Rise of the Indian FMCG Company

Adithya Nagarajan, Esha Arora, Kaushik Subramaian & Varshik Nimmagadda | IIM Shillong

The Rise of the Indian FMCG Company

Nearly twenty years ago the Indian government undertook a series of policies that would change the face of the country. The government opened up a tottering socialist economy to the greater world and liberalized its policies for industry. The critics to this step were numerous and one point in particular always figured in the arguments that they made. The critics were nearly unanimous that the insular Indian industry, nurtured on licences and trade quotas would soon be overwhelmed by the advent of the free market. And one industry in particular was big on this list i.e. the Indian FMCG industry. It was widely expected that the advent of global FMCG majors with their expertise, international brands and experience of competing in the world markets would sound the death knell for the nascent Indian FMCG industry.
But the Indian FMCG players seem intent on proving all these predictions wrong. For twenty years they held on even as the major markets were taken over by the likes of P&G & Coca-cola. They took the time to understand the dynamics of competition in this new era and changed their strategies and processes to be more relevant to the Indian consumer and now they seem to be intent on taking back their lost turf. From processed foods to milk products to soaps the Indian players seem to be on a comeback trail. This cover story attempts to chronicle the rise of this new brave breed of Indian FMCGs from the viewpoint of three companies that seem to be on the forefront of this revolution.
The interesting part of this entire story is that these companies have followed entirely different strategies to counter the bigger players. Players like Marico have successfully utilized the blue ocean strategy to establish a first mover advantage in fields like skin care via the Kaya skin clinics while Godrej has successfully leveraged its brand name and distribution strength to play itself into a position of strength in the rural market for soaps. One thing in common seems to be a new found understanding of the Indian consumer. The Indian companies are putting great emphasis on understanding the needs of the Indian consumers and tailoring their products to those needs. This has helped some of them to discover niches in the market that have been untapped by the MNCs and have helped them to avoid competition. For example Emami’s ayurvedic formulations for its products like Fair and Handsome have helped to stand out in the marketplace and differentiate itself.
If the avoidance of completion by finding new differentiation strategies seems to be the forte of some of the players others like GCPL and Dabur are competing with the global majors head-on. Dabur particularly is in a difficult industry with its oral care products with the market leader i.e. Colgate commanding a huge market share of 53 percent compared to Dabur’s 13 percent. It has managed to capture a significant percentage of the fast growing rural market by basing its positioning on herbal strategy.
These are exciting times in the FMCG industry. The Indian players seem to have stolen a march over their bigger rivals with their unique understanding of the Indian consumer and different positioning but it will not be long before the bigger players react to this challenge. The next four years can prove to be a trial by fire for these Indian majors as they fight to sustain the gains they have made and capture markets that have been fortresses of the multinationals.

Marico

The uncommon sense that Marico believes in, has brought about radical results for the company. Led by Harish Mariwala, the Company enjoys leadership positions in most of the markets it is present in- viz. Coconut Oil, Hair Oils, Anti-lice Treatment, Premium Refined Edible Oils, Fabric Care etc.
Be it the convenient packaging for Parachute from the erstwhile tin cans of coconut oil, the introduction of heart care with Saffola in the edible oil market, or the starching process branded and eased by Revive, Marico’s innovation has helped it be the pioneer, stay consumer centric and sustain a firm hold in the market space.
Hair Oil market:
With Parachute and Nihar, Marico holds more than 50% market share in the branded hair oil segment. It enjoys over 21% share of the 3000 crore hair oil segment (composed of coconut hair oil, amla, light, cooling and tonics and gels). In the coconut oil market, Parachute itself controls about 50% share of the market.
In the coconut hair oil market they have capitalised on the fact that consumers test quality based on the oil’s aroma. From showing the concept of handpicking coconuts from Kerala, to their ‘gorgeous hamesha’ concept of celebrating womanhood, the brand has taken numerous leaps. The innovative packaging helps the brand address changing consumer needs.
Edible Oil market:
In the premium refined edible oil market, Marico’s Saffola faces fierce competition from Sundrop in terms of volume, with the former holding close to 50% share.
Safolla’s message has been clear. By showcasing mild fear, its commercials aim to introduce heart care through the edible oil. Its approach is preventive. The ‘kal se’ campaign brought a quantum leap in sales while the ‘thief’ ad, and ‘dil ka haal’ reinforced the same idea to slightly varying targets- ranging from heart patients to the 30 year old man, who is likely to face heart problems with the kind of lifestyle he is leading. The ‘Prayaschit’/repent ad (guilt after indulgence in food) directly targets the housewife who is, most often, the buyer in this case.
Having established Saffola as a healthcare product, Marico continues to leverage its positioning into segments like packaged wheat flour, rice, and breakfast cereals with a strong health quotient.
Innovation:
The spirit of innovation coupled with the ‘uncommon sense’ in Marico is evident in its unique product designs. This covers the product idea, the packaging as well as the product delivery. Innovation and uniqueness encompasses Saffola’s range of functional foods, Parachute Therapie (hair fall reduction through hair oil), their Kaya product range, Parachute Advansed Night Repair Crème, a bottle heater for Parachute Hot Champi, Parachute massager for the working woman.


Overseas Presence
In addition to its presence in the domestic market, Marico has been strategic in acquiring some international brands and leveraging its presence in foreign countries in two ways- it not only taps newer markets but also strengthens its existing portfolios.
For instance, in January 2010, the Malaysian unit of Marico bought the hair styling brand ‘Code 10’ from Colgate Palmolive Company marking Marico’s entry in Malaysian hair styling market, at the same time growing its strengths in hair creams and hair gels market.
In May 2010, Kaya acquired the aesthetics business of the Singapore based Derma Rx. The deal, while stitching together an additional turnover of about 50 crores and 37000 customers, brings with itself access to an advanced range of skin care products for Kaya. This is complemented by access a network of suppliers of beauty products from the developed nations.
In a similar case, the South Africa subsidiary of Marico acquired the healthcare brand Ingwe in August 2010. First, the brand goes well with Marico SA portfolio. Second, the acquisition strengthens the company's distribution reach, particularly with independent trade and step up its growth momentum.
Marico’s international business has shown healthy contribution to its revenues- 23% of the group's turnover in 2009-10. Moreover, thanks to such smart buys, the international business witnessed a 29% sales growth during the June’10 quarter, when its Indian sales posted a relatively meagre 6.8% rise over the same period a year ago.
Way Forward
While a brand like Saffola may be priced for slightly higher income groups, Parachute cuts across different income groups and yet has a premium appeal. In the hair oil segment, the company has attempted to tackle the unorganized segment through low-cost and small-unit packs.
It also plans to make it bigger in the cool oil segment (over 500 crore market) through its recent launches- Parachute Advanced Cooling Oil and Nihar Naturals Cooling Oil.
In near future, Marico plans to enter rural markets to tap their potential in a much bigger way. It has already started adding to its distribution in areas of Madhya Pradesh, Maharashtra and Karnataka. It continues to foray beyond the prominent towns and districts, not only in terms of its distribution but also to understand the rural needs and tune its portfolio to the same.
On the international front, considering the recent developments in terms of acquisitions, it can be noted that the company is attempting to streamline its manufacturing base and at the same time market its Indian brands through the newly acquired distribution system. Marico is likely to continue with similar strategic acquisitions adding to its revenue base simultaneously.
In terms of revenues, Marico aims to clock in Rs 2500 crore turnover for the financial year 2010. This shall be a 9% rise on its last year’s returns, inspite of food inflation and weak monsoons.

GCPL

Picture this: Just about a decade earlier you set aside your hard earned money to invest in FMCG stocks. After examining the nitty gritties on the Dalal street, you decide to stay clear of the High fliers, Hindustan Unilever(HUL) and Procter and Gamble(P&G) and decide to bet on GCPL(Godrej Consumer Products Limited). A decade later; you laugh all the way to the bank. What was ` 10 in 2001 amounts to ` 378 today. GCPL , the consumer products wing of the $2.1 billion Godrej group is well and truly making it big in the FMCG space. The Adi Godrej headed company operates primarily in the Home care and personal hygiene categories.

Rural focus:

GCPL’s efficient penetration of the Indian Market, especially the rural consumer base deserves special mention. Hair dyes and Hennas which were once considered luxuries in rural households are everyday products now. And GCPL has been instrumental in bringing about this metamorphosis through its ambitious rural expansion project Dharti, which was launched in early 2009. Beefing up an enviable distribution network that spans 50,000 plus villages and 8000 small towns, the company has ensured that almost half its revenues come from the rural areas of the country.

