Tuesday, June 15, 2010

Are the huge investments in 3G spectrum justified for the telecos?


Jeeva S, IIMS

Andrew S. Grove in his book “Only Paranoids Survive” has rightly pointed out that every industry passes through a SIP (Strategic Inflection point), where the rules of the game are completely changed and there is a paradigm shift in the way the business operates.

The Indian telecom industry is now passing through one such phase, with the ARPUs (Average Revenue per User) of all major players at an all-time low. The only way out of this is to move from the declining voice based services to burgeoning data based services.

Here comes the importance of 3G Technology. To effectively stay in the operation every established player has to adapt themselves to the changing business scenario; reason why, every service provider bid frantically. Although the prices of the bids looks exorbitant it’s normal, considering that the Indian telecom market is one of the fastest growing markets in the world and it’s a question of survival for the telcos. An underpenetrated market, with a teledensity of 45% when compared to the global average teledensity of 78%, with data based services having penetrated to just over 7%, the Indian telecom market offers enormous opportunity for the 3G service providers. Yes, initially it may be difficult to upsell 3G Technology but with the advent of cheaper smart phones, growing data services, increasing usage by youngsters and in rural are for purposes(like ITC’s e-choupal) coupled with the growing customer base should make the job easier.

With 4G Technologies, LTE still in infancy and Wimax requiring a fresh infrastructure, there should be sufficient time for telcos to break even and make profits. The mystery in the huge investments in 3G would be history once people start realizing that Voice is History!


Ankit Jalla, Welingkar, Mumbai
The current scenario is uncomfortably reminiscent of the 3G auctions in Europe, 2000-01. Billions of dollars were raised by the respective Governments and in less than a year, telcos had to give pink slips to around 100,000 people. Operators were on the verge of bankruptcy and it took them several years to regain financial stability. Telecom companies here could go through the same; nine of them together will be shelling out a jaw dropping amount of Rs.67,719 crores for a 20 year license to provide 3G services across circles.

Indian operators will most likely bleed post-3G auctions and even a possibility of some players crumbling down looks imminent. Operators have paid double the amount Government was expecting and have been extravagant rather than being rational.

The payments have to be made within ten days of the last bidding day and that’s just not it, this is only the entry cost. Operators will have to spend enormous amounts on creating and buying applications, marketing, and not having pan-India presence will lead to costs for roaming agreements between operators.

All this would result in a near-premium pricing of services which Indian customers will definitely not welcome and to top it all, as per Evalueserve currently only 3% of the subscribers in India have 3G enabled sets.

The future looks bleak for telecom operators and could prove to be a very expensive victory for the winners.

SV - Airtel Express Yourself

Winner: Deep Hegitse, Welingkar, Mumbai

Honorary Mention: Bharat Suvarna, Welingkar, Mumbai

Marketing for Tomorrow: Social Media Marketing

Avirup Ganguly, Tanvi Saraf , IIM B

Today’s marketers are increasingly harnessing the viral power of social media marketing (marketing through online social forums and social networking sites) through innovative campaigns. The proportion of marketing spend allocated to this marketing form is predicted to quadruple in the next 5 years. This article looks at social media marketing through various lenses and examines ways in which it scores over traditional marketing. Validation of social media marketing from a social psychology perspective has been presented and several innovative campaigns have been discussed.

What do you do when you are faced with the seemingly impossible job of creating visibility for a tiny brand on a shoestring budget and you are promoting something as unexciting as a blender?
Here’s an idea: Take $50, use it to purchase a rotisserie chicken, Coke, a bag of marbles, golf balls and a URL. Then, turn on the video recorder and ask your CEO to engage in extreme blending wherein he blends marbles, golf-balls, chicken and Coke to show off the power of his blender. Upload this video on your URL and within days, clips of the CEO’s extreme blending exploits will pop-up in YouTube and your brand will get instant fame – all for $50. This is the story of BlendTec, a Utah-based blender’s successful viral marketing campaign.

This is just one among the numerous colourful examples of the ways marketers are harnessing the power of social media marketing.

Recent Developments in Social Media Marketing
Facebook CEO Mark Zuckerberg says that the social networking site now has over 200 million users. If Facebook was a country, it would be the 5th largest in the world! In May 2007, Facebook opened its network to external developers. This marked the beginning of numerous social media marketing innovations. Other common social media marketing tools include Twitter, blogs, LinkedIn, Flickr and YouTube.

According to a 2009 survey, a company’s spend on social media marketing averages around 3.5% of its total marketing budget. This figure is predicted to grow to 6.1% within a year and to 13.7% within five years.

Through the lens of Social Psychology – The Third Person Effect
Sears has a unique strategy for generating word-of-mouth publicity through female Facebook users. Instead of naively pursuing each user on its own, it asks women to ‘help others choose their prom dresses’. Sears has correctly identified the implications of the “Third-person effect”.
Numerous social psychology studies have demonstrated that we consider other people to be more influenced by media than us. This effect is particularly strong in the context of social-networking websites. Hence Facebook users believe that they can help others, who they believe to be more gullible to aggressive marketing communication, by recommending brands they personally believe in.

These and other such behavioral tendencies of consumers can be exploited by social media marketers by careful planning of their campaign.

