Wednesday, 23 December 2009

pricing in India

Some very random thoughts:

India is NOT a low price market.

Nokia phones, tires, computers and cars sell in India at the same price (almost) as the comparable offer sells in more developed markets of Europe and Asia.

India is not a low price market.

True, the higher the price, the lower the pentration of the product. But companies are under no obligation to sell European products at cheap prices in India.

India is a "value" centric market.

Nokia sells USD 20 phones in India and a 100 million consumers buy these.

But these phones are configurd for the Indian market with lesser features. Features that the Indian consumer values more than an Mp3 player. (a phone that doubles as a torchlight for example)

These phones sell at prices that most surely (and we cannot confirm this) offer NOkia lower margins compared to their most advanced devices. Selling 100s of millions of these phones will drag lower the margins of Nokia.

In the Indian market, companies need to choose very carefully between pricing for the mass market and pricing for large margins. Both are possible. But not simultaneously.

Companies with high legacy costs (pension plans to pay off, large health care benefits to take care off) should think long and hard about which segment of the market to enter. In the long run, it may be posible to innovate and hence design and manufacture products that are cheap but with very strong margins. But from here to there...... is a long time.

Ritu, Venkat

Tuesday, 15 December 2009

Tiger and the branding of personalities

Ok- Tiger goofed up. But unlike most people, i am not worked up about it. I think his wife needs to handle the goof up, not me.

I am not a golfer, but i think Tiger is an outstanding athlete. A great brand, because apart from all other attributes, Tiger lasted (lasts) a long time- the true attribute of a great brand.

In maintaining a regular stream of "off the books" relationships however, Tiger seems to have suddenly turned from legend into a deplorable person overnight.

My two bits:
Tylenol was a bigger disaster- people died.
Firestone as well.
But the brands survived.

Why not Tiger?

Personality brands often highlight our own inadequacies. Tiger the perfect man- great golf game, great family....everyday men see Tiger on TV, they are reminded of their "average" existence. The wife drools over Tiger, the girlfriend fantasizes. It is the wide appeal of Tiger which will be lost forever. A tiger will now appeal only to a niche (like Paris Hilton- hopefully not to the same niche).

A moral fall is a great leveler. Suddenly our wives and girlfriends don't think much of Tiger. He has fallen, and by extension, i have risen. Do i want to see Tiger rise from this? Nope.

The brand Tiger is finished. Not zero, but nowhere close to where he was. He was on a pedestal, and now he is possible going to be held at the same level as a Paris Hilton.

If Tiger had been French, he would have been most likely forgiven by his countrymen. Not Americans, who still guard some "moral" values. (I am myself very uncomfortable with the word "moral" - how it is defined- by whom etc).

But America is the largest golf market in the world, and no matter what citizenship Tiger held, his worth in the US market would have fallen.

A very clear message for celebrity brands.

Friday, 4 December 2009

corporate strategy in India

This may be very ambitious, but here it is.

Say you are selling a standalone product. A standalone product can be used by itself using fuel- without the aid of any other product.
Eg; A car is a standalone product. A tire is not (since you need a car to sell the tire!)

I believe, that for standalone products priced at 30$ per unit, a penetration of 30% of India's households is possible. Do the math to calculate the volumes.
If the economy grows at 9%, then at constant prices, 9% more people will enter this market. Pricing innovations (producing the same item for 20USD) will get disproportionate volume growth.

For products cheaper than this, penetration will off course increase- around 0.25 USD per item, 60% product penetration is possible. (Distribution becomes the challenge- how do you reach 60% of India's population?)

There still is 40% (in my opinion) of the population for whom buying a USD 1 product is a luxury to be avoided.

At 3000 USD, the penetration of the product will drop to 4%.

So here it is : In 2009 prices:
Price USD 3000 Penetration: 4%
Price USD 30 Penetration 30%
Price USD 1 Penetration 60%

So where do you want to position yourself?

The great waves of India and China

If you have been living in India for a decade or so, or have been visiting often over the past ten years, you would agree with this observations.

There is a lot of change happening in India- social- economic and demographic. You see the increasing affluence around you, the cars- homes. Yet the sight of slums, beggars and abject poverty never goes away.

Why? We asked.

And we realised that the this is the case in India and possibly China- large and poor economies. The large size of the population means that the only entity that has the objective of moving forward the entire population,i.e. the government, has no chance of either reaching everyone nor has the resources to move the population upwards, together.

So economic activity will never be "equal" or socialist- no matter what the government says, tries or does.

In the meanwhile, people move to cities - the areas of maximum economic activity, to get rich the earliest. These go ahead to buy cars and homes.

As cities reach saturation levels, private enterprise goes further into smaller cities for newer markets. So on and so forth. At the same time, less affluent people are heading to the cities- the centres of activity.

When a countries population is 30 or 40 million, this change can be rapid.

When the population is 1 billion, this change takes place over time. India's affluence is concentrated in the top 10% of its population. This is the FIRST WAVE of people that benefited from their presence in cities to benefit from the first wave of economic investment.

The rest of the population is poorer, most fighting for basic needs, unconcerned about public hygiene, cleanliness or the environment. So for every person who becomes more conscious about the environment and decides not to litter, there is another who enters the city to make his fortune- but is absolutely unconcerned about civic duties. So the litter and filth continue.

The first wave will give rise to the next wave in 5-10 years. And then the next wave.

In this way, we see the entire population getter richer (per capital GDP of USD 30,000 for example) over 50-60 years.

In the meanwhile, one set of poor people will move on in life to be replaced by a slightly poorer set of people. Who will move on to be replaced by another set of less affluent.

The rich and the poor in this way will continue to cohabit for many many years. Maybe as the fifth wave takes over (in 30-40 years), the affluence will cover better the poverty....but for the next few decades, lets just accept the site of two India's all around us.

What does this mean for companies looking to invest in India?

Ritu, Venkat

Thursday, 12 November 2009

Tirupati, Cricket and the changing Indian demography

First Tirupati- which is a town in South India with a temple dedicated to Lord Venkateshwara, of the Hindu faith. What is impressive about the town is how well it is organized and maintained. Smoking is banned, littering is absolutely banned, Indians are not allowed to chew tobacco (and spit out the red stained saliva). And in the name of the Lord, all Indians that enter the town respect the rules.

It is in a way, a little Singapore. I had to walk bare-feet for a mile in the city and it was really clean. You cannot walk barefoot in any city in India. In Tirupati, you can.

That was the good news.

The bad news was the crowds. Hundreds of thousands of people have been visiting the temple each day. This has been the case for many many years. And yet, the capacity of the temple management to regulate crowds is inadequate. Each solution is outdated by the time it is implemented, and the pushing, jostling to catch a view of the statue of the lord (which is stationery) is unimaginable. And this is the richest temple in the country with donations pouring in. Why cant crowd management solutions be put in place and implemented?

As I stood in the temple however, I made however, another observation that i note here.

Indian demographics is changing the nature of the visitor to the temple. The temple management should take note of this and act now, else be overwhelmed by the surge in the number of devotees.

When I visited the temple as a child, the exercise of traveling to a far off city, finding accommodation etc was an expensive “holiday”. So much so that it was restricted to many in the “upper middle class”. My parents saved money to donate to the temple.

Now, with travel getting cheaper and the average income in India on the rise, there are many more visitors. But the profile of the visitor is predominantly rural/ semi urban and from the small towns. This is good news. But on the other hand, the donations (per person and adjusted for inflation) being put into the temple are likely to be much lower than in the past.

The temple is going to find itself with few resources per person to handle the bulging crowds.

The temple has also created specific slots for a more personal viewing of the Lord, very early in the morning. These cost USD 2000 for a 10 year pass (where you can have a more exclusive viewing for the family once a year). Ordinary viewing tickets are USD1 per person. These however are limited in number. And with time are getting more and more expensive- supply and demand at work. However a family paying USD 2000 would expect a certain level of service from the temple in order to continue making this contribution to the temple.

On this visit, in spite of the “exclusive” pass, I found myself having to cover 2 miles and search in three buildings to find the office where I could get the “prasad” for the prayer I attended. The rules and the offices change every 6 months, so devotees have not many options to learn beforehand of a procedure.

The two above points highlight a classical marketing problem called segmentation.
You have a mass market. There the challenge is to maximize revenues from a large base but low affluence consumer. Cost management is critical here.

And you have the “niche” segment consumers willing to pay more, but demanding extra services. These are high margin consumers.

Managing both ends simultaneously is always a challenge, especially in a country like India with its “socialist” beginnings.

But the Tirupati temple trust need to wake up to the evolving Indian demographics to ensure the town and the temple continues to bring in devotes who can pray in a comfortable way.

2. The second area where I see a huge change that is going to come about is the sport of Cricket. Wildly popular in India raking in millions of dollars for the administrators, media and players.

