Wednesday, July 15, 2009

Professor Nirmalya Kumar Professor of Marketing, London Business School

“Markets always change faster than marketing”

Nirmalya Kumar brought a drastic change to the frame works of marketing and awakened the sleeping lions of businesses to play a greater role in their territory. Nirmalya Kumar is Professor of Marketing, Director of Centre for Marketing, and Co-Director for Aditya V. Birla India Centre at London Business School. Prior to the current assignment he has taught at Harvard Business School, IMD (Switzerland), Northwestern University, Columbia University. He is also a coach, consultant, seminar leader for fifty Fortune 500 companies in forty-five different countries.

He serves or has served on the Boards of Directors of ACC, Bata India, BP Ergo and Zensar Technologies. His book “Marketing as Strategy: Understanding the CEO’s Agenda for Driving Growth and Innovation“ is sought after in the academic as well as in the corporate arena. His new book “India's Global Powerhouses: How They Are Taking on the World” is the perfect destination to savor the globalization march of India Inc. In this interview which is the very first for any B School Magazine, he talked to Markathon about the various dimensions of marketing that needs to be strengthened in these tumultuous times and also proposed a sustainable path to success for budding managers.

Markathon: In the book “Marketing as Strategy”, you have mentioned about the declining role of CMO’s on the CEO‘s desk. Do you think the practice can change, with more emphasis now given to quick-fix tactics rather than well formulated strategies and the desire to achieve quicker ROI’s?

Nirmalya Kumar: As mentioned in the book to get CEO’s attention and credibility, CMOs have to become more strategic, more bottom-line oriented and more cross functional. In the light of the current situation, the role of marketing is to get a makeover. Because in the end, one cannot cut costs fast enough. You really have to find out how you can increase revenues; find out where the revenues are! The challenge for marketing people in the recession is how to get the revenue up, that too in a short term.

Markathon: How does the proposed 3V model is applicable in case of mutually exclusive customer segments on the basis of their perceived value?

Nirmalya Kumar: Basically the 3V model is about valued customer, valued propositions and valued network. The more segments you have the more applicable the model is. Because for each segment first you have to define who is the valued customer, that’s what the target segment is. As you said, it could be innovative products Vs low cost Vs other products. So every segment has valued customer segment which is mutually exclusive. That’s how it defines the first part. The second thing is once each customer segment is identified, one has to have different value proposition for each customer. So for customers inclined towards innovation, you should have products which are innovative in features, for the low cost customers you have to strip away everything and give them a value proposition which is very much about low price and the basic stuff only.

The most interesting part of the 3V model comes, after you know about your different valued customers, and then formulate the value propositions. Then the question becomes where to cut the value network in order to serve the different segments? Because of course I can cut the value network everywhere for each segments. Suppose for each segment I have dedicated purchasing, dedicated R&D, dedicated marketing, dedicated distribution and dedicated service, I can do that. That way I can have differentiation for each of the segments, but the problem is I will lose economies of scale. So the challenge in serving mutually exclusive customer segment is to find out where to cut the value network in order to get the differentiation that the customer desires, while still having the economies of scale that we need for efficiencies. And this is an art. Try to figure out where exactly we need to absolutely cut the value network in order to provide the differentiation that the customer needs and still maintain enough commonality between the value networks of serving different customers, so that we can get the economies of scale.

Markathon: Which function of marketing can bring the unique value proposition to the company and to the customer, when value propositions are getting emulated in short period?

Nirmalya Kumar: Of course the company will look towards new product development, as it can create the most value for the company if it comes up with unique products that truly meet the needs of the customer. That’s what the companies are looking for. So UVP best comes from the new product development. Of course innovative pricing or distribution can create value propositions that are interesting, but they can be emulated. The one which is most difficult to emulate is the one which comes out of the new product development, because it takes time for the competitors to develop them.

Markathon: Along with product development would you also say discontinuing non profitable products should also be taken at a faster rate? Because see in this recession the companies will obviously look for cost cutting, but new product development will involve lots of investment

Nirmalya Kumar: Yes, you cannot have new product development without investment. The fact of the matter is that in the boom time’s lot of bad practices creep into the companies. There are so many products lying on the shelf and nobody took the decision to delete these products. Recession forces companies to confront products which are not selling, brands that are not performing, promotion tactics that are not working, and distribution channels that are not adding value and sales force which are not productive. And for all of these things that you confront in recession, you have no choice but to remove them to cut costs. So recession can be a very strong scenario for change management in marketing programs. You look at the automotive companies in US, they all have to restructure. Look at the banks, steel companies, and cement companies. They are closing down their plants and operations which are not profitable and working towards closing down the products which are not performing, removing sales people who are not generating sales. So, you need to prune parts of the product line in which you don’t have competitive advantage. That’s what you are seeing across the board right now.

Markathon: How can innovation in marketing help make corporate strategies sustainable?

Nirmalya Kumar: There is no such thing like sustainable strategy because obviously competitors will copy successful practices. Environment changes, competitor changes, customer evolves and technology too is changing rapidly. So there is no one strategy which is sustainable. But of course, the innovation is an engine which can drive sustainability. Even the most innovative companies are not about launching an innovation and sitting back. To make it sustainable you have to improve it constantly. So the companies, which are successful in innovation, launch a new product with radical features and continuously improve it in small steps all the time and then again launch another product and thus innovation goes on. So innovation is the game which you have to play continuously.

Markathon: India Inc is rapidly expanding abroad, but still many international marketing practices have not yet made inroads into India. What do you think the reasons behind it: whether it’s the characteristics of the Indian market, immaturity of consumers or the attitude of corporate?

Nirmalya Kumar: I am not very sure that I have agreed with what you have said. I think that many international marketing practices have made inroads into India. For example the advertising industry in India is extremely creative and quite at par with world standards. Where international marketing practices that have not made into India, most of them are happen to do with online marketing. Online marketing or internet marketing is not that developed in India, it is for good reasons as many customers are still not connected online.

That’s why a big difference between India and abroad in marketing practices is all based on customer behaviour. In India print and television advertising is very attractive. In developed world print is almost dying and effectiveness of television advertising is declining. So you have to go online, on the mobile, gaming and social networking to get most of your branding and promotions done. That’s where most of the new actions are and where marketing money is moving. This is not yet relevant in India. So that’s why it’s not a valuable investment.

There’s one other place where Indian marketing is different from the developed world’s marketing. Because of the fact that so many customers are either rural or at the bottom of the pyramid, many Indian companies are coming out with innovative products for them. We don’t see this in the developed world and even we don’t need to see them there. I think the reasons, for the differences between international marketing practices and to India; have less to do with immaturity of Indian market but more to do with its specific context. The Indian market is still very rural, poor and traditional in consumption and that is why many international marketing practices are not yet relevant in India. But when they will become relevant for India, I am sure they will be adopted. Indian marketing innovation will be in the rural market and in the bottom of the pyramid. You will see a lot of new products that are very robust, potable and low cost and that are where the innovation in India lies.

Markathon: What should be the course of action for marketers in the aftermath of recession, with market sentiments at all time low?

Nirmalya Kumar: Basically there are three actions. First course of action is to cut out all the products which are not generating any value. Look at the marketing programs which are not working and cut those out, because many programs of companies are ineffective. Second is, find ways to increase the revenue. And the third action is to look at the certain needs of the money strapped customers in this recession and find unique value proposition for that.

No comments:

Post a Comment