Transcending Beyond Reality
Nokia has initiated a very successful Facebook marketing campaign called “Somebody Else’s Phone” which is a flash micro-site that allows one to look into the phone of a hero named Luca. The idea is as follows: by exploring somebody else’s phone (text messages, address book, music stored, etc) one can tell a lot about the person and his way of life. Users can then ask Luca questions through his fanpage to gauge if they have understood him correctly.

Nokia’s campaign satisfies a very basic human craving – the urge to peek into other people’s lives. The internet can prove to be extremely liberating for it allows us to indulge in our otherwise difficult to satisfy needs from behind a shroud of anonymity. Nokia’s initiative shows how marketers can satisfy otherwise elusive human emotional needs by using internet technology.

Integrating Social Media Marketing into Brands
Despite the challenges involved, several companies are finding innovative ways of integrating social media into their brands. IKEA is one such example; the company was successful in converting idle browsing into a flourishing bottomline. An account of one of their store managers was created on Facebook and showroom furniture images were uploaded to his Facebook photo album. Using the all-popular “tagging” feature, customers were able to locate items in the pictures and put their name on it. The first person to tag an object got to take it home.

Facebook users started embedding links and images in their own profiles and across news feeds. In turn, thousands and thousands of users willing
ly promoted IKEA. The cost of reaching out to thousands of these users was just that of giving away some furniture.

Social Media Marketing versus Traditional Marketing
There are several avenues through which social media marketing scores over other traditional methods:

•Viral Nature
Consumers initially targeted via social media pass along marketing messages to a large number of their friends and the overall growth of marketing campaigns snowballs very quickly. Most recently, Harley-Davidson zeroed in on social media marketing. They launched social media initiatives on Facebook on July 2008 by creating an account for their brand. They accrued 145,904 fans on Facebook within a period of just 10 months.

•Focussed and Targeted Growth
The rise in fan base achieved by Harley-Davidson was purely through organic growth, without any promotional pushes. Such growth helps companies to reach out to like-minded people, to fish where the fish are, so to speak. Hence, marketing campaigns can be designed in a focussed and targeted way.

•Voice of the Customer
One of the greatest advantages for social media is the voice of the customer. If Harley-Davidson posts a question, such as, ‘Are you in favor of darkening the bike out, blackening the bike out or shiny chrome?’ it is not unusual to receive 300 to 500 comments. Social Media marketing helps companies to intercept what consumers are saying about its brands outside its walls.

•Harnessing Influential Personalities
Traditional marketing often uses celebrity influence to further their brands. Nowadays, bloggers and site owners also represent an exceptional and dedicated segment of the communications and media landscape and their influence is on the rise. Social media marketing helps in harnessing their support and promotion through such endorsers is more economical as well.
HP used this influence to their advantage by providing 31 HP laptops to bloggers to create their own unique contests specifically catered to their readers, winners of which would receive the HP laptops (one per blog). The promotion spread over 31 days, garnered positive discussion about HP on the internet which quickly led to a rise in sales. HP registered a 84% increase in sales of the model being promoted and 14% overall increase of traffic on their website.

• Economics
The total cost of the HP promotion was that of the systems given out and shipping; this amounted to just $ 250,000. The economics of social media initiatives usually compares very favourably in terms of economics with traditional marketing methods producing similar benefits.

Social media marketing offers a unique opportunity to marketers to achieve marketing success by making best use of its viral and focussed nature. The trick to perform well in this game is to understand the forces that guide human interaction and creating innovative campaigns to harness these forces.

Several successful social media marketing campaigns show us that if the campaign is well designed and is innovative enough to create a buzz, the cost of marketing is really low in social media marketing. Hence, in future one expects to see more creative talent in social media marketing and campaigns which will extend the boundaries of creativity these forces.

Marketing in the time of crisis

Amit Agarwal, Sachin Paul, XLRI Jamshedpur

Webster’s define crisis as “an unstable or crucial time or state of affairs in which a decisive change is impending”. In period of crisis, nothing is important for a brand more than ensuring the operating flexibility necessary for innovative and market-driven decisions.

Global financial crisis that struck the whole world in 2008, has affected almost every business. Infact, brand loyalty has become a concept of past as consumers have been switching between the brands too frequently. Everyone is questioning whether the collapse in the brand valuations is going to be the next bubble to burst after financial bubble?

What Market Survey shows
Over the past few decades, financial markets have consistently pushed up the stock prices of brand-owning companies. But, as per analysts at WPP Group-owned advertising agency Young & Rubicam, over the same period consumers have been “falling out of love” with brands. As a part of “brand asset valuator” research program, in 1993, consumers said they trusted 52% of the brands researchers asked them about. But, the trust level has fallen to 25% now.
Researchers have estimated the size of the “brand bubble” to be $4 trillion, much bigger than the size of the subprime mortgage market.

With the survey it is clear that the branding has become more and more difficult with customers focusing more on the product itself rather than the brand.