The popularity of cricket in India has risen along with the rise in affluence of the Indian middle class. Almost every Indian living in the large towns has played cricket in his childhood. It is cheap, and with the availability of a playground, easily accessible. Unlike hockey and football (which need specific ground sizes and proper grass to play on). Swimming, golf, tennis all remained very expensive for India.

The Indian middle class that played cricket in its younger days (and lives in its cities) is now the Indian upper middle class. We pay to see people play and we relive our childhood neighborhood games when we see the cricket.

Cricket was always a middle class- upper middle class sport and with few exceptions, all of our players came from these backgrounds.

That is changing. The cities have no place to play cricket and indeed the affluent kids are shifting to tennis/ squash and other sports. These sports will grow in the future.

Cricket meanwhile is being shifted to smaller towns and villages which seen the only places now with open grounds where kids can play and practice the sport.

Emerging players for the national team (in the next 5 years) will have very non urban backgrounds. They will have learnt the sport by observation rather than training. (In non urban centers, training and coaching facilities are non existent).

They will come in with unorthodox techniques. Not ideal physical conditioning.

They will suffer far higher burnout than current cricketers, thereby limiting their playing time and the capability of the Indian team. Cricket will not be the money maker it is in Indian life today. The cricket board, in my view, is totally blind to this.

My guess is that unless administrators of cricket in India focus more on developing training facilities in smaller towns and villages, the competence of the Indian cricket team will decline very sharply in the next 4-5 years.

Lets wait and watch how these two areas of Indian life are influenced by the changing Indian demographics.


Friday, 23 October 2009

Nokia sues Apple

A brief note today (you can click the title to read about Nokia's latest strategy).

We don't recall Apple using the court as its innovation lab.

Nokia, wake up- focus on the customer and not on Apple.

Ritu, Venkat

Wednesday, 21 October 2009

Apple, Nokia and CNN

No, they have nothing in common.

Apple announced its sterling results recently. And Richard Quest on CNN was analysing last evening the same with the help of some tech correspondent in the US and UK.

Apple makes cool products.
Nokia stumbled in looking for volume market share- and has so badly lost its 'cool factor'.
And CNN, business report on these two companies was so pathetic, it made me angry.

Our strategy thumb rule states that no company has cconsistently gained volume market share and maintained premium pricing (high margins) at the same time. Period. It has never happened.

Mass markets and premium products require very very different execution skills. They cannot remain in the same company.

Lexus and Toyota is a striking example of how to make it work.

In 2007, we mentioned that Nokia was possibly making a very big mistake is running after market share numbers. Sure, in the short run "analysts" reward companies for their sales. More sales means more revenues. But that is short term.

A technology company with high margins needs high innovation and investment in technology. When it gets distracted with mass market products, its capacity to dedicate resources (money and people) to technological advances reduces.

Sony Ericsson, in the meanwhile has simply gone the other way and now focuses on VALUE market share. We believe they will benefit in terms of bottom line as well as strengthening of the brand.

Apple keeps making sexy products and charging sexy money. What i find interesting about Apple is that they don't produce anything for the mass market. As the technology becomes out-dated, they simply drop the price to allow more people to enter their product categories. This is interesting. Designing and selling "cheap products" is a costly proposition. Selling cheap older technology is a great way to bring in new consumers.

And CNN got all of this wrong. The tech correspondent from California says " Apple is able to read the consumers needs of tomorrow and make products around that". !!!! What????

Their UK correspondent says " Apple makes great products, but i don't expect them to challenge Nokia's market share for a long time." Wow! He still does not get it. The day Apple starts to chase global market share folks, sell its stock.

All Apple does is use technology to create easy user interfaces. Lets not make soothsayers out of them. They simply listen to their consumers and enhance user experience.

Strategy is about choices. The first one to make is, who is my consumer?

If we start out to satisfy everyone, sooner or later we will satisfy no-one.

Venkat, Ritu

Monday, 12 October 2009

animation in advertising

I saw recently Michelin's ( new TV advertisements on the tagline "the right tire changes everything". Click title to see ad on youtube.

Without going into a discussion on the content, the position , message etc i simply reflected on the use of animation.

Bibendum, the Michelin mascot cleraly works better in animation that in real life. Animation proposes modifications to Bibendum's expressions and actions that would be difficult to replicate with real life actors.

And since Bibendum 'humanises' the tire like nothing else, he does appear at the centre of all advertitisng. Is this a good idea in itself? A very thin line between using the Michelin man to help tires emote, verus overexposing him.

Coming back to animated ads. (Coke has started this as well).

Unfortunately for the advertising industry Pixar is setting the standards in the animation business. And i would believe that consumers that see animation advertisements are immediately comparing the work to Wall-E or Nemo. TBWA is not a Pixar and the production quality shows.

Animation works well when it creates an incredible world for its characters. Worlds with lights, colors, sounds that seem more real than real. That's the difference between animation and cartoons.

Animation works when it uses a great storyline and humanlike characters. With expressions, with an interaction that allows us to experience our own lives even while looking at a movie about monsters, fish or outdated robots. Great animation
re-creates life through unreal metaphors.

Average animation is "plasticy" and establishes a disconnect from its message. Average animation simply exaggerates the human existence while drowning out the human condition. The message for a real world becomes distant.

The real risk for companies using animation comes not from their product competitors but from companies that exploit the animation technique so well that anything less than extraordinary simple makes the execution of the ad very ordinary.


Saturday, 10 October 2009

Obama, the Nobel peace prize and bombarding the moon

You guessed it. There will be a lot of debate on this.

Anyway, i read the two headlines together this morning and found the irony funny.

"NASA bombards the moon" ..and i thought to myself why they used the word 'bombard'to describe NASA's experiment. Heck- to think we are bombarding the moon as well.

And then "Obama wins the Nobel Peace Prize". Read immediately after the first headline i could not help thinking why the man who started bombarding the moon of all places deserved the peace prize.

To me his award signifies a couple of things:

Firstly, it appears no clear and obvious choice seems ot have existed. It seems no one really delivered a significant peace initiative last year.

The only 'stabilisation' seems to be in Iraq- so Bush should have won for that. Life in Afghanistan seems to have takes a turn for the worse.

African states embroiled in unrest continue. The Palestine problem is not solved. India and Pakistan continue thier uneasy peace.

Was the Nobel prize really needed this year?

Secondly, is that the only wasy we could get Obama to work concretely towards expanding peace in the world. Is this what we are saying about the most powerful man in the world. That his good intentions need a prize before he actually is motivated enough to do something about it?

I mean we could have as well given the prize to Sarkozy- it was after all the French that started confronting Somalian pirates off the African coast?

Its like tipping a waiter as you enter a fancy restaurant.


C'mon folks, Gandhi did not get a Nobel prize for peace. Imagine that. And now Obama gets it.


Thursday, 17 September 2009

Women power and the incremental 5 trillion USD

The news-week in its Sep 21 issue talks of the ‘real emerging market’, the estimated 5 trillion USD of new female earned income that will be generated in the next 5 years.

Men earn 20 Trillion USD today compared to women (10 Tn USD), but the growth in income will largely be driven by women in the next 5years.

This is a BCG study and I don’t have access to the methodology.

As a marketer this is very big news, and I tried to dissect this with Ritu to understand what the implications are:

1. In the developed world significant numbers of women are educated and employed. Younger women while replacing the older women will move onto more higher paying jobs but this will be an incremental.
2. So the onus on creating this incremental 5 Tn USD will lie on the women of the developing world. They are more in number and getting access to education and job opportunities in larger numbers.

The problem however is that much of the work coming into the developing world is low end manufacturing or service which does not pay as much but employs large numbers of women.

The 5 trillion will be distributed over many many women, most earning between USD 1000 and USD 4000 per year.

At this level of personal income or ‘incremental family income’, spending is still limited to achievement of ‘family dreams’- TV, fridge , washing machine, car or house, the children’s education.

The number of women who will indulge on themselves will remain a very small percentage.
We disagree with analysts who say that “companies like Visa, Wal-Mart, Nestle, Johnson & Johnson, and others that already have a strong leg up in the women's market stand to prosper further from the female consumer boom.”

Companies that serve the ‘family dream’ market of the millions of families that re beginning to enter the middle class will be the real winners.

Thursday, 20 August 2009

buying jeans on monthly instalments plans

Please click the title of the note to read Levi's pilot campaign in Bangalore (India). They are offering purchase of the brand on a 3 month installment plan.

This will stir up a lot of discussion. Its been done before - TVs- cars- houses- holidays- are all available on loan schemes. But Jeans? Interesting.

And if Jeans, what next?

Our opinion? Lets look at 2 issues first and then we will give our verdict:

- does this promotion serve the target audience of the Levi's brand in India? Given Levi's pricing, (4-5 times that of a 'local player', their target market would be the top 10% of India's population)

Is this person going to buy Levi's because of the instalment scheme? Maybe. But an instalment scheme cannot alter the price proposition of the brand- especially a 3 month instalment scheme. If it was a 12 month scheme, suddenly the equation changes. But that takes guts for the bank to execute. And it is expensive for the brand to implement.

