Strategist Vol 3

>
www.business-standard.com.
C O N T E N T S
1
LIGHTS CAMERA ACTION
SEGMENT & RULE
PACKING A PUNCH
THE NEW FRONTIER
THE LEADERSHIP PIPELINE
LEARNING TO BE SMART
CLICKING ON A NEW CHAPTER
WALKING THE PRICE TIGHTROPE
BUILDING THE PERFECT PROPERTY
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MADE IN INDIA, ONLY FOR INDIA
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IN SEARCH OF A BUSINESS MODEL
12
FROM CUSTOM MADE TO CUSTOMER MADE
13
ORGANISING UNORGANISED MARKETS
14
MANAGING CUSTOMER EXPECTATIONS
15
DEALING WITH DISCOUNTS
16
WINNER TAKES ALL
17
LOOK WHO`S TALKING
18
MANAGING REMOTE WORKERS
19
SOLVING THE INGREDIENT BRANDING PUZZLE
20
WINNING THE RELATIONSHIP GAME
21
THREAT AND OPPORTUNITY
22
LOW BUDGET BIG BANG
23
START.STOP.START
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MAKING VARIABLE PAY WORK
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SUPPLIERS DILEMMA
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PUTTING BIG DATA TO WORK
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07
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98
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CRACKING NEW MARKETS
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HIRING 3.0
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THE REWARDS OF LOYALTY
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REVIEW 365
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WHY GOOD ADVERTISING WORKS
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GO WITH THE FLOW
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RUNNING SUCCESSFULLY
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GOING SOLO
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FAST & SECURE
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LEARN TO STRETCH SUCCESS
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MEASURING TRAINING EFFECTIVENESS
38
LIMITING COSUMER CHOICE
39
TWIST IN THE TALE
40
20 REASONS TO BE OPTIMISTIC
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DONT FIGHT THE FUTURE
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GOT BAD ONLINE REVIEWS
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ONE VERSUS MANY
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LEVERAGING CHINA
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MOST INDIAN RETAILERS STOP AT REWARDS
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LEARN TO MANAGE THE MILLENNIALS
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TO BE A LEADER, YOU HAVE TO BE READY
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THE WORLD SURVIVED 2012, SO CAN TELECOM 171
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A UNIFIED LOYALTY PROGRAMME
TO SUPPORT FAILURE
DOESNT WORK IN INDIA

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DISRUPT TO INNOVATE
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action...
Lights,camera,
A bunch of new production houses and young artistes are

changing the face of the Bengali movie industry
SHINE JACOB & DEBALEENA SENGUPTA
arivartan might be the
favourite buzzword in
the political circles of
West Bengal, but it can
equally describe the face
of the movie industry in the state.
Referred to in the popular press as
Tollywood from Tollygunge, in south
Kolkata, where the majority of the film
studios of the city are located the
Bengali film industry today is a far cry
from the one that was once synonymous
with parallel cinema in the country, one
which produced legends like Satyajit
Ray, Mrinal Sen, Bimal Roy and Ritwik
Ghatak.
Fast moving story lines, glossy overseas locations, swift action sequences,
dialogues that pack a punch-that is new
age Bengali cinema for you. The result of
efforts by a bunch of new-age production
houses and movie makers who are working overtime to revive the golden age of
Bengali cinema.
We are changing with the times, says
Arijit Dutta, actor, film distributor and
owner of Priya Cinema, a theatre located
in south Kolkata. Now, the trend is to
produce urban cinema and remake blockbusters from the south, much like what is
happening in Bollywood (Mumbai film
industry) for some time. That is the kind
of cinema from the stable of production
houses such as Shree Venkatesh Films,
03
Surinder Films and Eskaay that has

revived the industry from a financial
slump.
Remember the industry has faced
many crisis beginning with the partition
when a large part of the market was lost to
Bangladesh. Many master technicians
and artistes like Sachin Dev Barman and
Rahul Deb Barman relocated to Bombay,
says film director Goutam Ghose. If the
on-screen chemistry between Uttam
Kumar and Suchitra Sen drew the audience back to the theatres-the popular lead
pair gave some 30 hit movies between
1945 and 1975 including classics like
Saptapadi, Harano sur, Pothe holo deri,
Share chuattor it was with the advent
of Doordarshan in 1975 that changed the
>
scenario at Tollygunge. By 1980, with television sets creeping into the drawing
rooms of most middle-class Bengali
households, cinema halls began wearing
a desolate look. The lack of marketing
and growing competition from the Hindi
film industry worsened the crisis, says
Ghose. When I was shooting for Paar (a
1984 Hindi movie), the technician studio
in Tollygunge was completely deserted.
Film maker Prabhat Roy says that the
death of Uttam Kumar was a big blow to
the industry. Directors like Anjan
Chowdhury, Sujit Guha, Biresh Chatterjee
did carry forward the mantel with scripts
that were based on contemporary issues,
he says. His films like Shwet Patharer
Thala (1992), which took up the issue of
widow remarriage, and Lathi (1996) that
upheld the virtues of the joint family system, were both commercially successful
and critically acclaimed. Simultaneously,
a section of the directors were choosing to
remake successful Tamil and Telugu
movies in Bengali. The south Indian
movies had some larger than life elements which were hitherto not served to
the Bengali audience and some of the
movies clicked in the box office, says
Ghose.
Before this could become a full-blown
trend directors like Aparna Sen,
Rituparna Ghosh band Gautam Ghosh
stepped in and took up the cause of serious movie making in right earnest. We
were able to retain the admirers of Ray,
Ghatak and Majumder with strong content, says Ghose.
Changing times
The very next phase was completely different in that it was a blend a whole lot of
elements from earlier genres from
commercial movies to art house cinema
and everything in between.
While remakes like the 2011 hit Paglu
(directed by Rajib Biswas, its a remake of
Telugu movie Devadasu) and Shotru (a
remake of Tamil film Singham, the 2011
Bengali action film was directed by Raj
Chakraborty) broke many box office
records. Experimental flicks like Baishe
Shrabon, Autograph, Moner Manush,
Abhohoman, Anuranan, The Japanese
Wife and Shukno Lanka walked the taut
tightrope between box office and critical
UP, UP AND AWAY

YEAR
NO. OF MOVIES MADE
2011
More than 100*
2010
110
2009
84
2008
66
2007
44
2006
Source: CBFC & Industry reports
42
(* Estimated)
fame with dexterity.

In last few years, the budget of movies
have increased from ~75 lakh-~1 crore to
~3-~5 crore. Now, for a popular Bengali
movie overseas locations are a must. We
are remaking many south Indian movies
like Bollywood houses are doing because
they lower the risk of failure as we are following an already hit formula, says
Surinder Singh, president of Eastern India
Motion Pictures Association (EIMPA), and
the founder Surinder Films, which produced Paglu. EIMPA has more than 500
production houses as registered members.
While senior actors like Mithun
Chakraborty and Prosenjit Chatterjee continue to shoulder much of the burden,
fresh faces like Dev (Deepak Adhikari),
Jeet (Jeetendra Madnani), Koel Mullick,
Priyanka Sarkar, Arunoday Banerjee,
Hiron, Shoham and Srabonti count among
the A-list stars in the region.
The revival is also evident in the number of movies made in the state every year.
From just 42 films made in 2006, the number of movies has increased to 110 in 2010,
according to the Central Board of Film
Certification. The number of films made
in 2011 is upwards of 100, though only 77
are registered with EIMPA. This success
has prompted Bollywood production houses to venture into Tollywood, but for various reasons, they are yet to make a mark,
EIMPAs Singh adds. Corporate houses like
Zee Motion Pictures, Reliance Anil
04
Dhirubhai Ambani Groups Big Pictures,

RP Sanjiv Goenka group firm Saregama,
SPS Group, Rose Valley group and Mumbai
Mantra owned by Mahindra & Mahindra
have dabbled with Bengali movies in the
recent years.
We are grossing anything between ~5
crore and ~10 crore even for low budget
movies. All the movies that we produced
over the last few years including
Khokababu, Shotru, Dujone, Fighter and
Wanted were huge box office hits. We
owe a large part of the success to marketing and the growing number of Bengali
television channels, says Himanshu
Dhanuka, who heads Eskaay Video.
According to a FICCI-Deloitte report on
entertainment industry in the state, the
average production cost of a Bengali film
varies between ~60 lakh to ~2 crore,
excluding print and publicity costs.
The marketing budget for Bengali
films varies between ~15 lakh and ~35 lakh
depending on their size. Unlike other
regions such as the south or the Hindi
movie industry where talent (artists and
technicians) is a substantial component
of a films cost, spend on these elements
is quite small so far as the Bengali film
industry is concerned, the report says.
More than the theatrical collections,
revenues from various other avenues like
satellite television rights, mobile ringtones and downloads, the DVD rights,
and overseas distribution have more than
doubled in the last four years.
Alongside the purely formula movies,
the new production housed are also betting on author-backed films like Royal
Bengal Rohosso, a thriller directed by
Sandip Ray based on the eponymous novel by Satyajit Ray. The film, produced by
Shree Venkatesh Films and Surinder
Films on a budget of ~2 crore, has reportedly grossed more than ~5 crore.
Describing the last few years as the
recovery period for the film industry in
Bengal, Ghose says, Producers and distributors were ready to invest in films
which subsequently improved the packaging that was missing from Bengali films.
Overseas distribution has also picked up
opening up newer markets for Bengali
movies abroad, Ghose points out.
The major markets for mainstream
Bengali movies are Bangladesh, the United
>
States and the United Kingdom which

have a sizable Bengali-speaking audience.
But the overseas collection for Bengali
films is still very small compared to that of,
say, Tamil films, that yielded ~9,516 crore
through a mix of theatrical and non-theatrical distribution channels last year,
according to the FICCI-Deloitte report.
Roadblock remains
While experts fault the new crop of production houses for blindly copying stories from successful south Indian films,
many in the business believe it is vital for
the existence of the industry. I believe
remakes are necessary; for me, the biggest
challenge is piracy, remarks Arijit Dutta
Tollywood calling
I expect the industry to grow at

70-80 per cent annually
Actor and convenor of FICCI Frames, eastern
region, Prosenjit Chatterjee, has been witness
to some of the biggest changes that have
taken place in the film industry of Bengal
in recent years. In a telephone interview
to the Business Standard he said the
opening up of the Bangladesh market
will give a big boost to the industry
As an actor who stood up to many of the challenges facing the Bengali film industry, can
you share some numbers that show the way
ahead?
The film industry in Bengal has grown tremendously in the last seven-eight years. Over the
next five years, I anticipate an average annual
growth rate of 70-80 per cent. From 30-35 films
a year, we have grown to a level where at least
100-105 films are being made every year. Many
young Bengali actors and directors are getting
noticed nationally. For example, Sujoy Ghoshs
Kahaani.
Budgets have quadrupled, glossy overseas locations have replaced local backdrops and experimentation is the name of the game. What else has
changed?
Yes, we see a lot of overseas locations in our films these
days. My last film Aparajita Tumi was shot abroad completely. This trend has come with the younger lot of actors,
whose films have a lot of songs and dance situations. The biggest
thing is the amount of money producers are willing to spend
sometimes running into ~30 to ~40 lakh per songs which immediately improves the prospect of recovery.
How has the film industry in Bengal evolved over the years?
I started as a child actor with black and white films and I have
05
>
of Priya.
According to EIMPA, the lack of infrastructure and cash flow remain major
hurdles for the film industry in the state.
About 10 years ago, we had more than
800 production houses; this has come
down to about 350 now. While in last four
years we have taken huge strides commercially, close to 150 theatres in suburban and rural Bengal which forms a
major market for us-have closed down,
sums up Singh of EIMPA.
I expect the industry to grow at 70-80 per cent annually

seen how things changed with the advent of colour and now
cinemascope. It is technology which has been the key to all this
change. Theatres have also improved here-it shows in the rising number of multiplexes. Earlier, the average budget of a film
used to be around ~20 to ~25 lakh, which has increased to ~5
to ~6 crore now. Today, a movie is treated like any other product with professionals guiding the marketing strategy.
young generation. That is what I am doing in my own productions.

You have ventured into production now. As a
producer what do you see as your biggest task now?
Yes, I have just produced a film with a bunch of new actors. I
have been trying to change the face of industry with fresh
talent. My production house will not cast me in the lead. I am
going ahead with subjects through which I can promote young
artistes.
From the commercial mess of the 90s to the well-organised production house-led flicks that are being churned
out today-there seems to be real makeover effort at work. As the convenor of FICCI Frames, do you
I have always advocated that cinema should be treated as an think corporate investments could change the future of
Tollywood, if we may use the term? Though
industry. That is why I decided to take on the task
firms like Reliance and Zee Motion Pictures
of heading the entertainment group of FICCI east- My production
have tried their luck in Bengal, we havent realern region. I believe, along with elements like culhouse will deal
ly seen much in terms of big corporate
ture and art, we should also keep the commercial
with subjects
initiatives here
aspect of a film top of mind art can be sustained
through which
Reliance is coming back again, though it did not
if the industry exists in the first place.
I can promote
make money in its earlier efforts. You see, corpoThere was a time when people thought that the
young artistes
rates have to come back because the industry needs
Bengali film industry has been driven to the
change. You need a big heart and creativity, and not
ground and that viewers were switching to films
made in other languages. Yes, at some point Bengals indus- look at the balance sheet all the time.
try was headed in that direction, but the whole industry
fought back and I consider myself as one of those soldiers. I Though it has grown quite a lot in recent years, the film
would say, I have taken it upon myself to fight many of the industry in Bengal is still way behind Hindi, Tamil, Telugu
challenges to highlight the fact that this should be treated like and Malayalam as far as revenue generation in concerned.
How long before we see the tide turning?
any other business.
If you make a movie in Tamil you can release it across the
What do you consider more important for a film com- southern states; not so for Bengali films. In that sense we have
a smaller market to start with. Having said that, we have a
mercial success or critical acclaim?
During the earlier part of my career, I had the opportunity to huge market in Bangladesh and things will change if that marwork with people like Tarun Majumdar. Then I moved towards the ket opens up. I must add, things are improving. For example,
commercial variety with fights, action the works. There was a Moner Manush was a joint venture between the two countries
time when we had a clear distinction between a mainstream film and it was a huge success. I think the market will open up
and the so called parallel films. But when I started doing films like soon and it will be good for both the countries. Now we have
Chokher Bali, we understood that there is an audience that would to deal with two different entities for the two countries with
want to watch artistic films wrapped in a commercial package. one releasing here and the other in Bangladesh. When that conToday, the success of films like Baishe Srabonand Autographhas straint is removed, we will be able to rise up to the standards of
proved that without doubt. I believe we have to focus on the any other industry.
06
>
SEGMENT AND
RULE
Given a high level of penetration and very little in terms of product

differentiation, marketers have segmented the shampoo market on benefit
platforms to stay relevant
MASOOM GUPTE
shampoo, is a shampoo,
is a shampoo. Right?
Wrong! Any woman
who steps out from her
salon after a hair treatment complete with a wash and blowdry wishes for nothing more than her
hair to stay that way lustrous, smooth,
soft to the touch. Or at least be able to
afford salon treatments more often.
Unfortunately, the latter is a luxury few
can afford even though the former
stays a life-long aspiration. Remember
the slogan from the Head & Shoulders ad

campaigns of the 1980s: You Never Get
a Second Chance to Make a First
Impression?
Fast moving consumer goods (FMCG)
companies have identified this aspiration quite well. The extensive range of
hair care products shampoos and
conditioners that line the shop
shelves stand proof to that. In fact, they
seem to be trying quite hard to ensure
the humble shampoo is no longer considered a plain vanilla cosmetic product
but one that aims to solve a specific
problem be it hair fall, dandruff, dull-
07
ness, dryness, damaged hair or lack of

bounce. You name a problem and there
is a variant(s) available in the marketplace to provide the solution.
Such evolution of the category is only
natural, say the industry players. The
segment, at around ~4,000 crore as of
January 2012 (as per Nielsen data) is
growing by over 18 per cent annually.
And competition for a share of this pie is
intense. Shampoos also enjoy one of the
highest penetration levels (around 8085 per cent) across product categories in
India, making it necessary for brands to
keep innovating to stay ahead.
>
Srinandan
Sundaram,
general manager, hair care,
Hindustan
Unilever
(HUL)
explains why companies are falling
over one another to offer a plethora
of variants and brands to consumers. There are major demographic
across price points, with
and psychographic differences amongst
myriad variants under each.
the consumers in India, he says.
But are companies worried
Keeping that in mind, we have a portfoabout cannibalising sales of
lio which helps us straddle the price
similar variants under various
pyramid while fulfilling all the needs of
brands in their stable? Satyaki
the consumer. Thus there is a range of
Ghosh, director, consumer products
brands differentiated on the basis of
division, LOreal India, which recently
consumer needs and aimed at specific
launched a Fall Repair variant under
target groups.
LOreal Paris range and also has a
Heres how HUL that holds the
Garnier Fall Fight variant, doesnt think
largest share in the market (43 per cent
so. If the pie is big enough, in this case
or ~1,720 crore) does it. The company
hair fall, one doesnt have to
holds four shampoo brands
worry. Besides the positioning
Dove, Clear, Sunsilk and Clinic The shampoo is
of the brands LOreal Paris
Plus. Each of these comes at a no longer a plain
is a premium expert care
different price point and is cosmetic product,
brand and Garnier is more of a
built on a specific platform. but a solution to
The platform forms the base a specific problem beauty brand-clearly separates the target audience.
offering of the product with
As for straddling the price
multiple variants to offer spepyramid, the shampoo category is split
cific solutions. For instance, Dove is
mainly into three segments econompositioned as a damage control expert. It
ic, popular and premium based on
offers variants like Dove Colour Rescue
(to protect coloured hair), Dove Hair Fall price. The challenge for marketers here
is to identify the requirements at each
Rescue (an anti hair fall variant), Dove
price point and formulate their offerings
Dandruff (anti-dandruff ) and so on.
accordingly. S Viswanathan, general
Similarly, Clear is an anti-dandruff solumanager,
marketing
services,
tion with variants like Clear Hair Fall
CavinKare, says, Hair care practices
Defense (anti-hair fall), Clear Radiant
vary across the pyramid. The bottom of
Black (for dark black hair) and others.
the pyramid uses hair oil extensively
Other players like Procter & Gamble
while the top emphasises more on
(29 per cent or ~1,160 crore), CavinKare
shampoo usage. Hair problems too will
(9 per cent or ~360 crore), Dabur (7 per
differ accordingly. Even at the lower
cent or ~280 crore), LOreal (4 per cent or
end of the price pyramid, consumers do
~160 crore) and ITC (1.1 per cent or ~44
crore) also hold two to three brands not want to give up on specific benefits
08
such as
defense against hair fall.
The difference lies elsewhere. A bottom of the
pyramid consumer may
favour products with natural ingredients. Therefore,
Chik
shampoo
from
CavinKare is full of ingredients
like hena, amla and badam. On her part,
a premium shampoo user may prefer
technology driven and scientifically
backed products. So LOreals Fall Repair
3X range of shampoo is bolstered with
arginine.
Similarly, the rural-urban divide may
throw up different hair care issues and
resultant needs. The urban lifestyle
and harsh environmental conditions
lead to hair damage. So the demand for a
product that restores damaged hair to its
former glory has grown a lot among such
consumers, says Nilanjan Mukherjee,
head, marketing, personal care products
business, ITC, which launched a premium shampoo brand, Fiama Di Wills
based on this platform in the year 2007.
Either way, to be successful, companies must have a play in all three segments and be available at all price
points. So the premium category is represented by brands like HULs Dove (200
ml bottle for ~123-~130), LOreal Paris
(200 ml for ~130-~135), P&Gs Pantene
(180 ml for ~120) and ITCs Fiama Di
>
Wills (200 ml for ~129).
Anti-dandruff shampoos like Clear
and Head & Shoulders from arch rivals
HUL and P&G respectively also fall in
the premium category. And since antidandruff shampoos are traditionally
considered more male-oriented, these
brands have had to segment the market
with special for-men variants. The two
FMCG majors seem to be on the brink of
a price war. Both brands have a ~139
pack-Clear is available at that price
point for a 200 ml bottle and Head &
Shoulders for a 170 ml one. The latter
has recently slashed prices by ~10. The
company (P&G) can argue that the price
cut is warranted as it is offering less in
terms of volume. But given the history of
the two companies, this seems more like
the onset of a new price war, says an
industry observer.
Next, comes the popular segment.
Pricing is quite varied in this segment
with HUL's Sunsilk at ~105, LOreals
Garnier at ~117, ITCs Vivel at ~89 and
CavinKares Nyle at ~82 (all prices for
200 ml bottles). The last segment, economic, constitutes of brands like
Superia (ITC), Rejoice (P&G), Chik, and
Clinic Plus.
The economy segment contributes a
little over half to the category in terms of
sales. However, the growth has been flat
in this segment with the popular category gaining more traction. Over the next
few years we expect the contribution of
the economy segment to be under pressure as consumers are likely to trade up
into the popular segment, says
Roosevelt Dsouza, executive director,
Nielsen India. The logic being that with
rising disposable incomes and increased
acceptance of the product, over a period
of time, consumers transition from one
segment to a higher one.
Small is beautiful
The shampoo market is split between
bottles and sachets. While both the segments are on par in terms of their contribution in value, the scales are tipped in
favour of sachets with regard to volumes. Bottles contributed 54 per cent in
value terms (~2,160 crore) as compared
to 46 per cent by sachets (~1,840 crore)
in January 2012 as per Nielsen data.
GROWING STEADY
Year-on-year growth of the shampoo market
over a five-year period in India
Period
January 2012
January 2011
January 2010
January 2009
January 2008
January 2007
Market size (in ~ crore)*

4,000
3,478
3,024
2,629
2,286
1,987
* The market has grown at an estimated rate of 15 per cent yearon-year over the past five years
Source: Market players
Sachets contributed 74 per cent to the

volumes vis-a-vis bottles at around 26
per cent.
According to Dsouza, the growth in
the urban markets has flattened, with
the rural markets driving the category.
Given that rural markets are price sensitive and consumers prefer sachets to
bottles, managing sachet offerings is key
to any brands success. Something that
even a premium brand like LOreal Paris
acknowledges. About four months back
it introduced some of its brands in
sachets. The sachets are available in
close to 2,000 towns currently and are
available at ~4, the highest in the sachet
segment. A necessary move many would
say as lower unit packs are necessary
to build trials, especially for premium
brands that come with hefty price tags.
The sachet market can however be a
great leveller for the segment. Even premium brands like Dove and Pantene are
available at ~1-~1.50, on par with economy and popular brands. Commenting
on LOreals pricing, an industry player
says, The price point pyramid in
sachets cannot be stretched beyond ~3.
Even heavyweights like Dove and
Pantene entered at ~3 levels but had to
soon succumb to market pressure and
bring their prices down. At ~4, LOreals
pricing seems a little out of reach. In
sachets, ~1 is the most popular price
point followed by 50 paise and then ~2.
Communicating with consumers
Shampoo commercials are counted
among the most glamorous ones on air.
And for good measure. In a multi-brand,
multi-variant segment, it is critical to
establish a brands proposition in the
consumer's mind to avoid confusion.
09
Overall, there are two approaches

to pick the star offerings and advertise
just those, which will have a rub-off
effect on the entire range. Or, go for
generic advertising. That is, highlight
the core proposition of a brand antidandruff, anti-hair fall and so on.
Nabankur Gupta, founder CEO, Nobby
Brand Architects & Strategic Marketing
Consultants, says such a strategy is not
sustainable. Shampoos have overdone
the whole anti-hair fall/anti-dandruff
routine. The category needs a strong
value proposition. Like soaps stand for
beauty, maybe shampoos could take on
a grooming positioning, making them
indispensable.
Most of the communication for
shampoos is done keeping in mind
urban consumers. However, there is a
definite rub-off on the rural markets as
well. Its a matter of aspiration. The
rural woman may see a beautiful woman
on the screen and aspire to get the look.
In that second, youve cinched a new
customer, says Gupta. With shampoo in
almost every Indian home, marketers
will need to focus more on styling and
looks, rather than the functionality of
cleaning and scrubbing.
>
PACKING A
PUNCH
Backpacks seem to be the new

battleground for luggage makers
Samsonite and VIP, but their strategies
are markedly different
MASOOM GUPTE
damsel in distress, an unlikely hero in a commoner and a
fight sequence with the
goons a scene straight out
of a Bollywood flick. The only
exception to this cliche: the heros
choice of weapon or source of strength,

if you will a red backpack. And that
my viewer is American Touristers latest
and also its first ever communication
promoting its smart international backpack range.
The
campaign
is
American
Touristers first step towards its ambitious plan of owning the category, one
that is as yet largely unorganised and
not dominated by any single brand.
Speaking of the companys plans for
2012, Sudip Ghose, group marketing
10
director, Samsonite South Asia, that

owns American Tourister, says, We
plan to sell two backpacks per minute in
2012. For the disbelievers, heres
Ghoses math: a year has over 5.25 lakh
minutes. His sales target is 10 lakh units,
higher by more than 50 per cent from
last years sales figure of 4.5 lakh backpacks. If the target is achieved, the aim
will be met.
The math may seem straightforward,
but reaching this target may prove to be
an uphill task. Mainly on two counts
>
the challenges faced by the category as
well as competition from players such as
VIP and casual bags maker Fastrack,
that are firming up plans to rule the
space, besides sports brands like Adidas
and Reebok that also target a similar
consumer base.
The latter, that is sports brands, pose
a bigger challenge on the back of their
existing connect with the youth. As a
brand our focus is primarily on creating
products that help athletes everyday
people like you and I who need gear for
our daily fitness regime or top athletes
to perform better as well as sports
fans, says Tushar Goculdas, director,
marketing and sales, Adidas India.
Though the brand does not actively promote itself as a range for casual wear or
use given the aspirational value
attached with the brand and the emotional connect thanks to its association
with leading sports stars, the youth naturally identifies with the brand, feels
Goculdas.
Building up a strong brand proposition may thus be key to attracting this
rather tricky audience, high on their
adulation for branded goods. For example, VIP, which is positioning as a stylish
travel gear, is hoping to capture the
attention of a younger audience with its
new collection of backpacks and an ad
campaign aimed slated to hit screens
end of April.
Numbers game
In India, the overall luggage market
stands at ~3,000-~4,000 crore, according
to market estimates. Of this, more than
50 per cent is controlled by organised
players like American Tourister,
Samsonite and VIP. The reverse is true
for the backpack category. While the
branded backpack market stands at
~400-~600 crore, the share of nonbranded, local players could be much
larger, say analysts.
To estimate this total universe, Ghose
offers another back of the envelope calculation. The total Indian population
stands at 1.2 billion. Assuming that one
third of this population falls in the 15-29
years age bracket, one is looking at a
potential target group of over 0.4 billion
or 40 crore. If even half of this audience
spends a basic ~200 on a bag each year,
the total bag market could stand at over
~4,000 crore, on par with the overall luggage market.
Branded backpacks start at a much
higher price point. For instance,
Fastrack starts its range at ~895 and goes
up to ~2,000. American Tourister, too, is
playing in a similar price band (~790~2,100). The VIP brand, Skybags, too
retails backpacks at a starting price of
~790. This starting price point is no
longer an issue as usage and attitude
studies conducted independently by
players dictate that the target consumers are willing to spend ~750-~800
for a good quality backpack.
As per Manish Vyas, VP, marketing,
VIP Industries, the ~500-~1,000 price
band is most popular with consumers
and efforts are concentrated on an
upgradation of usage patterns a sentiment echoed by players across the
board. To this end, players are wooing
consumers with stylish designs and
sturdy, good quality products.
sioned an in-house study to gauge the

expectations and needs of the consumers, gaining some interesting
insights in the process. For instance,
students in classes six to twelve want a
secret pouch in the backpack. College
students, high on the fashion quotient,
want the branding to be prominent on
the bag. And lastly, it was found that
young executives mostly travel by bikes
and hence during monsoons need a
cover for their bags.
A backpack, by nature, is a very personal item and every user will have
his/her own quirks. While the product
cannot be custom made for each user, it
can surely be sub-segmented as per
broad categories. Even if you look at
college students as a broad category,
close up there will be differences. So
within this universe, there may be a student who carries a bag to college as just a
fashion accessory, while there may be
others who need sturdy laptop cases,
says VIPs Vyas.
VIP, therefore, has a focused backpack brand, Footloose, for college stuDesign matters
dents and laptop backpacks from
Given the typical target group
Skybags for young executives
for this category is 15-29-yearand
college
students.
old young adults, the focus is a
American Tourister too has
blend of design, functionality
adopted a similar approach
and of course comfort as
with different brands targetpointed out by Simeran
ing different categories: Buzz
Bhasin, marketing head,
(for school kids), Code (for
Fastrack. Ergonomics is a key
college students) and Citi Pro
aspect. As the load you carry
(for young professionals).
increases, comfort becomes The backpack
Backpacks for school
very important. The other market in India
kids too provide players
thing is how the bag helps you faces an issue many with a big opportunity but
organise your stuff con- others do
there are mixed reactions to
sumers are always looking for that of cheap
the space. Ghose feels that
easy access, explains Bhasin. knock-offs
cartoon character bags
Once this basic criteria are
mean big business; Vyas
met, the products can be furfeels it is a dynamic space,
ther enhanced by adding features for
as there is a separate flavour-of-the-seausage by a specific group. For instance, son cartoon character, posing a chalmost backpacks available in the market
lenge with regard to building brand
are treated as unisex products. To do
longevity. Someone like Fastrack though
away with this anomaly, Fastrack has a
wouldnt even venture close to the terrirange that caters specifically to girls,
tory as it holds fast to its uber cool,
one with bright colours as preferred by
youth image.
women. In terms of functionality, there
Challenges galore
may be additions like a built-in cosmetic
This category is plagued by an issue
pouch and so on.
faced by many categories in India that
American Tou- rister, too, commis-
11
>
of cheap knock-offs. This is a very cluttered category, the biggest challenge

being fakes. The entry barriers into this
category are low and it takes less than a
month for the unorganised market to
replicate products and launch them at a
quarter of the price, as they are able to
do so after completely ignoring quality.
Therefore we need to be ahead of the
curve all the time, says Bhasin. Some
observers feel this may actually be a
blessing in disguise: a lower price point
for a fake could only increase the snob
value of the original product.
A bigger challenge though would be
ensuring reach. Currently most of these
players have a distribution footprint
hovering between 2,500 (Fastrack) to
7,000 (American Tourister) across channels like company-owned stores, franchisees, departmental stores, distributors and so on. Says Purnendu Kumar,
associate VP, Technopak, globally, such
products are mostly retailed through
large retailers. But in India, like fast
moving consumers goods, backpacks
are retailed largely through smaller traditional retail outlets. Each store
means a new customer and each new
customer means new negotiations, new
arrangements, newer challenges. But,
this can work both ways. A daunting
task at first, once established, it can be
your biggest advantage over your competitor, adds Kumar.
Once the distribution network is in
place, one must deal with space constraints. Most mom and pop stores have
an area of just about 200 square feet on
average. Within this limited space,
brands must jostle with each other
besides taking on non-branded, locally
made backpacks, knapsacks, other casual bags and so on. Despite the many
challenges, all the players are only
speaking of scaling up their business in
this space. From the looks of it, the luggage industry has found its sunrise segment.
12
>
THE NEW
FRONTIER
Thums Up moves away from its individualistic,

masculine positioning to be the flag bearer of daredevilry,
a la Mountain Dew
SAYANTANI KAR & MASOOM GUPTE
eres an old war story with a
new twist. Coca-Cola India
has two brands, a cola and a
clear drink, among the top
three carbonated soft drinks
in the country. PepsiCos Pepsi is at No
3. But the top cola in Coca-Colas arsenal is not Coke, like it is worldwide. It is
Thums Up, the homegrown brand it
acquired in 1994. When Coca-Cola and
Pepsico entered India, they did not
leave their legendary rivalry behind. It

fell on Thums Up to battle it out with
Pepsi on the ground as well as in its
communication. Coca-Colas Sprite
took upon itself the onerous task of
fighting PepsiCos non-cola drinks.
Well, the script is changing. Thums
Up has picked out a new opponent
PepsiCos citrus Mountain Dew.
In a move to contemporise Thums
Up, Coca Cola has pitted its largest
Indian brand against one with a 7 per
cent market share but the fastest grow-
13
ing in the fizzy drinks category. In the

US, Mountain Dew is the third largest
carbonated soft drink, after Coke and
Pepsi. In India, Mountain Dew has
taken less than 10 years to join
PepsiCos ~1,000-crore-brand club that
till last year counted Pepsi, 7-UP and
Mirinda as members. For PepsiCo, the
rise of Mountain Dew is in line with its
increased focus on non-cola beverages.
For Coca-Cola, which gets the majority
of its sales from outside the United
States, this is one more cause for worry.
>
Enter old war horse Thums Up. The

job this time is to take on Mountain
Dew, from the stable of what is often
referred to as the eternal underdog,
PepsiCo. As things stand, Thums Up has
a share of 15 per cent of the ~13,000
crore fizzy drink market, followed by
Sprite with 14 per cent and Pepsi at 12.5
per cent. Coke has 8.5 per cent of the
market while Mountain Dew 7.7 per
cent.
Here is the crux. Globally, in the
most profitable markets carbonated
drinks is a shrinking segment something that PepsiCo predicted and reacted to first, diversifying successfully into
categories of products that were perceived more desirable.
And the stakes are high. India is
expected to rank among Coca-Colas top
five markets by the end of the decade.
Last year, during a conversation with
journalists in Delhi, Ahmet C Bozer,
president of the Eurasia and Africa
group of the Coca-Cola Co, had said that
16 per cent of Coca-Colas total revenue
comes from Eurasia and Africa. Of this,
13 per cent comes from India alone. But
the opportunity is bigger. We are told
Indians consume only 12 200 ml bottles
of beverages every year compared with
675 bottles by Mexicans, the largest
consumers of Coca-Cola globally.
So the company plans to invest $2
billion in India over the next five years
the size of the investment is equal to
what the worlds largest soft drink company has spent in India over the past 18
years since re-entering the country in
the year 1993.
on Thums Up and says Aaj kuch toofani

karte hain. He runs and jumps off the
terrace to lead the others across
rooftops and down water pipes, using
parkour-like movements, to the tune of
a racy track that says Boring pe daring
ka jacket chadha ke. We are told at the
end
of
the session that with the new route the
gang succeeded in shortening the journey (30 minute ka raasta 3 minute ka
bana diya).
Cut to two youngsters with skateboards on a ledge. When one of them
baulks at the sight, his friend takes a
swig from his bottle of Mountain Dew
Next change
and says, Darr ko Maro Dew before
We have four youngsters poring over a
letting the bottle go. The camera pans
map on a terrace. But one of them sips
out to show us that he
is referring to the
300-feet drop down a
>
dam. He leaps on his
Darr Ko Maaro Dew takes
skateboard to race the
forward the brand ideology
water from the dams
of Darr Ke Aage Jeet Hai.
open gates and dive
We urge the consumers to
into the lake beneath.
move ahead with selfBoth
the
ads
belief
depend heavily on
RUCHIRA JAITLY, EXECUTIVE VP, MARKETING,
stunts. Each has
BEVERAGES (FLAVOURS), PEPSICO INDIA
youngsters as protag-
Do the Dew
14
onists, who pull off the stunts pull off

the stunts with consummate ease,
thanks to their respective drinks. The
voiceover exorts the viewer to take on
more risks. With Aaj kuch toofani karte
hain, Thums Up asks her to avoid the
mundane way of doing things and whip
up a storm. Mountain Dew asks her to
scare the daylights out of fear.
The new code of war is daredevilry
and the protagonists are from two different segments.
Then for Thums Up the days of taking potshots at Pepsi are far behind. For
close to a decade now it has concentrated on consolidating its macho positioning with the movie star Akshay
Kumar while Pepsi has continued taking jibes at it from time to time. This
time both its Taste the Thunder
tagline and Kumar are conspicuous by
their absence. Coca-Cola says this was
done to contemporise its lead brand.
Srinivas Murthy, director, marketing
(Thums Up and flavours), Coca-Cola
India, says the campaign was the result
of a search for the new code of masculinity and an attempt to bring it alive.
For an average mid-twenties male,
masculinity is no longer about a strong
man beating up the bad guys for a girl.
Thats the old code. The new definition
of masculinity is about challenging the
status quo, doing things your own way.
Adds Sainath Saraban, executive creative director, Leo Burnett, the advertising agency that handles the account,
Its all about taking the thunder out of
this strong full-bodied cola and adding
it to the consumers life.
Anand Halve, co-founder of chlorophyll brand and communications consultancy, points out that so far Thums
Up ads were about the man among the
boys, who always remained one step
ahead of juvenile male gangs. The
drink is more carbonated than the others and hence consistent with this
grown-up positioning. He points out
even the brands activations were in
sync. He recalls one which connected
this grown-up stance with the need to
have a license to be able to drive. To
Halve,
the
current
ad
looks
too young, with the youngsters trying
too hard to get a taste of adventure.
>
>
Taste the thunder
Masculinity is no longer about a strong man

beating up the bad guys for a girl. Its new
definition is about challenging the status quo,
doing things your own way
SRINIVAS MURTHY, DIRECTOR, MARKETING (THUMS UP AND
FLAVOURS), COCA-COLA INDIA
Fearless youngsters, on the other

hand, have been integral to Mountain
Dews imagery since its launch in 2003.
This is in sync with how the brand has
evolved worldwide from a friendly
drink to a high-energy, action-sports
oriented brand. In its early days in
India, the brand toed the global line
with Do the Dew. In 2007 it moved to a
more precise positioning with Dar ke
Aage Jeet Hai.
For the summer of 2012, a new
agency on board, Taproot, has meant a
new take on this positioning stance.
Ruchira Jaitly, executive vice-president, marketing, beverages (flavours),
PepsiCo India, says, Darr Ko Maaro
Dew takes forward the brand ideology
of Darr Ke Aage Jeet Hai. We urge the
consumers to cut the emotion of fear
down to size and move ahead with selfbelief.
Mountain Dew began the season with two films, featuring
Olympic medalist boxer
Vijender Singh and World
Champion
wrestler
Sushil Kumar, which
told the stories of how
the two overcame their
fear. The skateboarding
TV commercial followed.
Agnello Dias, chairman
and co-founder, Taproot,
says, Mountain Dew works
on quenching thirst that
results from a dry throat when
one is in fear. But we cant depict facing
fear the same way every year. So we had
to interpret it in a new way. The insight
is how objects of fear seem to grow more
threatening if we continue to fear them
and that the whole thing is in ones
mind. The best way to beat fear is to rein
it in the mind. Mountain Dew has
always reflected the adventurous spirit
of the contemporary youth and our

communication has been high-adrenaline and about outdoor adventure, says
Jaitly. The brand over the years has
depicted white-water rafting and wingsuit base jumping in its ads. It also
launched a neon bottle to dispel the fear
of darkness.
Halve says the new Thums Up ad
presents an image very similar to that of
Mountain Dew. Depicting youngsters
drinking out of the bottle and then performing stunts is just another way of
asking us to overcome our fears, he
says. Imitation can be the best form of
flattery and when the leader does so, it
can be telling, Halve adds.
15
So far, Coca Cola had deployed Sprite

to take on Mountain Dew. Both were
clear, citrus drinks and were youth-centric. To Mountain Dews Do the Dew,
Sprite had All taste. No gyaan and
Dont want to do. Over the last decade,
Mountain Dew took digs at Thums Up
and Sprite while Sprite ran spoofs on
Pepsi and Mountain Dew. Sprite continues to be tongue-in-cheek, Thums Up
will now be walking the adventure talk
like Mountain Dew in its activations
and consolidating its stronger markets.
Different strokes
The two are also playing to their geographical strengths. The lead in the
Thums Up ad is the Telugu movie star,
Mahesh Babu, who is popular in Andhra
Pradesh, Thums Ups stronghold, points
out Vikas Gupta, former head of marketing at Coca-Cola (he was with the
company from 1994 to 2006). He will
also give a youthful face to the national
audience. Taste the Thunder had
always been Toofani Thanda in Hindi
and audiences are already familiar with
the line, Gupta adds. PepsiCo which
>
had been investing in the northern markets for Mountain Dew, released its first
Overall carbonated soft drinks
t
w
o
market in India: ~13,000 crore
athlete-films on Doordarshan to connect instantly with the Hindi-speaking
heartland, while the skateboard ad
released during the ongoing session of
the Indian Premier League cricket tournament.
THUMS UP
~1,950 cr
Coca-Cola is lining up urban
Toofani Zones that will replicate its
Thums Up Jalsa, which is an
SPRITE
OTHERS
action-packed show running in
~1,820 cr
the rural areas for three years now,
covering 300 centres and engaging
around 2.4 million. It is now
PEPSI
~1,625 cr
encouraging discussions about outMOUNTAIN
door adventure on its Facebook page.
DEW COKE
~1,105 cr ~1,105 cr
The conversation threads include Are
you planning to relax this Sunday or
will you be setting off a toofan with your
own Toofani team? or Do you sky-dive?
Go mountain biking? Share pictures
Source: Industry figures
and stories of your most Toofani adventures with us!
Pepsico is not about to concede any
beaten track. Be it cars, jeans, beverages
ground either. It is bringing the
or even wristwatches, he adds. Jaitly
Mountain Dew Xtreme Tours to India
agrees, The can do attitude and rebelwhich will have international profeslion are attributes that connect well
sionals participating in skateboarding,
with the contemporary youth, which
BMX (Bicycle Moto X) and FMX
explains the increasing adoption of
(Freestyle Moto X) and interacting with
these by different brands.
the audience across India. The brand
With both the brands firm on appealhas been arranging rapelling, bungie
ing to the contemporary youth, it could
jumping over the years across
either lead to a fizzle-out, with
the country, but the Xtreme Thums Up will
Thums Up shifting gears or
Tours promises to beat these now be walking
finding a sharper message to
in scale. Specially-built ramps the adventure
differentiate
itself
from
will be transported across the talk like
Mountain Dew.
country for the performances. Mountain Dew
The online campaign with the in its activations
two athletes had already garnered 15,000 entries to qualify for a
days training with them.
Numbers matter
15
14
42.3
12.5
7.7
8.5
Why a dare?
But why is adventure the new buzzword? Halve says that 10 years ago,
everyone wanted to be cast as the
investment banker with almost no visible signs of testosterone. But now you
find more and more people quitting
their jobs and breaking out of that
mould. That is why you will find all
kinds of brands talking about bucking
the trend, and going away from the
16
>
THE
LEADERSHIP
PIPELINE
Developing a deep bench is a human resource issue, not restricted to the top management,
but spanning an organisations hierarchy. In most global organisations, leadership
development initiatives are considered an integral part of the corporate strategy.
Are Indian corporations using global best practices to plan succession? Does India Inc. have
sufficient ready now candidates to replace planned and unplanned losses of key leaders?
Our panel of experts offer some answers.
17
>
dollar multinational business. In such cases, Indian companies have ended up
extending peoples services, not gone
through a full succession in the timeframe
they had planned for and had to rejig and
rework their processes.
At the Aditya Birla group, the interesting
aspect has been that we have never looked
at succession just within the same business. We have looked at the group to get the
best talent fit for a role. For example,
Shailendra Jain (who retired as whole-time
director and president of Grasim Industries
in 2010) was fibre head. KK Maheshwari
who was not in the business but was in the
chemicals business succeeded him at
Grasim. Among the primary factors that
decide such things is the runway available
to each individual, the years to retirement.
That gets compared against the plans for
the business and what is the runway
required for it. A business could require
substantial greenfield investments in the
next two years but it may give results fiveIndian companies have grown proves that
seven years down the line. Then one wont
it has worked.
look at someone with just two years of runHaving said that, India Inc. can be
way because he/she wont be able to see
accused of being deficient in one respect i.e.
the project to fruition-the commissioning
in announcing succession well ahead of
and operation. Then of course, the competime. It is often announced less than six
tence and the interest of the individual
months from the succession date. That is a
influence the choice heavily. In large organcommunication and transparency issue. It
isations, where multiple options are availhappens for many reasons, not because
able, people will have their own prefercorporations dont want to announce well
ences. You cant force a plan on a person.
in time. There are issues in making
Such plans are needed because preannouncements ahead of time someparedness is indispensable. It also measures
times a company stands to lose other
the bench strength of talent in the compaemployees if one among them is chosen
ny. A systematic plan also makes one a betwell in preference to others.
ter employer because one can
Indian companies have grown
answer peoples questions about
significantly over the last five-sev- India Inc. has
their growth and career.
en years. When you grow in size been very
We review our plans twice a
significantly, it is not easy to find creative and
year, especially for the top 30
successors quickly. Business experimental
positions. We look at where we
expansion happens faster than in succession
have ready successors, emerhuman capability development. planning
gency successors. For large busiTherefore some of them have had
nesses, there are always two-three
to find patchwork solutions, delay
successors, who would be ready in different
their succession, ponder over it a little
timeframes. By revisiting the scenario we
more.
see if the plan needs revision, whether there
Suppose I have a billion dollar business
with a ready successor and then suddenly are any gaps (if someone has left or moved
to another role).
an acquisition comes along and it became
Family businesses have found different
a three billion dollar business. Now the perways to plan a succession-even in case famson I had identified as a successor was good
ily members they make choices. The phienough for a billion dollar business but
losophy of horses for courses equally
might not be able to handle a three billion
A SUCCESSION PLAN IS A CHOICE AN ORGANISATION MAKES

