Marketing-Eye : Practical Take on Marketing Today

7 commandments for getting a better price

2012-02-05T19:17:00.003+05:30

You do not necessarily need a better product
to get a better price ! Here's Why ..

But be clear who your customer is.

Is he end-user ? Applicator? Recommender? Trader? Salesman?

Your answers will change ..

We all would like love to improve our margins and get a better price from the market but the question is how? Offering a better product is an obvious answer but it does not always work. Your customers are not always in the need of a better product. Then, what are they in need of that will make them pay a better price? Here is a list ... pick what fits you ! In each case, I have given examples too hoping that some of these will ring a bell !

Some customers pay more if you provide more FACILITIES
People visit restaurants not only for good food but also for more parking space.
Facilities are in the nature of more space, more specious, less crowded, cleaner etc ..
Payment facilities - cash, card, EMI, lease - are important
Some will pay more for door delivery
Some customers pay more for ACCESS to someone they like to interact.
People visit those exhibitions where they meet the type of people they want to meet.
People want to join those clubs whose members they are keen on mixing with.
People buy tariff plans of those cell networks who cater to their friends.
People become members of the social networks frequented by their friends.
Some customers pay more for SERVICE
People pay more to DHL because of their service of net-enables "parcel tracking service"
People choose insurance company only on premium but one which settles claims faster
Lot of market share of Maruti Suzuki is because its service network is wider and deeper
Some customers pay more for HUMAN SERVICE / EXPERTISE / TRUST
A doctor which charges more has the reputation of curing difficult cases
A lawyer which charges more has won more cases and is more famous
The same goes for businesses where competency is more important
Tickets for a known singer's performance are at a higher price
All of us are willing to pay / wait more for our favorite hair dresser
Auto-check-in machines exist at airports and yet many wait in queue to see the agent
All of us frequent the same retailer / restaurant where we are personally recognized
Some customers pay more if it gives them the STATUS they seek
An Arrow shirt has not only better quality but the "A" on the sleeve sends out a signal.
Director of Mercedes said; " 25% price is for the car, the rest is for the "star""
Some customers pay more for SAVING THEIR PRECIOUS TIME
Shopper's Stop calls its members to inspect items on sale before others and avoid queues
Vendors with ready stock charge more but you get material fast and proceed ahead
In a money-rich and time-poor world there are many ways to charge higher prices
Pre-cut vegetables, ready-mixes of food, home delivery of foods all are time saving ways
Some customers pay more for having a LOWER RISK
Samsung sells "extended warranty period" on its cell phones and it has a value!
Customers buy steel pipes from Welspun because its quality is already certified by APPA.

In addition do not forget the TWO UNIVERSAL PRINCIPLES : Customers will pay more for a better VALUE PROPOSITION which fits the customer's needs and wants better - and IF THE CUSTOMER COMES THROUGH CERTAIN KIND OF CHANNELS where the costs of operations are higher like airport outlets etc.

By the way, it has always struck me why the students in the entrepreneurship courses do not think of simple and easy to implement ideas where money is surer, faster and safer. Why do not they think of providing facilities, access, service, expertise, status, risk reduction and time-saving to people?

3 options : what to attack. 19 Ways : how to attack

2012-01-24T10:43:00.000+05:30

3 options for "What to attack"

Head-On attack on the chosen competitor with theintention of grabbing the entire market of the said competitor and thus to injurethe competitor so seriously that he exits the market. But sometimes the competitorturns on you and signals his willingness to “fight till finish” and it can cause muchblood letting from both the sides. Ultimately one side either withdraws fromthe market or withdraws into a small corner. ( This happened to HMT whenattacked by Titan).
Because of the risk and uncertainty involved inhead-on attacks, a flanking attack
is much more common. The attacker aims only for a small part of the competition’spie. In such cases the defending company also may not fight as hard - and mayeven cede to you – if the market segment ( customers, geography, application) is small or not worth picking a fight on. ( This happened when SONY sliced off a segment of the laptop market with VAIO which catered to the segment of customers who wanted a good audio visual and gaming experience on their laptops )
Bypass attack is actually an attack on the futureof the competitor. You, the attacker, figure out what the competition is likelyto do next and then do it before he does. ( This happened when Kent attacked Eureka Forbes Ultra Violet Water Purifier business by figuring out that the demand for Reverse Osmosis products will go up when the customers - increasingly using borewell water - will find that only RO softens the water. They first launched RO in their attempt to stop Eureka Forbes in its tracks )

Note : If you plan to convert non-users of the category into users, you do not need to attack anyone at all. When Nirma launched its low priced detergent, it was designed to convert people using soap suds and not detergent users at all !

19 ways "How to attack"

7 Ways of "street smart" attacking without differentiation

Counterfeit (and ride on him )
Imitate ( andconfuse the market )
Overpower
Move fast andreach markets earlier than him
Block hisentry
Initiatelitigation against him
Create afighter brand / unit

12 ways of attacking with differentiation

You can create differentiation not only through a better value proposition but also through a better Go-To-Market strategy

BETTER VALUE PROPOSITION CAN BE ACHIEVED BY

Better targeting of customers / regions / applications
Better insight (understanding of what matters : needs, wants and motivations)
Better offer (based on "what matters")
Better "Reason Why"

BETTER GO-TO-MARKET ACTIVITY CAN BE ACHIEVED BY

Better insight into how customer behave which make following possible
Better ways to search (or be searched by) potential customers
Better ways to contact (or be found by) such customers
Better ways to engage ( or be engaged with) such customers
Better ways to achieve communication outreach ( or inbound inquiries by ) customers
Better ways to facilitate purchase by customers
Better ways to transact ( take order, deliver, get paid) with the customer
Better ways to service the customer after purchase ( AMC, spares, recondition, replace)

4 reasons why your good brand may not be yet successful

2012-01-22T12:58:00.001+05:30

Your brand has been put together rather neatly - the design side (like logo, colors, graphics is in place) and the marketing mix side ( Product, Packaging, Price, Promotion) is in place AND YET YOU ARE STRUGGLING to make a dent in the market? Probably the following 4 issues may have prevented you from doing so....

You may be going against the grain / charter / DNA / destiny of the brand

You may have done market research and benchmarking and spent a lot of money and time on R&D, Product Engineering, positioning, marketing mix, offer and schemes etc. But are going in the direction of your brand's DNA?

Look at Apple : Apple's charter has always been to (a) challenge the status quo (b) emphasize beautifuldesign (c) make computer devices.... in that order. Apple's following is based on creating this charter. Apple does not start with market research (where people can tell you what they know but cannot tell you what they dont know) or with benchmarking (of best practice) but they start with their DNA of challenging the status quo (primary DNA) and they enhance the deal by creating beautiful and useful products (secondary) . Apple always markets this mission first and the products come later. From the founderall the way down to the customer, everyone knows exactly why Apple exists.

BMW used to make fighter planes and motor cycles for the German air force during the war. They did not know what to make when they came out of war. But they knew how to design and make high precision machines using internal combustion engines and to make them respond swiftly to even the slightest touch from the person driving the machines. Hence came their DNA of "The Ultimate Driving Machine". Their entry into car market was driven by this vision.

Way Forward : Knowing what energizes your key stakeholders, and what you are good at, is fundamental in deciding which markets to serve.

Did you count that different cohorts have experienced you differently

If your company is old, you have created different impressions in the minds of different cohorts because they all have experienced you differently. Let us take the example of IBM.

People who are over 70 today have experienced it as a electronic typewriter company
People between 50 and 70 have experienced it as a mainframe (corporate) computer company
People between 35 and 50 have experienced it as a PC (home) computer company
People between 20 and 35 have experienced it as a solutions company

As a result of this, any action that IBM takes will be interpreted differently by these different cohorts and IBM must take this into account and the external branding strategy needs to view these different markets individually and a broad brush stroke - treating all these customers as one - will not work. The same goes for internal branding : IBM is likely to have different cohorts of employees who have experienced the company differently during these times and IBM will need different approaches towards them.

Way forward : tools are available today to segment external markets as well as internal employees.

Set your sights on undervalued and unfathomed markets

Be like a value investor… find markets that are under-valued but have promising growth because if you jump into a highly competitive or shrinking market you may not succeed. It is better to create your own market.

Amazon jumped into e-readers and caught the attention of early adopters. Though Kindle has not yet been as great as people hoped, there is no doubt thatAmazon will dominate the e-reader market

Way forward : the model of 3 concentric circles is a good tool to uncover invisible markets and to see customers which your competitors do not see.

Take the case of Jim Beam. They saw the market for women. Most of the big spiritscompanies didn’t give any attention to women, even after knowing 50% of the Vodka market was of women. Their plan was to advertise to themen and the women will follow. Jim Beam decided to treatwomen as the primary market and developed product lines like a margarita variety (Skinny Girl Cocktail) that became #1. They did it using a unique flavor and lower alcohol content.

You don't need a different product : so long as your experience is different

Most products are so similar these days that probably the only way to differentiate them is to creating an awesome user experience. Your customers must feel that interaction with you is what makes you different.

Cell phones were all the same till Apple entered the market and challenged status quo. This all started with the iPod. Apple floated a minimumviable product out into the market to see how it would be responded to. Peoplewent crazy over the iPod so Apple figured that the iPhone, which would costmore to create, wouldn’t be such a gamble. They were right.

Way Forward : Start bylooking at the customers of your competitor and see what is missing fromtheir experience.

And the nice thing about user experience is you can go afterbig competitors without having their deep pockets.

4 Ways to decide if you are in wrong market

2012-01-08T13:37:00.000+05:30

You will fail if you choose a wrong market.

I hope this is a self evident statement to you that you will fail if you select a wrong market.

This does NOT mean to say you will succeed only by being in the right market. For that to happen, all the 3 basis of the strategic triangle have to be strong. The 3 bases being choice of the market, crafting of a value proposition and the go-to-market activities .

But market selection is probably the most important. I have seen - and been also involved in - turnaround of the fortunes of businesses only based only on the principle of market selection. Remember everybody cannot be your customer because you cannot use a broad brush and chase everybody (like all furniture users, all car owners, all word processors, all people needing painting..etc) unless you are very big. For the rest of us you must focus and select only specific group of customers using the 4 principles given below.

Be in the market where you understand what is needed by market

# 1 : where you understand the customers well

Unless you have a first-hand and insightful understanding of what drives the selected customers to search, sort and buy things in the space you want to operate in; you are likely to make fundamental mistakes.
You are likely to incur costs which your are fond of - rather than those the customers are likely to see as valuable. You must do more of those things that really matter to the chosen customers and less of those things that do not really matter to such chosen customers.
In fact your incurring of any cost is justified only through your finding identifying and finding customers who are willing to pay a price for it. No cost, in isolation, is right or wrong... it purely and only depends on whether the customers want it and whether you can get such customers.

