Marketing Shift from Firm to Consumer

Venkatesh KG | Great Lakes Institute Of Management, Chennai

Marketing is shifting from mass communication to individual, one to one interaction with the integration of various digital technologies like SMAC. Also marketing strategy is shifting from product push to customer pull strategy. Digital marketing is picking up fast and intense market research is being resorted to by companies on their products to understand customers’ preferences and sentiments before targeting/positioning their products and services. Companies have started having their webpage in various social media platforms and are advertising via social media to reach to a wider segment of customers. Content management has become a crucial aspect in social media marketing as it is the content which delivers the right message to the end users. The number of competitors in each industry is increasing and each is following a different marketing strategy like

differentiated pricing, adding unique features to their products, providing value added services and positioning their products after evaluating the existing trends, expectations and assessing the distinct features in their competitors’ products and services. There are several instances where the strategy/market position has increased the brand proposition and a few of them have gone wrong

disrupting the performance of their brand in the market. I would like to cite a few specimen cases indicating the diverse issues involved:

Food & FMCG domain:

• McDonalds had never introduced vegetarian options in any nation. To cater to the Indian market, they have introduced vegetarian novelties like Alootiki/ paneer tikki burgers and maintain separate kitchen for veg and nonveg food

• Pizza Hut have customised their pizza to Indian market by introducing Indianised flavours like Tandoori paneer and paneer makhni amongst others

• Cornflakes is thinner in foreign nations than in India as foreigners have the tradition of consuming flakes with cold milk but in India, we consume with hot milk.Thinner cornflakes were getting reduced to porridge when mixed with hot milk. So they had to introduce thicker cornflakes in India

• Cadbury Dairy Milk was targeting only youth earlier. But when they positioned their product as a family product by engaging the popular Amitabh Bachchan in their advertisements, sales increased by more than 5%

• Chick shampoo of Cavincare targeted rural market by introducing sachets black in colour, having less quantity of shampoo to meet and satisfy and suite rural people’s sentiments and requirements

• Apple pricing strategy is skimming followed by penentration. They initially price their products high to target the set of customers who are willing to pay high and get the gadget at the earliest. The moment a new version is released, the previous version of the product cost is re-duced to target customers who are interested in purchasing their product at a lower price.

• News feed in social media is so designed such that customers get news feed on the products and services based on customers’ internet search history.

• In FMCG sector, companies package their products differently for rural and urban markets. For Rural markets, they target sales with smaller packaging and bright colours, while for urban markets,

they come up with larger packets in sober colours.

Retail domain:

 • Many players have come up with customer centric loyalty program, membership cards and competitive pricing strategy to enhance their market share

 • Based on earlier purchase patterns of customers for specific categories of products, select customers often get email and SMS alerts on special offers on their historically preferred products using SMAC technology

 • The product line-up in modern retail outlets are so designed to keep the essential items at the far end of the row so as to offer better visibility for optional products to end customers

Other Industries:

 • Nike, Airtel and Dell have introduced an interactive portal allowing their customers to customise their orders according to their respective requirements

 • Ericsson, when introduced its high-priced mobile phone in India during 1990s, it targeted the upper class folk by having their advertisement telecasted in a Five Star hotel favoured and frequented by the elite, also the ads had a classy look

As observed, products and services are becoming more and more customer-centric out of mandatory needs and necessities and the products are shifting from mass production to customised production to cater to individual customers’ choices. However there are instances where the strategies opted by some of them didn’t work because of improper assessment of customers’ choices and needs and insufficient marketing research.

 • Tata Nano priced at just rupees one lakh and equipped with all the basic features required for a car, they positioned it as the cheapest car in the world. This hurt the ego of the purchasing people and many of them were unwilling to purchase.So Tata could not achieve their targeted sales figure. Tata Motors, post the initial setback, has decided to upgrade the features and are now positioning it as an Ideal urban car.

 • McDonald’s “When the U.S. Wins, You win”: McDonald’s came out with a campaign to increase sales that if US wins in 1984 Olympics, the customers would win a “food item”. Gold medal meant Big Mac, silver medal meant fries and bronze a Coke. Soviet Union boycotted it that year, and the U.S. took home 174 medals, including 83 gold leading to unprecedented outgo of freebees. The result indicated that one should not strategize in an entity where the end-result is un-predictable

 • New blue coke: Because of high competition in the cola industry, Coke introduced sweeter blue coloured coke. However higher sweetness and blue colour associated with the edible items was not welcomed by customers. The reason for the failure was presumably portfolio misfit

 • Toilet to Tap: This deals with innovative waste-water recycling in Orange Country, California. Though this project was successful in providing water for irrigational purpose, it was not successful in drinking water segment though it was advertised as the President of the nation drinking this water. This was attributed to the psychological factor, the “yuck’ factor” among the people.

