“Ask a finance person what NPV is and how to calculate it and you'll likely get the same answer just about anywhere you go in the world, but if you ask a marketer to define a segment, however, you'll get a thousand different answers!”
As I read this comment in an article, I was reminded of a piece of advice someone gave me a few years back-‘ Marketing is subjective and if you have the conviction don’t bother about what others think because there are hundred ways of doing things, just that you should know what you’re doing!’
The article mentioned something which all of us would have felt at some point in time during a conversation with other marketers- you get the sense that even though you are talking about marketing, sometimes you aren't on the same page about how marketing should work, be implemented or the direction it's headed?
During my internship, I had a chat with lot of members from the marketing team, for whom marketing was still a shot in the dark. Some had worked before in firms that never made a marketing plan. But, then I checked with other people from P&G etc and found that the bigger firms were more conscious of things like ROIs and depended a lot on facts and figures. And I think that such practices come from experience. The same holds true even for marketing professionals. I believe that when most of us will start out, we won’t have much of an idea about how things work. But, over a period we’ll develop ideas, patterns, opinions of our own that will shape our definition of the marketing profession. We tend to believe everything of what we hear or read from our first influencers, the professors, and the subsequent ones like books, blogs et al but we would surely find a disconnect during our first job as the requirements and the variables change!
Another aspect of this discussion would be to see it from the eyes of people who see marketing as an art vs the ones for whom it’s a science. And I think that is where the marketing is an ‘art’ contingent wins as if it were to be an exact science, we would see the same things over and over again! The ‘artist’ within a marketer is, I think, the reason why developing a common ground for marketing is tough.
What do you guys think of this? And also what all can be done to address the issue of marketers not being on the same page!
Just visit any retail shop and try to observe a change in the offerings of the FMCG players. I am talking about bundle offers. Invariably every FMCG company is giving these kinds of offers. Let’s look at some of the bundle offers.
· Emami’s schemes include Emami Pure Skin worth Rs 22 free with Boroplus
Advanced Moisturizing Lotion worth Rs 98
· Five pieces of Sardija Cough drops worth Rs 5 free with 100 ml of
Sardija Cough Syrup worth Rs 50
· ITC is offering Vivel Di Wills shampoo (200 ml) free with its 75 gm
bathing soap for Rs 89
· Fiama Di Wills and Lux are offering free lufa with their body washes
· Sunfeast is giving 4 packs of variety of its biscuits for Rs 25
· Kurkure (Frito-Lay) is offering 3 different flavors for reduced price
· Meswak is giving toothpaste and tooth brushes together
in a nice cylindrical box
· Dettol has a bundle offer of its soap and liquid
These offers operate on logic of “Buy more to save more”. In these hard times this tactical measure can provide companies with more revenues (though profit may decrease), better cash flows. At the same time these offers help the companies to increase the trial of the new and upcoming variants/flavors which are often bundled with their best sellers. These offers also give them more shelf space and eyeballs in the retail chain. Consumers may not buy them immediately but atleast will pick up the bundle, look at the price point (I also did the same) and may decide to buy one in future.
Let’s look at how these offers work from the company’s perspective.
Because of the lower price point the total value perceived by the customer goes up and customer is tempted to buy the bundle product. He would not have bought the unbundled standalone product. Also these bundle offers create one more price point for the customer. Some customers buy the product at the new price point.
This strategy sometimes proves perilous for the company In the long run as the customer may get used to lower price point and may not be willing to shell extra money once the offer is withdrawn. This sometimes happens with Soaps which can often bundled in a pack of three and are price substantially lower.
From the customer’s perspective these offers are often tempting. Great packaging adds fuel to this temptation. In case new flavors/variants are bundled with existing flavors/variants bundling provides him the incentive to try. It also provides him with the incentive to buy more and pay less which he always strives for.
I am sure that someone amongst us will surely be tempted by one such offer…Soon…
Vikas
Next Post --> “Positioning of great Indians companies”
I have come across the modern retail industry a lot in the last half a year and I thought it’ll be best to start my contribution to this blog by sharing a few perceptions on it. I’ll talk about the two issues that I think, plague the industry and will come to the forefront in a short time.
We all have witnessed the growth of modern retail over the last half decade. The shift has been enormous from a time when our parents visited the weekly Mandi to this day when the neighborhood store from ABG/Reliance or Mr. Biyani has become the obvious choice. Leaving apart the hypermarkets, let’s see what the supermarkets have tried to do. These stores try to capture the market in the radius of 5km, from the kirana/general stores by offering same/cheaper prices in a better environment and also giving the shopper an opportunity to assess the products on the shelf unlike a kirana store. The only two areas where a kirana store had an upper hand were a) the provision of credit & b) the benefits coming from the fact that you dealt with the same guy every time (bargaining/he knows what you buy etc).