Be in the market where you understand what you need to do

#2 : where you can be competent in the long run

Are you confident of equipping yourself (machines, talent, offices, dealers, technology, location etc) to cater to the defined needs of such customers in a better fashion than the options currently available to them?
Are you willing and capable of continually investing in renewing your competence to keep pace with - if not to be ahead of - evolution of the market ?

Be in the market where you and customers can meet on price

#3 : if price is profitable to you & acceptable to customers

Otherwise it will not sustain your interest in selling or the customer's interest in buying.
When customers leave, it puts an additional strain on your business to continuously look for new customers. It costs much more to continuously hunt for new customers than to retain existing customers.
The customers finding your price acceptable and good value-for-money (not necessarily L1 or the cheapest) is the key to retention of the customers and profitable growth of your business.

Be in the market that gives you an opportunity to be what you want to be

#4 : if the direction of market development is OK with you

If you select a market too small in size, your organization will lose its interest in serving them over the time.
If you select a market which is too big, you may find you may not have enough resources to continue catering to these customers and they may begin losing interest in you.
It is possible that the kind of technology and talent and infrastructure your customers may demand in future from you is very different than what your own aspirations and inclinations for your business are.
If your customers' ways are divergent with your ways, you may head for a divorce down the road and divorces are always painful.

Recipes for Unearthing New Business Opportunities

2011-10-09T02:10:00.000+05:30

You do not necessarily need surveys. Intelligent reading, observation and conversation are the keys to new business ideas.

During their heyday, transatlantic cruise lines transported tens ofmillions of passengers between Europe and the United States but by 60s theirbusiness was being eclipsed by transatlantic flights. To save themselves, cruiseship lines could have got into vacation cruises because there were vacationcruises ever since 1930s. But the cruise lines missed this window of opportunityand saw their profitability fall as dozens of startups retrofitted existing ships to offer pleasurecruises. Managers and entrepreneurs walkpast lucrative opportunities all the time, and later kick themselves whensomeone else exploits the strategy they overlooked. It happens because what psychologists call as confirmationbias: People tend to notice what confirms their existing beliefs, andignore that challenges them. It is difficult to overcome confirmation bias but itis not impossible.

Look for products that should exist; but don't

In the early 1990s, Kate Brosnahan spotteda gap in the handbag market between functional bags that lacked style and expensiveand impractical designer bags from Hermès or Gucci. She founded Kate Spade LLC which produced fabric handbags combiningfunctionality and fashion. They became a success. Many well-known productinnovations — including the airplane, the mobile phone, and the tablet computer— are products that people felt shouldalready exist. Customer surveys, focus groups or interaction can tell you the needs they are aware of - but they cannot tell you their own needs which they are not even aware of. Direct observation or comparative analysis of type of products on offer can also be useful. Probe "is there something that the customer wished was there?".

Opportunity hidden in annoying / expensive customer experiences

Customers will pay for the irritation togo away. Netflix was founded afterreceiving $40 late fee for a rented videocassette that had been misplaced.Charles Schwab created low-cost brokerage house as he was fed up paying thecommissions of conventional stockbrokers. Scott Cook got the idea for Quickenafter watching his wife grow frustrated tracking their finances by hand. Here the focus of your probe will be what are the customers unhappy about with the products, packs, availability, information, process, ambiance, service and people they currently encounter in the market.

Re-deploy under-priced resources

Sometimes an asset is underpricedbecause only a few people recognize its potential. When a low-cost airline announcesits intention to fly to a new airport, real estate investors often leap to buyvacation property nearby as they expect a jump in real estate values. Foundersof Infosys were first to recognize that Indian engineers, working for very lowsalaries, could provide great value to multinational clients. Customers will not be able to tell you this. You need to exercise your grey cells intensely where are the opportunities for arbitrage. You must always see everything in terms of "can I utilize this resource to get a better return if offered to a different customer"

Ferret out new applications for what you already have with you

Hira Thapliyal, discovered a processcalled coblation which uses radio frequency energy to dissolve damaged tissuewith minimal effect on surrounding parts of the body. He founded a company to offer it for cardiacsurgery but the market turned out to be too small and competitive to support anew venture. Later he found an application in orthopedics where 2 millionarthroscopic surgeries are done per year. When Arm & Hammer baking soda sales were declining, they did not change the product - they found a new application for the same product. Baking soda has the property to absorb food odours. They sold it as a refrigerator de-odorizer and met with great success. Customers will not know this. You need to think how the same product can can create more value for a different application or situation.

Your industry not yet seen what already exists and works elsewhere

In 1954, restaurant equipment salesmanRay Kroc convinced McDonald brothers’ hamburger stand in southern California tofranchise their assembly-line approach to flipping burgers. In 1982, coffeemachine manufacturing executive Howard Schultz visited a coffee bean producercalled Starbucks in Seattle. He tried convincing them to start European style “coffeebars” but when he could not, he started his own coffeehouse chain which waslater bought back by Starbucks and became their core business. For this to happen you must be a keen observer in the market. Before Voltas launched Rasna soft drink concentrate in 1982, the product concept was being sold on the streets of Ahmedabad for several years before ! It is the greatness of Voltas to spot the opportunity that existed in standardizing the concept and then making and selling it on a mass scale ! Do you go out and observe the markets regularly and see what is working already?

Know the applications your customers have already found

Chinese appliance maker Haier Groupdiscovered that some rural customers were using their washing machines to clean vegetables. Theyused wider drain pipes and coarser filters so as not to clog these with and added pictures of local produce andinstructions on how to wash vegetables safely. This innovation later ledto “washing machine” for making goat milkinto cheese. They penetrated rural areas avoiding cutthroat pricing of appliancesin cities. This thought is an extension of what we said under point 5. Very few marketers I know actually go out beyond their immediate buyers to observe how the end users use it. Many surprises and lessons await those who do it.

See the logic behind the illogical behavior of customers

Remove the goggles you are wearing - and the seeming nonsensical behavior of the customer will begin making sense; and in the process you will discover what goggle the customer wears normally Honda entered U.S. motorcycle market in 50s to sell largemotorcycles to leather-clad bikers but without success. Then a mechanicalfailure made the company recall these models and sell smaller 50cc motorbike - the Cub. The companydid not expect this model to sell but it did and Honda realized it has discovered an untappedsegment looking for two-wheel motorized transportation. In Eureka Forbes, when we went international, we saw a great opportunity for selling water purifiers in Indonesia because that is what we were doing successfully in India - but the product did not do well. When an Indonesian came to our office he saw our vacuum cleaners and said the product will sell well in his own country and sure enough it did. Keep an open mind when you enter a market. My surmise is that Kellogg in India would have done better if they had entered India with Granola Bar - a product which they already have internationally - rather then entering with breakfast cereals.

Source the product ideas from customers and communities

Joint Juice, an easy-to-digest glucosamineliquid, was founded by Kevin Stone, a prominent San Francisco orthopedicsurgeon. He learned about the nutrient from some of his patients, who took itfor joint pain instead of the ibuprofen he had prescribed. Many doctors mighthave ignored this or even scolded their patients for falling prey to fads, butStone recognized he might be missing something. He looked up the clinicalresearch on glucosamine in Europe, where it was the leading nutritionalsupplement. Veterinarians, he discovered, swore by it, as their patients fellfor neither fads nor placebos. He built a business around it. It is only in the last decade that consumer product companies have begun realizing that they can tap into the collective wisdom and experience that has come from centuries of social trial and error in India which has produced Ayurvedic and Unani and herbal remedies, a system of classifying foods, grandma's prescriptions, recipes etc ... it is a treasure trove that needs to be explored.

Look for products that thrive elsewhere

In early 90s, swedish student Carl Svensen-Amelnwanted to store his belongings in Sweden when he went to college in Seattle –to find that local facilities were full.He studied the storage industry in the USA and discovered it had high rents,low turnover, and negligible operating costs. Yet this industry did not existin continental Europe. He set up a partnership with an established U.S. companycalled Shurgard and formed European Mini-Storage. It met with great success.

Search for profitable businesses hidden from the view

Goldman Sachs avoided investmentmanagement believing it generated lower fees than trading and investmentbanking. When Donaldson, Lufkin & Jenrette published its financial performance as part ofa 1970 stock offering, Goldman Sachs were startled to learn that fees andbrokerage commissions on frequent trades added up to a highly profitablebusiness. Seeing this they expanded into managing corporate pension funds, andaggressively built its business.

Some of the examples used above are taken from strategy+business website

Selling High End Services Through Customer Dilemmas

2011-10-08T22:10:00.002+05:30

The technique of differentiation based on some elements of "marketing mix" - product, price, place, people, process, or physical evidence, does not work well in high end services.

That is where the technique of selling based on customer's dilemma comes in. A dilemma is defined as a choice among options that seemequally unfavorable or equally favorable. Dilemmas are not problems - because problemshave solutions but dilemmdeas do not. Dilemmas are not solved but resolved - by properly weighing competing options.

WHY THE STANDARD POSITIONING DOES NOT WORK?

If you sell your service as a solution to a problem, the client may say “I can do it better myself" or "I know someone who can do it as well as you". But say the same thing as an answer to his dilemma and he may get interested.

Service : Outplacement
Say : "We help managements (with the dilemma of how to ) fire one of their friends.”

Positioning based on dilemma captures several messages at once. It conveys whatyou do and also the special way in which you do it.

Service : PR
Say : "we help companies develop communications for situations where communicating facts is a risk but not doing so is also a risk".

Service : Financial Planner
Say “I help executives who don't trust experts but are simultaneously afraid that the world is complex and they must act under advice otherwise they may forego opportunities.

Service : HR Consultant
Say : "We help clients who do not know whether to take a rigid approach to treating talent and see their best people leave or whether to treat people on a case by case basis"

Rules and Tools for "selling" complex & expensive B2B solutions or products

2011-09-25T11:57:00.000+05:30

The "sales funnel" approach advocated in most sales management books ( prospecting, planning, contacting, presenting, overcoming objections, closing, transacting, delivering. commissioning and collecting) works only under those circumstances which have following 3 conditions present :

the selling situation is P2P (Person To Person)
the customer in front of you understands his need
whatever you are trying to sell already exists

What about rest of us who are in charge of selling complex , customized, high value solutions and products - like projects, offset printing machines, industrial air conditioning plants, call center services to foreign clients, the idea of including your group of publications in your client's media plans, ERP systems, pitching for a new client account in the advertising business etc ..?

THE APPROACH YOU NEED IN THESE CASES IS ALTOGETHER DIFFERENT.