IN ITS OWN CONTEXT
SANTRUPT MISRA
very company does succession planning in its own way. To the outside
world, it looks like there is no symmetry, no pattern to it. The very fact that
corporate India has grown it has managed to replace a generation of leaders with
another generation, whether you look at
large corporate houses including the Birlas
or MNCs in India such as Unilever or Glaxoshows there is a system in place, though
there is no one dominant way in which people have gone about succession planning.
Each one of these has managed the
issue of succession in its own way. Some
have relied on internal resources and some
on outside resources. Some have looked to
people from the same discipline as the predecessor was, some have moved away to
another discipline to look for successors. I
would in fact say that India Inc. has been
very creative and experimental in the way
they have done succession planning.
Where Indian corporations differ from
the Western world is in the fact that succession planning is not always a robust
board-level discussion. But then, that is not
necessary because as long as the board has
delegated the job to, say, the chairman or
the lead director of the board, it is good
enough.
The
very
fact
that
systems have not been broken and that
18
>
informs family succession when the best

and the brightest perhaps get the largest
business to look after. Some have even split
businesses to divide it among members.
The leader of the family has to make a
choice between members. Thats what one
owes as a leader to the whole family and its
legacy.
Most of the time, shareholders are looking at performance. People looking at a
companys succession plan should also try
to remember if there has ever been a leadership vacuum at the top. If not, then the
succession planning is working and no
shareholder has a reason to grumble or be
concerned. That means the previous leadership has built robust processes to sustain
the company for a reasonable period of
time. Then there are times when a collabo-
ration of the next few in line serve as stop
nance to claim a stake. Succession to a
gap arrangement during a vacuum. It can
shareholding is the shareholder's choice.
be seen in action when a formal successor
No one else has a right to comment on that
has not been named yet but the organisachoice.
tion still continues to perform. Such short
In an organisation which is rolling
term arrangements are never ideal for the
from crisis to crisis or is in the midst of a crilong term.
sis, it wouldnt be a good time for the CEO
Succession planning is certainly importo exit. She or he should see it through the
tant, but lets not forget that large organicrises, bring some stability and then look at
succession. Leadership succession is a
sations are resilient. A large organisation is
always run by many. There are at least a
means to an end and not an end in itself.
score or two of leaders who provide the
Similarly, in an organisation going through
foundation and the backbone. As for poster
exponential growth, where the fundamenboys, even they know that their
tal strategies are in place, and the
success is due to a large team who Leadership
leader faces the question of when
work backstage. If the corpora- succession is a
to retire or step down. Should
he/she keep a third partys
tion gets value out of the individ- means to an
notion of corporate governance
ual on a sustained basis then it end and not an
decides not to replace him or her. end in itself
and step down because the sucBut if the leadership is lacking in
cession plans is in place on paper
some respect and yet the person is still peror lead the organisation through the strategic phase of growth? Therefore, succession
sisted with, that will be a cause for worry.
plan is a choice an organisation makes in its
In publicly-held organisations, as long
as the shareholder is happy with the leader,
own context. And best practices are not
no one can say anything. In a privately- one-size-fits-all plans.
(AS TOLD TO SAYANTANI KAR)
held organisation, it is the leaders organisation and he has a right to choose. Mr
Birla, our chairman has always maintained
The author is director, human resources, Aditya
that he does not see someone who is not a
Birla Group, & CEO of the Groups Carbon Black
Birla leading the group. Now, if someone
Business. He is also a director on the Aditya Birla
aspires to be in his shoe, then she or he
Management Corporation Board, the apex
should know that this is not the right organdecision making body of the group
isation. One cannot cite corporate gover-
THERES A NEED TO VIEW

SUCCESSION PLANNING
AS A TALENT DEVELOPMENT
PROCESS
INDRANIL ROY
ndia Inc has a significant succession

issue. Partly due to leadership demographics, an entire generation of leaders
and first generation entrepreneurs are
going to retire over the next five to 10 years,
paving the way for a new generation of
executives.
This in itself is a significant challenge.
Add to this the fact that Indias economic
growth has created a huge demand for executives, straining the pool of available executive talent in the country, especially with
Indian executives finding lucrative global
19
>
sized impact on the culture, values and the

Building financial and commercial
capability is part of the challenge; a bigger
operating style of the company, making it
challenge lies in building learning agility
difficult even for the best of executive talent
the ability of an executive to learn quickly
to fully replace the founder. We have witfrom experience and be effective in unfanessed this in Dell and Starbucks where,
miliar situations. Indian business houses
even with a solid bench of talent, the
have recently started to focus on learning
founder had to return to set things straight.
agility as a core part of their succession
Add to this the tradition in India of next
process.
generation family members taking over
> Globalising Indian comp-anies: As an
companies founded by their parents, and
the issue gets even more complex. Several
increasing number of Indian businesses
first generation promoters are now lookare aspi-ring to go global, we are seeing
ing to evaluate their children alongside
the emergence of a new succession chalnon-family professionals that have been
lenge in India. These companies will need
deeply involved in building the business
to build a bench of global-ready leaders
over the years.
who can operate in different countries and
Moreover, founders are realising that
in a diverse set of cultural contexts.
their children may not be interAdapting and adjusting ones
ested in the core/traditional busi- Building
leadership style is critical for sucness, and might be interested in financial and
roles in multinationals. Finally, the aspiracess. Running a global business,
creating new and exciting busi- commercial
tions of young talent is changing rapidly
acquiring and integrating internesses in technology, media and capability is
with an increasing number of young leaders
national assets, working with
entertainment. Succession in part of the
choosing to either start their own businessdiverse and cross cultural management teams are capabilities
es or move out of the corporate sector alto- these cases is particularly chal- challenge
lenging. Getting the criteria right,
gether and work in the non-government
that will need to be built and
the expectations straight and the process
accelerated over time.
sector. These three trends, taken together is
rigorous and transparent is key to navigatcreating a significant succession challenge
International expansion does give these
ing through this complex transition.
companies access to global talent in other
in India.
Treating the process as a replacement plancountries, but we are yet to see Indian comIndia Inc. has had a long history of
ning process does not work in these cases,
panies embrace a foreign-majority manbuilding talent for the future. Several globone has to have meaningful conversations
agement mix. This will happen over time,
al studies have identified Indian compawith each individual stakeholder,
but for now, the key will be to use foreignnies like the Tata Group, Infosys,
coach individuals through the
ers in specific roles, while we build strong
ICICI, Wipro, Hindustan Unilever, Succession
transition and constantly evaluglobal-readiness in the core Indian execuAditya Birla Group and others as planning in
the
tive pool. Globalising the succession planglobal leaders in the arena of talent conglomerates ate
plans to adjust to emerging
ning process to incorporate talent from a
and leadership development. So, is not an
issues. The process may take in
wide range of countries is also part of the
in theory, Indian companies episodic
excess of five years to be comlearning curve that these companies are
should not have an issue navigat- initiative
pleted satisfactorily.
going through.
ing the shift in executive ranks
> Indian business houses (confrom one generation to the other.
Overall, Indian companies are taking
glomerates): Succession planning for execthe succession issue very seriously. There is
At the most visible end of the spectrum,
utives in conglomerates is not an episodic
a growing recognition of the need to be
with celebrity succession cases like Ratan
initiative, it is a full-time job. Some conproactive about it and the need to view this
Tata, Narayana Murthy etc that seems to be
glomerates in India have designated a
the case. We have been witness to very careas much as a development process for
team of professionals to do this on a full
talent as it is a replacement process for
ful and meticulous succession planning
time basis. Others are contemplating such
executives.
from major corporations like the Tata
a move. In conglomerate situations, it is
Group, Infosys and ICICI in the recent past.
critical to groom a pool of multi-domain
That said, the vast majority of companies in
The author is managing director for Korn/ Ferry
generalists to take over different business
India are still struggling with the idea of
Internationals Leadership and Talent
leadership roles in different domains over
smooth handover across generations.
Consulting business in Asia Pacific
time. The art and science of finding and
There are three main reasons based on the
grooming this special category of executype of company:
> Promoter-led businesses: Succession
tives who could be running an automobile
planning in first generation promoter-led
business today and a beverage business in
businesses is difficult anywhere in the
two years, is the key challenge in conworld. The founder tends to have an outglomerates.
20
>
INDIA INC. SHOULD BE WILLING TO TAKE RISKS IN

SUCCESSION PLANNING
RAJEEV DUBEY
have noticed that even when companies have succession plans, they tend to
be risk averse. If it is felt that the internal
candidate who was in line to take over a role
is not ready for whatever reason, companies
dont hesitate to look outside. So, despite a
formal succession planning in place, we have
seen senior level lateral hires in the industry.
It is understandable because companies
want the senior management people who
take up new roles to hit the ground running,
since these are critical positions.
But most such plans involve growing
talent over a period of time. In my opinion,
India Inc should be willing to take risks in
succession planning and go ahead with
the internal candidates who had been
shortlisted as successors.
Of course, I am not saying that there
should not be external hires at all. When
corporations enter a new business or technical vertical, then an external expert could
be the ideal to lead that division. In cases of
frantic expansions, companies tend to concentrate on just building the business and
not so much on succession planning internally. External talent helps to form the talent pool in such companies. The ideal ratio
of internal to external talent for a company
would be a 70:30 or 80:20 to keep a steady
functional talent council that looks at the

inventory of talent in each function that is
required across diff-erent businesses.
Mr Mahindra presides over the apex talent council which busies itself with the top
three levels in the entire Mahindra Group.
The 10 days that he spends sees avid discussions with all the business talent councils for one whole day each. Of course, the
micro-processes in the business talent
councils help in such sessions as well. At
the end of the individual meetings, there is
an integrated one which brings with it complete visibility of the lateral movements, if
any.
The talent councils were established in
2004. There were challenges. Initially, the
chiefs of the different businesses were skeptical of the benefits of such a process and
wondered what value it would add to their
verticals. We had to work towards getting
them to realise the import of succession
planning on their strategies. Soon enough,
they learnt how such a step can add to the
ease of doing business. We were able to get
flow of fresh thinking in the company.
the succession cover up from 40 per cent
Succession planning is all about a
earlier to the current 80 per cent. That
process and a structure. It is what helps a
means at least one successor for 80 per cent
conglomerate like ours (the Mahindra
of the positions in the company. Now the
Group of Companies) prevent our transitions from becoming unwieldy. Not only task is to fill all the different layers of the
succession plans across a five year period,
do the individuals, but business heads also
have a role to play in this. Each of the busi- or even more. We are also infusing more
rigour in the timelines we have for the difness heads has a talent council. These
ferent plans.
micro-manage the succession planning for
The senior management suceach business. The councils help
cessions entail corporate goverin ensuring synergies in talent Succession
nance. It is an integral to the
management and prevent any planning is
all about a
appointment of the top position in
cross-purpose deployments.
a company. At Mahindra, the
Anand Mahindra, himself, process and a
remuneration, governance and
spends around 10-12 days in a structure
nomination committee comprisyear going through the formal
ing members of the board is responsible
talent management programme. He does
for coming up with Mr Mahindras succesnot look at the micro-management, but
sor. And it is already looking out for the
mainly concerns himself with the planning
right successor.
of the top three levels in the organisation.
Even if the stakeholders of a company
The micro-management would include
are not concerned about the succession,
a 360-degree review of the person. It would
the management should be. At the end of
include everything from her tenure in
the day, the board represents the shareMahindra to her ambition. It is debated if
holder.
the strategies of the business fit with the
(AS TOLD TO SAYANTANI KAR)
skills and competencies of the person.
Eventually, her development plans, career
The author is president, group HR & afterlength and the need for coaching and mentorship are considered. It is after the review
market, & member of the Group Executive Board
that she might be chosen for any of the levels in a succession plan. There is also a
21
>
THE TIME IS ALWAYS RIGHT TO PLAN FOR SUCCESSION
INDRAJIT MUKHERJEE
ecent events in corporate world have

brought a stark reality to the fore,
that many well established Indian
corporates do not have a well-planned succession plan in place for Chief Executives.
There appears to be a fair bit of ambiguity even among blue-chip firms on who
would take over once the incumbent MD/
chairman completes his term or decides to
move on. To the outside world it appears
there is a scramble to identify, shortlist and
decide on an insider or outsider depending
on the organization's culture, value system
and business objectives at that point in time.
It is important to have a considered succession plan in place well ahead of time to avoid
missteps in the succession planning
process. Many western companies appear to
have a succession planning system in place,
or else Apple Computer would still have
been hunting for someone to step into Steve
Jobs shoes. Berkshire Hathway under
Warren Buffet also appears to have a succession plan in place. The recent announcement that Buffet has been diagnosed with
early stage cancer re-affirmed that the marketplace is aware that a successor is in place
though yet unannounced.
The Tata succession plan as we know
had been going on for few years and of
course the final announcement of a successor to Ratan Tata did come as a surprise
for those who were not familiar with the
iterative succession planning process the
company had put in place. That leaves us
wondering about the future at Infosys once
the founders have had a go at the helm by
more scions of family owned businesses

getting professionally qualified, such concerns might be reducing.
Successions are important but complex
events in the life cycle of all businesses. In
family businesses it is more so because of the
special characteristics of such businesses
the internal dynamics of the family owning
the business spill over into the business decisions and the business issues affect the family relationships. The effect of family dynamics on business is possibly the most complex
in the event of succession from one generation to another (intergenerational transition), especially from the first generation
(founder) to the second.
Some family businesses which are successful intergenerational transition take the
rotation. Recently, the succession planning
process as ongoing. The process of developprocess in Larsen & Toubro appeared stalled
ing the next generation for the final succestill a sudden announcement was made.
sion starts right after they join the business.
Succession planning as one knows is a sysOften businesses or groups of businesses
tematic process by which four or fivedyare spilt to make sure multiple offspring get
namic leaders are groomed over time. CEO
a fair share and control of the business. A
coaching, as we are all aware, is on the rise
clear plan and communication also help in
and for a reason. Once a select group of
potential CEOs are identified, it is followed reducing the anxiety among siblings, which
through by a process of short-listing based in turn helps reduce sibling rivalry. Above all,
the awareness and acceptance of the factors
on past experience, potential to handle busileading to the success or failure of intergenness challenges, crisis, diversity etc.
erational transition can go a long way
Most likely, business dynamics would
towards removing the problems from the
change across industry sectors on a 10 year
root.
horizon. For example, from a home grown
Well, it is not my intent to claim that
business through organic and inorganic
there is a right or wrong process or formugrowth a company might have the intent to
lae to this complex business realacquire a global footprint thereby
ity. Suffice it to say that good sucmaking it imperative to bring a dif- CEO coaching,
cession planning can bring about
ferent set of skill-sets to the top job as we are all
smooth transition from the old
apart from the simple number aware, is on
to the new, with minimum busicrunching topline and botton- the rise and
for a reason
ness disruption. And it is time
mline.
that forward-thinking organisaFamily business succession on
tions in India Inc proactively respond to
the other hand, involves handing over the
the sign of the times from a global perbusiness to offspring or close family memspective. Having a smooth succession plan
bers; or to professional managers. Many
in place is also a signal in the marketplace
studies have shown that retention of conthat an organization has a well-thought out
trol by members of family owning the busistrategic plan and structure in place to face
ness usually results in more long term
the non-linear challenges in an increasfocus, stronger community relationships,
ingly unpredictable global economy. A
more employee loyalty and greater comsmooth transition may take as long as 15 to
petitive advantages derived from idiosyn20 years so an early start and progress of the
cratic knowledge of the company. However,
there are also concerns that family mem- transition planning is highly beneficial.
bers without the requisite professional
The author is professor, Strategic Management
qualification or acumen may fail to manage
the business as well as the professional
Area, XLRI School of Business and Human
managers. In recent times, with more and
Resources
22
>
From X-ray machines to
circuit breakers and
airport conveyor belts,
from signaling systems to
switch gears and foetal
heart beat monitors a
portfolio of low cost,
locally made, no-frills
products is helping
Siemens reinvent itself
ARIJIT BARMAN
ts been a frantic last few weeks for

Ranjeet Dalvi and his corporate strategy and business excellence team at
the Siemens India headquarters. Dalvis
trusted lieutenant Nirmal Gandhi especially has been keeping long hours, meticulously charting out a day-and-a-half long
strategic brainstorming session for 80 of
their colleagues. Some came from the
German headquarters; some others
arrived from the corporations global outposts in the US, Switzerland and
Singapore. A bunch were Gandhis emerging market peers from China, Brazil and
Hong Kong, his partners in a strategic initiative that is setting a new template for
the storied European multinational in
key markets.
After Shanghai and Beijing, last fortnights SMART Day was travelling to India
for the first time in its three year history.
The rationale is to be interactive and
share ideas, knowledge and learnings, discuss success stories, strategies and even
ponder about the urgent challenges
among a community of project and product managers, business development
teams, R&D and strategy managers, says
Gandhi, chief manager, Strategy Projects,
Siemens Ltd, sitting in his fifth floor cubicle. He just got back from the companys
Vadodra plant visit with his fellow
German colleagues. We make industrial
turbines there. Two to three more SMART
products are also planned there, he clarifies.
The
acronym
SMART
refers
to the new DNA of Siemens, changing its
worldview in the process. And hubs like
India
and
China
are
LEARNING
TO BE
SMART
23
>
SMART FACTS
~14,40,000 crore
(^240 billion)
Potential market for
SMART products and
solutions across
emerging markets
~1,26,000 crore
(^21 billion)
Potential in India
~11,942 crore
Net sales for Siemens Ltd
in India in 2010-11
(October-September)
~1200-1220 crore
(10% of total sales)
SMART sales in India
in 2010-11
(October-September)
~600 crore
SMART sales in India
in 2009-10
~6000 crore
SMART sales target
by 2020
63
Number of SMART
products under
development in India
30
Number of SMART
products already in
Indian market
35
Number of SMART
products to be ready in
India by the end of 2012
trate markets and segments where the

the cornerstones, nudging the much
companys presence has historically been
needed change to address the exploding
low. The bottom of the pyramid was never
needs of the emerging markets.
really a prime focus. But now things seem
These simple, maintenance friendly,
to be changing.
affordable and timely-to-market portfoWithin three years, the new agenda has
lio of basic products and solutions are a
started yielding dividends, clocking doueuro 240 billion future for Siemens worldble digit revenues from India alone. The
wide. India alone is a euro 21 billion bet
principles and the strike rate are similar
(see box).
across Asia, echoing similar need patterns
Sans the management speak and snappy adjectives, these machines are on an in its different markets. China and India
are the clear trailblazers where
average 40 to 60 per cent cheaper
80 per cent of the global SMART
than the feature-rich, high-tech- SMART is
range has already been intronology electronics and electrical tailor made
duced.
engineering offerings that for the
low-and
Armin Bruck, Siemens India
Siemens has always been known
mid-level
Managing Director for the last
for. SMART therefore is tailor
tech markets
four years, however, introduces a
made for the low- and mid-level
caveat. SMART is not cheap, stripped
technology markets which happen to be
down products, he says, it means matchvery price sensitive whether they are in
ing technical aspirations at prices that are
India or in China.
affordable.
Growth was always our focus. We were
The market feedback was clear. Many
exploring cost competitive drivers, says
Indian engineers from smaller compaDalvi, executive vice-president, Corporate
nies are fully conversant with the latest
Strategy & Business Excellence, and adds,
technologies, but are not willing to pay
many of our products were imported,
top dollars for them. Therefore, we starttherefore they have been expensive. A
ed to tailor the products for these local
large chunk of India, we figured, needs
customers. Designed, manufactured
basic products. Yet they need to cater to
Indian conditions, have to withstand dust locally to capture the price advantage and
lower the cost overheads, says Bruck.
and humidity, and handle power and voltTraditionally, it was the M1 and M2 segage fluctuations.
ments of the market that Siemens has
Thats where localisation and custom
been catering to. M1 is niche, price inelasmakes come in. The SMART portfolio
tic and the high-end consumer of the allfully designed, manufactured and marfrills, top end products. Then comes M2, a
keted in India acts as a portal to pene-
24
>
category where buyers seek specific solutions for their requirements, and will pay
if it is available. M4 is the other extreme
more of a commodity play, not choosy
about technology or make. Copyright and
IPR infringement is equally rampant. So
the verdict: best avoided.
M3 is the goldmine. People here are
still looking at quality products but with
basic minimum features. The segment is
conscious of price sensitivity, Gandhi
breaks it down threadbare. And thats
where Siemens has moved in. In effect,
you protect the base to protect the top of
the pyramid.
SMART is what the (Volkswagen) Vento
and (Skoda) Rapid are in the automobile
market the German comparison is
unavoidable.
The breakthrough innovations have
been diverse. First came a basic X-ray
machine Multimobi from the Goa plant
in 2009, followed by a new steam turbine,
the worlds first 1,200-kv circuit breaker
for power plants, low voltage switchgears,
low-end signaling system for railways,
water treatment products, a machine to
monitor foetal heart beat and even a baggage handling conveyor belt, currently
installed at the New Delhi airports
swanky Terminal 3. Many like the X-ray
machines or the signaling systems are
exported, the former to 40 countries
already. Malaysian Railways is installing
the railway solutions from India.
The SMART switchgears and numerical relays have helped us significantly cut
down operations and maintenance cost
at our Gujarat refinery. For five years, no
shutdown will be required for the electrical distribution system of the plant.
Because there will be no breakdown, our
reliability and profits will also go up.
These products also save 50 per cent
space, observes Mayur Budh, a senior
maintainence department official at Essar
Oils Vadinar refinery.
Sunil Bhore, director of the Punebased water treatment and management
firm Aquatech, too is ecstatic. We compete for global tenders. So price competitiveness is critical. SMART offers great
technology at an even greater price. Our
costs are down 40 per cent.
But SMARTs conception was modest.
In fact it was somewhat of a covert opera-
tion, a submarine assignment as Bruck

calls it.
Submarine Beginnings
It was more of a trial and error exercise
that had a quiet encouragement from the
local top brass. Germany had no inkling.
We called it submarine since it was not an
official worldwide launch, no high level
25
involvement of R&D across the globe and

in Munich (read HQ). It was out of the box
thinking in an obsessively process-driven
company to cater to unique needs of the
hour, remembers Bruck.
There was no fanfare. No fuss in its
birth. The seeds sprouted with budgets
that were actually outside the official R&D
sanctions.
>
Bruck had thought once Multimobi

was born practically from scratch using
very little of the existing technology
everybody will be forced to market it, may
be even grudgingly. But much to his surprise, the timing seemed providential.
Siemens AG at the very top was undergoing drastic change and the new CEO,
Austria-born Peter Loscher, was keen on
thought leadership.
So this overnight became a SMART
new business idea and ever since has
dominated the management thinking at
the company. It mirrored the transition
that Siemens as a global corporation was
going through. This was a positive thinking strategy, says Bruck. Interestingly, it
found immediate resonance across Brazil,
China and other breakout markets, making it a global phenomenon.
The inflection point is today. Last
year, 50 per cent of the time in the Berlin
conference of the entire Siemens global
top management, was spent on SMART
strategies. Top talent from India and
China were invited to present solutions,
Brucks pride is quite evident. One of his
most memorable moments was when at
Siemens is not forfeiting its original
Siemens AG, the India subsidiary was
strength. High tech and its basic counranked the second best regional company
terpart are two pillars who should grow
in 2010-11, ahead of US and China and just
symbiotically. You need them both, feels
below Germany.
Bruck. The ultimate aim, therefore, would
To be honest, necessity has also been
be to add more features in a single product,
the mother of the SMART inventions. If
yet be affordable. Thats an unbeatable forSiemens did not address the bottom of
mula.
the pyramid, its nimble footed
Its an ongoing quest. So in
European and Asian rivals would India is
just two-three years, Siemens has
have completely outmaneuvered playing a
almost doubled its manufacturit from a crowded and fiercely larger role in
ing footprint to 21 factories localcompetitive market. If we dont, Siemenss
ly. Of the 10 units added, half are
others will. And very soon there global
driven by SMART initiatives. Its
will be hell on earth for us, Bruck operations
more or less an even distribution
says.
among all the four priority busiStatistics will make it easier to grapple
ness verticals or sectors industry,
with the global situation. Growth markets
healthcare, energy and the latest, infralike India or China can make or break the
structure
and
corporate backbone. Last fiscal (October
city solutions. These came up as there was
2010-September 2011), while revenues of no local manufacturing base and only
the diversified German parent rose 7 per
assembling units handled the imports.
cent, in India, Siemens Ltd leaped ahead
Even existing plants switchgear and
with a 28 per cent surge in sales.
switchboards in Kalwa (on the outskirts of
India is increasingly playing a larger
Mumbai), the gear box factory in Chennai,
role in the companys global operations.
isolators (high voltage switchgear) in
Hyderabad, and the steam turbine factoAnd as the opportunity quadruples, the
ry in Baroda have seen brownfield
infrastructure too is getting beefed up.
expansions to meet the new demand.
26
At least three more facilities are coming up in Nashik, Baroda and Vizag over
the next 12-24 months with ~1,600 crore
investments. India can easily grow into
a euro 30-40 billion opportunity. And 6070 of that can be SMART solutions.
Already its revenues have doubled, says
Dalvi. But China alone has a ^90 billion
market opportunity.
There are pockets with high potential
like healthcare. For Siemens, Indian healthcare alone is a billion euro spent a year
market in diagnostics technologies and
products. But I am absolutely convinced
that we could talk about a euro 5 billion a
year market, if we are able to reduce the cost
of all our products by 50 per cent, says
Bruck.
Unique in India
With 1.3 hospital beds per 1,000 population, Indias figures are abysmal. Even
Africa has 1.5 while the global average is 33.5. In India you have less than nothing.
Whats the point of just focusing on infrastructure? You need healthy people to drive that infrastructure and growth forward, says Bruck. He has identified this
huge vacuum to blend his corporate strat-
>
egy with his social responsibilities.
Healthcare, as he sees it, is the bed rock of
a healthy country. Naturally in India, it
has been amongst the most important verticals.
Similarly, forays into renewable energy
with wind and steam turbines and solar
thermal receivers will be the next big frontier. The challenge like always will be to
make commercially viable innovations
that are best suited for local conditions,
often not the most optimal in the world.
What is equally amazing is the journey
of an idea into a cutting edge product and
how in true German precision, the corporation keeps a track of it. How it coordinates centrally with all its 220 arms is
also symptomatic of the seriousness of
the efforts.
The need is always generated locally as
priorities differ with markets and gathering intelligence is incessant. From the
sector to the division, from a cluster to a
hub, there is bottom-up involvement
right through. The various relevant CEOs
and their strategy teams are hands on but
the lower you go in the pyramid, the
more precise you get to address the specific needs, says Bruck.
There is also a central points man
Felix Scheffler to monitor all the SMART
moves world over. When the annual strategic business plans are made, the big picture
trends and strategy inputs may come in
from a handful of global CEOs, but he incorporates the mega trends and micro operational features from inputs gathered from all
across.
With the launch of a dedicated innovation platform in the in-house intranet,
each and every one of 80,000 workforce
can post their big ideas online. Bruck
breaks it down even further. Some ideas
will make it, some wont. But all of us will
get a chance to work on them. Once an
idea gets to a stage of maturity, then its
handed over to the project management
teams. In this process we can motivate
our teams and get a chance to examine
even the craziest of thoughts. Finally, the
Global Entrepreneur or a Global Sector
CEO, responsible for a bunch of products
or markets can adopt it.
In the case of Multimobi, X-ray
machines, the Indian healthcare vertical
team along with strategy team and the
R&D centre came up with the basic idea
and then it was sent to a level above. We
continuously evaluate our market share.
For example, we were not present in
wind. And this was a growing segment.
But India is a low wind market. So we had
to work our plans accordingly and make
products that fit, adds Dalvi.
A couple of factors are key to figure
out how exactly a product gets aligned to
a market. Again, true to the Siemens style,
its fastidiously managed.
Step by step
Its a three step process. First comes
product life cycle management (PLM) or
the R&D, design, product development,
drawings for manufacturing bit. It actually covers the entire life cycle of
a product. What follows is the
supply chain management (SCM) cycle
concerning
sourcing
of
parts and actual manufacturing and
finally customer relationship management or CRM which is the go-to market
step involving sales, order placements
and even maintenance.
While developing a SMART product
you need to be strong in the PLM and SCM
cycle. Not every country is equipped to
do that. India and China has seen significant R&D investments for their potential,
says Bhaskar Mandal, vice-president &
head, industrial automation business.
The PLM cycle is critical. The design
processes get defined and then transferred
to a cluster via a well defined transfer protocol as a complete PLM package. Since
2008, India is the chosen one for the South
Asia cluster of Nepal, Bangladesh and a few
more neighboring markets. You may have
a common PLM cycle for a handful of clusters. But after the designs are ready, then
different clusters take charge of the CRM
process. The customers are local, so are
their needs. For pricing local handling also
become important. Even the language in
the manuals will be different, points out
Mandal.
Selling to a B2B audience needs different orientation. So Siemens may conduct
exhaustive multi-city road shows to
launch a product, but when you are selling
solutions for the smallest and the most
humongous of problems simultaneously,
then each sector needs to have a different
27
sales orientation. SMART also requires

one to go deeper.
In metals, a sub-set of the industry verticals, the key account managers have so
far been dealing with large steel companies like Tata, Bhushan Steel, Jindal Steel
& Power to help them build their blast furnaces, sinter plants, casting solutions. But
now with SMART, a regional strategy has
been adopted to reach out to even smaller players in the hinterlands. Its quite
similar for healthcare. Dedicated sales
teams are separately zoning in on both
high end and basic SMART solutions.
However for products like switch gears or
motors and automation, one needs
extended dealership arms and networks.
So temporary low cost sales resources
have also been roped in with a specific
mandate.
In both the energy and the infrastructure verticals, the business is tender
based. So the customers are known and
are easy to manage. But now with SMART,
there is an added portfolio on offer.
Currently the eco-system is quite
spread out: 57 sales offices all over the
country handling around 400 dealers,
plus 200 system houses that would actually do the last mile customisation as per
a clients need and the 1,700-odd retailers.
Siemens is serious about SMART and
about India. And it has prepared well for
this paradigm shift. At a corporate level,
last year has seen the ground being prepared for consolidation, with parent
Siemens AG spending a billion euros to
launch an open offer to hike its stake to 75
per cent from 55 per cent and thereby
tightening its grip on its Indian arm. This
clearly reflects a greater dominance of
markets like India. There has been a series
of restructuring exercises as well through
mergers and acquisitions and divestments. But further streamlining may be
necessary as the company has 10-odd
firms in different areas, apart from the
BSE-listed Siemens Ltd.
Most strategic has been the recent
entry into non-banking financial services
(NBFC) through Siemens Financial
Services. This dovetails perfectly with the
ongoing SMART initiatives. The NBFC will
primarily finance small companies and
entrepreneurs who are looking at start up
shops using Siemens products.
>
For instance, Siemens Financial will

finance doctors or hospitals that may want
to buy the foetal heart rate monitor, a small
device that can be worn on a belt by a pregnant woman. The hospitals or doctors can
then rent it out to women during their pregnancies.
Naturally then the company dismisses

fears that SMART will dilute margins and
volumes will eat into profitability. Its the
in house competitive edge. Through a
localised value chain and features fulfilling local requirements our SMART products are meeting local price levels, there-
by ensuring profitable business, Felix

Scheffler, head of corporate top+ and
corporate quality management in
Siemens AG paraphrases the collective
sentiment. (see Q&A)
Siemens is clearly learning to
be smarter.
Q&A
SMART products meet local price levels and thereby

ensure profitable business
Sitting in Germany, FELIX SCHEFFLER, head of Corporate Top+ and corporate quality
management at Siemens AG has an important mandate. Top+ is a Siemens business
excellence programme. He also coordinates among the key SMART hubs around the
world and formulates the global strategy for the headquarters.
He took time out during his trip to India for this interview. Edited excerpts.
acronym SMART, which stands for simple, maintenance- friendly, affordable,
reliable and timely-to-market products
and solutions.
Why are SMART products so strategic

for Siemens?
Grow in emerging markets is one of

the nine focus areas forming the One
Siemens framework for value creation.
Especially in the BRIC/ME countries,
which account for 50 per cent of the global GDP growth, our growth is significantly driven by entry-level segments.
And thats exactly what SMART products and solutions aim for.
With the SMART portfolio addressing local customer requirements we can
fully participate in the growth of emerging marketsand compete with emerging competitors on their home turf.
How do you co-ordinate the exciting
ideas from around the world that keep
cropping up from time to time?
The responsibility for all these innovative ideas lies with each business. One
major contribution that we provide centrally to drive SMART is to foster a vivid
knowledge exchange. Therefore, we have
established the global SMART community consisting of colleagues across all
businesses, which exchange best practices and new ideas in regular conferences, virtual meetings and intranet platforms.
Globally, where is the SMART push

coming from? Is it from India, China or
from Brazil?
We see that SMART is important not only

for individual countries but for all emerging markets where the demand for solutions targeting entry-level segments
is growing.
What role do you see India take for
Siemens in this initiative that spans
emerging markets?
Can India be the SMART hub for all of

South East Asia?
India offers a large market potential in

the entry-level segments and is one of
the key markets for our SMART products. With the right people/competencies on board and the set up of local
product responsibility, India is one of
the role models for our new approach.
What is the most essential element to
make a SMART product work? Is it
about SMART ideas or SMART pricing
or SMART time and route
to market?
All these characteristics are equally

important. That is why we created the
28
For a couple of our businesses SMART

products from India are already being
exported. The other businesses are
focusing on establishing SMART products in the Indian market first, then
expand their scope beyond the country
and finally establishing a SMART hub.
Experts say that SMART products may
give Siemens more sales volumes but
its margins will shrink. Do you agree?
Through a localised value chain and features fulfilling local requirements our
SMART products are meeting local price
levels and thereby ensuring profitable
business.
>
CLICKING ON A NEW
CHAPTER
Tata Groups Croma, which launched its e-retail store last month, is reworking its backend
to secure its early mover advantage
MASOOM GUPTE
hen myriad portals selling everything from personal items like

apparel and shoes to financial
products like insurance and mutual funds
cropped up over the past couple of years,
many said e-commerce was coming of age
in India. But now, with the Tata Group
owned electronic goods retail chain Croma
foraying into online retail, one is tempted to
say e-commerce has finally arrived.
Croma launched its online arm, Croma
Retail, last month, extending its reach from
the 14 cities the chain is currently present
in through brick and mortar stores to a virtual presence in 319 cities, covering around
6,000 pin codes. More pin codes will be
added every week going further.
Weve noticed our consumers are not
short on resources. But, while in major metros they are short on time, in the smaller
cities they have limited access to the latest

gadgets and electronic items, says Ajit Joshi,
MD and CEO, Infiniti Retail, the wholly
owned subsidiary of Tata Sons, which runs
the multi-brand electronics store chain
Croma, explaining the latest initiative.
Joshis reasons are in place, but he also has
numbers on his side to support this move.
According to a November 2011 report
on the digital commerce industry by financial services firm Avendus Capital, the
Indian e-commerce market is estimated at
~28,500 crore. Online travel transactions
constitute almost 87 per cent of this, way
higher than that in any other country under
consideration like the US, where online
travel transactions stand at 37 per cent of
the overall pie. The rest of the pie in India
(13 per cent) is contributed by e-tailing, a
~3,600 crore industry.
Avendus predicts this market will be 10
29
times its current size in just four years. They

estimate it to grow to about ~53,000 crore by
2015, achieving an overall penetration of 1.4
per cent. This is still very small compared to
China where it is already at 4 per cent.
Based on these estimates and Joshis
rationale, an online presence would be the
fastest way to scale up operations for a player like Croma and increase its reach manifold. But first they must spot their customers.
Changing customer profile
Anand Ramanathan, associate director at
KPMG, doesnt think the brick and mortar
stores and online model will jostle for the
same set of customers. The touch and feel
factor continues to dominate the purchasing habits especially for large appliances
and are hence restricted to store buying,
he says. It may not be as important for
>
half of the targeted pin codes.
smaller gadgets or standard accessories

like cartridges, which may be easily bought
over the internet. Online medium
also helps greatly with pre-buying decision making. Also, given that Cromas
physical footprint is still very small, the
possibility of an overlap among consumers
is on the lower side.
However, if the orders received by
Croma during the first seven days of the
website going live are any indication, it is
safe to assume that the well-documented
predilection of the Indian consumer with
regard to the touch and feel factor is
changing.
Croma
has
received
orders
for
air
conditioners, coolers and refrigerators in
addition to laptops, iPads and mobile
phones from across the cities it has a digital presence.
Another myth to be busted here: the
average sale price (ASP) for tier 2/3 cities is
almost double that of the top metros. It
stands around ~10,000 versus the ~5,000
ASP for top metros. In fact, smaller cities
seem to have a voracious appetite for highend electronic gadgets. The mindset is
changing and there is a cultural shift. What
helps is, these are cash rich customers, for
whom there is also something of a snob
value in owning the latest and expensive
gadgets, says an executive associated with
Croma Retail.
There is no denying the online story
sounds promising. But, one cannot ignore
the challenges in building a successful business model in the space. The challenges
will be unique among them are things
like ensuring on-time deliveries as well as

managing the consumer expectations even
from the delivery crew. The distribution
model thus becomes key in an online business. Here the company must bridge the
last mile reach out to the consumer,
rather than vice-versa.
Managing distribution
A common practice in e-tailing is to outsource the management of forward logistics, while the company would focus on
managing the back-end operations. Only
few players, like Flipkart, have moved away
from this, choosing to manage its logistics
end-to-end. Most others rely on tie-ups
with courier companies for the last mile
deliveries.
Croma seems in no rush to defy the
established wisdom. The company has tied
up with courier companies FedEx and Blue
Dart and fellow Tata Group logistics company Diesl. While Joshi doesnt divulge
details about the particular regions to be
catered to by each of these companies or
any other split of services, he says that one
of the partners would handle smaller appliances and laptops. The other two will handle deliveries of large appliances.
Croma is also in talks with India Post for
a delivery tie-up. No player can compete
with India Post when it comes to reach.
The network is vast and spans even the
remotest hinterlands, says Joshi. A
fact endorsed by industry experts who
point out that courier companies have an
approximate reach of around 2,000 pin
codes currently. The number is less than
30
Joshi adds, We are now in final stages of

talks and verifying its (India Posts) capabilities for delivering large appliances as
well.
With e-commerce, there is always a
chance of returns and hence the need for a
strong reverse logistics model as well. While
Croma doesnt anticipate too many returns,
it has made arrangements with the same
players for managing the same. The costs
per
delivery
as per the Avendus Capital report could
range
from
~35-75
and
for reverse logistics it can vary
from ~40-55. This cost will be absorbed by
Croma.
Experts endorse this approach of outsourcing the forward as well as reverse
logistics. E-tailing isnt developed enough
or hasnt received the required scale for
businesses to invest considerably in supply
chains. As things stand now, it is still just a
medium for businesses to test waters. And
to do so, tie-ups with courier companies
are a quick and not-so-expensive-to-manage option, says Pinakiranjan Mishra, partner and national leader, retail and consumer products, Ernst & Young.
Currently, Croma has seven distribution centres (DCs) across India that cater to
its physical stores, managed by Australian
retail major Woolworths: Bhiwandi (caters
to the stores in Maharashtra), Gandhinagar
(Gujarat), Hyderabad (Andhra Pradesh),
Bangalore (Karnataka), Chennai (Tamil
Nadu), Delhi (Haryana, Delhi and Uttar
Pradesh) and the recently opened centre at
Jalandhar to supply to Punjab.
Till now, the chain followed a largely
hub and spoke model, with a DC catering to
a certain catchment area. It will continue to
do so for its physical stores. The chain plans
to add another 83,000 square feet real
estate in the coming year, taking its store
count from 72 to 86. The aim will be to go
deeper within the cities that Croma is
already present in and extend reach
through the online model, which will be
serviced by the same DCs.
As a retailer, margins do not grow
overnight, so we need to work on controlling costs. For instance, if we advertise, say
through print, its easier to ensure effectiveness of such communication if you
>
have multiple stores in the same city. The

spread can become too thin if we look at a
multiple-city model and the realisation of
that rupee can become a problem, explains
Joshi.
Like most businesses, the chain operates a one-distribution-centre-per-state
model because of varying central sales taxes. However, once the country moves to
the Goods and Services tax regime, Joshi is
hopeful of shifting to a four to five distribution centre model that will cover regions
rather than individual states. Until then,
the current model shall serve. The chain
has no immediate plans for new DCs specifically to take its online ambitions further.
However, the company has opened a
dialogue with its suppliers, that is the
brands, like Sony, Samsung, LG etc, possibly to ensure that its maximum-seven-day
delivery time promise is fulfilled. These
partners (brands) have their own networks
and depots in place in large numbers
around the country. We are exploring the
possibility of leveraging this, says Joshi.
The challenge here is to establish a strong
communication link between these centres or depots and the chains order management system. The solution though
will come through technology. And the
process will be simplified once Croma fig-
ures
out
how
best
to
communicate electronically with all its
partners.
The Croma experience
The company has stated categorically that
its online foray will not translate into any
kind of discounted buying opportunities
for the consumer. It will focus on product
bundling and services instead to attract
consumers. Examples of bundling include
buy laptop and get printer free or buy
fridge and get food processor free.
According to the company this is very pop-
ON A STEADY GROWTH PATH

38
28
21
15
11
7
3
2007
5
2008
2009
2010
2011 2012E 2013E 2014E
2015E
31
ular with consumers. For instance, the

chain offers a ~1-lakh wedding pack that
include most of the electronics products
necessary
to
set
up
a
new home. These are a hit with information
technology professionals who shift cities
very often, according to Joshi.
With regard to service, Croma will now
offer consumers a standby option. If your
product purchased from one of its stores
breaks down, the company will replace it
with another on a temporary basis at no
extra cost till your own product gets
repaired. The facility is available for a few
product categories only, and is currently
limited to customers in Mumbai, Delhi and
Bangalore whove made their purchases
from the stores. It will soon be extended to
the online customers within these cities.
By September the service will be rolled out
to all Croma customers.
Croma, which started its operations
2006 and clocked a revenue ~1,970 crore
last fiscal, says the online model has the
potential to generate similar revenues within just two years. The prerequisite being
that the Indian governments ambitious
internet in every village by 2014 plan is
realised. Industry experts are cautious
though.
Whether the ~2,000 crore revenue
comes through or not in the next two years,
Croma has made a start. With almost no
competition currently, it will also have the
first mover advantage. And if the rising
purchasing power of the Indian middle
class, that resides beyond the top cities is a
reality, the journey promises to be exciting.
>
Walking
the price
TIGHTROPE
Is it imperative for a player in the
mobile handset market in India
to straddle both endsbe a mass
warrior, yet retain the aspirational
high ground?
PRIYANKA JOSHI & ALOKANANDA CHAKRABORTY
very time a company decides to raise

prices of its products it says the Indian
consumer appreciates value and is willing
to pay for it. That today, the buyers decision takes into account the brand, credibility, the ease of use, and other features, promotions
or specials the marketer has to offer to keep the buyer
interested over and above the price. That price was
the attraction du jour until buying behaviours evolved.
So can you be a player in one of the fastest growing
and highly competitive markets in India and stay out of
the escalating price war? Or is it imperative for a player to
straddle both ends be a mass warrior, yet retain the
aspirational high ground?
Look at the direction in which the pecking order in the
183-million-unit mobile device market in India is moving
32
>
for cues. Mind you, the Indian mobile
market is driven by the lowest call rates
in the world and remains essentially a
feature phone market with smart phones
accounting for just about 10 per cent of
the overalls sales (in the fourth quarter
of 2011, compared to 6 per cent of the
overall mobile phone industry in the
fourth quarter of 2010). From 8 million
last year, the number of units is expected to touch 18-20 million before we close
the year.
The bulk of the market comprises a
plethora of low-cost devices that
account for 75 per cent of the overall
sales. While the top five remain
embroiled in a bitter battle to get the
upper hand in the aspirational smart
phone segment, none has dared to
ignore the basic feature phone market.
Take Nokia, the worlds largest seller of
mobile phones by volumes and number
1 in India with 31 per cent share in 2011
(according to CyberMedia Research),
which has been losing share in India to
domestic phone makers such as
Micromax, Lava and Maxx Mobile that
are
riding on low-cost, dual-SIM mobile
handsets sourced mainly from China.
The company is looking to make a
sweeping comeback with a range of
dual-SIM mobile phones on a one hand
and another range of phones branded
Asha that start at ~4,000 and are positioned as a cross between a feature and
smart phone. A late entrant in the multi-SIM device category, Nokia has fast
tracked the process of consolidation by
rolling out five models by September
2011,
to
make
its
presence felt in every price segment in
India.
In fact, late entrant Samsungs
growth in India has been startling and a
big reason for worry for the worlds
largest hand phone manufacturer.
According to the figures from a Voice &
Data study, Samsung posted a growth of
21.7 per cent to register revenues of
~5,720
crore
in
2010-11
from
India (up from ~4,700 crore in the previous fiscal, while Nokia showed flat
growth, with revenues of ~12,929 crore in
2010-11 from the country, compared to
~12,900 in the previous fiscal.
Samsung was quick to learn that customers who want the cheap and cheerful
can be more demanding than the premium segment customers. In an earlier
interview, Ranjit Yadav, country head,
mobile & IT business at Samsung India,
told The Strategist, We are not here for
a niche play or for a small set of the consumers. We want to offer certain features and applications for everybody
who has a Samsung phone and then
offer them a choice to move up to a
smartphone. So range is key for the
Korean firm it has phones starting at
~7,000,
going
all
the
way up to ~35,000 across its three
operating platforms.
Both Samsung and Nokia
strongly believe that while
they are in a market creation mode, an emphasis
on price will be a big
mistake. The customer
must get a superior
experience
and
should be offered an
eco-system that will
help them make full
The price
correction and
sachet-priced
data plans
have enabled
us to reach the
tier 2 cities and
areas that
aspired for the
device and
its messenger
services
KRISHNADEEP BARUAH
Director, marketing
RIM India
33
>
SOARING HIGHER
The India mobile handsets market
India mobile handset shipments

(millions of units), year: 2011
Y-O-Y
2011 growth
2010
Featurephones
use of the device in their hand, says
Samsungs Yadav. With time the price
will come down in any case. If customers
are dissatisfied with the outcome, irrespective of the price, all efforts will fail.
This is a choice manufacturers have to
make offer value pricing or cheap
products. Of course, the cheap and
cheerful works if you have an extremely
low cost base and there is huge demand.
For Blackberry the struggle is of a different order altogether. Although 2012
seems to have begun on a note of struggle for RIM overall earnings are down,
sales are down the Canadian company is working hard to convince naysayers
that it isnt pulling out of the Indian
market. A case in point is the entry level handset, the BlackBerry Curve 9220
smartphone priced at ~10,990 (with free
apps worth ~2,500), which the company
unveiled specifically for the Indian mass
market.
RIM India executives are convinced
that the Curve 9220 will find acceptance
among the youth segment. To address
the demands of this set of customer, RIM
160.5
172.2
7%
Smartphones
6.0
11.2
87%
Shares of leading vendors in

smartphones (in %)
2010
72
13
5
2011
Nokia
RIM
Samsung
39
15
28
Shares of leading vendors

in 3G phones (in %)
2010
2011
Nokia
Nokia
49
52
Samsung
Samsung
24
27
Sony Ericsson
RIM
Source: CyberMedia Research India
34
has packed in a dedicated BlackBerry

Messenger (BBM) button for instant
access, a 2 MP camera with 5X digital
zoom, FM radio, WiFi connectivity and
expandable memory up to 32GB. Sunil
Dutt, managing director of RIM India,
says putting BlackBerry within reach of
the younger customer base will help it
garner the much needed volumes, if not
the top place in the smartphone market.
We are not just putting affordable smart
devices but along with partner operators like Vodafone we have now prepaid
BBM plans starting as low as ~5 per day.
And this is as affordable as it gets for the
youth, he says.
Playing the affordable handset card
has worked for RIM in India until now.
Naveen Mishra, lead analyst (telecoms
practice), CyberMedia Research, reasons, In its consistent effort to launch
new devices at attractive price points,
the share of BlackBerry in the India
smartphones market has grown from 3
per cent in 2008 to 15 per cent in 2011.
While aggressive competitors like
Samsung, which make smartphones
>
based
on
multiple OS platforms such as Android
and Windows Mobile, have recorded
even higher year-on-year growth rates,
BlackBerry devices have found a large,
new customer base in the India youth
segment.
No one at RIM India denies that they
have a tricky situation at hand.
Krishnadeep Baruah, RIMs director
marketing (India) is aware of the uphill
task on hand convincing the new buyers to pick up a BlackBerry. So the company is working hard to ensure cheaper
data packages are bundled along with
its smartphones and the message goes
loud and clear to the consumer. In
comes a new BlackBerry Boys advertisement that focuses on the new breed
of users, mostly retail customers. To woo
the value-conscious Indian customer,
RIM has slashed the prices of three of
its entry level BlackBerry models, in the
Curve series. The highest price cut of
around ~8,000 was for its Torch phone,
which is both touchscreen and QWERTY.
The price correction and sachet-priced
data plans have enabled us to reach the
tier 2 cities and areas that aspired for
the device and its messenger services.
We have seen a great demand from
towns
like
Baroda,
Rajkot,
Bhubaneshwar, Hubli, Mysore etc that
were never on the smartphone radar,
points Baruah.
Anshul Gupta, principal research
analyst, Gartner points how RIM is making all the right moves in India. In the
emerging markets, smartphone is experiencing over 43 per cent CAGR and
affordability is the number 1 criteria
among buyers. He quickly adds that
affordability means lower average selling prices for devices and latest technology at the same time. Which explains
the rush to launch 3G handsets. In
anticipation of increased 3G data usage
among subscribers all the major handset
vendors introduced their 3G phone portfolios to the India market during CY
2011. In many respects, 2012 will be a
test year for the growth and adoption of
3G handsets and data services in the
country and it will be interesting to see
how new alliances and offerings emerge
from handset vendors, service providers
and content developers to target mobile
subscribers with innovative device plus
data service bundles, says Naveen
Mishra,
lead
telecoms
analyst,
CyberMedia Research.
For Dutt, RIMs success in India will
rest on making sure that consumers
dont abandon the cheaper BlackBerrys
as they move up the smartphone ladder
while making sure that for the next set of
enterprise customers including SMBs
choose their sachet-priced business
solutions.
And
while
RIM India is sold on the idea of selling
affordable devices and cheaper data services, other smartphone players like
Apple and Samsung have moved swiftly
to consolidate their position among the
top tier customers, truly making their
brands aspirational. The big challenge
to succeed in this market is to have proper mix of features and technology relevant to consumers offered at the lowest
possible price, Anshul Gupta, principal
research analyst, Gartner sums up.
So there you have it. The average
Indian consumer wants all the whistles
and bells. And they seem to know how to
quantify value down to the last rupee.
35
>
Building the
perfect property
When competition overwhelms the market and brands find it difficult
to differentiate on unique attributes or price, it might be a good idea to
invest in building a property
RAJARSHI BHATTACHARJEE
hen one thinks of Coke

three things come immediately to mind: the Coke
brand mark, the iconic
bottle and the colour red.
These are powerful attributes and provide
instant customer recognition when used
in combination or even individually. While
Coca-Cola has spent hundreds of millions
of dollars over decades to build these attributes, their success is not purely a result of
time and money. It is thanks largely to the
companys understanding of one of the

basic principles of branding building
strong product attributes that work as powerful differentiators.
The competition for mindshare in a
world of look-alike products and services
has only intensified since then. And differentiation on attributes is easier said than
done. So now marketers have to walk that
extra mile to add a strong experiential element to the brand, which in turn can add to
its overall equity. Says Wasim Basir, integrated marketing communications director, Coca-Cola India, The bottom line is
36
building a relationship with the customer.