 Now many companies have started bringing customers into their organization to explain them the stories and also establishing customer advice panel for providing ongoing inputs for new product or service development.

Takeaway:

 • Once the product has matured, proper action has to be taken to assess and cater to the latent needs of customers and differentiation has to be conveyed properly

 • Sufficient time and money has to be invested on market research to understand the changing customer sentiments. It has to be done not only at one place, but across the target geographical locations. Based on favourable responses, new products can be launched, or existing products redesigned

• The products have to be marketed in such a way that by purchasing or using it the ego of consumers is not hit

• Customers now are relatively better informed and educated on products and services than before, due to the advent of technology and advertisements. Proper planning is vital and has to be done while developing new products so that the promised services match and excel the services provided by competitors

A customer-centric strategy can enable companies to understand the changing customer needs and the price customers are willing to pay, and consistently deliver on their promise to customers

Better assessment and better days!!

Future of Coffee Retail Chains in India

"After Starbucks with Tata, Dunkin Donuts is also entering Indian market. Will India be a success story for these coffee retail chains or is Indian market not big enough for all these players?"

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Lokesh Harnal, MDI Gurgaon

With over 170,000 coffee farms in India, cultivating nearly 900,000 acres of coffee trees, India is the 5th largest producer of coffee in the world, out of which 75% is exported. The current market for coffee in India is $ 160 million, making it the second most popular beverage, growing at an astronomical rate of 40% year-on-year. A favorable demography, growing economy, and increasing disposable income, the whopping 68% growth rate of Café Coffee Day and 36% growth rate of Barista, reinforce the success story India could and should witness in the industry of Organized Coffee chains.

The present Government policy permits a 51% investment in single-brand products, allowing for a congenial platform for leveraging of the synergies by both the International players with experience of retailing and the domestic players providing the premium arabica coffee beans (TATA Coffee) and roasting facilities. In addition to this, the collaboration to promote responsible agronomy practices, including training for local farmers, technicians and agronomists to improve their coffee-growing and milling skills, is a welcome practice.

The present production and domestic consumption make for a considerable difference in the demand and supply equation, favoring a potential capitalization by new entrants.
Moreover, the concept of coffee chains in India has been positioned around selling a much loved, cordial and welcoming ambience for youngsters to interact, hangout, spend soothing time amidst while providing coffee and scrumptious snacks.


Counter-view

Srikkant, IIMS

The coffee retail industry seems to have attracted a lot of interest over the last few years. The FDI inflow in to the ‘Tea and Coffee industry’ has increased from just 186mn in Jan 2010 to 460mn in Dec 2010 and the increase has been very steady. However, there are a lot of pitfalls with such a burgeoning investment spree on the industry.

According to Coffee day 54% of Indians still prefer tea, 17% prefer plain milk while only 13% of Indians prefer Coffee for a drink. Also, coffee is predominantly a south Indian drink where ‘filter coffee’ is the most preferred which none of the coffee retail chains provide. This choice of the coffee retail chains has further restricted the market potential.

Secondly, the target market of these retail chains is largely the ‘affluent youth’ in the upmarket. These retail chains have long ago moved from ‘product selling’ to ‘experience selling’. The value chain of the coffee industry is like this: Arabica grade coffee is valued at Rs. 142 per kg at production, exports yield a rate of Rs. 165 and Retail selling is at a rate of Rs. 260+. However, in a CCD, the average price of coffee which used 12-16gram of coffee at a cost of Rs.4 is Rs. 42. This kind of pricing means that all new entrants will only be competing in the upmarket leading only to increased competition.

Thirdly, fixed costs are extremely high and in most stores, just the rent eats up to 20% of the sales. A lot of these stores require extensive styling and lot of initial investment goes into the outlet design. This nature of the industry favours ‘price wars’ which is bound to affect the industry’s margins and pricing. It is clear that this stereotypic model of growth is not good enough to take in this kind of rapid investments and it is time the ‘Coffee retail’ industry looked at a different model of growth.