Before anything else you must understand the difference between business development and selling. Business Development is the coldest of the "cold call" situation - meeting a customer who you think can benefit from what you offer - but he does not know it and has not even thought about it. In short, in business development you meet a customer who is not searching - even 1% - for a solution, vendor or product. He does not have intention, organization, specification, RFP or a budget for what you are trying to sell. The business development is the most demanding selling situation. It is like winking at a girl in a dark, she does not see it !
It is therefore needless to say that you should not begin such contact by talking about your products, features, prices orterms. None of these make sense to the kind of customer we are talking about. He has not thought about the need, let alone the solution that will address the need. He needs to be sold about you first, your identification of the need secondly and - if you successfully cross these two filters - you will come to the stage of selling features, price and terms at the last stage.
In such situations - even if a client has RFP (Request For Proposal) ready, you must assume - although you should never say it - that the client does not clearly know what he needs. At the most the client may know a few "symptoms" and “pain points” but he has not clearly know what hisneeds are and how to specify the solution that will satisfactorily address those needs. Of course, a client who has an RFP is better than a company who still has not reached the RFP stage. All that I am saying is do not treat an RFP as gospel; it is a starting point. The clients will love you if you find and suggest a serious flaw in their RFP. It will establish you as an expert.
Your actions under this type of situation should be to

demonstrate you are an expert and alsotrustworthy
show you have the inclination and technique to partner with the client
to stimulate client's thinking through questioning and position you as an expert
help the client create solutions which he alone could not have thought of

The model to use here is not "sales funnel" but "DDDD loop" which consists of Discover, Diagnose, Design andDeliver. In conventional selling a salesperson starts with a product which isalready designed for a known target market and his task is to present the productinteractively - in the light of the need of the customer- so that an order canbe obtained. In short, the emphasis of the traditional selling is on salesmanship.On the other hand, a sale of the kind we are talking about is a combination of marketingand sales put together : it is first understanding the need of the customer, figureout what he wants, configure it for him and only then begin selling it. The people who succeed in project selling therefore are

whodiagnose the client needs by discovering through questions and facts
who use rational and consultative approach to come to a conclusion
who let a customer realize his cost and painwithout hurrying him
who help a customer in arriving at a solution.

The pitfalls to avoid in such situations are

Do not make premature and speculative suggestions and presentations
Do not proceed without customer take co-ownership at all the steps
Not to tell customer it is not a plug-in product; he too will need to change his ways
Not to check if the customer has an immediatereason and resources to change

True? A "tailored suit" is a product & a "Vehicle Loan" a service ?

2011-04-17T21:57:00.005+05:30

A marketing eye sees things differently than a government economist. Economics data of the government shows a suit to be a product because it is tangible. They classify a vehicle loan as a service because it cannot be touched. But this is superficial ! The way the marketing eye sees it , the "litmus test" of service is not its tangibility but it is asking yourself the following 3 questions sequentially

What is the main value a customer is seeking
This value cannot be inspected / experienced by a customer before buying
The source of this value is hidden in a given person or an entity

If your answer is "Yes" to both "2" and "3" you are surely talking about a "service". Even if what you are selling is tangible. There are many examples that come to my mind : a photo frame of a god is tangible but the main benefit the customer expects to get from it is to bring good luck. It cannot be inspected or experienced and is a hidden quality. The value comes more out of faith. You must use the principles of service marketing if you are marketing photo frames of gods.

If you apply these criteria, it turns out that a tailored suit is largely a service whereas a vehicle loan is largely a product.

TAILORED SUIT : The main value you expect from any suit is that it should sit well on you and that it should make you look good. This main value does not come either from using good materials or a good sewing machine – it comes from the quality of craftsmanship hidden in an individual tailor. A good tailor knows how to measure you, how to advise you, how to cut the fabric and how to adjust the fit at the time of the trial. Therefore a tailored suit is more of a service : it is people dependent, customers will pay a good price for the right person and it is difficult to scale up. Ability to scale up is another important criterion of service. If a tailor is doing good business in a location, you cannot fund him and ask him to start 10 tailoring shops. The crucial ingredient is a talented tailor – how will you recruit or develop 10 tailors for these 10 shops?

VEHICLE LOAN : The main value you expect from a vehicle loan is a good interest rate, suitable repayment terms and an easy documentation requirement. These main values can be easily pre-inspected. Besides, the source of these values is not some qualities hidden in some individual person. Therefore a vehicle loan is more of a product and this is reflected in the fact that it can be quickly scaled up. A vehicle loan scheme successful in one city can be rolled out to hundreds of cities nationally within a week by briefing the local staff and by advertising.

Strange are the ways of the Marketing Eye.

A "Narrowly focused" e-marketing approach is becoming more profitable

2011-03-28T22:36:00.003+05:30

The internet is already huge ( Google estimated the size to be 5 Billion Gb data in 2008 ) and becoming more so with several billion pages getting added every day to the "cloud". Over a billion people are connected to the net and 500 million surf at least once a week. You and I probably are among the 100 million who are on the net at least twice a day.

Consider the fact that people now can connect to the net in an instant - by just looking at the screens of their smart phones - not to mention push mail devices like Blackberry - which deliver e mail in your pocket phone - whether you want it or not - because it is connected to the net 24x365.

The time has been indeed ripe for the social media to appear : Twitter, Facebook and Linked- to save us from the onslaught of the trillions of pages of content on the net and help us to filter, follow & befriend only those we like to. People increasingly want to exercise a personal control on what I want to hear and from whom.

Marketers - used to sending generic e mails - using mail-merge and auto-send programs - are at best losing an opportunity to engage customers on the personal level that those customers now expect - and, at worst, they run the risk of being seen by their potential customers as "spammers". Once your customers see you as a spammer, your mails can actually frustrate them, damage your brand and reduce customer lifetime value because you are losing access to your market : they dont want to read you anymore. Every un-targeted and irrelevant message is a reminder to them that you neither understand them nor care.

For the last few years data mining has evolved to enable you slice / dice data to reveal patterns that will aid your decisions - and the next orbit of predictive modeling is just round the corner - which can identify customer groups

who will buy (or renew) in response to a campaign - who otherwise would not have done so
who would have bought - whether or not the campaign ran
who would never buy - even with the campaign
who hate being contacted

This will allow you in future to focus efforts only on narrow and specific groups which will not only reduce the cost of your outreach but it will also help reduce your cost of fulfillment as it will avoid your giving away incentives to customers who would have bought anyway - at full price.

Pricing - why do you assume that people are different from what you are ?

2011-03-16T00:27:00.001+05:30

Despite what the common sense would tell you, the fact is that we all act stingy on things we need but don't really want. Conversely we are generous on things we want - but do not really need.

That is why a customer may prefer to spend 3 times on a BMW than a Kizashi which is almost as good. But when it comes to disposable ball pens, the same customer may choose a Rs 5 ball pen over Rs 8 !

I have always believed that you should generally not under-price yourself for premium, luxury products. In fact you should raise prices! How many know the case of the famous Tag Heuer watch brand : it did not sell well at popular price so they raised the price to make it exclusive and the rest is history.

Whenever you are tempted to lower your price compared to your rival X because his brand awareness and value is more, ask yourself if you would rather let a prospect walk away saying "I wish I could afford his product" OR " If the price is what it is, I wonder if the product is really as good as I thought it was"?"

Ask yourself - is your shirt the cheapest you could find? is your vehicle the cheapest available? in fact almost nothing that you purchased in the last 1 year was the cheapest in that category. Then why do you assume that the rest of the world is any different from you?

7 Ways to sell more even if your product is the same as that of your competitor

2011-03-05T22:26:00.008+05:30

You don't always need to have a better product to compete; and sell more....

Even if your product is the same as your competitor, you can still sell more by making your product available to the customers where your competitors’ product is not available. Identify where your competitor’s product is not available – but where the customer would appreciate it – and you score over your competition. This is true particularly of convenience products like toothpastes and soaps because people must find them without walking too much. The same applies to impulse products like soft drinks, confectionery, eatables, affordable fashion. How would customers buy unless they see it prominently. My friend Jagdeep Kapoor says; “jo dikhta hai woh bikta hai”
Even if your product is the same as your competitor, you can still sell more by delivering it to customers where, when and in quantities they require. For products which are heavy, cumbersome or risky to carry, this works. These days, where walking or traveling is becoming increasingly difficult, would offering to deliver helps? My friend Jayesh Ravindranath says; “we recommended to Dubai based retailer Choithram that a kiosk be put after the checkout counter so that anyone who does not want to lug the goods along with her can have them delivered later when she wants it by paying a small fee and leaving them at the kiosk”. Even in B2B selling, customers who are space constrained will appreciate more frequent deliveries in smaller lots. The customer will save a lot of space and will pay you for it by giving you a better price.
Even if your product is the same as your competitor, you can still sell more by providing financing to your customer through a various schemes like loans, hire purchase, EMI etc. This is true for big ticket items like cars and expensive consumer durables. My friend Sundar says, “An LCD TV at a price of Rs 60000 is a very different “product” than the same TV at a down payment of Rs 5000 per month and an EMI of Rs 3000 every month.” The market expands dramatically many fold when you provide finance - many more customers can now afford to purchase it.
Even if your product is the same as your competitor, you can still sell more by if people are more aware of your product. This is particularly true of fancy, novel products and un-needed products like fashion, novelties, curios, small and big luxuries, insurance policies etc. Your customers tend to buy them when they become aware of them though ads, showrooms, window displays or sales pitches. My friend Vikesh Wallia once said; “a large display window of a department store on the high street of Pedder Road went for a song whereas an outdoor sign board of the same size near the store went at several times the price”. The difference was that the signboard went from the advertising budget of the Product Manager through an ad agency whereas the compensation for the window display went from the display budget of the area manager through the distributor. In the insurance business I know many customers who rue buying a particular policy because they were not aware of what was the appropriate policy for them. There are literally millions of products out there on the shelves but the customers can keep hardly 3-4 alternatives in their mind for every product category they are likely to buy. This is called as "consideration set" of each customer. If you are not in the consideration set of a person, it is highly unlikely that she will buy your product. She does not know it exists!
Even if your product is the same as your competitor, you can still sell more by educating and updatingThis is true for situations where the customer does not know that she has a problem, or that there is a solution or how to access and use the solution. Suresh Goklaney of Eureka Forbes says; the customers. “when we launched vacuum cleaners, people were not aware that the millions of dust mites hidden in carpets, upholstery and curtains lead to respiratory irritation of house members. Or, when launched AquaGuard water purifier, people were not aware that 80% of the diseases in a tropical country like ours were due to water borne disease-carrying bacteria. The biggest task was to make the customer aware that she had a problem using educational approach and demonstration. After that, the product sold itself in most cases.” I know of a printing press owner who was eternally grateful to a sales executive who educated him that, instead of buying a new offset-printing machine costing several crores, he could purchase some balancing equipment and change his layout to increase his plant capacity at only 20% of the cost of a new machine. The printer never ever questioned the quotations or prices of that sales executive after the episode.
Even if your product is the same as your competitor, you can still sell more by providing expertise to the customer and help him diagnose the problem and suggest a solution. This is true of situations where the customer does not really know how to define the problem and evaluate a solution. My friend Satish Menon builds houses and says, “a customer was so fed up of water leakage during monsoon in his flat that he was seriously thinking of selling it off. I spent half a day investigating it and found that the holes drilled to drive nails in the neighbor’s external wall were responsible for the leakage. He was happy to pay me 3 times the price I was really expecting.”
Even if your product is the same as your competitor, you can still sell more by helping the customer to install, fit and commission it. This is true of products which need to be connected, installed, fitted and commissioned at site. This is normally true in B2B businesses where plant and machinery is bought by the customer in bits and pieces from different vendors but needs someone to put it all together and make it work. Even in B2C situations, architects, interior decorators, engineers etc work in this fashion. Customer always pay good price to people with good reputations and good work to show off.