How to Maintain Marketing Fundamentals in the times of crisis
Maintaining marketing fundamentals will definitely help even in the times of low market sentiment. Here’s what a company can do ride over the hard times:


Refine the Segmentation
Crisis limits the resources and companies cannot and shall not make products for everyone which makes re-segmentation necessary. The common segmentation techniques based on demographics, geography and even psychographics will not work as they just measure people’s lifestyle, self-image and aspirations but are very weak at predicting what any of these people is actually likely to purchase in any given category. Hence, the segmentation technique selected must find out:
• Who “can pay premium” / “will demand lower prices”
• Which customers drive profits & what values they share
• The dissatisfied customer who is likely to switch
• Those likely to make first-time purchase
• Which benefits and features matter to the customer
• Which attitudes actually affect buying decisions

Refine its Target Segment
Individual marketing can be very costly to start and expand in the crisis times. Hence, the most common marketing to be used shall be either Local Marketing or Niche Marketing whereby we need not make customized products for each and every individual but for people living in a particular area or segments with specific needs. Similarly, the refined segmentation done before shall prevent marketers from doing Full Market Coverage and go for either selective or product or market specialization.

Example: Nike In 1999, Nike started reengineering its customers’ experience around very targeted and specific customers to improve its brand presence. For this, Nike started a global foundation and adopted global processes to position the company for growth as a brand. And the results were clear. It not only improved Nike’s key performance with greater cash flow but also led to improved inventory management and profitability.

Refine the Positioning
The product must have a clear positioning. However, repositioning can always be used to rejuvenate the brand and help in maintaining clarity in positioning. The same can be done via:
Reverse Positioning: This can be done by shedding product attributes the rest of the industry considers sacred & supplementing the stripped product with one or two carefully chosen attributes that would typically be found only in highly augmented products. This practice works best with services industry.

Breakaway positioning: This can be done by getting away from one category & associating with an altogether different one. The conventions of the new category are used to change how the products are consumed and with whom they compete. This works best with Packaged Goods.

Measuring the basics by Marketing Metrics
In tough times, marketers are pressured to deliver hard data on how their efforts increase the company's bottom line. Thus, only a focus on metrics can form an efficient marketing effort.
Following could be done to measure marketing activities:
• Understand objective behind any marketing activity
• Choose correct marketing activity for the goal
• Outline the measurable components of that activity
• Communicate clearly what needs to be measured

But, what to measure is actually becoming trickier these days for the marketers. They need to take a disciplined approach to using accurate, timely and meaningful marketing metrics. In order to help develop more insightful and useful marketing metrics, focus should be on these four fundamentals:

Essential metrics criteria-
It's important not to have too many metrics. Focus on those metrics that:
Return good business results, and,
Can be measured precisely, consistently & cost effectively

Customer-acquisition metrics-
All marketers want to acquire new customers. So metrics to be used to measure the effectiveness of acquisition marketing efforts shall include the following:
• Awareness levels ,
• Purchase-decision drivers ,
• Market share , and,
• Cost of customer acquisition
• Product "wow" metrics

A great product or service is the most important element for building an exceptional customer experience. Examples of product "wow" metric include:
Ease of use,
Satisfaction versus expectations, and,
First-time user experience metrics

Customer-retention metrics-
Marketers want customers not only to continue using products but also to buy other products. Some key customer retention metrics include:
Retention Rate,
Lifetime Value, and,
Brand Equity

Some Best Practices to be followed in the times of Crisis
Protect and cultivate Your Brand: Innovation is the key to success here. Brands can be made or broken in crisis. Retaining profitable customers and reaching out to new ones requires greater innovation. Innovative ideas like new products, services or strategic acquisitions can help in tough times.

Get Closer to Your preeminent Customers: In difficult times, customers look for reliable, trustworthy suppliers. The organization need to segment its customers by risk, size, and value so that it can optimize its sales potential by offering targeted, value-based pricing.

Retain Your peak Talent: Top talent can work wonders for the firm. Thus, organizations need to create programs to retain them and build a team that can help it achieve its growth objectives.
Manage Cash and Run Lean Operations: As credit lines tighten and spending slows, organizations should do the following:
• Manage their cash-to-cash cycle,
• Pay particular attention to balance-sheet health,
• Make liquidity management a vital part of organization’s core processes, and,
• Reduce leverage & boost cash flow through working capital practices to support long-term cash.

Spend on the brand: Market sentiments affect the brand in a long way. Any kind of negative news from market can cause customers to get defensive and gravitate away from brands. Also, companies might be tempted to reduce their marketing expenses and pass these savings in the form of price cuts to customers which may lead to enhanced negative impact on future brand preference.

Spend on brand significance: Brand significance is the alignment of a brand with primary needs & wants of the target audience. Firms need to try & associate the new brand in the domain with the consumer’s personality.

Avoid the sale attitude: Sales promotion provide an attractive alternative to marketers but the impact they have on the position of brand cannot be undone. They puzzle consumers regarding the brand positioning which might change the brand acceptance and association altogether. This can lead to customer dissatisfaction with the brand & loss of brand loyalty.

Example of Brand Revival
Apple Inc.: Apple is a prime example of how a company reinvented itself by creating a customer experience second to none. First, Apple dropped those products that didn’t contribute to its bottom line. Then, the company created a new line of products that took Apple back to its roots (elegance, ease of use, fashionable). Finally, it launched new services like iTunes which was needed for their other products & which they provided for free. A focus on branding, customer experience, and the bottom line was the only way to survive. In last 5 yrs, Apple’s revenue skyrocketed from US$6 bn to $32 bn & its brand value grew from $5 bn to $13 bn.