New Marketing Channels Driving The Retailers

Abheek Talukdar, Aswini. R | FMS

New Marketing Channels Driving The Retailers

Marketing has transcended a long way from marketing 1.0 to marketing 3.0, from being product centric to people centric to value centric. So have the various means and channels of reaching your customer. Earlier the customer, walked up to buy, now, the retailers reach out to them, and be present at the right time, right place and to the right people. This opens door to new channels of marketing, not disparate from the traditional methods but new parallel ones to support the traditional practices and enhance the brand presence.

Consumer Trends and New Brand Experience Expectation

Gone are the days when one could sell merely with convincing TV ads and celebrity endorsements. The consumers of today present a big challenge to the business. They lead a fast moving on-the-go life and are always Time starved. The science has made everything just a click-away for them, and people are now pro-technology unlike yesteryears when the society was resistant to any new technology. The tech-savvy customers now have access to ample information everywhere about everything. The web has now become an interactive platform; people not only get information but also share their experiences. This has increased the customer’s interconnectivity immensely. The retailers can’t hush any bad experiences or flawed products. The awareness about any product/service is so high that they are conscious and expect worthwhile value. Customers now want the special treatment and need to be feel like kings and queens. The need of the hour isn’t mass marketing rather a personalized experience is what is needed.

The New Set of Touch Points

The new channels powered by digital technology present the retailers with vast array of new touch-points for engaging with consumers and creating a differentiated brand experience.
New channels, such as mobile and social media, present retailers with new ways to connect with and engage the consumers. These new channels are not necessarily about driving transactions; instead, they enable retailers to transform the customer experience and engage with consumers more directly and in entirely new ways.

To successfully navigate these new channels requires retailers to:

• Understand their customers and each segment’s cross-channel needs and shopping habits
• Achieve brand alignment and consistency across channels to present one view of the retailer while tailoring experiences by channel where appropriate
• Understand how to leverage the strengths of each channel to create a better overall brand experience
• Drive loyalty and deliver a consistent brand experience by integrating front-end and back-end systems, data and services across all points of contact

Retailers, who engage with customers to provide a seamless, integrated brand experience across channels and meet customers’ expectations around transparency, personalization and collaboration, stand to reap significant benefits. Not only does the brand exposure of the retailers improve through customer touch-points; it helps retailers in increasing their revenue base due to increased traffic and loyalty of the retailers’ product, in turn improving the employee productivity and satisfaction.

The advantages of reaching customers by the use of newer channels are summarized.

• Revenue Boost: The quintessential element of any retailer is revenue generation. Through the use of innovative and customer focused channels, the increase in the number of customers will imperatively improve the balance sheets of any retailer.
• Traffic Opportunity: No retailer can improve their revenue without the increase of the number of customers. By providing ‘everywhere’ access and engaging in a 24/7 conversation with customers, traffic in all the channels in which the retailers performs in will increase boosting the revenue.
• Loyalty Increase: Customer loyalty is a tough thing to attain and by providing a seamless, personalized experience across all channels, retailers can maintain that loyalty by providing focused and value products.
• Employee Productivity and Customer Satisfaction Rise: Operating in different focused channels will better the employee productivity through increase of visibility in case of inventory, product info, critical tasks, long lines, business performance, etc. Focused products will indefinitely improve the customer service and satisfaction.

Instantly on using the 2D scan on the net, she is able to view the recipe, watch a cooking video of the chicken biryani, talks to a live expert about the cholesterol & fat level of the product and instantly receives a customer care call informing of the stores it is in.

The Changing Retail Experience Example: Mobile Marketing and Sales Support

The power of reaching the target customer using innovative channels can be seen from the following example. A certain housewife, Deepi on her way to the daily grocery notices a new ready-to-eat chicken biryani advertisement on the street and photographs the 2D Barcode attached.

After she is satisfied with the product and reads about the rave reviews on Twitter/Facebook and other social media sites, she goes to the store to buy the product. She scans her digital loyalty card at the retail store, which gives her discount schemes running in the store. The discount available through the advertisement is procured using her m-commerce mobile wallet, she pays the product and recieves a gift coupon from the store.

Finally, satisfied with the product, she rates the product on various social media websites. She also joins the facebook page and discusses the various recipes that she had tried. All in all, it is a win-win situation for both the customer and the retailer.