Your customers (and not what you see on your P&L ) decide what business you are in !

2010-06-27T16:05:00.012+05:30

Many companies define themselves - as being in "Product Busienss" or "Service Business" etc - because they take their P&L too seriously ! Just because you see mainly mfg costs sitting on your P&L does NOT mean you are in "Product Business". You have forgotten that you CHOSE to be in product business and that's why your P&L is what it is. So far as your customers are concerned, they consume a lot of services along with your product and - irrespective of whose P&L the service costs are getting debited to - you are responsible for the products and services together. The services surrounding the product is your key to growing your sale and also becoming more competitive in the marketplace. Learn the SARP sequence given here.

Let us say you are making and selling diesel engines. Does that mean to you that you are in a "Product Business"?   Banish the notion and see what your customer is buying and you will realize that he is almost always buying your product along with some services . For example, your diesel engine will not get sold to a fisherman for his boat unless there is someone to explain to him what type of engines are available, which of these are suitable for his needs, why a specific model is better, answer his queries, to take down his order, to deliver the engine, to help him install it, to be there to take his call in case repairs are needed, to go and repair it…etc . All of these are services ! Without these services your engine will not sell.

It is possible you do not see the service delivery activity on your P&L account because you have chosen not to undertake the service directly - instead you may be paying the trade (or someone else) to conduct the pre-sales, sales and after-sales service activities for you. It may not be on your P&L account but it does not mean you are not responsible for the service delivery. As far as your customers are concerned, you are responsible for the service because you are selling to them under your name and hence must be responsible for all the services they need to purchase, install and use your product. Many companies see the service as a hassle, an activity that generates nothing but complaints. They prefer to operate manufacturing in one central location where everything can be planned and controlled nicely. Service is not so nice. It is spread-out, demand for it is unpredictable and it is very difficult to please the customers and also to retain and motivate trained employees. But, when it is becoming increasingly difficult for marketers to differentiate their physical product, service is emerging as the next frontier.

A LOOK AT HUL THROUGH ITS P&L LENS

But let us go back to our original thread : why do companies remain under the notion that they are in "Product Business" ? Let us take the example of Hindustan Unilever Limited. Most people, including probably the company executives themselves, may be under the impression that HUL is in “product business”.

Their P&L shows that ,for the 12 month period ending December 31, 2007, its Income   was Rs 14106 Crores and its Operating expenses were Rs 11797 Crores . The accounting policy of HUL shows that sales are net of taxes and also net of the trade commission paid - generally 8% to the distributors and 12% to the retailers. Let us recast the P&L account of HUL from the customer perspective and it will be seen that the turnover of HUL is, at consumer prices, actually Rs 18760 Crores and this pie splits as follows.

Trade Commissions : Rs   3250 Crores ( Service * ) : 17% of consumer spending ( Rs 18760 Crores )
Taxes : Rs    1400 Crores ( Government ) : 7% of consumer spending
Materials : Rs    7414 Crores ( Bought out ) : 40% of consumer spending
Machine Depreciation : Rs 138 Crores ( Book Charge ) : 1% of consumer spending
Services ** :   Rs    4409 Crores ( Service ) : 24% of consumer spending

* service to the consumer and trade is compensated by way of commissions
** employees, ad & promotion, freight

In other words, when consumers spend on HUL products, 80% of it gets almost equally split between buying of services and buying of materials : HUL is as much a service organization as a product organization.

The misconception that HUL is in “Product Business” comes from the narrow interpretation of what costs are seen on the books of HUL. What is missed is the fact that HUL’s products will not sell unless they are widely available, widely seen and widely known. HUL has to do all this - it has no option! But HUL does not do this under its own banner - but gets it done through their sales force (which is on their P&L ), their distributors, their retailers and their ad agency. During the year under discussion as above, they incurred Rs 3250 Crores of trade commissions and Rs 1400 Crores of advertising – a whopping Rs 4650 Crores worth of services - and they do not include other services like travel, sales force salaries, sales offices, godown rents etc. If they too are taken into account, the figure will come close to what they are spending on manufacturing activities.

Ultimately it is HUL which is the wellspring of the service activity : the sales force which contacts its distributors which appoints and services them, the salesmen and delivery boys of the distributors who contact the retailers and sell to them, the merchandisers who put up the shop displays, the billboard contractors who put up HUL ads on their sites, the ad agency which creates ads and releases them in media. They are all services.

Whys is this important? Because many companies are acting under the wrong notion that they are in the "Product Business" whereas, in reality, they are - and should be acting as if they are - in "Service Business". Is there a difference in these two in terms of action ? Yes - and huge !

"Product Business" people tend to get occupied with materials and machines and related stuff like sourcing, purchasing, plant layout, supply chain, cycle time, down time, preventive maintenance etc. "Service Business" people tend to get occupied with things like organization, competencies, motivation, performance tracking, training, culture etc.

Those who think who are in product business must learn to go through the following SARP sequence to understand what business you really are in

what are you selling ( vacuum cleaner )
what application your product enables (cleaning )
what result comes form the application ( good impression )
what payoff is acheived in the end ( favourable customer perception )

You understand what business you are in only when you can answer all the 4 SARP questions.

None Returns to tell us of the Road ...

2010-03-16T17:45:00.003+05:30

There is no shortage of theories. But what an executive needs is to be able to apply the theory to his specific context. For example, in sales management, the royal road is to be able to sniff out people with good selling ability and then hire them. Many travel on this road but not many have left behind a road map. This is what happened to me when I followed this road...

Is it not strange of the many who,
Traveled before us, the door of darkness through
None returns to tell us of the road
Which, to discover, we must travel too.
( Omar Khayyam)

I had just joined Eureka Forbes as the Head of Marketing in 1998. Our large sales force of over 4000 people - operating out of over 150 offices in 90 cities of the country - was considered to be a great tool of our marketing. And I was keen to learn how to improve it further. The annual “Silver Circle Club” for the elite 20% salesmen at Goa in 1999 was my first opportunity to observe them. I learnt an important lesson there about selling qualities among people.

In Eureka Forbes we always assigned a very high importance to our front line sellers. We never called them as salesmen and instead fondly called them as “EuroChamps”. In the annual “Silver Circle Club” the top EuroChamps were taken every year to an exotic tourist place in India and given a time of their life for 4 days. They were put up in five star hotels, had a non-stop party during this entire time, were treated like royalty in great style and all their bosses would be in attendance at that time to serve them and help them enjoy - including the CEO of the company. No expense or effort was spared. The entry to the club was by qualification only. The EuroChamps had to achieve special sales targets for 7 continuous months to qualify to come to the club.

The managers too loved the club. The club was a tool to get them to achieve a large part of their sales target. All they had to do was to drum up sufficient number of EuroChamps under them to enter the club. After that the aura of the club - built up over the years - worked its magic into the sales force. Being present in the club had assumed legendary proportions in the sales force because it was a sure way to hobnob with the managers and get known to them. Most promotions took place from among those who were regularly seen at the club. Not being in the club was a big let-down.

It was my first Silver Circle Club at Cidade de Goa in 1999. I had an idea of conducting a survey to capture the profile of these highly successful EuroChamps to see what drives them. I designed a simple questionnaire, put a serial number on each, distributed these among all the rooms and announced that a raffle will be held the next day based on the serial number. Most submitted their filled forms the next day. When we analyzed the data after coming back from Goa, there was a shock waiting for us. The elite of our sales force was less educated than the rest of them who were not so successful. Some of the best EuroChamps were not even graduates! Did it mean that less educated the person, the better he will be in selling? That is what the textbooks would have use believe.

I remember discussing this with Adil Bhesania - my colleague from HR who had just joined us from Coke – to make sense out of this seeming anti-correlation between education and selling ability. After many discussions we formed a working hypothesis – which I still believe is true – that our education system is largely based on mathematical, logical and linguistic ability, and does not impart, nor evaluate, the selling ability of a person. We both were excited because till that time we were short listing candidates for front line selling positions based on their educational qualifications. The simple survey showed that educational qualifications were not really the qualifications to look at for a front line selling job!

We were convinced by now that we were on to something big because we had a big problem of having widely varying recruitment standards because our 175 offices in 90 cities interviewed virtually every day. Very few of these offices could afford its own HR officer who could assist in interviewing process. In 90% of the offices the recruitment was done essentially by the executives from the sales operations function. Both Adil and I began looking for a “test” or a “scale” that could be administered to all aspirants uniformly in all locations. Our aim was to take more people into the sales force based on their selling ability and not based on their educational qualifications!

We searched high and low. Many consultants were will gave us "gyan" about motivation and organizational behavior. But no one really came forward to give us what we wanted which will enable us to administer a test uniformly at all locations to sniff out people with selling ability. We had given up the hope of finding a simple solution when we happened to meet one consultant. He not only offered to suggest a test but also explained very simply and convincingly what does a selling ability consists of. His name was Harish Shivdasani and he was a psychiatrist by training!

We did not believe him at first. Then Adil came out with a brilliant idea and - to our surprise Harish agreed to be subjected to our acid test. We told him we will buy the scale from him provided his test could sniff out best salesmen from a random group. We hired a hall and gave him and gave him a mixed group of 40 persons - 20 of them were Silver Circle Club members and 20 were not. And nobody knew who was who except us. Both of us were really amazed to discover that more than 80% of his choice - based on the test scores - was correct. His test could indeed distinguish top salespersons from those who were not.

It is another story of how we bought the scale from him and wanted to deploy it across the country. It was an interesting experience for us to practice our version of "scientific sales management". And it furthered my belief that a simple glimpse of insight, validated in your own context, is better than being lost in the temple of a comprehensive theoretical model.

This I know of the one true light
Kindle me to love, or wrath consume me quite;
One glimpse of it within the tavern caught,
is better than in the temple lost outright
( Omar Khayyam )

What is more important - Strategy or Implementation ?

2009-12-26T12:26:00.141+05:30

Thousands of young MBAs enter the industry every year - only to find they have been taught the strategic part of marketing which they will not have a chance to practice at least for the first five years of their professional life.

The bigger and more reputed the company, the longer it will take them to come to a point in their career where they can practice what they learnt in the B school.

Virtually all marketing activity is unique (not repetitive) and can be carried out in 4 steps (1) Discover the situation through data collection (2) Diagnose the problem that needs to be solved through analysis (3) Design the solution through application of strategy (4) Deliver the solution through implementation. The paradox is that in the B Schools we teach them the first 3 parts but not the last part - and that precisely is the part the industry wants young MBAs to do at the beginning of their careers!

