Each quarter, research and measurement company Nielsen publishes the results of a Global Survey of Consumer Confidence. This is perhaps the largest survey of its kind, sampling more than 30,000 consumers online in 60 countries, to understand how confident they are about the future. It also gauges their future spending intentions, which are dependent on such confidence. The results of the latest survey were published by Nielsen a few days ago. What do these findings tell us?

The big news in these latest results is that India has topped the Consumer Confidence Index. In the previous five consecutive quarters, Indonesia had ranked first, but this time around India is well ahead. This means that Indian consumers are today the most confident and optimistic, in comparison with their counterparts in all 60 countries surveyed worldwide. The equally important news is that India’s consumer confidence score has also increased significantly within the past few months - it now stands at a handsome 128, up from 121 in the previous quarter.

Any score above a baseline of 100 indicates degrees of optimism in the economy. Interestingly, consumer confidence scores in large countries such as the US, the UK, and the UAE — which have strong linkages with the Indian economy — have also increased by 4, 5 and 3 points, respectively, compared with the previous quarter.

India’s consumer confidence score requires some further detailing, to understand how powerful a figure this is. At 128, it is now virtually on par with its pre-slowdown score of 133 during 2007, when the Indian economy had been roaring ahead at a growth rate of more than 8 per cent per year. It is also significantly ahead of the global average, which stands at 97 and which has increased by only one point over the previous quarter. This means that Indian consumers are surging ahead in terms of confidence, compared with historical and global yardsticks.

This is surely very good news for Indian marketers. Many product categories and brands are likely to rise on this swelling tide of optimism. But the biggest victories will belong to marketers and retailers who leverage this increased consumer confidence most appropriately and powerfully — particularly because such rising confidence comes in the run-up to the busiest shopping season in India, the festivals of Navratri and Diwali. To translate consumer confidence into extreme purchase buoyancy for their brands, companies will need to understand the fundamental reasons why Indian consumers are feeling far more optimistic today; and also what they can do, as smart marketers, to fuel and leverage these factors.

Budget moves At the national level, the coming to power of a stable Narendra Modi-led Government with a strong majority and a progressive agenda appears to have impacted Indian consumer confidence very positively. Consumers feel more confident when their Government espouses and drives an agenda for economic growth, which has the potential of spurring future investment and creating new jobs. As the Nielsen report points out – “The annual budget announced by the new Government reveals a positive outlook for business, and we expect this to reflect in consumer sentiment in subsequent quarters as well.” A strong Independence Day address by the Prime Minister on August 15, which emphasises the actions being taken to drive growth, will undoubtedly add further to such consumer optimism.

In addition, tax-paying consumers today feel that they have more disposable income to spend on products they want to buy, because of some specific personal income tax exemptions announced in the recent Budget. The Finance Minister has raised the basic income tax limit from ₹2 lakh to ₹2.5 lakh for everyone, and from ₹2.5 lakh to ₹3 lakh for senior citizens. In addition, he has increased the amount eligible for tax exemption under Section 80C and has also enhanced tax deduction on home loans.

All this means that a tax payer in the 30 per cent tax slab is richer by ₹36,000 per year and a tax payer in the 20 per cent tax slab by ₹25,000 per year. That is enough additional money for the consumer to buy a new television set, an air-conditioner or several pairs of new clothes for the family, in the season ahead.

What media says matters People are generally aware of their own economic state but there is also the additional impact of media on consumer confidence. A CES study undertaken in 2006 (“Impact of Newspapers on Consumer Confidence”) highlights that consumer optimism is impacted not only by economic fundamentals but also by the way these fundamentals are reported in media.

Indian media, over the past few weeks, has generally voiced optimism about the economic policies and measures of the new Government and also about the long-term India growth story. This has also added to the overall positive sentiment.

In this positive landscape, a poor monsoon and continuing high inflation still have the potential to play spoilsport. However, there is no doubt that the number of factors driving an optimistic outlook has gone up sharply over the past few months and this is what has resulted in India topping the global consumer confidence index. And it is also heartening to see that the monsoon, after a shaky start, has revived during July.

What marketers should do How should Indian marketers respond to such growing consumer confidence? The answer will vary across categories and segments, but here are some initial thoughts for us to consider.

First and foremost, when consumer confidence shows such strong increases after several quarters, there will be significant pent-up demand that suddenly begins expressing itself. If people had put off buying discretionary items such as a new car or two-wheeler or wrist watch for the past couple of years, this is the season when they are likely to consider purchases once again. Therefore, in the months ahead, marketers would do well to focus their energies and investments on discretionary categories which have seen sluggish demand, or even declines in demand, over the past two or three years.

Second, there are a number of useful consumer insights that marketers can tap into, in these times. For instance, many people may wish to indulge their families during the forthcoming festive season, after having been somewhat frugal in the past couple of years.

Also, if consumers can be appropriately reminded of the significant amount they are saving in taxes this year, they may be willing to spend this amount relatively freely, without any undue anxiety or guilt. Savvy marketing can help leverage and own such insights powerfully.

Third, marketers and retailers should consider significantly stepping up investments in driving footfalls and purchase consideration during the busy season ahead. Marketing investments tend to work much better during times of consumer optimism, than during relatively bleak periods.

Brands that are the first to occupy consumer mind space in their respective categories are most likely to be the ones to best leverage such positive sentiment.

Finally, for brands that target affluent and upper-middle-class consumers, this is absolutely the right time to promote premium products that may be somewhat more expensive but are also far more indulgent. Confident and optimistic consumers generally like to indulge themselves.

Here’s wishing all my fellow marketers good luck, as you begin preparing for an excellent festive season ahead. This year, you should feel greatly encouraged that you have consumer confidence on your side.

Harish Bhat is the author of Tata Log: Eight Modern Stories from a Timeless Institution. The views are personal. bhatharish@hotmail.com

Related Topics