GCPL is second only to Hindustan Unilever (HUL) in manufacturing bath soaps. Its Godrej No:1 brand is the best selling soap in the Grade-1 category. Apart from this, it’s impressive array of Brands also include Cinthol and a host of exciting Hair care products. The Core competency of Godrej has been its ability to successfully create, communicate and deliver a portfolio of value brands to the huge segment of cost conscious customers. Even in times of recession the company decided not to raise prices and successfully managed rising commodity prices through efficient cost management and squeezing out efficiencies from its supply chain. It tailored the size of the offering and not the product as such, and introduced them at price points that the customers could afford.

Innovative promotions:

GCPL innovated and customized its Communication and promotional strategies in accordance with its goal. Shunning satellite channels, GCPL decided to promote its offerings on Doordarshan, All India Radio, local publications and regional TV channels. For its hair colour products, GCPL depended more on word of mouth publicity. It engaged around 50,000 barbers spread across 9 states in a Co-branding exercise. GCPL provided them with grooming kits in exchange for prominent display of its logos in the saloons. Since most people turn to their hair dresser for advice, it made perfect sense to influence the influencer.

International Strategy:

Another striking aspect of GCPL’s success story has been its aggressive acquisition drive. In the past few months, GCPL has announced 5 acquisitions: Indonesia-based Megasari Makmur group and its subsidiary, the remaining shares of Godrej Sara Lee, Nigeria-based Tura Group, and the Latin American based groups Issue and Argencos. It has envisioned a three-by-three strategy for its international operations: targeting the three continents of the developing world - Africa, Asia and Latin America - and in three categories - personal wash, home care and hair care. The decision to target emerging markets stems from the fact that they have demographic and behavioural profiles that are similar to that of India.

These three continents are now on a growth trajectory and the opportunities that they provide for the consumer products business are too lucrative to be missed. An additional incentive to invest in these markets can also be traced down to the fact that multinationals like Unilever, L’Oreal and Procter & Gamble don’t have a domineering presence which provides ample scope for the regional brands to grow. Also the acquisitions provide GCPL an opportunity to indulge in cross pollination of brands; bringing some brands into India and taking some brands to these markets.

The Road Ahead

The emerging market centric acquisition focus has strengthened GCPL’s brand portfolio by roping in strong brands like Good Knight and HIT which are among the fastest growing FMCG categories. Also by bringing in GCPL, Godrej Hershey and Godrej Sara Lee operationally into a single fold they can expect to achieve distribution synergies and develop pioneering supply chain solutions.
The increased scale of operations would fuel the pace of innovation in the existing portfolio and help leverage branding opportunities. The strong commitment that GCPL has to the Godrej Group's core values, ethics, employees and consumers will be instrumental for its success. Even though concerns may arise with regards to GCPL’s exposure to currency risk and its ability to ensure an appropriate cultural fit of acquired brands, it is well positioned to ride the growth wave. GCPL’s decision to venture into emerging markets may be a small step for the company, but it may well provide the fodder for Indian FMCG companies to take a giant leap in the near future.

Wipro Consumer Care Lighting Ltd.

Wipro Consumer Care and Lighting (WCCLG), a business unit of Wipro Limited, started with vegetable oil production in 1947 and has since then come a long way and established a profitable presence in the branded retail market. With a vast variety of products spanning soaps, baby care products, health and wellness, Wipro's products have bettered the lives of millions of consumers across India and global markets. It has been one of the fastest growing FMCG companies, both organically and through acquisitions.
They have just announced sales revenue of Rs 6410 million, which is 9% of the total revenues of Wipro Ltd. They reported an EBIT of Rs 807 million for the quarter ending 31st M arch 2010, which was an increase of 16% compared to the previous year’s same quarter. In addition to these impressive facts, WCCL plans to invest Rs. 800 million to augment its production capacity for products such as Glucovita, CFL’s, toilet soap etc.
What is WCCL doing right that they are coming off age in a splendid manner and standing their own against the much bigger and well entrenched FMCG companies.
Going Global
A mentioned earlier WCCL has grown through organic & inorganic ways. In 2007, WCCL acquired Unza Holdings Ltd, South East Asia’s leading Personal Care Company for Rs. 1010 crores. This was the largest acquisition in personal care segment by an Indian company and was expected to double Wipro’s FMCG revenue. Earlier Santoor became the third largest soap brand in India after Lux and Lifebuoy with a value of Rs 500 crores. Wipro had previously acquired Chandrika Soaps for Rs.31 crores and Glucovita for Rs.5 crores to expand its FMCG basket. This deal with Unza gave WCCL the expertise to sell products through big retail chains.
As a next step WCCL wished to leverage Unza’s presence in Nigeria and Egypt and tried to understand & exploit the potential of markets in East & West African countries.
Following the success of the Unza acquisition, in November 2009 acquired the personal care business of Yardley in the Asia, Middle East, Australasia and some African markets from Britain-based Lornamead group. The acquisition was worth Rs. 214 crores approximately. The 239-year-old Yardley provided offerings of personal care products including fragrances, bath and shower products and skin care.
Subsequently in July 2010, Wipro Yardley unveiled luxury soaps in India. They were launched in 5 fragrances namely Red Rose, English Rose, Jasmine, Sandalwood & English Lavender.By doing this WCCL was looking to introduce the world class heritage brand to Indian consumers and build up a brand loyalty.
Domestic Game Plan
Wipro Yardley’s 5 new fragrances performed extremely well and contributed 6% to WCCL’s quarterly revenue. And as a result of this, now WCCL has decided to enter tier-II cities with Wipro Yardley.
WCCL is also planning to expand the portfolio of its ayurvedic brand Chandrika. WCCL President Vineet Agarwal said the brand had done reasonably well during the quarter ended June 2010. “Under the Chandrika portfolio we are looking to introduce a bigger range of face washes which along with deodorants are sunrise categories,” he said.
The company is also planning to expand its skincare range under its flagship brand Santoor. Recently Santoor has launched another brand extension - Santoor Deodorant. Now WCCL already markets deodorants, soaps and talcum powder under the brand. What we can see is that Santoor is gradually becoming a personal care brand rather than just being limited to a soap brand. This 600+ crore brand was on a roll last year becoming one of the largest selling soap brands in India. It uses only modern trade channels to market its skincare range. Also thier glucose powder Glucovita and artificial sweetener Sweet ‘n’ Healthy were rolled out nationally post a test-marketing phase.
Recently WCCL has launched LED rechargeable lanterns in 3 configurations namely, Solar, Rechargeable and Dry cell. The low power consumption of LED ensures that they give a backup of up to 25 hours. They would be initially launched in south India, U.P and Punjab.
Path Ahead
From the above stated facts one thing is clear. WCCL are on a roll solely due to the reason that they had a vision and they made sure they stuck to it. They decided to go in for a global strategy by way of a number of international acquisitions which not only granted them to access to international markets but also helped them in learning and gaining expertise.
And at the same time they had sound strategies to face the competition in the domestic market, be it pricing or the distribution or their brand launches and as a result of which we are able to see the success of the Santoor & Yardley brands.
The future definitely looks bright and the top management of WCCL maintain that they would continue to be on the lookout for potential companies they could acquire and benefit from and at the same time they have decided to stay focussed on the emerging markets and give the MNC’s a run for their money.

Is Bajaj Auto's decision to drop the Bajaj name from Pulsar & Discover bikes a wise one?

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Maruthi G | IIM Shillong

“FAT BOB”, “SOFTAIL”, “FAT BOY”, “SUPERLOW”….do these ring any bells with you? Hint: These are super bikes or motorcycles as they are called as. Stop cursing me! These apparently derisive adjectives are indeed for names of motorcycles. This is what happens when I drop the all important prefix to these names…HARLEY-DAVIDSON! Pat yourselves on the back magnanimously if you had guessed it right without this prefix! But if this prefix was so very significant why would BAJAJ decide to do away with it and call that their new branding strategy.