New MBAs are first placed in "operations" before they get to work on strategy because it is the primary activity of the business and anyone who wants to ultimately lead the business at the highest level must know "operations" well. What is "operations" - the definition varies from business to business but generally the following are considered as "operations"

Sales : customer contact or supervision of customer contact
Support : helping customers, sales force, distributors, dealers
Operations : produce and reach materials to those who need it
Assistance : to their bosses in managing their jobs.

If this is what the industry wants; why don't we teach these subjects in our Business Schools? There are two main reasons.

Operations are not in media limelight - the Brand Equities and Business Lines do not consider leaders in customer service, training, administration etc as protagonists of the industry. They hero-worship strategists, visionaries, missionaries and thought leaders. Ram Kumar of ICICI once said that many professors would be proud to say that they teach strategy but not many would like to identify themselves as teaching implementation? Implementation is just not fashionable!
The second reason is more interesting. Our current education depends almost entirely on the written word in the text book and the texts can carry only explicit knowledge - the one that can be captured on paper, transmitted through writing and reading and evaluated through an examination. That is why we do not pay much attention to the subjects with a high amount of tacit knowledge because it cannot be easily captured into a textbook.

This has bothered me for the last several years when I taught at some of the B Schools around Mumbai like SPJIMR, NMIMS, JBIMS and MICA. I was fortunate in finding many professors who resonated with my plans of teaching "practice of marketing" and I began developing a systematic approach of teaching practice of marketing at S P Jain Institute, NMIMS and at MICA. Prof M S Rao invited me to teach at his "Start Your Business" program at SPJIMR. Prof Mala Shrivastava at NMIMS encouraged me to design and deliver a course on "Marketing Implementation". Prof Atul Tandon at MICA invited me to teach a thoroughly practical course on "Sales and Distribution". The results in all cases were beyond my expectations. Many students said "now we will know what to do when we enter the industry".

What is the main difference between strategy and implementation? From my perspective it is simply this : a strategy is about cerebral concepts, an implementation is about influencing the behaviour of people. The strategist thinks there is an absolute & correct answer and once it is found, the job is done - the implementation can be delegated down the line! The strategist spends 90% of his time in situation analysis and strategy formulation. The implementer is very different : he believes a startegy merely makes the outcome possible but it is the people who make the strategy happen. He believes that a strategy that does not excite and motivate people is a non-starter; even if perfect from a textbook viewpoint. A pragmatic strategist begins his search for "what to do" not only through data analysis but also through peeking into the hearts and aspirations and inclinations of the people who will carry it forward. Your reputation as an executive is built up not only by knowing the theory that goes into making the plan but equally importantly in knowing the people who will deliver the plan. As the book "Good to Great" says, the people come first and the strategy comes later in great companies.

The main issue in any implementation is whether you know who are the key people in your organization whose behavior you need to influence in order to get your plan implemented? The key question he asks himself from the implementation perspective is whether he has created communications, mechanisms and organizational support for these implementers to

ACCOUNTABILITY : (1) Make them feel they "own" the plan (2) Let it be clear who is responsible for implementing the strategy in a given region, account, location etc. Deciding a strategy and then not knowing who will action it is a non-starter!
STANDARDS : It should be clear what observable / behavioral outcomes need to be produced. Many times people understand the goal (example : to become customer centric company) but don't know what they need to do about it.
CONFIDENCE CREATION : People's confidence is high if they have done it before. If not, it can be built up by training. Ideally the people who will supervise them should take part in this training.
CONSISTENT SUPPORT : (1) CULTURE : It helps if it becomes a part of "how we do things around here" - meaning there is plenty of informal chat and folklore around the required behaviors (example : how the boss caught him for not doing this) (2) CONNECTIONS : Other things in the company are connected with this .
MOTIVATION : Personal consequences (reward or otherwise) are created and communicated.
COMMUNICATION AND FEEDBACK : goal setting and periodic previews and reviews happen based on this.

None of these 6 points are what glamorous theory and concepts are made of. Yet, these simple points make up for great execution.

WHOSE BEHAVIOR NEEDS TO BE INFLUENCED : First you need to be clear who are the key people in your company whose behavior you need to influence to get your plan implemented. Just because you have written a plan and sent to everyone does not mean it will get implemented. Just because someone's job description involves implementing your plan does not mean it will get implemented.

DO THEY FEEL A PART OF THE TEAM MAKING THE PLAN : If people feel that the plan was thrust on them, there is very little chance that people will behave in the way you planned. This does not mean everything should be the way every implementer wants it but you must ideally consult them before finalizing the plan. Many times most people not only feel good when they are consulted but also make valuable suggestions to improve your plan. If there are many people then you should consult their bosses and not they themselves. If they are good bosses, they will consult their people anyway.

Generally the implementers themselves should be asked to make a plan because then this question becomes redundant. But occasionally situations may arise, particularly in the areas of strategic planning etc, that the management may think that only specialists can plan. In reality, the specialists should be put into a consulting roles and the implementers should be made to consult them so that the ownership rests with them only. Where this is not possible, the planners should definitely consult the implementers in any of the two ways : either the planners make the plan first and then run it past the implementers or it can be the other way too.

DO THEY KNOW WHAT OBSERVABLE OUTCOMES THEY NEED TO PRODUCE ? Many times your plans are wrapped in a strategic and theoretical language and the people at the operating level do not know what is actually expected out of them. If you are running a retail promotion, your own statement in the plan regarding customer behavior - "the availability is very important for customers during festive buying because they need to take home the product by evening that day" - is correct but I am sure the salesperson on the beat will not know what is he expected to do about it. You must clearly state that the "opening stock on the first day of the festival in every A class store should be at least equal to 10% of your monthly sales target or 50% more than the mast month's sale from that store - whichever is higher. Please compile this for each store and give it to the local godown by September 30th." Of course every small thing need not be specified but major operating actions of major implementers must be planned and communicated effectively.

HAVE THEY DONE THIS BEFORE? HOW CONFIDENT ARE THEY OF DOING WHAT YOU ARE ASKING? What is obvious and easy for you may not be so obvious and easy for all those involved in the implementation of your plan. Many plans fail because the standard actions, systems, materials, formats were not shown to the people who had to use them.

DO THEY KNOW WHAT SUPPORT WILL THEY GET? FROM WHERE? HOW? Do they know what resources they will get ? To continue the example of the retail promotion, do they know where they will get the tags and display materials, when will special products come and in what quantities, whether the store will remain open throughout the night to enable them to put up the display overnight? Most planners are happy to see the materials in their offices but it is a mistake. The plan will get executed only when all these materials come together in the field for every implementer and they know how to use them and are given an opportunity to do so.

DO THEY KNOW WHAT ARE THE PERSONAL CONSEQUENCES AWAITING THEM ? Just because there is a circular or an e mail from you does not mean it will happen. Almost the whole organization is competing for implementation as far as the front line employee is concerned. His boss , his boss's boss, his HR Head, his Admn Head, his Regional Head, his Product Managers and his customers .... are all in line for his attention. He does those things where he clearly sees a positive payoff (benefit) or a negative payoff (scolding). You need to make sure that the implementer knows what these are - ideally this should be done through his boss. The payoff to the employees need not always be money; it can be recognition also.

WILL THE IMMEDIATE BOSS LEAD, GUIDE OR HELP? OR AT LEAST WILL NOT HARM ? The support from the immediate boss is very important. Ideally he should go all out and support. At the very least, he should not distract the employee from the behavior demanded by your plan.

Advertising a product or service for the first time ? Beware !!

2009-12-10T19:36:00.008+05:30

Many who advertise to push their products hard into the market for the first time get hurt so badly that they do not return to market again. Some even close their business! Many people think that once they begin advertising ...

customers will become aware and begin buying and the sales level will increase. Well, that is how it is supposed to happen. It is literally worth millions to you to learn why it does not happen this way many times - and what you should do to avoid losing money due to advertising.

A strong burst of advertising is like an air force attack. The planes are visible, fast and power-packed. But it all gets over fast and before you know the planes have unloaded their bombs and headed home. In the same way, a strong advertising blitz through mainline media can guzzle millions of rupees a week and, before you know, you will have finished your budget!

If you are the first timer in the world of advertising, chances are that you may not have got your act together - because you have not advertised before! Even if the campaign works out without a hitch, you will face problems you had not anticipated. For instance, chances are that you will discover that your supply chain is not adequately tuned to cater to your needs.

In 1992, I was Vice President of Marketing and Sales at Balsara, we watched the entry of IPCL into mosquito repellent mats market with a brand called "6-to-6". We were selling similar mats under the brand name "Odomos Mats" and our Chairman Aspi Balsara was rather concerned what would happen to our brands because they had a good story (a mat that lasts 12 hours from 6pm evening to 6am in the morning) and were highly visible on the TV with a good looking ad. I told him I was not concerned and it will be only a few months before the brand got wounded. Sure enough, what happened was worse than I had predicted - they closed down the whole consumer division . This resulted in their having to sell off their brand Teepol too!

How did I know ? Because their supply chain and distribution network was so weak that it could not have kept pace with the kind of national TV advertising they were doing. They had a distribution system that was created and sustained by their dish-wash liquid brand Teepol. It was a niche brand, used only by a few top households in the country - and its distribution footprint was woefully inadequate for the mass media campaign they had unleashed. By 1992 calculations, for a mass advertised brand to sustain itself and make it financially worthwhile, it should have to be in at least 4 Lakh outlets. Teepol was available not even in 40000 outlets! It was to clear to me that the new brand "6 to 6", which was riding on the distribution network of Teepol, could reach only about 40000-50000 outlets. The sale, even if brisk, from so few outlets, could never have sustained the expense involved in national TV campaign. It is easy to spend millions in media but it takes years to increase distribution from 40000 to 4 Lakhs on a sustainable basis. That was the rub. Before they could even begin expending the network and supply chain, the campaign was over! A huge amount of cash was spent - without a commensurate sales in return. The consumer division never recovered from the red ink created by the success of advertising!

These kind of supply chain wrinkles cannot be ironed out in a hurry. A furniture retailer from Mumbai advertised 3 furniture items together. For one of the items, the response was so overwhelming that he ran out of stock and incurred an opportunity loss. Since the item was imported, it would take weeks before he could get the next order in. On the other hand, one of the other two items he advertised had no takers.

No air force can win a war by itself. Its action needs to be co-ordinated with action of troops on the ground and directed by generals who have an understanding of what is happening in the entire theatre of the war. Similarly, advertising by itself cannot generate business and profits. It has to be in tandem with action in the factory and through the sales force and a good distribution system.

Many first time advertisers are in a hurry to launch publicity campaigns because they want to be quick in establishing themselves in a market. What they do not see is that the advertising works for their big competitors because they have got their act together before they started advertising. Their distribution is in place. They know exactly what kind of an impact advertising has had on their business. They have marketing personnel who tap the right target audience, with the right message, through the right medium. These are all pre-conditions for advertising to produce results.