- does this promotion increase consumption of the brand , or bring in more users?

Will the possibility of spreading my purchase cost over three months make me more inclined to buy Jeans (and T shirts) versus other Indian dresses- casual shirts- trousers? Unlikely.

A pair of jeans in India competes with other pairs of Jeans. In a market where a pair of Levi's costs 5 times the "private label", does this promotion really address the price issue?

Given that credit card penetration is very low in India, does this scheme actually enable to bring in more consumers?

Or is Levi's simply trying to get more share from the other brands such a Pepe/ Wrangler?

We think someone at Levi's India got really excited by the idea of selling jeans on credit. The bank charges restricted them to a 3 months scheme. And the marketing team just pushed ahead anyway.

Levi's may report a change in volumes and market share, but this is not going to expand the category. Sooner or later the other brands will launch the same offer, and the bar will be reset to zero.

Thumbs down! An installment scheme for Levi's cannot be a competitive advantage. But it makes for interesting news.

Thursday, 6 August 2009

beware the naked man that offers you his shirt

This note borrows its title from a book by Venkat's very first management guru, Harvey Mackay.

His lesson came to mind as we read this free book by Chris Anderson - FREE. Please click title to read.

Chris Anderson has written a well known book called "The long tail". He is a well known writer and his new book is on a concept that has been around in marketing for decades. (So we're glad its free, but still cost us our time).

Anyway its an interesting concept to summarise in a few lines. Marketing theory and practice has been using the idea of FREE for many many years. Among the 4Ps of marketing, 'FREE' falls under 'Promotions'.

Its various forms are:
- buy one get one free (increases volumes, the consumer gets one unit free.
- get X% more (same as above)
- Buy a set of razor blades, get a can of shaving gel free. (a company wanting to launch shaving cream will give free samples of this with every purchase of its razor blades.)
- 50ml of sunscreen lotion FREE on every purchase of body lotion.
- sampling - handing out trial packs of one time use to get people to buy more.

Once some years ago in India, we ran a very successful sales promotion giving away a micro wave free for every purchase of a Home PC. The logic was that Indians buy the PC when all other household purchases are done, so this offer was aimed at a two in one benefit for the family, accelerating the penetration of the first PC in the home.We made this possible by getting the marketing folks to buy microwave ovens instead of TV spots!

Free happens all around us. Has been for years. But its objective is to get us to pay for the stuff that makes money for companies.

Now what happens when ideas are shared for free? This is the interesting, but really no different from products being given free. Google gives away so much for free because it wants you to come back to its search engines where it makes money.

'Free' works if the free item was indeed valuable. Then folks come back for more, even if they need to pay.

'Free' works, if there is the probability of more 'free'. Even then folks will stick around for more.

But 'free' has to make money somewhere for the company. TO create something takes time and money- which costs. And the cost is always borne by the consumer.

In fact, the more 'free' stuff from a company, the more expensive its 'paid' content is.

Wonder why Mckinsey keeps putting out free industry reports?

Free and relevant insights build credibility and allow ideas to reach a wider section of people. And invite consumers to pay for more services if they so desire.

We like free. We blog to share our opinions for free. We think 'free' knowledge builds communities bigger and wider than any subscription service can. The problem with free is filtering. It makes it difficult for you to select your community. New technologies could help solve this problem, though.

FREE is a good idea to consider in any line of work. So what will you give away free today?

Venkat, Ritu

Thursday, 9 July 2009

Beware the ghost of the BS art

An interesting note by Clif Reichard (please click title to read it).

We are practitioners of sales and marketing and in our more limited experience (11 years) find that mostly sales persons today are being trained to fail.

We have been in the B 2 C space and deal with products that pass from the company to distributors and onto retailers before the consumer buys them.

The sales force is required to ensure the product is available at the distributor and then sold into the retailer by the distributor.

The distributor and retailer do not buy the product from the company for the reason that the end consumer does. The end consumer wants to feel beautiful. The distributor wants to feel rich.

In fast moving consumer goods (toothpastes etc), distributor gross margins in India are about 5%. Net margins are 2%. Unless his working capital rotates 12-15 times, the distributor is better off investing money in the stock market.

In this business, salesmen need to be trained in managing working capital and advising distributors and retailers in managing working capital. What stocks to order- how much- how to stock products-how to allocate costs to various products.

We have seem the same principles apply in the PC business and in the tire business. We believe it is universal. Simple xcel tools can help sales persons understand how their customers make money.

Yet few companies train their sales persons on anything more than product benefits. We are not surprised at all that the sales community is viewed with skepticism. They dont seem to speak a language relevant to their customers.

Most senior managers don't grasp the idea that the same principles that apply to their business, apply to their customers' business.

Ritu and Venkat

Asia Rising- Only half the story

A recent blog entry in the Harvard Business web site ( spoke of Asia rising as a key trend. Sure nothing wrong in that. But it did beg the question, is the West sleeping? and if so , why?

It is clear that India and China (and Africa as well) will grow fast...why not, they are the poorest parts of the world. Especially in the case of India, poor government policies of the first 50 years of independence condemned large parts of the population to stagnation.

Now, these two countries are trying to make up for lost time and opportunity. 1 billion people in these two countries are still poor...i.e. not even in the middle class. The per capita GDP in India is USD 1000 and in China about USD 2000. About 15 times lower than Western Europe.

But this is still half the story of the world. The slowdown in western europe and the US made me ask a question to my colleagues there.

At 30,000 USD of per capita GDP, have you achieved all that you want?
Is there really no further aspiration?
Why is it that space travel is still not affordable and aspired for by your country?
Have you reached the end of research into AIDS and cancer treatment?
Have you given up on green technologies- and alternate fuels?

The world has too many unsolved problems. India and China can solve a few, but only those that don't require expensive research.

Why the West gave up on the idea of "renewing and re-educating" itself, i cannot say. The world has more than enough room to grow at more than 4% over a very long period. It needs productive investments. Both in Asia and in the West. Our leaders fail us when they allow us to get complacent. Both business leaders and government leaders in the west are responsible for the slowdown there.

One day Asia and China may also begin to bask in the glow of "contentment"- to their own peril.

India was a very rich country 500 years ago, but the kings spent the money on luxury goods- building palaces and generally decorating themselves. Sounds familiar?

Ritu and Venkatesh

Tuesday, 7 July 2009

The Indian Budget 2009-2010

There will now be numerous notes on the Indian Budget that was announced yesterday. (please click link above to read what the Economic Times has to say).

The budget disappointed those who wanted specific details on the disinvestment plan, on increased Foreign Direct Investment and on reducing the fiscal deficit.

But on the other hand, the government has spelt out clearly how it will focus expenditure on the rural economy, on building infrastructure and creating jobs for the weaker sections of society. The focus is clearly on strengthening the economically weaker sections of society- bridge the very huge gap between the rich and the poor in India.

Penetration of consumer goods in India (apart from TVs) is very low and enriching the weaker sections of society will drive consumption and hence purchase of goods and services. This should succeed in creating a trickle up effect.

We maintain that the huge salary growths of the middle and upper classes in the period 2003-2007 have raised income levels sufficiently and now the focus must be on delivering wealth more directly to the 60% of the population which is dependent on agriculture and is significantly poorer than the average family.

This is our belief. We support the budget.

Ritu and venkat

Monday, 6 July 2009

Brands that target niches- should this be news at all?

The Financial Times (click on title) had this article on Mars (maker of M&M, Twix chocolates) is targeting women with a new brand of chocolates called "Fling" -(

The news item first had me cynical. Why is this?
A friend of mine tells an old tale to describe how his company (multinational in the foods/ home and personal care business) keeps going in circles. First cuts all local brands to focus on "key brands and innovations", then goes back to investing in local brands to "revive sales and market share on a country basis"....and goes through this loop every 5-7 years.

The tale is about an old woman with 4 sons. Someone asks her how the sons keep busy to which, after much coaxing she says..."do you see the carpet hanging there. Well, two of my sons unravel it every few days...and the two others then stitch it back."

To why is the creation of segments "which the FT very stylishly refers to as 'niches' ", news?

Creation of segments based on distinct and profitable needs is the basis of marketing.

What is annoying is how marketers seem to develop needs through brands that make a connect with consumers, and then in the interest of "shareholder value" and cost-cutting, kill brands overnight, transferring the brand's properties to a larger "mega brand".

This weakens brand management and over time erodes the "mega brand" as well.


Sunday, 5 July 2009

an essay on recent pricing trends in india

Income growth estimates 2003-2007:

Given a lack of recent public statistics on income and income growth, we used newspaper reports and other estimates to paint a picture on the income segmentation in India in 2003 and its evolution in the period 2003-2007.