When BAJAJ hazards the move of dropping the sacred prefix once and for all from its two wheelers, it is not without foresight! Two wheelers sans BAJAJ means Pulsar and Discover sans BAJAJ as these constitute 70% of their sales. This move wasn’t meant for India at all in the first place. They must be kidding if they were to tell me or for that matter any Indian customer that we would stop seeing Pulsar and Discover as from BAJAJ. From the stats shown above it should not take you long to figure out that they sell almost every third bike to a foreign market as exports! The fact is that Pulsar and Discover are brands looming larger than what anybody could have possibly imagined. The way I see it these could very well be the first Indian two wheeler brands, especially Pulsar, which could rule foreign markets as well. And it is only but rational that BAJAJ tries to build these as global brands deprived of Indian-ness. But what indeed is surprising is the timing of their move. Considering that they started their experimentation in advertisements nearly a year ago I am only happy that they did not wait for any propitious omen!

Counter-view

Amlan Mitra | SIMSR Mumbai

What comes to your mind when you hear the term “Hamara Bajaj”? Your answer probably is the 90’s advertisement that sold scooters to the middle class and instilled in them a pride to own something that personified the independent, self sufficient Indian.
Bajaj has been synonymous with the two and three wheeler industry for the past sixty years. The brand equity of Bajaj is the envy of many an Indian company. So when managing director, Rajiv Bajaj’s decision to drop the name ‘Bajaj’ from their popular auto products, Pulsar and Discover hit the news, there was understandable noise.
Mr. Bajaj would need to prove how the concept of cannibalizing the name that the company has grown with will help achieve customer confidence. There are many contradictions to his claim that the dilution of the ‘Bajaj’ brand in other sectors like insurance and electricals works against mentioning it with auto products. General Electric has its footprint in finance, consumer electronics, healthcare etc. Tata is inundated in sectors including steel, motors and information technology. Although these companies have been around for decades, they are still able to project themselves as contemporary and appealing to the eyes of the 21st century consumer.
The most important asset of a company is its customers’ trust. It is important for the management to lead by example and show faith in its brand. Today’s prospective clientele for Bajaj might be westernised and not fully aware of their earlier dominance. But if marketed right, it could attract them by resurrecting its brand power with modern communication strategies. A strong Indian brand associated with an impeccable product will stand the test of time as compared to a shiny new faceless product which is yet to connect with most of the country.

Undercover Marketing: The Changing Trend

Ekta, Swati Gupta | NMIMS UNIVERSITY, Mumbai

Ever wondered why you need a popcorn bucket and cold drink to enjoy a movie be it theatre or your home entertainment system. Make no mistake to believe that it’s a new trendy culture followed by us. This behavior was instilled in our sub-conscious in 1950s by Coca-cola, Morton Salt and various individual popcorn companies’ campaign in the USA movie theatres. A single frame saying “Eat Popcorn” was inserted / spliced into film reels and, you guessed it, popcorn sales went shooting up without anyone having any conscious-level sense of where the urge to eat popcorn came from. This marketing incognito is popularly known as Stealth Marketing or Undercover Marketing in which an audience is not aware that they are being marketed to.
What is it? Undercover marketing is a form of marketing where a consumer is unaware that he is been introduced to or marketed a product. An actor or a socially adept person is hired by a marketing agency to highlight the positive features of a product. He usually goes to a public place like a bar or a shopping mall or even a social networking site to carry out his undercover mission. People have no inclination of his intention. It could be a person at Twitter talking about the latest gadget he received. Or it could be an innocent looking outsider in a famous tourist spot asking you to take a photo from his latest camera.
A consumer has no inkling of his intention to market the product and is impressed by the new latest technology gadget he chances upon. He uses the product and moves on however the positive image of the brand still remains in his mind. It might induce him to buy the product himself or talk to ten more people about it like in case of the electronic gadget.
It’s differently productive: This form of marketing is believed to be more effective .Customers trust it more as they mostly have an one to one interaction and touch-feel the product they are raving about. Also they take it as a moral duty to spread good word about the product they were introduced to. It has better recall value too. It’s a far cry from the conventional media where the clutter of so many products makes you a prey to very short term retention.
The beginning: Stealth marketing began in media by cigarette companies in USA where its undercover agents became the high profile actors and celebrities like James Dean, Frank Sinatra, and Marilyn Monroe. They were shown puffing on a cigarette as if it were the classy, chic thing to do thereby attacking the subconscious consumer behavior of the movie fans. However the campaign later had to be curbed by the government for environment and health reasons.
Evolution:
• Apple has redefined modern undercover marketing with its ubiquitous product placement strategy. Which movie or TV show do you see today that does not use an Apple product be it a Mac Book Pro on the desk or an IPhone. Practically every person in a movie or television show is using an MP3 player or an Ipod. Apple products owe their popularity largely to their efficient implementation of stealth marketing through major media outlets in collaboration with effective branding of their products while attaching aspects of popular modern cultural trend to them.
• The glaring signs of undercover marketing can be seen in the lyrics and music videos of the rap music which are responsible for the promotion of variety of brands of drinks like Courvoisier, Hennessey, Crystal and many more. The alcohol is now identified with partying and good time and of course rap music.
• Undercover marketing has very low financial risk requiring lesser investment and better payoff. This form of marketing is especially useful in tobacco and alcohol industry where customers do not prefer above the line media advertising anymore. Freedom Tobacco went undercover when it wanted to market Legal, their new brand of cigarettes and did not have a big budget. The actors hired were made to sit at bars with a package of cigarettes on the table. The packets were kept open; they looked full, and attracted attention from the bystanders who would want to borrow a cigarette from the actor.
• A similar thing happened with Soulkool operatives when they went undercover on the Internet, to promote the movie “Cowboy Bebop,” an animated feature. Soulkool employees, all of them barely in their 20s, boost the promotion by flooding Internet chat rooms and message boards with rave reviews for the movie. The actors got small rewards in the form of t-shirts and posters.
• Online implementation of undercover marketing is also possible wherein a central site of the product will be created with a number of network sites all hinting towards the better features of the product of the main site. Somewhere along the lines of what Scion had done as its undercover marketing strategy. One model used to be available outside the famous events and people were allowed to test drive with no suggestion to buy the product, only its features were projected. The quality of product and word-of-mouth sells the product.
Backlash: As we have seen above, undercover marketing leads to other form of promotion like buzz marketing, viral marketing and word-of-mouth promotions which leads to a larger reach of the promotional strategy with use of very limited resources. However this form of marketing carries the high risk of backlash too. If customers find out that they have been cheated or marketed a product without their consent it often becomes an ego issue. This happened with Sony Zipatone. Zipatone engaged in a stealth marketing campaign, but it was quickly detected by the internet community. Sony immediately experienced backlash from video game enthusiasts. Their advertising campaign was perceived by the community to be shallow enough that it insulted Sony’s target audience by implying that they were shallow enough to fall for it.
Malcolm Gladwell, who wrote about such things in his book, “The Tipping Point,” thinks undercover marketing is a bit of a con game: “Well, there’s an element, obviously, of deception involved that I don’t think is the case in conventional advertising. Conventional advertising is about trying to charm us or trying to persuade us. But it’s not usually about trying to trick us. And it’s the trickery part, I think, that makes this different”

The Rising Sun: Bank of Baroda

Arjun Verma, Parul, Anit Roy | IIFT, New Delhi

“I think the Sun is a very respected symbol and calling it the Baroda Sun created a sense of pride in people. In fact, we went to the extent of branding the Sun itself” These words were said by none other than Dr. Anil K Khandelwal, Chairman & Managing Director, Bank of Baroda in 2006. Since then, Bank of Baroda has positioned itself as the “India’s International Bank” with a rising sun as its logo. While, a number of the visible components of the banks promotion strategy can be easily assessed for the targeted segment and the value proposition that it wants to propose to the customer base, its marketing & branding strategies can be analysed on the basis of the following points:

1) Brand Ambassador -

It initially had India’s former cricket team captain- Rahul Dravid as its brand ambassador (2004-07). As an icon, Rahul Dravid epitomized stability, sincerity and substance which in a way complemented to the Bank of Baroda’s brand image.

2) Expansion -

Bank of Baroda has established its operations in Maldives, Sri Lanka, Singapore, UAE, Yemen, Russia, Kenya, China, Malaysia, Thailand and many other countries around the globe. Rapid integration of business with the technologies through core banking solutions, i-banking, and host of other facilities has established Bank of Baroda as the foremost PSU bank in the country.

3) Positioning –

It is the fourth largest bank in India and consists of 2.5 crore customers. Bank’s latest marketing initiatives are aimed at positioning it as a financial service provider with “value proposition” and “market-driven” being the keywords. The bank has rolled out branches far and wide across the country to distribute an impressive assortment of financial products to its heterogeneous customer base.