Consequences and Future Implications
If the Brand Bubble bursts in near future, most of the companies will not be able to save their brands from its effects. But there are certain set of brands whose value continues to rise in both consumer’s and investor’s perspectives. A few of them are Adidas, Apple, IKEA, Red Bull, and Toyota & Tesco. These provide a ray of hope for the future.

But these brands are becoming fewer in number. This shows that the investors and the consumers will increasingly shift brands that will genuinely deliver superior value, from those that are simply going through the motions of branding but are in fact little more than commodities.

Thus, all we need is an altogether new brand-building mantra called brand energy. This brand energy is nothing but the continuous innovation that can excite consumers and builds the brand’s reputation.

Also, there is still a need to stress on the need for marketing considerations to cross corporate silos and learned corporate strategy. If consumer and investor perceptions of brand value have indeed been diverging, a huge re-evaluation of the value of brand-owning companies needs to be done in the near future.

All Lines are Busy!

Gagan Arora | Umamaheshwaran B S | Samita S. Patnaik | Saurabh Kr. Sinha, IIM S

Telecom industry has undergone a sea change since last year from price wars commoditizing the telecom services to the 3G auctions that saw a collection that far exceeded the government’s expectations, giving the hope of achieving a fiscal deficit below 5%. But there is cautious optimism surrounding the future of telecom market with falling ARPU and huge debt in the balance sheets of the service providers not making the investors too happy and sending the market capitalization for a toss. Even in the post 3G auction scenario, Indian telecom giants like Airtel are exploring other markets and acquiring companies. The dynamics of the Reliance empire is making the industry all the more happening with Mukesh Ambani buying stakes in Infotel and Anil Ambani trying to sell stakes in RCom. This article attempts to draw a sketch of the entire industry scenario analysing the strategies of the various players and what future holds for them and for the industry as a whole. We have classified the industry players into three different categories depending on their period of existence and the analysis has been carried out on the GSM mobile service providers…

The last mile?
Take a flashback to the year of 2005, when Airtel, Vodafone and BSNL together constituted 68.91% of Indian GSM cellular subscriber base. Today going by the statistics of May 2010, these three service providers’ together account for 69.03% of the mobile subscribers. Not much of a change. But going deep we gain a significant insight: their combined monthly additions of new subscribers in May 2005 were 68.61% which drastically has come down to 58.97% in May 2010. The numbers were much better in May 2008, but after that the journey has become tougher.

Going by the numbers, Airtel and Vodafone have done remarkably well to grow in this hyper competitive telecomm industry, whereas BSNL has fallen prey to competition and has been consistently losing market share. But this growth story has been changing since last two years with continuous increase in market share of Idea and Aircel. The market share and monthly additions of both Airtel and Vodafone has fallen significantly on a year to year basis in May 2010. The entry of newer players like Tata Docomo, Uninor and Videocon has also increased their worries.
Airtel and Vodafone have followed different marketing strategies for their survival and growth. Starting with differentiation in the market, Vodafone has relied heavily on its brand image; network quality and value added services whereas Airtel has banked on its connectivity, functionality, special tariffs and creating a mass appeal. Airtel has often been identified by its music and its brand ambassadors ranging from Shahrukh Khan to Sachin Tendulkar to Kareena Kapoor to A.R Rehman. On the other hand Vodafone has the brand imagery associated with the Hutch dog and recently through its zoo-zoos. Cricket has been another platform for Airtel for reaching out to masses and it recently bid for Indian cricket team sponsorship and also became the official sponsors of Championship League. Vodafone is also not far behind and it leveraged IPL seasons for maximum eyeballs for its zoo-zoo ads. It is also using FIFA World Cup 2010 for connecting to people and promoting VAS.

Both of the operators have been targeting youth and working professionals with high preference for metros. But because of its association with celebrities and coverage, Airtel has been comparatively more successful in penetrating into rural markets. Both of these operators have embraced changing customer trends in their pricing and introduced attractive tariff plans and discounts for different groups of customers. Off late, neither distribution nor ease of recharging & bill payment has helped anyone of them to gain competitive edge over other. But these are the areas where BSNL has lost the plot in spite of having excellent network coverage.
Partnership is yet another aspect of competition between Airtel and Vodafone. The long-standing partnership with Nokia has given Airtel an edge into latent markets of eastern India by providing infrastructure and managed services. While both of them brought Apple iPhone to India, Vodafone has already partnered with Apple for launching Apple iPhone 4. It has also collaborated with Research in Motion for Blackberry handsets in India. These partnerships are even more important keeping an eye on the launch of 3G services. BSNL has again lagged behind in partnerships and has paid the price for the same.
Considering the 3G spectrum bidding strategy, Airtel has majorly opted for pre-dominated circles bagging 13 of them. Vodafone also adopted similar strategy and won licenses in 9 circles. With such massive investments, they are looking forward to increase their falling ARPU. For that, they are keen to upgrade their existing customers to high end services which may not be very difficult in Delhi and Mumbai but definitely far from easy in other circles because of the fear of losing them. For Delhi and Mumbai, both Airtel and Vodafone together with Reliance will also be looking to snatch subscribers from operators who won’t be able to provide 3G services.

New claimants to the throne?