Table 1.1:

Number -------Annual inc(INR)----Average----Grth%(03-07)--Income 07----Inc grth% 08
of HH

4,000,000 ----->215,000 ---------215,000 -----25%---------524,902---------10%
90,000,000-----45,000-215,000----130,000 -----15%----------27,371----------8%
66,000,000------< 45,000----------22,000-- ----6%----------28,405----------6%

Table 1.2:

Average Inflation in the period 2003-2007 ----5%
Inflation 2008 -------------12%
Inflation 2009 -------------------1%

1 USD= 48 Indian Rupees (INR)

Given that the Indian economy grew between 7-9% in this period, these household income growths were not seen to be irregular. Income growths in the period 2003-2007 were significantly higher across all income segments, compared to inflation in the same period.
Note that salary growth rate fell in 2008 while inflation rose spectacularly (refer table 1.1)

Income growth in 2003-2007 must be seen in the context of supply and demand. While the Indian economy grew at break neck speed, the number of well educated graduates and competent managers was restrained by the lack of growth of high quality educational institutes. This resulted in high rates of turnover in companies, sky rocketing salaries and an overall increase in employment. In-fact this period also saw a large migration of people having very basic educational qualifications (grade 8 pass) moving from villages to cities where booming sectors such as retail were offering entry level jobs to people with modest education.

This means that apart from the 66 Mn households at the bottom of the pyramid, all other households were earning far more than inflation. This is a very big difference w.r.t. Western economies where salary increases are very closely tied to inflation. The savings rate in India increased from 27% in 2003 to 36% in 2008.

The period 2003-2007 was giving most Indian households real income growths in excess of 10%, taking into account inflation, and a lot of extra savings was being created

This is one of the reasons we wrote in 2008, that high inflation of 12% in 2008 was unlikely to impact the common man. Contrary to common opinion held in India that Indians would take to the streets to protest high prices, we maintained that “middle class” India had received a huge buffer in terms of salary increases since 2003 and would be able to withstand inflation of 12% in 2008. We maintained that if salaries rises were to reduce, the middle class would still be able to survive 12% inflation into 2009. But that inflation would need to fall in 2009 to 5% or lower.

The bottom most segment of 66 Mn households is agriculture dependent. This segment consumes what it produces and then sells to the market its excess. In a high inflation period, our understanding is that this segment is insulated from increasing prices of cereals and staples, since they themselves are the producers.

So, how did all this translate into pricing?

In the period 2003-2007, pricing went through the roof- particularly for the packaged goods and services sectors. From FMCG majors like Colgate and Unilever to airlines and everything in between, raised prices continuously between 2003 and 2007.

Capacity increases often take time and in the period where industry was constrained by capacity, prices increased sharply.

These packaged goods and services, do not have a significant impact on the calculation of inflation in India, official inflation continued at 5%. The less affluent families also did not see their basket of goods (mainly non processed food) becoming very expensive.

There was a complete “free for all” interms of pricing and companies reported huge profits in this period.

The year 2008:
In 2008, commodity prices started impacting India as well and the price of basket of goods that are used to calculate inflation, rose 12%. India also began to take note of the global slowdown, which through the fall in exports of products and services, hit home sometime in the second half of the calendar year 2008-2009.

Sentiment fell. We wrote at that stage that the large and untapped Indian market was reason enough for entrepreneurs to focus on satisfying domestic demand, and not worry about global sentiments. We added that as long as the companies representing “new India” - Infosys/ TCS/ WIpro did not lay off staff, there would not be any risk of mass layoffs and hence the economy would be able to continue growing, albeit at a lower pace of maybe 5-6%. On top of this, the government announced various incentives (farmer loan waivers/ infra investment/ pay scale revision of govt employees) all adding to almost 200 Bn USD. This is a big investment for a 1 trillion USD economy.

Companies reacted by initially holding prices steady and accepting declining volumes. A very bizarre approach in the mass market segments. Sure enough, worsening sentiment coupled with high prices (given salary increases were minimal in 2008), meant that the Indian shopper stayed home. Retail sales collapsed in the 3rd Qtr of 2008.

By the end of 2008 and in the early months of 2009, however, we have seen pricing sentiment and philosophy change significantly. Companies became more cost conscious and began to benefit from the worldwide fall in raw material prices. They started to reduce prices and most companies took a hit to margins as well. And companies looked to maximise capacity utilisation.

- FMCG majors such as Unilever dropped prices in the market.
- Promotions (cross promotions/ price discounts/ free volumes) on products have increased.
- Hotels have launched very sensible “all inclusive” packages taking care of food, non alcoholic beverages, laundry and sight-seeing for their guests.
- Low cost airlines became truly low cost opening a 30-40% differential versus full price.
- Capital goods manufacturers reduced prices as the government announced reduction in sales taxes.
- Real estate prices have fallen 10-30% depending on the location.

Over and above, companies have started looking at rural India as a viable business opportunity and have started to set up products and services targeted at rural masses (at suitable price points). The aggressive pricing has brought the Indian consumer back and Q4 of the financial year 2008-2009 recorded 6% growth for the Indian economy.

What happens going forward:
A new budget will be announced by the government early next week. We expect to see investments made to facilitate development of the less affluent, infrastructure development and privatisation of government companies (mostly to finance the budget deficit, but also to make them more competitive).

These will be good initiatives that will continue to increase domestic demand.

However, one concern is still agriculture- the monsoons are late. 60% of the employment sector is supported by agriculture and if the rains fail, this will impact the buying capacity of a significant segment of the population while diverting government resources from investments to direct support of the weaker sections of society.

Bottom-line on Pricing in India:

Our view is that India is a market where product availability and distribution are the most important factors for success. Marketing is very nascent and is limited to advertisements featuring prominent film celebrities. Marketing becomes important when people start having choices. In India, we are still many years behind that stage.

In our view, the capacity shortages of 2003-2007 which caused pricing to spiral out of control, have been corrected. A lot of investment went into infrastructure and manufacturing capacity in the period 2003-2007, and these will keep pressure on pricing. Investments in education, infrastructure are increasing and the supply-demand imbalance of talent should be mitigated significantly by the time the Indian economy returns again to its 9% trajectory.

Companies will find it hard to increase prices beyond “raw material increases” or the standard inflation rate (4-5%). While there is some segmentation in the market, penetrations for most product categories are less than 20% (micro waves/ washing machines/ computers/ vehicles). This means that driving penetration and hence gaining volumes and market shares in the market is the priority. The Indian consumer is price sensitive and hence value pricing and “penetration” pricing will continue to drive the pricing approach in India.

Ritu and Venkat
June 2009.

Monday, 29 June 2009

Brand Michael Jackson

The title above leads to an article by John Quelch, a Harvard professor and renowned expert on marketing. This note from John, we felt was pretty badly written. One of the reasons we think, serious thinkers should avoid going pop.

Apart from the style of writing, we disagree with the content. MJ, for all his wonderful music, died a very poor brand. At the pinnacle of his fame (80s-mid 90s), he was a great brand, but we are not sure he will be remembered as one.

The last decade of his life, MJ did not create any entertainment or associate himself with any work that engaged , entertained or educated his fans. The 3 Es that all brands must continuously strive to deliver to remain consistent.

In fact, his actions took him into realms where even his staunchest fans could not but begin to suspect an unstable mind at work.

We loved his music and hold both "Off the Wall" and "Thriller" as masterpieces. We are saddened by his death, but we were equally saddened to see the brand already in decline from the mid 90s. We were hoping the brand would revive itself with the latest concert.

If anything (and with a heavy heart), we would present his life as a classic case in not only how great brands establish themselves, but how they fade away as well.
While we cannot offer any precise insights on what went on in his life, we think he started living in a virtual world filled with sycophants. Brand managers that get removed from their consumers should beware. It appeared as if, MJ felt he was above the rules of social living. Great brands reflect the society they live in and working from within, evolve social thinking.

Thanks for all the music and entertainment MJ. May your soul rest in peace.

Ritu, Venkat.

Tuesday, 23 June 2009

Apple's retail store success

A very interesting note (click title) on the success of Apple's retail stores.

We believe brands must have control over all elements of their customer engagement, especially distribution. This works for every brand, in every category- if you see the brand as a "leader".

Controlling distribution is seen as expensive keeping in mind the cost of space, staff and inventory. But it is a customer facing activity.

Outsource manufacturing, finance, logistics. Set up metrices to control the delivery. A 1 in a 100 error may still be acceptable.

But control and master your customer facing moments.

Leadership cannot be outsourced. Nor can the 4Ps (pricing, product, distribution, promotions (communications).

Ritu and Venkat

Tuesday, 9 June 2009

Pontiac- this ad cuts through clutter...

We are regular visitors to which reviews ads (in the US) on a regular basis. Its a great repository and worth a regular visit.

This Pontiac ad is pretty old, but worth a view. In our view, amazing.

Click title to view,

Ritu, Venkat.

And for lateral thinking in advertising, try this out:

Wednesday, 3 June 2009

Great brands take every opportunity to educate their customers

A very interesting note that arrived in our post. National Geographic gave us some tips on getting the most out of the time we spend reading the magazine.

Its a good way of making sure you get the most out of your investment.