4) Business Lines -

The bank has divided its operations in 6 distinct business lines- Corporate Financial Services, Personal Financial Services, Business Services, Treasury, International Operations and Rural Banking and is aggressively focusing on becoming No. 1 in each of these segments
A schematic representation of the banks marketing strategy is as follows:





5) Publicity –

To build its brand equity, the bank has organized hosts of seminars nationally and internationally- latest being Basel II. Bank has actively managed its public relations through media.

6) Customer Focus –

The bank has built its brand around superior customer services and international focus which are also the point of differentiation of the bank from other PSU banks.

7) Recent Marketing Initiatives –

• Communication Campaigns : Shukriya Sau Salon Kaa and Baroda Next
• Use of Sybase 365 Marketing Information System
• Launch of Baroda Swarojgar Vikas Sansthan
• Next Gen Branch opened in Ahmedabad
• 50 city sales offices opened

8) Advertisements –

The advertising campaigns in both print and television media emphasize on the bright orange corporate colours of the bank and the ‘rising sun’. The key traits that the bank wants to highlight such as trust, competence and ease of use are reiterated in the numerous advertisements. The targeted consumer segment is clearly visible via the imagery in the advertisements like the middle-class Indian doing every-day chores, who now has numerous financial needs, not just plain and traditional banking. Another striking factor is the focus on the age segment beyond the 35-40 age bracket, people who are able easily identify with the PSU banking sector as a familiar entity. The promotion strategy of utilizing customer awareness sessions with the display of the standard corporate visuals like the bright logo and the tagline with stills from the supporting print and television advertisements is also heavily relied on. The banners around ATMs and bank branches are easily visible entities because of the corporate colors and themes chosen.

9) Promotions Abroad –

In the promotion strategy abroad, the targeted segment is clearly the Indian who is away from home. The promotion campaign for Bank of Baroda in UK centers around the target audience of expatriate Indians. The imagery associated with the campaign has the distinct feel of the Indian bank aiming to replicate the ease and trust of an Indian entity with the efficiency of a modern and global enterprise. The location of the advertisements especially outdoors, is on buses and billboards near stations and bus-stands, typically meant for the average middle-class customer used to travelling in public transport. The tag line of “India’s International Bank” also focus on the core aspect of Bank of Baroda being an Indian bank meant for the Indian community living abroad, looking for the familiarity of a known brand for a personalized service like banking.

In a short summarization, the marketing strategy of the Bank of Baroda focuses on the promotion of the values that the bank wants to portray to its customers (both prospective and current). It wants to be seen as an efficient organization meeting all the needs of the average middle-class customer in a warm and familiar setting. The accessibility of the bank in all corners and the adoption of the latest technology are some of the areas mentioned to create the feel of a bank which despite being national in origin, is up with the times and ready for the new-age customer’s demands.

Prof. Sunil Gupta, Head of Marketing Department, Harvard Business School

An interview with Professor Sunil Gupta, Head of Marketing Department, Harvard Business School

Markathon: An engineering degree from IIT Delhi, MBA from IIM Ahmedabad and PhD in Marketing from Columbia University to Edward W. Carter Professor of Business Administration and Head of the Marketing Department at Harvard Business School. Please share with us some insights and learning’s that have played a defining role in your journey.

Sunil Gupta: The journey from IIT Delhi to Harvard Busness School has been amazing. Soon after IIT, I joined IIMA and then worked for two years at HMM marketing Horlicks and Boost. However, during these two years I felt uncomfortable with the way marketing decisions were made. My marketing director was a scholar at heart and he encoraged me to read research articles to dig deeper and try new things at my job. This encouraged me to apply for my PhD at Columbia. At that time I was not sure what a PhD was all about. I assumed it was an advanced MBA that would allow me to become a consultant and I almost ended up being one. But my advisor convinced me to try academia for a few years and I am eternally thankful to him for this suggestion.

I am absolutely convinced that life is a series of coincidences and it does not follow a fixed plan. The trick is to be open-minded and take advantage of the opportunities when they arise. Based on my personal experience I encourage my students and my children to follow their passion rather than simply following the crowd. My basic belief is that it does not matter what you do so far as you are the best in that field.

Markathon: Your concept of Customer Lifetime Value (CLV) serves as the building block of Customer based valuation of a firm. It assumes the profit margins from a customer and the retention rate of customers of the firm to be constant. How applicable this model is for companies having a wide range of product categories and decreasing customer loyalty, especially in developing markets like India?

Sunil Gupta: My interest in Customer Lifetime Value (CLV) and customer-based valuation of firm developed during the height of the dot-com days in late 1990s. At that time many new economy companies like Amazon and eBay had sky high stock prices. It was hard for finance experts to value these firms based on traditional valuation methods like discounted cash flow or P/E ratio since there was no cash flow to discount and there was no earnings or E!

My basic premise in developing this approach was that firms generate cash flow and profits from selling products to customers. So if we can estimate the value of one customer of Amazon as, say $100, and we know that Amazon has 30 million customers, we know that the value of its current customer base is $3 billion. Next, we can build a model to forecast growth of Amazon’s customer base, and we can estimate the value of its future customer base. Add these two and we have a fairly good estimate of the firm value.

As a starting point for estimating these models I assumed constant margin and constant retention rate, which implies that if a firm has a retention rate of 90% then it will have 90% of its original customer base after year 1, 0.9*0.9 or 81% by end of year 2, and so on. In other words, it assumes an exponential decay in a customer cohort. Clearly this was a simplifying assumption. We later show that it is straightforward to build complexities in the model where margins and retention rates change over time. So the basic concept with some adjustments in the model and its underlying assumptions can be used for Indian companies as well.

Markathon: In your book “Managing Customers as Investments”, you have proposed to create a business profit tree for finding the key customer objectives as a part of customer-based planning exercise. Can you please elaborate the ways in which this profit tree helps in taking decisions on investment on new & existing customers?

Sunil Gupta: A medical analogy perhaps best illustrates the fundamental idea here. A doctor does not prescribe you a medicine unless he has run tests and diagnosed the root cause of the problem. Yet, I have seen that too often companies are quick to allocate their scarce resources to a specific task or program without identifying the key bottleneck or the main problem. The business profit tree is one simple way to break down the big problem into its potential causes.

Majority of the companies today reward their sales team on the basis of new customer accounts. But, your analysis shows customer retention to have the largest impact on customer profitability. What do you think is the reason for such company practices and how do you see the same changing in near future?

Part of this is cultural. We all like to win new territories, get new clients, gain market share and launch new products. It is more fun to do this than defend existing base or tinker with old products. The other major factor is that it is easy to measure and give credit for a new account to a sales person. It is much harder to say if a current customer stays with the company due to the efforts of the sales person or some other factors.

The only way to change this behavior is to design new metrics that companies can monitor and use to reward their managers and sales teams. In the U.S. many companies have already embarked on this journey and are building more comprehensive measurement tools and compensation systems. I should note two caveats. First, complex metrics and opaque reward systems can cause confusion and send mixed messages to the sales force. So one needs to be very careful in designing them. Second, a focus on customer acquisition is not necessarily bad in some situations. For example, in new and growing markets such as the mobile phone market in India, it is important to establish a strong presence by acquiring a large customer base quickly. The CLV concept simply suggests that it is also important to focus on the quality of customers you acquire, not just the number of customers.

Markathon: In your opinion should a company facilitate customer learning? And how does customer learning help in the long term retention of the customer?

Sunil Gupta: It is certainly good for a company to encourage customers to learn about its products and services. Research studies show that when users learn and get comfortable in navigating the web site of a company, such as Amazon, they are very reluctant to switch to a competing site even if it is a mouse click away.

It is also useful for companies to help customers undertsand their own usage behavior even if it has a short-term negative impact on a firm’s profits. Mobile phone carriers in the U.S. were notorious for profiting from consumers overage fees – fees that consumers pay when they use minutes over and above the free minutes allowed under their monthly mobile plan (most U.S. customers do not use pre-paid service). These fees result from consumers not being able to estimate their own monthly usage behavior accurately. However, when consumers get their monthly bill, they are outraged and switch carriers. Over time, mobile carriers realized that the short-term benefit from these fees is small compared to the cost of losing customers and the associated cost of acquiring new customers. So many companies now help customers learn and understand their own usage behavior to avoid such fees. In the end you need to strike a balance between the value you provide to customers and the profits you generate from them. If the equation tilts too much in one direction or the other, things start going wrong.