Had Maggi sauce’s punch line not been “It’s different” then it would have been Tata Docomo’s for sure. This has been the whole essence of Tata Docomo’s brand positioning from day one. It introduced revolutionary pay per second pricing, mytunes and buddynet. In fact it is the only one among Idea, Aircel and Reliance not to have a brand ambassador. Pay per second pricing has changed Indian telecom landscape by forcing all other major telecom providers to follow the suit. This enticing pricing offered by Tata Docomo was a huge success for Docomo as it helped in building up a sizeable segment of consumer base rapidly specially in South India and Maharashtra. In fact, it was Reliance Mobile in first place, which positioned itself on the basis of aggressive pricing strategy, making money on scale but trying to assure it’s not skimming the market. Reliance is accredited with changing the face of Indian telecom market by introducing ultra-cheap calling rates, but the only problem was that the offering was in CDMA technology which failed to entice many and ultimately Reliance mobile CDMA primarily became a bottom-of-pyramid product. Thus, it ended up tapping a substantial chunk of rural market and it has continued to do so by bringing out ultra-cheap products like mobile internet phone at a paltry price of Rs480. The major difference between Reliance’s and Docomo’s strategy has been that Docomo used aggressive pricing to gain market share and then shifted its focus on VAS and innovation whereas Reliance has more or less chosen to stay differentiated through pricing.
Idea and Aircel of late have been involved in engaging customers in creating brand equity by running campaigns like “save paper” & “save tigers” respectively and hence, helping themselves in chalking up effective brand salience points. The brands have been successful in running the campaign as 360 degree campaigns to take them to masses by various media like TV channels, media partners, social websites etc. Initially Idea was a JV between Tata, Birla and AT&T and it created a huge stir in the telecom market. Eventually it did not live up to the hype and AT&T (now Cingular wireless) and Tata sold their stakes to Birla. Idea started with focus on improving the infrastructure and tariff plans and based
its branding on the same. In due course Idea, as a brand, began to take shape around 2006. It got major brand ambassador and then it continued to reap eyeballs when it roped in Abhishek Bachchan as its publicity by sponsoring Mumbai Indians and Deccan Chargers in IPL II and IPL III respectively.

Aircel has come off age with a small beginning. It has found innovative ways of branding. Be it the projection of its logo on the Gateway of India, ‘Just arrived’ boxes at the airport, or the IPL Scoreboard put up at the Mahim Causeway, Aircel has managed to create an unbeatable buzz. The inflated raft Aircel put up on Milan subway in Mumbai to be used during an emergency caused by heavy rains was a huge success and Aircel has planned to take this idea further to other cities. Aircel has shifted its focus on creating differentiation via innovative VAS services rather than innovative pricing as it used to do earlier. It has used its brand ambassador MS Dhoni very effectively for the same. It was the first ones to bring the idea of “pocket internet” and internet recharge cards.
Aircel has won all under tapped and promising circles like North East in 3G auction thus looking to gain strong presence in those circles whereas Docomo and Idea chose to bid for markets where they already have a strong presence. There is one fear with the 3G spectrums that some operators are going to use large amount of these spectrum for managing eternally increasing voice traffic, as Indian VAS market is yet to see highly expected Hockey-stick growth. Fortunately, this will be a temporary trend because to compensate for falling ARPUs (Average revenue per user) companies will have to shift their focus on VAS.

New kids on the block…
Slowly eating into the market share of the telecom giants are the new entrants. But breaking the telecom clutter is easier said than done. The price war, that characterizes this industry, was itself turned into a differentiating factor by Uninor, a telecom venture of Unitech and Telenor. The company, which has today’s ambitious youth looking for quality and service as its target group, attempted to achieve differentiation by
introducing ‘24x7 Badalta Discount Plan’. According to this plan, subscriber would be granted discounts inversely proportional to the traffic handled by the BTS they are currently covered by. Uninor is set to change industry practices with such dynamic pricing. In an industry where towers are the most essential as well as the most expensive investment, dynamic pricing will help utilize BTS better while providing the customers with discounts ranging from 5% to 60%. The discount offered will be continuously updated and displayed on the handset screen thus empowering the subscriber to control his tariffs. This is an attempt to redistribute the call traffic to ensure better utilization of resources and also delivery of better services.

While Uninor had one of the largest launches in terms of footprint, Videocon Telecommunication Ltd. hopes to flex parent company’s distribution muscle to get better reach and availability. The parent company has a good brand recall and retail penetration which gives the service provider a unique advantage. The parent company’s presence in IPL only helped in increasing the brand awareness of the Videocon’s telecommunication services. Uninor which is operational only in 13 circles interestingly stayed away from the 3G auctions. With the target of attaining 8% market share by 2015, Uninor is following the ‘voice is where volume lies’ mantra and is keen on leveraging opportunities available in 2G. On the other hand, to achieve its ambition of 10 Crore subscribers within three years, Videocon, having lost 3G bids is now trying to penetrate data savvy subscribers by providing free access to Facebook, mobile broadband and charging solutions. Its inclination towards mobile data services is based on the realization that though voice is still the mass market, mobile internet penetration continues to improve rapidly across the country.
In a scenario where all the players want to be present in the GSM platform, being restricted to CDMA is a risk that MTS has taken in the hope of high rewards. In LTE (Long Term Evaluation) standard CDMA and GSM would come together. So there might not be much difference in future. Besides, CDMA is better for data services. This gamble can prove profitable for MTS with the development of generic handsets.
Way forward…
This dynamic and vibrant industry has come a long way from incoming calls being charged to dynamic pricing. The consumer seems to be gaining the most – better and cheaper voice and data services. They have got very good dividends giving them the lowest tariffs in the world, courtesy the price wars. Since there cannot be any major price differentiation among operators,