After so many years, we still have not figured out all the features in Windows. MS does not care (it seems).

We cant figure out everything in my Nokia. We suppose they dont care either.

But Nat Geo cares. And we appreciate it. Take a moment to read the note. And remember , its always a good idea to educate consumers in any way you can.

Market leaders engage, educate and entertain.

Ritu and Venkat

Saturday, 30 May 2009

Twitter for market research

Twitter should get more intelligent (Wolfram Alpha?). If we are putting in a query from India, the results should be sorted so we get more relevant "Indian" results.

Anyway, we wrote a while back on how new media is allowing consumers to learn more about products and develop their own opinions. So that the role of a brand manager is likely to change in the future from an "instructor" to a "facilitator".

We finaly got onto Twitter some weeks back and the first thing that struck us was :
- CHEAP MARKET RESEARCH! (Dip stick anyway).

We typed in a few brands...Nike/ Vodafone...and got a lot of twits that indicating what consumers were experiencing with each brand.

But most responses were "foreign" and we could not get an Indian feel to this. So we typed in a very well known Indian mobile services brand. And then things got very interesting.

People are twitting about its new services...its business plans etc. But mostly people are twitting about their experience of its products and services.

Mostly they are complaining. (we estimated 70% negative twits product/ services).

This is interesting, because the twitters are tech savvy, early adopters. They are passionate about technology and its usage. If they are complaining, its a good reason to look into why.

We are not sure if the brand manager at this company twits or even reads twitter. But he should.

But if Twitter could classify results relevant to the country of the twitter (India in our case), this would become a very interesting tool even for multinational marketing managers.

Ritu and Venkat

iPhone apps: Losing users within 30 days?

A very interesting note we read on (Please click title to read).

We are trying to conceptualise this but at this time, its just worth reading and digesting slowly.

Ritu - Venkat

From Spelling to Searching bee.

We take the spelling bee as an example to highlight why it is necessary to give up some skills of the past to learn new skills that will enhance the future.

Why do we celebrate the “spelling bee”?
Our children today have spell check on email/ on word/ xcel/ google and powerpoint. They complete close to 95% of their written tasks on these softwares.

Why do we celebrate the spelling bee? I am not sure we capture our surprise (dismay) at this. Infact we are surprised by the continued emphasis a lot of exams place (especially in India) on memorisation of facts. Perhaps in a country with very limited (PC penetration is about 5%) access to internet search tools, memorisation of facts is important.

But in the US, with a far higher degree of online search available through the PC or mobile phone, what’s the fun in continuing with a spell bee? (Wikipedia suggests this concept perhaps started in the 1700s with the emergence of reading and writing skills in the West).

Why don’t we have a “search bee” contest now for school kids? We ask them the most difficult questions, and the kids have PCs and access to any search engine (s) that they choose to get the answer in 3 minutes.

We take the spelling bee as an example to highlight why it is necessary to give up some skills of the past to learn new skills that will enhance the future.

We argued recently with friends of ours why the government should not incentivise the learning of ancient dance forms such as Bhrathnatyam and Kuchipudi. They were shocked.
“How can we lose our tradition like this? This is so irresponsible”, they said.

Our reaction was this:

- In the past 10,000 years, we have no ideas exactly how many forms of communication were learnt and forgotten(modified) as mankind evolved the complexity of his communication needs.

- In fact dance and songs, In ancient times lacking widespread reading and writing skills were only one way of recording stories and transmitting them. Now we have books/ photos and videos to do this recording and transmission. Why dance?

- What we know now is simply because we recorded in paintings or written form these cultural elements from the past 2000 years.

- But recording a cultural element itself preserves it for the future. Why force it to be learnt through incentives that can be applied to other educational and cultural needs.

- Why not create a museum for fine arts that has DVDs of every known cultural expression and detailed instructions on how to learn it in case someone wants to.

- But diverting resources to preserve a past in a country that lacks basic resources is a crime.

Anyway, we came back to this thought when the winner of the 2009 spelling bee in the US was announced on TV recently.

We are patenting our “search bee” idea. Its more relevant for the future.

Ritu and Venkat

Tuesday, 26 May 2009

Bharti- MTN merger

Why? And why now?

Bharti (India's largest mobile service company) has announced plans to pursue once again a merger with MTN of South Africa. (click title to read more on this).

Bharti is a phenomenally successful company. WIth 100 million subscribers in India, revenues of USD 8 Bn and profits of USD 1.7Bn, it is by far the leader in the Indian market.

I am proud of this company which has set new standard in the business. It was the first company to completely outsource its IT infrastructure and hence reduced hugely its costs. Thereby giving customers prices of Rs 1 per minute of talk time (2 cents per minute).

Now, It wants to expand globally, and is looking at emerging markets as a first step.

I wish the company every success, but i am not clear why they should want to do this.
India has 300 million subscribers and this is expected to rise to 600 million in another 5 years. Bharti can double its subscriber base in India itself. Why go out?

If costs need to be reduced, they can be done in India, as the size of the company's customer base doubles. If this is urgent, why not merge with AT&T?

Is it about management resources? I dont think Bharti needs to look out of the country to get that.

In addition, i dont think the company has exhausted all sources of growth in India. Value added services are still in nascent stages, customer segmentation and customer service can be improved, there are new businesses such as IPTV where Bharti is making a play.

Surely the company is confident it has the resources to handle the demands of the Indian market as it ventures abroad. This is a very interesting and exciting move. And i repeat i am proud of this company and its ambitions.

The Indian press this morning is full of stories of how the merger will be executed and what the final company will look like. But take a minute folks, and help me answer two basic questions:

Why? And why now?


Wednesday, 20 May 2009

Titan FAST-TRACK Repulsive advertising

Marketers must use their common sense and judgment as they try to connect with audiences.

Titan (a well known Indian brand of watches) has a collection targeted to the youth called FAST TRACK.

We saw an ad for this brand yesterday with the tag line being "move on". Here a young boy and girl meet, have a one night stand (suggested) and then, as the girl tries to build more intimacy, the guy runs off (very fast)... this it appears is a ploy from the girl to drive the boy she wants to "move on".

Repulsive. This is the strongest critique we have done on this blog. But we are really offended by the treatment of young people (and if we may add, condoned) in the ad. Is this really what connects with our youth in India today? Or is this the best output an adman and brand manager keen to sensationalise in the name of connecting with youth.

We have not yet found the ad on the internet, but it appears that an add on the same "move on " concept has been aired before. An example can bee seen at

Here we cringe at the casualness of the break-up. Is this what "moving on" means to the youth today? Is this what it should mean to youth today?

Coming back to the "one night stand ad", lets assume this is what market research is suggesting connects with the youth today. The girl chasing away the with whom she has spent an intimate few hours? So that she can find the next target. If this is the case, something is wrong with our society. But the point is that a marketer must use judgment to decide whether he wants to build on this insight or he wants to transform this insight.

Is this attitude of young people correct? Would the brand manager want his children behaving like this? Is the answer is yes, he should find help. If no, then the marketer must use his ability and resources to bring positive transformation.

Why cannot young people "move on" from failure or success to take on the next challenge? Is that not a reasonable condition to "move on" from? Lets face it - unplanned pregnancies/ multiple partners/ teenage sex...these are all trends on the decline in the West. Are we saying, the very "internationally aware" youth of urban India have not plugged into the declining rates of these trends?
Wake up Titan, multiple partners have been declared passe!

"Titan" is a reputed brand name that in our books has completely lost dignity with the Fast Track ads.

Ritu and Venkat

Sunday, 17 May 2009

Indian Elelctions 2009 - Part 2

India has learnt to reward performance in civil administration.

A great great job by the Indian government in organising safely and efficiently this massive democratic exercise. A 1 billion strong country voted, and the results announced yesterday give a clear direction of a stable government for the next 5 years.

1. We will be investing in the Indian stock market tomorrow.
2. The results surprise us a little, but give us so much more optimism.

At preliminary analysis, the three national level parties (The BJP/ COngress and the Left) have put together returned with the same number of votes as the last election. The left, although touted as a "national party" is strong in the states of W. Bengal an Kerala..with a few pockets of visibility across the country.

So the Indian middle class, which votes basically across these three parties kept to expected lines. There was s shift from the BJP and the Left towards the Congress which saw the Congress emerge as the single largest party with 201 seats, its best performance in 25 years.

The BJP's right wing agenda was rejected and the Left's left wing agenda was taken down. The Centrist Congress collected handsome riches.

The total victories of the regional parties remained the same as last year, but we see some interesting trends:

- In states such as Bihar (tradionally very backward, but making economic gains in the last 5 years), the voters have voted for the incumbent's track record of good governance and development. In Bihar, the incumbent has gained votes across caste and community lines. We believe this is also because (and we will try to get some more data) parties have fielded candidates that represent various caste/ community and religious sentiments.