Markathon: In your opinion are differentiated pricing strategies sustainable in the long-term and do they provide a source of competitive advantage to a company?

Sunil Gupta: Absolutely. Differentiated pricing or charging different prices to different customers for the same or slightly different products requires a deep understanding of customers, their needs and their willingness to pay. Airlines is one of the prime examples of such price discrimination. One study found that the price of a Coke bottle varied by as much as 3 times in the same city on the same day depending on where it was sold. Interstingly, the price was higher at a vending machine placed at the entrance of a train station compared to a vending machine placed at the exit point of the station. Companies that design software or information products usually build full version of their product first and then deliberately disable some functions (e.g., student version of a software) to sell it at a cheaper price.

Current technology allows companies to get more and more information about customers that allows them to customize products and services to individual needs and therefore price its service differentially. The competitive advantage to firms will therefore come from a continuous and better understanding of customers.

Markathon: In your article on “A Model of Consumer Learning for Service Quality and Usage”, you argue that the customers make most of their learning in the first few service encounters and therefore these needs to be managed strategically. Could you give an example of how the first few service encounters should be managed and should they necessarily different from the later encounters?

Sunil Gupta: AT&T recently changed its pricing policy for smartphone users. Unlike its previous plan where users of iPhones or Blackberrys could use unlimited data for a fixed monthly fee of $30, consumers now have to choose between two plans: 250 MB of data for $15 per month or 2 GB of data for $25 per month. Most consumers are not sure how much data they might consume but they will learn as they start monitoring their monthly usage. Our research article shows that this learning is quite rapid and it is in the best interest of companies to help consumers in this process since this leads to a win-win situation: customers are less frustrated with unexpected charges which lead to higher retention and better long-run profits for companies. In fact AT&T is doing exactly this by providing tools to consumers to monitor their usage.

Markathon: Will privacy concerns be a major factor in the further development of online social networks and will the customer satisfaction with these networks be affected due to these concerns?

Sunil Gupta: Privacy has already become a major issue for online social networks. In November 2007, Facebook started its Beacon program to track its users’ visits to external websites. Mark Zuckerberg of Facebook argued that it would provide valuable information to its users since people could benefit from knowing if their friends bought, for example, a dress from Bloomingdales. However, Facebook never got users permission to track their website visits and the program created a huge controversy and was later retracted.

There are ongoing discussions and debates about this issue where companies claim that getting consumers’ personal information will help them provide more useful products and ads to them, while privacy experts fear that private information can be easily misused. I think this debate will continue in the future and probably intensify as technology becomes more sophisticated in tracking our location through mobile phones, or our preferences from our website visits.

Markathon: Has the growth of networks like Facebook reached a plateau? If not where are the next 400 million users going to come from?

Sunil Gupta: Currently there are almost 5 billion mobile phones used in the world. As social networks such as Facebook intensify their presence in mobile, they are likely to gain a lot of new users, especially in emerging markets, who never had access to Internet.

Markathon: How will the rise of these networks influence marketing trends and will it cause a paradigm shift in marketing principles?

Sunil Gupta: Social networks are already having a huge impact on how consumers obtain information about products and how they make decisions. Consumers use Facebook Connect to learn what their friends are buying. They use user-generated sites such as Trip Advisor to learn other users’ experiences with hotels before selecting a hotel. Marketing practices have to evolve with this changing consumer trend where word-of-mouth and viral campaigns become more important than mass marketing.

Markathon: With such an extensive academic and corporate experience, what do you think are the major differences between academic knowledge and corporate practices? Could you suggest ways to bridge these gaps?

Sunil Gupta: At the risk of making a sweeping statement, I think that academics are generally very good in creating new conceptual frameworks and coming up with broad generalizations by connecting the dots across companies and industries. However they typically lack a good understanding of the organziational complexities, specific situation or context of a company, and the people issues inherently involved in implementing any decision. Practicing managers, on the other hand, are very good in exactly those issues where academics lack knoweldge. In other words, the two complement each other very well.

At Harvard Busness School we have a strong focus on bridging this gap where faculty are encouraged to be in touch with management practice through case writing and field research. We also actively recruit leading practitioners to become Professors of Managemt Practice to encourage this dialog. There is an increasing need to bridge this gap and I hope more schools take a proactive action in this direction.

The Two sides of Customer Value
Customer-based strategy recognizes two sides of customer value:
•Value which the company provides to the customers(Value to customers) – In terms of products and services
•Value which the customer pays back to company(Value of customers) – In terms of profits over time




As shown in figure this divides customers into four sets:
•Star Customers: A true win-win situation
•Lost Cause: Company should reduce investments in this set of customers or even drop them if it can’t increase profitability from them
•Vulnerable Customers: Most loyal ones, but at the same time highly exposed to competition
•Free Riders: They exploit the relationship with the company to the maximum extent

Do you think the brand revamp that Star Plus has gone in for will be successful?

View

Sandeepkumar A, Welingkar,Bengaluru

Satellite Television Asia Region popularly known as STAR is owned by Rupert Murdoch’s News Corporation. In the year 1992, the then government of India opened up cable television to private players. Star Networks leveraged the situation to its best benefit. Star Plus (then Star TV) was dominant in the general entertain-ment segment in multiple slots for the next 10 years.

There are lot of reasons for a company to go in for brand revamp, in our case with the new tag line “Rishtawahi, SochNayi” it appears that the channel wants to keep its target audience intact and target them with new age, refreshing content. The challenge for STAR Plus is to stand out in the heavily crowed entertainment clutter. After “Kaun Banega Crorepati” sequence, the content pipe line has literally dried up in comparison to other general entertainment channels.

The brand revamp exercise saw STAR Plus spending around INR 200 million. It has created fantastic awareness among the target audience, but how much of it will translate into interest is a wait and watch proposition.

Not leaving any stone unturned, the channel is in the process of launching series of new programs, some in the prime time, a critical slot it lost to Colors few months back only to regain it later.

Analyzing and anticipating the competition from 200 odd new age general entertainment channels is a sensible strategy it has adopted. Brand revamp has provided the channel with a broader visibility. With solid content and other activities around the brand (STAR TV), it will help it fly through the turbulence safely for few more miles.

Counterview

Bhavesh Kothari, Welingkar,Mumbai

Once upon a time there was a storyteller, whose stories became a hit among the women of every household, women who had grown up listening to grandmother tales. These women started to find themselves in the characters of the storyteller, as the modestsister, or son-forsaken mother--in laws.These stories were identifiable, like they were scenes picked out from their very lives!

This storyteller, none other than Star Plus, had ruled the Indian GEC segment for 7 years in a row but Colors, whose shows weren’t merely household stories, were so different & contemporary that in 2 years, it displaced Star from the no.1 position!

That was the time when Star started to think seriously about its positioning. After a yearlong research, they decided to revamp the brand with a new look, new logo, new tagline and even new shows. On June 14th, 2010, their 10th anniversary, Star Plus unveiled its new red colour looks and the new tagline “Rishtawahi, SochNayi”, clearly signifying that it will follow the path of Colors. But they couldn’t back this ‘new thinking’ promise with its shows. The channel could manage to get only 443 TRPs in the following week, just slightly more than its previous rating.

Channel revamping has seen a varied degree of success in the Indian television scenario; SAB TV revamped itself to success with its light hearted soaps; Sony tried but failed last year. So far, the Star Plus revamping has not brought enough points to its TRP kitty, but it will be interesting to see if the Indian women accept the old storyteller in the new look!

SV - Samsung 3D LED TV

Winner: Karthikeyan T, NITIE, Mumbai

Honorary Mention: Kawal Mahatre, Welingkar, Mumbai

Customer, the new Marketer

Indu Mahapatra, Soumyasankha Maiti, XIMB

A prize money of Rs. 50 lakh and 1% on the turnover: this is the new promo campaign for anyone who comes up with a hit new flavour for Lays. This is in essence the idea of Co-Creation wherein you are involving the consumer (one of the stake holders) of your product into its development.

If winter comes can spring be far behind? So almost at the same time Bingo asked people to create games, quizzes et al, around the theme “Bingo har angle se mmm..”. It got the wackiest of responses from someone suggesting George Bush should say “I’m sending Bingo ChilliDhamaka to Iraq”, and not bombs; to a blind man seeing with his mind’s eye how “yummy” the chips were.

The new trend is to use the global brainpower to develop new products, new commercials, and new virals – whatever a global brainstorming to solve your problems.Every solution has a reward and big corporation is asking Innocentive (Innovation+Incentive) for help.