Whole Foods Market

With over 1.8 million followers on its account page and over 3,000 followers on twitter account, Whole Foods engage a 2-way dialogue with consumers about topics that are important to them – the environment, organic products, and product recommendations.

Missions App: The Mission App gives consumers an opportunity to explore new products, learn about healthy eating and engage in a conversation in their social networks. Consumers complete steps of varying difficulty and earn badges through their “Missions”. Users can access over 2,000 recipes, store information, store specials and a calendar of events for their local store and advice on cooking, nutrition, green living and food storage.

Target Corporation

It was the first retailer to offer the ability to scan a bar code directly from a mobile device at any store nationwide in the US and also initiated mobile coupons which let consumers redeem discount offers by scanning a 2D bar code at the point of sale.

Target customers can access their Target Mobile Gift Cards, view online assortments, check product availability and store locations, manage their Target gift registry and lists and browse the weekly ad all on their mobile phones. Target also offers mobile payment through a consumer’s mobile device.

Innovative Channel’s Indian examples

VOLKSWAGEN INDIA

The innovation in marketing channel hasn’t spared anyone, even the big automobile players like Volkswagen are introducing campaigns like ‘Innovations for everyone’ and ‘Think Blue’ to have a long term approach to building loyal community by being present across all major social media platforms. Volkswagen has cashed on the new feature of Linkedin, the company page where they have already received a commendable 2772 recommendations on their 7 listed car models. This could generate sales and bulk orders for them.

The Future of Reaching the Customer

Best Buy came up with a unique channel to give customers the ultimate experience. Their idea was of providing Mobile Point of Sale and Manager Dashboard on iPod Touch.
Employees in nearly 27 Best Buy stores can search for product information and check out customers using a mobile point-of-sale system. Every department has an oversized barcode plastered on the adjacent wall. Customers can scan the barcode by store’s mobile app and download coupons or advertisements on the handset. It helped in eliminating paperwork and cost involved in buying POS hardware.

Key Challenges to Retailers

Siloed Metrics: Major problem for all retailers is that customer information is spread across different systems driving a lack of knowledge on customer engagement with the brand across segments. The lack of common customer experience metrics becomes prominent in the view that many retailers need customer behavior information to understand market.
New Channels Require New Model: Nowadays, Retailers make the mistake of using every channel alike like Face book or YouTube end up being copies of the website. New channels require connecting with consumers in new ways and understanding how customers want to use each channel. Thus, a lack of channel differentiation demands a new channel model.

Platform Integration: Though technology like CRM and SAP has made it much easy for retailers to keep track of all the customer data, companies’ still face issues in integration of existing channels with newer channels.

Rapidly Evolving Technology: With advent of changing technology, adoption of marketing channels isn’t sufficient enough to deliver the one-to-one personalized experience which the retailer seeks to achieve.

Private Labels: From cheap substitutes to serious competition

Sumit Bedi, IIM B

Private labels are brands owned, merchandised and sold by retailers themselves. These can be categorized into store brands, store sub-brands & umbrella brands. They are also called in-store or own brands. Globally, private labels contribute 17% of retail sales with a growth of 5% per annum. International retailers like Wal-Mart of USA and Tesco of UK have 40% and 55% own label brands representation in their stores respectively. Private label penetration in the United Kingdom is close to 37 per cent currently, and is forecasted to exceed 40 per cent by 2011. In Germany private label has shot up from 12 per cent of sales to 34 per cent over the last decade.

Growth in India
The role of private labels is gaining significance in the developing markets too. In India there is a growing trend towards acceptance of private label brands and thus their penetration is on the rise especially in the apparel, consumer durables, home care and FMCG segments. For instance, Future Group has already tasted the success with its Tasty Treat brand which is just behind Frito Lay in the potato chips segment. Its Care Mate in the baby diaper segment has left behind Huggies in the in-store sales. Experts comment that when it comes to local tastes and preferences, private label brands have an advantage over national brands and this reflects in the increasing percentage share (as shown in the figure) of these goods in Indian retail chains.


Commercial Objectives behind Private Labels

Higher Margins
Private label goods are cheaper to produce than branded goods. Besides, due to the lack of advertising and marketing expenses they provide double advantage to the retailer when it comes to the profit margins. While majority of branded goods provide margins in the range of 6-12%, private label goods can offer margins up to 40%.
Stronger Customer Loyalty
As the private label offerings increase and the quality is assured, a high sense of loyalty is cultivated among its customer base. This customer loyalty is the result of an affinity with the retailer brand which implies that the development of private label brands can tangibly enhance the retailer’s brand itself. So in the long run, the private labels become an important tool for the retailer to establish its positioning and strategically attract the target customers to its outlet. Numerous studies have also shown that private label buyers are more store-loyal and not as easily influenced as brand buyers.