In the past, political parties could also be defined by a community as the majority of its members belonged to a certain community. This gave advantages in terms of winning votes of a particular community, but being closed to others. Hence the rise of fractured politics in a number of areas in India. The recent elections have shown political parties including within their folds, greater representation of the diversity of the communities they govern.

This means that:
1. if governance has been good, it makes it easier for the population to vote for the party through a candidate it is comfortable with.

2. That if the governance has not been good, the local population can indeed find alternative political parties tat are fielding candidates that represent at the basic minimum, the community of the voter.

This allows us to rationalise what has happened in another "under-developed" state- Uttar Pradesh, which is a close neighbour of Bihar.

Here, it has been widely felt that the state government was corrupt and inefficient, but has been voted in the previous elections on the basis of the caste and commnity equations it had correctly identified.

Lack of development meant that people wanted to find an alternate political party.

Each of the alternatives that gained (including the Congress) clearly had learnt lessons from the past and fielded candidates that closely represented the communities from where they stood.

This voting on community lines is what we are afraid of. But in this election, this issue was SECONDARY. The fact is that, largely the Indian voter voted for good governance. Where the local party had been governing well and developing the state, the party was voted for.

This bodes very well for the future. re-election will depend on good governance. At city, state and country level.

India has learnt to reward performance in civil administration.

We are hopeful and optimistic for the future.

Our broker will be a happy man tomorrow morning.

Ritu and Venkat

Saturday, 16 May 2009

Indian elections 2009

Its the day the results will be declared. The 1 Bn strong jury will of course come out with a split decision. Today we will know exactly what.

There should be no surprises. India will once again be governed by a coalition. In a note we wrote after the Nov 11 attacks in Mumbai we argued that politics in India is multifaceted with "national level" issues having a limited impact on elections and hence creation of governments.

The outrage after the Nov attacks took maybe 80% of Air Time on all news channels, but move away 150Km from the big cities, and people were already too far from Mumbai.

We believe, India votes on three philosophies.

A. The rich, well educated "elite" is largely a cynic. These folks have perhaps the lowest turnout. They don't care (anymore). They believe that any government formed will be just as inefficient. They want business to thrive and their well paying jobs to be secure. "Government, get out of the way" is the motto.

India will not go the socialist way anymore. The performance of the finance and commerce ministries are extremely critical for any government to have a semblance of functioning. Hence, no matter who wins, governments ensure that the F and C ministers will be the best available candidates. That's all the "upwardly mobile" Indian expects from the govenrment. "Get out of my way, make F and C work". The real work will be done by the bureaucrats of the Indian Administrative Service, so most ministers do not matter.

B. Then there is the middle class, which was made of mostly employees of the government sector. These folks, we believe always voted for the Indian National Congress, but found a choice with the emerging right wing Bharatiya Janata Party (BJP). The middle class voter (the ones we have known all our lives) rarely ever change their voting habits. It took the BJP many many years to enter the national debate. We do not see a third "national party" anytime soon. So the choice is one or the other.

C. And then , the rural voter. Largely farmers, but more and more people involved in the manufacturing and rural service economy.

These folks, mostly, vote by familiarity. Familiarity of community. There are about 3000 communities in India. Each community is seeking its own voice and this is causing extreme fragmentation of the vote bank at the rural level.

Indeed the two main parties- Congress and the BJP have been facing this vote bank fragmentation not in the cities, but in the rural areas- where community based voting has found a very strong foothold. Promises of more subsidies and fair "representation" of community leaders takes predominance over national level issues.

Caste and community, being seen as easier ways to get elected, means that the current lot of rural politicians does not have to focus on development. Subsidies will do. Perhaps, the trickle down effect- and increasing awareness will change this equation. But it will take time. The "minorities" have only recently found voice (maybe in the past 4 elections), so they will want to cherish if for a while longer, before giving up their interests before broader national issues.

The last Indian government was a coalition of more than 20 parties. We would be surprised if today's results threw up a small coalition.

But if the past 5 years have been any indication, we (of the cynical "government should get out of the way" class) should look forward to some robust growth in the next 5 years.

Ritu and Venkat

Thursday, 14 May 2009

the language of an organisation

Blog post 100. Its a milestone for us. We don't write for a living, but we see enough around us that merits debate and discussion. And we make some time to put out our point of view.

100 ..and counting....we're grateful.

The language of an organisation is a simple concept. Each organisation uses vocabulary which is very specific. Some companies use "we" more than "I"..others use "suggest" more than "lets do this". Still others use "lets discuss this" while others stick with "you can do this...or you can't do this".

Its been a long time since either Ritu or I changed jobs, but a friend of ours changed jobs recently. Moved from consulting to industry. I noticed that as a consultant he used certain words very casually:
- home working
- connecting on sametime
- "deck" to refer to a set of powerpoint slides
- "play" to refer to participation in a market
- "billable" hours

We spoke after his third day on the job and he referred to a conversation he had at work earlier in the day. When asked for his advice on a new project, he listed out his approach with numerous instances of "i think we should do this"...." i think we cannot do that..." etc.

I understood from him that in a consulting organisation, he could be as direct with his own team members (not with his clients, of course) and he extended that to the new company, only to get some very shocked looks from across the table.

The language of the orgsanisation.

Sure, most organisations have English as the official language. But "I" and "we" are both English words. So are " i believe we could" and " i think we should".

When you change jobs, do you try to figure out what language your organisation speaks? Are they direct? Are they consensus driven? Are they comfortable working on sametime? Are they comfortable working across functional silos? How do they show respect? Is it to hierarchy or to capability?

How much senior management talent is from the outside rather than home grown? How old is the company?

Without an effective understanding and usage of the language of an organisation, it is impossible to integrate into it. No great ideas will ever pass through an organisation whose language one has not yet learnt.

I remember a relative once telling me (almost two decades ago) why he had taken so much trouble to learn the American accent, when he relocated to the US.
"They just don't understand our way of speaking English", he said to me. " So i learnt to speak their way".

I remembered that today. When i thought of how groups of people develop their own language. You move to a new neighborhood, you have a new language. New country- new language. New school- new language. New project- new language.

So new company? Better learn the new language.


Wednesday, 13 May 2009

Advertising Jujitsu in India (Vodafone versus Airtel)

The #1 (Airtel, 85 million subscribers) and #3 (Vodafone 60 million subscribers) are dominating the airwaves with their ads for value added services. (VAS).

The Indian Premier League (Cricket) is on and this gives advertisers plenty of eye balls to target. With the wireless service provider business still growing (adding 8 million new subscribers each month), its this industry that has dominated the ad spots.

None more than Airtel and Vodafone. And here is where we see some serious JIJITSU

Airtel has two actors as its brand ambassadors...Mahadevan and Vidya Balan. Their ads can be found at

Vodafone, recently started using "egg headed" a puppet-animation format. They are called the Zoozoo ads
and can be seen at

We think Vodafone has outmaneuvered Airtel.

1. Its "zoo zoo" ads come at no "celebrity" costs. They seem to be created at very low cost.
2. Animation allows the storyline to be exaggerating- creating better humor and shock content. (as opposed to Airtel which has been relying more on emotional appeal)
2. Low cost of production is implying that for 3 of Airtels' VAS story lines, Vodafone has launched more than 20.
4. In the Indian advertisement market (usually seen to be fixated on celebrity endorsements) Vodafone has moved the conversation to content.

It has stood out. It has created a new reference for advertisement development.

We insist however, that neither company's approach is really encouraging consumers to try value added services.

Both companies are describing their value added services to the consumer. But their story lines are not compelling enough for people to overcome the price and uncertainty barrier. Consequently VAS penetration is less than 1%. (estimated from the Indian Telecom department's qtrly review).

Given that there are more than 300 million subscribers and 100 million phones capable of accessing the internet, this low penetration of VAs is a problem.

Our solution is based on the fact that the Indian consumer is clearly interested in "bang for the buck", and in India, the buck is very hard to come by.

Building up a new category requires marketers to define the role and relevance of the category in the consumers life, at a particular price point.

Trials are very key to building new categories. Value added services must entice consumers to try them.

1. Mobile companies must allow a few hours of "free trial time" while consumers get used to a service.
2. A call center that takes consumers through every step and only activates charges when the consumer confirms his interest.
3.Killer content.

It comes back to great brands being built on the promise of "engage, educate, entertain".

Else these ad wars and karate-jujitsu will only make for entertaining viewing...and transfer of wealth from shareholders to advertising agencies.

Ritu and venkat

Monday, 4 May 2009

The workplace... silos or collaboration?

We were reading a note on how engaging today's workplaces are for employees. It suggested that current work place structures are a turn off for the new generation of employees coming into the workforce.

The argument being that Gen Y employees, young, energetic, idealistic seem to look for more collaborative work places...technologically alive...and often get put off by silos and IT firewalls.

We thought about this and came up with a counter question... if all work places got re-designed for the Gen Y, what would happen to Gen X? Should we expect them to change? Should we help them to change? Or should we simply replace them? (not possible numerically, unless you are in India or China)

Should we simply ignore the Gen Y employee?