Customer is the Designer
‘Customer is the King’ not only in terms of purchasing power and negotiation, customers are now contributing everywhere; starting from creating ad campaigns, product or service development contests, co-creating for the corporations by tapping into their intellectual capital, who in exchange give them a direct say in what actually gets produced, manufactured, developed, designed, serviced, or processed. Consumerism will never be the same.

P&G realised it, when the then CEO, A.G. Lafley, found that he was running out of ideas and it was getting impossible to keep up with the demands of consumers. P&G’s Connect + Develop were launched to ask customers to help. Its “Pringles Prints”, where interesting things were printed directly on the chips was launched at almost no cost & in no time. Through ‘Connect’, it found a small bakery in Italy which could do the job for them, proving cheaper & faster than developing the process in-house.

And the results so far have been amzing, to say the least: everything, from Swiffer Wet Jet, Olay Daily Facials, Crest Whitestrips & Night Effects, to Mr. Clean Autodry, Kandoo baby wipes and Lipfinity.

Customer Incentives
Most companies are trying to translate the enthusiasm of their most highly-engaged customers into valuable marketing. For the customers it can be any of the following:
•Status: people love to be seen; love to show off their creative skills and thinking
•Bespoke lifestyle: something consumers have been personally involved in should guarantee goods, services and experiences that are tailored to their needs
•Cold hard cash: getting a well deserved reward or even a profit cut for helping a company develop The Next Big Thing is irresistible
•Employment: in an almost ironic twist, customer-made is turning out to be a great vehicle for finding employment, as it helps companies recruit their next in-house designer, guerrilla advertising agency or brilliant strategist
•Fun and involvement:there's pleasure and satisfaction to be derived from making and creating, especially for brands one loves, likes or at least feels empathy for

How different is it?
Unlike most advertisements which furnish the consumers with all the information about the products, mob marketing ensures consumers get involved with the brand and have a feel of it. Consumers today are often well informed and selling them ideas extolling brands may eventually end up pushing the customer away. It is difficult now to influence consumers purely by overwhelming them with information and ‘nice’ advertisements.

For Example, At the Apple’s iTune’s store, user-created playlists enable customers to upload their favorite music selections and share them with others, who can then buy the songs if they like. Then there is the open marriage between customer-made and user-generated content. The four-year-old South Korean online newspaper OhMyNews works with 26,000 'citizen reporters', who send in stories and pictures to make up 80% of its content. OhMyNews pays up to USD 20 per article, though for many citizen reporters, getting their name in the paper is the real reward. Fiercely outspoken, it has successfully challenged the traditionally conservative press in South Korea.

Effectiveness of the medium
This form of communication with the people makes them feel involved with the brand. If companies create enough buzz about such campaigns then the rest of the promotions can be carried out word of mouth, helping companies cut down their advertising costs. Thus brands can register in the ‘Top of the Mind’ of the consumers and also drive sales.

The Electrolux Design Lab 2005 saw entries from 3,058 design students from 88 countries where they had to design household appliances for the year 2020. 12 finalists participated in a six-day design event in Stockholm, including workshops, model building and a competition for cash-awards, & appliances etc.

Core 77, the industrial design site, teamed up with Timex for a global design competition called Timex2154: The Future of Time to celebrate Timex's 150th anniversary. Designers from more than 72 countries explored and visualized personal and portable timekeeping 150 years into the future, with over 640 entries.

New Trend
Crowd sourcing seems to be a profitable model for businesses. “Innocentive” uses the global brainpower to develop new products, new commercials and new virals; a global brainstorming to solve your problems – can you beat that? Every solution has a reward and big corporations (P&G used Innocentive to launch Pringles print) are turning to Innocentive for help.

Moving past contests and gifts, this is where it gets really interesting: co-creators receive a cut of profits from whatever gets developed based on their input, suggestions, design or ideas.
Danish ‘Vores’ (‘Our Beer’) claims to be the world's first open-source beer. The recipe and the entire brand are published under a Creative Commons license, meaning anyone can use ‘Vores’ recipe to brew the beer or to create a derivative. As long as home brewers publish the recipe under the same license, they’re free to make money from their effort, which includes free access to ‘Vores’ design and branding elements.

Conclusion
But with the gap between traditional business practices and truly empowered consumers now reaching significant proportions, the ‘Customer is Designer’ trend will only accelerate, moving from the fringes to mainstream. In fact, ‘Customer is Designer’ may turn out to be one of the most exciting and long term engines behind change and innovation that the world of business has seen in years: a way of thinking that has the power to redefine the relationship between customer and brand, between consumer and producer, something that taps into the most awesome reservoir of intellectual capital ever assembled.

So, what is the future for the ‘Customer is Designer’ revolution? Maybe Customer-owned? As the number of ‘Customer is Designer’ initiatives grows exponentially, savvy members of generation will demand serious compensation; if not a fair percentage of whatever it is they've co-created. Soon, a simple iPod in exchange for designing the firm's Next Big Thing just won't do. Also expect a slew of intermediaries coordinating millions of knowledge exchanges between producers and consumers, from talent brokers to project managers.

Who disrupts the disruptor?

Asit Kumar Jain, Venture Analyst, Innosight Venture

We can all recall the Aamir Khan Starrer “ThandaMatlab Coca-Cola” campaign which was a genuine attempt by Coca-cola to reinforce its leadership in the cola market. Similarly Pepsi tried hard to match Coca Cola through its Youngistan and now the My Game campaign. But can these leaders with their marketing ploys survive the onslaught of time and virtual competition!!! In the language of value & volume they might be the largest, but hang on; we really don’t know the size of the unorganised (beverage) market thriving at every nook and corner of the country. The article is nothing about numbers or ranking, but unravelling a new development taking place at the bottom of the market. It’s a fight between two unorganised disruptors which ultimately confirms a theory that a disruptive substitute is always replaced by another disruptor. Let’s see how it goes…

The beverage market at least in India has gone through lots of ups and downs. It’s simply because it is not yet the replacement of water as is the case in the western market. Unable to change the behaviour of Indians, consequently all major cola companies began to sell packaged drinking water. As a result they have begun eating away the market share of Bisleri. Many liquor manufacturers are also following their footsteps. (It’s better to sell plain water with more profit then the colored spirit with lots of regulations). But still their biggest competitor is not just water, but many other beverages sold locally, by unnamed manufacturer.

Think of their volume/value of sales in India’s tier 2 and tier 3 cities and you will definitely get a feel of their presence. I am not advocating that they are as big as the branded ones, but they have the capacity to disrupt these incumbents. When packaged water made its entry into India, people were skeptical about its survival but now every other manufacturer is making money and they have also started serving Himalayan glacier water to us Indians! But do they know how susceptible they are to disruptors?

After the entry of the packaged drinking water which is served at around rupees 10 per bottle, there was one similar entry focused only for the people at the bottom of the market. These were water pouches, a sachet cousin of shampoos and masalas. Although they are unfriendly to environment (plastic pollution), they have followed a perfect path of disruption and so are the ones who disrupted them, about whom I will explain later So these water pouch manufacturers started in very small scale, selling only in their localities. The big brands took a notice of the development but chose to ignore it, since it was not hurting their customer base. There was only Bisleri and some other brands which were available in the road side shops and railway stations and Bisleri even became synonymous with bottled water. But the pouch manufacturer without bleeding, continuously served the bottom of the pyramid (1 rupee pouch) and raked in enough capital to march into the next phase of disruption. They started manufacturing bottled water and served the local market. The transportation as well as marketing cost worked in their favour as compared to the branded one’s, eventually which they passed on to the retailer. The retailer was happy enough to sell the local bottle water making double the profit as compared to selling a branded one that too at a low price point. The consumer too was happy enough to take away the local product in the name of Bisleri (bottle water = Bisleri). So what I found is nothing but a trail of disruption working over the years to challenge the incumbents. As explained by Clayton Christensen, the distinguished professor of Harvard and the one who coined the term Disruptive Innovation, disruption works whenever there are underserved or overshot customers. It works in the way as explained below:
1) The incumbent ignores the entrant as their customer base is not affected
2) Rather it gives space to the entrant to grow, as serving the bottom of the market is less profitable
3) It moves upward serving more profitable customers giving the less profitable ones to the new entrants
4) In the mean while the entrant with a very cost effective business model makes profit and passes through a techno-managerial development
5) It goes up-market and starts serving the customer base of incumbent with simplicity, affordability and convenience
6) The customer responds to the call of the entrant and the incumbent does nothing but again flees up market for better profitability with very high quality products and the race continues till the other calls it quit.

