Vote Share or Mar­ket Share, 31% is Top Dog

The Economic Times - - The Edit Page - Brian Car­valho

In April, In­diGo main­tained its lead over its ri­vals with a 31.6% share of the to­tal pas­sen­gers fer­ried that month. Jet (Air­ways plus Lite 21.8%), Air In­dia (18.3%) and SpiceJet (17.9%) fol­lowed. In­diGo is the leader in the avi­a­tion sec­tor in terms of mar­ket share. Funny, though, that no­body notices the flip side — that over two thirds (or 68.4%) of pas­sen­gers did not opt for In­diGo. Well, no­body cares.

It would be great for its top dog sta­tus if more than half of In­dia’s pas­sen­gers flew In­diGo, but then such vir­tual mo­nop­o­lies are rare and, in fact, dis­cour­aged by in­dus­try watch­dogs as un­healthy. Let’s take this a bit fur­ther — does the fact that 68.4% of pas­sen­gers didn’t fly In­diGo mean that they don’t think much about the air­line; that they dis­tinctly pre­fer its com­peti­tors; and that they will never fly In­diGo ever again in fu­ture? Of course not. That the mar­ket share data dif­fers ev­ery month (Air In­dia’s, for in­stance, was over 2 per­cent­age points higher in March) in­di­cates that, be­sides brand re­call, brand eq­uity, brand pref­er­ence, and sheer brand loy­alty, pas­sen­gers are also swayed by the best deals on of­fer. So, if in May, say, GoAir has more mouth­wa­ter­ing fares to of­fer than the rest, we could likely see a spike in its mar­ket share. And brand loy­alty works up to a point — pas­sen­gers are al­ways free to try ri­vals’ of­fer­ings when­ever they feel like (or if In­diGo messes up on some cus­tomer sat­is­fac­tion pa­ram­e­ter). The short point: In­diGo’s lead­er­ship sta­tus in­di­cates that more pas­sen­gers pre­fer fly­ing with the air­line that any other, but it by no means in­di­cates that pas­sen­gers have made up their minds that they will not con­sider any of its ri­vals. You know where this is leading: if the BJP’s vote share in the gen­eral elec­tions stood at 31%, and still al­lowed it to grab well over half of the 428 seats it con­tested, does that mean that 69% of the voting pop­u­la­tion gave the party an out­right thumbs down? Not nec­es­sar­ily. Don’t for­get that the BJP-led coali­tion, the NDA, con­tested ev­ery seat but one (542), which ex­plains why the to­tal tally of the al­liance stood at 336, with a vote share of 38.5%. So there are vot­ers who didn’t vote for the BJP but for its part­ners like the Shiv Sena in Ma­ha­rash­tra and the Tel­ugu De­sam Party in See­mandhra. Be­yond al­liance part­ners, the 61.5% who didn’t vote NDA saw bet­ter op­tions, par­tic­u­larly in states like Ben­gal and Tamil Nadu, where the TMC and AIADMK ruled the roost.

Go­ing back to the BJP and the air­line anal­ogy, SpiceJet, which flies al­most twice as many south­ern des­ti­na­tions than In­diGo, would have a health­ier mar­ket share in that re­gion. This, how­ever, mat­ters lit­tle at the na­tional level where In­diGo has a bet­ter pres­ence, much like that of the BJP rel­a­tive to the re­gional par­ties.

So, the 69% who didn’t vote for the BJP and the 68.4% of pas­sen­gers who didn’t fly In­diGo in April shouldn’t take away from the re­spec­tive lead­er­ship sta­tus of party and air­line.

That said, com­par­ing a po­lit­i­cal party with an air­line has its lim­i­ta­tions. An air­line, for in­stance, can’t af­ford to have the ca­pac­ity to cater to ev­ery sin­gle po­ten­tial pas­sen­ger — not in a com­pet­i­tive sce­nario as any di­ver­sion of traf­fic would prove fi­nan­cially dis­as­trous.

Po­lit­i­cal par­ties do not have such con­straints; so to that ex­tent, the­o­ret­i­cally, 100% of those who voted in the con­stituen­cies in which the BJP con­tested could have opted for it.

But there may be an­other anal­ogy to be drawn from the world of fi­nance. BJP’s 31% share of votes trans­lated into 282 seats. Re­search an­a­lysts on Dalal Street will tell you that mar­ket share mat­ters lit­tle if it’s com­ing at the ex­pense of prof­itabil­ity. That prof­itabil­ity is gauged as prof­its as a per­cent­age of sales, or mar­gins.

In­diGo is eas­ily In­dia’s most prof­itable air­line — it showed prof­its of just un­der.`800 crore in 2012-13 on sales of al­most .` 9,500 crore — even as most of its ri­vals reel un­der losses.

Stretch the In­diGo anal­ogy even fur­ther and look at the BJP’s ‘prof­itabil­ity’: 282 out of 428 seats — a mar­gin of just un­der 66%.

So what if the vote share was on the lower side, the way the In­dian elec­toral sys­tem works en­sures that it’s prof­itabil­ity that’s king.

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