If you're working with a business unit that has been around 20 years or more, don't expect a dynamic flexible environment. Be ready to see around you a lot of folks that have been around 20 years. "If it ain't broke, don't fix it"....people have risen over time and doing a set of things that they expect will carry them another 20 years. Most of these units work in silos. With defined boundaries and control structures.

Find out when was the last time the organisation reworked its business process to keep in touch with its customers. Remember, you can do this before you join, and its your responsibility to do so.

Companies that are young, probably got created by young people who are more adaptable to "matrix" structures/ collaboration...or simply the lack of hierarchy.

But the surest sign of whether you fit in or not is to compare your work experience in years with the age of the business. If you've worked many years, be careful of joining a start up. If you're entering the workforce, be sure that established companies will work in established ways.

Re-organisations may lead you into silos/ or into collaborative environments. Unfortunately, what works for employee A, may not work for B. Be aware of this as you enter a workplace. Sure, you may want to change the DNA of your workplace. But the only way you will get to do that is to gain credibility by imbibing the current DNA.

Are you ready for that?

Ritu and Venkat

Tuesday, 28 April 2009

The power of an Apology

Please click on the title to read this note by Peter BREGMAN that we came across on the Harvard business's blog site. A very nice note on the power and the need of an apology.

We thought Peter should have gone further. Giving an apology , in our view is only step one. Something more should follow.

We hear customer service reps now start the conversation with " i'm sorry this has happened, i will try to solve it". What we tell them is "this happened last month as well....and a few months before..."

How do you accept an apology that is automated and built into a response?

How do you distinguish between a sincere apology and "systematic" one?

What stops us, over time, from getting skeptical about apologies?

An apology must lead to a correction in behavior. If this does not happen. In fact, an apology is only relevant when the apologiser understands the error of his way and the better course of action. And then decides to implement that course of action.

It used to be said that it takes courage to apologise. That's no longer true.

It takes courage to apologise and ensure the mistake is never repeated again.

Ritu and Venkat

Thursday, 23 April 2009

Building up a comprehensive theory of business

After 3 days of debate, and at the cost of sounding pompous, we decided to go on with the title. Do read on.....

PART A: Why industries and companies exist
- All organisations are in the business of processing information. Be it the software business/ tire business/ rise from the ability to convert matter from one form to another.

- Industries differ in the type of information they process.

- Within industries, companies differ in how efficiently they process the information.

Effectively, all competition boils down to innovation, which is the application of creative and original thinking to business issues.

When innovation ends, businesses become commodities.

B. The role of organisation structure:

Within companies, organisational structures are created to maximise the efficiency of information exchange. Two critical drivers of structure are therefore:
- people
- information technology

Organisation structures inherently move in the direction that best aligns its people and its information technology. Organisation structures fail when this match of people and information flow is misaligned.


A command and control system fails when the maturity and competency of people is high and they demand more "lateral" freedom. If the access to information within the organisation is also easy, rigid structures come in the way of development of people and ideas.

A matrix structure fails when the employees have not yet learned the benefits of collaboration. Furthermore, if information is not easily available, the "gate keepers of knowledge" inherently become the power centres. The matrix fails.

When processes and systems of an organisation are insufficient for information to flow freely (horizontally and vertically) in an organisation, "politics" becomes critical.

C. Organisational Politics

Politics in an organisation, like in all other fields, is the development of power "implicitly". Implicit power is necessary when:
- explicit power is not well defined.
- explicit power is not efficient (i.e. the processes prevent recognition of the value creation within the organisation).

"Perception management", an integral part of office politics, becomes important when an organisation lacks transparency - in structure (information flow is weak and hence the performers and non-performers are both invisible) and in its processes (definition of value adding activities is actually not clear so people don't know what is expected of them).

D. Talent management:

Given that (and this is true mostly of developing economies) the number of higher level educational institutes has not kept pace with economic growth, talent is indeed scarce.

Unless organisations invest to develop talent,
- the talent it already has will disappear, seeking more competent companies.
- the dissipating talent will be hard to replace
- insufficiently trained people will be elevated higher up the organisation.
All three are key reasons to why industries rise and fall over time.
Lack of talent means lack of innovation means lack of excitement means exodus of talent.

Industries commoditise for lack of ideas. Period.

Ritu and Venkat

Thursday, 16 April 2009

Luxury Fashion Executive Domenico De Sole: 'Stay the Course with the Brand'

(Click link to read the artical)
Published April 15, 2009 in Knowledge@Wharton, this is an interview with Domencio De Sole, the chairman of Tom Ford International, and the person believed responsible for the turnaround of Gucci in the 80s.

A fascinating discourse on brand management. Some excerpts.

Knowledge@Wharton: What kind of strategy would you suggest a luxury goods company follow?
De Sole: The strategy for all luxury goods -- and I think excellent managers understand this strategy -- should be the traditional set of managing for cash in difficult times. Watch your costs very aggressively. But, at the time same, stay the course with the brand. Discounting prices really doesn't make a lot of sense. At the end of the day, it is imperative for luxury companies to deliver good value. It doesn't mean the price has to be lower. Just make sure that whatever is delivered is a good value -- great quality, great fashion, great brand.... The savviest people know that the number one [strategy] is to stay the course.

Knowledge@Wharton: In what ways do you think that the financial downturn has changed consumers? You started out talking about this, about how consumers are now pushing back on price. They are much more sale and discount conscious. Will this be a long-term change or, as you touched on earlier, might they revert back to their old ways once the recession is over?

De Sole: Again, nobody knows the real answer. But my instinct tells me that this difficult time is going to last. It's not going to be fixed in a few months. I think that people obviously are very concerned. But my experience is that at the end of the day, the consumer forgets. People love luxury brands. Historically, if you think about it, during the Stone Age, people were buying bracelets and earrings made of stone. So it's something that's part of human nature. My sense is that things will get back to being good. The real issue is, that it's going to last some time. I think that it's going to be a year, or two, or three. But nobody knows.

ritu and venkat

Wednesday, 15 April 2009

Lessons for Indian retailers from Why we buy (Paco Underhill)

Indian demographics tilted towards the youth (and reduced wealth in older age) makes for a phenomenally different shopping experience, compared to the West.

I went back to Paco's "Why we Buy" recently, after reading his book "Call of the Mall". I was disappointed with "Call of the Mall", and went back to Why we buy to understand what it was that i enjoyed about the book when i read it in 2000.

Paco's book in 2000 was a mix of social observation and science fiction. India had maybe 3 malls back then, so it was interesting to read what we believed would be the future of Indian retailing (the science fiction part). I have always believed that Indian retailing will not pick up till we have better road connectivity. Else malls would be located in the city center where high real estate prices and immense competition would severely limit their sustainability. (this has been the case to this day)

In 2009, as i re-read the book, i still felt a bit of "science fiction " to it.
But Paco makes an interesting point. Understand your customers and build the shopping experience around it.

This got be thinking about what the profile of the Indian mall shopper is today. Specifically, the grocery shopper in the new super(hyper) markets springing up around the country. Young family: Age 27-40; husband wife with zero, one or more kids.

No baby boomers!
No single male or female shopper (very very rare).

This is a very homogeneous profile.

The aged in India are financially less well off, and would often avoid driving on the manic roads to go to a super market 15 miles away. The mom and pop store in India is definitely continuing to thrive with home delivery options keeping his customers loyal to him.

Young men and women, who live with their parents, do not shop for grocery.
Independent men and women order home delivery or shop closer to home, thereby maximising leisure time on the weekends.

The literacy rate in India is low, and it implies that a number of couples in the 35-50 age group have only recently gained upward mobility. Their use of technology is limited. A stores have a lot of "help".
1. self check out counters are non existent.
2. store workers weigh and price all non-packaged goods (fruits and vegetables. This also helps to control pilferage.

Home and apartment sizes are very small, implying that households have to shop at least once a week. Since both the husband and wife work, shopping is then a chore that has to be done. The browse to buy ration ( amount of time browsing a category before buying a product) is very low. Decisions are made on brand recognition and price. Period.

(Interestingly, supermarkets have not yet begun to integrate play areas or eating areas within the store in an attempt to prolong the visit. The idea so far has been to maximise store space with as many products and brands as possible. Consumers in a rush want convenience, not choice. The Indian grocery shopper is always in a rush)

Given these characteristics, i am surprised that malls:
- do not package all goods, including fruits. I believe this comes from the belief that Indians like to feel everything before they buy. True of my parents generation, not of mine. (and my parent's generation does not visit the super market)

- have too many brands.... when the browse to buy rate is low, this is not a good idea.

- do not offer home delivery options (within a 5 km radius for example)

Why we buy continues to be a fascinating reading and extremely relevant for a market taking its first steps to becoming a consumption society.


Tuesday, 14 April 2009

Targeting your consumers through appropriate distribution

I read this note a couple of days back (i am sure it was the businessweek online, but i am unable to trace a link to it and put it here for perusal) about HP (the computer guys) using different types of retail outlets to get closer to their customers.