We can rightly equate the development of bottled water industry with the theory explained above. Now they have started selling mineral water (an expensive product). Again, the branded players may be growing at double digits but their local colleagues are not way behind. Certainly a time will come when they will be left with no other option but to acquire these local units at sky rocketing prices to quench their thirst for profitability.

Similarly for the cola companies there are disruptors as well, but not working in the right direction. Rather they have become a disruptor to the water pouch industry. These are again locally manufactured soda water or sweet water available at similar price point to the water pouches. Recently I found that water pouches were being banned in one of the major city of Orissa and the biggest beneficiaries of this development were not the bottled water manufacturer but these local made soda/sweet water companies who were certainly a weak disruptor to the cola companies, but finally worked somewhere.

Aviation-Flight Plan to the Dream Destination

Shweta Srivastava, Debanjana Sinha | IIM S

The first quarter of 2010 brought some good news to the Indian airlines industry. According to Directorate General of Civil Aviation (DGCA), domestic air travel in India has reported growth of 20% in the first quarter of 2010. After the double-digit fall in traffic in the first quarter of 2009, this means that passenger numbers are up around 7% in Q1, 2010. India’s domestic traffic slump began in June 2008 and it eroded the bottom line of almost all the carriers and led to industry consolidation. Battling rising Airline Turbine Fuel costs, excessive low cost carrier challenge, errant employee unions and political interference, the dream destination for this sector looks quite far.

The 9th largest market in the world, the aviation industry in India is one of those sectors that saw a constant pace of growth among the other industries in the world over the past many years. One of the most dynamic industries, it has witnessed an exponential growth over the last two decades. Ever since the government’s open sky policy was implemented, the industry trudged on a growth path registering y-o-y growth rate as high as 18% resulting in the entrance of many overseas players. For some time, it seemed that the fairy tale will never end.
Then the recession came and the aviation sector that witnessed a double digit growth in recent years began resorting to rationalisation. Private Indian airlines, which in the past had experienced massive growth, started demanding a “bailout” in the form of reduction in taxes and airport charges etc from the government and even threatened to ground their planes if their demands were not met. A case that needs special mention in this context is that of Air India. The Maharaja piled up accumulated losses of over Rs 7,000 crore and debt exceeding Rs 16,000 crore. As a result, it was forced to cut salaries and cancel order for new jets. The situation got so grave that it headed for a major government sponsored restructuring, after being denied bailout. Joining it, among others, were Kingfisher Airlines, IndiGo and SpiceJet, with accumulated losses of Rs 2,444 crore in 2007-08 and expected to stay in the red in 2008-09 with losses of over Rs 10,000 crore. The following two figuresshows the current condition of the Airlines Industry.


Challenges are many and problems need to be overcome. The current status speaks high of the sad plight the industry is in, but we would like to list some reasons as to why I think the industry will revive and be among the top 5 aviation markets in 5 years.
Standing by the customers
Recession, undoubtedly, took its toll over the aviation industry but one must stop awhile and look at what happened in the western airlines. US Airways started charging for blankets, and they already charge for water leading to a seeming decline in airline provisions and the imposition of new fees on almost every service of value to travellers. Ryanair is famous for being the most hated airline in Europe, since it hardly takes care of its customers. Interestingly, bad times have not resulted in a disregard for customer service in Indian aviation.
Surprisingly, this is not the trend in Indian carriers. Private airlines have ramped up their customer service even in the Economy Class with special focus on personalized service. Jet Airways recently won the Best First Class award, and Kingfisher does everything it can to uphold its 5-Star Airline status. Indigo started the use of automated screening systems to validate passenger names on the boarding passes, a technology used for the first time by an LCC in India. The airlines also came up with special deals on all their routes.
Is it that someone forgot to tell these airlines that they were in a recession? Probably not! But their focus on keeping the customer happy will definitely pay off in the long run. It is a known fact that it costs 5 times as much to bring in a new customer, than to keep an existing one. And this mantra was religiously followed by the Indian carriers by utilizing the “back to basics” of customer service. The loyal customers will never ditch them. And when good times return, these same happy customers will contribute their best to generate enough brand awareness through word-of-mouth to bring in new passengers.

Being resilient pays off
Unlike airlines in the Middle East, most airlines in India do not have any special privileges like reduced oil prices or backing from a government with deep pockets. This forced them to act on their own to cut costs to remain afloat in these difficult times. And they successfully did it. Instead of bothering the customer with frivolous charges like in US airlines, Indian carriers cut costs where it mattered.

Kingfisher Airlines swiftly postponed plans for more overseas route launches like Singapore, Hong Kong etc – since they tend to be resource heavy at the beginning. Jet Airways did away with glamorous but bleeding routes like that to San Francisco. Moreover, they both either delayed the delivery of new aircraft, or leased them to airlines like Turkish and GulfAir. Most airlines in India switched to focused marketing efforts, rather than blanket campaigns to get more bang for the buck. And Kingfisher and Jet Airways came up with a code-share alliance to save costs keeping aside their competitive aspirations. It is this resilience and fast action that will pay off well in the end.

Indian economy among the fastest growing even during recession
The word “recession” has disappeared from the vocabulary now. The International Monetary Fund (IMF) has raised its India growth forecast for 2010 to 9.4 per cent from 8.8 per cent. Despite the fact that India's civil aviation industry was the second largest loser after the US due to the recession worldwide, more than anyone else, it’s the Indian carriers that will reap the best rewards of a still-active Indian economy, if they play their cards right. And till now, they haven’t let most people down when it comes to crises handling.
The Indian Aviation sector has the potential of absorbing up to USD 120 billion of investment by the year 2020. It’s high time that the regulatory and policy framework is aligned with the needs of the civil aviation industry to encourage serious investment in the sector and create a safe, secure, efficient and environment friendly system conducive to healthy growth.


Kingfisher Airlines- CRM the way forward…
Kingfisher Airlines (KFA) is positioned as “Full Frills - True Value Carrier”. In order to achieve this, KFA had to differentiate itself from the then market leader, Jet Airways. It dedicated itself to Customer Relationship Management to initiate its customer base and retain its profitable customers. Some of the initiatives by Kingfisher Airlines are:

Roving Agents
KFA combined its IT expertise and customer service to create the concept of “Roving Agents”. The Roving Agent is a Kingfisher staffer carrying a handheld that is connected to the main reservation and check-in system wirelessly using Wi-Fi, and a portable thermal printer, attached to the staffer's belt, that links with the PDA using Bluetooth. Guests flying with Kingfisher carrying only hand luggage can be intercepted near the entrance. Using a ticket's PNR number, a Roving Agent can help guests choose a seat on their plane, print a boarding pass from the printer on the Rover's belt and send passengers straight to security check. On a typical day, at a busy airport like Mumbai or New Delhi, this initiative can help save a passenger seven or eight minutes. It might not sound like much, but for a business traveler pressed for time and catching a flight at the last moment, eight minutes can come very handy.

Partner Program
Although frequent flier’s program is done by all major airlines in the world, KFA’s partner program tied with best brands in across industries to provide functional quality to its loyalty program, the King Club. It teamed with the stalwarts in various sectors to help its loyalty program members earn and redeem points. All its partnering and co-branding efforts are targeted towards acquiring and retaining its most valuable customers, i.e., the globe-trotting business traveler. Some of the examples are:

• Passengers can earn miles by travelling in the major international airlines around the world. This includes Emirates, Air France, KLM Royal Dutch Airlines, Qatar Airways, Delta Air Lines and Continental Airlines.
• It tied up with the major banks, both national and international, such that the each brand’s star and premium credit cards can earn mileage to King Club customers, through each transaction.
• Their hospitality partners include The Hilton Family, Oberoi Hotels, Leela Hotels, Ananda, Trident Hotels, Ista Hotels, The Park Hotels, The Paul Hotels and ITC-Welcomgroup.
• They even tied up with publishing partners like Harvard Business Review and Fortune to expand its global customer base.
• Such diverse portfolio of partnering is unheard in India and it has provided KFA the competitive advantage over other carriers with true focus that “The right Customer is the king”

Add-On Selling strategies:
Kingfisher Airlines have successfully integrated its Customer Relationship Management to cross selling very well.
This includes transaction in Air Boutique ONLINE – KFA’s premium online reward shop. It is the first of its kind in the Indian airline industry. This is a 24 hour service that is exclusive to King Club members and customers can redeem reward points merchandise.
The reward points or the King Miles for KFA are transferable to family and friends at a nominal value unlike many carriers in India. This flexibility allows KFA to acquire newer customers and strengthen its customer base considerably. It has also integrated its Kingfisher Holidays with its loyalty program. This completes the full circle of impact of UB group in hospitality industry.
All the above examples show the superiority of Kingfisher Airlines in delivering the right mix of technical and functional quality in its service. Its ability to manage customer service at the actual touch points and provide newer avenues of experiencing its superior pre and post journey is unmatched in the India airlines industry. Only time will tell if its customer focused strategy will help it pass through the difficult times of negative bottom line and an immensely regulated airlines industry.