While the credit issue was well handled through tie-ups with banks and offering credit cards that earned you reward points, the second factor was and is still troubling the stores. This, in my opinion is the first issue that will impede the ascent of the industry (let’s forget about the real estate and funding issues for a moment). The management sitting in a board room planned as to how they will tackle the issue and voila, came the solutions like well-trained staff & attractive uniforms. But, such initiatives have to be implemented effectively at the grounds rather than being discussed in the boardrooms. If you haven’t noticed it yet, next time you visit one of the stores please do try to see how helpful and aware the employees are and you might figure out what I mean. For a fact, I have seen the staff of Reliance Retail beating up a group of 3-4 customers over a petty issue and I’ll leave it at just that.
The second area that needs attention is the use of business intelligence in this industry. It’s not very difficult to understand that this is a very data oriented industry with every transaction of every consumer being recorded. The SKU type & the category type data have to be put in and then there are daily/weekly/monthly price discounts or bundled offers. We have done well in recording all this information but where Indian retail players need to gear up is using analytics efficiently by embedding them into their day to day decision making. I worked on one such project this term for my course – ‘Business Analytics & Intelligence’ where we created a market basket for a retail store based on the transactions over a period of two and a half months. We started out with the goal to find out ‘associations’ across all the transactions. What this meant was looking for a combination of products in a particular bill that was bought repeatedly. This task introduced my project group to two tools (both are add-ins for MS-Excel) namely, XLMiner and Microsoft’s Shopper Basket Analysis Tool. Both require different kind of input but the first add-in has a limitation. The free demo version can handle only 600 rows of the excel file. Considering that you have lakhs of transactions, that’s a limitation that cannot be dealt with. On the other hand, MS’s tool is a blessing for any category manager or a retail store manager. Its output gives you the percentage of lift that a product gets because of another product(s) and that is how you know that bundling product X with product Y or placing the category A adjacent to category B would result in higher value for the store.
Use of analytics in online retailing by players in the developed markets is a case in point that the stores can achieve a much better level of efficiency through employing tools that help in unlocking the door to understanding the consumer behavior. Many analytics firms like Manthan Systems have realised the potential of this opportunity and are catering to the BI needs of retailers across the geographies.
Let me conclude this post by saying that to succeed, the modern retailers need to excel at both the qualitative and the quantitative aspects of the business and the two concerns that I've mentioned are exactly at the extremes of these.
Just read through the comments at the following link that I picked and you’ll know what magic analytics can do. Happy Reading!
https://www.insightcommunity.com/case.php?iid=1188
Bedi.
P.S. - Next up: "Loss Leaders @ Big Bazaar" & "Growth of Private Labels"
Almost every company strives to be number 1 company in its area. Everybody wants the bigger share of the pie. GE had a company policy to be number 1 or number 2 in every business area they operate in or exit that business. In this article we will discuss the approach company should adopt to attack the market leader and garner market share. There are broadly three strategies to attack market leader and companies can adopt anyone or combination of these.
1. Open War: In open war strength of the market leader is attacked. There are ample examples of this kind of warfare. Some companies were able to succeed and some failed by adopting this strategy.
Virgin cola: Virgin openly attacked Cola giants by entering in their segment. Visuals shown make the strategy of Virgin loud and clear. This open war proved to be futile as Virgin cola was only able to reap 1% of the market share in fizzy drink segments even after 5 years of its launch.
Nirma: HUL left some gaps in the product line of washing powder by not having any product at the entry level. This innocuous folly was exploited by Nirma to the maximum which took the giant head on by launching detergent on national scale.
Ujalla: Ujalla was able to dislodge Robin blue from its market leader position in whitener segment by launching a better liquid version of the product. Robin blue reacted by launching liquid version but by then the damaged had been done.
Microsoft Xbox: Microsoft launched its Xbox against market leader play station Sony. It was priced lower than the Sony and Nintendo. This strategy to garner more market share by lowering price proved hazardous for all players in the market. Neither was Microsoft able to garner high market share and nor it was able to profit from this venture. At the same time Sony and Nintendo margins were also badly hit.
IE Explorer: Microsoft virtually cannibalized Netscape after launching its own browser, apparently by resorting to unfair practices. This is a classic case of a bog giant taking lesser mortal head on and finishing it.