There are areas in which you can achieve it.
And in that, there are areas which are unexplored and areas which are already cluttered. In the second case, we need to
create, package and place a property in a
way that stands out of the crowd and connects to our customers.
Enter Coca-Cola Indias new property,
Sprite Gully Cricket Champs. The format is
simple. It invites cricket players from 13
states, 112 cities. Each city will host an independent tournament with all the teams
playing in a knock-out format. The win-
>
Brand properties are more about

building a relationship with
customers. We need to package and
place the property in a way that it
stands out in the crowd. These
properties take us closer to the
customers.
If you create a 'name property', it

becomes difficult to sell it. One
cannot buy the Lakm Fashion Week
as the new owner might have a
different set of brands; but all
investments must give some
returns.
A branded property may vampire

the brand and become something
that has a life of its own. If such a
thing happens, the brand owners
need to ensure that they create a
separate revenue stream from the
property.
WASIM BASIR
ANAND HALVE
M G PARAMESWARAN
director, integrated marketing communications,

Coca-Cola India
co-founder, chlorophyll brand & communications

consultancy
executive director & CEO,

Draftfcb + Ulka
ners from the league matches from these

112 cities are given a cash prize. Much like
any other street cricket match, there are
obstructions hitting which a batsman is
declared out or runs get deducted. Likewise
there are areas where hitting the ball can
fetch a batsman as many as 10 to 12 runs.
We all have played gully cricket at some
point of time in our life, but it was never
encouraged or presented in such an organised format, says Basir. Such properties
take us closer to the customers beyond
what
advertising
and other forms of publicity can achieve.
In his words, this property connects to
the core proposition of Sprite Raasta
clear hai. We never say that Sprite is any
magic potion. Its a refreshing drink that
peps you up before you get on with
your life. We all have our strengths and
shortcomings. Sprite lifts your spirit and
you move on to overcome your obstacles
quite a bit of which you do while playing
street cricket, adds Basir.
The foundation of building a property,
marketers say, lies in being the propertys
relevance to the core proposition of the
brand/company. It may start as a loose
association, which over a period of time, an
organisation may be able to convert to a
brand property. Ramanujam Sridhar,
founder CEO, brand-comm, emphasises a
few things a company needs to bear in
mind while embarking on this journey.

The property you are trying to create
needs to be close to your core proposition.
But if there is nothing unique about the
property itself, it will just be another property which people will fail to recall in connection with your brand or company. For
Coke, for instance, we have to first look at its
mission statement or core proposition, and
then who is its target audience? Looking at
these two things, Coke needs to associate
itself with an interest which its target audience feels strongly about.
And this is just the beginning. Topmost
among a range of other guidelines on how
to build a wholesome property is the commitment of the brand/company to sustain
the property for a substantial period of
time. According to Anand Halve, cofounder, chlorophyll brand & communications consultancy, if a brand or a company
is not willing to handhold the property for
a length of time, or avoid huge investments,
it can latch on to someone elses event or
property
as
a
partner
or
co-sponsor. Sprite Gully Cricket is an interesting sports property. But the property
should be projected over a long time to be
considered a real property. If one does a
one-day show or a few-days event, it doesnt qualify to be a property, opines Halve.
A perfect case in point here is the
Kingfisher Derby, a sports property that
belongs to the United Breweries Group. It is

held every year in Bangalore since its inception way back in 1988 when United
Breweries realised that alcoholic beverage
advertising will continue to be in dead
space in India. As such, the company consciously pursued sports and associations
that are stylish, fashionable and glamorous in keeping with its UBs proposition
of being the King of good times.
Halve goes on to elaborate what Sridhar
touched upon the nature of the brands
connection with the property. It is the
nature of the connection that remains valid
for the entire life of the property. For example, the business of the Filmfare magazine
is about films. Tomorrow they can open a
Filmfare academy to train people for entering the film industry. They can have a
Filmfare production company that makes
movies. They can do many things, but the
connecting aspect in all the cases will be
films. To my mind this makes a strong base
to build a property.
The same is the case with the Lakm
India Fashion Week, a property, which had
its inception in a crisis of sorts but it is
something that has been nurtured over a
period of time in a manner that it has
become integral to the whole Lakm proposition and a differentiator vis-a-vis other
beauty brands. (Related box How I did it
on page 4 details the Lakm India Fashion
37
>
Week journey in the words of its architect
Anil Chopra.)
The Sprite Gully Cricket Champs, on the
other hand, is a very different proposition.
First, it has a long way to go before it can be
anywhere near what the Lakm India
Fasion Week is today. Second, at the product level it is a beverage, but broadly it is a
product with a lifestyle appeal. The problem with most lifestyle products is, what is
of interest today may not be of interest
tomorrow. If you look at how Coca-Cola
Company sums up what they are, you will
find they change every season or every year
from Pio sar utha ke, to Brrrrr, now
Happier tomorrow. So, the lifestyle proposition keeps changing, points out Halve.
So the whole idea of creating a branded
property in this case would be to somehow
create an aura around the brand that
makes it different from the competition.
And if a property promises that, go for it,
says Sridhar. As they always said, your
brand resides inside your customers
minds and it got there through their
experiences with your product, service,
organisation or any related offerings.
Another often-debated aspect here is
the commercial-value connection between
the property and the core business. In the
last five to 10 years, a dubious word has got
introduced in the marketing dialogue
engagement. Companies and brands talk
about investing to engage their audience.
The whole business of engagement is
tricky, to say the least.
Take a stand-up comedian who is on
the pay-rolls of a club where he performs
regularly, and the club earns money
because people flock there buying entry
passes or tickets and purchase food and
beverages along the way. The stand-up
comedian cant claim that he is the one
engaging the audience he is one of the
many props so far as the club is concerned.
While he gets paid to put up a show, he is
not integral to the whole scheme of things.
He is absolutely replaceable and easy to do
duplicate.
Not clear? Here, the Filmfare example
will come in handy. The magazine earns
revenue from its telecom partners for the
nominations done through mass SMS, it
releases entry forms inside the issues with
details of the actors and actresses capable
of being nominated and the event, then
issues are printed with pictures of the winners, TV shows are done to showcase what
happened at the event and these shows
charge advertisers to place their ads in the
programme. As such, the Filmfare award is
a money-making property and it strongly
links to the fundamental offering of the
brand itself.Now consider General Motors
recent decision to drop Facebook paid ads.
While General Motors will continue to have
its free page on Facebook, marketers say its
recent move is a reflection of the auto
giants realisation that clicks per page view
and the number of likes contributes little
or too less to the revenue chart.
Engagements do not translate to any revenue benefit for the company or
the brand. In other words, easily dispensable. At little or no extra cost.
The bottom line, therefore, is monetisability.Here, two more dimension of properties, as pointed out by Halve, come into
play. That the brand or company should be
able to collect rent (read return on the
investment made in the property) on that
property, and can sell it at a profit. As Halve
puts it, If you create a name property, it
becomes very difficult to sell it. One cannot
buy the Lakm Fashion Week as the new
owner might have a completely different
set of brands. At the end of the day, marketing investments must have some marketing returns.
Samar Singh Sheikhawat, senior vicepresident, marketing, United Breweries
Limited, takes the argument forward. He
says the potential to generate revenue from
a property depends on the kind of industry
you are operating in. We have realised that
the alcho-bev industry not only survives
in a media-dark environment, but also has
to conform to a lot of legal and statutory
regulations. So to a large extent, revenue in
this business is actually driven by pricing
which is determined by the government.
Therefore, in the alcho-bev space, a property must contribute to a few key things.
Yes, either it should contribute to revenue,
or contribute to brand salience or consumer
advocacy, or it should fit in with the overall
pattern of the business one is doing. The
Kingfisher Derby, like many of our other
properties, is designed on these fundamentals, says Sheikhawat.
The kind of investment that goes into
building a property also depends on the
38
brand and its long-term focus. In terms of

return-on-investment, branded properties
cannot be expected to deliver short-term
sales or even image score improvements,
believes M G Parameswaran, executive director & CEO, Draftfcb+Ulka. When Albert
Lasker motivated Charles Wrigley to invest in
renovating the stadium in Chicago, Wrigley
did it out of his love for the game. The fact the
stadium got named Wrigley Fields and continues to be a branded property, in many
senses of the term, is a bonus. The same
could be said of the scholarships that companies offer like Ford Scholarships and in our
own country the Tata Scholarships and
Aditya Birla Scholarships, he explains.
While this is a game fraught with uncertainty, it has the potential to open up whole
new possibilities for a brand, if handled
carefully. As Parameswaran puts it, sometimes a branded property may vampire the
brand and become something that has a
life of its own. If such a thing happens,
the brand owners need to ensure that they
create a separate revenue stream from the
branded property and ensure that there is
always an arms-length relationship with
the brand. The Guinness Book of Records is
a great example of a branded property that
has got a life of its own. So while Guinness
cannot be sold to kids, the book of records
is a constant source of inspiration for school
kids, Parameswaran explains.
In other words, brand properties take
time to create, and can last a long time. No
matter the size of our business, your brands
and your marketing budget, by developing
unique and memorable brand properties
marketers can fully leverage the value of
their brand building efforts.
>
Made in India,
only for India
For a whole host of
corporations,
exclusively-for-India
is not just a
marketing slogan, it
is an integral part of
their product
development
strategy
MASOOM GUPTE
f marketers got a penny

every time they said
India is a unique market, quite unlike the
rest, with multiple
markets ensconced within
a single geography, they
would have added another
billion to their kitty by
now. A possible addendum to that: we not only
have our specific requirements but also our own
quirky ways of consuming or
using products and services.
After all, where else do you
see washing machines being
used to churn buttermilk in large
quantities, breakfast cereal consumed like the traditional evening
snack item chivda or even bhel
rather than just that, a breakfast item?
Or deodorants used as cheap substitutes
of
their
costlier
cousins,
perfumes
and
not
for
their
anti-perspirant qualities that they are
actually meant for and even used world
39
>
PLAYING THE INDIA CARD

HONDA DREAM YUGA
Launched in
2012
Investment
Unavailable
Consumer insight
Even within the mass segment,
consumers have aspirational
needs. But in terms of
requirements, the mandate was
simple: performance before looks,
comfort and maintenance before
style. Obvious expectations were
better mileage, low maintenance
and hence low cost of ownership,
more comfort while riding and a
motorcycle well suited to
handling the myriad road
conditions in India.
GE HEALTHCARE
Launched in
2009
Investment
~750 crore
(R&D investment till date)
Consumer insight
Electrocardiogram (ECG) machines
are used by trained professionals in
urban areas. In smaller towns and
villages, these machines are
operated by physicians, hence
these must be easy to operate. Also
there are space constraints and
machines need to be compact here.
Lastly, due to frequent power cuts
in many places, machines need to
have a good battery backup and
most importantly, affordable.
over?
Marketers may not always be able to
address this quirkiness of Indians. But
more often than not, they can alter,
adapt, change their products or marketing strategies to suit the needs of the
Indian consumers. Or, as an increasing
number of companies are choosing to
do, listen to the Indian consumers and
give them products specifically designed
to suit their needs.
HYUNDAI EON
Launched in
2011
Investment
~900 crore
Consumer insight
The company believes that the
first-car buyer segment has
evolved over time. Compact car
buyers earlier looked for mileage,
price, styling and interior space in
that order. But as per Hyundai
research the order has changed to
mileage (the hygiene factor in the
segment) then styling, space and
interiors and finally pricing. This
finding formed the basis of the
development of Eon.
LG ELECTRONICS
Launched in
2009
Investment
~100 crore (approx. in Indian Insight

Products till date)
Consumer insight
Fully automatic machines werent
as popular as semi-automatic ones
as housewives/ maids who mostly
use these products couldnt
understand all the functions. They
were also shy in contacting the
company engineers to understand
more about it. This insight led to
the development of the speech
technology at LG, wherein
consumers could find all
instructions pre-recorded at the
click of a button.
40
Market needs
Earlier this month, Honda Motorcycles
and Scooters India (HMSI) launched its
India-specific motorcycle model, Dream
Yuga in the mass segment (100-110 cc;
priced ~44,642) in which it didnt have
any presence in till now. The segment is
important for any two-wheeler player to
generate volumes as it contributes over
50 per cent to the overall market. By that
estimate, if the two-wheeler market
stood at 1.34 crore units in 2011-12, the
mass segment would be around 67 lakh
units. That is almost three times the total
sales of Honda in the Indian two-wheeler market last year across segments
(21.07-lakh units).
Dream Yuga, is a collaborative effort
of Honda R&D India (HRDI; the groups
research and development arm) and
HMSI. The consumer needs and
requirements are analysed by our two
companies (HRDI and HMSI). Based on
this, the HRDI then works closely with
our R&D team in Japan to develop our
products, explains Y S Guleria, VP and
operating head (sales and marketing),
HMSI, who refuses to put a figure to the
investment in developing Dream Yuga.
But word on the street states that Honda
is stepping up its investment in R&D to
move from the No. 3 position to that of
the market leader currently held by Hero
Group, its erstwhile partner. To compete and outdo Hero, Honda needs to get
aggressive in the mass segment.
Localising R&D may help them reduce
the timeline between development and
launch as well as understand consumer
needs and respond to them better, says
an industry player.
Mind you HMSI does have a fighting
chance. Bajaj Auto, the countrys secondlargest two-wheeler manufacturer, lost
>
>
Walking that extra mile
We conduct surveys to learn more

about peoples expectations from
our products. This helps us develop
a product concept
Y V VERMA, DIRECTOR,
HOME APPLIANCES, LG INDIA
Some of these in-India, for-India

its No. 2 position to HMSI in March, but
products by GEHC include the Lullaby
reclaimed the spot in April. Thats just a
Phototherapy system for the treatment of
minor irritant: HMSI feels it has a finger
new born babies, the Lullaby Baby
on the pulse of the market. Says Guleria,
Warmer, portable ECG devices and so on.
The basic needs of a mass segment consumer remain constant mileage, comCulture matters
fort while commuting, low maintenance.
Each country has its own culture and
But we also noticed that even within this
each culture its own requirements, own
segment there are aspirational needs.
Now look in a completely new direc- daily routines and lifestyles. Home appliances need to address these variations
tion. It is no secret that healthcare costs
to be of some applicability in the conin India are skyrocketing and few can
sumers life. Marketing global products
afford the expensive drugs, tests and hoswithout altering them to suit the Indian
pital visits. Diagnostic technologies are
consumers needs is not
mostly imported in India, makenough. They will not fulfill
ing them expensive as well as Increasingly,
his needs, says Y V Verma,
unsuitable in some cases as they products
director, home appliances, LG
are designed to address the developed for
India.
needs of developed markets. India are being
Hence, with an initial
They are high technology and launched in other
investment of around ~80
sometimes large foot print, similar markets
crore LG India started the consays a GE Healthcare (GEHC)
cept of Indian Insight
spokesperson, explaining the
Products in 2009. Since then the companeed for India-specific diagnostic techny has introduced products based on
nologies.
Indian insights across categories, with
The spokesperson says, currently in
the number currently standing at 27. The
India, over 70 per cent population is
company earmarks a specific investment
being covered by 30 per cent trained
for this endeavour each year, the current
medical practitioners. The rest, 30 per
commitment being ~27 crore for 2012.
cent population, is served by the remainWe do robust consumer surveys and
ing chunk of medical professionals, leavstudies to understand current and future
ing much to be desired and a huge opportrends. We conduct surveys to exactly
tunity as well. The low cost technological
learn more about peoples expectations
innovations are being shipped out globfrom our products. We also keep a close
ally, to the developed countries as well by
tab on the changing lifestyle trends as
GEHC.
well. This helps us develop a product
GEHC spotted this opportunity early
concept. These concepts are then brainon, starting its R&D operations in India in
stormed on by HQ lifestyle and Indian
2009. It has committed an average
R&D people, elaborates Verma.
investment of $50 million in R&D in
The products may not be designed
India every year. The company has about
from scratch. They may instead be
1,200 dedicated engineers and scientists
tweaked to include features to suit local
working on innovating healthcare soluneeds. As for the challenges, the biggest
tions. The target: to bring out 100 inwould be the difficulty faced by any playIndia, for-India solutions by 2020 to meet
er in meeting the specific regional
the countrys healthcare needs.
41
demands of a country as diverse as India.

Products are therefore designed to
address the common ground. Their markets grow as these products find acceptance in countries with cultures and
lifestyles similar to India like in West
Asia, Africa and some parts of Sri Lanka.
Another automaker vying for the
Indian pie by seducing us with a for-youonly stance is Hyundai with its model,
Eon, specifically built keeping in mind
the varied Indian conditions and special
requirements of the customers here,
launched in October last year.
As with all other sectors and companies, the reasons for developing a model
specific to India stay the same the
Indian consumers our unique preferences, the vast population that makes
for a market second to only China in size
and the rising disposable incomes and
aspirations.
Hyundai Motor Company (HMC),
South Korea, has put great emphasis on
R&D and its commitment to bringing
innovative products. HMCs Namyang
R&D centre worked closely with the
Indian R&D unit in Hyderabad to develop Eon in order to meet the needs of customers in India. More than 1,000
Hyundai R&D staff members (Korean
and Indian) devoted four years to capture the needs of Indian consumers. The
development cost for Eon has been
approximately ~900 crore, says Arvind
Saxena, director, marketing and sales,
Hyundai Motor India.
With the Eon selling a total of 70,000
units (in India plus exports to around 20
countries) till date and an average sale
price of ~3.5 lakh, the company has
already made sales worth ~2,450 crore in
under eight months.
Talking about the products development, Saxena says, The challenges was
to create a car which is affordable yet
appealing to the Indian design and
styling sensibilities, and tailored to fit
the local climate, road conditions and
culture.
Other stories
The consumer goods market has also
caught the made-for-India-in-India
virus. Take LOreal India. Just sometime
back, this cosmetic major was struggling
to make a mark in the Indian eye make-
>
>
Putting that extra effort
More than 1,000 Hyundai R&D staff

members (Korean and Indian) devoted
four years to capture the needs of
Indian consumers
ARVIND SAXENA, DIRECTOR, MARKETING & SALES, HYUNDAI MOTOR INDIA
up market. Globally, the eye makeup

market is defined by mascara. That is
not the case in India where kaajal is
much bigger, seeped into the Indian psyche, says Satyaki Ghosh, director (consumer products division), LOreal India.
To crack this market, the company
therefore went back to its laboratories in
Paris seeking a formulation for kaajal
that is smudge proof and can be applied
on the lower waterline. The reluctance
was natural as globally there wasnt
another market that could have absorbed
the product. And yet, today Ghosh considers Maybelline Colossal Kaajal one of
LOreal Indias biggest success stories and
the company is even contemplating other markets like Morocco, West Asia and
Pakistan with an appetite for the product.
Then theres the mobile handset maker, Research In Motion (RIM),
BlackBerrys parent. It recently launched
a for-India model, Curve 9220, aimed at
the youth, priced a little over ~10,000.
In the last couple of years, there has
been tremendous growth in consumer
devices in India and most of it has come
from the youth, says Krishnadeep
Baruah, director, marketing, RIM India.
It has therefore become critical to offer
relevant products to this segment.
And since this group is synonymous
with high usage of social media and the
BlackBerry messenger (BBM), the company introduced a special button dedicated to the BBM. Of course, the hygiene
factors are all there the FM radio and
the youthful colours like pink over and
above the run of the mill.
Though developed for India, the product has been launched in other countries
too. Baruah says that is the key challenge
for a global player like RIM: to develop a
product with features that can find
applicability in other markets as well.
In stating this challenge, Baruah has
quite succinctly summed up the dilemma of every marketer looking at an Indiaonly product. But then, most find solace
in the fact that such products do find
resonance in neighbouring countries as
well as fellow Asian nations, even in
some Latin American ones like Brazil
and Mexico, especially if you are looking to ride your two-wheeler beyond
Indias borders.
42
>
In search of a
business model
Players in the mobile TV market are trying out various revenue

streams before cheap and fast data pipelines open up
SAYANTANI KAR
ndia happens to be the third largest

television household market. The
country also has the second largest
cell phone user base in the world.
Mobile television would seem like
the natural progression. Right?
Well, from the looks of it, it is still some
time for the two to come together. The technologies for mobile TV have of course
found their way to India, but the jury is still
out on which business model to
bet on. As a result most of the players
are trying to straddle more than one
revenue model.
It is difficult to get a fix on the size of the
market. That is because the nomenclature can encompass anything from TV content hosted on websites to over-the-top
mobile deliveries, says Kiran Kulkarni,
managing director of Geodesic. Indians
surf the internet more on handheld devices
than desktops. Industry observers put the
number of mobile phone internet users at
around 80 million with another 10 million
users accessing the internet through handheld devices such as tablets and e-readers.
Analysts put sticky mobile TV subscribers
at 8 per cent of this 90 million universe of
43
mobile internet users. Ernst & Young

Partner Devendra Parulekar says,
Advertisers are still staying away from the
mobile TV platform because the stickiness
of viewers as with say, renewals and repeat
purchases in DTH, is still absent.
Observers point out the average annual
spend of each customer to be anywhere
between ~300-900 (data costs and subscription costs). The ecosystem, then, is
generating not more than ~450 crore.
The opportunity is immense. A global
survey commissioned by new media delivery specialist Vidiator has found that India
is leading the way in monetising mobile
>
content with 50 per cent of the people having paid for mobile video content. This
compares to just 26 per cent in the UK and
47 per cent in Malaysia.
When will mobile TV find its feet
in India?
It should have been sooner. Indian
households mostly have single TVs, making
it a ripe market for the cell phone to become
the second screen for TV consumption. But
coming in the way of players like Apalya,
Zenga, Mundu and Ditto are low bandwidth, which results in poor quality image
and slow streaming and inconsistent load
times, and the issue of revenue sharing
with telecom partners who tend to grab a
bigger share of the pie.
The early entrants tied up with the
mobile operators as part of the mobile value-added services, sharing their revenues
from subscriptions with network operators
and content providers. A few bundled their
applications in the new-generation handsets. Now they are looking for ways to circumvent the telecom operator altogether.
Some of them are trying what is called overthe-top delivery through providers that
bypass cable packages and provide content
directly through web browsers. But it is far
from being a clear winner, with its own set
of problems. The biggest threat in this case
comes
from the internet itself, from free channels
such as YouTube.
The playing field
The good news is, the broadcasters are
warming up to the potential of mobile TV
and are trying to get their act together. The
imminent wave of 4G and LTE (long-term
evolution or LTE is part of the GSM evolution strategy beyond 3G) appears too irresistible for them. Take Zee Entertainments
Ditto TV, which has built a business model that side steps the telecom operators altogether. It has taken on board Siemens to put
together its over-the-top delivery model.
Users will have to subscribe to this service
separately, while paying their operators for
the resultant data traffic. We were the first
to launch an Indian satellite channel, the
first to launch DTH. Now we want to talk to
a different audience-the young people-for
our new media drive, says Punit Goenka,
managing director and chief executive officer, Zee Entertainment.
You can't look at mobile TV as

a standalone product, but have
to work with the entire
ecosystem which has original
equipment manufacturers,
telecom partners and content
providers. That is how you can
make it more affordable for the
end consumer.
VAMSHI REDDY
founder-MD of Apalya Technologies
Interestingly, Zee says it doesnt want to

brand its mobile TV offering as a Zee product. It will allow Ditto TV to carry off a
new language for the youth, says Goenka.
Frontpage teaser ads in newspapers cheekily declared that readers could watch television everywhere if they were bored of
doing it on the couch. It will also put
the fellow broadcasters at ease who might
then be more open to joining the Zee platform for the mobile TV service. If we brand
it as Zee then it defeats its role as a distribution platform, says Vishal Malhotra, business head (new media), Zee Entertainment
Enterprises.
With the over-the-top model, Zee hopes
to build a profitable platform of mobile TV
distribution. We havent tied up with any
mobile operators because there is no revenue to be made there. If I get 10-50 paise
per channel per viewer, there is not much
left for my content partners and us, says
Malhotra. Operators pocket 60-70 per cent
of revenues in services bundled with their
networks. Ernst & Youngs Parulekar says,
When telecom operator ARPUs (average
revenue per user) are rock-bottom, you
cant fault them much for they have to wor-
44
ry about their profitability too. India is the

only market where just 20-30 per cent of
revenues trickle down to mobile TV players.
Pallab Mitra, head (new product development, consumer VAS) and additional vicepresident at Tata Docomo, says, Operators
have to spend on feeder systems and servers
to stream the content. We are the ones who
are responsible for facilitating the selection
and use of mobile TV by the end consumers.
There is also the capital investment to
increase the data bandwidth allowing
mobile TV streaming.
But the operator-agnostic model is not
the easiest to pull off. Vamshi Reddy,
founder-MD of Apalya Technologies, points
out the biggest one. The operator already
owns a ready customer base. When we tie
up with them, the operator can market the
service and bring in these customers without us spending on it. Apalya started services on low-end networks, providing the
backend for most operator-branded mobile TV services, and kept pace with highend deliveries when smartphones and 3G
took off. It offers over 200 channels and
has strea-med Indian Premier League
matches.
Reddy points out that now most operators dont charge for data ferrying and only
for a mobile TV pack every month, making
it more affordable. You cant look at mobile
TV as a standalone product, but have to
work with the entire ecosystem which has
original equipment manufacturers, telecom partners and content providers. That
is how you can make it more affordable for
the end consumer, says Reddy.
Mitra of Tata Docomo says, Mobile TV
still largely acts as a catch-up platform for
a quick update on news or an important
game or a few minutes of TV on the move.
It will also take off because in the communal TV-viewing environment in India, it
affords privacy. That is why our satchet
packs for daily and weekly viewing are
more popular than monthly or yearly ones.
Mitra also points out that operator-based
mobile TV packs dont have to go through
any separate online payments or retail
recharge route since services are bundled
together.
Sustainability factor
Reddy says the business is sustainable even
>
with operators pocketing a large part of the
revenue. With most content providers (read
television channels), it has revenue-share
agreements and for events such as cricket
matches, it is often done on a minimum
revenue commitment. Popular TV networks also charge a minimum guarantee
fee (minimum revenue assurance).
However, even though it has been in the
mobile TV business for about six years, it
broke even only last quarter.
Malhotra says Dittos over-the-top model will work because of the audience on its
radar. They are not only young but also
affluent. Beaming its feeds to the metros
and large cities, Ditto TV will bank on people watching their mobile TV either for a
short span (15 minutes or so) on regular
2G/3G networks when on the move or at
homes, usually hooked up through unlimited wi-fi access to the internet. Such usage
and Zee has research data to prove the
point will ensure the customer doesnt
incur any additional data charges as it
expects most of its customers to be on at
least 1GB data plans on their mobile
phones. We will be getting content from
any broadcaster who can bring us audience
aged
13-35
years.
They
are the ones who consume content this
way. Older people still prefer larger
screens, says Malhotra.
Ditto has already seen more than 1 lakh
users download its applications, on handheld and desktop devices. Having undergone one renewal cycle since its February
launch, it has seen 30 per cent of them pay
for the services (there are also a few free-toair channels available).
Kulkarni of Geodesic, Zees erstwhile
mobile TV partner, says mobile TV adoption has been delayed because of the lack of
payment options, apart from the expensive 3G rates, affecting all the players. Like
Ditto, Geodesics mobile TV brand, Mundu
TV, launched a year ago, has rolled out prepaid cards for subscribers that can be activated both on desktops and handheld
devices to woo e-commerce-wary users.
Only 3-4 per cent of ones customer base
subscribe to paid channels. The rest watch
free-to-air channels for now, he complains.
The payment options are also on Zees
mind and it is working on shaping up its ecommerce payment options to launch its
video-on-demand services. It will even let
We were the first to launch an

Indian satellite channel, the
first to launch DTH. Now we
want to talk to a different
audience with our new mobile
TV offer. We don't want to brand
it as Zee, as it will defeat its role
as a distribution platform.
PUNIT GOENKA
managing director and chief executive
officer, Zee Entertainment
users pay cash on delivery if they cant

access a retail outlet easily.
Geodesic has a finger in all the business
models for now. It is present in over-the-top
deliveries with its pre-paid cards at retail
stores, after Zee parted ways for a partner
who could enable video-on-demand and
e-commerce subscription. It is also toying
with an ad-based direct-to-handset model
which is still very nascent in India. What is
a viable alternative to its prepaid cards is
embedding its application in mobile handsets and other handheld devices (via OEM
partnerships). The cost of acquiring the
customer is very low and also such users
dont migrate to another application easily
since it is embedded in the product
already, points out Kulkarni. It will also
enable Geodesic to embed ads in the applications which will be stored on the handsets, rather than take up additional streaming bandwidth of the user. Mundu TV
enjoys margins of 22-25 per cent, after
accounting for streaming, infrastructure
and content costs.
Zenga is the other major player in OEMembedded mobile TV services and also one
of the oldest. It stores its content on the
cloud to avoid hardware investment
45
expenses in the backend. Offering its services for free, it mainly earns from partnering with handset manufacturers.
Players such as Zenga and Mundu have
seen more traction in smaller cities and
towns. Kulkarni points out, Small towns
face power cuts with inverters diverted to
run fans etc. Also, in these households, there
is no scope for personal television viewing,
making live TV on mobile handsets more
relevant. He also says small and medium
enterprises have been known to subscribe to
such services for personal computers
instead of investing in a TV set and concurrent connections for their employees.
Even though India often ranks among
the top four downloader of video content,
Parulekar says, even high-end 3G today is no
match for high-speed broadband in the
country. Broadband is affordable and also
fast enough to support mobile TV streaming. 4G and LTE will change the scenario for
wireless mobile TV because these would
make data consumption comparable to
wired broadband services in both speed and
price, he says. No wonder most mobile TV
players are also keen on tying up broadband players for reaching the viewer, including over-the-top players such as Ditto TV.
Parulekar reveals that over-the-tops
main draw will eventually be video on
demand since live TV can be streamed other ways too. For channels, it makes sense
to tie up with a distributor, the operator in
this case, and bundle services so the consumer does not have to pay separately, he
says. Both Zee and Geodesic are getting
into video content in earnest. If the established players such as Apalya and Zenga
can lay claims to IPL match screenings, Zee
is eyeing short-form youth serials co-produced with young producers for the platform. For now, it will be wellness and cartoons. Its movie library will go live the
moment it puts its online payment mechanisms in place. Geodesic shows music
concerts at joints such as Blue Frog and
will integrate education content, the bulk of
which is already digitised.
Content is king
One of the major internet TV content hosts
is YouTube, the popular video-sharing portal, owned by Google. Google India
Managing Director Rajan Anandan says,
India has more than 50 million mobile
>
TV. Zee had not been able to monetise its
erstwhile
online
TV
portal,
mypopcorn.com. However, its rival, Star
India is readying a comeback with its version, called Star Player.
Sanjay Gupta, COO of Star India, says,
4G and LTE will roll out in the next 12-18
months. We have to be prepared for it. We too
are working on it and will be launching a
service this year, having spoken about it earlier. It can be accessed via the web but can be
used on multiple devices, including a smart
TV, he adds. For Gupta, mobile TV options
will drive viewers to use more number of
devices. Indians consume just 2.5 hours of
TV content per day on an average; in the US,
it is five hours. Either through ones own or
shared platforms, we have to push for multiplicity of devices, Gupta notes.
What is more critical for Star India is to
get its 12,000 hours of content it makes
every year to an audience beyond India.
Today, not all of our channels reach all the
overseas markets, save for Star Plus which
reaches 65 countries. The other vernacular
channels could now reach these markets
too, Gupta says. On its part, Ditto will capitalise on Zees international audience.
With broadcasters in the race with technology providers to provide mobile TV,
what will separate the boys from the men
will be the kind of investment one can rustle up. While Zee, with its healthy balance
sheet, can invest in the business without
much trouble, others like Apalya have got
venture capital to support them.
But the ecosystem is still lopsided, driving some players to avoid bundling services with distributor partners. This might
hike the bills for users and end up discouraging them further. As a result, for now, all
the players are focusing on sharpening their
user experience while dabbling in the available revenue models.
It will be still some time before a model
emerges the winner. Till then the audience
will be waiting.
QUICK BYTES
OVER THE TOP
Pros:
>
Gets to keep the bulk of the revenue, only pays for content and infrastructure costs
>
Has a customer base of its own, and not dependent on others
>
Can monitor consumer preferences quickly as a result
>
Customers might find it expensive, paying for data and subscription separately
>
Recharge options need to be seamless for renewals, not yet achieved
>
Recharge dependent on network built, both offline and online
>
Spend on marketing to acquire viewers
Cons:
PARTNERING WITH OPERATORS

Pros:
>
Audience brought in by operator, low customer acquisition costs
>
Infrastructure cost and delivery modes facilitated by mobile operator
>
Services bundled with operators data plans, easier to subscribe to
>
Revenue share at a low 40-30 per cent, to be shared with content providers and the rest
pocketed by operator
>
Content providers demand minimum guarantee fees
>
Cant tap desktop Internet surfers
Cons:
EMBEDDED IN MOBILE PHONES

Pros:
>
High stickiness, as software already embedded in the device bought,

incentive to use other services low
>
Customer acquisition aided by phone manufacturers; advertising
>
Dependent on handset makers marketing efforts
>
Once trial periods are over,

subscription models activate,
separate from data charges
Cons:
DELIVERY THROUGH
ONLINE PLAYERS
Pros:
>
Revenue through advertising
>
Infrastructure costs low, uses streaming through the internet
>
Could actually spike the data bills with heavy streaming
>
At the mercy of the data internet speed available to the viewer
>
No way to gauge stickiness or monetise the customer on a large scale yet
Cons:
internet users, and that number is set to go

up to 300 million in a few years time. What
is important is to have enough content for
them to be available on the web. We need

100 times more video content on the net, so
I welcome any player who enters mobile
46
>
From custom made to
SAYANTANI KAR
customermade N
Marketers are making the lives of their consumers
difficult they want the crowd out there to contribute
to the product strategy
47
asa is doing it for its Pluto

and Mars missions. Unilever
fired its advertising agency
to go with it. Crowdsourcing,
a term coined by Wired
Contributing Editor Jeff Howe, has
stretched from scientific discoveries to corporate research and development. Nasa
has numerous websites dedicated to nonscientists to contribute to space research,
while Unilever, among many other multinational consumer brands, has asked its
consumers to create ads
for many of its brands.
Closer home, life is getting complicated for consumers. Companies are
now actively seeking out
users to help in solving various prob-
>
We could have gone to design

houses or consultants. But
most of them were not very
clued in to our core audience
PRATIK SEAL
head of marketing Micromax
lems from designing packaging, to logos,

to advertising slogans just name it. If
Kurkure is getting its festive pack designed
through entries from the crowd, the Indian
handphone manufacturer, Micromax, and
even the Government of India, have gone to
the Indian crowd for design inspiration.
While Micromax constituted its new logo
from a user suggestion, our new rupee symbol was the result of a similar initiative by
the Finance Ministry and the Reserve Bank
of India.
The groups they are turning to could
have specialised talent or could simply be
representatives of the larger consumer population. At times, brands directly
reach out to the public or do so through
mediators who can bring in users with the
right background for the job at hand.
Incentives include money, or active
acknowledgement from the company in
terms of, say, featuring in the companys ad.
For the chief marketing officer, crowdsourcing or co-creating with the consumer
is a tangible measure of harnessing the
social media well, a network that many of
them still cant figure out. So for now, consumer brands in India are inviting communication and design ideas from people
outside their own and partner organisation
networks.
But
vanguards
of
crowdsourcing
both
in
India and abroad speak of a
future when even innovation and product
development could be crowdsourced.

