Market Leaders: leading from the front

I remember reading Philip Kotler while pursuing my management degree explaining marketing strategies for market leaders, challengers, followers, nichers. The strategies mentioned for market leaders included the expanding market share (but this may lead to unnecessary price wars), defending market share and expanding the total market (this is more preferred as it is observed that when the total market is expanded the market leader benefits the most). And I want to concentrate on this third strategy. Total market can be expanded in mainly two ways i.e. by getting more customers to buy your product or by increasing the usage of your product (theme of this post).
One of the companies that has used this strategy to its advantage over the years is Colgate which currently enjoys the market share of 51.2 % in toothpaste market (Source: Colgate analyst meet in May, 2010) It has been the leader in this particular market since the time one can remember but the interesting thing to be noted here is the fact that Colgate did the market a huge favor by increasing the usage of the toothpaste by coming out with ads showing the importance of brushing one’s teeth before going to sleep. And it connected with people so well that the number of people brushing their teeth twice a day is moving up with every passing day.
But one company which has consistently increased its scope of business over the years using the same strategy and in turn also helped the industry benefit in the process is my favorite Cadbury. They are a master at this. Let us see what it has done with Cadbury Dairy Milk. We all still remember the classic ad featuring one beautiful girl running on the ground and doing a free style dance (my all-time favorite) with the background song “asli swaad zindagi ka”. Even at that time the ad promoted Cadbury as something that makes you express yourself and something representing the test of life. There were never any efforts to position it as purely ‘chocolate’ as it actually it is. Then there is another brilliant ad of Cadbury celebrations shown during Raksha bandhan. I have personally seen my sister using Cadbury instead of sweets. The product is the same that is available throughout the year but what is different is presentation and suddenly it replaced sweets and made people buy more of it compared to normal! There was one ad i.e. “pappu pass ho gaya” which I did not like as much as other ads but otherwise Cadbury has been superb with its ads. Recent ads have also been quite brilliant. One ad features a girl waiting at a bus stop having a Cadbury when one guy approaches her asking for it saying “acha kaam karne se phele kuch meetha khana chahiye” And on being asked about that “acha kaam” he shows his willingness to drop her home. It was so brilliantly executed and conveyed the message so well that Cadbury is something that you can have or rather should have when you planning to start something new. The ad ends with the words “shubh aarambh”. The latest one features a cute girl refusing to part with her Dairy milk with the family members when they are discussing as to what they should have in dessert. Again the ad ends with words “Khane ke baad meethe mein kuch meetha ho jaaye”! And I am sure there many other ads doing the same thing.
So as it can be observed that it has always made efforts to increase the usage of Dairy milk with every new ad and it has done it successfully and as I mentioned, if this strategy of expanding the market by increasing the usage if executed well the one who benefits the most is the market leader itself i.e. Colgate as well as Cadbury!

Schumpeter’s theory revisited

One market research firm called IBISWorld came out with a report listing out the top 10 industries in the US which are on the verge of death. Interestingly among these 10 industries, at least 5 are affected by the digital revolution that is taking place. These 5 industries include wired telecommunication carriers, Newspaper publishing, video rental, video post-production services and photofinishing.
Newspaper publishing has been facing a lot of competition from internet with the same news available online for free. However, as far as India is concerned the industry is still flourishing thanks to the low access to internet, negligible cost of newspapers; in some cases it is actually profitable to buy newspapers as the amount of money that you can make from raddi is more than the cost of yearly subscription! India is way behind the period that US is experiencing at this stage in case of newspaper publishing at least. But as far as the rest of the industries are concerned the trends are not much different. We see how video rental has almost disappeared due to availability of downloadable media online and how ubiquitous the digital camera has become nowadays.
This news story reminds me of one theory that I studied during college: Theory of creative destruction by Joseph Schumpeter. The theory explained how status quo is disturbed by some innovation where you gradually witness the downfall of present technology/trend and the same getting replaced by the new one. The theory perfectly explains the reason behind the downfall of these industries in US but the amazing part is that all most of these have been victims of digital technology. Hats off to people like Joseph Schumpeter who had the foresight and the intelligence to publish something like this in 1942, which is applicable even today.