Since “Drinking Chocolate” is a beverage that is drunk hot abroad, Cadbury’s started off by promoting it as a hot drink in India. Later they realized the housewives here were using it more as a recipe ingredient and less as a beverage. The company had to go in for a refocus. Cadbury survived to see another day because it was a going company - but had it been a small company with limited resources, it could easily have gone under for sending out a wrong message.

Good generals use the air force only after their on-ground troops are in the right place and formation, with a good map of the territory and when they know exactly where the enemy needs to be attacked. Similarly, good businessmen should use advertising only after you are sure that the groundwork has been taken care of. You should know who your audience is, what you should tell them, in what tone and through which medium. You should also have a reasonable estimate of what type of products will get sold and in what quantities. But how will you know all this unless you advertise in the first place? This is a very real dilemma for first time advertisers.

Once, working for a comapny called Corn Products ( Now Best Foods) I had to choose a promotional gift for the customers. I sent my product manager to go to Apna Bazaar opposite Regal Cinema and actually offer a choice to housewives who came to buy our products. Within a day we had the answer. 80% of the housewives ignored the fancy stuff we had procured and preferred a plain stainless steel spoon! In our case we had done our homework and knew exactly what to play up.

Market researchers can probably tell you how customers may respond to your ad but you will never know how the industry will react or how the supply system will cope up till you actually release the ad. The wise thing to do is learn by trial and error : test market in one small market then move up the scale. And by all means resist the pressure or temptation to undertake a big national campaign : you may end up losing millions.

Clarity, Courage and Strategy

2009-10-12T20:04:00.026+05:30

In that moment of realization I saw that all great leaders – whether Gandhi, Jesus or Krishna or anyone else – had this quality in abundance. They had their own inner light which burned bright and showed them the way in their moments of darkness, fear, confusion and dilemma.

Last Sunday I was invited to speak on “strategy” to an unlikely audience at an unusual venue on a beautiful morning.

The audience consisted of about 30 Christian adults who seemed eager to learn to become leaders in their own spheres. They had assembled under a banner called “Power to lead” started by my friends Dr Raja Smarta and Ruth DeSouza. The venue was the green and sprawling campus of St Pius seminary at Goregaon.

Everything conspired that morning to enable me to make connections of strategy to things that I had heard and read several years ago in the 80s and 90s. My mind recollected Carlos Casteneda’s book “Tales of Power” from the 90s where he describes the qualities of a “warrior”. Further back I went back to Werner Erhard’s “est” course I had once attended and its description of being either “at effect” or “at source”. And then I went back to my childhood when my grandmother told me the story of Mahabharata where Arjuna was faced with the dilemma of warring against his own relatives when Arjuna was reminded of his duty (”Dharma”) in his principle role in life as the warrior king. In that beautiful morning I made the connection and learnt that the words like “strategy”, “warrior king”, “at-effect”, “character” all mean the same thing.

In that moment of realization I saw that all great leaders – whether Gandhi, Jesus or Krishna or anyone else – had this quality in abundance. They had their own inner light which burned bright and showed them the way in their moments of darkness, fear, confusion and dilemma. Most of us mortals are stressed out due to the dilemmas we face and the compromises we make in our daily lives. Hence we admire those who have sorted themselves out what they are here for - and unhesitatingly know what purposes they will pursue - and also know what they will not. This is the stuff which leaders are made of. The connection between leadership and strategy is so strong that people will many times follow a leader even if his strategy is wrong - Hitler is an example – as long as they see clarity and courage in the leader.

If I look back, the my main message that morning was the same for individuals, groups and companies. Do not waste time in solving the dilemmas every day between so many activities making demands on your scarce resources. Instead of focusing on the lower orbit of deciding “which activities”, go to the higher orbit of deciding “which purposes”. You will save a lot of time and feel more at ease when, instead of considering the “trivial many” decisions regarding activities, you will focus and decide on what are those “vital few” purposes. Once sorted out, these vital few decisions will guide you into objectives, sub-objectives and activities that come out from the strategy. After all, what is a strategy? It is the choice of purposes (not activities) you have made to guide your activities.

3 things are really needed for you as a leader to travel on the right path. First, you need a calm mind to clearly see what purposes (strategic objectives) are important to you and your group. Second, you need to have a strong intent to act on your decisions : to have the conviction, commitment and courage. Thirdly, you need to operationalize and implement the strategy through (a) Planning : what will be done, towards what targets and outcomes, who will do it, by when, how and within what time and money constraints (b) Implementation : to contact the stakeholders and understand their expectations before finalizing the strategy, to communicate the plan and targets and milestones, to monitor the progress and take corrective action (c) to create structure for implementation regarding who will do what : secretary, treasurer, storekeeper, accountant etc.

There are many examples – small and big – to illustrate the benefit of thinking in terms of purpose rather than activities. Let me give only one. In the American space program, they realized that a ball pen cannot be used in the space because of the absence of gravity which pressures ink forward and went in search of "a ball pen that can write under no gravity situation” and it took them millions to develop a pen. The Russians used a pencil because they defined their purpose as writing on paper.

When you choose to undertake an activity – for the sake of the activity without knowing the purpose behind it – you are at best wasting your time and at worst harming yourself. Do you feel compelled to answer someone just because something has put something in your inbox even when it is not your priority? Do you eat just because it happens to be a lunch time even when you are not hungry? Do you feel compelled to react back when someone has hurt you even when doing so is against your long term interest? In each of these cases you are acting as if you are not a leader and as if you have no strategy.

Robin Hood - despised in castles, admired on streets

2009-10-04T15:34:00.004+05:30

Wholesalers are spirited, strong willed, ruthless and self appointed resellers of products they choose to deal in. Product marketers must carefully weigh how they wish to align themselves to these Robin Hoods. If they become your complementors, they will help you grow. If you cross swords, they can bleed you - sometimes to death as the example of a Chennai based CTV company shows.

Who are these wholesalers - and what do they do? The question gets different answers from different people. At worst, they are mercenary, parasitic, self-willed and exasperating. At best they are symbiotic complementors, entrepreneurial and helpful. Just like Sherwood's Robin Hood - depends on who you ask.

At their best, wholesalers create new sales opportunities for your products on their own; thereby boosting your sales volumes and shares. At their worst, they are parasites who will subvert your distribution set-up and take you to the cleaners. In the marketing textbooks and in the Business Schools, they are neatly tucked away under a classification called “channel partners” but you must speak to the foot soldiers of marketing to get the real picture.

Can you believe that a single wholesaler was responsible for ruining a big colour TV firm based in Chennai during the 80s by falling into his trap? It is a true and interesting tale of what a wholesaler can do to a company. This wholesaler, based in the busy T Nagar locality of Chennai, must have initially seemed like an angel to this company when he must have first showed up on the company's tracking system as a wholesale with continuously increasing sales; month after month.

As a reward for this good performance, the wholesaler negotiated - and obtained - higher and higher extra discounts on his purchases. Most of us may not see anything wrong with this. In fact, such discounting is justified by the "Cost to Serve" model. This model says that, since the cost of servicing a Rs 100,000 order is not very much more than the cost of servicing a Rs 10,000 order, the former / bigger customer deserves to share the cost saved in servicing a large order. However, this model does not  adequately capture the reality of what actually happened in the marketplace for the CTV company.

The wholesaler used these discounts to create his own pricelist for the company's  products in such a way that it was more attractive than the original price list of thye company! As a result, customers who used to buy directly from the company now started buying from the wholesaler. The sales volume, which would have come at the regular price through the dealers through direct transactions, now came indirectly via the wholesaler at a discounted price. The more the wholesaler sold, the less margins the company made.

This was the beginning of the end. Slowly a stage came when most of the dealers switched to buying from the wholesaler instead of from the company and the company became over-dependant on the wholesaler. One day, the wholesaler became so greedy that the fresh tranche of extra margin he demanded made the whole company unviable. The company refused further reductions in the margin but the company had to downsize its operations. It never recovered and slowly the brand went into oblivion. But the wholesaler prospered. He used the dealer network he had created using the company's products and discounts - to generate  sales volumes for other companies. He built up a large retail chain spanning several cities in Tamilnadu and lived happily afterwards.

We all know the importance of the product, price, positioning, advertising and the distribution but the role played by the wholesalers in making or breaking of the companies has neither been fully analysed nor appreciated. Most of us from the organized marketing industry see ourselves in a no-win situation vis-à-vis these party-spoilers. The principle objective of most wholesalers is to create their own loyal sub-networks - by breaking into your original network - using your own extra discounts against you. In short, they use your money to turn your own dealers against you. A “parasitic operation”!

Some time ago there was an article in the Business Standard describing the success of Whirlpool in India. It said that one of the strategies of the company was to stop the typically white goods style “informal wholesaling” and replace it with FMCG style organized , multi-tiered distribution with clear and transparent pricing. In short, the company’s strategy was to bust the wholesale mafia . From my perspective this is NOT a universal and failsafe strategy.

It would work only if there is a high degree of support given to the distribution channel by way of advertising, brand-building and field force coverage. It is only when you are sure of finding, convincing and driving a sufficient number of customers to your stores; that the stores will “fall in line” and listen to whatever you want them to do - including organized, multi-tier operation, with transparent FMCG style pricing - if that’s what you want !

If the above has given you an impression that wholesalers are a problem; let me give you instances where they come across as angels. Like Robin Hood, they are foes of the high and mighty but friends of the ordinary. If you do not have big resources - or if you do not wish to put in such resources - the wholesalers are your best option. Somewhat like Robin Hood, they help the small firms distribute their products while riding on the widespread market demand of big-league items. The wholesalers build their networks by dealing in big-league items, and may sustain and bind these networks by negotiating extra discounts from these big-ticket suppliers but they survive on the profits they make through the margins they get from small and medium league marketers. They have a symbiotic relationship with both the big league firms and mid / small league firms. Without the biggies, they would not be able to create networks. Without the smaller firms they will not be able to make profits.

For small start-ups who know how to make a good and competitive product but cannot afford big-budget marketing; wholesalers may be saviors. The wholesalers can give them access to the networks they have created using the big brands. The wholesale channel is absolutely indispensable even if you are not a start-up but just want to “feel” how a new market responds to your product and pricing strategy without spending much on advertising or your own sales force.

But, even large firms benefit from the wholesale channel. For example, a toothpaste brand with a 5% share of the market can afford to cover only about 300,000 outlets per month but, on the other hand, it may be typically available in 600,000 outlets. How does it get such an extra reach of about 300,000 outlets? Through the activity of these wholesalers of course!

The organized sector - which is the source as well as user of marketing knowledge - considers the wholesales as being on the seamier side of the market and many times get classified as belonging to “unorganised”, "grey" or “parallel” segment. But from my perspective, they play an important role in the marketing of products - and stand you in good stead if you are not strong on resources.