In the US, websites such as InnoCentive
have been crowdsourcing solutions that
had stumped R&D teams at corporations
such as Elly Lily, Procter & Gamble (P&G)
and Colgate, saving them money. The problem solvers? Maverick tinkerers, hobbyists
and freelancers with little or no expertise in
the fields they dabble in. P&G has its own
website, connect+develop, for submissions
on innovation covering the entire gamut
products, packaging, business models and
trademark licensing. Dell has taken such
submissions a step further by getting consumer fraternity to vote the best crowdsourced idea, be it about products, design,
packaging or technology suggestions. Its
Ideastorm website pulsates with implemented ideas, and recent and trending
ideas for all to see.
In India, companies are just starting to
fathom what they stand to gain-besides the
savings on money, the sheer number of
ideas that stream in can boggle ones mind.
Voting of the ideas by the crowd is gradually
becoming part of the drill.
Designed for success
Designing is an area that lends itself well to
crowdsourcing. Pratik Seal, head of marketing at Micromax, says, For our logo
redesign, we could have gone to design
houses or consultants. But we realised that
Be it our association with

musicians or bloggers, we
have kept music central to our
communication
RANJIVJIT SINGH
CMO, PSG,
Hewlett-Packard
48
most of the brand consultants were not

very clued in to our core audience. The
middle class youth is Seals consumer a
demographic consultants dont necessarily map well. So Micromax enlisted the help
of talent-hunting agency, Talenthouse
India, a JV between Reliance ADA Group
and the California-based, Talenthouse.
While Talenhouse mines groups with specific artistic talents, the entries are put up
online to solicit votes. In that sense, even
the finalists are crowdsourced. Talenthouse
was able to make a presentation of the leading themes which came up through the
process, one of which was that of the
punch. A version of the same won the
brands logo hunt.
For PepsiCos Kurkure, the annual festival pack design turned out to be an opportunity to figure out if crowdsourcing works
or not. Nalin Sood, executive vice-president, marketing, foods, PepsiCo India, says,
Since we have thrown the brief open to
both our regular advertising agency and
the outside world, we will be able to compare the results to decide whether crowdsourcing has the potential to start something new for us.
Again, Sood chose Talenthouse because
of its ability to tap a pool of people with
some background in design. Where you
mine for responses will depend on how
specialised the task is. So, the flavour-hunt
by Lay was thrown open to the general public, while our festive pack design is tapping
into a design talent pool, points out Sood.
Design and communication inputs are
easier to solicit as the first step to crowdsourcing because the companies dont have
to share critical business information. But
brands cant be casual about the briefs they
craft for the crowd either. One has to
design the initiative well. The prize will
have to be commensurate with the effort.
You need to commit the prize and not have
a bailout in the fine print saying there
would be no prize if the entries are not good
enough. There should not be any ambiguity in the brief and you should be specific
even as to the colours etc if it is design,
points out Deepinder Goyal, CEO, Zomato,
a food and restaurant listings website that
has crowdsourced its television commercial.
While Micromax sourced ideas from the
crowd it ended up spending close to ~20
>
crore to unveil the crowdsourced logo. In
contrast, start-up Zomato embraced it for
the savings it affords. If we had gone to an
ad agency, they would have charged anything starting from ~50 lakh for, lets say,
three ideas. Through this route, we have
received 110 ideas at one-tenth the cost,
notes Goyal. It found 10 per cent of the
entries useful, without any of them being
ready for TV. Zomato then armed the 10
entries it had chosen with more money,
time and feedback to come back for the
final round.
Zomato had experimented with crowdsourcing a year back with its iPad contest
that asked bloggers to review the website.
One valuable insight that actually forced it
to tweak the website was that users should
be able to search by specific dishes rather
than just by restaurants. Frito-Lay, the first
brand from PepsiCo to go crowdsourcing,
did so to devise a new flavour. Four flavours
shortlisted fron user suggestions were manufactured for real and then put up for votes.
The winning flavour, Mastana Mango, won
its maker 1 per cent of the revenue generated by its sales, apart from a ~50 lakh cash
prize.
Crowdsourcing has helped solve another dilemma for the marketers how to
keep their social media followers engaged.
Arun Mehra, CEO, Talenthouse India,
observes, For most brands looking to
crowdsource videos, the inspiration is
Facebook. Hence, Airtel with its HFZ uservideos and PepsiCo with its Tropicana
shorts were routed through Mehras team to
their microsites and Facebook pages. HUL
is currently busy sourcing videos for its Axe
deodorants for similar use.
For Hewlett-Packard (HP), it meant
more than just content for its social media.
Ranjivjit Singh, chief marketing officer,
Personal Systems Group, Hewlett- Packard,
says the rock anthem that HP invited its
one lakh online fans to put together, echoed
HPs positioning. With one of the influencers for our core TG, the youth, being
music, we have determined that it will be
our peg. Nearly 80 per cent of them listen
to music on their notebooks. So, be it our
association with musicians and bloggers
or our Beats-enabled laptops, we have kept
music central to our communication, he
adds.
Asking its fans to create an anthem,
In my advertising days, I have

seen ideas come from the
unlikeliest of places and not
necessarily from those on the job
ROHIT MISRA
co-founder
Ideademocracy
which was finally put to music and sung by

one of the users, made them feel they had
some part in the branding. Brands are now
being created out there, among the consumers, and not behind agency doors anymore, adds Singh. As a result of the online
buzz, HP saw 45,000 more fans added to its
Facebook page. Singh also found such an
avid participation by the crowd boosted
the morale of the employees. The employees felt proud when they saw consumers
engage with the brand, he says. The music
video has also been taken to retail partners.
Same difference
But is all this just an evolved version of
focus groups in consumer research? Singh
of HP says, Focus groups are curated to go
in a certain direction. For crowdsourcing
ideas, brands should be open to embracing
all kinds of suggestions. Most importantly,
they should have no expectations. It is more
of how the brand fits into the consumers
life than just brainstorming. Goyal agrees,
Focus groups in consumer research dont
always get people who care about the product but are forced to. While crowdsourcing
often gets you in touch with people who
would have given your problem some
thought to qualify for the prize up for the
taking. They take an effort to make their
suggestions valuable.
With brands lending an ear to the consumer, advertising and research agencies,
49
the erstwhile mediators, will have to pull

up their socks. Ideademocracy (www.theideademocracy.com) is being build up to be
Indias first crowdsharing platform. Rohit
Misra, co-founder, who was in advertising
for over two decades, now wants to establish
a platform that will have a community of
users who can collaborate to solve client
briefs.
The platform will first put up the brief
for the online community, it will then check
the entries to avoid plagiarism and put up
the ideas for brainstorming by the entire
community. Misra wants to take the voting
seen so far a step further. In my advertising days, I have seen ideas come from the
unlikeliest of places and not necessarily
from the agency team with the creative
mandate. So, we will tap this creativity in
people out there and get them to brainstorm on the ideas that are put up on the
platform and may be even merge more
than one idea to come up with the ideal
solution, he adds.
Such brainstorming will be critical to
spin crowdsourcing beyond the logo
designs. Logo design inputs are processdriven and dont take much to create. But as
we move higher up the value chain to product design and business challenges, the
crowd has to discuss the project together to
come up with the best option, Misra points
out. The website will have briefs for basic
design, website design for SMEs and ultimately briefs from larger brands on business challenges.
What will keep brands from bypassing
the crowdsourcing agency or mediator
altogether? Mehra cites the example of an
automobile company in India that crowdsourced snippets for its TVC, but ended up
spending ~25,000 per video it received as
cost of inviting applications. While a similar effort by Mehras team for Airtel needed only ~2,000 per video. The number of
videos we got was 216 out of which 70 were
great but they received only 20 good videos
from the 10,000 that came in,
he adds. By focusing on the right crowd,
brands can look to save on their crowdsourcing
initiatives.
And
to truly mine the crowds wisdom, brands
will have to move beyond design challenges and get them involved in more
meaty roles.
>
Organising
unorganised
markets
The benefits of organising markets are obvious. But
there are many hurdles to overcome.
RAJARSHI BHATTACHARJEE &
ALOKANANDA CHAKRABORTY
Life in a metro like Delhi can be difficult, if
one doesnt have a personal vehicle. And
thats the first thing he needs to sort out,
Kaushik Gupta, senior manager with a
multinational company, thought to himself
when his boss told him that he has been
transferred to the capital city from Kolkata.
Shifting base with his family, Gupta was,
however, pleasantly surprised to find a safe
and punctual travel option in the radio cab
operators in the city.
Cut to Chennai. When journalist K S

Narayanan had to move back to Chennai to
be close to his family he dreaded the daily
drudgery of shopping for essentials, used as
he was to the well-oiled retail machinery in
Mumbai. However, the customised
services and the hassle-free shopping
experience in weather-controlled malls

thanks to the retail revolution Chennai is
witnessing made him wonder why he had
dilly-dallied in the first place.
he winds of change might have

warmed Gupta and Narayanan,
but marketers say India has a
long way to go when it comes to
organising the huge unorganised segments of the market. Yes, the signs are all
there but the so-called boom is limited to
the urban markets, as a big part of Indian
retail, hospitality, entertainment, travel
fleet management continue to be unorganised.
In fact, a recent PricewaterhouseCoopers report says while the Indian
retail sector is worth between ~18-20
lakh crore, the organised portion is just
about 8 per cent. Take
the pharma retail market in India that was
50
valued at ~50,000 crore in 2011. The organised segment of that market was just about
~4,000 crore. For consumer goods, the
organised modern trade format has just 5-8
per cent of the overall market.
When it comes to retail, a key reason
that seems to stand in the way of wholesale
reorganisation is the capital intensive
nature of the business it is often not so
easy to spread the retail networks without
worrying about additional working capital
requirements. Rohit Bhasin, leader, retail
practice, Pricewaterhouse- Coopers India,
says, Because of political compulsions,
foreign direct investment (FDI) in multibrand retail has not been allowed. The day
FDI opens up to multi-brand retail, we will
see a larger penetration of organised retail
and the 8 per cent figure will clearly go up.
As global players enter the Indian retail arena, they will come in with the capital and
the know-how required for operating
organised retail networks.
Bhasin says the decision to step beyond
tier 2 markets is not an easy one for retailers
they would rather exploit areas that are
likely to offer better returns. The gestation
period is very high in this sector. Achieving
break-even is a major challenge for players; especially in a situation when raising
capital is becoming difficult, the propensity is to go to the metros and tier 1 cities first.
The other reason can be related to logistics
particularly for the pharmacy and the
food and grocery segments. It is not so easy
to reach tier 2 and 3 cities as the supply
chain networks are not well developed yet,
explains Bhasin.
Bhasin, however, adds organising retail formats in India is a
function of time, economic
growth and opening
up of FDI in multi
brand retail. And its
not a distant
dream because the
>
Indian consumer has started changing and

is demanding more efficient customer
interfaces and better services. Consumers
across segments tend to prefer brands for
their uniformity, provided cost-effectiveness is attached to the marketing proposition. An organised player with well-known
branding induces confidence among its
consumers in a similar way as a popular
newspaper evokes credibility among its
readers, says Om Manchanda, CEO, Dr Lal
PathLabs.
In a sense the ball is in the marketers
court. It is incumbent of them to educate
retailers about the benefits of organisation
and step out of their comfort zones to
devise ways and means of wooing consumers in markets that remain fragmented
and outside the radar of other manufacturers, says a Mumbai-based brand consultant. Y V Verma, director, home appliances, LG Electronics, agrees. The
challenge is to educate the small retailers

that the whole experience is becoming very
important even in smaller cities products need to be displayed according to the
planogram. He has to identify which are
the hot-spots on the shop-floor-when a customer walks in, where does she spend most
of her time; they have to figure out what
type of products should be kept where, at
what height, and they have to take on the
task of training the shop-floor executives to
EXPERT TAKE
Modernising retail requires a revolution

DEVANGSHU DUTTA
odern retail is equated with a

more structured and systematised organisation, hence the
term organised retail. This term is
weighted with expectations of greater
capability, better competitiveness and
greater benefits for industry and society.
However, if we take organised to mean
better for the consumer then, often, our
age-old corner shop and the local clothmerchant-turned-fashion-retailer appear
more organised and better at delivering
more relevant products to us at lower
prices with superior services than most of
the new corporate chains.
Over the last two decades or so, there
has been a steady transformation of the
retail landscape and the consumers
shopping attitudes. There are many more
people with much more money in hand
to spend at their discretion today than
ever before. This has encouraged the
growth of brands, Indian and international, as well as the emergence of modern retail chains and malls. The transformation is most visible in our largest cities,
some locations already having a surplus
of mall space. A generation is growing up
in these cities that takes malls for granted, and that completely avoids the more
traditional retail spaces.
There has certainly been a gold-rush,
among companies, investors, real estate
developers, even professionals looking to
put the next big thing on their resumes.
The true impact, however, is still very
limited, very shallow for the country

overall. In fact, in locations with high
concentration of modern retail, the
impact has even been negative in terms
of poorly developed space, or rising costs,
and stressed infrastructure to the detriment of the local inhabitant.
The impact of this growth is little
understood, much less guided or planned
for the long term. There are loud voices
both for and against corporatised modern
retail, but there is very little balanced discussion. There are several laws binding or
restricting retail activity, but very little
policy enabling it, whether we look at
modern retail or traditional, corporate
or individual owner-driven stores.
Here are some major issues that we
need to tackle, at the policy level and
within retail businesses:
Regulatory frameworks: For the
most part our laws are obstructive
rather than productive or directional. The multiplicity of authorities that a retail business must
deal with doesnt help either
including various central ministries, state-level ministries, and
myriad municipal departments,
local utilities and other authorities.
Space and infrastructure: Retail
is mostly an afterthought, either as
a small fraction of poorly developed
space within an urban development,
TURN TO PAGE 52>
51
>
EXPERT TAKE
Modernising retail requires a revolution

TURN FROM PAGE 51>
or as massive glitzy shopping malls that
have no correlation to their surroundings. Either there is not enough good
space, or too much without adequate
support services. A retail centre needs to
be a positive part of the local ecosystem
in every way, rather than an unwanted
cancerous growth.
Integration with the local economy:
We all intuitively know that shopping is
an intensely local and personal activity.
Yet, in the race to gain efficiencies of
scale, modern retail managers take
national or international template-based
approach. Decisions are made centrally,
products shipped by distant suppliers
and the labour force is also often drawn
from outside. There is little local relevance left and hardly any contribution to
generating healthy economic activity in
the stores vicinity.
Diversity of choice and competition:
We need to think through how the economic balance of power is handled
between retailers and their suppliers, to
maintain healthy diversity for the sake of
the consumer. The evolution of modern
retail business models can shrink rather
than increasing the consumers choice.
Strategic sourcing, partnering and collaboration are buzzwords that drive
increasingly narrow supply-development, and retailside consolidation
means
fewer
not just sell a product

but satisfy the evolving
consumer. Organised brand outlets
offer advantage in terms of retailer margin, cost-benefit and inventory-management.
This, however, doesnt mean the 12 million mom-and-pop stores (according to a
PricewaterhouseCoopers report) will cease
to exist as Indian retail turns organised.
It is true that certain margin is lost in the
channels to the consumer. For wider

impact across the economy a diverse
and vibrant design, development and
manufacturing base is needed that can
effectively compete within itself and
externally.
We need to drastically rethink the
role of retail in our society if we want
Indias urban centres to be healthier,
dynamic and sustainable in every possible way. Retail is the one economic
activity that touches the daily life of virtually everyone modernising it is an
imperative. Modern retail should not
mean space more expensive than that in
rich economies, for a handful of companies selling brands to an elite fraction
of Indias population. We shouldnt treat
it as the exclusive party to which only
large companies are invited, whether
Indian or foreign. For a true movement
from unorganised to organised retail
we need to have brands and product
offerings that meet the needs and budgets of the real Indian middle class and
below, delivered in an affordable and
inclusive way, in cities that thrive with
retail at their heart as part of the social
and economic infrastructure.
Perhaps we even need a National
Mission to holistically think through
how we can improve the quality of the
entire retail ecosystem! This may is the
only way to create a true retail revolution
in India and use it as an engine for wider
economic and social growth.
Devangshu Dutta is chief
executive of Third Eyesight
unorganised retail value

chain, more so in case of food
and grocery retail. But at the
same time the margin deployment is coming at a very low level of investment. Price
flexed organised trades tend to work on a
lower spread but at a higher investment. As
such, it would be safe to say that apart
from commodity products, in most places,
the unorganised trade has showed more
efficiency than what most people pre-
52
sumed it was, says Ashutosh Tiwari, executive vice-president, strategic marketing,

Godrej Group.
Tiwari adds that while most people
approach organised retail format from cost
and efficiency viewpoint, for the bulk of
the organised traders the advantage lies at
the value end and not as much at the cost
end. Here we are seeing a lot of success stories. A lot of our brands have a higher market share in modern trade/organised retail
as compared to traditional trade. This is
because organised retail offers us some
consumer and shopper-friendly opportunities. One, introduce new products and
variants specifically at an entry threshold
which is a fraction of the entry threshold
that was required to introduce in a traditional market. If we do not have a ~10 to 20
crore line-of-sight (advertisement) immediately after the launch a product, the product will not succeed. But organised retail
offers us the opportunity to bring down
these thresholds dramatically. This is
because we can advertise and communicate in-store, super-segment or even hypersegment the offerings, divide them into a
lot of complementary slices and at an
investment that is only a fraction of the
investment quantum that was earlier
required. This also creates a lot of value for
the consumers, he elaborates.
Travel smart
Retail might be the most obvious first stop
for any discussion on organised formats,
but the whole issue of travel and hotel booking/stay is becoming smoother right under
our nose.
As the average Indian has become more
net-savvy and therefore a better informed
customer the largely unorganised travel
service space is fast sprucing up its act. It is
a far cry from the scene earlier which was
controlled largely by fly-by-night operators.
A big part in this whole effort has been
played by the online travel/tourism companies that not only help you plan your itinerary better but help you execute the whole
plan in the most cost-effective manner.
Of course, the scene is far from being
perfect. For the players, becoming organised will require investment in technology
and human capital, as well as automation
and standardisation to support real time
>
SECOND OPINION
costs of selling in an unorganised
market?
The biggest impediment to

organising markets is capital
HARMINDER SAHNI
Founder, Wazir Advisors, a management consulting firm
Across the globe segments of markets that were highly fragmented are
getting organised. Where is the push
for organisation coming from
from the consumers or the marketers? Why?
The initial push always comes from

marketers. But once the consumer
enjoys the benefit of the organised
sector, then the pull comes from the
consumer end. For example the first
few malls or organised retail stores
were a result of marketers push
efforts in Delhi and Mumbai, but
then the pull came from the consumer side in tier 1 and tier 2 cities to
be able to enjoy those same facilities.
The reason for marketers to push
for an organised sector is that they
can offer better, wider and newer
products through proper display and
inventory and balance the demand-andsupply

pipeline.
Keyur
Joshi,
co-founder and chief commercial officer,
MakeMyTrip, says the tax structures
need to be supportive of the needs of a
nascent industry that is trying to organise
at a massive scale.
demonstrations. In the unorganised

sector, most items are sold over the
counter and consumers are not
exposed to whats new. Also an unorganised retailer will only show consumers what they wish to push due
to higher margins or to meet their
targets. The rights of consumers to
choose versus the marketers power to
offer choice is curtailed in the unorganised sector. Another party that
should be interested in organising
sectors is the government,
because the leakage of revenue in terms of taxes and
levies from the unorganised
sector is very high.
The
What elements of the market
represent the biggest impediments to organising unorganised markets?
The cost of selling in an unorganised

market includes cost of reach and
delivery. There is a huge difference in
delivering to 10,000 retailers versus to
one retailers distribution centre who
has a few thousand stores of his own.
Other hidden costs include the
cost of capital that gets stuck with so
many retailers, for carrying buffer
stock at warehouses, distributors and
carrying and forwarding agents, and
in transit.
This raises the question of what happens in those sectors where there are
no large brands, but there is a proliferation of small, mostly not very well known
brands with minimal
advertising support.
How do the smaller
players
cope
up a to seismic
only way
shift of this nature?
small brands
can survive
is through
acquiring
scale
The biggest impediment is

capital as the cost of organising anything at any level is
very high. The initial investments are
risky as they are done more on the
basis of hunches and less on actual
demand, so complete loss is a scary
reality. Another impediment is
the compulsion of the unorganised
sector to fight extinction at any cost
and their capacity to work on
extremely low margins.
The only way small

brands can survive is
through
acquiring
scale. The organised
retail is a big boon for
small brands as they
can reach many more
markets and consumers without having to spend on advertising and distribution. They can build their brand
in collaboration with organised
retailers through in-store brand
building campaigns.
How are the consumer buying behaviours different in organised
and unorganised markets?
Consumers enjoy the choice and liberty of an organised market and feel
The benefits of organising markets

are obvious. What are the hidden
When MakeMyTrip first tried to consolidate the hotels inventory and bring it
online (in 2009), we faced many challenges.
We had to actually invest in automating
our hotel-partners so that customers visiting our website could access this inventory
real-time. Small boutique properties were
53
either apprehensive of the investments

required to ramp up their technology platforms, or it was not financially viable for
them, says Joshi.
He believes that being part of an organised sector will provide a stronger representation for the sector. Despite creating
>
more jobs per million rupees of investment

rience, Siddhartha Pahwa, chief executive
than any other sector of the economy, the
officer, Meru Cabs, says, In the early days
travel and tourism sector has not received
even the consumers did not understand
its due in terms of sops, special benefits or
how this service is going to be any different
policies to fast-track growth and seize the from the local taxi service used by them.
advantages, he points out. A World Travel
Urging them to make a call to a customer to
& Tourism Council estimate indicates the book a cab rather than hail a taxi on the
tourism industry in India is likely to genroad was a new experience.
erate US$121.4 billion of economic activity
Pahwa says whether it is retail or fleet
by the year 2015 and become the
operation the need of the hour is grooming
second largest employer in$ the world
passionate managers. And it is an added
(employing 4,037,000 people, directly or
advantage if they come from a completely
indirectly) by 2019.
different industry they bring new conWith most players in this segment
sumer insights and management ideas and
being small and medium enterprises, marredefine the whole business in the process.
keters say the key challenge is to bring
Test result
them all under one comprehensive
umbrella and create a regulatory frameAnother industry where trained profeswork that is credible, so that even
sionals have changes the face of business
the smaller players find it advantageous
relates to healthcare.
to be a part of it.
Even a couple of years back, a visit to the
Thats the story in inter-city/inter-state
neighbourhood pathology shop would
travel. For intra-city travel, which is still
mean walking into an ill-kempt dimly-lit
largely unorganised, a whole host of operahole-in-the-wall establishment, strewn
tors have burst onto the scene trying to bring
with strange looking vials. The smell waftsome method into the madness. With about
ing through the room wouldnt be particua dozen players across India cashing on this
larly pleasing, while the man at the counter
lucrative market that included players
would typically wear a dont-bother-mesuch as Mega, Meru, EasyCab, Select Cabs,
look. In short, one wouldnt want to enter a
Delhi Cabs, Mumbai Gold, Fast Track, Metro
pathology shop, except under dire circumCabs, Quick Cabs, and women-driven cab
stances.
services like Priyadarshini
Circa 2004, all of these
Private Cabs, Go For Pink,
began to change. In keeping
Even in an
and For-She the business
with increased awareness
unorganised
is set to boom and spread to
about best practices on
market,
new cities. These radio cabs
patient care, pathology
consumers look
are air-conditioned cars
shops by now christened
for uniform
equipped with state-of-theas medical diagnostic estabcustomer
art GPS-based communicalishments started looking
experience, costtion technology and most
their part. Smart, neon-lit
effectiveness
have well-groomed drivers.
hoardings went up in place
and quality
The service is supported by a
of old and worn-out sig24x7 customer call centre
nages; glass-panes replaced
OM MANCHANDA
and in most cases you can
rickety doors; dingy rooms
Chief Executive Officer,
Dr Lal PathLabs
book online as well.
metamorphosed into wellA pet peeve among these
lit and well-ventilated rest
operators is scarcity of
areas. And, the new persontrained manpower
nel, most important of all,
trained not just in the art of
are handpicked professiondriving but in dealing with
als trained in patient-care.
consumers, in building relaWhile patients certainly
tionships. So most operators
did not complain, there
end up investing in training
were solid economic reatheir personnel, besides
sons which prompted newbuilding the fleet and the
generation entrepreneurs
back-end. Sharing his expeand
dyed-in-the-wool
54
businessmen from the organised sector to

enter the sector by mid-2000.
The medical diagnostics market was
about ~5,000 crore about seven years back.
Now, it has touched ~8,000 crore, growing
at a steady rate of 15 per cent every year.
However, whats interesting that the organised segment continues to grow at a much
faster clip of 30 per cent. Being recession
proof and offering good returns, does it
really take rocket-science to explain why
entrepreneurs new and old made a
beeline for this market?
As of date, the top five players within
the organised sector in revenue terms are
Super Religare Laboratories (SRL: FY12:
~500 crore), Dr Lal PathLabs (LPL: FY12:
~325 crore), Metropolis (FY12: ~300 crore)
and Thyrocare (~100 crore). A handful of
others (about 20 city level players) constitute a market of ~275 crore. Many players
are offering a combination of pathology
and radiology services to patients.
This market is also faced with many
hurdles. The biggest roadblock is the
absence of a level-playing field, says Om
Manchanda of Dr Lal PathLabs. For an
organied player such as Dr Lal PathLabs in
an unorganised medical diagnostics market, initial corporate overheads are very
high. Apart from the salaries, issues like
cost of air-travel and holding banquets at
quality hotels provide a strain on the
finances. A local player faces no such
expense heads. Therefore, it is only beyond
a certain inflection point that an organised player starts making profits in newer
centres.
The absence of quality standards is
another big impediment to organising the
unorganised pathology markets. The bigger, organised players align themselves to
international medical quality standards,
and are forced to reckon with associated
costs. Then, there is the issue of unethical
doctor referrals, where some unorganised
players tend to pay off doctors in return of
their support, Manchanda adds.
So there you have it: across segments
there is a concerted push to get markets
organised. But while the benefits are obvious, players are still grappling with issues
relating to the availability of capital, trained
professionals and ensuring quality. And
the consumer is waiting for the pieces of the
puzzle to fall in place.
>
MANAGING CUSTOMER
expectations
Worried that your new brand may not take
off in an already downbeat market? Stop
fretting. Simply, under promise.
MASOOM GUPTE
THINKSTOCK
ou place an order with an online

retailer who promises you will get
all your grocery delivered to your
home at a time convenient for you, for a
nominal fee. You wait at home at the scheduled hour, and then you wait a little longer.
Indeed, you kick your heels for hours but
the delivery boy doesnt show up. Then the
grim realisation kicks in that if you dont
have enough food in the refrigerator, youll
probably have to help yourself to the readyto-eat dal fry that came free with your cooking oil and has been lying at the back of the
cupboard for a week now. You will be lucky
if you found some bread to go with it.
Nine out of 10 consumers, just to be on
the conservative side in ones statistical
estimation, have faced delays in receiving
home-delivered goods. Numerous calls and
parroted responses from the retailer about
the delivery boy being on the way dont
help. The result: a disgruntled customer.
Worse, this customer will likely tell his family and friends not to touch that particular
retailer with a 10-feet barge pole! Like interactive marketing expert Pete Blackshaw
warns, satisfied customers tell three
friends, angry customers tell 3,000.
The issue here is not just about failing to
deliver on time; what this particular retailer ended up doing was fail on the consumers assumed level of service. The marketer could have been in any business. He
could have been a soap maker, promising to
make you fairer in 14 days, or an automobile
manufacturer promising to cut your gas
consumption by half. One of the best ways
to have happy customers in any market is
to make sure they know what to expect.
Now consider a real life example that

of city taxi service Meru Cabs. Alpana
Parida, president of brand consulting and
brand design firm, DY Works, who avails of
radio taxi services regularly, says, When
Meru launched its services (way back in
2007),
the
message
conveyed
was that it would change the way we look at
cabs. The service would be crisp, we would
get clean cabs, the drivers would be cour-
55
teous the whole experience would be

similar to travelling in your own car.
Today, while the radio taxi service seems
to be faltering on some of the things it had
promised at launch there is no guarantee
that you will get a cab or a driver who knows
the way there are a whole host of services
that have come up that offer comparable or
better services to consumers. There is no
real distinction between a Meru cab and a
>
regular cool cab now. The fact that getting a cab is not assured and that short distance journeys are not catered to mars the
brand experience further, she adds.
Lesson for businesses: while meeting
consumer expectations is critical to maintaining your relations with this rather fickle crowd, you also need to be proactive in
setting the level of expectation right. And
of course, meet them.
And nowhere is this lesson as critical in
its applicability as it is during the launch
phase of a brand. The risk of going overboard in ones drive to hard sell a new product is much more than when the brand is,
if we may use the term, on auto-pilot.
Failing to deliver on promises made during
the launch phase can scar your brand for
life.
A glaring example of this would be the
peoples car, the Nano. Around four years
back, when the car was announced, the
world waited with bated breath for the
impossible to take shape: a ~1 lakh car. It
was the launch that was meant to deliver
the dream of millions of Indians graduating
from a two-wheeler to a car. The emotions
riding on this launch were unprecedented. But after the huge buzz around the
launch came the equally scathing product
reviews and criticisms.
There were issues about the long wait
period for the car, about potential buyers
not getting loans (a large chunk of the buyer profile didnt qualify for auto loans) and
even technical glitches with the car. But
the biggest criticism of the car related to the
price tag.
The ~1 lakh car wasnt actually available
at that price point. Post taxes and on-road
costs, the price went up by at least ~30,000.
While a car priced at ~1.3-1.5 lakh is quite a
PRAVIN SHAH
ALPANA PARIDA
chief executive - automotive division,

Mahindra & Mahindra
The consumer was kept at the
centre in all the communication
pre and post the launch and his
interaction with the car was the
key
AJIT JOSHI
AMIT JATIA
CEO & MD, Infiniti Retail Ltd
vice-chairman,
Hard Castle Restaurants Pvt Ltd
We may have the capability to

deliver in less time, but why
overstretch ourselves? It is better
to surprise the customer with an
early delivery when he is least
expecting it
president, DY Works
When Meru launched its services,
the message conveyed was that it
would change the way we look at
cabs. The whole experience would
be similar to travelling in your
own car
56
We wanted the customers to come

in expecting something but not
knowing what. We wanted to not
just surprise them but wow
them
steal by any yardstick, the potential consumer felt shortchanged, and Nanos sales
began to dip from mid-2010.
More not less
Almost as a way out, brands are increasingly treading on the side of caution.
Choosing to under-promise and then overdeliver. Take another Tata company,
Infiniti Retail, the owner of the Croma
chain of electronic stores. The chain forayed into e-tailing a few months back and
like other e-commerce websites, there is a
delivery time promise. But rather than touting the shortest possible delivery time, the
company has chosen to under-promise,
even add a disclaimer in case there is a
stray incident of delay. We may have the
capability to deliver in less time (than the
promised seven days), but why overstretch
ourselves? It is better to surprise
the customer with an early delivery when
he is least expecting it, says Ajit Joshi, MD
and CEO, Infiniti Retail.
Now look at another example. The first
Asha phones from Nokia hit stores in
January this year, within two months of
Nokia relinquishing its leadership position
in smart phones to Samsung last
November, and a month after the first
Windows-based Lumia phone from Nokia
was shipped to India in December 2011.
>
Promise
performance
&
The ~1 lakh car

Pre-launch Massive media build-up for the
Nano touted as the peoples car
Post-launch The on-road price overshot this
price tag puncturing a hole through the
entire built up around the price
Clutter-breaking design
Pre-launch The XUV 500 made no mention of
functionality or price in its communication
Post-launch People were sold the design
story convincingly
A hip eating joint

Pre-launch No media interaction or mass
media advertising before the redesigned Mc
Donalds outlets were unveiled
Post-launch A perfect moment of consumer
delight when they walked in and were
wowed by the new look and feel
A glamorous diva & an aam admi

option
Pre-launch Lumia was heavily publicised and
the launch was accompanied with a lot of
razzmatazz. Ashas launch wasnt supported
by a high decibel campaign
Post-launch Despite different approaches for
building the sub-brands, Nokia continues
to expand the range of phones under both
Interestingly, the whole razzmatazz around

the Lumia launch overshadowed the arrival
of Asha. Remember that Asha is a key cog
in Nokias comeback plan in the country.
Priced between ~4,000 and ~6,000, the
Asha series is positioned as a cross between
a feature and smart phone. Till then,
Nokias smart phone range started from
~11,000.
Now there are five Asha models in the
market but still very little noise. Well, the
Lumia is a whole new religion, a company
spokesperson had told Business
Standard during an earlier interview, and
that Asha operates in a completely different category and therefore calls for a different treatment. Its possible that Nokia
was merely trying to manage expectations
going into a major product launch, says an
executive with a rival firm, given that
Asha arrived at a time when the media was
agog over the Samsung versus Nokia rivalry and about how Samsung pulled the rug
from under Nokias feet.
In a completely different business,
McDonalds is hoping to achieve a similar
effect. The chain, in accordance with its
international partners, is going in for an
image overhaul. The attempt is to keep up
with its core customers-no longer just a
bunch of kids but a generation that has
grown up with this quick service restaurant
chain. So there will be three new design
formats-Allegro, Foam and Lim-each with
its own design elements, varying seating
arrangements (like community seating for
families or booth seating for groups of
friends looking for privacy or wall counter
seating for single eaters), variations in lighting at the store and so on. Its a McDonalds
as the customer has never experienced
before. The design will be tweaked further
as per the stores location (mall, residential
area, closer to business areas) as well as
the expected customer profile.
And yet, the franchisees for the chain in
India, Hardcastle Restaurants and
Connaught Plaza Restaurants, did not
advertise or even speak about these
changes to the media. One fine day, the
chains outlet at the Phoenix Mills compound, a marquee property in the popular
mall and entertainment zone in Mumbai,
downed the shutters with a board, shut
for renovation, opening soon. So did its
outlet in the Mumbai suburb of Bandra.
57
There were a few teaser billboards speaking

vaguely about a new and better
McDonalds, but no specifics.
The company was playing it uncharacteristically coy. Why? Explains Amit Jatia,
vice-chairman, Hardcastle Restaurants
(that manages the South and West operations for the chain in India), We wanted the
customers to come in expecting something
but not know what. We wanted to not just
surprise them but wow them. Vikram
Bakshi, MD, Connaught Plaza Restaurants
(that manages the North and East franchises of McDonalds) has a similar take, The
moment the consumers walk in, they
exclaim how different their McDonalds
looks. It will surely be a conversation piece
generating far more publicity than any normal advertising campaign could.
Like management guru Tom Peters said,
a simple formula for building trusted relationships in business is to under promise
and over deliver. Under promising and
over delivering is a great approach for a
brand to navigate the vagaries of the Indian
market. It gives brands a tool to leave a lasting impression in consumers mind, says
Ankur Bisen, associate vice-president, retail
& consumer products, Technopak Advisors,
a management consulting firm. In a world
where promises are routinely made to be broken, when we encounter such service or
surprises, that are better than what we expected or hoped for we remember it above all
else. And pass it on.
In a way, word-of-mouth remains the
strongest vehicle of publicity even in this
day of all-pervasive media options and possibly the most credible. Take the case of
the Mahindra & Mahindra XUV 500 (pronounced as five-o-o), also considered one of
the most successful launches of 2011 as per
the Brand Derby study (published in The
Strategist on June 25). In the pre-launch
social media campaign, M&M tried to create excitement about the product but didnt talk about its features or try to stoke
consumer expectations. Various online
activations asked users to guess the cars
name or price, revealing the cars look in
parts creating some amount of online buzz
and conversation just before the launch.
The post-launch advertising too steered
clear of speaking about functionality or
price. It stuck to the realm of experience.
The consumer was kept at the centre in all
>
Promise
performance
LESSONS LEARNT
&
Big-bang theory
Pre-launch RaOne was propped up on a
huge marketing budget and many
co-branding initiatives
Post-launch Despite poor reviews, the film
grossed ~170 crore in worldwide box office
collections, riding on the hype
Unlikely success
Pre-launch Vicky Donor was sold as a small
budget film with a hatke storyline
Post-launch Word of mouth helped the film
gain popularity as well as traction with
audiences and the box office
Service with a smile

Pre-launch Meru was sold as a service that
will change the way you think about cabs
Post-launch After five years of launch, the
company seems to have lost its first-mover
advantage and is seen as an also-ran
the communication pre and post the
launch and his interaction with the looks,
the design, the feel of the car was the key,
explains Pravin Shah, chief executive, auto-
Understand what customers want

Customer education is key to managing
customer expectations
Exceeding customer expectation levels
improves loyalty
Make it easy for the customer to send feed
back or even to complain
Maintain a one-on-one relationship with
customers
Know where to draw the line
motive division, Mahindra & Mahindra.

Possibly because the brands unique selling
proposition was its clutter-breaking design.
But are these marketers keeping a low
profile by choice or because they are more
cautious about the money they would want
to spend on marketing and promotions?
How much of this is a reflection of the overall mood of the economy? To an extent
this is a function of the budget and the risk
appetite of a particular company, say an
public relations professional based in Delhi.
The same clients now tell us to do more
with less and want us to push for editorial
support rather than spend money on, say,
another print ad.
Make or break
In academic terms, there is a point where
marketers toss between accommodating
and altering the consumers expectations.
While in the former, you are giving the consumer what he wants, satisfying his product needs or even meeting his service standards, the latter would mean adjusting his
wants to your level of expertise. That is
because the consumers wants may range
from unrealistically high or unrealistically
low. As a marketer you need to adjust them
to the level of your performance or bring it
closer to a more realistic match. This may
be the norm, but what brands like Croma or
McDonalds or the XUV 500 are doing represents the third alternative: do not quantify the standard, keep a low profile and
just follow the basic rule of surprising and,
as Jatia says, wowing the customer.
But, what if the consumer is not
amused? Or what if she prefers consistency rather than constant surprises, even if it
means a later, rather than an earlier-thanexpected delivery? Or worst of
all, what if a brand fails to manage this
58
tightrope walk continuously? Well thats a

chance you will have to take. There will
always be a section of your consumer base
that will be too difficult to please, says a
Mumbai-based brand consultant. You can
adopt any path but managing the expectations of that particular section of consumers will be, in one word, impossible.
And if you cant meet the consumers
expectations or manage them, then simply
do a RaOne. The film has gone down in the
annals of history as much for its content (or
the lack of it) as for its mammoth marketing
budget and the brand tie-ups. The producers
spent almost a-third of the films production cost on marketing (~50 crore). It was
everywhere prior to its release and made
RaOne into such a larger than life phenomenon that on the opening weekend itself it
clocked clocked box office earnings of ~170
crore. A successful, commercial film and yet
one that was panned by viewers and critics
alike for the quality. The film was a pure
entertainer, made specifically for children.
The curiosity generated around it through
the pre-release activities drove in the numbers in a big way, says Komal Nahta, a trade
analyst. While it failed to generate positive
buzz or repeat viewing, the early numbers
ensured it was home without much trouble,
and the brand affiliations ensured the producers had recouped their investments even
before launch!
Sadly, thats one strategy that businesses can only marvel at and not consider replicating, especially if they are
looking for sustainable value. If you are
looking for filmi inspiration, do a Vicky
Donor instead, an unexpected but pleasant surprise for the consumer one she
wouldnt mind watching several times
over and tattling to her friends over
umpteen cups of tea.
>
DEALING
WITH DISCOUNTS
A whole host of deal-based
sites have gone out of
business. Many others are
tweaking their business
models. A look at whats
working and whats not
ALOKANANDA CHAKRABORTY &

veryone loves a good deal. And

theres nothing more gratifying
than finding that special item for
an unbeatable price sitting right at your
drawing room. If nothing else, you can
brandish that new hand phone you
bought at a 30 per cent discount to your
colleagues
in office or brag about it to your friends
and acquaintances on your Google
Groups and prove you are way smarter!
Well, with an estimated 50 million
internet users scanning the net for good
deals every day in India, a whole host of
entrepreneurs thought they couldnt go
wrong with a business model that rests
on aggregating deals online an
evolved version of coupons in newspapers and magazines we are so familiar
with.
As it is, the daily deal model is easy
to copy and startup costs are extremely low. Much like New Yorks Lotto slogan, All you need is a dollar and a
dream, the industry has entrepreneurs seeing the potential for a big
pay off. But just as with the Lotto, the
59
>
chances of winning are beginning to look
slim.
As it turns out, players in the daily
deal and group buying segment are a harried lot these days. A huge chunk of the
market has simply gone out of business
some have shut shop and others have
thought it prudent to sell out. Those that
remain are busy tweaking their business
models to stay afloat. From 40 daily deal
sites in 2010, we have just about a handful now may be four or five that can lay
claim to being pure-play deal players. Add
to these figures a recent study that reports
just over 20 per cent of daily deals customers become repeat customers, and
you can see why the daily deals market is
one that seems to divide opinion on its
benefits.
So what is going wrong? Is the average
Indians love for a good bargain no more
than an exaggeration?
The whole business paradigm is
undergoing a shift, points out Kishore
Chakraborti, vice-president, consumer
insight, McCann Worldgroup. If earlier
consumers were looking at the cheapest
offer, now they are looking at the whole
experience, how the deal site makes her
life easy or cuts down the peripheral
issues she has to deal with during every
transaction or every cancellation. In other words, the industry is in a sort of churn,
the kind of churn you would notice in an
industry just beginning to mature.
Agrees
Ryan
Valles,
CEO,
DealsAndYou.com, part of the Smile
Group companies. I dont think the business of group buying and deal sites is ailing in any way, he says. Rather it is
evolving like every other e-commerce
business. He says the reason why many
think the business is ailing or that it will
soon come to a grinding halt is that a
bunch of players have decided that their
future lies somewhere else. When a new
business model is introduced, a lot of
players jump in. Some players are not
committed enough to be there for the
long run, some are not adequately
backed by capital. What has happened
in this market is that over the last two
years all the non-serious, non-well funded players have died out. Only the real
players are operating now, he adds.
Isnt it also true that consumer traffic to
ANKUR WARIKOO
ANISHA SINGH
CEO, Crazeal.com
Founder and CEO, Mydala.com
Deal sites tend to step into

other areas of business
when they see themselves
playing in an area which
offers low margin, and
very few high quality
merchants and customers
coming in
The appetite for good

deals is higher in tier 2
and tier 3 cities than
the tier 1 cities. Mobile
internet penetration is
also extremely high in
tier 2 and tier 3 cities
of India
deal sites is dwindling, forcing players to

expand their repertoire? Those in the business will put it down to business compulsions. Valles explains the trend citing the
case of Flipkart, a non-deal e-commerce
site, which started as online book store
and has diversified into new product categories over time. He says, This means that
their business compulsion was to do a lot
more. Of course, there are many players in
the deal space who have not diversified.
We have not diversified, he points out.
We are not doing anything dramatically
different, because we are committed and
know that the long-term prospect in this
space is extremely good. India is a country
where everybody like to save, avail of discounts. We stand for value, which is actually central to the Indian shopping mentality. So, we think there is absolutely no
reason to change our key offering.
Staying focused
Stick to your knitting, in other words. But
be careful of the partners you choose, so
60
to say. Ankur Warikoo, CEO, Crazeal.com,

part of Groupon Inc, says, There is definitely a limit on the number of quality
merchants in a particular region. If you
start getting the wrong kind of merchants
or customers, you will eventually lose out
on both. One way around this is the model Crazeal is following. Where we have
done things differently is, we have stuck
to the merchant-first model. The best way
to market yourself and the best way to
create excitement among the customer
is to get a high-quality merchants at a
great price. For this, we stick to a-deal
a-day model instead of publishing several deals in a day. And it is done with a
carefully chosen merchant, Warikoo
adds.
Crazeal, which launched its website
only last year, is also unique in the way it
is sharing the risk with the merchants.
We only make money when the merchants make money, because we charge
the merchant a certain commission from
the deal price, but only when the
deal/product gets sold, he says.
>
KISHORE CHAKRABORTI
Vice-president, consumer insight,
McCann Worldgroup
If earlier consumers were

looking at the cheapest
offer, now they are looking
at the whole experience,
how the deal site makes
her life easy
For Mydala.com, which started with
selling deals in 2009, the business is
all about merchant showcasing.
Although it never took its eyes off the
ball its core proposition of offering
attractive deals it has roped in partners in other platforms, such as print,
television and social media to present
itself as a comprehensive merchant
marketing platform. Talking about
diversification and possibilities of
expansion
in
other areas, Anisha Singh, founder and
CEO, Mydala.com, says, I am not
going to say that we didnt think about
it. It is obvious to get tempted leaning
from success stories of other e-commerce businesses around. Also, when a
business model is maturing, one tends
to
look
in different directions to indentify the
best way forward. Having said that, our
business model was always deals and it
continues to be our core proposition.
Mydalas merchant marketing platform works on a simple promise. To
market a merchant, we offer whatever
platform the merchant requires or
suites him best. If a small restaurant in
Mumbai approaches Mydala and says it
aspires to market itself on some local
television network or is looking forward
to a newspaper ad, we can offer it what
it wants. We do certain amount of
promotion around that for which
we charge the merchant. All our
initiatives, in the end, is aimed at
driving customers to the merchant,
she elaborates.
Here the problem is the high customer acquisition cost, because, of the
total number that surfs the net, only
1.5-2 per cent actually buy the deal. This
also has a bearing on consumer loyalty,
on making sure that people keep coming back to a website to hunt for deals.
With many tempting deals every day
on a plethora of daily-deal websites,
customers are spoilt for choice.
Warikoo believes the problem is not
about whether there was a better deal;
its about having possibly the same deal
all around. What, therefore, will tilt the
balance in a sites favour is the quality
of choice. A spa is a spa. But why is a
five star spa different from a non-five
star spa? If you are a well-informed customer, then you would go for your preferred spa. Even if it is coming for a
slight premium, you will have the confidence that you will cherish the experience thereon. Thats when the loyalty
shifts, he says.
The problem is, most daily deals sites
focus on the non-essentials, such as spa
treatments, restaurants and entertainment venues, the very things most of us
can do without. And even if we do opt in
for the deal, its doubtful well be repeat
customers. Its not the businesss fault;
consumers are getting smarter and are
looking for deals with more relevance.
Building loyalty
There are many ways to promote loyalty. If a site doesnt already have one,
they could build a loyalty card for their
daily deals customers. The first time
they come in, they should fill out a
short form proving key information
about themselves. They then get a loyalty card with unique offers based
around the daily deals. Use it X amount
61
of times and they receive a free product

or service (within a certain budget).
For Valles of DealsAndYou, repeat
customers are really important and the
formula to keep them hooked is pretty
simple: If you provide the relevant
deal to the customers, which they want
at the best value and you provide a
good
experience
in
terms
of acquiring and redeeming the deals,
then the customers will come back
to the deal site again and again,
he proffers.
During its initial days, the segment
had deal with the criticism that merchants and salespeople at the shop floor
probably deal with customers walking
in with deal coupons with a certain
amount of disdain. But such criticism
was unfounded. Merchants quickly
realised that if he is attending to a dailydeal customer, he is most likely attending a new customer walking into the
store. As such, the merchant have begun
wooing such customers in right earnest
in the hope that she comes back again,
RYAN VALLES
CEO, DealsAndYou.com
When a new business

model is introduced, a lot
of players jump in. Over
the last two years all the
non-serious, non-well
funded players have died
out. Only the real players
are operating now
>
What works,what doesnt

DOs
Educate the merchants as well as
customers on benefits of this
business model
Emphasise on quality experience
to ensure repeat customers and
repeat merchants
Win the merchants confidence by
sharing risk with him, and not
with the brand
Select a merchant who offers best
experience, for a sustainable
consumer engagement
Moving away from foreign clones,
innovate the business models for
India
Offer a good experience to
customers in terms of acquiring
and redeeming the deals
DONTs
Avoid SMSs and junk mails
claiming "once in a lifetime"
deal offers
Do not maintain hidden and
non-transparent conditions for
sustainable business
Do not focus on customers who
are less then, say, 30 years old,
as they have less disposable
income
Avoid indulging in over-selling
coupons, as it can compromise
quality service to customers
India is still a young market
for e-commerce. So,
expectations should not be
unreasonable
Dont set a wrong price.
Group buying customers are
usually savvy shoppers
and know what makes
a good saving
with or without a deal coupon.

she makes the decision. So your WAPThe premise of doing a deal is to
enabled mobile phone becomes your
ensure that when a customer comes
personal guide to all the great deals
and tries the merchant and if she
within your reach.
finds him good enough she should
Point noted.
come back again and again. Both merchants and customers now realise that
deals allow a lot more for a lot less,
sums up Valles.
In other words, its still early days
to make any sweeping judgments. As
Madhurima Bhatia, head of media
engagement, Ipsos Research. Internet
penetration is still very low and many
deal sites dont still have the volumes to
make their operations profitable and
viable. I would say it will take time for
this segment to realise its full potential.
Is diversification the way Merchants today have
forward? Take the case of begun wooing the
Flipkart, the poster boy of customers coming
e-commerce in India. Three with deal coupons in
years after being launched right earnest in the
as an online book store, it hope that she will
broadbased its portfolio to come back again,
selling electronic products with or without a
as well. The result: a huge deal coupon
jump in revenue. While in
2000-10 it posted revenues of ~25 crore,
it closed 2011-12 at ~500 crore.
Or consider Snapdeal which started
its journey as a pure-play deal site in
2009. After diversifying into products
about 10 months ago, its revenue has
started growing at 80 per cent year-onyear compared to 50 per cent earlier.
When it had services and deals, it covered 30 cities; with products it reaches
4,000 towns and deals with 10,000
brands. Everybody doesnt have the
deep pockets these guys have, says a
marketing executive in a rival firm. So
it wont be easy fighting the horizontal
players.
In sum, does the future look brighter
than as things stand now? It will be,
says an old hand in the industry who
didnt wish to be identified in the story
because his firm is undergoing some
changes. When players realise that the
whole thing boils down to consumer
pull and not merchant push. And the
real game changer will be the mobile
phone so that the consumer knows
about the deal right at the point when
62
>
WINNER TAKES ALL

Why YouTube continues to dominate the business of online video streaming
PRIYANKA JOSHI
nline streaming media may be

doing to traditional television
what TV did to radio in the 1950s.
A recent survey commissioned by blip.tv
claims that online viewing is moving from
lunchtime (at work) to prime time (at
home). In simple words, audiences are
beginning to add original web series into
their nightly viewing habits. In an independent study, Ooyala, a leading video
solutions company, noticed that for the
first time, long-form content (videos
longer than 10 minutes in length)
accounted for over half the content consumed between January 1 and March 31,
2012, across Ooyalas footprint of nearly
200 million monthly viewers worldwide.