Quality will be the driver. Valuation will move from subscriber base based to a model based on margins and Minutes of usage. With the much anticipated MNP, rise of tariffs will be impossible. Hyper competition is going to be a common place in the coming days with each operator trying to come up with innovative pricing plans to offset that of competitors.
Rapid re-basing of prices by the major players will make the existence of smaller players unviable and the consolidation will happen sooner than later. With business becoming all the more mobile and dynamic, there will be a need for instant data access and this will lead to smartphones ruling the upper middle class urban India. But to penetrate rural market, price has to come down rapidly and there must be applications relevant to the rural population as voice alone won’t help the players much.

Mobile VAS industry will definitely come to the rescue of the industry as it is growing at 50% CAGR. It will compensate for the falling ARPU and aid profit margins. As of now, Voice and rentals form 90% of the revenue with VAS contributing a measly 5% of the revenue. With reality shows ruling the roost, interactivity is increasing between the viewers and program which augurs well for VAS.

Mobile advertising is something that will pick up going by the sheer spread of the subscriber base. Though mass advertising is highly criticized, it is definitely a very good model in terms of returns. In the future, companies are planning to go in for targeted advertising after proper customer profiling which would be welcomed by one and all.
The mobile market in rural India has significant potential with number of subscribers anticipated to grow at a CAGR of around 32% during 2009 to 2012. Experiences in rural India show that information and communications technology can enhance poor people's opportunities by improving their access to markets, health care and education. Post 3G, fishermen can negotiate prices for their catch before heading for shore by sending in pictures of the type of fish they possess. Similarly, farmers who have perishable produce can use 3G services to bargain for the best prices before harvesting and giving the middlemen a skip. The amount of infrastructure needed will be even more when 3G rolls out because of the need for more closely spaced towers as 3G waves being of the higher frequency, cannot travel long distances without distortion. There is the political pressure group acting with TRAI insisting that telecom gear makers submit their entire source code to while away any security fears. Currently, Regulators hold the trump card as the players can’t afford to lose out on the huge business opportunity that India presents.
Even though the industry is cluttered, innovations just don’t stop. For instance, Tata Teleservices and Future group have launched a co-branded GSM mobile service called T24 that offers free talk time to customers who have purchased things at retail outlets owned by future group across the country. We have seen some innovations in the retail sector when discounts are offered. But this is one step further.

The industry is going to provide us with high intensity drama. The players have betted big in spite of huge uncertainties and it seems they will go to any distance to win the battle. With so many stakeholders eagerly looking forward to see how the drama unfolds, it is going to be interesting days ahead. It has all the makings of a perfect case study.

Branded Fuels: Future Tense?

Priyanka Pandit | IIM S
By the time this article gets published, an Empowered Group of Ministers (EGoM) headed by the Finance Minister has probably decided whether the petrol and diesel prices are to be freed from government control or not. Decontrol would effectively increase rates by over Rs 6 a litre and cut down on the loss of Rs 46,051 that the three public OMCs (Oil Marketing Companies) incurred in 2009-2010.

But the OMCs are not rejoicing. The government subsidizes them to compensate for below-market prices, and this in effect eliminates private competition. The decontrol would mean losing the edge over competitors; the ones forced to shut down as well as the ones eyeing the market from the foreign shores.

Fuel Branding in India
Branded fuels were introduced in the early 2000s as a means to cash in on the growing number and variety of vehicles on the Indian roads. The premium product seemed to be the only way to make a little profit for the loss-making OMCs. The initial years showed positive results too, but then the crude prices hit the sky in late 2008 and the special tax on the branded fuel also kicked in. The price differential between the branded and the regular fuel rose to over Rs. 4/litre.

The average Indian passenger car owner began to think of RoI on his purchase of branded fuels and the sales have been dropping since then. Are these specialty fuels going to be another branded product buried in the Valley of Death?

Analysis of Present Offerings
Firstly, the similar positioning statements of all the brands, as mentioned above in the chart, make it obvious that the average consumer of branded fuel is confused about the identity of the brand he is using.

Second major concern is the quality assurance aspect of the product. Although all the OMCs have special initiatives at their major retail outlets for the same, there is almost zero assurance to the buyer that the premium paid for the branded fuels have any returns. A rare inquisitive consumer may find the names of the companies from where the additives are sourced, at best. But there is no validation of the claims about better mileage or engine life. It creates the impression that there is no major difference between the regular and premium fuel. This is one of the prime reasons for the drop in usage after trials.

The target for these fuels seems to be, predictably, the urban youth who prefer branded products. IOCL has however, introduced it at some of its KisanSevaKendras in rural areas with positive feedback. A deeper segmentation even in the branded fuel users can be done, as shown by Hi-Speed which focuses on Green Technology.

Branding a commodity is a very tough proposition and once a company sets out on the road, it has to keep investing to build on the brand else it is sure to lose consumers mindspace. Of all the brands reviewed here, only Speed has had a continued association with a well-known brand ambassador and stands out with a regularly updated microsite.