Differentiation
Through private labels, retailers get a chance to bring in unique products in their supply chains that have not been branded before. So if a retailer can cater to the local tastes and preferences of the consumers well by top quality private labels, they can differentiate themselves from other stores and become destination stores. In effect, it’s a win-win situation even for the producers who get a chance to display their produce.


Freedom with Pricing Strategy
A retailer promoting a private label has the added benefit of greater freedom to play with pricing strategies, as a result of which, these are cheaper than brand leaders. For instance, in USA, some private labels are 25 percent cheaper than leading brands. In addition, since it is an own private label, the retailer has the freedom to create a marketing strategy and have more control over stock inventory. This command in all the stages that a product goes through, gives the retailer high flexibility in pricing.

Implications for Indian Retail Marketers
Identify the Needs of Your Customer Base
The private label should provide the required functional as well as emotional attributes and benefits. Keeping in mind that it already has a price advantage, it should take into account the needs that are important to consumers and offer a reliable point of difference. This furthers its promise that has already been informed by the competition, confirming its category membership, but it is clearly not a me-too expression.

Leverage the Consumer Connection
A successful private label has the capacity to strike a chord with consumers in multiple categories of products. Unlike national brands, private labels are offered exclusively through a specific retailer and can easily surpass specific categories because they have a consumer focus rather than a product focus as their brand foundation. These brands instigate trustworthiness and allegiance from their loyal consumers so that the parent store becomes their conscious and obvious retail source for certain categories. Moreover, these categories may be the reason that consumers are initially drawn into the store, but once they get there, the store also has the prospect of encouraging them to spend more on impulse purchases. Therefore, the private labels not only reinforce enduring loyalty and positive feelings for the retail brand, they also enable the retailer to capture a more significant share of the consumers’ mind space and hence, wallet than a national brand.

Communicate at the Point Of Sale
Retailers need to be more cognizant of the significance of the communication with the consumer at the point of sale. They own the canvas that consumers shop on and thus, through store environments, in-store messaging, merchandising systems, and packaging as well as external messaging like circulars, catalogs and advertising in a congruent manner, the retailer is able to create a lasting impression in-store, at shelf and at the time of purchase. Retailers need to make sure that they send out the right message at these interaction points. Moreover, many of these messages do not require revolutionary change for extended periods of time, so they perpetuate a persuasive branded voice and don’t require constant investment from retailers.

Collaborative Category Management
To maximize the efficiencies of product flow throughout the distribution system, a retailer must be aligned with the supplier. The relationship between the retailer and trade should become increasingly about cooperation and lesser about negotiations on price. This will ensure that the category as a whole remains profitable and emotionally appealing to the customer resulting in both private label and branded goods as winners. They can collaborate in understanding and deciding how to optimize the product lines and Stock Keeping Units (SKUs) that will progress the category definition as a whole and determine Plano grams and shelf allocations to rally the greatest degree of category interest and excitement from consumers.

Manage Brand Architecture the Right Way
Brand architecture is a critical consideration for private label marketing. Once the brand proposition solidifies, the brand architecture strategy enables decision makers to promote this promise at the store level in order to stimulate a sense of familiarity, recognition and trust. Private labels have broader set of aisles than national brands making it all the more important to differentiate their attributes and benefits on an aisle; category and product basis. So the implication for the retailer is to strike the right balance of similarities and differences with brand messaging and offerings.

The growth of private labels in the Indian retail industry is inevitable but retailers do need to keep a few things in mind. Promotion of own label and allocation of large shelf space at the expense of well-marketed national brands can depress the overall size and value of the category. On the other hand, joining hands with them and following principles of category management can create a win-win situation for both.

Retailers need to realize the importance of consistent brand message and should ensure that the product quality backs it well. Moreover, when used as an umbrella brand, the brand portfolio should be managed properly as to avoid any negative impact on the store brand. To conclude it is quite evident that as the Indian retail industry consolidates over next decade, retailers will look to differentiate among themselves and private labels will form a highly significant part of their strategies.