In simple words, people are spending
more time than ever watching full-length
TV shows, feature films and sporting
events, while time viewed in short bursts
is decreasing as a percentage of overall
consumption.
Ficci-KPMG data suggests that in
India, television viewers spent an average
of 77 hours a month watching TV against
7 hours per user per month watching
videos online in 2011. A key enabler for
online video has been the proliferation
of smart phones and tablet devices. As
per a Nielsen Informate Mobile Insights
study, after activities like social networking, communication and search, video is
the most popular activity for smart phone
KEEPING IT SIMPLE
No one believed Google could
mint money from YouTube. First it
was who would ever watch
stupid clips online? Then theyll
never make money and finally
theyll get sued out of business.
Here's how Google did it right.
Step#1 Create a simple but intuitive
user experience
YouTube made it easier to upload
videos and added a touch of interactivity. By
tagging files with keywords, users could easily
search for videos they wanted. Users were also
able to rate and review videos, pushing the
most popular and relevant ones to the top of
the search results.
Step#2 Give users what they wont
get anywhere else
YouTubes major advantage was its ability to
offer popular classic videos along with user
created clips that could be easily uploaded.
Step#3 Viral marketing is serious business
YouTubes rapid viral growth was a result of its
ability to take advantage of the emerging
interests of a growing online generation. By
making it easy to embed and host YouTube
videos on any webpage or blog, the site simply
made it easier for everyone to share videos.
Step#4 Focus on users before revenues
By focusing on delivering near-accurate video
results to users, YouTube began
a slow but steady experiment with ad formats
without disturbing the
viewing experience.
63
>
November, 2005
YOUTUBES
JOURNEY
Conceptualised by three
former PayPal employees
Chad Hurley, Steve Chen and
Jawed Karim Youtube.com
came in to being on February
14, 2005. In April, 2005 the
first video entitled Me at The
Zoo was uploaded by Jawed
Karim and the site eventually
opened to public in
An industry survey
conducted in July 2006
estimated that over 100
million video clips were
being viewed on YouTube
every day, and more than
65,000new videos were
being uploaded. With
YouTube's popularity
growing, rumours of a buyout
began to circulate.
Google acquired YouTube for
$1.65 billion in 2006, less
than 20 months after sites
founders registered the
domain www.youtube.com
In 2008, Google took YouTube
to the next level when it
partnered with content
producers like CBS, BBC, MGM,
VEVO and Lions Gate
Entertainment who added
videos as well as full-length
TV programme onto
the website
Google does not offer specific
numbers for YouTube but
financial analysts covering

the company say that
YouTube's revenue grew from
somewhere between $100
million and $250 million in
2008to just about$1 billionin
2010-11
Despite having a a fuzzy
business model and issues
with copyright infringement,
the video site relentlessly
experimented with new
revenue models such as
creating branded channels
and charging advertisers only
when viewers actually watch
an ad; nurtured
a new generation of content
producers across the globe
who could draw audiences
based on their original videos
The website underwent a
new look with a design that
was meant to increase time
spent on the site
while making the whole
experience on the website
simpler and easier
Following the success of
partnering with various

producers, in March 2010
YouTube began broadcasting
live sporting events, available
globally. Indian Premier
League cricket season was
live-streamed in April, 2010
YouTube exceeds 2 billion
views a day in 2010
By 2011, YouTube claimed 94
of the top 100 brand
advertisers were running
campaigns on the video
platform
Today, the site has more than
a million advertisers using
Google ad platforms, the
majority of which are small
businesses
Above: (from left) Steve Chen, Jawed Karim and Chad Hurley
users in India.
Industry data suggests that India will
reach 250-350 million internet users by
2015 and video is expected to remain one
of the primary drivers of content consumption online. Internet video will be 70
per cent of all internet traffic in 2016 in
India, up from 30 per cent in 2011, according to a Cisco Visual Networking Index
Forecast.
Thats exactly the kind of news
YouTube, which was founded in 2005 and
owned by Google since 2007, wants to
hear. With nearly 72 hours of content
uploaded (globally) onto its platform
every minute, YouTube remains the top
video site in India with over 25 per cent
share of the market (source: Avendus
Capital; report titled, Indian Digital
Consumer). Quite naturally, it is time for
action. Adam Smith, director of product
management and head, YouTube, lists
that the site redesigned itself in
December 2011 to help viewers find
videos they like easily and engage them
better. YouTube also launched an effort to

fund or boost 100 new and existing channels, in the hope of becoming an entertainment destination. There is a fundamental shift in the way people are viewing
television. Consumers now have the power to choose their own prime time, notes
Jay Fulcher, chief executive officer,
Ooyala. The spike in tablet and smart
phone viewing during weekend nights
and during commutes shows how the living room experience is fragmenting
across devices, he adds.
Attracting
advertising
moolah
remains a big headache for streaming
media content producers, particularly
from advertisers that are comfortable
with the old triumvirate of TV, radio, and
print. Thats why at Rs 1,850 crore the
online advertising market in India today
is about 7 per cent of the overall advertising pie.
Currently, YouTube earns its revenue
through non-intrusive advertisements
displayed at the bottom of the streaming
64
movie. YouTube is also working hard to

offer live streams of few Indian channels
including Star News, Aaj Tak, Life Ok and
UTV Bindaas at Youtube.com/live. The
revenue model is near-identical for other
leading video streaming sites like Yahoo,
Rediff, MSN, DailyMotion, Metacafe etc.
Despite the growth in online video
consumption, many advertisers are struggling to connect with consumers via video
ad campaigns, believes Nielsen, a leading
consumer analytics firm. The Nielsen
Global Multi-Screen Report also found
that consumer trust in messages delivered via online video advertisements was
low across Asia at just 33 per cent.
Online video ad messages also appeared
to be missing the mark in Asia, with just
36 per cent saying the messages delivered via online video ads had relevance
only when they are searching for product
information.
Google has taken note of the findings.
Steve Stukenborg and Phil Farhi, product managers wrote on YouTubes offi-
>
cial blog, Over the past year, TrueView
ads (that allow users to skip an ad after 5
seconds) have been one of our fastest
growing ad formats on YouTube and now
60 per cent of all in-stream ads are skippable. Our research shows that nine out of
10 consumers prefer ads they can skip.
The duo claims that TrueView in-stream
ads reduced audience drop-off by 40 per
cent compared to regular in-stream ads.
While Google is now advocating skippable ads on its video platform, other
video sites like Yahoo, Metacafe,
DailyMotion among others still rely on
the CPM (cost-per-impression) which
they get for showing video ads that are
usually shown before actual video gets
started.
YouTube is taking its content partnerships to a new level by sharing ad revenues with content owners. YouTube has
added more than 30,000 partners (who
create and share video content) from 27
countries around the world. In fact, its
YouTube Partner Programme (YPP) revenue in India has grown by over 250 per
cent in the last one year. YouTube now
allows its partners to promote their content via the YPP that automatically turns
video into ad units and places them on
the Google Display Network where they
can reach 92 per cent of the internet population. The site has practically created
an economy of its own by paying anyone
to produce content for it, with a generous
split of the ad revenue.
THE STORY IN NUMBERS

30.2 million online users in India
watched online video in January 2011,
representing 72 per cent of the total
online population, according to a
report by comScore.
More than 23.5 million viewers
watched a total of 785 million
videos on Google Sites, with viewers
averaging 1.7 viewing hours during
the month. Viewership at Google
Sites was mainly driven by
YouTube.com which accounted for
780.7 million videos, representing
44.5% of all videos viewed in India in
January.
Facebook.com ranked second with
6.6 million viewers and 30.1 million
videos viewed, followed by Metacafe
in third place with 3.9 million
viewers.
India-based properties Network 18
and Rediff.com India Ltd. Both
ranked among the top 10 largest
video properties reaching 1.2 million
and 861,000 viewers respectively.
SOURCE: comScore
Bangalore-based ODigMa, an online

digital marketing, underlines that
YouTube advertising comes a close second after Facebooks premium ads for
many B2C clients. Although the clickthrough rate or CTR of Facebook ads is
about 2 per cent, ads placed on YouTube
usually turn in about 5 per cent CTR and
Enter Facebook
thats mainly because of the
Social marketers believe that With nearly 72 hours
wide network of Google platYouTubes biggest challenge of content uploaded
forms on web, says Advit
comes from social media site (globally) onto its
Sahdev, CEO & founder,
Facebook, which has over 50 platform every
ODigMa. (CTR is defined as
million users in country. minute, YouTube
the number of clicks on an
Ooyalas
report
says, remains the top
ad divided by the number of
Facebook users on average video site in India
times the ad is shown, and is
share 10 times more videos
expressed as a percentage.)
than Twitter users.
Theres no denying that advertisers,
Facebook reportedly earned about $99
brands, media agencies, and broadcasters
million in advertising revenues from Asia,
have become more focused on the
largely
led
by
India promise of internet traffic. We all know
and Southeast Asia in the March
ad dollars will always flow in the direction
2012 quarter. We expect that user growth of better data, more targeting, and highin the future will continue to be higher in er accountability. And its all happening
those regions where ARPU (average revvery gradually, concludes Sahdev of
enue per user) is relatively low, such as ODigMa.
Experts
and
social
Asia, Facebook said in its IPO filing.
analytics firms also agree that as video
65
engagement becomes more sophisticated, emerging and enhanced platforms

that measure and allow for clickable
videos or hot spotting-where viewers click
into the actual footage as a call to actionare becoming more popular. From Yahoo
to Google, every site is testing new video
formats to maximise their ad revenues.
The road ahead
In India, YouTube sees over 31 million
unique users per month and a-fourth of
the views come from mobile (300 per cent
growth in traffic from mobile phones).
But Facebook has spread even faster
among the mobile population. A whopping 93 per cent of the smart phone users
in country access social networking sites
on their mobile handsets, estimates
Nielsen Informate Mobile Insights, making it the most visited site, followed by
Google+ and Twitter.
Unlike the online space, Google is seeing worthy competitors in the domestic
mobile market. Take players like Vuclip,
an independent mobile video destination, that reaches 11 million unique users
in India every month, clocking 120 million video views. Salman Hussain,
Vuclips VP (business development) and
MD (India & Middle East) points out that
unlike YouTube, the company does not
rely on in-video ads for revenues. Vuclip
has instead tied up with leading telecom
operators, offering its services to users
on daily or monthly subscription and
splits revenues with the operators.
We deliver optimised videos on more
than 5,500 handsets, which includes
entry-level Chinese handsets where companies like Google make no effort to
reach. And since we use the operators
bandwidth to deliver results, we chose to
partner with them to monetise our content, says Hussain. With 80 content partners on board, the company is focused
on delivering targeted regional content
to its users.
For now, YouTube also remains
focused on integrating its videos with
social networks like Google+. Smith clearly wants to do more with companys own
social platform, Google+. He details, Just
recently we added the ability to create,
control, save and share playlists of videos
with your friends-all inside a Hangout
>
(group video chat tool on Google+). Or if

you like a video thats playing,
you can share the video with
your Google+ circles. And while
YouTube figures out its social tie-ins with
Google+, Vuclip already clocks about 65
per
cent
of
its
existing
traffic via social recommendations. Our
users can share their favourite video links
over SMS with their friends and thats
been pretty effective for us, highlights
Hussain. Local OEM partnerships means
the company is able to place Vuclip app
or bookmark the site prominently allowing users to discover the video service
conveniently.
The company has also added a dedicated mobile portal, titled Mira, which
showcases content from about 30 content providers specifically for women. In
a survey conducted by Vuclip, 60 per cent
of Indian women respondents admitted
using their handsets as a primary source
of entertainm ent. Meera Chopra, Vuclips
VP (advertising), notes, Currently,
women constitute only 14 per cent of the
total 11 million users on Vuclip in India.
We hope that by the end of this year, Mira
will help Vuclip double its existing 1.54
million women users in India.
66
>
LOOK WHOS
TALKING
Machine to machine
conversations will drive the
consulting business of
telecom companies
IN A NUTSHELL
SAYANTANI KAR
# 1 The story so far

The adoption has been slow. For
now meter reading, surveillance,
vending or other point of sale
machine systems, remote
monitoring and fleet tracking are
the first set of M2M services being
put to use
Telecom operators cant

wait to increase their
revenue from data usage.
Heres how they are
looking to gain the early
mover advantage
ou may know all

about the internet, a
world of bits and bytes
formed from the interactions of
people and machines. But are you
ready for the internet of things, a
network where machines talk to each
other? Using the wireless modes that we
now use for communication such as
GPRS, wifi, 2G, 3G and LTE networks,
machines are increasingly blipping bytes to each other. You
could get your home appliances to do your bidding
even when you are out of
the house. At another time, a
pacemaker could warn you
about an odd heartbeat and the
nearest hospital.
It is this internet of things that will be
key to the data strategy of telecom operators in India. Buffeted by regulations,
corruption and punishing margins in
voice, telecom operators cant wait to
increase their revenue from data usage.
In their arsenal are machine-tomachine (M2M) services that will eventually make machine internet a reality.
Setting aside the science-fiction connotations, M2M applications are growing
roots across the world. Some countries
are mandating the use while others are
adopting these ad hoc. India,

though lagging, could catch
up fast if telecom operators
can get their pitch right.
According to the independent wireless analyst firm Berg
Insight, the most significant market
development in 2011 was the breakthrough of cellular M2M communication
in Asia-Pacific. The number of M2M subscribers in the region increased by 64 per
cent to reach approximately
34.5 million, fuelled massively by China with a
base of about 21 million.
The EU and the US have
about 30 million and 27
million
respectively.
Berg noted that South Asia
and Southeast Asia were still
67
# 2 Future promise
Information gathered by the
machine about the machine or
data entered into it pushed to a
system, guided by a programme,
for analysis. Current uses can be
extended to telematics, telemetry,
smart homes and gadgets
# 3 Example of M2M application for
consumers in India
Handygo Founder and CEO Praveen
Rajpal says its mobile commerce
application, RockASAP, which
powers Airtel Money is an instance
of end consumer M2M use. It could
extend to mobile vouchers in mcommerce and tracking fund
disbursement in m-governance,
says Rajpal
# 4 Evolution curve
Berg Insight, the wireless analyst,
says the most significant market
development in 2011 for M2M was
the breakthrough of cellular M2M
communication in Asia-Pacific,
thanks to China. South Asia,
including India, is at an early phase
of adoption
>
at an early phase of adoption with few

M2M subscribers in countries like India.
Najib Khan, chief marketing officer
(enterprise services), Bharti Airtel, says
that the early adopters will be enterprises because of the problem-solving nature
of M2M services. For the machines to
transmit information over long distances,
they will need a SIM card to ride the airwaves over long distances. This makes
the role of the telecom operator in M2M
services indispensable.
Operators as consultants
M2M communication has been enabling
automation, control, information relay and
analysis of that information for those who
adopt it. Indian consumers are still some
time away from a smart home that is being
Director
enabled by some of AT&Ts applications
Vodafone Business Services
such as security camera monitoring, remote
door locks and home appliance controls
Imagine the feedback that
that would get mapped on smartphones.
a beverage company can
Before consumers in India can
give to its fridge provider.
dream of smart homes like the
The empirical data shared
$113 million one that belongs to Bill Gates, it
will be enterprises that will be the early
can lead to more relevant
adopters. M2M services which increase efficustomisations.
ciency and solve business problems are
what telecom operators are banking on to
Udit Shanker, CEO, TeleDNA, an
fuel their consultancy bids.
M2M application provider, says,
When donning their probMost of the applications in
Smart
lem-solving hats, the operaM2M today are still pullHome
tors dont want to be just
based. People have to pull
network providers but endinformation relayed by
to-end solution providers
machines. True M2M conto businesses. M2M will be
versations are those which
their way to bring in empirare automatically pushed
ical data for analytics and
for perusal and need no
monitoring that companies can
human intervention. Adds
use to get answers to operational
Ashish Gulati, country manager,
and even strategic problems. The ensuing
Telit Wireless Solutions, a global provider
automation will cut out errors and manof M2M modules and services, Monitoring
ual labour at the same time.
and smart metering have been deployed
However, the adoption has been scatover the last five years. For now, radio cabs,
tered so far. For now, metre reading, sur- asset tracking by logistics companies and
veillance, vending or other point of sale
even point-of-sale use of handheld devices
machine systems, remote monitoring and
by microfinance, courier and retail agents
fleet tracking are the first set of M2M serare what M2M is being used for.
vices being put to use. In India, M2M is
restricted to vehicle tracking and metreVolume game
reading. These are not even a blip on the
Not only is M2M being used
Cargo
evolution of M2M services. You can do
for the most basic of purthis on SMS and dont need end-to-end
poses in India, it is yet to get
strategies for these, says Navin Chopra,
critical mass. And volume is
director, Vodafone Business Services.
what this segment will survive
NAVIN CHOPRA
68
on. Chopra says that M2M implementation does away with manual intervention
and errors, saving costs and manpower.
However, it will be volume-driven.
Sridhar Pai, founder and CEO of Tonse
Telecom, a telecom and M2M research company, says The data traffic from one SIM
generated by M2M is very little. Only when
devices are wired up on a large scale will
M2M services yield substantial revenue.
Metre-reading using M2M would be
one relay of info or ping an hour per
million customers. Otherwise, just a staid
once-a-month metre-reading will provide
the utility company with no additional
knowledge. Hourly pinging by metres
gives the company data to understand
how the city uses its electricity every day
which it can correlate to its boilers and
generation, Chopra adds.
It is the need for volume that is driving
telecom operators to approach it as a part
of their enterprise business. There will
be companies who will come to us for
connectivity alone, but the real value for
us from M2M will come when we can provide analytics, when we can work with
system integrators and device manufacturers to provide consulting beyond wireless connectivity, points out Chopra.
For Airtel, M2M is a big part of its
MATES (mobile application tools for
enterprises) strategy. There are applications that are hosted at the customers
end. It has already seen 10-15 per
cent of its B2B data revenues generated by
its M2M assignments in the last three
years. Applications are in the realm of
automatic metre reading, mobile finance,
point-of-sale or vending machines and
vehicle tracking. To convince its clients, it
has enabled complete M2M services at all
its towers that monitors fuel consumption and also prevents theft. It is one of the
advanced uses of M2M telemetry
which can monitor any product out on
the field, from gensets to vending
machines.
Some of its functional M2M services include managing
Bangalore Traffic Polices
database of vehicles and
traffic violators on smartphones given to all 650
officers. As a result data
from two million cases can be
>
pulled out in two minutes. With the
Odisha State of Road Transport
Corporation, Airtel has installed vehicle
tracking and a passenger information system within the buses for commuters, all
operating through SIMs.
Vodafone will look to enabling push
M2M services in the long term. The
M2M conversations could feed the
clients SAP system to generate diagnoses, Chopra says. Take visi-coolers used by soft drinks companies.
Today, most FMCG companies can
track these fridges that provide instore branding and preserve their
products shelf life at the retailers.
But it is only the tip of the range of
possibilities, adds Chopra.
He cites how M2M between the
companys backend server and a
device in the fridge can indicate how
many times the door is opened or
the fluctuations in temperature
as a result of that. Imagine the
feedback that the beverage
company can give to its fridge
provider it can ask for anything from sturdier door frames
to compressors better suited for
the region. In short, such empirical
data can lead to more relevant customisations, Chopra explains. Instead of being
just cost centres, these machines from all
over the country can help the company
operate more efficiently. The SIM devices
can be retro-fitted on the devices as well.
Vodafone is turning to its international
repertoire to preempt M2M demand in India.
BMW, for example, uses Vodafones M2M
analytics for remote car diagnostics and
even concierge services.
Chopra says, We happen to be one of
the leaders in M2M best practices, with a
200-strong team stationed in Germany
that work on M2M applications, run the
platform, develop new services,
roadmaps, evolution curve, and relevance
in different countries. Vodafone India
then wants to bring in this teams consultancy mindset and the understanding of
M2M to the country. Just like BMW, car
manufacturers in India too could look at
M2M to get around the challenge of operating a wide service network in India. SIMenabled cars could alert the manufacturers service centre about, say, a vehicle
overheating in far-out places. The vehicle user would then get a message asking
her to pull over and pour water in the radiator, avoiding a bigger crisis. Gulati says,
Telematics in M2M would combine not
just navigation but information relay
about the vehicles health as well.
Vodafone has already started developing a platform to be unveiled by the
end of October. For Vodafone, it will provide a dashboard to maintain the M2M
set-up of the clients and remotely diagnose any problems in the SIM-enabled
machines. This is where the billing and
customer service will also be hosted. The
platform can tell clients if they need to
send a person to fix the machine at all,
says Chopra.
Tata Docomo spruced up its non-voice
services last year with people in both the
central and circle offices. The team would
activate mobile payments, remote diagnostics, mobile education different
69
NAJIB KHAN
Chief Marketing Officer
(enterprise services), Bharti Airtel
Telecom operators are

indispensable in M2M
services because machines
need a SIM card to ride the
airwaves and transmit
information.
>
support the internet of things.
UDIT SHANKER
Chief Executive Officer
TeleDNA
Most applications in M2M
today are pull-based. True
M2M conversations are
automatically pushed for
perusal and need no
human intervention.
uses that M2M can be put to. One can
either use a SIM or NFC (or near field
communication is the next generation
short-range high frequency wireless communication technology which enables
the exchange of data between devices
build with this technology) for such interactions, says Sunil Tandon, head,
non-voice
services,
Tata
Teleservices.
In some developed markets, there are other wireless
solutions such as ZigBee etc
for smaller areas. Tata
Teleservices is conducting
focus groups to understand the
needs of the market. The sectors such
as BFSI, manufacturing and BPO have
remote surveillance needs which it would
address first. Tandon says that remote
diagnostics by which doctors can be
informed about a patients vital statistics
and as a result, warn the patient of any
irregularity would be an area it would
concentrate on as well. Like Vodafone, it
is putting in place a platform to integrate
billing systems and manage features to
Survive in an ecosystem
Any internet carrier can enable an M2M
ecosystem. For those that need SIM cards,
mobile operators are the most important
link in the chain. But device manufacturers and software companies are also
indispensable. Airtel works with 25 software vendors to customise applications.
Khan of Airtel points out that original
equipment manufacturers such as white
goods brands would need to embed chips
or SIM into their products to enable such
an environment. Chopra says, Even for
B2C M2M applications, I will still have to
talk to the equipment providers.
Gulati of Telit Wireless Solutions says
Telit hopes to play a bigger role because
M2M communications need different
capacities and products from man to
machine interactions. It recently bought
Calixto Solution, a Bangalore-based electronics product enablement company, to
develop applications for both the B2B
clients and retail consumers. The infrastructure is already in place. So stakeholders need to invest at the product level. We are waiting for more and more
machines to join the wireless network,
says Gulati. TeleDNA is one such valueadded service provider for telecom operators which is readying a framework or a
platform for those operators that might
not have a proprietary one. The server or
platform deployed at the operators end
would handle both billing and customer service, says Shanker of
TeleDNA. But network speeds
will also play a role, something
that 4G and LTE might redefine for India, he adds.
Revenue streams
The telecom operators cant wait
for the rollout of the next wave of technology. M2M and enterprise solutions
provide an assured stream of revenue
according to experts. It binds them to
the solution provider because it manages
more than just the network, says
Shanker. Chopra of Vodafone agrees:
M2M pitches will have to be made to the
CXOs of a company because they have to
see its relevance for their business and
not just one function. We want to be in the
70
ASHISH GULATI
Country Manager
Telit Wireless Solutions
The infrastructure is in
place. So stakeholders need
to invest at the product
level. We are waiting for
more and more machines to
join the wireless network.
consultancy space, because it allows us to
have more conversations for services
rather than negotiations. The relationship with such end-to-end solutions
reduces the need for churning out.
Vodafone will bank on its global enterprise clients to deploy M2M solutions
once its platform is ready.
While sales force, logistics and metrereading are often traffic-based revenue
models, providing M2M as part of their
enterprise solutions will allow operators to
either sell the platform and system to the
clients as a capital investment and charge
for annual maintenance or rent out their
back-end platform for the daily running of
the systems they put up for the client.
Till then consumers can get an idea
of the things to come with the help of
smartphone applications such as the justlaunched Chirp by a British developer
that allows links to be shared via sound
on a phones loudspeaker. The stated
objective of the founders: to enable anything that carries sound to carry data
such as doorbells, saxophones, car horns
and so on.
>
Managing remote workers

Infrastructure and accountability assume centre stage as organisations reach out
to talent across geographies
ts another Monday morning. You

roll out of your bed sharp at 7.00.
Commute to the next room in your
house coat and fuzzy slippers. Turn
on the laptop instead of the car ignition. Work for the next eight hours straight,
grabbing a bite along the way. No rushing
out of the home, no stop-start traffic, no
immaculate chic. The prize: Save thousands of bucks on travel expenses.
Its happening. Though not exactly a
new phenomenon, remote working professionals working from any place other
than their offices is now becoming
almost routine as more and more companies look at it not just as a tool to cut operational costs but as a means to retain
employees and offer them a better work-life
balance. First adopted by companies in the
domain of IT/ITES, advertising, software,
off-shore contracting, consulting and
human resources, flexibility is now a sine
qua non of smart organisational practices.
While remote workers make up of a huge
chunk of Indias workforce, current costcutting trends suggest that this trade of
office cabins for cyber cafes and dining

tables will continue. Indeed, many companies see remote work as a significant perk
they can offer their employees in the competition for top talent.
But how does an organisation keep a
remote team on the right track and in line
with the company and team needs? How
does the human resource manager ensure
the flexi-worker is not slacking off while
everyone else is busy working? Above all,
how do you help remote employees really
feel they are an essential part of the team?
There are no one-size-fits all answers to
these questions but one can draw important
lessons from the experiences of companies
such as Philips, CISCO, SAP Labs India
and Motorola among many others that
are trying to institutionalise work-fromhome or remote working. The challenge
here is infrastructure and accountability,
said Marc Effron, author of One Page Talent
Management: Eliminating Complexity,
Adding Value, and CEO, The Talent Strategy
Group, in an earlier interview to The
Strategist. Remote employee management
skills are essential to thriving in todays virtual work environment, but the old methods
71
simply dont work. So put in place the infrastructure to make that work.
The key enablers
The first thing in making a remote arrangement work is making sure the remote
employee knows what is expected of him or
her. Cisco offers remote working across the
board as long as the employees are able to
deliver work results expected out of them,
says Seema Nair, head, HR operations, CISCO India. Schedules are drawn up within
teams for working remotely, taking into consideration work pressures. In fact, there are
some functions such as product development, marketing etc that lend themselves
better to remote working than functions
such as admin etc which inherently requires
more face-to-face interactions.
The next thing is to ensure the employee
has the right tools to stay connected. CISCO,
for instance, has a comprehensive portfolio
of solutions to help extend the office network and allows a telecommuter to work
from any location. These solutions offer easy
and secure access to the companys business data, phone system, applications and
resources through secure, wired, wireless,
>
ASSESSING REMOTE EMPLOYEES
EMPOWERING REMOTE
EMPLOYEES
| Clear deliverables need to be assigned

to remote professionals. This helps in
clarity of achievement and prioritising
| An organisation should view remote

working as a strategy and establish
clear rules and guidelines
| Parameters of work quality need to be

unambiguous and accepted by both
the senior and remote professional
| Remote employees should have formal

and informal access channels to the
management
| Process conformity and data discipline

apart from KRA, performance can be
assessed on standard operating
procedures
| When remote professionals are joining

in, he/she should be trained on the
intricacies, benefits and pitfalls of
remote working
| Managers and remote professional
should have regular meetings, offsites, visits to corporate office
| Client satisfaction if a remote

professional has direct client facing
profile, this becomes a key assessment
parameter
| A fair assessment of remote

professionals for good projects,
promotions, etc drives encouragement
| Contribution as a team player and as a

buddy to other remote professionals of
the team
and head, HR, Philips India, says this secand high-speed internet connections.
ond enabler is more of a psychological or
At IBM, workforce flexibility is seen as a
an ethical enabler, which is about employcompetitive advantage. The company has
ers understanding the principals behind
developed a global guide to mobile work to
allowing this.
help employees and managers stay conThere are specific circumstances under
nected, perform effectively in mobile enviwhich Philips employees are allowed to work
ronments and respond quickly to changing
from home or any remote location. The comneeds of customers and employees. To this
panys managers are trained accordingly and
end, the company has developed connecknow the objective behind the guidelines.
tivity tools such as Same Time (an IBM chat
Employees who avail of this opportunity are
tool), Beehive and team-based tools to
also given a complete low down on the dos
increase efficiency.
and donts. At Philips, the guidelines and
Says Surbhi Mathur Gandhi, senior viceprincipals are clear and the objective is to
president, TeamLease Services, a staffing
ensure work-life balance of employees, given
solutions firm, With cloud computing comthe new social and ancillary challenges posed
ing into play, information, data and work
on the young talents today. For Philips
related details have become a lot more open
remote working is also about
and interactive today improving
increasing the count of women in
the accessibility of a remote Technology is
its workforce. When you have a
employee to his/her organisation. the biggest
diverse workforce, it is important
Many operational softwares are enabler for
web-enabled that allow a remote people working that the organisation has to be
sensitive to their needs, Mahadik
employee to source data as well as from remote
says. This is also about putting
upload his/her work on a compa- locations
faith and trust in your human
nys portal or server and log on to
resources developing trust by beginning to
the next level of logistics. We are poised to
trust employees, says Mahadik.
see this to spread across to many other
In short, developing structured guideindustries (outside of IT/ITES) that have prelines for managing and assessing remote
viously restricted data or information
employees is imperative. Philips India, for
access.
instance, doesnt want to make remote
If technology is an essential enabler
working a regular feature, but allows it on
that needs to be in place before an organisation allows employees to work from a case-by-case basis. CISCO relies on its
structured performance management
remote locations, the important enabler
model and personal development plans to
from the employees point of view is empameasure key results; SAP Labs India has a
thy. Yashwant Mahadik, vice-president
72
policy that allows employees to work from

home one day a week.
Alignment with business is necessary
to ensure continuity does not get affected.
There are always certain departments or
small teams that may not have the flexibility or the appetite to implement such policies. Also, managers need to trust their
employees when they work from home and
not feel they are misusing such benefits.
Hence buy-in from managers is very important in building and rolling out such a policy, indicates Bhuvaneswar Naik, vicepresident, HR, SAP Labs India.
All in the cloud
Then there companies like management
and HR consulting firm, PeopleSys, which
is on an expansion spree across the country
and beyond, having employees reporting
from remote locations. We want people to
work from remote locations because it is
convenient and our all sensitive data are
secure, shares Gurunandan Savnal, managing director, PeopleSys.
The companys entire customer relationship and sales management is on the
cloud client meetings and team meetings are preferred on audio-visual conferences irrespective of locations. If any of my
team member from any location updates
some information or data somewhere in
our cloud platform, I am updated of the
same and assign the deal to someone and
that person actually finds it right on his/her
screen instantly. I can get in touch with my
>
Our work from

home policy too
has been decided
by our employees
and therefore,
we have not
encountered any
roadblocks
BHUVANESWAR
NAIK
vice-president, HR,
SAP Labs India
As long as an
employee is
doing his work
without affecting
the customer,
one can work
from home with
the consent of
the manager
YASHWANT
MAHADIK
VP and head, HR,
Philips India
We are poised
to see this trend
spread across
to many other
industries that
have previously
restricted data
or information
access
SURBHI MATHUR
GANDHI
senior vice-president,
TeamLease Services
Information
security for the
organisations and
their clients is a
critical and not
just important
aspect to be
considered during
remote working
GURUNANDAN
SAVNAL
managing director,
PeopleSys
This is especially true for employees who

team, all together, irrespective of how far
have had the experience of working in a
they are, have audio-visual meetings with
team they might feel isolated and miss
more than 20-25 people at the same time,
and share all that we are doing, says the interaction with co-workers, says Nair.
Mahadik of Philips India says ultimateSavnal.
ly the success of this relationship rests on
Savnal also points at the need to address
the maturity of employees and the trust
some of the other key challenges that most
between the employer and the employee.
companies face while allowing employees
He says, Initially, the big chalworking from home or other localenge Philips faced was to
tions information security, lack Many companies
make employees understand
of spontaneity and motivation see remote work
how to execute the whole
arising from absence of physical as a perk they
thing with maturity. Over a
proximity, assessment structure can offer their
period of time, we gained
and corporate image manage- employees
some key insights. It started to
ment. Most remote professionals
become a regular feature with some
see their company through the prism of
employees. So we actually had to sit down
their laptops. This may sometimes create
with them and have and ask whether they
a distorted view of the company and what
were looking at a work from home option or
it stands for. Their actions thus are dictatwere they are looking at a part time job.
ed by this company image. As such, the
company should plan the on-boarding of
Assessment is difficult
such professionals in a strategic manner
and periodically enculturise the remote
professionals on what the brand stands
for, the values and the culture of the organisation, adds Savnal.
CISCOs Nair agrees with Savnal on most
of these counts. Absence of external motivation is a potential roadblock that our
employees tend to face in such a scenario.
Assessment of remote employees is another area where a lot of HR time is being

invested. At SAP Labs, the strategy is
streamlined: clear deliverables, high intensity communications with remote employers on how goals are to be measured, and a
sense of trust and good working relationship between the manager and the remote
73
We use our
technology
effectively in our
workplaces to
enable work-life
integration,
boost employee
morale, and
increase business
productivity
SEEMA NAIR
head, HR operations,
CISCO India
employee. Other aspects include: quality of

work done rework, first-go-through
rates, failure rates etc can be calculated
depending on the assignment of the professional. This data can be collected over
time and feedback given periodically to
improve performance. While KRAs are
important, it is critical that it is done by
conforming to the laid down process or
standard operating procedures.
How important is face time in all this? In
the regular office environment, the HR
manager might pop in at the coffee
machine to chit-chat with the employee.
Some managers are naturally like that but
there are managers who would happily sit
inside their offices and manage. The classic
challenge is here: if Im thinking about
someone for promotions, who is going to
come to my mind readily? Is it the brilliant
flexi worker that I have or is it someone
whom I see every time inside the office and
Im a little bit more comfortable with?
Effron of The Talent Strategy Group has
a simple advise, Get down to the absolute
basics in performance management: fundamental goal setting, coaching and
moulding employees. Tell everybody about
the goals openly and hold them accountable for it.
>
Solving the
ingredient
branding puzzle
From being mere suppliers, component makers can become the customers preferred
value-adder with a single-minded focus on brand building
MASOOM GUPTE
t is quite trendy for businesses to

draw management lessons from
disciplines as varied as spirituality
to sports these days. Why shouldnt
the spectacle that was the London
2012 Games provide that inspiration
beyond all that sporting glory of the past
two weeks?
So lets take the brand Olympics. The
many sporting events that take place during the Olympics may then be considered
as its sub brands. All the athletes and

sportsmen and women from around the
world would be the ingredients that give
shape to the final brand. They are the ones
who sway your decision as consumers
(read: viewers) to consume (read: watch) a
particular sub brand (read: event).
It may be argued that the national spirit is a key factor in deciding whether we
want to watch an event or not. The next
question would then be why would you
watch events that do not feature represen-
74
tatives from your nation? For instance, the

final swimming event that Michael Phelps
participated in, the one that was supposed
to be a career last, would not have been
missed by any Olympics enthusiast. The
ingredient Michael Phelps, guided your
consumption decision in this case, possibly
because he is a brand in himself, of equal,
if not greater repute than the host brand,
the Olympics itself.
Apply this to business now. When a consumer buys a brand, several factors deter-
>
mine his purchase decision. Sometimes, a
part of the whole that is your brandan
ingredientmay be the single biggest
determinant. Take the example of Tetra
Pak, a packaging material manufacturer.
Why would a consumer want to buy milk in
Tetra Pak packaging when it drives up the
price point for a single transaction? Of
course, for the benefits that that packaging
offers; but then the consumer has to know
of these benefits first.
Ingredient makers have also recognised
this, which explains their desire to carve out
a separate identity for themselves in the
minds of their consumersan identity distinct from their host brands, that is, the
end product brand they are a part of.
First among equals
By branding itself the ingredient maker
ceases being the metaphorical nut and
bolt provider, and starts being perceived
as something that adds serious value to
the final product. Talking about the companys recent advertising, Jaideep
Gokhale, communications and environment director, Tetra Pak South Asia markets, says, Weve noticed that there is
very little awareness among the consumers as well as their influencers about
the packaging material used. They also
harbour several misconceptions about
the freshness or quality of carton products at large. Our attempt is to dispel
these notions. The campaign therefore
aimed to highlight how the usage of Tetra
Pak packaging protected the products.
A similar and classic example of ingredient branding would be Intel with its
Intel Inside campaign launched in the
early nineties. Explaining how the branding initiatives were undertaken, Sandeep
Aurora, director of marketing, Intel South
Asia, says, In order to correctly communicate the benefits of new processors to
personal computer buyers it became
important that Intel transfer any brand
equity from the ambiguous and unprotected processor numbers to the company itself. Although the company was
widely recognised among computer manufacturers, the brand had little name
recognition among end users, despite the
fact that Intel microprocessors were the
brains inside their PCs. Television was
used extensively to reach out to con-
Being first to the

market helps
players capture
a consumers
attention and
eventually
scale up
S RAJENDRAN
chief marketing
officer,
Acer India
The web has

ensured that the
consumer well
read and also
well informed
about the
choices he
makes
SANDEEP AURORA
director of marketing,
Intel South Asia
Weve never
done direct
advertising;
instead weve
worked with
actual device
makers
PANKAJ KEDIA
country manager,
Dolby Laboratories
India
sumers and the five-tone melody that

became the Intel signature came into
existence.
Highlighting the benefits and building
consumer connect is the starting point.
But the aim of any ingredient branding
really is to enable the component maker
to become indispensable to the product
manufacturer. And if one has the first
mover advantage as well, it can help build
long lasting monopolies.
Sample this: as per industry estimates,
currently only 17 per cent of the total milk
consumed in India is sold in a packaged
format. Carton milk or milk sold in Tetra
Paks is just a fraction of this. With urban-
75
isation and income levels on the rise and

an increasing inclination towards adopting the western lifestyles, this segment
is expected to boom. Host brands will
continue to add to the product repertoire
in the space to capitalise on this demand.
And consumers, who have already started identifying with Tetra Pak, will look for
a continued association, in turn pushing
the brands to choose Tetra Pak packaging
material.
However, ingredient branding is not a
genie granting you the boon of a lifelong
monopoly. In Tetra Paks case it is not its
branding initiatives but the absence of a
serious competitor that is believed to feed
its dominance. Remember price is a big
factor here. If another player offering the
same quality at a lower pricing comes
along and if there is no big difference
between the two in terms of quality the
discerning consumer will not bother,
says an analyst tracking the sector.
The idea then would be to stay a step
ahead be it technology or in pricing.
This not only helps the ingredient maker
retain an edge over competition but also
fuel some among its clients. Again, take
Intels case. Even with the same component, the reaction time from different
players will be different for any new
launch. So when ultrathins were introduced, similar Intel processors may have
been used by all players. But there was a
variation in launch timing. As S
Rajendran, chief marketing officer, Acer
India, says, Competition will eventually
catch up. But for players, being first to
the market helps capture a consumers
attention and eventually scale up.
And for the host brands, cashing in on
the brand equity of a component maker
coupled with timing is surely one way of
staying ahead of the pack. Consider Acers
tie up with Dolby. The company first tied
up with Dolby to provide the latters
sound technology via its products in 2007.
Since then the company has steadily built
up its portfolio in liaison with Dolby,
recently launching 25 models, across
price bands, with different Dolby technologies. The move reflects the changed
consumption patterns; functional
aspects, though important, are secondary
to personal technology products that
serve as tools for media consumption.
>
WHEN DOES INGREDIENT
BRANDING COME HANDY FOR
END PRODUCTS
| When the ingredient is central to a
products performance or establishes
its superiority. Think Intel with its
different processors used across
models
| When ingredient works a
differentiator
as compared to competition. Think
Dolby
and the edge in terms of media
consumption it provides
| When end products are not very well
branded themselves. Think Lycra and
how its material is necessarily what
the consumer wants
| When an ingredient can help assure
consumers of quality. Think Tetra Pak
and its positioning as the packaging
that keeps the contents fresh and
pure
| When multiple ingredients, that may
even be sold separately in
aftermarket, come together to form a
product, establishing loyalties for
them. Think cars and allied products
like tyres, music systems etc
Says Rajendran, The tie up gives the

brand that extra gloss. Laptops/computers
are commodities at the end of the day. If
they stay on the shelves too long their value gets corroded. Such tie ups will help the
product fly off the shelf faster. Since Dolby
is an experiential feature, the company is
focusing on retail level promotions for consumers. This is something of a marketing
merry-go-round. Acer cashing in on
Dolbys reputation and in turn being the
medium that provides Dolby with some, if
you will, free publicity.
Unlike Intel and Tetra Pak that used the
mainstream media to reach out to the consumers directly, Dolby has banked on its
partners. Weve never done direct advertising, instead worked with actual device
makers, known as the playback side and
the content creators to build our brand,
putting the Dolby logo upfront, says
Pankaj Kedia, country manager, Dolby
India.
The merry-go-round would then come
full circle when, as Kedia says, the tech-
EXPERT TAKE
ABOUT THE PART AND THE WHOLE
ngredient branding refers to the concept

where a product has a distinct brand
name (host brand) associated with the
product as a whole but where one or more of
its constituent attributes is associated with
different brand names (ingredient brands).
Some well-known examples include Dell
computers with Intel processors (where Dell
is the host brand with Intel as an ingredient
brand), cookware brands with Teflon coating, and Diet Coke with NutraSweet.
From the perspective of the host brand,
RAJIV SINHA
the
primary motivation of ingredient brandLonnie L Ostrom Chair
ing is to leverage the value of the branded
in Business & Professor
ingredient to position the product as superiof Marketing,
or from among competing product offerings.
Arizona State University,
It is well known that trusted ingredients can
W P Carey School of Business
greatly simplify consumers decision making, especially for new to the market products that have not been
experienced before. For example, April 2012 marked the first transAtlantic commercial flight by Japan Airlines in the new Boeing 787
Dreamliner jet. The well-known design features and in-cabin innovations of this Boeing provides commercial airlines (the host brand)
with a variety of competitive advantages, including the ability to
charge higher prices and reduction in promotion costs.
From the perspective of the ingredient brand owners, who are generally (but not always) suppliers to the business markets, strong brand
equity for ingredients would mean better profit margins, stability of
demand and long term relationship with product manufacturers.
Manufacturers who traditionally pursue lowest cost for fixed quality
specifications when it comes to supplier selection can no longer pursue
that approach as the suppliers brands directly influence their customers choices. Apart from benefiting ingredient suppliers and new
product marketers, ingredient branding can benefit other downstream
marketing channel members like wholesalers and retailers. Provision of
shelf access and promotional resources is a non-trivial exercise for
retailers and new product marketers can use their association with wellknown ingredient brands as signals of success.
While ingredient branding has promise for competitive advantage,
whether to pursue the strategydependson the nature of the product or
ingredient being marketed and the potential pitfalls of such a multibrand association. If you are a supplier of the ingredient it is imperative to ascertain whether the promotional cost for brand building is
viable given the nature of your business market. Many successful
examples of high value ingredient brands are based market leaders
with enviable discretionary budget for promotion. Second, it is
important to analyse the growth potential of the product categories
where the ingredient is likely to be used. There is reason why high
TURN TO PAGE 77>
76
>
nology (ingredient) that started off as a differentiator, enters the consumers expectation set over time. In some situations
even worming its way into a consumers
consciousness to an extent that the ingredient becomes a generic brand.
This may be a double edged sword
though. With time, consumers may simply use the brand name to identify with a
particular category without actually staying loyal. Like Lycra. Few consumers may
actually know that it is one particular
brand of spandex material and not the
generic name for the material itself. In
such cases, consumers must constantly
be reminded of the brand, giving it an
overriding positioning over competition.
Extending the brand to finished products
can also ensure top of mind recall.
Ingredient branding can potentially
work wonders not just for itself but also
for the host brands. Especially if the latter are not well known or new entrants. A
well established component could help
them gain consumer acceptance more
easily through unwritten assurances of
quality.
The new rules
Ihe rules have changed however. As
Aurora of Intel says Today the consumer
is inundated with several choices and
brands in every walk of life. He is well
connected via his social networks and the
proliferation of the world wide web has
ensured that not only is the consumer
well read but hes also well informed
about the choices he makes. The need to
distinguish oneself from competition has
never been more pronounced. Host
brands can play a key role in providing
the requisite push by playing the influencers. In this ingredient brands can take
a leaf out of the low involvement categories (such as adhesives and paints)
branding Bibles.
Adhesives as a category is dominated
by Fevicol in India. Its advertising enjoys
a cult status and everyone remembers zor
lagake haisha. Over the years, weve
established the functional differentiation
of our products as well built a strong emotional connect with consumers. In fact,
we dont think it is low involvement anymore, as the stakeholders like carpenters,
contractors and interior designers pay
EXPERT TAKE
ABOUT THE PART AND THE WHOLE

TURN FROM PAGE 76 >
technology firms spend heavily on ingredient
brand; they serve a wide variety of business markets that are on the verge of a growth phase.
Third, success of direct-to-consumer promotion
of an ingredient brand might put immediate
pressure on order pipelines. It is important to
Strong brand
plan for demand spike and increase in production capacity. Finally, as consumers have the last equity for
say in the success of a brand, it is wise to employ ingredients
market research to identify the key determiwould mean
nants of choice when it comes to purchase of
better profit
products that employ your ingredient. For exam- margins and
ple, sugar content in food, processors in comput- a long term
ers and operating system in smartphonesare key relationship
attributes for consumer choice and are natural
with product
candidates for ingredient branding.
manufacturer
Recent research has investigated the benefits
of ingredient branding in different types of product portfolio expansions. The general consensus is that ingredient brands benefit host
brands for new products that incorporate an entirely new feature as
opposed to changing the level of an already well known attribute. For
example, a detergent host brand with a new scent ingredient brand
may not benefit as much as a chocolate host brand with a diet food
based ingredient brand because scent is not as radically new to the
detergent category as diet food is to the chocolate category. In such
cases, an ingredient brand that is completely owned by the host
brand might cut the risks of failure.
More research into market place instances of ingredient branding
practice is essential to identify key determinants of success.
Marketers meanwhile need to precede an ingredient branding
arrangement with a thorough cost-benefit analysis based on their role
in the marketing channel, nature of the ingredient, type and life-cycle
phase of the host brands product and legal safeguards in the branding arrangement.
close attention to adhesive usage in their

line of work, says Anil Jayaraj, CMO,
Pidilite.
Even newbie category like decorative
paints rely heavily on influencers.
Applicators play a key role in pushing
our products. Consumers are less knowledgeable about the differences among
various types and brands of paints.
Sufficient knowledge has to reside at the
point of sale to educate the consumer and
demonstrate product benefits to them,
says Pushkar Jain, digital head and mar-
77
keting manager, exteriors, Dulux, Akzo

Nobel India.
There you have it. Concerted brand
building and a judicious use of influencers have helped these categories move
from the low involvement end to the high
involvement one. Ingredient brands can
use the same tools to make the journey
from being component makers to being
the cog that drives the wheel.
>
Winning the
relationship
game
Social media communication,
unlike broadcast media, cannot
beforced upon the consumer
PRIYANKA JOSHI
xactTarget, a global interactive

marketing services company,
recently released the results of
a survey in a report titled, The
Social Break-Up. The big-but
not surprising- take-away is that brands
and their fans break up for three basic reasons: brands talk too much (frequency),
they repeat the same information (boredom), and that there are other brands out
there who do it better (relevance).
Gulshan Verma, vice-president & country head at Komli Media (India and North
America) believes a good conversation
between a brand and a potential consumer
can be broke down as follows: 40 per cent
of it would be about things that are of inter-
est to the consumer, 40 per cent tangential

references to the brand and 20 per cent
direct conversations about the brands products and features. When Steve Jobs passed
away, several autism societies talked about
the impact that the iPad can have on teaching children with autism. Thats an example of good conversation. They were often
widely shared, he says.
Fans/followers unsubscribe if they find
that topics are completely related and add
no real value, adds Advit Sahdev, CEO &
founder, ODigMa. Sahdev says, A user on
social media does not come to purchase.
They come to socialise or get information.
When they see posts that are only related to
sales and promotions, they unfollow
brands.
Why should brands be bothered with
78
social media? In India, over 50 million users

use Facebook, about 13 million users throng
on LinkedIn, more than 15 million have
Twitter accounts. Indians generate the second highest traffic for Google+. Industry
reports suggest that more than half
the online population in India is socially
active on one platform or another, making
it an indispensable platform for brands
and marketers.
Research firm Gartner advises brands
with a social media presence need to ensure
that their content is kept fresh so they
instantly attracts the attention of consumers, as users are likely to be turned off
by dull or dated content. In fact, getting
liked online in some form or another has
become a de rigueur of most digital marketing campaigns.
>
But that does not mean consumers will

