Thursday, 20 November 2008

What does your customer want done?

Scott D. Anthony asks in the Discussion Leader (
"Who is your competition?"

Its a very motivating thought. Looking beyond the he points out "what is the consumer trying to get done?". We think immediately of Theodore Levitt's classic "What business are you in?" (a must read for any young MBA/ marketing practitioner)

Our example- Michelin, a tire company. It started as one. Need not have remained so focused on this business, though. Its brand that stood for quality mobility...and it should have moved in many new directions. A travel website- tie in the Michelin star rated restaurants to star rated accommodation, star rated holidays .....why did the lonely plant take over this space? Why did Opodo or a bevy of travel websites take over this space , given that Michelin's maps are the finest and most widely used - at least in Europe.

The customer's state of mind is not static. We use a product, and once we have mastered it, we want to take it to the next level. This is mostly interpreted by companies as the license to build a better mousetrap.

The consumer wants to be engaged 24/7. Most young people we know want to be connected to their peers on their terms. Not all the time...but when they want the connectivity, they expect to have it. Technology makes this possible. Smaller devices, more powerful devices allow them to "waste time" playing games...yet get on the internet in a second to look at the the assignments due for the next day.

Clearly what an Apple understands about technology and the needs people want to satisfy with it, Sony does not understand.

Truly remarkable question this..."what does you customer want get done?"

Ritu and Venkat

Friday, 14 November 2008

How "niche" should a start up be?

We came across this topic on the “Discussion Leader” site of the HBS Press. It’s an interesting place with simulating points of view.

The topic got us thinking of a fundamental misunderstanding.
How “niche” asks the author? Does that mean there are levels of niche?

"Should a start-up be mass market or niche?", he asks. Well, firstly, it’s a question you ask before you create your company. Not after.

Clearly, it can be played both ways. The mass market will give it (due to lower price) less margin per unit, but more sales volumes....hence good profits.

If you want a "niche" product, you have to be ready to continuously innovate to be at the cutting edge "wow" factor of your category....then recover that cost of innovation through pricing.

If you think you need to have millions of consumers to make the business a success, remember to have distribution systems/ customer support systems/ pricing and product development tuned to this.

Your choice of the 4 Ps..product/ pricing/ place and promotion is based on who you are targeting as your consumer. Be sure you know how your product will evolve over time. Without that vision of maybe 3-5 years, you cannot begin to decide whether you want a mass market play or a niche play.

In the consumers space, brand building rests on creating a duality for consumers. Consumers today want to be connected to "communities". While at the same time want to be able to express their individuality.

Nokia/ Apple/ Nike do this very well. A belonging to a community of like minded people helps consumers validate themselves.

How a start up should do this, we leave to its creators to decide. But to build a consumer brand, you have the ability to "personalise" the product. Question- how do you create a useful do you make this idea bigger?

We advice a company that is trying to establish itself in the consumer goods (jams/ pickles) space with its USP (for the Indian market) being that it has an astounding 60% of real fruit and vegetable pieces in the product.

We think this product belongs to a "niche". The product can demand a price premium. Fewer units of sales, but more profits per unit. No brand in the history of marketing has had a mass market appeal and maintained high volume share over a sustainable period of time. So a choice has to be made. We can always debate whether mass market or nice market products have greater long term benefits, but that’s not for now.

In our view brands that can innovate continuously, win. The choice of mass market or niche is not a determinant to the durability of the brand. Innovation is. And innovation forms the backbone of any brand built over decades.

We personally rate "value share" more useful than "market share".

The view of value at the "bottom of the pyramid" has convinced most marketers in India to run after volume market share. VCs believe (naively) that high volume share, i.e. large consumer base, can be magically converted to high revenues and profits in the long run. This is false, but a commonly held belief of most financial analysts and VCs.

So what should you do?

Understand how many people would YOU like to sell the product to.
(Please don't say "as many as possible". )

Niche or mass market strategies both work. A marketer has to decide where he wants to play.

Ritu and Venkat

Wednesday, 12 November 2008

Nicholas D. Kristof: Obama and the war on brains

The one above from Nicholas is an amazing yet obvious insight. In India, politicians are corrupt. Mostly. But the Prime Miniter has always been intellectually strong. Mostly.

With the emergence of Bush and his defeating Gore, most of us really gave up on the need for intellectual leadership as one of the criteria for American presidency. The Amercian "common man" it seemed cared nothing of intellect, as long as he got his beef, corn and well oiled rifle.

But the participation of the youth has changed this. Youth that have access to information and have a medium for making themselves heard. 24 X 7. From the comfort of their rooms. Just out of college. Who would like to believe that they have the right to asking intelligent questions and be given intelligent answers. They want to believe that change for the better comes from them. (this may be naive, but it gives change a chance)

Never before have young people been so engaged in an election. People, it seems, saw through Palin very quickly. The internet and the right to a good education will change the way leaders will get chosen. There is no doubt about it.

What we will see next is the use of the internet in other western economies which have a high penetration of the internet. Western European elections of the near future will be influenced. (I wonder why Gordon Brown has still not activated the web?)

The US election and the rise of Obama must be taken as a catalyst by all those people that are tired of being condenmed for their intellect. Strong intellect should not mean "lack of touch" with the common man. It should mean the ability of the leader to understand better the problems of theb common man and to build better solutions.

