The Economics of “Refill”

In all probability you must have seen this.  An Indian scientist is explaining to a group of Indian visitors what seems like a visitor’s gallery in NASA about the most ambitious project of NASA“JUNO” a spacecraft to discover Jupiter’s secrets.  At the end of his brief, he asks the group if there are any questions. Up goes a hand and the man asks nonchalantly “Kitna Deti Hai” (How much does it give – mileage?)  The scene cuts to the scientist who is flabbergasted by the question. The commercial closes with a voiceover which says “For a country obsessed with mileage Maruti Suzuki makes India’s most efficient cars”. This is one in the series of ads being aired by Maruti with the same theme to drive home the point concerning the obsession of Indians with mileage when they look to buy cars.  Here’s the link to that commercial.

The scientist who is shown as an Indian should not be so astounded after all. Because an average Indian consumer who apart from looking at the price of a product is programmed right from his childhood to also look at its running cost over a period of time while buying any product.   Hence this obsession with mileage as far as car is concerned and may be a space craft when he decides to buy one.   The importance of the “cost of using” a product (let’s call it ‘running cost’ to keep it simple) is not limited to cars alone.

Till I was in school, I was using a fountain pen in which the ink can be refilled and used for a long while.  I ‘graduated’ from using a fountain pen to a ball point pen ‘when I left college’. This can be used for eternity by just replacing the “Refill” once the ink is over.  Though the ball point pen as such costed few cents – we were told that it should NOT be ‘used and thrown” but refilled and re-used again and again.

Welcome to the “Economics of Refill”.  Welcome to India.

Between “Use & Throw” and “Refill & Use”, the vote of the Indian consumer is always for the 2nd one.   So you have refill solutions for almost all categories – In Fast moving consumer goods (FMCG) category  you get refill sachets for dishwashing liquids, mosquito repellants, room fresheners, cleaning liquids and the like.  In appliances – we are keen to know what the power consumption is because we are concerned that the electricity bill should not detonate in our face after we start using the product.  Moving from consumer to business category the story is not so different.

In my own long enough experience of selling printers in India, I’ve seen that the 1st question the trade asks when you talk of a printer is “Refill hota kya”? (Is this refillable?) And if your answer is negative, you can knock off one high potential emerging market from your pursuit list.  So you have the Dot Matrix printer ribbons being refilled with inked fabric, Inkjet cartridges of Inkjet printers being refilled with Inks and Toner cartridges of Laser products being refilled with Toner powder…  Akin to “Kitna Deti hai” in cars is the question – “Running cost kya hai” (What is the running cost?) in the printer industry.  . So much so, few years ago when we were planning to introduce a label printer which produces High quality labels which are long lasting – though the price of the printer itself was quite affordable we were continuously faced with the question of “Cost per label”!!!    Here we are talking of a label printer which can produce labels of such high quality that they are dust proof, impervious, chemical resistant, heat resilient so on and so forth and the 1st question which pops up is “All that is fine. What is the Cost per label”?  We had to change the narrative of the product from “Cost per label” to “labels for life” to be successful.  Succeeded we did, but it took a lot of sweat.  This question of “Cost per label” was not so commonly faced by the company in other markets it sold this product before.  Similarly in developed economies like US and Western Europe, I understand that the toner doesn’t get refilled by cheap refill vendors.  (There is an organized refurbished toner market though)

There is a common notion among foreign companies that consumers in India want cheap products (means products that cost as low as possible) and don’t care for anything else.  And this notion is continuously flagellated while arriving at product as well as pricing strategies. Well this view can be off the mark by the width of the Indian Ocean.  An Indian consumer while is certainly cost conscious also looks for lower running costs which includes recurring costs on usage like power consumption, consumables cost, maintenance costs, fuel costs, .. depending upon the type of product.

With this “refill psyche” in our DNA, look at the contribution we are making to a greener planet!!!  “Use & Throw” generates more plastic than “Refill and Use” isn’t it?

So companies looking to script a success story in India or an emerging market are well advised to introduce products which follow the “Economics of Refill” wherever applicable.

“While on this, don’t miss to read – “Characteristics of Emerging Markets and the Opportunities They Create” by Kamini Banga and Vijay Mahajan.

Post script : In villages, you can hear the phrase “Kitna Deti Hai?” actually in reference to “cows” when they are being sold in the market – meaning how much milk does it give in a day !!!  So the cow which gives a very high “milkeage” becomes a “Cash Cow”!!!

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29 thoughts on “The Economics of “Refill”

  1. nirmalya biswas says:

    Anand – good one! Well one thing for sure this blog took me down memory lane and in a flash I could imagine myself at the MBRs in Taj!

    Like

  2. SO DEP says:

    It’s really a great and helpful piece of information. I am satisfied that you just shared this helpful info with us. Please keep us up to date like this. Thank you for sharing.

    Like

  3. Ramesh says:

    Dear Anand,

    A real good one. With car manufacturers luring customers with 32+ kilometers and with creative ads like this one, one only hopes the authorities pay heed to growing infra needs. The simple thought of having our veteran citizens put up with potholes after-hours is scary.

    Very soon, a competitive ad would go like : Battees Km deti hai. Teintees pe baithi hai. (Shuts down at 33).

    Ramesh

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  4. excellent piece of info…….Your blogs help me understand the basics of indian target mass, and how to cater to their needs. your blogs are so informative, ppl like me cant resist following them. thanks for all the info and waiting for mor to com 🙂

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  5. Mohit Gaur says:

    Amazing analogy between Running cost and Economics of Refill.
    Great Thought , backed up with your vast experience of Printer Market sir. Infact, RICOH has captured this thought into their newly launched refillable laser products.
    It is the ‘running cost’ for which most of the car manufacturers are offering Company Fitted CNG kits; Just like EPSON has started offering inkjets with Company fitted Tank Systems.

    Like

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