CEO, Social Wavelength, highlights that
one may begin to follow a brand because of
never unfollow brands. Too many brands
focus on chasing fan numbers
some incentive (say, a contest)
and hitting the magical million More than half while not being interested in that
mark and then forget to actually of the online
brand. However, later they
reach out to and connect with population in
realise that the content from the
these fans. They neglect life after India is socially brand is not as clever or interestthe like, and that alienates con- active in online ing. Hence swiftly unfollowed.
sumers. Its like being invited to a platforms
The only way ahead for
brands, points Yashraj Vakil, COO
party only to find that the host is
busy inviting others rather than mingling
of Red Digital, is study consumer preferences in advance of social efforts and conwith the guests that have arrived, opines
Ashok Lalla, digital marketer, founder and
tinually monitor what consumers expect
and want in a particular channel. He says,
author of The Future of Digital for Brands.
Social media communication, unlike
If you cannot bring in fresh ideas, new
contests or promotional offers on to your
broadcast media, cannot be forced upon
the consumer. Hareesh Tibrewala, joint
social pages like Twitter or, Facebook then
dont push spam on to the users pages as

that will always turn off the fans. The reality is that customers can and will cut ties
with brands that do not take their best
interests into account.
So how does a build a sustainable social
media strategy? What metrics do you use to
measure social media in the first place?
Here, Shrikant Shenoy, media director,
Lodestar UM, offers some directions taking
cues from the agencys study on social
media, Wave 6, which is among the longest
running studies of its kind that aims to arm
planners with the ability to devise a social
media strategy as well as measure and compare the value of marketing activities.
The new social order

Social media is a long-term commitment and not a marketing gimmick
challenging. Different social experiences
meet different marketing objectives. An
experience that drives brand advocacy
in one category simply creates awareness
in another. An experience that encourages brand participation for one person
does very little for someone else.
The right strategy is a must to navigate
this complex environment and learn
what social relationships can deliver for
brands. Do they make people want to
spend more time with the brand? Do they
make them feel valued as customers? Or
do they encourage people to recommend
the brand to others? Besides understanding the social experience that users
want, advertisers need to define the marketing value that these experiences can
deliver to brands. Knowing the value of
an experience means the marketer can
build a social media strategy designed to
meet a marketing objective, rather than
starting with how to exploit an existing
social platform. In short, this knowledge
is vital to make social media a legitimate
platform for brand development.
SHRIKANT SHENOY
magine a car showroom in

Mumbai with zero infrastructure
or real estate rentals. Or an
impromptu fashion show to unveil
a freshly inspired designer line.
Marketers now have the ability to create
virtual versions of the real at less than a
fraction of the cost.
There is little doubt that social networks
have overtaken brand websites in getting
consumers what they seek. The nature and
depth of the interaction varies from person
to person and from category to category.
But brands that create the right social experience have gained enormously in terms of
loyalty, endorsement and sales.
Little wonder that social media is on
every marketers wish list. But its role is
still loosely defined. While traditional
media has well established metrics, social
media is weighed by popular measures of
success such as likes, posts or tweets
instead of more important brand objectives. It is no surprise then that social
experiences end up being one dimensional, undifferentiated from others and
centered on familiar platforms to achieve
familiar objectives.
Understanding social media can be
GETTING THE PLAN RIGHT

Dos and donts on social media
Dos
| Start with the marketing objective
| Understand the nature of the social
relationship sought, is it superficial or
deep?
| Keep the outcome in mind while
devising social experiences
| Look for audience specific cues to
micro target
| Use personal response to build
commitment and loyalty
Donts
| Devise objectives based on the
platform. For instance, likes on
Facebook
| Assume consumers want a social
relationship
Socialisation of brands
| Expect the same experience to deliver

across categories
Brands are the new friends on our
| Fear addressing complaints personally
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79
>
The new social order

TURN FROM PAGE 81 >
Facebook pages. With online hangouts
increasingly becoming the centre of the
consumers social lives, their interaction
with brands has increased in terms of the
number of transactions as well as complexity. Like human relationships, the
nature and intensity of brand relationships can vary. The consumers may seek
only superficial relationships like expecting discount vouchers or accessing entertaining content or deep involvement like
helping with product development or
being part of a brand community.
The most common mistake advertisers make is to assume that consumers
necessarily want a relationship with their
brands. Instead they need to probe further
and understand the kind of social relationship consumers seek. Such relationships can be superficial-for instance, let
me know when your product comes
out or deep for instance, I want to
play a role in developing products. It is
important to know where the brands
stand on the relationship scale to make a
fair estimate of the investment to be made
when creating the social strategy. For
example, computer software consumers
are twice as likely to be interested in
opportunities to learn something new
about applications as in accessing sponsored events.
The journey of a consumer interaction can be divided into three broad
stages: discovering the brand, taking
action to acquire and use the brand, and
finally, becoming part of the larger community of brand users who subscribe to
the brands values and recommend the
brand to others. Each of these stages is
activated by distinct drivers.
All marketing activities including
social experiences trigger one or more
of these drivers. Integrating social experiences into the marketing plan allows
advertisers to understand their relative
value vis-a-vis other activities. The drivers that are used to define mass media
communication objectives can also be
used to identify social experiences that
can be created. One can then define the

value of the social experiences in terms
of their contribution in activating brand
drivers.
Though all social experiences have
some impact on the brand drivers, the
impact varies significantly. It is therefore
important to devise a social strategy
based on those experiences that maximise returns on the desired drivers. For
example, giving people access to news
about a computer software brand drives
awareness and education but little else.
Discount vouchers stimulate transaction
and trial but do little for the computer
software brand elsewhere. When it comes
to driving commitment and inducing
consumers to find out more, one needs
experiences that build deep relationships, like co-operating in the development new products.
A one-size-fits-all strategy doesnt
work for social experiences as category
differences also influence the outcome. A
social experience that delivers a certain
outcome in one category may deliver a
very different outcome in another. Each
category has its unique dynamics, making it necessary to fine-tune the social
experience.
For example, allowing consumers to
help in product development in the computer software industry can help meet
a variety of objectives like driving
loyalty and inducing people to seek more
information about the brand. But in the
movie industry, the same activity can
deliver awareness and education but not
much more.
Knowing the value of social experiences allows advertisers to start with the
objective and build a strategy from there.
As the same objective cannot be fulfilled
in the same way for every category,
most of the social strategies that
look similar today should in fact be different. For example, if our objective is to
make people feel close to the company,
there will be different ways to do it in
each category.
Product development is the best route
in computer software. Providing oppor-
80
tunities to build knowledge and skills can

bring people closer to a fashion label. Easy
access to content can increase the musicians fan following and good service can
impress customers in computer hardware.
Targeting is key
Data on social behaviour also helps
advertisers find the key audiences in the
online mass, their profiles and preferences. These insights can be used to
tailor the brand communication to
the requirement of the targets. Each
consumer segment has distinct expectations which call for different sets of marketing activities.
While some companies see social media
as an opportunity to use paid and owned
media to drive earned media, many others
dont. Habituated to the controlled environment of traditional media like television and print they are still wary about
social media and the lack of control of either
the conversation or the content being
shared about and around them. A natural
fear of amplifying negative vibes around a
brand is a concern. It takes only one negative comment to swell into a threat to a
brands reputation. However, in reality,
being open to complaints and personally
responding to issues is the biggest opportunity that brands can get to connect with
consumers. Customers feel valued even by
a simple response to their concerns.
Social experiences though powerful
need not be complicated. Even a
response to complaints can drive more
loyalty and advocacy than any rewards
programme could.
More than ever before, advertisers
need to know the value of social experiences in meeting their challenges. For
this advertisers must stay continuously
invested in understanding the fast changing dynamics of the social world.
Experiences rooted in social media strategy that builds connections with the consumer as well as delivers value for the
brand will surely result in a winning
proposition for both.
The author is media director, Lodestar UM
>
Threat and
opportunity
Managing reputation is a long-term strategic
undertaking, more like a marathon than a
100-mt sprint
MASOOM GUPTE
here is no reality, only perception, says Dr Phillip

McGraw or Dr Phil as he is
popularly known, post his
eponymous psychology TV
show. The statement, as much as the subject reality versus perception, has led to
much philosophical debate historically,
with no immediate resolution in sight.
But, step out of the realms of psychology,
into the everyday transactional world of
business and there is a definite ring of
truth to it.
A few weeks back, the NDTV-Nielsen

lawsuit grabbed headlines. The media
group accused Nielsens local television
rating arm, TAM, of fudging the rating
data. Damning enough, but not as much
as the accusation of its employees being
open to accepting bribes in order to
swing the data in favour of the bribing
party. The lawsuit opened the floodgates.
There was silence about the bribery
claims as the matter is sub judice. But
the industry unanimously echoed the
NDTV voice of discontentment over the
ratings process. Stories about similar
81
scandals that hit TAM in the past, general unhappiness with Nielsen research
started circulating, putting at stake the
research majors entire credibility the
key driver of its success, far more important than any other, given that it operates
in the knowledge space.
A similar controversy this time the
information provider is not the damned
but the one that is accusing another party has also been much in the news
lately. Veritas, the Canadian research
agency, has been churning out reports
on accounting malpractices and other
>
gaps in data provided by Indian companies like DLF, Kingfisher, Reliance
Communications, IndiaBulls regularly
for the past few months, raising some
serious questions about the corporate
governance practices in India.
A common element between the two
is the media interest and coverage. And
the length and breadth of this coverage
has rendered the belief, any publicity
(implying even negative) is good publicity useless, building the case for corporate reputation management.
At another time, companies looked
good by simply doing what they did.
Back then business media wasnt evolved
like it has today. A companys interaction with the press was mostly restricted
to product launches and may be financial
results. But that is hardly the case anymore, says Madhurima Bhatia, image
manager at market research agency,
Ipsos. The instant any news about a company is reported in any medium, there is
a cascade of follow-ups from other
media. Fresher angles are found to the
stories, newer details are dug out and
before you know it, what began as a trickle transforms into a full blown avalanche.
Especially in this age of social media,
when reaching out to a global audience
feels like a stroll in the park. Now anything that happens in India has an
impact even on the global audiences and
vice versa. The world is watching, quite
literally, says Bhatia.
The next question is where is the need
to manage reputation? If the companies ensure they play by the rules and
are ethical in their transactions, is there
really a case for actively managing their
reputation? Well, there is. For reputation management goes beyond crisis
communication.
Rajiv Desai, founder of IPAN and
Comma Consulting, prefers the term
communication management. He says,
Communication is the currency of corporate
reputation
management.
Companies need to speak not just externally to the consumers and media but
also internally to their employees and
the shareholders. Communicate effectively with your employees and you have
a substantive base of brand ambassadors.
EXPERT TAKE
THE INTERNET CAN SERVE AS AN EARLY

WARNING SYSTEM TO THE CEO
Harold Burson, founding chairman, Burson-Marsteller, talks about the
importance of reputation management in a networked world
What role does the internet play in influencing a
companys reputation? This is something that is
not as easy to control.
The internet has both positive and negative

aspects. The internet makes it easier for disgruntled employees to complain publicly about a grievance. On the other hand, it can also serve as an early warning system to the CEO and those who are
responsible for compliance. So I think a company
HAROLD BURSON
Founding chairman, Burson-Marsteller must constantly monitor the internet and take
seriously the statements and claims that are made
to find out whether or not there is any truth in them. This is burdensome but if there
is a violation and if it transpires that the CEO is warned about it by some anonymous
person on the internet and he did not act, there could be trouble.
Isnt it harder to figure out who your stake holder is in a networked world?
The internet is context- and character-neutral. You never know if the person who is
on it is a good character or a bad character. It is a transmission device, and it can be
used for good or for bad. Its a bit like anonymous letters in the pre-internet days
people would send a letter on a sheet of paper that was typed, no signature, sometimes
posted from another town. Complaints on the internet are often like that.
Do you think CEOs are taking the internet seriously enough as a reputationbuilding and protection tool?
Some are and some arent. Many are still in the learning process. But the medium is
still so young and immature that we are just learning about the impact it has on recipients. We do know that it is powerful. I am a big believer in Marshall McLuhans maxim that the medium is the message. The internet has yet to establish how much credibility it will have in future.
Some CEOs seem to consider blogs a popular way of communicating. What would
you say are the risks and dividends of CEO blogs?
The blog is a form of communication. The important element is the content. If the
content is considered relevant by the recipient it will have an impact. If it is not considered relevant it will have little impact. Its no point for a CEO to say, Im going to
have a blog if he has nothing to say. A blogger is like a newspaper columnist or an editorial writer. The success of that editorial writer and his readership is dependent on
what he says. The one great differentiation is that the blog automatically provides a
method to react. It is much more difficult to get a reaction in a magazine or a newspaper. The blog is instantaneous. This makes it easy to gauge opinion very quickly.
You dont have to wait until 1,000 people respond. Over a period of time you can find
out from the first 10 or 20 responses. Usually theres a predictability. You know if the
first three responses are negative, that the overall reaction is going to be negative. It
gives CEOs writing a blog an opportunity to know whether their policies, statements,
beliefs or vision have an acceptance or not.
With permission from Genesis Burson-Marsteller
82
>
GAINERS AND LOSERS

Technology remains on top; finance sector at the bottom
The performance of the financial sector in the 2012 Edelman Trust Barometer survey exemplifies how hard
it is to gain trust. As the financial situation around the globe remains bleak, banks and financial services
stay the two least trusted industry sectors for the second year in a row. On the opposite end of the trust
spectrum, technology, for the sixth consecutive year, is the most trusted. The steady introduction of more
powerful tablets and smart phones has helped keep the tech sector in good standing in both developed
markets such as the US and the UK and in developing ones like China and India
2011
2012
Technology
80
Telecommunications 67
Automotive
67
Food and beverage 64
Pharmaceuticals
61
Energy
60
Consumer packaged goods
57
Brewing and spirits
57
Media
52
Banks
50
Financial services
48
Technology
79
Automotive
66
Food and beverage 64
Consumer packaged goods
62
Telecommunications 60
Brewing and spirits 59
Pharmaceuticals
56
Energy
53
Media
51
Banks
47
Financial services
45
Question asked: How much do you trust the above industries to do what is right?
2012 Edelman Trust Barometer survey
Responses 6-9 only on 1-9 scale; 9 highest; informed publics ages 25-64 in 20 countries
Communicating right is also very critical in the face of prejudices, or more

recently activism. Reputation enjoyed by
a company in its home country doesnt
naturally extend to a host country when
it hopes to expand beyond national borders. As an example of the prejudices,
Desai cites the case of Pepsi. In May 1985,
PepsiCo joined hands with RPG Group
to form Agro Product Export Limited.
The plan was to import cola concentrate,
in return for the export of juice concentrate from Punjab, and sell soft drinks
under the Pepsi label. The government
rejected the proposal citing regulatory
issues.
PepsiCo tried again sometime later,
this time adding positives to the compa-
nys proposal. The company agreed to

set up fruit and vegetable processing
plants, agriculture research stations,
franchised bottling operations and
snack-food factories using local potatoes
and tomatoes, providing an impetus to
the agricultural industry in the state in
lieu of the permission to operate its soft
drinks business in India. The move
helped it win over the farmers lobby and
allay fears of the multinational monster.
It was also a strategic move given that
the now prosperous north Indian state
was torn by militant insurgency in the
mid and late eighties. The MNC argued
that its operations in the state would help
create jobs and possibly restore peace.
The Pepsi Foods Ltd venture was
83
cleared in the end of 1988 and Pepsi, a

joint venture between PepsiCo (36.89 per
cent), Punjab Agro Industries (36.11 per
cent), and Voltas (24 per cent), a subsidiary of the Tata Group, was formed.
The company launched its soft drinks
business in 1989.
We (India) as a country dont look
upon MNCs favourably, says Harsimron
Sandhu, CEO, India Infomedia, a perception management firm. An outsider
treatment meted out to these companies.
In order to sidestep such antagonism and
be accepted, companies need to engage
with the people where they operate,
where the factories are located, with their
consumers and be part of the larger community. He cites the example of
>
Hindustan Unilever Ltd, the Indian arm

tions to local problems in your strategic
of Anglo-Dutch fast moving consumer
plan or tying up with reputed
goods company Unilever. In its earlier
brands/partners (as Pepsi did by joining
avatar the company was known as
hands with the Tatas). And yet another
Hindustan Lever Limited (HLL), giving
may be to bringing on board a team that
people the impression that it is an Indian
is well respected in the community,
company. Necessary since it came to
heard in the media and enjoys the confiIndia in the pre-Independence era, when
dence of the local administration.
the Swadeshi fervour ruled the people of
Speaking of whom, having the local leadthe country and any allusions to the comers empanelled with your cause will only
panys parentage may not have sat well in
aid your purpose.
Indians. The company also undertook
Reputation management is not only
several initiatives to connect with the
about the pull effect (as demanded by
rural markets and be one
stakeholders) but often
with the community, he
about the push effect.
adds.
Especially if you operate in
Another piece of advice,
one of those industries that
more universal in nature,
are collectively held in low
from Sandhu, If you
esteem in the stakeholders
change policies or disconconsciousness. Like banking
tinue any practices, explain
and insurance, considered to
your rationale to your stakebe rife with hidden costs that
holders. Communicate the Companies need to
range from deliberate misnew policies clearly to them speak not just
selling to more minor irribefore any charges of foul externally to the
tants like incessant cusplay are levied against you. consumers and
tomer service calls at odd
In a fascinating turn of media but also
hours. You must then make a
events, the sentiments the internally to their
conscious effort to say it loud
MNCs faced in India when employees and the
and clear that you are differthey tentatively stepped shareholders
ent. Consider Max Life
foot in a freshly liberalised
Insurance (earlier Max New
country are similar to what
York Life), harping on about
many Indian companies are facing today
its
honesty
as they pursue their global ambitions.
in selling an insurance plan through its
The prejudices of stealing jobs, not being
latest television campaign.
compliant with local business and social
You may say it repeatedly and loudly,
practices and its culture will all follow.
but what if you arent different and your
The tables may have turned but the rules
agents continue to mis-sell? Or for other
remain the same. When companies step
industries, your employees are dishonoutside their countrys boundaries, they
est, potentially giving you a bad name.
must build a whole new reputation for
Does the Citibank wealth manager fraud
themselves. How? Engage with the
case from around two years back ring a
locals, understand them, dont just combell? Rajeev Sethi, Professor of
municate, actually talk to them, listen to
Economics, Barnard College, Columbia
them. Make them feel that you are there University, in a blog post links a compato be a part of their community and not
nys reputational capital with incentives.
to take anything away from them, says He writes, One could hire individuals
Desai.
who are predisposed to behave in a prinEasier said than done. One way would
cipled manner even in the face of incenbe to go the traditional way of connecting
tives not to do so, or one could design
with locally respectable publications,
compensation schemes that adequately
making formal announcements, keeping
reward actions that preserve or enhance
the stream of communication and conreputation.
versation flowing, making relevant
But thats the long-term game plan.
noise. Another could be, taking a cue
If a crisis seems to loom, dive headlong
from the Pepsi case, incorporating solu- into crisis management mode as an
84
immediate measure responsibility,

compensate affected parties fairly, communicate updates on the matter regularly to all stakeholders and take corrective steps to avoid future mishaps.
>
ILLUSTRATION: AJAY MOHANTY
Low budget, big bang

Conventional wisdom says there is a direct correlation between
marketing spends and market impact. But products like Nokias
Asha, M&Ms XUV500 and Vicky Donor have shown that you can
win big on a shoe-string budget. Heres how they did it.
MASOOM GUPTE
ou have a new product and

you have done your SWOT
analysis. You have put together a relevant product proposition. You have resear- ched
your potential buyer and know what she
wants. You have a reasonably strong distribution network to reach her and you
have kept a keen eye on what
competition is up to. You know what
your unique selling proposition is, and
what makes you a better alternative to
your competition. You are clear in your
mind about your margin and turnover
goals. Above all, you have a compelling
pricing strategy.
So you are set for launch.
Think again. The real work starts now:
you get only one launch to impress the
consumer. You need a big bang. And the

budget is never good enough.
Conventional wisdom says there is a
direct correlation between marketing
spends and market impact. If a new
product is supported by heavy advertising, as opposed to limited advertising, it
is 70 per cent more likely to be bought by
consumers, wrote Nirmalya Kumar, professor of marketing and co-director of
Aditya Birla India Centre at London
Business School, and Jan-Benedict E M
Steenkamp, professor of marketing at
Kenan-Flagler Business School, UNCChapel Hill, in a June 2012 essay prepared
specially for The Strategist (issue dated
June 25, 2012).
Thats conventional wisdom, but in
recent months, brands like Nokias Asha,
M&Ms XUV500 and Vicky Donor have
shown that you can make a big impact
85
even on a shoe-string budget. Without

exception, all of them have opted for a
slow and low-decibel launch strategy but
have managed to make a huge impact.
They have demonstrated that a product
launch is as much about branding as it is
about how you manage logistics, alliances
and the various channels of communication.
The reasons for choosing such a strategy have been different in each case. If for
Godrej Consumer Products the issue was
to put the distribution network in place
before building up buzz around its air
care product Godrej Aer, for Micromax,
the plan was to ramp up manufacturing
capability before launching a full-scale
campaign around its new tablet Funbook.
Interestingly, all of these brands have
restricted the use of mass media to keep
the costs low and have chosen to exploit
>
Getting the mix right

DOs
| Define objectives of branding clearly;
you cannot do everything on a
shoe-string budget, so select and
priortise before hand
| Decide on the budget independent of
objectives; dream and wish big and
then be demanding to fit that within
a budget
| Be very unreasonable when
negotiating the cost of media or
anything else; there's nothing like a
fixed or lowest possible, there is always
room for lower
| Work with experienced professionals;
in ones zeal to save on costs don't
work with less experienced/cheaper
options that may waste time and not
deliver real value
| Measure the success of all initiatives
carefully and continuously so as to
change the course when needed and
move effort elsewhere
| Collaborate with other firms that have
interest in same target customer group;
tie up with an insurance firm if you are
healthcare company; leverage each
other's brand equity and budgets
| Use PR to the hilt; create stories about
the brand that media finds interesting
and customers connect with
DONTs
| Believe in thumb rules, like media mix
or minimum burst or spurt, or least
possible budget
| Overestimate the power of new media
like online and mobile
| Underestimate the power of traditional
media like print and television
| Make campaigns for yourself, your
distributors or staff but for the
end customers
| Lose patience and continue investing in
brand building even if it is small amounts
Put together by Harminder Sahni, founder and managing
director,Wazir Advisors
the social media to gain a head start. They

have wooed bloggers and reviewers and
in some cases have relied exclusively on
good old-fashioned word-of-mouth. Take
Hindi movie Vicky Donor launched earlier this year: a small budget film, made
with ~5 crore and a relatively unknown

assortment of actors. The movie raked in
~40 crore purely on the basis of word of
mouth. Compare that with Ra.One, the
film that may or may not (whatever your
view) make it to the rolls of history for its
content, but will surely be remembered
for its marketing blitzkrieg, unleashed by
lead actor and co-producer Shah Rukh
Khan just before its release. The movie
truly enjoyed a big bang launch with close
to 25 brand associations, worth around
~52 crore. The film also generated more
press for its marketing than for the product itself. The pre-launch buzz ensured
the audiences flocked to the theatres but
trade analysts remain divided in their
views about the level of success attained
by the film. While in absolute terms the
return for Vicky Donor was smaller, in
percentage terms its an impressive performance by all accounts.
Now take Mahindra & Mahindra XUV
500 (pronounced as five-o-o), also considered to be one of the most successful
launches of 2011 according to The Brand
Derby study of The Strategist. In the prelaunch social media campaign, M&M
tried to create excitement about the product but didnt talk about its features or try
and create too much expectation around
it. Various online activations simply
asked users to guess the cars name or
price, revealing the cars look in parts,
instigating curiosity and conversation
around the launch. Unlike the Tata Nano,
which harped on the features and price
before launch, XUV 500 spoke of the overall car experience the car will offer.
The post-launch advertising too
steered clear of speaking about functionality or price. It stuck to the experiential
realm. The consumer was kept at the
centre in all the communication pre and
post the launch and his interaction with
the looks, the design, the feel of the car
was the key, explained Pravin Shah, chief
executive, automotive division, M&M.
Possibly because the brands USP was
considered its clutter-breaking design.
When XUV 500 first opened bookings
post its official launch in September 2011,
the company received around 8,000
bookings across five cities, and had to
close bookings in 10 days. The XUV 500
started with a production capacity of
86
2,500 a month.
The thinking was that it is better to
have a smaller, successful launch than
having it all explode in your face.
Return on investment
Rebecca Robins, co-author of Brand
Medicine: The role of branding in the
pharmaceutical industry, says in her
paper on managing brand lifecycle,
Getting the branding right will never
compensate for a poor product; but getting the branding wrong, or failing to
unlock the true potential of a brand, can
make the difference between good brand
recognition and loyalty and great brand
recognition and loyalty, thus impacting
on the bottom line in terms of the difference between good ROI (return on investment) and great ROI. A corollary to this
in the context of launches would be:
getting the correct launch pad and providing the brand the necessary support
at the launch phase may not ensure that
the brand will hit a home run, but it can
surely aid the brand by giving it a certain
momentum.
Now consider the Nokia Lumia and
Asha series phones. Straddling the two
ends of the market one for the premium consumer and the other for the masses the brands entered the market
around the same time. The Lumia, the
glamorous cousin hogged the front pages
and was endorsed by Hindi movie actor
Priyanka Chopra. The Asha, the earthy
one was conspicuous by its restricted
presence in the mass media. It is only
now, after almost 10 months of being present in the market, that the Asha is being
seen on air with an ad set in a college canteen.
So why was the launch of Asha singularly devoid of Nokia-esque razzmatazz,
at least compared with the hullabaloo
around the Lumia? Well, the Lumia is a
whole new religion (its a Windows phone,
in other words), Viral Oza, director, marketing, Nokia India, told Business
Standard in an earlier interview; so it
required a treatment different from the
Asha range, which was conceived as a
bridge phone a bridge between a
smart phone and a feature phone so to
speak that starts at slightly over ~4,000.
In other words, the launch strategy is
>
EXPERT TAKE
FIRMS ARE LEARNING HOW TO

LEVERAGE SOCIAL MEDIA
help in many ways such as

testing the product prior to
launch, or creating word of
mouth during launch.
Every marketer wants his new product launch to be successful ensure his product flies off
the shelf while keeping costs low and profit margins high. Siddharth S Singh, associate
professor of marketing, and director of the fellow programme in management at the Indian
School of Business (ISB) tells Rajarshi Bhattacharjee how marketers can manage all that on a
tight budget.
SIDDHARTH S SINGH
Associate professor, marketing, and
director of the fellow programme in
management, ISB
Given the tight economic
scenario, what strategies
could marketers pursue to
reduce launch costs? What
are the early warning signs
that a launch strategy is not
working?
I would leverage new media

(that is, social media) to
reduce costs. Of course, there
are associated challenges and
such platforms should not be
considered casually and for
short-term benefits..
The early warning signs
can be many since the reasons of failure are many. The
obvious ones are the lack of
adoption, low repeat purchase, low awareness for the

product, issues with the
inventory, lack of support at
the sales channel, and training of sales persons.
Typically, firms will develop
tracking mechanisms to track
the key metrics and use these
metrics to evaluate launch
performance. An unexpected
value of these metrics indicates issues with the corresponding component of the
launch strategy.
It is important to understand that a launch is an
expensive proposition and a
company has to plan it meticulously, which includes tracking and contingency planning. Therefore, any warning
signs that the company can
recognise control and/or
respond to are considered in
the planning process. The
planning results in many early warning signs that are monitored by the company. Of
course, surprises still happen
but that is a different issue.
How can a new brand use the
also a factor of the personality you are

trying to build for your brand. If the
Lumia fashions itself as the glamorous
one, then it has to been seen in the right
places, in the right company. The Asha,
on the other hand, needed to make
inroads into the markets and first connect with the consumers on a one-to-one
level, says a brand consultant com-
social media? What are the

so-called traps of using the
social media?
The social media must not be

considered on an ad hoc basis.
A company must approach
the social media to engage
and strengthen its relationship with its customers. There
are many benefits to a well
thought of social media strategy. Once a company has
incorporated social media
into its business, it can
achieve many benefits by
leveraging its presence on the
social media to help its product launches. An important
aspect of the social media
relates to product development. Engaging customers in
this process increases the likelihood of success to start with.
Another important aspect
is that the social media allows
a firm to engage with a selfselected group of customers
who are more inclined to like
it and its products. Customers
who spend time with the firm
on social media already value the relationship. Easy
access to such a group can
menting on different launch strategies

for the two brands. Besides, delaying the
advertising can also help you to gain market insights and interpret perception to
build upon your identity.
Choosing the decibel levels as well as
the tone of your launch campaign, especially for manufactured goods, is as much
about branding tactic as it is about a
87
Al Ries recently wrote, If

you dont have the right
strategy, good tactics wont
help you very much. And
social, like all media, is a
tactic. What concerns me is
that too many marketers
have elevated tactics
especially those of social
media to the level of
strategy. Would you agree?
Not entirely. The first part is

correct. I would not entirely
agree with the second part.
More and more people are
recognising that the social
media is a major development
that has significant implications. It is conversation on
steroids across time and
space. It has subtle and longterm implications for consumer behaviour. Firms are
learning how to leverage it. I
believe that eventually
the use of the social media
would become an integral
part of many functions within
a company. Therefore, this
would naturally be part of a
companys strategy. I am not
suggesting that companies
are doing this now. At the
moment, the ad hoc approach
to social media is dominant,
that in essence is a tactic, not
a strategy.
brands overall strategy. It is a direct play

between your targeted sales and the period over which you aim to generate them.
The marketing spends must then justify
themselves based on the volumes to be
generated. It is also a function of your
backend capabilities: manufacturing as
well as distribution.
Mobile
phone
manufacturer
>
Micromax launched its tablet, Funbook
early April this year. The entire promotional campaign, starting with engaging
with bloggers for reviews, exploring various media (print, television, outdoor),
retail initiatives etc was spread over a
period of three months. Quite unlike the
Bling campaign. The mobile phone model, designed specifically for women was
promoted via a high octane campaign,
with a 360-degree media coverage. The
difference in the approach for the two
products is explained by Pratik Seal, head
of marketing at Micromax: The choice is
quite simply guided by matching the
manufacturing capabilities vis-a-vis
demand mapping, also generated
through your marketing efforts. For
instance, it is pointless to make noise
about a product and not be ready with
product availability.
In the case of Bling, the product was
made available to meet the projected
demand following the test marketing
phase. Funbook took baby steps to begin
with; now, after selling 1.8 lakh units, it is
on a much firmer ground, opening the
doors to a large-scale promotional campaign.
Moment of truth
The point of sale is the moment of truth,
where all the monies worth is known.
Being available, when the consumer seeks
your brand out, is absolutely imperative.
So proclaiming your presence without
putting in place a strong distribution network is counter effective, say experts.
Take Godrej Aer, the recently launched
air care product from Godrej Consumer
Products stable. Says Sunil Kataria, executive vice-president, sales and new business development, GCPL, The promotional strategy television and print
commercials etc will be put into action
only after the distribution is in place.
Similarly, if purely skimming the market is your intention, opt for media channels that provide a targeted reach.
Consider Nivea Sun, a sunscreen lotion
from the skincare brand. Given that the
category (sunscreen) is fairly nascent in
India and largely an urban phenomenon,
the company excluded television from
the media mix. It was deemed an unnecessary expense.
Most new launches

are for extensions,
rather than
completely new
brands
RAKSHIT HARGAVE
MANAGING
DIRECTOR,
NIVEA INDIA
It is pointless to
make noise about a
product and not
ensure availability
PRATIK SEAL
HEAD, MARKETING,
MICROMAX
The promotional
strategy will be put
into action only after
the distribution is
in place
SUNIL KATARIA
EVP, SALES & NEW
BUSINESS
DEVELOPMENT,
GCPL
The frequency of new launches is easily the highest for the fast moving consumer goods (FMCG) category. And yet,
only few get noticed. Then many of the
new launches are not exactly new brands,
more often than not they are simple
extensions of an existing brand. The cost
of building brands today has gone up significantly. Most new launches are for
extensions, rather than completely new
brands, says Rakshit Hargave, managing director, Nivea India, explaining why
launches from the FMCG category are
becoming muted. This is, however, not
unexpected. Unless completely new categories are being built, the launches will
88
stay muted.
But there is also a significant opportunity to explore new media and channels
says Hargave. For instance, brands can
invest more in retail level activations.
They can amass a wealth of information
from the consumer as well share a great
deal with him, making the buying experience personal, rather than depending
on the one-way communication of the
mass media.
That is really the essence. So far,
brands have spoken about generating
noise around their launches. But in the
current age, when the talk has moved
from monologue to dialogue to engagement, this noise can end up being a raucous disturbance. Leaving aside the cutand-dried you-cant-escape-my-brand
approach, marketers must reach out to
the consumer in spaces she operates in.
For instance, bloggers, those who write
about technology and tech products,
enjoy popularity and following. Like
Micromax, many other tech product
manufacturers are engaging with bloggers. The example of Acer India can be
cited here. Its chief marketing officer,
S Rajendran, spent an entire day in
Mumbai engaging with bloggers about
the companys latest series with Dolby
sound system.
As is evident, brands built with little or
no media support were once relatively
rare, but theyve begun to proliferate in
recent years, thanks to social media and
the inhabitants that populate that space.
But the thumb rules for a new launch
remain the same: cover your flanks well;
mitigate your risk as much as possible
with great planning. Above all remember that your existing customers (whether
they are using a free version of your product or not) are your best friends.
>
Start.Stop.Start
Many start-ups find that the original assumptions on which they
base their businesses dont work. A few have picked up the early
warning signals, re-worked their plan and got back to work.
Heres how they learnt to bounce back
PRYANKA JOSHI
hen an entrepreneur
identifies a new market
that has not been tapped
before or a new business
idea that has not been
appropriated in an earlier attempt, you
can safely assume one of the two things:
either the market is difficult to crack or the
idea doomed to failure. It is therefore natural for an entrepreneur to jettison the
idea at the first sign of trouble and look for
new markets, new business models and,
perhaps, newer sources of funding. That
is, if he is still enamoured at the prospect
of being his own boss.
This, if you think about it, could be his
first real mistake. While there is no go-to
playbook that contains the winning game
plan, the trick, say analysts, is to learn

from the false starts, make amends early
and stay invested. Thats precisely what a
bunch of new internet start-ups such as
iStream, VoiceTap and HealthcareMagic
are doing to equip themselves to make
that leap from point A to point C.
Of course, this is easier done if you are an
internet enterprisethe entry barriers are
low and therefore the overheads and risks
are lower than in a brick-and-mortar business. The biggest lesson that comes across
from the experiences of these start-ups
whether you are iStream, which moved
from being a content aggregator to being
an online video streaming service on the
lines of Youtube, or a VoiceTap that considered folding up when it started bleedingis really very simple: that you need to
be flexible. Of course, you cant fail if you
89
dont play the game, but its better to play the

game than watch from the sidelines.
Mind you, all these start-ups are in
what is called the ramen profitable
phase in start-up parlancethey are selfsustaining and have bought enough time
on their side to be able to slog it out till the
business gains traction. One last prefatorial point: we decided to leave out the socalled poster boys of internet commerce
from this study: their problems have been
well-documented and blames assigned.
The cases studied here comprise a bunch
of relatively new start-ups that are still
trying to build the firewalls. And if we
were to really pin it down, most of their
problems stem from three broad areas:
the business model, the choice of people
and the investments needed to keep
going.
>
We had to build a digital studio

and add people to secure the
delivery pipeline
something we
hadnt envisaged
when we started
RADHAKRISHNAN
RAMACHANDRAN
Take iStream that was founded in 2007 as

a video content aggregation service on
the lines of Youtube and saw digital platforms like MSN India and DailyMotion
as its ideal partners. The company, says
founder & CEO Radhakrishnan Ramachandran, was born out of a desire to
build a cool consumer media brand.
The revenue, they reckoned, will flow
from the advertising, as in the case of
Youtube.
But while Youtube relies on user-generated content, Ramachandran and his
team tried producing original content.
They soon realised that the model wouldnt work since the production costs were
prohibitive. Reaching out to content generators and convincing them to share
content for the digital medium turned
out to be a humungous task.
The solution: We built a digital studio
that took the responsibility of digitising
the entire partner content including their
archives. This meant that content partners did not have to spend any money or
bandwidth on digitising their content.
Their risks were reduced, says
Ramachandran.
This, however, meant reworking the
numbers all over again: the investment
into the venture shot up which was
cobbled together by the original founders
but the team decided to go ahead
because it was a way to secure the delivery pipeline. The founders invested ~30
lakh in the digital studio and added five
employees. The whole initiative, born out
of necessity, improved its revenue potential. Since the final content was generated by iStream, it had the liberty to place
MRIGANK
TRIPATHI
SOUMYA
BANERJEE
FOUNDER & CEO,

iSTREAM
Threat to opportunity
We figured call revenue was

never going to be enough. We
had to tweak the
business model,
bring a new
partner and seek
fresh investments
Things almost never go as per

the business plan on Excel or
PowerPoint. We
revised the
milestones as
the business
evolved
FOUNDER, VOICETAP
TECHNOLOGIES
CEO, ATTANO
ads anywhere as opposed to if and

where the content owner wanted. iStream
thus got to pocket the ad revenue instead
of sharing it with the content partner.
Today, the company has close to 80
content partners and claims to have better understanding of what sort of content
does well in the online space.
Why did the businessman in him feel
the need to change the business model?
The Indian market presented some very
interesting challengessuch as a whole
range of languages and a wide range in
the quality of internet connections.
Unlike our bigger US-cousins, we are
serving an audience that speaks many
languages. Does that make our job more
challenging? Yes, very much. Does that
make it more exciting? An even bigger
yes.
The change in business plan worked
for iStream.com, which managed to raise
$5 million from the global private equity
fund SAIF Partners, its first investment in
the online video space.
Ramachandran, who has a bachelors
degree in engineering from Mysore
University, and a masters in communication and journalism from the
University of Kerala, adds, One of the
most encouraging metrics for us has been
our user engagement pattern. An average user watches over 17 minutes of content every month, which is comparable
with the likes of Hulu in the US.
Spot the error

Making some big mistakes was part of the
learning process for entrepreneur
Mrigank Tripathi who founded VoiceTap
Technologies, a firm focused on mobile-
90
education. It was conceptualised as a

career counselling portal for students
who could call in and speak to the
experts. The revenue, it was assumed,
would come from the calls made by students. As it turned out, the revenue share
was skewed in favour of the telecom operator. The figure was huge 70 per cent or
more depending on the operator. Says
Tripathi, When you have to work with
telecom partners in a model where the
revenue share is skewed in favour of the
operator you know you need volumes to
tide over. If that does not happen, it
means limited money to sustain business
and even limited funds for future innovation, he explains.
The problem was simple: call revenues
was never going to be enough. Tripathi
needed more money and figured there
were two ways of raising it. By bringing in
a new co-founder, who would, in turn,
bring in both new cash and new ideas,
and by tweaking the business model so as
to introduce new sources of revenue. The
first problem was solved by roping in
Vivek Khandelwal, who is in-charge of
new product development, product lifecycle management and managing
alliances and relationships with partners.
For the second, the company reckoned it
had to increase the user base. VoiceTap
did that by adding features like conference call facility and developing mobile
apps complete with interactive videos,
in-call note sharing etc right on the
mobile devices. So, the scope of the offering increasedfrom offering consultation over phone it progressed to being an
aggregator of educational content.
In the new model, the source of rev-
>
enues wasnt limited to students who

called in; the firm was now earning a
bigger share from the apps it developed
and marketed.
Tripathis woes didnt end by tweaking
the business model though. A big mistake he made early on was to hire professionals keeping in mind budgets and
not capabilities. Two of my issuesthe
source of investments and the source of
revenuewere structural and had to be
fixed first. Its just like a new caryou
cant change the design once its in production. But the third issue I managed
by going after the best guys and relentlessly recruiting, responds Tripathi.
Today the company works with partners such as Airtel and Tata Docomo and
harbors plans to break into international
markets such as Africa.
To fund its growth from
here on, VoiceTap is set to raise
$7 million from venture capital funds in the US, Singapore
and India. It has already raised
$1 million from CCube Angels,
Frontline Strategy and angel
investor Umesh Kumar
Baveja. Tripathi insists that
hes in no hurry to bring in
new investors. We need to
understand what value possible investors will add to the
project, he says.
Identify the customer
Initially, the founders saw their business as a lead generation tool for hospitals.
In other words, the customer was the hospital and not the user traffic on its portal.
Soon, we realised this was not a revenue
generating business model, says Sinha.
Sinha and his team decided to change
the business plan along way and started
by charging for the answers being given to
the health-queries asked to experts (doctors, specialists, psychologists etc)
onboard. Sinha admits, The concept was
new in the country. Our biggest challenge
was to get quality doctors on board to
respond to queries. Initially we used our
personal contacts reaching out to 10-15
doctors assuring them that they will get
recognition and get paid if they come on
board. It was a chicken-and-egg situation. We did not know if we should promote ourselves to visitors or
have 100 doctors on the portal
first.
Things began to turn for
the better once the initial
batch of 10-15 doctors started
responding on the site and
visitors got their answers.
Today, HealthcareMagic gets
an average 60,000 visitors
on its portal every day, gets
about 400-500 health
queries a day, patients are
promised replies within 24
hours, and charges vary
between ~150 and ~600 per
case. The revenue model is
based on revenue sharing,
which means taking a percentage from doctors fee.
His advice? Focus on profitability first
and then increase the revenue. There is a
tendency to spend money on online ads
and see growth in the topline. We saw that
as a big waste. We realise what we bring to
the market is unique. It has not been tried
before so we have to be conservative and
grow organically, says Sinha.
While there is
no go-to
playbook that
contains the
winning game
plan, the trick,
say analysts, is
to learn from
the false starts
Brant Cooper and Patrick

Vlaskovits, authors of The
Lean Entrepreneur, write in
their book, Entrepreneurs
carry market segments around in the
back of their minds, relying on gut-feel to
determine whether customers they are
seeing are the right customers. The
problem is when youre chasing revenue
any and all customers will seem like the
right customer. In other words, you cant
be all things to all people, a lesson Kunal
Sinha, founder, HealthcareMagic, a firm
designed to help consumers make
informed decisions about their healthcare needs, learnt the hard way. Things
did not work out as planned the first few
months and we had to change the revenue model within the first few months of
operation, he says.
Paper goals versus reality

While every start-up and its founder(s)
spend hours on getting the business
PowerPoint presentations for investors
right, they often dont have a plan to deal
with surprises pleasant or unpleasant.
Soumya Banerjee, CEO, Attano, which cre-
91
ates digital education products, says,

Things almost never go as per the business plan on Excel or PowerPoint.
Attano.coms vision was to be Indias
first digital education marketplace. On
paper, the model was simple: create compelling content for students to buy and
the money will keep pouring in. Being in
a virgin territory, Banerjee quickly found
that he had to build the ecosystemcomprising publishers, content owners and
device manufacturersfrom scratch. In
short, it meant a longer gestation period.
Attano revised its milestones as the
business evolved. We had to demonstrate
success with our initial partners (Pratham
Books, Turner International etc) which
catalysed the next wave of partnerships
(leading publishers like Pearson, Tata
McGraw-Hill plus a dozen more leading
publishers, device manufacturers like
Samsung), reveals Banerjee.
As the ecosystem evolved, the company moved into educational applications
for smartphones and tablets, over and
above the PC, the original idea on which
the business model was based. The scope
the business widened as it moved from
one platform to the other. But unlike
VoiceTap, Attano doesnt share revenue
with a telecom operator as the content is
pushed directly through mobile data. It
only requires the customer to subscribe
for mobile data from their operator.
VoiceTap, on other hand, has its app
established at the operator end and
requires its customer to access it over an
IVR-based voice platform.
A big lesson for the companys
founders has been that no person, partner
or product idea is too small to disregard.
Weve had interns (who now work fulltime with us) who have given us some of
our most innovative solutions and helped
define industry standards. Also, some of
our best on-ground insights have come
from startup partners who are hungry,
nimble and adaptive, lists Banerjee.
Today, if he were to do it all over again,
Banerjee says, he would start out by first
building the partner ecosystem even
before the product is ready.
>
IMAGING: AJAY MOHANTY
Making
variable
pay work
While studies show that variable pay is being used successfully
across the globe, many firms in India have failed to make it work.
Heres what they can learn from a handful that seem to have
cracked the formula
ABHILASHA OJHA
report released last month by

Aon Hewitt, the Lincolnshirebased global human resource
solutions business of Aon plc,
found that companies in the
US continue to use variable pay as a tool to
retain talent, reward employees and grow
their business. A whopping 92 per cent of
1,300 companies that participated in the
survey used variable pay plans compared to
75 per cent in 2005-06. In a prepared note
from the company, Ken Abosch,
compensation marketing, strategy and

development leader at Aon Hewitt, said,
They (companies) are spending less on
base pay and instead rewarding high performing workers with larger performancebased awards allowing better control
spending, while still providing incentives
for their best employees.
Now consider another recent report
conducted among 142 companies in India
by Deloitte Human Capital Advisory
Services, an audit, tax, consulting and
financial advisory services firm. In its
variable pay 2012-13 analysis Deloitte
92
found that the trend veered towards an

overall decrease in variable pay across
industries. In fact, across industries, the
variable pay component reduced the most
by as much as 2.5 percentage points
for the top management. The highest variable payouts hovered around 30 per cent
compared to 41 per cent last year.
In short, while variable pay seems to
have taken root in the West, it is yet to
prove its merit in India.
The Strategist spoke to a whole host of
companies including those that continue to use variable pay and those that have
>
The pay-by-performance
method has worked to the
companys advantage as it marks
out clear goals for
individual
employees
We realised the need to have

our variable pay plan clearly
communicated something that
didnt happen as
effectively before
PRABIR JHA
SANJAY BALI
MUNINDER ANAND
SENIOR VP & HEAD,