Way Ahead
India is yet to witness a success story like Southwest Airlines where the integration of marketing, CRM and technology and route optimization led to record revenues irrespective of condition of the industry. With the domestic traffic boosting up, it is high time that carriers utilize the best practices in customer service from around the world and turn the tables for the Indian aviation industry.

Pepsodent Kids

DebDipta Majumdar | BIM Trichy

Pepsodent has established itself as a strong, reliable brand commanding the second place in terms of market share next to Colgate from Colgate-Palmolive Ltd. The product line of Pepsodent is wide spread right from lower end to the higher end addressing the basic needs of decay protection & advanced whitening to specific medical needs with Pepsodent G gum care and Pepsodent Sensitive. The customer expectations of the toothpaste market are good taste, fresh breath, clean teeth, more foam and proper cleaning.

Children are influencing around 41% of the total purchases in the total consumer market and children are permitted to make decisions in 65% of the total purchases in the toothpaste purchases. In this case ideally, a product for the children, launched properly should be a runaway success. Realizing this, Pepsodent introduced Pepsodent Kids and Pepsodent Junior in November 2007. Contrary to the expectations, Pepsodent Kids did not taste success. Colgate’s Bubble Fruit is the direct competitor of Pepsodent Kids. Pepsodent Kids comes with an attractive squeeze down pack in attractive colors with three variants, namely -

1. Barbie (pink color)

2. Superman (Blue color)

3. Tom & Jerry (Orange color)

Product Strategy

Retailer observations for product improvement mainly involve two factors:

1. Size of the Pack

2. Color Variants

Small sized packs

As against the popular notion of high price of the Pepsodent Kids, the market can be sustained based on the exclusivity of the product for the Kids. Indeed the high pricing of Pepsodent Kids as observed in survey is not real but a perception created by its ‘Pack Size’. Analyzing the competitor Colgate’s Bubble Fruit pricing strategy sheds light on the same as given below.

Product Weight(Gms.) Price(Rs)

Pepsodent Kids 80 45

Colgate’s Bubble Fruit 40 22

As it can be observed, the pricing is not high but it is the pack size that gives them that impression. Tooth Paste Customers (Parents) can be classified into:

1. Informed Customer - the one who looks into the details deep into the contents of the product even that is not communicated by the marketer.

2. Un-Informed Customer - An uninformed customer is one who doesn’t look into all the details.

? Alternatives

To take the product to the masses, the competitor reference prices in the minds of the customer must be made comparable. In other words, Price need not be reduced but the Pack Size can be reduced. Two inherent advantages in this approach are:

• The uninformed customers’ views that the product is in the same price as others.

• The informed consumer who may be price conscious will try to use it.

An average Indian family of 3 members uses single 80 grams pack for a month. Introducing 80gms pack in the child segment might not be well received because there is only one consumer in place of 3. The size of the family usually determines the quantity of the toothpaste bought and in our case the number of kids in the family forms another important factor.

Hence, reducing the size of the pack may be a viable and apt option to increase the children toothpaste market share.

Color Variants

It’s been a proven fact that children are attracted to bright colors more than the dull dark colors. The variants available in the market are Tom & Jerry (Orange Packs), Barbie (Pink Packs) and Superman (Dark Blue Packs). By the sales figures in the retail outlets, it was seen that the children respond positively only to first two variants.

? Alternatives

• Attractive colors can be introduced to keep children pulled in to try the new variants every time.

• Special limited editions during festive seasons & holidays can be sold to increase revenue.

New cartoon characters in the current day channels (Jetix, Cartoon Network etc.) can be added as new variants. By the TRP ratings, children are found to watch Jetix channel’s Power rangers show more and form a potentially attractive market for the new variant. Moreover, each character in the power rangers can form a pack design adding more income to the sales figure through the collectors’ series.

An additional survey conducted among the children of age 10-14 years indicated that children tend to remember the swadeshi products more than the foreign products. They are able to remember Ruf & Tuf jeans though the kids watch Lee and Wrangler advertisements more. Creating paste for our own Indian characters like Krish or Mowgli in Jungle Book may be more appealing to children.

Marketing Strategy

First, the child, the consumer watches the advertisement, urges the mother or father for the ownership of the same, parents verifies whether it is safe and purchases for the child.

Alternatively a child can get impressed by the product attractiveness, on visiting a retail outlet or through his friends in school. The urge may come at first sight or because of the impact of the advertisements. But in either case, the stress will be higher only when the product has established its footprint in the child’s mind.

In the second stage Decider or Ultimate Buyer, the parent analyzes the products safety and whether it is good for the child’s health. Based on their inferences and the level of urge by the child they decide to buy the product.

Retailers strongly feel that the ‘urge’ from children is missing in the case of Pepsodent Kids. Hence the marketing strategy must be targeted in two directions – towards the children and the parent.

? Alternatives

• Colorful television commercials featuring cartoon characters of interest for current generation children.

• At the same time, Newspaper/Television commercials must convince the parents that the product is effective and makes brushing fun for children.

Pepsodent has already established trust in the minds of customers as a total family toothpaste. The time of telecast of the two advertisements and the programs which need to be sponsored should be different for two sets of advertisements.

The one which aims at the mothers must be telecasted during day hours and sponsoring the vernacular TV Serial shows will help the product. The message can be “Mummy, my mouth tastes sweet and look my teeth shines like silver.”

The other aimed at the children must be telecasted in Cartoon Network, Jetix, Animax and others. Thus, the marketing strategy gets tuned to winning the child’s heart and parent’s trust at the same time.

More than the Survey

In an FMCG industry, any consumer contact with theproduct/brand initiates a communication between the product and consumer/customers.The following personal suggestions derived from the survey, emphasis on the way the product is presented to the end customers.

“Pepsodent Junior” and “Pepsodent Kids” can be bundled together. Pepsodent Junior launched along with the Pepsodent Kids is moving well in the market. Pepsodent Junior can be bundled with the Pepsodent Kids in a small total dental solution kit.

1. The kit can be introduced along with a “Kids Stand” to hold only the Pepsodent Kids toothpaste and toothbrush in sockets. The sockets must be made to hold only the Pepsodent products.

2. The Kids Stand can be introduced in variety of themes matching different characters. The kit can also contain a booklet/ sheet depicting a small story or characters description. The children view these as their toy and also feel proud of owning it.

3. Children generally use the toothbrush for 3 months but the toothpaste gets over in a month considering 40 gm pack. Hence once the tooth paste gets over, children refill the socket with Pepsodent Kids toothpaste in that place.

Promotional Strategy

Every children’s product has to be promoted not only through TV commercials but also from non-conventional events. A nation/State wide drawing competition can be organized for children of classes 1 to 7 standard. The competition can be conducted only to the children belonging to upper class, upper middle class and middle class families i.e., in the schools in which they study. The competition can be conducted in district levels, state levels and national levels. Prizes can be characters in the Kids series or the Pepsodent Kids Kit itself.

This campaign must be supported with a newspaper campaign and the combined cost will be lesser than a TV campaigns. The school management will support the initiative since such initiatives bring out the inborn talents of the children.

Display pattern

During the personal interviews with the store managers and the assistants, it is noticed that in some stores that the product is not actually displayed at a height easily assessable to the children. In a research for consumer browsing pattern of the products done with help of eye cameras fitted in the goggles, it is found that the adults mainly look at the products at the level between their chest and hip and the children at their eye level. Adults do not generally look at the products at their eye level. HUL’s sales representative must be informed to ensure the product placement at a height range of 110cms to 130cms. This enables easy identification of the product needs by the children and they urge their parent to buy.

Conclusion

By following this marketing strategy we can bring up the sales and market share of Pepsodent Kids in no time.