We want more (read three holidays)

Match between India and Pakistan saw the whole of India coming to a standstill. When I say ‘standstill’ I am talking about ‘the commercial or the working’ part of it as we saw people suddenly getting ‘sick’ in the morning and taking leave on that day, there were some who went to office but never seemed to work and the rest managed to get away in the second half to catch the spectacle on television with their friends and family.
I appreciate the government realizing the importance of these matches and in turn declaring a public holiday. But my question is whether one holiday is enough? I certainly do not think so as the ‘previous’ and the ‘next’ day of any ‘big’ match in India is as important as the match day itself. We are living in a country where everyone has an opinion on Cricket (unlike Mahesh Bhatt who has an opinion on everything under the sun!) And the best part about this is that everyone likes to express it as well. So you can not expect people to come to work on the ‘previous’ day do their work at their productive best and leave and get a holiday to watch a match at home or outside and then turn up the ‘next’ day and be at their productive best! No, it is not possible, at least in India. As the ‘previous’ day is usually spent by all of us discussing as to what the Indian team should do on the match day and the ‘next’ day is spent discussing the right or the wrong decisions depending upon the outcome of the match! The worst part is that you have people on these two days i.e. ‘previous’ as well as the ‘next’ working halfheartedly so you see productivity per person going down. Productivity of people on the ‘previous’ as well as the ‘next’ day, I am sure, can be a topic of some path-breaking and earth-shattering research!
I understand that giving three holidays is not only impractical but nonsensical as well and that I am just writing this post because I have nothing else to do but I feel this is one fact which can not be overlooked. Personally, I am fortunate to be working in a company where arrangements were made to watch the match in the second half. So is there any solution to make sure that the productivity remains in tact? Yes I have a solution. I am sure the companies will be ready to pay me millions to know the solution but I do not mind sharing it for free. The idea is to hire people who hate cricket! How is that for a solution? If the companies do decide to go with this idea, the HR professionals have a tough job on their hands. We could see some ads like
“ABC Ltd. requires people with at least 2 years of work-ex in sales & marketing and he/she should not like watching or discussing cricket”!

Life Insurance: a must-have thing

We were just discussing our past work-ex in the office when the question cropped up: what is the most difficult thing to sell? Luckily we have people coming in from various industries so it turned out to be very interesting and informative discussion. There were some who believed FMCG offers more challenges than any other sector and some thought it was telecom but finally there was a consensus as to one of the most difficult things to sell is LIFE insurance. This discussion made me thing as to why it is tough to sell life insurance compared to any other product or any other insurance for that matter?
I remember reading somewhere that insurance is one such industry which runs on the mutual ignorance of both, buyer as well as the seller. If the buyer knows that he is not going to die in the next 20 years he will not take insurance for the next 20 years and if the seller knows that the buyer is going to die tomorrow then he will not sell it to him. Since both are not sure as to what is going to happen in future they enter into contract of insurance. So the basis of contract itself is the mutual ignorance of people entering into it!
Coming back to the selling part of it as to why it is so difficult to sell, especially in India where the percentage of people having life insurance is minimal compared to other countries where celebrities have insured right from legs to chest hair to butts to middle finger to semen and what not! Talk about niche markets in insurance! I feel the factor playing a major role in it is our optimistic nature. An average Indian feels so positive about himself and things around him that the fear of sudden death rarely crosses his mind (this is despite all the bomb blasts in trains and buses. Even when there are blasts you would see these same buses and trains going jam packed the very next day). And there are some orthodox people who are just not convinced about ‘profiting’ out of death as they believe whatever happens is destined and things finally will fall in place with or without insurance.
People have always preferred investing somewhere where they would get reasonable returns and that is where term insurance loses ground. As the term insurance does not give any returns though it gives maximum life coverage (actual objective behind life insurance). The issue is that whatever few people are buying life insurance are going in for products which give returns along with life coverage and in the process they are jeopardizing the future of their families.
Some seriously innovative ideas are the need of the hour to drive home the point that insurance is a must. And if we manage to do this, may be few years down the line insurance will be one of the easier things to sell! One thing that we can do is providing special tax benefits to people who buy TERM insurance as incentives never fail to motivate people whether they are selling or buying!

Buying democracy

We are all aware of the cash-for-votes scandal that hit the headlines in July 2008 when video tapes were released by the opposition party showing its MPs being bribed to save the government. It left an indelible blot on the idea of democracy where representatives of people were caught red-handed accepting money and in turn selling their votes. It just confirmed the level of corruption in India, the largest democracy in the world.
Same thing is taking place once again in Tamil Nadu but under the garb of freebies. The ruling as well as the opposition parties are competing with each other as to which one of them gives out more gifts. Freebies include a mixer, grinder, TV, laptop, free bus travel for senior citizens, rice at subsidized rates, free goats for poor families and even direct cash transfers! Forget about the results, people are just waiting for the elections to get over! Just to give you some idea of generosity: according to one newspaper, freebies that were announced by the earlier governments have cost around Rs.100, 000 crores!
Something seems to puzzle me about the whole affair: why do we not consider this in the same bracket as cash-for-votes scam. Just because it is out in the public officially at the insistence of parties (who want to garner as much attention as they can) and people are being benefited at large it is not considered as buying votes? These are the same people who were screaming on television abusing those politicians who tried to jeopardize national interest for their personal gains. But now it is okay as we are all getting something out of the booty. Secondly, this also prevents honest independent candidates and smaller parties from making their mark in the election as they can not afford such largess. It is like our own money (in the form of taxes) is being used by them (in the form of gifts) to win our hearts and rule us for five years as a result. Democracy is being mocked at, meanwhile there are parties happening in Tamil Nadu, courtesy some other parties (read political parties)!

