we explored how consumers use the Internet during the product purchase cycle. We then examined specific behaviors of the digitally influenced users. Our analysis assessed the use of digital technology across ten touch points within the three stages of the purchase cycle:
Prepurchase. Product research, price research, search for store locations, and search for discounts or coupons
Purchase. Online ordering and online payment
Postpurchase. Troubleshooting, customer service, accessory purchase, and posting product reviews or comments
We explored the prevalence of digital touch points in 101 product categories, assigning each category a Digital Intensity Index score (DII) on the basis of the extent to which digitally influenced consumers use the Internet in each of the ten touch points of the purchase cycle. (See “What’s Your Product’s Digital-Intensity-Index Score?”)
To better understand the impact of the Internet on different product categories, we evaluated each category on the basis of four factors, as shown in the exhibit below:
Digital Footprint. The percentage of buyers with Internet access
Digital Influence. The percentage of buyers who used the Internet during any of the three stages—prepurchase, purchase, or postpurchase—of the buying process
Digital Buyers. The percentage of buyers who made online purchases
Digital Intensity Index Score (DII). The extent to which buyers used the Internet across the ten touch points of the purchase cycle
Our analysis showed that air travel has one of the highest DIIs, with six digitally influenced touch points—including online purchasing. In contrast, the auto category has one of the lowest DIIs because online activity consists primarily of price and product comparisons. Product categories with the highest DII have the most online activity at different stages of the purchase cycle, including the prepurchase and postpurchase stages. A product category in which all digitally influenced buyers conducted all ten aspects of the purchase cycle online would achieve a perfect DII of 100.
The fact that air travel, with the second-highest digital intensity, has a DII of only 20.6 shows how much opportunity still exists to increase the online activities of Indian consumers.
We also looked at how satisfied digitally influenced users are with their online experiences and the importance of digital media relative to other channels during the purchasing process. The survey’s insights can help guide companies as they develop strategies for reaching and engaging India’s growing base of online consumers.