HR, TATA MOTORS
DIRECTOR, INFORMATION
PRODUCT SOLUTIONS,
MERCER INDIA
VP-CORPORATE
HR, SAMSUNG
INDIA
given up on the concept after some early

hiccups to figure out the possible scenarios where a variable pay plan can go
completely haywire. First, like any other
HR strategy, there is no one-size-fits-all
variable plan. Each plan has to be
designed keeping the individual employee
in
mind.
The
plan
for
technical staff in an IT company, for
instance, has to be differently designed
than that of, say, sales staff, where measuring the performance matrix is relatively simpler what with target goals clearly
defined. Or, for that matter, variable plans
for the ad, sales and marketing team of a
television media company has to be measured differently than, say, the script writing team where target goals have to look at
quality of writing, not quantity. The first
step to ensure success of a variable pay
plan is customisation, says Subeer
Bakshi, director, talent and rewards,
Towers Watson, India, a leading global
professional services firm.
Second, variable pay plans suffer
when companies opt for poorly designed
key performance indicators (KPIs). A
plan has to be designed after discussion
with the individual employee. Here two
things come in transparency and communication. According to Muninder
Anand, director, information product
solutions, Mercer Consulting India,
besides poor design, lack of transparency, communication gaps between managers and employees, poor implementation and unrealistic goal structures are
reasons why variable pay plans fall flat.
Third, when introducing such a structure for the first time, it is best to allow
individuals time to gain confidence in
The idea is to move to a more

reward-based approach,
pegged on both, company and
employee
performance
their own ability and gradually increase

the variable component of the package.
In other words, allow time for the whole
concept
to
settle
in.
Most
professionals dont fully understand
what they need to do to influence their
bonus, most prefer a larger base pay
because they are not confident about
their ability to influence their incentives, adds Bakshi.
Teething troubles
Those in the business of human resource
management believe that effective variable pay programmes will be the trend
for India Inc. The emphasis and the
challenge is on what companies can offer
to their employees without having to
increase the dollar value, says Anand
adding that organisations see variable
pay as a compelling value proposition.
The idea is to move away from compensation to a more reward-based
approach, which is pegged on both, the
individuals performance along with
companys performance, he says.
Little wonder, there are a whole host
of companies that are working hard to
get the strategy right. Tata Motors, for
instance. The biggest manufacturer of
buses and trucks in India, Tata Motors
faced a communication lacuna in that
many employees didnt know or
understand variable pay programmes.
What shocked Prabir Jha, senior vicepresident and head of HR, Tata Motors,
was the realisation that many employees
who earned a bonus didnt have a clue on
just how theyd earned it. So, last year,
when it rolled out its reworked variable
pay policy for employees, it was based on
93
blueprints that were worked and debated

for almost a year. As part of the process,
Jha says, the company relooked at its
entire compensation philosophy.
HR managers spoke to managers in
different departments, discussing their
goals and expectations. The new variable
pay plan drawn up is a combination of
company and individual goals. The final
plan was put up on an internal website
for each and every employee to see.
Basically, we realised the need to have
our variable pay plan clearly communicated something that didnt happen as
effectively before says Jha.
Today, everyone at Tata Motors
from the trainees recruited at various
management institute campuses to the
top management team has some portion of their salary in the variable form.
This can range between 9 per cent (typically for newcomers) and 40 per cent or
more (for the top management). Jha says
that employees who do exceptionally
well can bring home twice the target
variable pay.
Fashionandyou.com, a popular e-commerce company engaged in the business
of lifestyle products, learned early how
lack of customisation can render a plan
useless for the employee. A pay-for-performance plan was rolled out two years back
to reward the above-average performers in
the company, says Priyanka Malik, head,
HR, Fashionand-you.com. But the company soon realised it had to draw up dedicated blueprints for different departments
within the organisation. After all, the role
of sales staff in the organisation, for
instance, is starkly different from the editorial team that works on the companys
>
website, newsletters and other initiatives.
Now it has different pay plans for different departments and the payout period varies from monthly (sales) to quarterly depending on the department.
While typically the ratio of fixed to variable pay in the company is 80:20, the
variable component goes up as you climb
the organisation ladder. Over the next
few months, the company will introduce
some more changes in the variable pay
plan for the topline management with
more emphasis on e-sops, profit sharing
and other non-financial variables. In
short, Fashionandyou.com is still learning the ropes but hopes to get there sooner than later.
Samsung India Electronics, a Korean
consumer electronics company seems to
be equally optimistic. It has increased its
variable payouts to 20 per cent compared
to 15 per cent last year, according to
Sanjay Bali, vice-president, corporate HR.
In his view, the pay-by-performance
method has worked to the companys
advantage as it marks out clear goals for
individual employees, allowing the company to separate the above-average performers from the average. While monthly
variables (based on performance) are
available to the sales (also defined as
core staff) in the company, other departments (non-core) get a half-yearly variable pay component. Focus groups have
been created within various departments
of Samsung to work out strategic goals
and plans that allows employees to get a
better understanding of the variables.
Advertising agency Cheil India Pvt
Ltd, which has a performance bonus
for all its employees, felt it was necessary
to have performance rewards. According
to Saswati Sinha, head, HR, Cheil India,
this is not part of the salary package of
employees. In her view, the idea makes
sense particularly when theres an
economic upheaval. Even if the average
increment is lower (during an economic
downturn), the performance bonus is
given to people who deserve it, says
Sinha. This bonus allows the company
to maintain a certain base of salary cost,
she adds.
Not every company is sold on the idea
though. Prashant Deo Singh, head, HR,
Panasonic India, the Japanese electron-
the company two-three years ago (ranging between 5 and 20 per cent).
A quick word with

the expert
Get smart
SUBEER BAKSHI
Director, talent & rewards,
Towers Watson, India
An ideal variable pay plan

Does at least one of the following:
reduce risk of business fluctuations
by holding back a percentage of wages
till the business has clarity on
financial viability for the cycle; links
performance to rewards, acts as a
wealth creation vehicle.
Why companies fail in
implementation
The lack of customisation, poor design,
failure to tweak it at the right time,
poor communication, misunderstood
plans: Performance linked incentives
should be reserved for employees that
can contribute to business on the
whole. Where such a line of sight is difficult, variable pay should only be business- and not performance-linked.
In a negative economy
Variable pay will emphasise on the
purpose of business, boost alignment
and increase cohesiveness of different
functions in organisations thus giving
leadership greater control in managing
direction and pace of the company,
which can drive messages of strategic
direction or clarify short- to mediumterm business objectives. Companies
can also influence company behaviour
and culture.
ics and home appliances major, says,
We dont philosophically believe in
keeping very high variable pay plans. Its
not in line with the mission of our company. In his view, when the market is
tough, it becomes difficult to achieve
individual targets, which in turn impacts
the variable payouts, thus, leaving the
employees in a flux. The company started its variable pay plan for everyone in
94
Smart companies, say experts, are those

who can keep working their variable pay
plan in a negative economy. Wipro is one
such company. Unlike Infosys, which
announced a steep cut in variable pay
post a salary freeze across departments,
thus leading to dissatisfaction among
employees (the topline management of
300 people took 70 per cent variable cut,
it was reported), Wipro recently
announced that it had tweaked its variable pay programme for both the juniorand mid-management employees.
Junior staff in the company (roughly 80
per cent of the IT department) now has to
clear customer satisfaction surveys once
a quarter to be eligible for the variable
pay (10-12 per cent of their salary).
Wipros mid-management staff will
also be measured on companys performance along with customer satisfaction
and employee satisfaction scores.
Earlier, 50 per cent of the junior employees quarterly bonus was dependent on
the companys performance. Wipros
decision, say experts, has been a smart
one in that the company tweaked its programme in good time.
Even as India Inc struggles to get its
variable pay formula right, analysts agree
what will help make the variable pay concept mainstream is the young work force
that demands salaries based on merit,
performance and achievements of targets. A recent study by Mercer India
reflects the changing mood: performance based pay and variable pay measures will continue to remain an area of
interest and innovation across levels, it
says. The current business scenario is
leading companies to emphasise returnon-investment (defined as a way of considering profits in relation to capital
invested), thus prompting their respective HR managers to respond more innovatively through incentives like variable
pay, says Anand.
>
Suppliers
dilemma
The economic slowdown signals testing times for brands across
the board. But a handful of business-to-business brands have
turned it into a reason to enter the consumer market
MASOOM GUPTE
he post-Lehman world has been

both different and difficult for
businesses to operate in. The
collective impact of all the
financial turmoil has meant a
fall in demand and therefore a severe
strain on the bottom line for many. The
problem is even more pronounced for
companies that operate in the businessto-business (B2B) space. The business they
do will depend on the success or failure of
the final product assimilated using their
components. There isnt much a B2B player can do to control the end game. Whether
it is this notion of being the master of its
own destiny or simply to get a wider consumer sweep, some players are using the
turmoil as an excuse to switch over and
engage with the consumers directly .
Then there is the bigger attraction of
fatter margins. To be successful in the
B2B space, companies need to be at a different level of cost competitiveness.
Reason: even if their costs go up, there is
only so much scope to pass it on their

consumers, the businesses. That is
because the businesses ability to pass on
the input cost to the actual consumer on
the street, too, is restricted. The dominos
will start falling for the supplier should
the institutional consumer swap him for
a cheaper supplier. If nothing else, moving to a B2C model can afford a producer
some respite from the squeezing margins
in the B2B space.
But the switch is hardly easy.
Shifting from a B2B model to a B2C is a
complex journey and can take years,
even decades, before businesses can successfully achieve this transition, says
Rahul Jain, partner and director, BCG.
The basic DNA requirement for the two
businesses is very different, he adds. In a
B2B model, one needs to deliver a tangible economic value to the consumers. In
a B2C model, the product game is completely different. You need to give the
consumer what he wants, when he wants
and where he wants, all at the price he
wants it at. You need to continue evolv-
95
ing to changing needs, constantly communicate to the consumer, and above all,
establish a brand which embodies your
proposition.
The supply chain, too, will be different
for the two models. It begins for the B2C
where it ends for B-to-B. The B2C business is a ready stock business. One supplies the product here in anticipation of
orders. You need to get the forecasting
right. Products must be placed in
advance in locations where demand is
anticipated in the right quantity and for a
fragmented demand base, says Jain.
The product complexity, in terms of
stock keeping units (SKUs) mix and location mix, present a challenge. It can take
a while before companies gets it right.
The institutional business is usually a
bill-to-order business. The process of getting the product in place begins only once
the order is placed. There isnt much
need for forecasting. Also, the locational
mix isnt as widespread as that for the
consumer business since industries tend
to operate in clusters. Plus, the order
>
quantum makes up for any out-of-regular-reach kind of delivery.
In B2C business, one can take the partnering approachretain the core business in-house and possibly outsource
some of the processes. In B2B, sub-contracting makes the whole model less efficient. The two business models need different focus a switch, therefore, may
take years to bear fruit. But that doesnt
seem to deter companies from taking the
leap. Some may switch sides entirely; others may prefer a balancing act. There is
no rule book stating which works better.
Each business needs to independently
assess its strengths and weaknesses to
figure that decision out.
Dual focus
Many B2B players have found the space
restricted beyond a point. The arena is
much larger in pure volumes terms when
one considers the consumer end. Take
Ingersoll Rands Trane, for instance.
The US-based Tranes main businesses
are climate (air conditioning) and security solutions, both largely in the commercial space. However, three years ago, the
company realised it could extend its
expertise in the residential market. That
was the birth of residential solutions, a
single unit tying in both their businesses
for the individual customer.
Trane recently launched air conditioners in India for residential usage.
There is only so much one can grow in a
B2B market. The residential market is
much bigger than the commercial one. It
makes sense to leverage our knowledge to
enter that segment, says Sameer Nagpal,
vice-president and business head, residential solutions, Ingersoll Rand India.
He says, if X (approximate $2 billion for
industrial solutions) is the current opportunity in his industry, then with residential solutions it could be 2X, or the
opportunity doubles, he says.
While prospects are big, challenges
are bigger. The Indian residential solutions market differs from that of the US,
its home market. For instance, air conditioning is centralised in the US even for
homes. In India, window ACs (different
units for different rooms) dominate the
residential market. A new market to service the product couldnt be simply
Mrs Bectors had spruced up its

quality and supply chain while
supplying buns, liquid
condiments to
McDonalds, ensuring
a smooth second
innings
AKSHAY BECTOR
MD, MRS
BECTORS
There is limited growth in a

B2B market. It makes sense to
leverage our knowledge
to enter the residential
segment
SAMEER NAGPAL
VP & BUSINESS
HEAD-RESIDENTIAL
SOLUTIONS,
INGERSOLL
RAND INDIA
The company launched Nesta, a

a readymade furniture brand, in
August, four years after deciding
that it wanted to
reach out to the
consumer directly
ABHRA BANERJEE
EXECUTIVE BUSINESS
HEAD, CENTURYPLY
brought down and sold here. So, the company spent the first 18 months researching the market, understanding consumer
usage patterns, crafting the product and
then launching it.
A bigger market may not be the only
motivation for companies. Take
Centuryply, the plywood manufacturer.
The company launched a readymade furniture brand, Nesta, last month, four
years after deciding that it wanted to
reach out to the consumer directly.
Technically, plywood is not a business
96
product. But building materials purchases are typically made by architects, carpenters or interior designers. The customer rarely gets involved in the category
directly, leaving the choice up to the
influencers. This is a category (plywood)
that consumers interact with hardly
twice or thrice in their lifetime (assuming
thats the number of times one buys
houses and furnishes them). It is low
involvement and one is either ignorant or
is a little intimidated to interact with the
category. As a result, the decision is left to
the influencers, who may or may not
make the right choices for him, says
Abhra Banerjee, executive business head
at Centuryply.
The company started engaging with
consumers in 2008, trying to build an
emotional bond with them through
below-the-line activations and digital
media initiatives. Centuryply commissioned studies to understand consumer
behaviour. It was through these studies
that the companys next step in the consumer engagement programme took
shape. We learnt that there is a significant portion of population in the age
group of 28-45 years today that is quite on
the move, staying in one location for not
more than three-five years. And that this
population doesnt carry the furniture
along each time they shift, preferring to
buy furniture instead with a budget of
around ~4-5 lakh. We tied up all these
learnings and their amalgamation is
Nesta, says Banerjee.
The company knows the road ahead
wont be easy and so it has kept the
expectations low. In terms of numbers,
the company is expecting to be worth
around ~4,000 crore by 2014-15 (double
their current worth ~2,000 crore). Of this
target, furniture is expected to contribute 5 per cent. But the company
hopes the brand will gain prominence as
consumers become sensitive to the benefits of using branded plywood.
There are some lucky ones who are
egged on by their institutional partners. Mrs Bectors Food Specialties,
the company that owns Cremica (that
provides liquid condiments like
ketchup, mayonnaise etc to quick service
restaurant
chains
like
McDonalds), is one such company.
>
EXPERT TAKE
Moving from B2B to B2C
HARMINDER SAHNI
Founder, Wazir Advisors
uilding a consumer brand is the ultimate

high for most of the businesses and
almost all of them strive to create a consumer
brand. The benefits are definitely worth the
effort. It is also a reality that not many
businesses are able to make the transition.
The reason lies in the basic nature of the
businesses. The seven major differences are:
Direct connect with the customer: Contrary to
the belief, a B2B business is far more in direct
touch with its customers as compared to a B2C
business. Every single business customer is a
We were largely focusing on the biscuit business while we did have a presence in breads and buns. Then came
McDonalds in 1996 and chose us to be
the sole supplier for buns, liquid condiments etc, tells Akshay Bector, MD,
Mrs Bectors.
Here the story is about a company
going from B2C to B2B to again B2C with
a larger play. The fact that it had
spruced up its quality and supply chain
to service McDonalds ensures its second innings in the consumer market
was relatively free of hiccups.
Based in Punjab, primarily servicing
the markets of north India, Mrs Bectors
is expanding one market at a time. Its
biggest worry now is to get the SKU mix
right. Ketchups as a category has various SKUsfrom big glass bottles to
mid-sized squeezies to sachets.
Another foods category player,
relationship and is to be built and nurtured

extremely carefully. While in case of B2C
businesses, the companys relationship with
the consumer is through the brand that is
distributed through a layered channel and
most of the communication with the
consumer is through mass media.
Size and scale of the transaction: In the case of
a B2B businesses, depending on the nature of
the product, the size of each transaction is
much larger than a consumer product. Also,
the lifetime value of a business customer is far
bigger than most consumer products. Hence,
the way in which a B2B company treats its
customers and the investment it makes in each
of them are very different from a B2C business.
Mutual dependence with customers: B2B
businesses enjoy a sort of mutual
dependence with the customers wherein
customers are as much dependent on them
as much they are. For example be it a
technology supplier or a raw material
supplier, the relationship is more balanced
than say in the case of a consumer business
wherein the consumer takes an impulsive call
every single time of purchase. And this
decision can be influenced by many factors
that are not in control of the brand managers.
Service element: The service element plays a
much larger role in a B2B business even if it
Canadian company McCain Foods,

which operates largely in the frozen
foods segment, with its marquee product being french fries, supplies to
restaurants and QSR chains and is now
available for in-home consumption.
McCain straddles the B2B plus B2C
models simultaneously. Its offering is
largely the same, only the consumers
whether retail or institutionalis different. While the company refused to
participate in the story, observers say
for companies like McCain the dilemma
would be segregating the two lines of
businessesof which processes to club
and which to keep separate and how
best the manufacturing capacities may
be leveraged.
The key challenge that these brands
are contending with, irrespective of the
sectors they operate in, is building a
consumer base. How does one make the
97
might be a commodity raw material supplier.

The customer business is dependent on the
services offered by the supplier while in case
of B2C it has far less impact and the role of
other channel partners like retailer is far more
visible than the brands own.
Channel of distribution: In most of the B2B
businesses, the channel of distribution is flat,
and at most there is a stockiest or an agent
that facilitates the business between two
companies. In B2C, there is a layered
distribution channel and will have at least 2/3
(wholesaler/distributor/retailer)
intermediaries between the company and
consumer. This close working relationship
between demand and supply end of the
business is missing in B2C businesses and can
be hard to comprehend and deal with by B2B
companies transiting to B2C side.
Inventory and stockholding: B2B moves
inventory fairly efficiently from its warehouse
to customer with limited chance of stocking
in between, and has full visibility from both
ends of the supply chain. In contrast, B2C
supply chains are extremely long and
opaque with numerous stocking points in
between. A B2B business manager can feel
overwhelmed with this ambiguity. On the
other hand, a B2C manager will feel too
exposed with such transparent chain of B2B.
consumer who has never seen your

product trust you? Is there a chance that
you will alienate your current consumer
base with a focus of a new set? And how
do you leverage your position as a seasoned supplier? One way could be to
start early. Ingredient branding can be a
good idea, something that Intel has
done successfully. But that only doubles
the pressure on the manufacturerto
stay consistent and not compromise on
the quality. Being a supplier to an institutional player, you cant risk any backlash for inconsistent quality or bad
press. In the age of social media you
need to be vigilant as one business reputation can easily rub off on another.
Evidently, switching or extending from
a B2B to a B2C model is a jugglers act. Drop
one ball and the show may be over.
>
Retailers in India
are on the cutting
edge of harnessing
big data to predict
customer
behaviour,
customise their
offerings and win
in a difficult market
Putting
big data to work
T
MASOOM GUPTE
en years ago, if a marketer

told you he has a mine of data
on his consumers what would
you imagine would be the
source and size of this information? Well, it would be a compilation
of data the consumer would volunteer to
offer while filling up her credit/debit
card application form, a snapshot of her
mobile phone usage pattern and may be
the information captured by the odd loyalty card offered by her favourite retailer or airline.
Today when he says he has data on
the consumer, you can be sure its a veritable treasure trove. In the digital age,
there is a string of footprints left
behind by every one of us: If a consumer swipes her card somewhere you
know what she is up to. If she browses
through online stores, you can pick up
clues about her shopping behaviour. If
she downloads your brand application
on her mobile, you know how much she
is ready to splurge on value add-ons.
Along with third-party information on
web interactions, credit card transactions, demographics and the like, this
data can help marketers paint consumer portraits, get a head start on the
competition and win over markets in
the process.
Welcome to the world of big data.
Managed correctly, big data is a powerful resource to improve decision-making for every business. More so in
98
retailing. The reason is simple: the

more information a retailer has on his
consumer, the better he is able to predict her buying behaviour. And, therefore, tailor his products and offers to
suit her needs. In short, improve his
chances of making a sale. The marriage of mathematics and business
knowledge has created the discipline of
predictive analytics, says Naveen Jain,
CEO of TransOrg Solutions and
Services, which offers analytics and
campaign-management services to the
clients in BFSI, retail, travel, online,
telecom and healthcare sectors. It has
created new opportunities for futureoriented analysis of large amounts of
data leading to actionable insights.
Indeed, retailers in India also,
>
Transaction data helps with store

layouts (known as adjacency
analytics) and
inventory
management
Big data, aided with locationbased technology, can be used to

update customers in store on
offers and
suggestions based
on their purchase
Agile analytics and campaign

management tools used by new
generation companies
have made analytics
affordable for Indian
companies
VINAY BHATIA
CUSTOMER CARE ASSOCIATE
AND SENIOR VP,
MARKETING AND
LOYALTY,
SHOPPERS STOP
across the globe are on the cutting
edge of harnessing this data. If the first
wave of data centred on the flow of bits
and bytes, and texts and emails, the
next wave is about knowledge and discovery, powered by intelligent, alwayson services that make sense of the big
mass of information flowing in through
smart devices. More than the size or
volume, the potential of big data lies in
the kind of insights it can offer businesses and the kind of questions it can
help answer. As a McKinsey Global
Institute paper on big data, puts it,
The widespread use of increasingly
granular customer data can enable
retailers to improve the effectiveness of
their marketing and merchandising.
Big data levers applied to operations
and supply chains will continue to
reduce costs and increasingly create
new competitive advantages and
strategies for growing retailers.
Mind you, the applications mentioned above are the final steps.
Typically, there are three steps to data
mining and interpretation, say
expertsrecognising what is happening, analysing the how and why it is
happening and lastly leveraging the
information. While a huge majority of
the Indian market is still at the recognising stage, according to Ankur Shiv
Bhandari, managing director for the
Indian subcontinent, Kantar Retail
(part of the Kantar Group, the insight
and consulting arm of WPP), there are a
handful of retailers such as Lifestyle
International, Pantaloon Retail and
Trent that are working to harness consumer data from every available source
to make their enterprises agile and
DEVARAJAN IYER
NAVEEN JAIN
VP, MARKETING,
LIFESTYLE
INTERNATIONAL
CEO, TRANSORG
SOLUTIONS
AND SERVICES
Tracking of sales-out, that is sales

to the final consumer, makes it
possible to actually
understand
consumption
patterns
ANKUR SHIV
BHANDARI
MD, INDIAN
SUBCONTINENT,
KANTAR RETAIL
Loyalty programmes are a strong

starting point for most retailers.
They need not be
restricted to just your
own store
PAWAN SARDA
CMO, FUTURE GROUP
hard to beat.
The shift, whatever the magnitude,
has come on the back of the evolution
of modern trade and electronic pointof-sale terminals that have made it easier to capture the data in the first place.
Earlier there was only the sales-in data
available on the quantitative side, says
Bhandari. That is, sales from the manufacturer to the distributor, or the
retailer, were tracked. It is only now
that sales-out, that is sales to the final
99
consumer, is being tracked, making it

possible to actually understand consumption patterns. Says Uma Talreja,
head, marketing, Westside, a retail
chain operated by Trent, the retail arm
of the Tata group, The more consumer-centric your business, the more
you can use consumer data for decision-making in the business. Several
decisions can leverage consumer
datathis includes store layouts and
adjacencies, buying decisions, merchandising decisions, property selection, pricing decisions, sales mix etc.
Companies may say that they have a
lot of data, a lot of information or a lot
of insight. But they must be wary of
using the phrases interchangeably,
says Bhandari of Kantar Retail. It is an
insight only if it holds true to the four
Rsreality (what is happening in the
market), resonance (relating it to what
you are doing), reasons (for why it is
happening) and lastly reaction from
consumers, he explains. This will also
help explain some of the challenges
retailers are grappling with currently.
Technology and storage aside, the
challenge lies in efficient use of large
complex data, finding meaningful relationships, analysing and creating useful and applicable and actionable business intelligence, says Talreja. This
requires enhancement of talent along
with technology. Businesses need to
invest more in using the data and leveraging it as compared to the investment
in collecting and storing it and use it
for smart decision making. As data
grows, it is critical for the business to
be able to slice and dice the data to create information that help answer ques-
>
tions critical to the business, she adds.
Even before the large format modern trade outlets started mushrooming,
the local kiranas or the friendly neighbourhood mom-and-pop stores knew
their customers on fairly intimate
terms. Then, times were simpler and
the sheer volume of transaction much
lower. Today, as competition is becoming intense and customer needs and
preferences more complex and difficult
to predict, it is precisely this one-toone relationship that big retailers are
looking to emulate. Big data is their
ammunition in this battle. (Read interview with Gary Hawkins for challenges
in mining big data on page 4).
Winning consumers
Indian companies are at different levels of data maturity some companies
are struggling to visualise their data
while others are using predictive models and real-time analytics to drive
their decisions. Agile analytics and
campaign management tools used by
new generation analytics companies
have made analytics affordable for
Indian companies, says Jain of
TransOrg Solutions and Services.
Loyalty programmes are a strong
starting point for most retailers. They
need not be restricted to just your own
store. Consider Pantaloon Retail, the
flagship company of Future Group.
The chain tied up with Payback, a
multi-partner loyalty programme
around a year ago. This tie-up, as per
Pawan Sarda, CMO, Future Group,
100
helps the company look at its customers in a more holistic light. We can
understand a customers entire profile
now where he eats, how often he
travels, whats his fuel consumption
like. This helps us in building a far
more personalised relationship with
him, says Sarda. For him, the biggest
application of data learnings can be the
ability to predict a consumers behaviour and then personalising the solutions for him.
How can it be done? For instance,
you find out either from his online
purchase data or credit card transactionsthat your customer is travelling
to the US in November. And you know
he will need heavy woollens to brace up
to the cold weather conditions. By
leveraging this information accessed
through a multi-partner programme,
the retailer can design customised
offers for him.
In fact, based on such transaction
data, Pantaloon has actually created
consumer profiles such as higher-trolley-load-low-frequency-of-visit, highfrequency-but-casual-shopper
etc.
Armed with this insight, the chain
hopes to create personalised offers and
experiences, something departmental
store chain Shoppers Stop is working
on as well.
Vinay Bhatia, customer care associate and senior VP, marketing and loyalty, Shoppers Stop shares an example.
When we looked deep into the First
Citizen (the loyalty programme subscriber) base, we observed that customers who buy both mens shirts and
trousers, the average yearly spend is 60
per cent more than that of consumers
who buy only shirts and three times
that of those who dont buy mens
shirts at all.
Approximately 9 lakh customers
were shortlisted for targeted trouser
communication. This group of customers was divided into sub-groups
based on purchase patterns and the
groups reactions to the various communication devices was observed. One
group was given information on the
variety available in trousers and new
brand launches at the store, another
was given offers on multiple trouser
>
purchases. These customers were
sliced into control groups to measure
the success or failure of the promotion.
With this equation in place, Shoppers
Stop raked ~9 crore worth additional
sales in a three-week period, a lift of 30
per cent, when there was no such coordinated effort.
Transaction data can also help with
store layouts (more popularly known as
adjacency analytics) and inventory
management. Like, if more customers
are buying a combination of belts and
shoes, it would be a good idea to put the
two items close by. A retailer can trigger purchases by simply putting some
items simply close together. Even if the
consumers dont necessarily want the
two together, putting them next to each
other may trigger off an impulse purchase. Analysing consumer buying patterns can throw up some insights that
may prompt a retailer to go as far as
changing a store lay-out completely.
Shoppers Stop, for instance, found that
very often when ladies shopped for
Indian clothing, the other item on their
list was mens innerwear. The company
hopes to include its finding in the next
round of changes it plans to make in
the store layout.
From the point of view of the retailer such insights can offer perspectives
on product bundling options to bolster
sales. Sample this: onions and potatoes
are a household staple and sharp price
increases have begun to hurt. To spruce
up lean midweek sales, food and grocery retailer, Big Bazaar, decided to
throw in a kilogram of onions and potatoes free with every bill that adds up to
~999. While exact numbers are not
available,
the
company
says
Wednesday footfalls have increased
dramatically after the free offer was
introduced.
While chains can push sales through
pricing and promotion, they must also
remember that consumers may simply
wander off if they dont get the right instore experience. Monitoring consumers can help gain insights on
improving shopper experience dramatically. It (in-store monitoring) is not
happening in India to the same extent
as it is prevalent in the West. But quite
a few are undertaking shopper behaviour studies, says Bhandari. This helps
one understand the occasions or motivations for buying products, activating
these insights and mirroring them in a
path to purchase. This can be done
through store layout, on-floor instructions and graphics, clear demarcation
of categories through storage etc.
The final victory for analytics will come
in the form of real-time application.
Analytics create opportunities for
actions which may be offline or on a
real-time basis. Says Devarajan Iyer,
vice-president, marketing, Lifestyle
International, Big data aided
with location-based technology can be used to update customers in store on the latest
The final victory

for analytics will
come in the form
of real-time
application
offers and shopping suggestion based

on their previous shopping history. He
added that the chain hasnt implemented it so far but is currently exploring this technology and its application
for future use.
Heres one more example of retail
stores taking quick decisions based on
real-time data. Surely you have come
across stores that quickly open an additional counter at the tills whenever
more than a certain number of customers are in a queue to pay for their
purchases and check out. This is part of
the in-store experience it is based on
the insight that even if the store sells
the cheapest goods, a longer wait time
at the point of purchase is a big put off
and can actually customers to a rival.
So chains like Big Bazaar and Spencers
have put in place systems that monitor
the traffic towards the tills to make
the check-out process hassle free they
open up more counters during rush
hours and then deploy the same set of
people for other tasks as the traffic
begins to wear off.
101
A corollary benefit of data analytics

is the possibility of generating an alternative revenue stream. Retailers are the
point of contact between stockists and
consumers. Now, stockists of FMCG
players such as HUL, P&G, Pepsi etc can
benefit from the insights gleaned by
retailers through their data. In fact,
globally some retailers have even set up
data services that sell the insights to
FMCG players like Unilever, P&G,
Nestle, Coke, Pepsi etc which benefit
from this data driven insights in the
ecosystem.
As we trade a multitude of brands
in our stores, our data is a rich
source of information for them
to understand the behaviour
and spending patterns of the
customers. Therefore, an
opportunity for alternative
source of revenue for big data
is to allow brands to pay up for
the access fees for this data.
They, in turn, use this for targeting consumers for new brand
launches, new season merchandise launches, understanding
response to their latest product
lines etc, adds Iyer of Lifestyle
International. He also says that
Lifestyle does send out targeted communication on behalf of brands that it
retails and charges them a fee to reach
out to their loyal member base, without sharing any data with any external
party.
Evidently, retailers are waking up to
the potential of big data. If you want to
understand the transformations in the
marketplace, you will have to understand and master analytics, says Jain
of TransOrg Solutions and Services.
Those who have made an early start in
capturing and trying to make sense of
all the data will definitely enjoy an
advantage but analysts say this is one
area that is rife with confusion making
it easy to lose sight of the true potential.
Additional inputs by Ankita Rai
>
EXPERT TAKE
CHALLENGES IN MINING BIG DATA

In his recent blog for the Harvard Business Review, Gary
Hawkins, CEO, Hawkins Strategic, a US-based consultancy
focused on gathering, understanding, and using detailed
customer data in retail, says big data has the potential to kill
all but the biggest retailers. He speaks to The Strategist on the
prospects of big data and challenges before retailers
Will big data indeed kill all but the biggest retailers?
As I called out in the article on HBR, big data is challenging all

but the largest retailers. It remains to be seen how smaller and
even mid-market retailers can respond when today they do
not have access to the sophisticated technologies or expensive
human resources and skill sets required to work with big
data. That being said, technology is rapidly evolving and
there may be solutions that come to market that help smaller retailers.
How about a country like India where retail is largely
unorganised?
My view is that in markets like India and others where the

retail industry is still splintered and the largest global retailers have not yet established themselves, smaller retailers or
locally owned retailers have an opportunity to leapfrog the
normal cycle of retail growth. An example is provided by the
telephone industry: In the US, telephones evolved from
landlines to todays cellular mobile phone systems. In countries like India, it is possible to pass over landlines and
immediately move to mobile phones (which is obviously
happening). A similar thought can be applied to retail.
Retailers tend to rely on loyalty programmes to beef up their
big data repository. What is the next trend in big data
management?
The next generation of loyalty will be personalised marketing.

Retailers and brand manufacturers directing specific promotions to specific shoppers based on their past purchasing
history, interests, and other attributes. In the world of
personalised marketing, there must be a way to
identify the shopper to the transaction; the same
shopper ID used to trigger the shopper-specific discounts at checkout. In this sense personalised marketing generates shopper data without the retailer
having to have a traditional loyalty programme.
Big retailers are supplementing shopper data
with other data sources such as monitoring Twitter
and Facetime, geolocation data from mobile
phones, appending other demographic
and lifestyle data to their shoppers
profiles, and other things.
Can big data open up an alternative source of revenue by

itself for the marketer or retailer?
Yes, it can create an incremental source of revenue. A great

example of this is Kroger (the largest supermarket chain in US)
and its partnership with dunnhumby (the analytics consultancy). The Kroger-dunnhumby partnership sells insights
and analytics garnered from Krogers shopper data to CPG
manufacturers (like Kraft, Unilever etc.) for millions of dollars
each year. Some in the industry estimate Kroger is generating
over $100 million annually in incremental revenue from selling data. I want to make clear that this is aggregated data
that is analysed; Kroger never sells or releases individual
shopper information.
What are the challenges in managing big data?
Two challenges in particular come to mind. Big Data is characterised by the three Vs: Volume, variety, and velocity. It is
the last of these velocity that is a real challenge. This
refers to constantly monitoring real-time data feeds from
things like social media (Twitter, Facebook, etc.) or data such
as geolocation from mobiles. Monitoring all these data feeds
in real-time is a major challenge. The second is related to the
first: Using that high-velocity data. To effectively use realtime volumes of data moving at velocity requires creating
complex and highly sophisticated systems that can react in
real-time to the data feed. As an example, if a retailer knows
from geolocation data that a shopper is within one mile of a
store, how will it respond? The retailer cannot have a person
constantly monitoring the data and reacting by creating a
specific message for that specific shopper; that is not scalable.
Creating a system that enables an automated response is
the way to go but this is a major undertaking.
Any examples that you could share about how companies
have interpreted consumer data and how its application has
helped them...
I go back to Kroger as a great example. Kroger has just reported

34 consecutive quarters of same store sales growth. This is very
impressive given the economic challenges in the US market
over the past few years. Krogers CEO David Dillon attributes this growth to the companys use of shopper data and
its efforts in precision targeted (personalised) marketing.
I also know the power of shopper data firsthand: as a retailer, I created and operated one of the
first true personalised marketing systems and programme in US supermarket retail starting in 2006.
Providing savings to shoppers on products they want
to buy drives increased shopping, increased shopping trips, and increased customer retention over time. The proper use of big
data, especially shopper data, is
incredibly powerful.
102
>
Cracking new markets

Home-grown
companies
venturing abroad
have been on the
rise. But the trip is
fraught with
challenges and risks
VIVEAT SUSAN PINTO
Ritesh Kumar works for a ~1,000-crore fast
moving consumer goods (FMCG) company.
Hes a vice-president there and has recently been given charge of pushing the companys interests abroad. This is a break that
Kumar has been seeking for long. He gets
down to the task, hiring consultants to study
the potential markets for his products. Yes,
the markets where his firm currently
exports could be a good place to start.
Kumar also realises that speed is critical: a
rival company has already set up a subsidiary abroad with two manufacturing
units already in operation. Many questions
need to be answered: is it a good idea to venture abroad now? Should the company go
alone or with local partners? Is the distribution channel in that country similar to
India?
or many companies, this is a

familiar scenario. After years of
serving the domestic market,
many companies begin sniffing
for opportunities beyond their
boundaries to sustain the growth momentum. Like Kumars company, for many in
the FMCG, auto or allied sectors, the first
reference point are the markets theyve
been exporting to. While such markets may
look familiar, many companies find that
103
>
once they get down to the brass tacks, all

clients project in a big way.
the scenario thinking and assumptionA crucial decision in the process is to figbased planning takes them only up to a
ure out how long the company is willing to
point.
wait for the venture to turn profitable. This
The experiences of companies such as
also determines how much a company is
Marico, Dabur, Mahindra & Mahindra and
willing to invest, whether it wants to join
Airtel offer some interesting insights into
hands with a local player or acquire a local
the idiosyncrasies of consumer markets
brand. The third key element is getting the
and how to deal with them. As an interna- right mix of people; seasoned hands from the
tional marketing head of an FMCG compahome base or local hires.
ny points out, When people say internaIt is imperative that you take a moment to
tional markets and consumers are different,
survey the playfield before you pop your
what they mean is the culture there is difmoney in the coin slot because there are a lot
ferent from what we encounter in India. It of targets and ball paths at the top.
is this culture that determines what people
Identify the need gaps
buy and wear, how they conduct themIn a conversation with Business Standard
selves at the market or the workplace. This
recently, Rajeev Batra, professor, marketing
throws up unique challenges in hiring,
communication, distribution... indeed at the University of Michigan, USA, who coauthored the book, The New Emerging
every step of the way.
The biggest challenge
remains identifying talent
and being able to deploy
Getting the right
resources adequately.
mix of people is
Arvind Singhal, chairman,
Technopak Advisors, a
critical to grow in
retail and management
the international
consultancy, says that barmarkets
ring a few examples such
as the Tatas or the Aditya
Birla Group, most compaMarket Multinationals: Four Strategies for
nies have struggled to retain a strong bench
Disrupting Markets and Building Brands,
of people simply because they remain small
said that many Indian companies seek interin the global scheme of things.
national markets similar to their home turfs,
Other issues, regulatory hurdles, for
since they are comfortable there. Consumer
instance, remain a challenge in many countries. This can add significantly to the cost profiles and segments are similar so thats
what drives them to go after these markets,
incurred by a company, if it has to rework the
he says. Examples of such companies
production lines or open up new facilities in
foreign markets, says a senior executive include Asian Paints, Marico, Dabur and
Godrej Consumer Products Ltd (GCPL).
with an FMCG firm, which has presence in
Some others have used a combination of
South East Asia, West Asia and Sri Lanka.
flexible manufacturing and low-cost
Adds a corporate trainer based in Delhi, who
research and development to come up with
has consulted with many companies that
solutions. This has been a favourite of comhave gone international, At home, you
would interview a candidate two/three panies that have lacked the scale and size to
compete with the big boys abroad. Some
times, do back-ground checks on each, and
do a final round of interview before you hire Indian companies have also used the global brand-building strategy well to go the
them, he says. Be equally diligent when
inorganic way. A case in point: the acquisimeeting with potential agents/distributors
tion of Jaguar Land Rover by Tata Motors,
overseas. One of the local suppliers for our
which ensured that marquee British brands
client X, for instance, had this notion that
were now part of the companys portfolio,
Indians were not sticklers for quality. So
known for trucks, cars and utility vehicles.
what he supplied was below par. This meant
But acquisitions have also remained a
dropping this partner, scouting for a new
means by which companies have not only
one and the whole process delayed my
104
acquired brands, but also skill-sets, and

entry into specific categories, says Batra.
Maricos acquisition of Derma Rx in
Singapore, for instance, gave it the muchneeded knowledge and wherewithal in the
premium skincare market. In Daburs case,
the acquisition of Hobi Kozmetik in 2010, in
Turkey, was intended to give it a foothold in
that market, since that was the best way to
approach it, according to PD Narang, group
director, Dabur India. The acquisition of
Namaste in the US by Dabur was intended
to help the company find its way to Africa
since Namaste was an ethnic hair products
maker in the US, Nigeria and South Africa.
GCPL, on its part, has used acquisitions
to enter new markets in three geographies
Asia, Africa and Latin America. Adi Godrej,
chairman, Godrej Group, has repeatedly
said that the company has a three-by-three
strategy looking at the three different continents and three product segments, including hair colour, personal wash and household insecticides.
Importance of staying flexible

Companies need to be flexible enough to
pick up the early warning signals and make
necessary corrections. Dabur, in fact, decided to set up a physical presence in its export
markets after its strategy began to waver.
The company had decided to tap some
markets in West Asia in the 1980s and the
route it took was exports. The company
soon found that this led to inadvertent
delays and subsequently loss in business.
Says Narang, In a sense, our journey really began in 1990 when we set up a unit in
Dubai. We had to plug the issue of delays
that led to losses. So we launched a unit
there...it opened up a world of possibilities
for us.
Dabur learnt early that while taking
super-hit products from India to new markets, especially in the Middle East, wasnt a
bad idea, developing new ones were equally important. This learning led to the development of products such as Haman Z, a
hair care regimen, which does well in the
West Asia.
The second issue was packaging and
communication. Once Dabur went back to
the drawing board to develop new product
ideas, it emphasised on the look and feel.
Result: sleeker packaging with bolder
motifs. We also began advertising on local
>
EXPERT TAKE
Managing HQ & local

relationships
NAVNEET VASISHTH
Partner & Director, The Boston Consulting Group
ndian companies have rapidly increased

the pace of globalising their sales and
operational footprint in the last decade.
The role of corporate centre in terms of its
location and talent is a question that has
become increasingly prescient for such
companies. In the first wave of international
expansion, firms traditionally relied on two
contrasting approaches exporting senior
talent from India to these new markets or
hiring senior local talent to augment the
majority Indian operating team in
channels and focused on distribution, says

Narang. Today, Dabur derives 30 per cent of
its ~5,305-crore turnover (topline for March
ended 2012) from international operations
spread across the Middle East, North Africa,
East Europe and Asian regions.
For Marico, the whole issue boiled
down to hard-sell. Vijay Subramaniam,
CEO, international business, Marico Ltd,
says, In the 1990s, we largely exported our
products to other countries from India. It
was in early 2000 that our thrust on international markets grew and we changed our
approach from trading to brand-building.
Our business grew from ~90 crore to ~960
crore in a decade. Today, the international
business contributes 24 per cent to Maricos
total turnover, which five years ago was just
about 7-8 per cent.
For Mahindra & Mahindra, the challenges were different. Many countries tend
to protect their local industry, says Ruzbeh
Irani, chief executive, international opera-
international locations.
Both these approaches were useful in the
early phase of globalisation and helped in
maintaining relationship-based trust
between the India-based corporate centre
and new countries. As scale of international
operations have increased, this approach is no
longer sufficient to drive growth in these
markets. A few companies have taken the
next step and questioned themselves on new
structure for corporate centres in a new reality
where international revenues form a major
part for their respective turnovers.
Companies will need to make two choices.
The first is global platforms what global
platforms do they need for future success and
which of these need to be located outside
India. Typically, scale oriented platforms are
better suited for an offshore location, but in
many areas like innovation and product
design, global platforms are best placed in
places closer to major markets. Leading Asian
companies like Samsung have successfully
embraced this approach by leveraging Europe
for developing design capabilities. Indian
companies need to identify which ones need
to be supported with centres of core
capabilities in global markets.
The second choice is selection of talent for
tions. In Brazil, CKD localisation is essential to be competitive. In advanced markets, emission and other regulatory norms
challenge players coming from developing
countries like ours. In Africa, foreign brands
have already made strong inroads, so the
task is difficult.
Indian multinational Bharti Airtels
acquisition of the African operations of
Kuwait-based telecom major Zain in 2010
met with issues similar to M&Ms. This was
an acquisition that gave Bharti access to 15
markets in Africa, making it the fifth-largest
wireless company in the world. Predictably,
a buy valued at $10.7 billion, was never
going to be easy. Bharti ran into legal and
regulatory hurdles in countries such as
Nigeria, Congo and Gabon. While in Congo
and Gabon, respective governments raised
a red flag to the deal, in Nigeria, Econet
Wireless, a former partner and five percent
shareholder in Zain, moved court saying it
was not consulted on the transaction.
105
top leadership and their physical location. The

corporate centre increasingly manages a
proliferating number of locations, target
markets, product variations, and partners.
New age leaders need a truly global mindset,
and a more collaborative and adaptive
approach. Hence, talent and experience
rather than origins should become the
defining criteria for corporate leaders. This will
necessitate that Indian companies become
inclusive as they target leadership.
Many people believe that in the new 24X7
connected age, location doesnt matter since
leaders are available all the time. But there is
still value to senior management immersing
themselves in target markets, living and
breathing the set of issues that their clients
face. It is imperative that key decision makers
place themselves in core markets and add
local context and nuances in their decision
making and behaviours. Many Indian
companies have embarked on this journey
and demonstrate success. Cognizant is an
example where the firm has built a global
leadership team that spreads majority of its
time in key customer markets. Globalisation is
a long-term journey with complex facets but
firms can start with selection of talent and
their location as initial point.
Though Zains Nigeria operations were

rebranded as Airtel Nigeria, a Nigerian
court, in early 2012, ruled in favour of
Econet. The matter is yet to be resolved.
Bharti continues to face challenges in
terms of managing the work force and operations in complex markets like Africa where
cross-country differences are high, say
industry experts. Also, Bharti has to contend with poor infrastructure, import curbs
as well as government intervention.
Despite the hurdles, companies are hunting for opportunities abroad. Abneesh Roy,
associate director, research at Mumbaibased brokerage Edelweiss, says, For consumer-facing businesses, growth in international markets is higher than domestic
markets, easily over 20-25 per cent... primarily why they have been making a beeline
abroad. Thorough ground-work, a well-executed plan, patience, he says, can help a
company build and sustain new international markets.
>
HIRING 3.0
If version
one was managed
offline and two was
led by job portals,
social media is where the third version of hiring is unfolding.
Heres how the process has become more efficient
PRIYANKA JOSHI
f you still havent included social

media in your recruitment plan, its
time you called in your HR manager for a little tte--tte. Most millennials, industry surveys suggest,
dont trust professional recruiters simply
because they know there are far better
ways to find a job. These millennials, who
make up more than half of the total internet population in India today, have some
form of social networking presence be
it on Facebook, LinkedIn, Twitter,
Pinterest among others and trust these
platforms much more than traditional
channels to hunt for jobs.