Tough Luck For Your New Products

2009-09-28T00:20:00.007+05:30

Marketing People invest too much energy into working with their technical, financial & advertising colleagues on New Products - but not enough with their distribution and sales colleagues. If they do, several crores spent on promotions can bear better fruit; not to speak of not having to miss promotions, slowed careers and lost accounts

New products was, and is, always a serious business - and it is getting more so. Mostly, the cards are stacked against your new products. The statistics shows that 90% of all new products fail during their launch phase. Failed new launches is much more than a loss of your future income opportunity - it is a loss for your vendors and distributors of their future income - and it is also a waste of your current cash and time. For the concerned marketing person and the ad agency it is at the least a black mark on their CV - and in severe cases a loss of job!

The increasing speed of obsolescence requires new products to be developed at a faster clip than ever before to replace the ones in the marketplace. In the early 1980s, a consumer durable dealer never complained about selling the same model for years - but today the same dealer expects you to change the model every year. Because everyone else is doing so! Even the consumers have come to expect this; although they dont need it!

A quick back-of-the-envelope calculation tells me that the Indian consumer product industry may be losing around Rs 1000 Crores annually - in promotion money alone - on failed new product launches. If all costs are counted, the losses will be of several thousand Crores.

What I want to say today is that you yourself - may be unwittingly - hurting your new products by falling prey to some common pitfalls; which can be easily avoided. If you are not careful, even potentially successful products may look like failures to you because there are two in-built disadvantages a new products start out with.

TRADE DISADVANTAGE

The first is a trade disadvantage. An external disadvantage. Under this, you may feel that the new product is not generating enough incremental volume. I quote from an issue of a leading Indian publication wherein the vice president of a well known international market research firm says “Unfortunately this is what the vast majority of new products do. On an average, 95% of a new product’s sales volume comes from stealing share from the existing brands.” The extent to which your new product is not encroaching on your existing products is indeed a measure of the success of your new product. After all you are spending on new products to increase your overall volume.

This is true, but with a catch : you must measure the encroachment over an appropriate time frame; otherwise you may reach wrong conclusions. You apply the criterion too soon and even a successful product can come out looking like a failure because, given the peculiarities of the Indian trade, it is very difficult for a new product to show you an adequate incremental volume in a short time.

The Indian trade allocates its key resources - buying budget and shelf space - to your business in its own unique way. Unlike foreign retailers who allocate their budgets and space based on floor space indices and slotting fees; the Indian trader allocates them based on an intuitive concept of "salesman-wise budget". Our Indian baniya has developed an experiential formula for the “size of the order” he would give to your salesman during his regular visit. To start with, he will allocate the same amount of resources to the entire basket of goods sold by your salesman; even if the salesman happens to carry a new product in his basket that day. Your marketing and advertising strategists may have targeted your new product at a different end-customer - but - while travelling through the common distribution channel – the new product lands up fighting for the same resources given to your other products. As a result, your new product faces sibling rivalry for the first few months; whether you like or not. Only when it has been demonstrated to the baniya that your new product does indeed generate a steady sale at his outlet will he increase his allocation to your salesman. Thus, your new product will have no option but to encroach on the resources of your other products in the interim period.

That is why, in India, it takes time for a new product to carve out its own niche. Unfortunately, many Marketing Managers and their bosses lose patience quickly and conclude prematurely that the new product is cannibalising too much into existing products and not generating sufficient incremental sale of its own. Before the new product is given time to earn its rightful space in the channel, the managers withdraw its support system and leave the new born to fend for itself in this cold and lonely world.

Which is why, in spite of all the advertising you do, your new product will take longer to take roots - unless you have plans to overcome this trade constraint. I am amazed that the ad agencies, who have high stakes in the new product game, and who “leave no stone unturned” from the customer marketing aspect, are frequently clueless about arrangements made by the client to overcome these trade problems associated with new products. Many agencies plan a diagnostic research as part of new product activity. But how many ask for trade diagnostics? The offtake data of Nielsen / ORG is good enough to see "what is" - but it is not good enough to tell you “what it could have been”.

SALES FORCE DISADVANTAGE
This is an internal disadvantage. I have seen many sales forces acting against the interests of their own new products because the new products make disproportionate demand on their time and attention compared to their contribution to sale. Instead of nurturing the new products they may unknowingly work against it.

What happens is this. Due to the first month of new product hoopla and conferences, the sale of existing products suffers because the sales force spends a lot of time behind the new products and even the top management goes to the market to supervise new product launches. By the end of the month the figures start looking bad for the existing products and the HO comes down heavily on the branches to “catch up” on the deficit of existing products. The sales force is only too glad to oblige.

For most sales forces the incentives are strongly linked to the overall sales value. The sales force, naturally, hates anything that comes in the way of their earning the incentives. Unfortunately, new products do. By their very nature of being new, they generate much lower volumes compared to the time and salesmanship that the sales force has to spend. Due to this in-built disincentive to sell the new product, when Head Office asks the sales force to “catch up” on the sales of the existing products, the sales forces happily falls back into their “default mode” of focusing on “tried and tested” high volume products. Result : new product suffers.

If you insist on selling both the new products as well as the old; sometimes you get the worst. As Vice President of Balsara, when I told our General Manager Vikesh Wallia to sell both the existing products - Promise and Babool toothpastes - as well the new Promise range of toothbrushes - he found that the sales force began selling the new range of brushes as if it was an established product : the new product was dumped in the trade with such high volumes that we were left licking our wounds for nearly an year after that. The range died a natural death just by lying for several months in the warehouses and shelves for months - waiting to be sold.

Because of these two practical disadvantages, you must make special arrangements of selling in advance to give your new products a chance to bloom. Unfortunately most marketing departments spend inordinately high amount of money and time discussing new products with their technical, financial and advertising people but not enough on how it will get distributed and sold. I have always felt that if an equal amount of planning is done in the area of sales and distribution, several Crores can be saved - not to mention of missed promotions, aborted careers and lost accounts!

Negotiable Price or Fixed Price ?

2009-09-26T00:28:00.007+05:30

Price is real but its perception is subjective. If marketers understand how customers interpret the price; they will keep their prices more firm and less negotiable.

In no other city in India can you rely on public taxi service as you can in Mumbai. You get a taxi within minutes; on most streets. You dont ask the cabbie how much he will charge before getting into it. You do not need to haggle when you get down - you only need see the meter. You don’t feel ripped off. May be that is why the market for cab-travel is more developed in Mumbai.

When the customers feel that the pricing in a market is fair and well-managed, customers tend to come oftener to such markets. When you want to develop a product category, it helps if the price is standardised.

Many markets remain undeveloped precisely due to this reason. Take the example of toy market. I was the CEO of a toy company called Funskool once; and I remember discussing pricing practices with my Marketing Head Raghavan Shrinivasan and my Sales Head Ashok Samant. The prices fluctuate so much between different stores for the same toy that this uncertainty drives the customers away from the market and they land up buying some other gift! The funny thing is that a toy customer generally feels she is charged unreasonably even if a dealer has given her a genuinely low price. No wonder the Indian toy market has remained underdeveloped.

Is a fixed price better than a price open for negotiation? I say, yes. In the TV market, a few years ago, almost no one quoted the best price upfront. They got “quotations” from different dealers and played one dealer against another. In those days, the dealers did not display their real rates, but only official ones, on the models. When the customer came in, they “sized up” the customer and accordingly played the game. Soon, the dealers realised that when the customer walked out to get another quote, she may never came back. So, many dealers have now changed their tactics and are giving their “best quote” upfront. Slowly, these new pricing tactics are sinking into the collective psyche of the customers and they are responding positively. The Francis Kanoi research showed that people are visiting less number of shops now compared to before - confidence in the product category is increasing.

In fact, laments from the sales people notwithstanding, I firmly believe that when the category is growing, one should generally not play the price card. When the category is growing, the product, it’s utility, and benefit to the customer must become the Centre of marketing attention. That is why in Eureka Forbes, where I headed marketing, we never ever gave any price discount. Any negotiability in price at the selling point distracts from the value of the product - and the sales conversation centres around the price - instead of the value.

For Direct marketing firms it is important to keep the prices steady because many of them sell "concept products" which have not been accepted by the masses yet. Such products can be sold only if the sales dialogue focuses on the product and its value and not on price.

Even if you are selling through a channel / network price clarity is equally important. There are dozens of examples among the FMCG crowd where giving more discounts to the trade only increases the price undercutting. This reduces the confidence of the dealers who start wondering whether the company or the wholesaler is the right source to buy from because the wholesaler’s price is better than the company’s prices. This reduces the hold of the sales force over the market. The sale of slow moving products suffers. The display and merchandising suffers. The relationship suffers.

I have noticed that firms which are trying to become more brand-oriented (as distinct from sales-oriented), find it difficult to tell their sales departments that they should reduce the schemes and discounts. It is not only a question of money but also of customer confidence. The more the price fluctuation, less the brand confidence.

What do you think? Comments, agreements, brickbats, views are welcome.

Excuse me, your brief is showing !

2009-09-24T20:23:00.010+05:30

What can the clients do to get the advertising that works? They must understand their own customers well & share this knowledge with their agency. They also must resist the temptation to try to do the agency's job.

What can clients do to get better and more effective advertising from their ad agency? They must give their ad agency an advantage of their own area of expertise by giving a proper brief in the first place. Then they must insist that the agency builds on this brief by using its own area of expertise. Simple and obvious.

Clients should be experts in the area of knowing the market and their business. They should know and share with their agency - who their customers are, what these customers desire, and what needs to be done - and said - to attract the customers.
Clients should then leave the agency to use its own areas of expertise - knowing how to communicate to various types of customers and through what media.

In reality this simple and obvious thing is not practiced because each party loves to get into the other’s turf. The clients tell the agency how to advertise and the agency loves to tell the client how they should conduct their business. Today I want to talk mainly about the client briefing.

I remember Glaxo releasing an ad, several years ago, in the Sunday supplement of The Times Of India Mumbai. The headline was “Too tired to lift even lift a finger? It could be diabetes.” I dare say this ad did not take into account two imporant factors. First, the people who are potentially interested in diabetes, like me, are likely to be above 40 and the copy of the ad was set in such a small typeface that they would surely lose interest before reaching the final “action line” inviting people to ask for a free booklet on diabetes. Secondly, it overlooked that on a Sunday morning, a typical target customer may prefer to talk to someone on the phone than reaching for a pen to ask for a booklet. Are these minor aspects you say ? I do not think so. These two insights about the customers, if shared and applied, would have resulted in more impact and more demand for the booklet. All that was needed was an increase in the font size, and putting in a phone number. And, of course, someone to be there to take down the names and addresses of the callers on a Sunday morning.

It is a myth that only the ad agency is responsible for good advertising. The client also makes a major contribution through his own area of expertise - his superior knowledge about his own customers and how his business revolves around these customers. A client’s deep knowledge about his customers’ frame of mind, lifestyle, behavior etc enables him to get better advertising. Although many clients say they advertise to increase sales, very few can actually brief their agencies about their model of how their advertising is supposed to work on the mind of the customer and how it is likely to lead to more sales.