We hope Obama succeeds. (whatever that may mean). Because the rise of intellectual political leaders in the future will gain a lot of momentum from his successful presidency.

Ritu and Venkat

David CARR on Electoral triumph built on a Web revolution

Came across this in the International Herald Tribune. Its a very nice note and you will now read millions like these on how Obama won the elections.

Empowerment and Connectivity.

These are the key trends of our times.

In the US, access to the internet is very deep. Across age groups.
The internet allows us(comsuners) to communicate our point of view. And gravitate towards groups that hold our beliefs. It allows the marketer (Obama) to share his views real time, continuously with his audience. A two way engagement.

But this is true now in every domain. The Nike+ site brings together hundreds of thousands of passionate runners. Who compete against themselves and others through the site.

Products/ service/ brands that build these aspects of "self expression" and "connection to a community" into their offer, will definitely find loyal and passionate customers.

Caution: The internet is a two way communication device. Obama, having been elected on the power of the internet has to definitely realise that his stakeholders now expect to be equally engaged during his presidency.

Application to India:

1. too many interest groups....200 political do you get a "mass movement" on any subject now without it being diluted by caste/ income/ language?

2. access to the internet do you develop a two way communication with the masses?

It will not work yet, at least not as a political tool at the national level. Definitely worth a try to engage young voters in the large cities of India.

Yet, for Marketers that are interested to develop strong consumer ties with at least the "niche" that have regular internet access, this is the way forward.

Its connectivity and empowerment.

Ritu and Venkat

Arsene Wenger and his management philosophy at Arsenal Football Club...

Mr. Wenger demanded more support from the fans of Arsenal for his very young team.

Please read through this note, Mr. Wenger speaks of the need to support young talent while taking the bold (and necessary) step of putting them in the hot seat.
He speaks of keeping an eye on the future, yet striving for excellence today.

He speaks of investing based on internal accruals and not borrowings.

He speaks of willingness to bring in outside talent when the need arises.

I was very impressed by this gentleman. Not many football managers (or CEOs) speak with such clarity.

And he is a Frenchman in the English Premier League.

The fans have responded very positively (based on the posted comments).

Talk of bridging the cultural barriers as well.

("This is football you know..... you write it", said Ritu)

Here's another note of the game recently where the average age of the AFC team was 22 years! Playing in the champions league.

Tuesday, 11 November 2008

‘We’ve spooked ourselves into thinking there is a slowdown’

This is a post we recommend. This, appeared in the Hindu Business Line- an interview with Mr J.P. Nayak, Director & President (Machinery & Industrial Products), Larsen and & Toubro Ltd.

We support his view and we take this moment to repeat:
- In a country where TV/ Fridge and Washim machine penetrations are below 25%, how can demand become sluggish? (Who has been smoking the strong stuff?)

- Sure, liquidity is an issue and steps need to be taken to ensure this.

- But we must recogonise that our stock market falls have more to do with foreign investors pulling out from the Indian market (to perhaps raise cash to meet their commitments back home).

- Demand in the Indian market is only limited by the imagination of the entrepreuner.
The real challenge is to set up supply chain and distribution systems that help manufacturers reach to consumers far away from Indian cities.

- This "investment in the interiors" is what new entrants to the market are not doing. Every entrepreuner seems to want to take away share from the current entrants in the cities. (This is in itself not wrong, but a suboptimal strategy for emerging markets.)

The focus on gaining market share in urban markets ignores that larger un-tapped rural India. And it avoids us forcing ourselves to think of profitable ways to making products and services available to this market.

So, evertime the US sneezes, we avoid looking at the opportunity that remains in the country, and quickly send the SENSEX off to the hospital!

Saturday, 8 November 2008

An Apple eating into Nokia

We are re-visiting this note following a note we read on the drop in Nokia market share from q3 2007 (51.4%) to q3 2008 (38.9%).

Apple in the meanwhile grew from 3.6% to 17.3%. (note below)

Its just a good time to repeat: No brand in marketing history has maintained high profit margins and market share simultaneously over a long period. A choice has to be made.
We believe Nokia has missed this.

We believe Apple will soon be seduced by volume market share.

There is value at the top of the consumer pyramid. LVMH demonstrates the success focusing on this segment. (but yes, we are seeing them salivate after the “entry level” products as well.

Mass market products require a mindset very different from premium products. No company has mastered these two skills simultaneously.
Premium products may offer extra-ordinary profits that need to be re-invested in the extra-ordinary consumer base. A consumer base that requires innovation and a superior product and service experience.

Mass market products require a marketing mix that invariably leads to a company focusing on maximising value for the masses of consumers. This invariably leads the premium consumer’s experience to be compromised.

The market of the “low cost” phones has grown a lot more than the overall market for cell phones. Nokia has chosen to sell in this segment. Unless it is then able to find a cost structure that allows it to have the same profitability as for its more “upmarket phones”, its capacity for investing in innovation will fall.

Exposing it to innovators such as Apple. Apple's move to price down its phones will expose it to the next innovator in the market.

As the mobile phone gets more and more “commoditised”, it is likely that cheaper manufacturers in China will be able to deliver phones at $25 without having a high cost structure due to lower investment in R&D, manufacturing costs etc.

Would Nokia be able to match this? Should it?

As an industry matures, many consumer segments emerge. Satisfying each segment well requires specific business models. Working and synchronising among these different models different skills in a company and eventually proves impossible.

Ritu and Venkat