Eg: a fashion/ clothes store for young women. HP places its products here- the ones that have fancy prints all over- and allows the women to use the hardware and software to try various outfits "virtually".

We think this is a wonderful idea. Ritu and I are not "mass market" marketers. We like to think about goods that cost upwards of USD50-75 a unit, hence cause consumers to think about their purchase. For brands that operate here, we recommend complete ownership of the distribution channel. i.e go online or have your own exclusive stores. Retailers take away control. If yours is a product that requires consumers to be educated, do it yourself. No retail.

What we like about HP's idea is that it allows you to be present in a wider range of stores, closer to the consumer that you want to reach. The consumr you want to reach.

Targeting your distribution. That's an exciting idea. We talk of targeting communication al lthe time....this is a step further.

And you're not keeping your entire range there. Just a relevant product that gets consumers excited about computers, feel at ease with them, and check out these new machines from HP.

What other applications can i think of? Sampling coffee in a high end retail store...where the lady (or gent) has to wait while the better half is getting the fitting correct.

Its an intresting line of thought and we will reflect more on this.

Ritu and venkat

Monday, 13 April 2009

marketing during an economic boom & disposable income sensitity tests

Price sensitivity tests must be accompanied by disposable income sensitivity tests as marketing teams develop the business case for launching new products.

Ok, this comment may sound very eccentric. We can't put a fix on it, but we think the logic is correct. We will continue to work on it.

"Marketing in a recession. Sales in a recession. HR in a recession." We are reading these headlines everyday. Prominent management gurus giving their inputs on how to maximise shareholder value in a recession/ downturn when consumers and employees lack confidence. We dont dispute most of these writings, except the ones that advice management to "re-look" pricing and make pricing "more attractive" (read discounts/ bulk deals etc) in a downturn.

Our take is this. Marketers should be as careful of how they market in a "boom" as they are in a "bust". More so in a boom, because these phases of expansions set up expectations (over optimistic) of the success of a brand or marketing approach. Fundamentally, does economic health determine how good a product is functioning?

-Was a Porsche a better car in 2007 than today?
-Is my Axe effect any less now than last year?
- Are the Himalayas any less beautiful today than 2 years ago?

A brand is a promise of a product/ service experience. It is based on a product and its differentiation (or lack of it). If the promise is maintained and communicated/ delivered over time, the brand becomes a signal. Fine.

Why then do consumers opt in and opt out of products, often siting economic conditions as the key. We believe that the value proposition of these consumer changes. In a boom cycle, the consumer feels richer and freer to purchase certain products which seem "an indulgence" when money is tighter. These are risky consumers and marketers must identify them early. Hence price sensitivity must be in conjunction with disposable income sensitivity to a product.

These fickle consumers will cause sales to rise during an expansionary period and decline during a recessionary period. This means that factories produce more when demand is higher, and less when it is lower.

Profits will rise in a boom, and fall in a bust. The number of consumer rises in a boom, and falls in a bust. This should not be surprising to a company. But it often is.

In fact, if the marketing processes included a sensitivity simulation of the economy on future purchases, all of these swings would be built into the business model for a new product.

1. The marketing team must start with a definition of the "core consumer" set for a product. The people for whom the product is an essential part of life.

2.Then identify Identify how sensitive the customer to a change in his disposal income. Not price sensitivity. But income sensitivity. What happens when the consumers income falls be 15%, 30%, 50%. This is a critical lesson for us from the current business environment.

3. What this will mean is that the business has identified a "economy independent" set of consumers around which its business is to be built. any new consumers in a "boom" should be taken as a bonus, and these earnings set aside in a war chest.

Any decline of consumers in the "bust" should be offset not by lowering pricing and inflating demand, but by digging into the war chest to continue R&D and marketing expenses in a low volume environment. (A sort of "oil surplus fund" that Russia created some years ago, to put aside its oil surpluses for a rainy day.)

Why should a business not work that way?

Adjust production to changes in the "peripheral" consumer set that a brand has attracted, but be focused on the core group. Pricing has no significant role to play in a recession. At least no more significant than during an expansion.

Friday, 3 April 2009

if you care, show it

For over a year i have struggled with the customer service approach of a large mobile service provider whose network carries my calls.

My monthly billing is very high (compared to Indian usage rates) and i should be easily among the top 5% of their customers in terms of revenue generated. And yet, i am treated with suspicion, and made to feel irrelevant.

A bill goes missing, i am told it will take 8 days. Since i have already paid the bill and only require a copy for official records, i ask why 8 days to send a bill by email. No reason...its policy. So i talk to the supervisor...." i will do it for you today (and only because its you)", he says. 24 hours later, nothing. So i call back, a new supervisor promises the same. 24 hours later nothing. By now i am feeling like they are taking me for a ride. No one seems to be interested in solving the problem...just closing the call.

So i call some friends working in the company and behold- the bill appears the next day.

And all this while, i am left with a feeling of helplessness. When i want to report the incident to the supervisor's manager, i am given an email id which says that i should get a response in 8 days. I want to be heard today. Not 8 days later.

I am bitter. I know that this company has perhaps the best network in the country, i cannot shift. So i must continue to suffer their indifference.
Bitterness, frustration are outcomes of a sense of helplessness. I felt the same way when i met the school bully! Till i threw my first punch at him.

What right does a company, that exists because i buy its services, have to make me bitter?

On a marketing blog, my own feelings are irrelevant. What's useful is that i have reflected now on what customer service processes should achieve:

- listen to the customer. Understand his problem.
- treat the customer as you would like to be treated. Dont mess with his time. And behave as you would if you were standing in front of him, and not in some undisclosed part of the world.
- empower the customer (and your front line staff to solve problems, not just pass on the buck). If you can, give the customer some alternatives and let him choose his solution.
- close the issue in the first call. Or stay with the customer and the issue till it is closed.

I do not spend time with people that do not respect me.

I had a vastly different customer service experience with the Taj group of hotels, just as recently. ( I had a problem with a policy, the lady at the desk said she could not sort it out. I asked to speak to her supervisor. She could not sort it out and suggested i email. When i said i would not email, she offered to connect me to her boss.

In an ideal world i would have liked her to sort out my problem. But i noticed that this was an organisation where senior management were not afraid to come in front of their customers. They did not hide behind emails. I got his mobile number and called.

The gentleman said he understood the problem, and would look into it and get back to me. If there was a reasonable chance of sorting it out in my favour, he would.

I dont care anymore that he does not sort out my problem. But by giving me his mobile number and direct email id, he showed that he trusted me. He heard me out.

Some organisations may be in the service business and some may be in the manufacturing. But all customer service departments are in the customer contact business. There can be no excuse for not respecting the one reason why a company is in business. The customer.


Thursday, 2 April 2009

Power Pricing Robert J. Dolan (Author), Hermann Simon (Author)

A very interesting book indeed, I would recommend it to managers looking to sensitise themselves to Pricing without getting into very technical treatment.

As a pricing manager myself for the Western European region, I had the opportunity to apply a lot of pricing concepts. And the application of pricing is a tremendous source of competitive advantage.

For example, elasticity. How much more or less do consumers buy given a price decrease (or increase). Now consider a company that sells through multiple channels….wholesalers/ retailers/ the internet.
How is channel elasticity different for each trade channel. How much saving does awareness of this fact, generate for a company.

Product elasctities. Consider than you have 50 SKUs of a single product. Elasticity for toothpastes may not be the same as the elasticity for a “tooth whitening” paste or a “breath freshening” paste.
Or that a 200g paste has a different elasticity than a 100g paste. Do you capture such variations?

Then the entire notion of price setting itself. Does a new product always have to be priced high. (Not if the product category is old and very competitive!)

What market place parameters influence pricing? In the auto industry, for example, the Original equipment Manufacturers are never keen to give more than 30% of the component business related to a particular model to one supplier. They create competition.
How about the fact that some consumers hang on to really outdated car models (not as old as antiques, but old enough). The tires on those cars could be a very old design. Yet, the “hockey Stick” concept suggests that as the product enters its “end of life” phase, it may present an opportunity to increase prices so as to milk the last sales from its die-hard customers. Wow.
Another interesting topic was the flow of goods between countries. A “price corridor” is now the recommended answer, suggesting that some countries increase prices and others decrease prices so that the differential between them is low enough to discourage price flows. It raises a very deep question: Do grey market flows happen because prices are out of equilibrium or that supply and demand are not synchronised in a particular market. Figure this out before you attack pricing, else even the smallest differentials are sufficient for some intermediaries to act.

Consumer goods in competitive markets represent very interesting pricing challenges. My request to any practitioner is to start with the questions:
- What does this product do for the consumer
- How does the consumer value this benefit from the product?

Most of us take the market prices as a given while position new entrants. Its simpler. But knowing what value products create in the lives of consumers, and maximising this is a very important goal of the marketing team.