For example, for an FMCG product like a Cadbury’s chocolate, which I handled once upon a time as Product Manager, it is possible for a sale to be “completed” through an ad - the customer can choose the product he wants to buy based on an advertising exposure. For such a low-ticket product, the customer behavior is impulsive and all that remains to convert the awareness into sale is visiting a retailer. On the other hand, for a high-ticket durable like an Onida TV, where I was heading marketing, sales and service functions, the product sale could not be “completed” in a similar fashion. Francis Kanoi Research showed that a person visits retailers at least 3.2 times before final purchase happens. In such a case the role of advertising is not to sell the product itself but to sell the idea of visiting the showroom and it is the dealer who would consummate the sale after demonstration and question answer session.

It is due to these fundamentally different behaviors of the customers in different markets that the role of advertising is different for different companies and industries. Ever wondered why FMCG firms are into product branding whereas durable firms are into corporate branding? The answer is that FMCG firms aim to sell the product whereas the durable firms aim to pull the customer to their showroom. The showrooms are always under corporate name.

The root of successful advertising is really into the customer psychology in each market. A long time ago I remember going through the market survey findings of Anacin; to discover a remarkable feature. For such products where people seek “relief” from an unpleasant situation , the customers’ expectations are expressed in very brief and simplistic language. The customers cannot generally talk more than 2-3 sentences about “what they expect from an ideal product”; and that too grudgingly. On the other hand, for “shopping” products - say Alan Solly shirt - they would happily and spontaneously talk for several minutes.

Such observations from the client give a sound navigation for the agency to follow. The advertising for Anacin has to be quick, should have less copy, but will need more frequency to reach such a “reluctant” audience. On the other hand, the shirt advertising needs to be an indulgent showcase. People need to savor the good looks, interesting texture; at a leisurely pace. This insight automatically suggests that shirt advertising should have press ads, color, good pictures and interesting copy. Instead of incorporating such fundamental insights in their briefs, the clients’ normally second-guess the agency and tell them how to do their job : creation of advertising.

In my 34 years of industry life, I have seen many briefing situations where the client assembles product samples, a list created by R&D of various product features, articles that appeared in new papers and industry magazines to support his point of view, a tome about the magic ingredient XYZ. And, without fail, loads of ideas on the which model, storyboard plots, clever lines etc that the client has conjured himself and would love to see in his advertising.

A long time ago I was a witness to a two hour briefing session in Delhi for a company making a milk additive powder for children's nutrition. Except for the first few minutes spent in looking at the products and related facts; the entire time was spent by the client animatedly briefing about various headlines, shots, angles, models etc. Finally, the agency asked " who the advertising was aimed at" and the client was shocked. His product manager had clearly included one line: “Target audience : all women having school going children”. Wasn’t that sufficient?

The agency persisted that such boiler-plate description was insufficient and they wanted in-depth appreciation of what kind of a frame of mind the customer was in. Finally, the client seemed to understand and said "we will send it later". Next day an office peon came to the agency carrying a large suitcase of startegy files, tour reports, market research reports, ORG reports, guard-books, clippings, annual target sheet and also a file on consumer complaints. The covering note said “Kindly do the needful". This happened twenty years ago and over the years I have noticed that the brand kept declining and is not even seen these days. However, during this slow death, three agencies were judged by the client as incapable and terminated.

When the chief strategist himself does not know who his customer is, I wonder how he can ever recognize a good ad from a bad one? In spite of the 1001 rules about what makes good advertising, there is only one that has withstood the test of time. Just as beauty is in the eyes of the beholder, the power of the ad is in the eyes of its target customer!

So, what do you think? Comments, applause, brickbats, viewpoints are welcome.

Strategy makes it possible. People Make it work.

2009-09-23T17:40:00.004+05:30

The strategists set the direction using logical and cerebral methods but what makes it work is the energy, hearts and aspirations of the people in the organization. A mere textbook strategy does not work well.

It is so easy to forget that a strategy works not only because it is logcal but also because it captures the hearts and tests the guts of people who make it work. The wellspring of our actions is frequently in our hearts and not in our heads. You may have experienced - sometime in your life - the feelings felt by those 17 athletes who broke the record of running four minutes a mile in 1954. Roger Bannister was the first in the world to break the four minute barrier (for a mile) - a feat claimed to be "impossible" by experts. And then, within a few days, 17 people all over the world broke the same record! Yes !! What prevented those 17 people to do the same just two weeks earlier? It was the mindset!

All of us act based on our mindsets. There are some plans which "leap out" at us as being possible. There are some others which we think are not possible. Then it becomes a self fulfilling prophesy. Somebody rightly said that “if you can see it, you can believe it. If you can believe it, you can become it”. For a strategy to become successful, it should be backed not only by a sound marketing head but an energetic and committed heart as well.

In 1991 the mosquito repellant mat market was an annual 150,000 cases. At Balsara, where I headed marketing and sales then, we had just introduced Odomos mats and had kept a very safe and conservative target of 4000 cases for the whole nation for the whole year and it worked out to be only 1000 cases every quarter. I remember finding myself in the first quarter review meeting and wondering, along with our Sales Head Daulat and Product Manager Geeta Sethi, why we could not achieve even such a paltry target in spite of our national distribution and odomos being an establsihed brand.

As usual, the culprit appeared to be the strategy. It is a time honoured tradition in the industry to blame the strategy when the targets are not met. I heard the usual ones - the product is not up-to the mark, sales returns, poor word of mouth, price too high, less advertising, aggressive competition etc. But such logical discussions frequently go nowhere. We were stuck in the meeting.

That is when I tried a different approach. I said to the group that - if any of the four regional managers came forward and voluntarily took an “astronomical” target of 10000 cases for just one region - I would go all out and "do anything" to support him. The least expected regional manager - Manian from south - came forward hesitatingly and said he would try and do 8000 cases in his region in the remaining three quarters. All that he asked was 2% scheme for a few months as an "extra". It turned out to be far less than I had feared he would ask for. I sanctioned it on the spot.

Believe it or not, by year end he had done 6000 cases - when all other three regions - togther - struggled to do 2000 cases. The effect of this unusual and unexpected acheivement was electric in the annual conference. Manian became our Roger Bannister and lit the way for the rest to follow. Within an year we had crossed 25000 cases in 1992. There was a new optimism about this product in the sales force. Geeta Sethi was ecstatic and wrote in her annual plan how the "test market” in South India was successful and provided us with a "new successful strategy" for growth.

But, from my perspective, facts were different. 2% scheme was not a strategy at all because we could have done it at any time for any region. Did 2% produce the results? No. It was Manian's devotion and commitment to the strategy!! I am clear we could not have produced results and discovered how good our strategy really was - had it not been for him! We created the torch but he lit it and went around showing the light to all of us.

All that I can say is that, for any given strategy, if I had the option of fielding my strategy in Market 1 where the analysis suggests there is maximum potential - and in Market 2 where the team is very keen on implementing the strategy - I would not let the analysis eclipse the heart and I will choose Market 2 first. Because then the team in Market 2 would “Bannister” my strategy and hopefully other teams would take their cue from this winning team and make us succeed nationally.

What do you think? What is your take? Brickbats? Applause? Comments? New viewpoints?

Advertising is only the tip; look at the whole iceberg!

2009-09-20T23:37:00.005+05:30

How important is it for the CEO to get involved in what are the sales messages going out of the company? Is it only a marketing matter or a corporate matter? How does it help the CEO to run the company?

A friend of mine was trying to create a press ad to be released in the Times of India for his office-use products. Since his company was medium sized, the press ad would have burnt a hole in his pocket and he was keen to have my advice on the ad.

When I entered his office, my friend, his wife and some of his managers were seated around the table. A smart client servicing executive and a creative person from the ad agency were also there. The discussion centred around which layout, which headline and which model was good. My freind hoped I will be helpful in coming up with the right layout, right headline etc.

I said I would like to know a little more about the market before I gave an opinion on these matters. I asked who, around the table, had gone out and met a potential customer during the last 6 months for the purpose of selling the products. I was surprised to find that no one had done that !

That stopped me in my tracks because I wanted to ask relevant questions like

what are the top 3 concerns and pain points of his customers?
what features in his products will make his customers feel they made the right choice?
what would make his customers feel they made a better choice buying my friend’s products than of his competitors?

When I raised these questions, there was a silence in the room and that told me a lot.
I give a lot of importance to what the business tells its salesmen / ad agencies to say to their customers - either verbally or in print. Many would think it is best to leave these matters to the advertising or marketing executives and the agencies. I differ. I feel even the CEO should sit in on these meetings once in a while to know how the company is coming across to its customers.

It is indeed a matter of grave concern when your company cannot tell your salesmen or your ad agencies what they should say to your potential customers. When you do not know what to tell your customers to convince them to buy your products, your customers begin telling you that they will buy your products only if the price is right - and that is the starting point of decline in margins.

It is a serious matter : if you are not profitably priced, your ability to invest in new products and new capabilities - as well as in repairing and renewing your existing business - comes under pressure. And, although I have raised this issue in the context of selling and advertising, this is only the tip of the iceberg ! The real issue is far deeper.

How will you know what features to put in your products and hence what kind of equipment and factory you should have? How will you know what kind of service is needed and hence what kind of service network to have? How will you know what kind of people you need to hire and what kind of training and objectives to give them? In fact, you may not know how to run any part of the business unless you are clear about what kind of customers you want to serve and how.

This is where the Positioning comes in. But I will talk about it in some other blog.

Business Development Advice For Start Ups !

2009-09-20T23:19:00.004+05:30

Small start-ups should not use the marketing styles used by large and profit making companies. Instead, they must use their advantage.

Presenting your offer to potential customers is important in any business – big or small . Marketing is therefore very important in any business.

However I see many start up firms spending far too much money and time on what they see around them – fancy stationery, sleek brochures, good looking web sites, glitzy booths at tradeshows, buying listing space in target industry directories and sometimes even advertising. They do not realize that these activities are undertaken by businesses where owners are making enough sales and profits already to hire a separate marketing department - or an ad agency - to focus on these activities which improve their visibility, create awareness and attract customers. But the case of start ups is different - and in a positive way.

They are the main (sometimes the only) resource of their businesses and when they go out there and begin talking to their potential customers, their infectious energy and sense of purpose rubs off on their customers. Nothing can ever substitute the power of person to person conversation.

If you are the kind of business I am talking about, you should not come from the viewpoint that you are stooping down to sell. You should speak from the conviction in your value proposition. Speak from the sense that you are serving your customers in a unique way which they have not been served before. Speak like a doctor and uncover the goals and challenges of your clients and tell them how what you are offering; helps. Communicate what your product will do for them.

Before you talk to your customer write down on a card the following (1) your value proposition (2) in what way you will serve them the way they have never been served before (3) what challenges and problems of your customers you will address (4) what success, in their own language, they will get when they deal with you.

Now go out and locate customers. Do not be discouraged if everyone does not buy. Take that as an opportunity to learn in each contact and then use to improve yourself and your activities. You will make progress faster in this way than through traditional marketing of media and materials.