With the Web 2.0 being driven by social networking, it is disheartening to see no activity on this front by any of the brands. Not only could they be important touchpoints for connecting with the customer, they might as well be used for inventory management and faster complaint redressal.

Considering the fact that most of the buying in this category is need-based and not impulse, the question whether the ‘Branded Fuels’ are anything more than commodities must be answered by the OMCs honestly.

Gearing up
International petroleum companies like Shell and even Indian ones like Reliance and Essar are waiting for a more deregulated market to re-enter. Before the private players had to exit the last time, they had resulted in an erosion of about 10 per cent in the market share of the public sector companies. If the OMCs want to play Round Two, they would have to pull up their act together.

The three things which need to be looked at with maximum priority are:
Believing in their brands and investing to build on the existing identity
Quantitative proof of claims made to build trust
An Integrated Media Communications plan to leverage all forms of media relevant
Branding a product can never be done away with a day’s work. What has been built must be maintained and taken care of, else ultimately they will only add to the long list of dead brands.

Absurdity in Advertising: The New Advertising Mantra?

Sabyasachi Ghosh & Yatindra Vijayvargiya | FMS, Delhi
Remember the last time you watched a potato wafers advertisement? Which one of them do you remember the most? Is it Lays, Uncle Chips or Bingo? An astonishing 90% of the respondent to this question confirmed Bingo. Welcome to the world of Absurdity in Advertisement.

Absurdity in advertisement is the new advertising mantra that has been practiced for long in the west but has now found its presence in Indian ad space. Absurdity has not only been able to capture eye balls during the commercial, but also has led to the Top of the Mind (TOM) recall of the product. This form of advertisement is very much beneficial and effective in introduction of a new product in a cluttered market space. Any marketing mix can either play around its Product, Price and Place or rely on promotion if it is similar to competitors on the other three parameters. Promotion is the key and absurdity in advertisement is the differentiator. But will it work always? We will take a deeper look into it.

Today, the influence of absurdity is not only bound to the limits of advertisement, but also extends to cinemas. Absurd advertisements create ambiguity by juxtaposing incongruous visual and verbal elements in sometimes humorous vignettes. By its nature, absurdity can be humorous or perhaps even pernicious and sinister. Absurdity can emerge from many illogical relationships that may result from the use of surrealism, anthropomorphism, allegory, humor and hyperbole.

Absurdity in advertisement is mainly defined in 4 ways:
a) Surrealism
b) Anthropomorphism
c) Allegory
d) Hyperbole

Each of these avenues has been exploited successfully by the advertisers. Whether it is the use of mix of animation and reality in the Sunfeast ads by ITC that made good use of surrealism or be it the Mr. Moneywiz of Moneycontrol.com that uses Anthropomorphism to connect a human with non-human.

The Hutch and later Vodafone pug and even the latest Zoozoos are a classic example of how allegory was used to convey a message.

Hyperbole, gross exaggeration to put across a point, has been the signature advertising campaign of brands like Happydent.

While gathering attention is the prime reason for this format of advertisement, it may also be a good way to send a reminder to the consumer that the brand still exists!
One conclusion that can be mistakenly drawn from all the above given statements is that absurdity is a sure shot success formula for marketing any product which is to be introduced in a cluttered market segment. Care should be taken to not reach this conclusion.

Absurdity works best for low involvement products but should not be attempted for high involvement products. Low involvement products are basically top of the mind recall products and the customer is usually not very involved with the brand and is not expected to make huge investment either in terms of time or money to acquire the product. Absurdity in advertisement cannot be used for products demanding high involvement because of these products are bought after a thorough analysis and are sold mainly based on the features and not an appealing advertisement.

Absurdity has been instrumental in creating “brand recall” for new products like Bingo wafers and Happydent chewing gums in their respective cluttered markets.Absurdity is a boon for the advertisers when there is repositioning, change in the mood of the brand, when nothing rational needs to be conveyed or simply to entertain consumers.

The Way forward
The way forward for absurdity in advertisement is bright. With the increased competition in various categories like confectionaries, snacks, beverages and cookies, we can expect absurd advertisements to create a good market for products in these highly competitive markets. Absurdity in advertisement is definitely the new age mantra for the advertisers and is expected to open new avenues of creating brand awareness and product recall, making the job of advertisers way easier.

Leveraging Goodwill: Marico's Kaya

BhawnaSajwani | Welingkar,Mumbai

Brand diversification is a curial decision as it can lead to make or kill a brand. Brand dilution is often hazardous for the entire spectrum of products but it seems Marico knows the formula to lead. Marico’s “uncommon sense” shaped into a skin care centre, not into mundane beauty parlours. ‘Kaya Skin Clinic’ aided Marico to diversify from products to services.

Parent Brand
Marico markets well-known brands such as Parachute, Saffola, Hair & Care, Shanti, Mediker and Revive. This completely product oriented company has leveraged its product-led consumer insight into consumer insight for services. In 2002, Marico Industries ventured into skin care services.

Kaya Skin Clinic
For years, Harsh Mariwala, the Chairman and Managing director of Marico Industries, wanted to have a presence in the skincare business where several other FMCG companies were already present. But he was looking for the right product to enter the high-margin skincare segment. In late 2002, a New York-based company asked Mariwala if he would be interested in selling laser hair removal machines. Initially, Mariwala was not very keen because he felt the product could be commoditised easily. But what surfaced was the idea of a service offered around such machines. That was how the skincare business got identified; finally they scaled this idea into a chain of skin care clinics. From incubating the idea till execution, all was done within a year.