Bingo: ITC launched its potato chip in a segment dominated by Pepsi’s lays. Through some innovative advertisement bingo was able to gain 15% market share in less than 3 years of its launch. In this case two giants confronted each other and eventually settled by sharing the pie with each other. ITC is also challenging big FMCG by launching products that directly compete with products of these MNCs.
2. Focus on Niche Areas: Instead of taking the market leader head on the company may decided to go the territories that are still unexplored. Market leader’s focus on these territories is low and risk on being swallowed by market leader is relatively less.
Red Bull: Instead of taking the cola giants head on Red Bull decided to focus on energy drink segment. By the time coke realized the potential of this segment and launched Vault against Red bull, it was already a big brand and market leader worldwide in this category. According to estimates Red Bull has more than 50% share in the energy drink market.
One important difference was also the way Red Bull went about its promotions. Instead of TVC it relied more on unconventional routes of advertisement like Bars, events etc. This strategy made sure that it is not attracting attention of big cola giants.
Skype: Skype is also into telephony like Vodafone and MTN, but it works on completely different technology. Due to this it virtually faced no competition from these big giants and carved a niche area for itself. It was acquired by Cisco for whopping amount.
3. Indirect attack (Guerilla warfare): This ploy was adopted by Ujalla to hold on to its share in the cloth whitener market. Jyoti laboratories figured out that Mortein is the cash cow of Reckitt & Benckiser. They hit them by launching low cost mosquito repellant products and reduced their focus on whitener market.
Choice of strategy is a big question with no clear answer as it depends a lot on the management of the company and risk they can afford to take. Based on the examples given in the previous section following are broad parameters which can be looked upon by companies before taking decision.
1. Direct attack
a. Companies with deep pockets and good cash flow from other product lines can take the leader head on. For e.g. Reliance due to its sheer resources was able to make inroads in the mobile service market in India. It is a number 3 operator by number of user now.
b. Better product/huge price differentiation: The companies having product which gives much more value to the customer than the existing products at equal or lesser price can make an attempt to attack the leader head on. But these companies must keep one thing in mind that their offering cannot be imitated by market leader easily. Because if market leader is able to copy the offering than it the beat the small competitor because of its distribution network and brand equity. Nirma was able to challenge HUL on the basis of huge price differentiation.
2. Niche areas
a. Middle and small size companies: These companies do not have the deep pocket to compete with market leader unless they have much better offering than the existing offerings. These companies should look for new territories instead of taking on the leaders head on. Economies of scale are not too important in these areas as small companies will seldom achieve them.
b. Patented technology: Small companies with unique product offering can take the market leader head on. The unique product must be perceived by customer as something which adds more value as compared to existing products. This happens in Pharma space where even small companies because of the patented technology are able to compete with biggies and even beat them in their own turf.
3. Guerilla warfare: It basically involves hitting the enemy at some unanticipated area. This strategy can be adopted by any company depending on the object it wants to achieve.
Caveat: It is very important to anticipate the reaction of the market leader while adopting any of these strategies.
Now companies are able to make incremental changes to tune themselves to the changing business environment. But sometimes they are unable to envisage the magnitude of the change happening in the market and hence become incapable of coping with it.
Author has give four possible reasons for this change. One reason is “New Primary Demand”, which essentially means that even though a company might be a pioneer in a particular market, it might not be able to cash on the new opportunities offered by the same market. Other companies which entered late might be able to serve those opportunities better. It may be called as second mover advantage. For e.g. though 3M has been pioneer in developing new markets, Unilever has been to better understand the market created by 3M and deliver better value proposition to the customers than 3M.
Second reason could be “New competing technologies”. Eveready continued to manufacture non rechargeable batteries, when the market was moving to the chargeable batteries fast and eventually lost the market share. This is a classic case of new technology making older technology obsolete. Same may happen to Moser Baer if they don’t move to new DVD format in the coming time.
Third reason is “Market Redefinition”. Under this one case is where customer prefer end to end solution rather that going for piece meal approach. Niche players sometimes loose to big players on this front. Fourth reason is “Channel Change”, which happens due to changing customer requirement s and market dynamics. For e.g. with internet becoming house hold phenomenon in Tier 1 and Tier 2 cities, Travel agents are facing a hard time. Due to internet means of deliver has changed and travel agents are no longer handy.
Apart for these four reasons there could be plenty of other reasons which might lead to change in the market requirements. Some of them are changing demographics, Globalization, rising income levels and many more.
The concept of strategic window comes in handy for both existing business and new entrants. Using this concept they can better time their decision to mobilize or demobilize the resources.
Existing businesses can find out if they are capable to mobilize the required by the changing market or should they exit the business. New entrants can find out the right time to enter the market. It should be the time when market requirements and companies competencies are in sync with each other.