Fortune at the middle of pyramid

I was just surfing the net when I came across this piece of news on forexpros.com about Cayman Islands (more popular as one of the tax havens) which said that a famous heart surgeon has decided to build a 2000-bed health care city in the country. Logic behind the move: it will come as a boon for patients and health insurers in US, as the cost of the same medical treatment will be a fraction of what one has to pay in US. In fact, the founder in his interview said that the insurance company, apart from footing the medical as well as the travel bill will be in a position to offer a two-week holiday in the country and all this at less than fifty percent of cost in US!
People talk about blue ocean strategy of making the competition irrelevant, this is a perfect example. And what makes even harder or almost impossible for others to replicate it, is the experience of the founder in handling this business model successfully before and anyways how many people can boast of having taken care of the most compassionate heart in the world: that of Mother Teresa! No doubt this is a brilliant idea and deserves all the publicity that it can get, but what prompted me to write this post was the fact that this feat has been achieved by an Indian born surgeon Dr. Devi Shetty. He is the same person who founded Narayana Hrudayalaya in Karnataka and helped the Karnataka government design the world’s cheapest health insurance scheme at Rs.5 per month for the poor farmers of the state.
Low-cost and high volume model is something that has constantly inspired people in India. Not content with the success Swach (the water purifier) Tata has now tied up with an MIT professor whose team plans to generate electricity out of waste water at a cheaper cost. We have also seen the success of Arvind eye care in India.
But this particular example of Cayman Islands can not be treated as serving the bottom of the pyramid like Swach or Arvind eye care as health care-cover costs in the US are not low and can not be afforded by anyone who wants it. So the people who will actually make it to the Cayman Islands are not exactly poor. Same is the case here in India, where Tata Nano and Air Deccan are put in the same bracket as Arvind eye care and Tata Swach. But it is not the case I feel, as the Nano and Air Deccan (now called Kingfisher Red) are serving the “aspiration category” which is constantly trying to improve its standard of living by trying and taking that one step ahead. Somebody who is driving a bike wants to buy a Nano or somebody who has been traveling in an AC compartment of train wants to use a low cost airline and mind you they are not poor or the ‘bottom’, as the poor in India still can not afford a bicycle. The idea behind writing this post was not only to highlight the achievement of Dr. Shetty but at the same time I wanted to convey my apprehension about confusing between the ‘middle’ and the ‘bottom’ of the pyramid. It is irritating when media attaches the ‘bottom’ word with people who buy a Nano or use a low-cost airline.

Sell healthy and get wealthy

Some facts: Diet coke has overtaken rival Pepsi to become the second most popular soft drink in US with Coke retaining the number one spot. Subway has become the largest restaurant chain dethroning McDonald’s with 34,225 restaurants worldwide compared to 32,737 for McDonald's. Now the question is to find out the common thread running between these two which is also an indicator of a change taking place in the food and beverages industry. Answer: It is the fact that both Diet coke and Subway are targeted towards health conscious people. Mind you this is the same category of people which was considered a niche some years ago and now they are in majority.
Hats off to these companies especially Subway which foresaw the trend at a time when not many realized it that health is actually wealth. McDonald's is of course popular worldwide, but not for serving the kind of food that Subway specializes in (McDonald's still ahead of Subway when it comes to revenue though the growth of subway confirms the increasing demand for healthy food). Of late McDonald’s has become proactive on this front with products containing fewer calories and fat (I just loved the print ad that it came out with in Israel when it launched some new products there. The ad featured only four square boxes with each one of them indicating sizes i.e. first one had "XL" printed on it, second one had "L" written on it, fourth one had "S" written on it, the third box had McDonald’s "M" printed on it indicating medium calories and fat).This trend is quite visible in India as well with growing popularity of subway sandwiches, probiotic ice-cream and increasing usage of sugar free.
One reason why I feel these products are selling more is because the people who play the role of "influencer" in the buying process are promoting them big time. The other day, I just heard one pregnant lady saying that doctor has advised her not to eat outside and if she does eat out at times then it has to be subway for health reasons! It will be interesting to see how things shape up in future. I am just waiting for a healthy "vada pav" now!