Widening the Horizons
Selling a product is like selling a hope but service gives the experience. Marico opted for blue ocean strategy, they took a decision to enter in the novel area of skin care service distinguishing from the overly crowed product market (Red ocean) .Kaya was designed to endow with holistic and customized result-oriented skincare solutions/treatments to its clients. Important facet was that their brand extension from products to skin care services was relevant to their core business. The move marked the FMCG major's foray into the branded services category, entering a nascent market untapped by other players.

Tapping the Trends
Marico had 50% of market share in hair oil segment, which made it a market leader in the category. Marico was trying to capture more market share by providing innovative products like Parachute Therapy, Parachute Lite, and Parachute Jasmine etc. But for their organic growth, they needed to look out of the fish pot .The annual audit report by Ernst & Young (2007 reports), Indian Spa & Wellness, estimated 110,000 Mn INR and growth at 25-30 per cent per annum. Indian markets were flooded with unorganized beauty parlours and few organized players like Lakme and L’Oreal. But, services provided were well-worn methods like painful waxing, threading etc. Sensing the hidden patterns of trends, Marico grabbed the opportunity and got the advantage of being the first movers in the market.

Winning Strategies
Marico just didn’t stop at the concept, but also wanted to make sure that their brand delivers. The biggest challenge for Kaya was to not only ensure customer satisfaction but also provide state of the art services as well as safety.

So, while the clinic's skin practitioners were trained for about 60 days, the 250-odd dermatologists had undergone at least 30 days of training. In fact, "skin practitioners" were required to be trained for a mandatory 500 hours before they were allowed to face a customer.

The next step then was to establish a standardized way of working, which is where the relevance of training, audit, timely solutions all comes in.
What followed later was customer awareness campaign, as a significant number of people were still unaware of cosmetic dermatology. Moreover, there was a taboo associated with using machines on skin.

Kaya came out with a 360 degree advertisement approach; where it heavily emphasized on digital media. It also introduced a digital campaign where key words could be linked from Google to the Kaya website. Moreover, dermatologists in the company responded to Tweets, Yahoo Q&A’s and live chats on the company's website (popularly known as Kaya Interactive). It had also launched a clinic group on social networking site Facebook.
Not just advertisements, Marico created awareness through celebrity endorsements and publicity in health and wellness magazine.

In India, Kaya faces competition from smaller neighborhood beauty parlors and smaller chains like VLCC. The small parlors have a better reach to local market in tier-1 as well tier-2 cities; which ensure a larger coverage but Kaya has its defined targets. Considering the fact that population they could not access is not their target; Kaya is much ahead of its competition.

Expansion Plans
Given the discretionary nature of consumer spending at Kaya, most of the growth during the quarter has come from new clinic expansion.
Started as a prototype clinic in Mumbai in September 2003, Kaya has grown at an unprecedented pace. Today, Kaya has 85 clinics across 26 cities in India and 13 clinics in the Middle East.
Diversifying and expanding at such a fast pace is making the roads for rivals difficult to enter into the same segment. During the year, Kaya clocked revenues of 1000 Mn INR. But more than its increasing contribution to group revenues, Kaya holds the promise of boosting the company’s bottom lines, thanks to its distinct service model.

Rest is History...
To boost its product revenue stream, Kaya began prototyping its “shop-in-shop” model through kiosks at malls. They are now also present in locations like Shoppers’ Stop, Hypercity and Lifestyle. Typically, kick-starting a Kaya a clinic takes 10-13 Mn INR (including technology investments and interiors) in a metro city.
The clinic breaks even in about nine months in a metro and takes a little bit longer in smaller cities.

Kaya attributes the success of the brand to two key factors. The first is its approach of offering solutions to consumers through the best technology available. It claims to possess over 20 new technologies in the Indian market. The second is its unique selling proposition of the real skin expert working towards making women look their beautiful best every day.
The graph above shows that Kaya contributes significantly to Marico’s Revenue mix. This tells the success story of Kaya!

Renovations and Innovations
Marico is incrementally evolving the Kaya with interesting concepts like “KAYA FOR MEN”. Men had become appearance-conscious and ‘Metro-Sexual’ men make the trends. KAYA FOR MEN has presented the concept that men need “what women want”!!

To capture the various occasions where appearance matters, Kaya has introduced packages like bridal package, hair care package, summer package and many more customized solutions.

Further enjoying the brand Kaya Marico has launched KAYA PRODUCTS in skin care segment. Kaya includes contribution from product sales, which accounts for ~13% of its revenues. Marico has further en-cashed the brand with KAYA LIFE, which provides weight management services.

To renovate itself, Kaya keeps on adding new machines and technology to provide complete solutions to its clients.

Future ahead
Kaya is at right place, in the right time. Marico’s strategy has been shaped into a perfect solution, which is working for well for the brand. But Kaya still has to penetrate in the market. Competitors are far behind but extraordinary customer service is the key as today’s customers are aware and negative ‘word of mouth’ can ruin the brand. However, this market is growing and Kaya has potential to become the cash cow for Marico!