And what are the real benefits for
recruiters? A recent IBM study reports
that social media can give a company
not only a platform to hire excellent
employees but it also helps in building a
talent pool online and engage with them
regularly, job offer or no offer. Also, what
many HR managers do not readily admit
is that a traditional employment agency
charges anywhere from 20 to 30 per cent
of a successful candidates first-year
salary for recruiting while talent scouted
and hired through social media postings
and referrals cost practically nothing.
Other intangible benefits include saving
106
precious management time that is otherwise spent on interviewing and hiring

candidates that are deemed best fits
for the company by an external agency.
But the argument that wins the day
for social recruitment is that conventional hiring methods mostly provide
information that a candidate offers,
while through social networks a
recruiter gets to know things about a
candidates skill sets, interests and
behaviour that she wouldnt care to put
down in her resume.
While the benefits are obvious, the
adoption of social media tools for
recruitment has been slow in India
>
studies show just about 6 per cent of the

Volkswagen,
HCL
Technologies,
companies are currently using social or
American
Express,
Wipro,
DSP
professional networking sites in India as
Blackrock, Biocon, AT&T, Citi, Dell,
compared to over 30 per cent in develHewlett Packard and Philips among othoped countries (source: Market Xcel ).
ers.
Globally, companies like Salesforce
Irfan Abdulla, head of hiring soluare often cited as a test case for social
tions at LinkedIn India, points out, An
hiring. In an official blog post, the comaverage Indian company has about 70
pany says, One facet of our recruiting
per cent of its employees active on
efforts is that at Salesforce.com we are
LinkedIn. LinkedIn Recruiter, designed
increasing use of the video job descripto meet hiring needs for India, is meant
tion. We figured its much more engagto help recruiters search for profiles as
ing to hear about an open position
per requirement; services like Jobs
straight from the hiring managers
Network, Work with us Ads, Targeted
mouths rather than skimming a long
Recruitment Ads and Talent Direct are
page of text for a jobs details. The comalso used by companies to build a talent
pany even maintains a YouTube
network on the professional networking
playlist that has the latest roundup of
site.
open positions and job details with
Scanning candidates
Salesforce.com.
Industry data indicates
While its hard to see
that more than twomany Indian corporates
thirds of all HR profesadopting Salesforce social
sionals now run internet
hiring strategy, a start has
searches on job applibeen made by a few smart
cants. According to surcorporations. Thanks to
veys from Microsoft
the growth of the social
Research
and
the
networking sites in India,
Reppler Company, a
coupled with inadequate
candidates online interrecruiting
platforms,
actions are watched
many Indian corporaclosely by potential
tions have started incorand current employporating social media in
More than twoers. About seven in 10
their overall hiring plan
thirds of all HR
employers
or
either as their main
professionals run
recruiters have dishiring tool or as an addinternet searches
qualified job applion to their traditional
on job applicants
cants after finding
hiring strategy or simply
material/information
as a means to check facts
they dont like on the
and solicit references.
social media. Some recruiters also check
The sluggish economy has only accelerfor grammar and spelling on platforms
ated this trend, say experts.
such as Facebook, Twitter, and
The industries that have taken the
lead in this are those that have a consid- LinkedIn, say other surveys.
Dell India, for instance, goes
erable online audience, including those
through LinkedIn, Facebook and
in software, e-commerce, digital media
and marketing, says Gautam Ghosh, an Twitter (in that order). Savneet Shergill,
head, talent acquisition, Dell India, says,
HR expert. LinkedIn, with over 16 milWe post jobs on LinkedIn regularly. We
lion users from India, leads all other
also use its corporate recruiter licenses
social platforms when it comes to huntto source profiles. Our team of recruiters
ing for prospective candidates. It has
regularly updates their profiles with staworked with over 500 Indian companies
tuses in terms of the positions that were
to help them either in straight-forward
hiring for. Dell India team is also active
hiring, or in marketing a company to
on LinkedIn Groups, participating in
potential candidates and this list
conversations and keeping a tab on
includes names like ING Vysya Bank,
107
whats brewing socially.

The company claims that the Careers
at Dell Facebook Page has become a
handy tool to disseminate career-related
information to candidates online.
Weve got a job search widget on
Facebook that helps prospective candidates look for the positions that were
offering... Weve got over 27,000 followers on our Facebook page as of now,
points out Shergill. On Twitter, the company interacts via its twitter handle
@CareersAtDell with its 1,500 followers,
posting jobs, career-related information
and even answering questions from followers.
Sakaar
Anand,
vice-president,
human resources, CA Technologies,
says the company is charting its course
carefully on social platforms. We started a dialogue with potential candidates
on popular social media sites such as
Facebook
and
LinkedIn.
CA
Technologies is exploring social media
tools to target candidates who are job
hunting, those who are watching passively and others who are window shopping for the right offer.
Curating talent
With potential job candidates maintaining profiles on social media sites, the
online data dossier of a given worker will
only get thicker with professional
accomplishments or personal factoids.
It is imperative for recruiters to see how
they can benefit (and save time) by
accessing such information.
Simply put, its not necessary to go to
a LinkedIn or Facebook after you have a
vacancy. If your HR team is smart, it will
start early. Like Biocon has done it
uses networking sites to stay in touch
with really smart people who can be
tapped later, when a vacancy arises.
While the company regularly updates its
Career Page on LinkedIn for hiring, it
has engaged with candidates as they
interact with employees via Work With
Us ads. It is not just a way to find your
next job, but also seen as a way to be better at the job you are already in, adds
Abdulla.
Indian
companies
like
HCL
Technologies claims that 90 per cent of
its key hires and about 25 per cent of the
>
EXPERT TAKE
Go online, save
time and money
TULIKA TRIPATHI
MD, Michael Page International (India)
ith more than 300 per cent growth in

the users of social media in the past
three years, it is imperative that
recruiters and employers focus energies on
platforms like LinkedIn, Twitter, Facebook,
Youtube and blogs. While this opens up a
haven for finding professionals, it brings with
it challenges and risks.
Engagement sending the right message
on the right platform: A common challenge
that companies face is in deciding their
social media messaging strategy. Focus
needs to be on answering not only what a
overall hiring for HCL is through

LinkedIn. ING Vysya Bank emphasises
that using LinkedIn Recruiter and Job
Slots tools for key positions among a
pool of both passive and active candidates resulted in better quality talent for
a few key positions within five months
of them going vacant.
Hiring tools
Social hiring has, in a sense, made the
process of information dissemination
and gathering in hiring more democratic. It is not simply about putting
resumes on websites, hoping someone
brand is saying but also to whom and finally

tying this in to the companys own websites
and job boards. Often, weve witnessed
companies disperse all of their messages via
all the tools available, resulting in a lot of
irrelevant information. Consequently these
companies end up with a negative and
sometimes even boring online presence.
The most popular employer brands
online have deciphered the combination of
the what and the whom. While LinkedIn
and blogs have worked well for midmanagement professionals, Facebook and
Twitter are great tools to create viral
discussions, buzz about the brands.
The idea is to add value through customising
the messages on these platforms rather than
overwhelming the audience with an
information overload.
LinkedIn has proved effective for
discussion forums around specialised
skills/industries and quick polls while
Facebook has been excellent for long
discussions and affinity-based networking.
Blogs and Twitter have proved to be the best
information dispersion and crowd sourcing
tools.
Credibility its all user-generated:
Arguably the biggest challenge recruiters
face arises from the very cornerstone that
has made social media so popular its
unregulated! Typical examples include
inflation of skills, titles and experience.
While a hiring manager might deem an
online profile a perfect fit, there is no
foolproof validation method. The
opportunity for doing specialised
will come across it, or having employers

post job vacancies with the hope that job
seekers will spot them. Technology is
offering candidates better quality links
to potential employers, and for organisations like Goldman Sachs that reportedly invest over 1,00,000 hours each
year in conversations with prospective
employees, social media can make
things move faster by proactively developing a relationship with potential candidates and keeping them engaged over
a period of time.
Recruiting through social networks,
therefore, is moving beyond plain vanil-
108
background checks as a service is thus, of

growing popularity and indeed an effective
solution. Even with some of our own
clients, these checks have proved
imperative in deciding on the right
candidate and eliminating fraudulent
candidatures early on in a process.
Online is social. Online is viral: From a risk
perspective, the fact that all current, former
and future employees of a company are
already online becomes a big challenge to
manage. Several reputed organisations have
suffered blows in the last 2-3 years with
former employees publishing blogs and posts,
bad-mouthing former bosses or opinions on
practices. Given the nature of the space, this is
going to be a challenge. In several cases, in
fact, it brings to light some genuine issues
internal to the company, but unknown to its
management. That aside, the best way to
address this is by engaging the target
audience from a positive and proactive
perspective as opposed to an aggressive and
reactive approach. The company has to make
peace with the fact these are but opinions
and they can be influenced over time with the
right messaging and use of these platforms.
The important point to remember is that
despite all the progress in technology and
mobile platforms, social media is a great
sourcing, long listing and branding tool but
nothing more. The hiring process involving
human interaction is irreplaceable and social
media should never be considered an alternate
to physically interviewing and selecting
candidates.
la descriptions of job postings like a

piece of marketing communication its
about identifying the target audience
and tailoring the hiring content to
appeal directly to them. Often, this goes
beyond employment goals. Social media
brings the action to a personal level, and
helps in getting to know the types of personalities you intend to recruit.
With a billion global users thronging
Facebook, of which more than 52 million
come from India, recruiters are willing
to experiment with employment apps
such as BranchOut, BeKnown and
Glassdoor to connect with the young tal-
>
ent. BranchOut, for instance, lets users
import LinkedIn profile and leverage
their Facebook friends to find jobs, sales
leads, and setup relationships with professional
contacts.
Reportedly,
BranchOut also operates the largest job
board on Facebook with over 3 million
jobs in 60 countries.
Glassdoor, on the other hand, can be
used by job hunters to look up salary
data on thousands of jobs. GlassDoor
also has a job search feature that pulls
openings from several leading job
boards as well as listings that companies
submit. Monster Worldwide allows job
seekers to create a private, LinkedInstyle professional network.
Not everyone is convinced. Its
(Facebook) a personal networking
forum. I doubt youngsters want to interact with their friends and prospective
employers on the same platform, says
an HR manager of a Delhi-based electronics major.
Handle with care

The problems facing social hiring have
to do with the stage of evolution of the
social media. HR professionals admit its
an uphill battle explaining the basics of
social hiring to senior executives of
companies. Its hard to make much of
an argument around the value of social
recruiting, including investing time and
money into those efforts unless it
increases applicant flow, shows markedly shorter time to fill positions, improves
candidate quality, builds brand preference among talent pool, says an HR
manager with a FMCG company.
HR professional Ghosh warns that
relying too much on social media currently may be detrimental in India as
one might miss out on some really good
candidates who may not be active on
such platforms. It may also be biased in
favour of the younger members of
Generation X and Y but for the more
senior baby boomers generation, this
could be a challenge, says Mohinish
Sinha, leadership & talent practice
leader, Hay Group, South & South East
Asia, Pacific & Africa.
For those in traditional manufacturing or service industries, its difficult to
ditch the traditional hiring process
entirely. Yann Gillet, general manager,
Park Hyatt, Chennai, says, We still use
the traditional means of hiring candidates; putting up ads, asking for
resumes to be posted, requesting candidates to bring in their resumes when
they come for interviews... But we do
perform web searches on candidates
that helps us to expedite the process of
hiring.
Theres also the issue of information
management. Not having a proper plan
to check outflow of confidential information can tarnish an organisations
public image. Dell India advises that an
organisation should ensure that its
employees are trained on what content
should be shared across social media
channels. One needs to ensure that
there is a content calendar in place that
is monitored on a regular basis, says the
company. Hay Groups Sinha adds, We
would recommend social leaders conduct routine self-assessments and
audits of their organisations readiness
and knowledge before handing the open
microphone to customers and employees.
While there is consensus on the fact
that social recruiting can give quicker
results, cut down on unproductive
vacancy days, experts also say that for
best results it should be looked at as a
long-term strategy, to build and maintain an online talent pool, rather than
just thata cost and time saving tool.
109
>
The rewards of loyalty

While loyalty programmes are aimed to encourage continued
consumer patronage, only a few brands have got the recipe right
in India. Heres how it can be put to work effectively
ABHILASHA OJHA
hats the easiest way to ensure

your best customers come back
to you over and over again?
Make them part of a loyalty programme.
The concept is simple really: being a member earns them loyalty points and the more
loyalty points they earn, the more rewards
they unlock. The rewards could be in the
form of giving them special benefits (noqueue payment/priority delivery, free
parking), giving them first dibs, and most
exciting of all, offering a range of freebies
and special discounts.
So, why is it that only 25-30 per cent of
shoppers in India actually opt for a loyalty
programme and even among those that do
only about 15 per cent actively use them
(source: industry estimates)? The whole
process is complicated right from filling
up the forms to redeeming your points

against rewards, says a retail consultant
based in Delhi.
Above all, as a shopper, do you really
want to carry 12 separate cards every time
you go shopping? We are also using primitive technology to collate data and not really looking at consumer convenience as a
priority area, adds the consultant.
This is not to say that loyalty programmes are unadvisable or useless. Not at
all, as many of the experts that The
Strategist spoke to said. Those in the business will tell you that a right kind of loyalty programme can help on several fronts
in building customer loyalty, increasing
brand value, allowing companies to understand the purchasing behaviour of consumers and thereby contributing to the
financial health of the brand in a significant
manner. Caroline Papadatos, senior vice-
110
president, LoyaltyOne, says, Loyalty programmes are an effective device for identifying the best customers and moving them
through the stages of customer engagement by giving them rewards, recognition
and relevant communications.
Thats the crux really relevance. If the
idea behind a loyalty programme is to
encourage the continued patronage of customers, it has to be designed with the consumer at the centre. So, the starting point
has to be simplicity and transparency. The
first task of the brand is to set down the
rewards and the way to earn them clearly,
no strings attached, and the next step is to
make the process of getting those rewards
easy. Just think of the way your local sabjiwala operates how he throws in some
free dhania/mirchi or an extra nimbu for his
best customers.
Not everyone thinks loyalty programmes
>
work though. Take Walmart, for instance,
which is all set to open retail outlets in India
over the next year-and-a-half. Unlike other
US supermarket chains like Kroger, Safeway,
and SuperVal, Walmart does not run any
loyalty programmes for its consumers.
According to a senior employee who did
not want to be identified, Walmart believes
real loyalty lies in the offerings of low
prices. According to this employee, Its
going to be a similar route in India. We wont
look at loyalty programme just yet for the
Indian market. Instead, we will look at offering products at a competitive price.
Whos got it right

The modern-day loyalty programme takes
off from the frequent-flier mile programme
introduced by American Airlines in 1981 to
reward repeat customers and build brand
loyalty. Since then sectors that have used
customer loyalty programmes to their
advantage have been hospitality, credit
cards, airline and retail, according to
Siddharth S Singh, director, fellow programme in management and associate professor of marketing, Indian School of
Business (ISB), Hyderabad, who has also
published a detailed research note,
Customer Loyalty Programmes: Are They
Profitable? (Management Science, Volume
54, No 6). Sinha sees a great opportunity for
loyalty programmes in the retail sector in
India as more and more international players enter the market.
Ashok MS, chief operating officer,
Accentiv, India, a leading operator in providing rewards and loyalty solutions (it has
clients like Van Heusen, Louis Philippe,
Tommy Hilfiger, Indian Oil, to name some),
says that loyalty programmes do well in
sectors that by their very nature record high
transactions. So, he adds, hospitality, credit cards, retail and airlines are potential sectors where such programmes do well. In
India, even the petroleum sector has
tremendous potential in devising attractive loyalty programmes, says Ashok.
ISBs Singh says, Eventually, I see loyalty programmes providing a complete
view of a customer. This includes their
interaction with the company and other
behaviour such as on the social media. New
metrics will come up that allow a firm to
evaluate a customer better. The concept of
customer value itself would become mul-
Coalition loyalty programmes

will allow a common platform
for many sectors to participate
together like fuel,
grocery and
telecom
RATHIN LAHIRI
CHIEF MARKETING
OFFICER,
LOYALTYONE,
INDIA
tidimensional and companies would learn
to identify and exploit their relationship
with customers along these different
dimensions for various benefits. (Read
interview with Siddharth S Singh, director,
fellow programme in management and associate professor of marketing, ISB, on page 4)
So, what is the recipe for a good loyalty
programme? How does it evolve? We will
use three example two of Indias biggest
retailers and a private airline to demonstrate how it can be put to work effectively.
Take Future Group, for instance, which
has a host of brands under its umbrella,
including Pantaloons, Big Bazaar, Food
Bazaar, Central, HomeTown, eZone, Brand
Factory and Future Bazaar. Pawan Sarda,
chief marketing officer, Future Group, says
India has always had the tradition of loyalty programmes especially when traditional family jewellers and neighbourhood
dukaandaars (shop owners), so to speak,
created a loyal base of generations of customers. So, in his view, effective loyalty programmes should come naturally to us. In
Sardas view, successful loyalty programmes are those that constantly evolve
based on needs of the customer and the
responses of the competition; theres no
room for complacency given that its a tool
that effectively decodes customer purchasing behaviour.
Future Group has taken great pains to
devise a consumer friendly programme
when it found that while consumers knew
its different brands they did not know all
these belonged to the same group. Last
year, Future Group and Payback, one of
Indias largest and Europes most successful multi-partner loyalty programmes,
entered a strategic tie-up to bring out a dedicated, single, loyalty card, that could be
111
used for the companys various brands. The

one-card-several-benefits concept now
allowed the company to have crisper consumer insight and a better personality
engagement. In just 10 months since the
PayBack programme began, the company
has got 8 million customers. Every week
since then, the group has added more than
a lakh consumers to its loyalty programmes.
According to September 2012 data of
the company, almost 45 per cent of the
group level billing has come through customers engaged in the loyalty programme.
For Pantaloons, specifically, 70 per cent of
the billing comes from loyalty programme
customers.
How does Pantaloons continue perfecting
its programme? For the first three months
after a customer picks up the card, the company communicates to her just how the
system works, how it can benefit her. There
are offers to woo the customer to actually
come to the store and experience the ease
of use. Once the concept sticks with her
and she understands the value of the loyalty card, the retailer starts tracking her
shopping behaviour what are the common items on her purchase list, does she
come midweek from office or on weekends
to shop and so on.
Future Group offers a mix of rewards to
its loyalty programme customers that
include free parking, a separate cash
counter, free home delivery, no fee on
exchange offers, premiere passes for films,
to name a few.
The data collected from loyalty card use
has helped the retailer to categorise customers based on usage and purchase patterns, which in turn has helped it rationalise
a host of things from stocking to store layout. Brand-based data can also be used as a
leverage in retailer-manufacturer relationships. If customers dont have brand loyalty, you can push back against manufacturers and tell them you wont carry their
products anymore if they raise prices, says
a leading retailer.
One such learning was that discount
schemes dont always work. Discounts on
private labels was not sustainable because
every other brand duplicate the move. So,
over a period of time we moved to a pointbased system, wherein card holders can
accumulate points and redeem them at any
>
Loyalty programmes do well in

sectors that by their very nature
record high transactions. For
example, hospitality and credit
cards. In India, even
the petroleum sector has
tremendous
potential in
devising loyalty
programmes
ASHOK MS
CHIEF OPERATING
OFFICER, ACCENTIV
INDIA
of the group stores, says Sarda. How the

group has ensured the plan works by revisiting it and studying it every month.
We are tracking the feedback continuously to make the programme more customer-friendly, says Sarda.
On its part, Shoppers Stop, one of the
oldest retail brands in India, which began
offering its popular First Citizen Loyalty
Programme card to customers 18 years ago,
has a total of 2.6 million members to vouch
for its success. Its loyalty programme continues to add layers to keep up with the
changing times, according to Vinay Bhatia,
customer care associate and senior vicepresident, marketing & loyalty, Shoppers
Stop Ltd. He says that theres one fundamental principle that the company has
been following from day one; charging a
marginal fee to the customer to own a loyalty card. While this automatically gives
the customer a choice (to own or not to
own a card), it also ensures customers use
it to get the best return on their initial
investment. The rewards are similar free
parking, communication on new products
and special discounts; what the company
gets out of it is consumer data. Our programme has allowed us to target customers
better, says Bhatia.
He explains how two years ago, in an
experiment done at the stores outlet in
Malad, Mumbai, the company realised that
men who are known to dislike shopping
but who visited Shoppers Stop outlets with
their family were buying only a handful
of things from it. The store concluded that

may be they were not aware that Shoppers
Stop also had an elaborate stock of
menswear. So it started communicating to
this set of consumers (not overdose but
simply informing them and announcing
bulk deals in the category, which wasnt
the case before) and within four weeks,
Shoppers Stop noted a ~2 crore increase in
sales from that one store, from that one
category alone.
Last year, about 72 per cent of the total
sales at Shoppers Stop came from loyalty
programme customers. Three years ago the
company felt it needed a separate team to
not
just
handle
the
loyalty
programme but to also study and analyse
the data thrown up by it. Remember, the
customer is not always structured in her
thoughts as the retailer. Brand loyalty offerings can influence her decision and make it
more manageable, says Bhatia.
Shoppers Stop goes as far as categorising
its customers into two groups those who
own loyalty cards, and with whom the company communicates, and those who dont.
It helps to show just how critical is communication and how it can be tweaked to
keep up with the changing demands of consumers, says Bhatia. Shoppers Stop has a
special app for smartphone users to help
Theres one fundamental

principle that the company has
been following from day one;
charging a marginal fee to the
customer to own a loyalty card.
While this automatically gives
the customer a choice (to own
or not to own a card), it also
ensures customers use it to get
the best return on
their initial
investment
VINAY BHATIA
CUSTOMER CARE
ASSOCIATE AND SENIOR
VP, MARKETING
& LOYALTY,
SHOPPERS
STOP
Successful loyalty programmes

are those that constantly evolve
based on needs of the customer
and the responses of the
competition... theres no room
for complacency given that its a
tool that effectively
decodes customer
purchasing
behaviour
PAWAN SARDA
CHIEF MARKETING
OFFICER,
FUTURE
GROUP
track personality types of its customers to

integrate it with the loyalty programme.
Among others Jet Airways, feel
experts, has done a great job with
JetPrivilege, Indias largest frequent flier
programme. Way back in 1993, the airlines
understood the need to have repeat business and in the next one year, it
announced its JetPrivilege programme.
Though the initial benefits revolved around
tele-check in and accumulated burn and
earn miles, gradually it expanded, through
customer feedback, to other offerings. It
started the tier system for different categories of members, thus allowing the airline
to segment data collected on the basis of
regularity and volume of travel.
The programme allowed for a unique
Dynamic Tier Review System, which
allowed customers to get benefits according to travel plans. The programme has
added an easy online system (to earn miles
even after the air travel was completed),
several partnerships with banks, hotels,
credit card companies, restaurants, retail
outlets and publishing houses to make it
appealing to the flier. Two months ago,
according to a company report, Jet decided to spin off the programme into a whole
new subsidiary to help it get a larger retailbased coalition loyalty structure to get better value on its investments.
Whos failing
If the benefits are so obvious why are some
112
>
Q& A
Copying a programme from another

company might be costly
relationship with each customer and take
actions to increase the value of its customer
base. Further, it should reveal opportunities
for the firm to leverage its relationship
with loyal customers for important functions
such as customer service and product
development.
How do some sectors manage successful
implementation?
Experience, experimentation, and research

collaborations have provided some sectors
(hospitality, airlines, retail) with a better
understanding of loyalty programmes.
SIDDHARTH S SINGH
Director, Fellow Programme in Management and
Associate Professor of Marketing, ISB
How should sectors proceed with an ideal

loyalty programme?
With international brands entering the Indian

market in various categories, the importance
of loyalty programmes, feels Singh, cannot be
undermined. There will be challenges and
opportunities for various sectors but
eventually, a sound loyalty programme will
benefit the consumer and the brand equally.
It is important to understand that a company

must be clear in its vision regarding the
programme. It should know where the
programme fits in its overall strategy. Once
these high-level decisions are made, a
suitable loyalty programme can be designed.
Simply copying a programme from another
company on an ad hoc basis might be costly
both in the short- and long-term without
providing the desired benefits.
What is the ideal loyalty programme for

companies/brands?
What will be the next trend in India as far as

loyalty programmes go?
A good loyalty programme is one that is

designed well to enhance customer loyalty
towards the company and its offerings. It
should allow the company to analyse its
Many more companies in India will try to

develop loyalty programmes in the near
future. Eventually, I see these programmes
providing a complete view of a customer. This
sectors slow to adopt loyalty plans and

leverage its benefits? Most sectors make
mistakes because they dont offer strong
value proposition on loyalty programmes, says Ashok of Accentiv.
Second, brands fail to offer relevant communication (its either too much or too little). Third, many companies (manufacturing, for instance) forget that just doing
customer loyalty is not enough. What
manufacturing sector needs is channel
partner programming where dealers and
other retail point people need to be target-
ed to help understand customer, even if

indirectly, says Ashok.
To be sure, Accentiv has already started
working towards a host of channel programming in many companies. It is working with a leading tyre company to influence the community of mechanics. It is
working with a host of MNCs for employee loyalty programmes.
In fact, tie-up for loyalty point exchange
and redemption, or coalition loyalty programmes is seen as the big innovation that
could change the fortune of loyalty cards in
113
includes their interaction with the company

and other behaviour, such as on social media.
New metrics will come up that allow a
firm to evaluate a customer better. The
concept of customer value itself would
become multidimensional and companies
will learn to identify and exploit their
relationship with customers along these
different dimensions for various benefits. For
example, a company might value some
customers because they are influential on
social networks, while it might value others
because they spend more.
Ultimately, it is about a firms relationship
with its customers, customer behaviour, data
available about customers, analytics using
this data, and leveraging this information for
benefits.
Whats the main goal of a loyalty
programme?
To strengthen customer loyalty towards the

firm and its products. This loyalty allows a
firm to understand the customer better, and
increase the value of its relationship with the
customer by providing more and better
products and services to the customer.
Do all sectors require it?
In some cases, a firm might deliberately

choose a strategy that does not focus on
leveraging customer relationships. For
example, the everyday low price strategy of
some retailers in the developed world focuses
on providing products at the lowest possible
price. Companies following this strategy want
to keep all unnecessary costs down and do
not typically have a loyalty programme. A
good example is Walmart.
India. Rathin Lahiri, chief marketing officer, LoyaltyOne, India, says coalition loyalty
programmes will allow a common platform
for many sectors to participate together
(fuel, grocery, telecom, for instance). While
this will definitely make things easy for the
user (she has to carry one card or may be
the whole system will migrate online),
brands will enjoy the benefit of having a
bigger database to draw their insights on.
When that happens the customer will
finally be the hero, sums up Lahiri.
>
From being the dreaded Day of Judgement, the

employee performance review is becoming
a round-the-year exercise for feedback and
goal adjustments
ROHIT NAUTIYAL
hats that one key

event in your professional life that many of you
are still doing just once in a full year? No
rewards for guessing its the whole exercise of filling up the annual performance
review form. For some reason, theres a
shared discomfort among managers and
subordinates the moment that important
mail with the subject tag annual performance review flashes on the top of their
inbox. The entire procedure takes up over
a month as managers and HR executives
scramble with paperwork or navigate
through piles of online data to fill up an
employees achievement-and-failure forms.
As an annual staff review is er an annual affair, both managers and employees
find it difficult to remember what actually
happened during the year. Both typically
come to the meeting ill prepared, with little meaningful goals to discuss. This makes
the process more difficult and frustrates
both the employee and manager.
In the end, neither the supervisor nor
ILLUSTRATION: BINAY SINHA
the subordinate seems

satisfied. In fact, surveys and
studies have found that attrition
is in many cases a direct consequence of
the way in which the performance management process is managed. In an era
when most professionals have declared
themselves social animals who love to do
everything real time, doesnt the annual
review system look like a tool from a
bygone era?
Recognising the shortcomings of a
slipshoddy annual review, smart companies are moving to a more ongoing
processwhere periodic reviews are
being used as a mechanism of participatory management and as a means for
obtaining staff input into the planning
and management of the companys goals.
Muninder Anand, director, information
product solutions at Mercer, points out
114
that the half-yearly performance review

picked up as a big trend only three years
ago as companies realised it is important
to hold regular conversations with
employees to win the war for talent.
Research conducted by The Strategist
shows a whole host of companies from
across industries have already moved to a
half-yearly appraisal cycle and the more
ambitious ones are looking at a quarterly
performance review system. The incentive is easy to spot: performance management systems (PMS) are being seen as a
cutting edge talent retention solution to
grapple with a young and increasingly
restless workforce. Agrees Sameer
Wadhawan, vice-president, HR & services,
India & South West Asia, Coca-Cola
India, Earlier, appraisal was a tool for
>
EXPERT TAKE
"The self-review is one of the worst ideas in

performance management"
heres absolutely no reason why a
company needs to conduct annual
reviews. The annual review exists largely
to serve the need of the compensation
department. Conducting shorter reviews more
frequently allows a better opportunity for
course correction. Its also less of a burden on
both the manager and the employee.
My clients are large global companies in the
financial services, consumer products and
technology industries and I find very similar
challenges in this area, such as:
Poor goal setting: In many companies its
not clear exactly what a performance appraisal
is appraising. Is it my managers perception of
my year in general? What tangible output I
produced? A performance appraisal is valuable
only if it assesses an employee against a few
very clear goals. My experience shows that
most companies do not have a crisp process for
setting goals. Its easy to understand why
employees dislike appraisals if they dont
understand what theyre being appraised
against.
Not enough differentiation based on the
results: Even in countries like India, where
large salary increases have been the recent
deciding increments. Today, it has

become a tool for career development.
Goal adjustments
While a half-year review may not lead to
an increment or out-of-turn raise for the
employee, it is largely about using the
achievements in the interim to improve
performance and delivery in the subsequent periods. Aditya Birla Groups
director, global HR & CEO, carbon black
business Santrupt Misra points out that
during the review process companies fail
to listen to their employees reasonably.
Performance review is me-time for managers and subordinates and so we encourage conversations from time to time in a
given
year.
For
Coca-Cola,
the focus area of the mid-year review
is to really improve the quality of
MARC EFFRON
President, The Talent Strategy Group & author of
One Page Talent Management
norm, theres still too little compensation

differentiation between top and bottom
performers. The appraisal process will seem
hollow if Im a high performer but my salary
increase is only a few thousand rupees larger
than whats received by the slacker who sits
next to me.
Bureaucratic forms and process: Busy
managers and employees get annoyed when
they have to spend an hour or more wading
through a bureaucratic HR process. Theres
absolutely no reason that the goal setting and
appraisal process cant be done on one sheet
conversations between managers and

their subordinates.
According to Rajeshwar Tripathi, chief
people officer, automotive & farm equipment sectors, Mahindra & Mahindra, a
half-yearly assessment system helps in
keeping track of an employees progress
and take corrective measures, if needed.
For instance, we are open to the idea of
readjusting goals if there are unfavourable
external or internal circumstances. But
there has to be solid ground as something
like this will have a cascading effect.
The company also encourages line managers and their subordinates to have
monthly or quarterly conversations.
Companies are also open to the idea of
goal readjustmentsread scaling down
targetsmid-year. Once in 2009 and
again this year, Cadbury Kraft Foods
115
of paper (or one computer screen).

The self-review is one of the worst ideas in
performance management. Companies ask
employees to conduct a thorough selfassessment and employees diligently spend
hours writing a narrative that they hope will
get them a better rating. What companies
dont tell their employees is that, in many
cases, their manager had to submit the ratings
before the conversation took place.
The employee thinks that they are
participating in a negotiation; the manager
knows that theyre not. Self reviews are a bad
idea because each of us overestimate our
performance. This sets up a challenging
dynamic at performance review time when, no
matter how positive my boss is about my
performance, Im always going to feel that I
actually performed a bit better.
The review is an opportunity for a manager
to gather data and tell the employee how they
did during the year. That doesnt mean there
shouldnt be a great conversation at review
time, but employees should understand that
their role is not to argue their case. I tell my
client that they should "give them (employees)
a voice, not a vote" in the review process.
Making the self-review voluntary would save
millions of hours of time that could be better
spent in working.
brought down the targets of its sales force.

Without getting into how and why of the
process, Rajesh Ramanathan, director,
human resources, Cadbury Kraft Foods,
says, Numbers are not cast in stone. We
are open to the idea of taking employee
targets up or down throughout the year.
Experience has taught us that it helps to
keep buffers in goal setting.
At Hyundai Motor India, the midterm review system introduced in 2010
helped remove glaring anomalies between
individual ratings and supervisor ratings.
That year the performance appraisal format in the company was broken down into
two parts: business plan for each division
and competency assessment. Both these
aspects get equal importance in the final
analysis. This system has helped employees align their goals with those of the
>
organisation as measurement milestones
were clearly defined. Says Sanjay Pillai,
vice-president, human resources and general affairs, Hyundai Motor India, After
this system was introduced, there has been
fewer cases of disgruntlement as employees know how they would be evaluated at
the end of the year and the steps they
should take to improve their rating.
A discussion with the supervisor helps
in course correction. An incident diary
was
introduced
in
2010
for
managers/supervisors where the manager is able to keep notes on the pluses and
minuses of the employee during the
course of the year and share the feedback
with him during the review sessions. The
result, says the company, is that the yearend self assessment has become more
realistic and the performance appraisal
closer to expectations. This has improved
satisfaction levels among employees significantly, claims Pillai.
For its workforce of 80,000, HCL has
an annual performance management system that supports the definition of individual, team and corporate objectives.
This is followed by mid-year assessment
on the objectives and then a year-end
appraisal. The performance philosophy is
driven by an individuals need to excel;
hence the system is called i4excel. Says
Prithvi Shergill, chief human resources
officer, HCL Technologies, We differentiate the performance review process for
our high performers as we ensure we provide them feedback more frequently and
consider them for deployment to roles
larger and more complex than what they
are currently handling so as to align their
career to organisational growth.
Difficult transition
While the benefits of a periodic review are
difficult to miss, the transition from an
annual to a mid-year or quarterly review
system is by no means an easy one and
may take more than a year after the ball is
set rolling. Take the case of Cadbury Kraft
Foods. In 2006, the company started the
shift to a half-yearly performance review
system. The implementation began by
initiating the transition as an informal
process. By 2009, a three-pronged
approach, dubbed Managing people at
Cadbury India, was adopted to make the
appraisal system more engaging for
employees. As a first step, the company
kicked off a comprehensive campaign
that educated employees about the new
system followed by a skill development
programme to train the appraisers (line
managers) for spot contribution (an ability/motivation matrix), performance
review and effective feedback. The last leg
of the process involved taking feedback
from employees on the entire experience
of the appraisal. Since then, every year,
this feedback is used to improve the next
cycle of appraisal.
Outdoor and adventure wear brand
Woodland has learned a few lessons on
performance review in the two decades of
its existence. One big lesson, for instance,
was that retail is one of the categories in
which its impossible to quantify an
employees performance on the basis of
numbers onlyfactors like customer
interaction, visual merchandising and
participation in in-store events are crucial
in adding footfalls. The company follows
an annual appraisal system but tracks the
progress of employees on a monthly basis,
especially for its store personnel. As part
of this, store personnel are allowed to rate
each other to bring synergy. The ratings
are approved by the store manager.
Earlier the company paid group incentives at the store level. This initiative
failed as the company released that if a
store did good numbers it was on the back
of stellar performance by a handful of
sales staff. But the benefits were equally
divided among star and average performers. Around 2009, Woodland decided to
move to a sales-target-per-employee
model. Says Amol Dhillon, vice-president,
strategy and planning, Woodland,
Voluntary engagement is important in
our business. We follow a multi-layered
appraisal review system that captures this
and other aspects like team work and attitude of sales force at our stores.
In some industries and functions, it is
indeed a big challenge for the HR departments to come up with the right parameters for measuring the performance of
employees across departments. For
instance, in a media company, while it is
easier to quantify the job done by an executive in the ad sales department by simply
looking at the volume of business she
116
brought, the same methodology cannot be

used to review a reporters performance.
To deal with such situations, media and
entertainment company Network18
switched to a competency-based system in
2011. As part of this process, competencies
are divided as common and function-specific competencies. After this, a list of
deliverables is prepared. Says Ajit Singh
Vig, HR head, Network18, It was crucial to
make these modifications in our review to
bridge the gap between skill and will of
our people. Also, we shifted the review
process online this year allowing supervisors and their subordinates to edit goals
if needed.
Evidently, periodic review is a tricky
affair and if your annual review system is
itself in a mess, duplicating it several
times in the year will only turn the review
process into a bigger mess. However,
done well, systematic review and feedback is the only way to avoid poor
resource deployment and the costly and
reactive problem-fixing on the fly.
In short, a sure-fire way to create a high
performance workforce.
>
Why good
advertising works
One right ad campaign, without other kinds of marketing support,
can push up sales of a brand for a considerable period. The
formula isnt that complicated
ROHIT NAUTIYAL
kshaya Tritiya of 2010

brought a challenge for
Future Groups Big
Bazaar. Unlike the last few years
when the retail chain was inducing purchase among its consumers in the south
zone during the festival, now was the
time to turn its eyes to other neglected
zones like north and east. Interestingly,
this mammoth task was to be accomplished without squandering money and
resources on promotions or getting into the

tricky job of placing the
right assortment after
studying consumer preference in each
zone. The key to success was a simple TV
commercial ideated by DDB Mudra,
117
which said how

Akshaya Tritiya is the time
to shop for everybody. As it
turned out, this three-day pan India
>
flawless execution, not great
2012. When the campaign
ideas, says Anil Bhardwaj,
reached its peak in February
founder of creative hot shop
this year, our business had
Basecamp India. In both the
grown ten times, says Ravi
cases mentioned above, the
Vora, senior vice-president,
campaigns were not supportmarketing, Flipkart.com.
ed by any major changes in
The idea was not that
pricing or distribution, but
great, after all. The ad films
they managed to change the
spoke of advantages of shopfortunes of the respective
ping online like cash on
brands forever.
delivery, 30-day replaceThe improving familiarity
ment warranty etc. What was
and
acceptance
of
interesting was the execuHappydent was reflected in
tion in fact, the ad took up
its sales, which grew more
the main concerns of online It is impossible to
than 55 per cent between
shoppers head on and tried measure the
to allay fears without beat- impact of an iconic 2006 and 2008, making it the
fastest growing brand in
ing around the bush.
ad in sales
Perfettis
portfolio.
The
Yes, sometimes execution
numbers and
industry growth rate for
can really take a simple idea
chewing gums stood at just 18
and give it a life beyond its brand recall by
per cent during this period.
average sale-by date. In limiting it to a
Mind you, the whole exe2006, Perfetti Van Melles time frame
cution bit can backfire if you
Happydent
White
had
dont have a strong idea in
accomplished unprecedent- SUMEET SINGH
the first place. Take the 2003
ed sales numbers along with
SENIOR VP,
ad for M-Seal. In association
global recognition MARKETING,
with its creative agency
by taking the tried STRATEGIC ALLIANCES
Ogilvy & Mather, Pidilite, the
and tested insight & CORPORATE
COMMUNICATION,
makers of epoxy compound
of sparkling-like- INFO EDGE INDIA
M-Seal launched a campaign
diamonds teeth
with the tag line ...sirf ek tapakti bund
many notches up with the
aapki kismat badal sakti hai...
Palace commercial.
It opened with an old man on his
The effect of the commudeathbed with relatives standing
nication was such that it
around in silence. His lawyer passes his
forced Perfetti to double the
will around and the relatives gently
production capacity of the
accept the dying mans bequeathal.
base product and also launch
But his unhappy son begs daddy to add
sub-brands and flavours
a zero at the end of the ~1,000 he has
under
the
Happydent
inherited. Then he asks for more zeros.
umbrella. As shown by the
had his way, he dumps the hapBrand Track gathered by
The ad took up the market research company Having
less father and takes off purportedly to
main concerns of
gloat over his newfound wealth. At the
TNS, brand awareness scores
online shoppers
doorway, a drop of water from a leak
went through the roof the
head on and tried total brand awareness scores overhead falls on the will, smudging
to allay fears
the figure 1 at the beginning of the
of Happydent reached 90 per
stated sum on the document. Serves
cent as compared to the 50
without beating
him right, one is tempted to say six
per cent that the brand stood
around the bush
zeroes stare at him as his father passes
at in 2005. The spontaneous
away.
recall
of
the
brand
RAVI VORA
At first sight, you may say the ad
Happydent had more than
SENIOR VP,
was making light of something very
doubled to 16 per cent, from
MARKETING,
serious the whole idea of death and
the previous 8 per cent in
FLIPKART.COM
inheritance. But, if you looked careful2005. Both Flipkart and
ly, while the central character dies at
Happydent are examples of
campaign (supported by print) resulted

in a spike of 25 per cent in the sales of
gold jewellery. The average spike in the
sales of gold jewellery during festivals
then was not more than 5 per cent.
During the same week, the next best performing category was electronics. The
client praised what the agency achieved
with a modest budget of ~3 crore.
This is just a small example of how a
market leader fulfilled sales targets on
the back of a simple ad campaign.
While many self-conscious marketers
may not like the idea of letting their
partners (read ad agencies) walk away
with the credit, a few are thankful for
the much-needed creative shot in the
sales of the brands they manage. If
thats half the job done, some brands
have found a permanent place in the
psyche of the Indian consumers with
iconic campaigns that resulted in sales
growth for a few months to years in
some cases. The examples we will share
are of brands that were known to the
consumers vaguely but became top of
mind and leaders in their
categories
after
tasting
unprecedented success with
an ad film.
Mind you, brand loyalty
hardly ever changes, and its
not something that responds
to advertising. So, experts
advise brands should focus
on increasing market penetrationthe ad campaign is
likely to be three times as
effective as trying to increase
loyalty.
Execution can be a clincher

In September last year,
online retailer Flipkarts
adult-like kids became the
talking point from Day 1 of
the No kidding. No worries
campaign going on air. Prior
to this, the company had
done a TVC, but that one
went unnoticed. The impact
of the campaign lasted close
to eight months as overall
clicks on the website went up
five
times
between
September 2011 and April
118
>
COMMERCIAL IMPACT
How some ads create that long-lasting magic
BRAND: BIG BAZAAR
The ad: To induce purchase by consumers
in the north and east zones on the auspicious occasion of Akshaya Tritiya.
Year of creation: 2010
Effect: The three-day pan India campaign
(supported by print) resulted in a spike of
25 per cent in the sales of gold jewellery.
The average spike in the sales of gold jewellery during festivals then was not more
than 5 per cent. During the same week,
the next best performing category was
electronics.
How long it sustained: Though just a threeday campaign, the effect, in terms of sales,
lasted out for close to a week.
BRAND: FLIPKART
The ad: No kidding. No worries campaign
speaking about advantages of shopping
online.
Effect: The impact of the campaign lasted
close to eight months as
overall clicks on the website went up five
times between September 2011 and April
2012. When the campaign reached its
peak in February this year, business had
grown 10 times.
How long it sustained: The campaign continues its mark even today given that it took
up the main concerns of online shoppers
head on and tried to allay fears without
beating around the bush.
BRAND: HAPPYDENT WHITE

The ad: To continue accomplishing sales
numbers of the brand along with global
recognition.
Effect: The effect of the communication was
such that it forced Perfetti to double the
production capacity of the base product
and also launch sub-brands and flavours
under the Happydent umbrella.
How long it sustained: According to Brand
Track, brand awareness scores of
Happydent reached 90 per cent (in 2005,

it was 50 per cent). The spontaneous recall
of the brand Happydent had more than
doubled to 16 per cent (8 per cent in
2005). Sales grew more than 55 per cent
between 2006-08, making it the fastest
growing brand in the portfolio.
BRAND: M-SEAL
The ad: The commercial tried to help the
brand make the transition from being an
industrial product to a leading consumer
brand for repairing domestic
water leakage.
Effect: The eight week-long TV campaign
not only managed to induce trials but
upped the sales of M-Seal by 12 per cent
in the same year.
the end, the joke was not on the dying

man; it was on his scheming son. It
made an instant connection with the
audience. At the time of the launch of
the ad film, M-Seal was trying to make
the transition from being an industrial
product to a leading consumer brand
for repairing domestic water leakage.
The ad fast tracked the process and to
this day the ad remains the best in its
category. The eight-week long TV campaign not only managed to induce trials but upped the sales of M-Seal by 12
per cent in the same year. Says Nilesh
Mazumdar, president, sales and marketing (maintenance products), Pidilite
Industries, When you are a market
leader, expanding the category is the
only way forward. Our next target is to
make the brand available at kirana
stores and if advertising can help us
achieve this, why not?
Timing is crucial too

How long it sustained: The ad story of an
old man dying even as his scheming son
wants him to sign away a cheque (the
numerical 1 gets washed away thanks to
water leakage) continues to be the best in
the category. The brand, which will soon
be available at kirana stores, is taking the
advertising route once again to get
noticed.
BRAND: NAUKRI
The ad: Effective portrayal of an employees
angst in a job even as he looks at a better
job opportunity through an online job
portal.
Effect: This was when the job market was
warming to online job portals like
Monster, Jobsahead and Naukri. The
underlying humour of the commercial
clicked with job seekers and employers
equally. There was a controversy, too,
when some sections of people objected to
the name Hari Sadu in the ad.
How long it sustained: The traffic share on
Naukri went up 15-20 per cent in the first
month of the TVC going on air. Even today,
Naukri hasnt phased it out completely
and brings it back on air on and off.
119
If execution did the trick for

Happydent and Flipkart, timing was
the
clincher
for
Naukri.com.
Remember the job portals Hari Sadu
ad that was launched way back in
2006? In his new book Darwin Brands,
Anand Halve, director, chlorophyll
brand and communications consultancy, says, One has to remember that
campaigns dont work in a vacuum.
Sometimes, they consciously leverage a
changing consumer habit or ride an
emerging trend. This is what Naukri
achieved by portraying an employees
angst in its ad. At that time the job market was warming to the rise of online
job portals like Monster, Jobsahead and
Naukri, while print was beginning to
cede its stranglehold on the recruitment ad budgets of Indian corporations.
The underlying humour of the
Naukri TV commercial clicked with job
seekers and employers equally. A controversy sparked on the use of name
Hari Sadu as it hurt the sentiments of
Hindus. This was followed by a man filing a complaint against the company
with the Advertising Standards Council
of India on how his son Hari had
become the butt of jokes in school
because of the ad. Fortunately, the
>
number of people who

seemed to like the ad outnumbered those who were
against it.
Sumeet Singh, senior
vice-president, marketing,
strategic alliances and corporate communication at
Info Edge India, which owns
and runs Naukri.com, says it
is impossible to measure the
impact of such a powerful
idea by limiting it to a time
frame. However, to give a
sense of the success of the If an online retailer
ad, the traffic share on is able to get the
Naukri went up 15-20 per
shopper to his
cent in the first month of the
website, his job is
TVC going on air. The whole
category was growing at that done as there is a
time but one can gauge the high probability of
power of the campaign by a purchase
the simple fact that Naukri
hasnt phased it out com- JITENDER DABAS
pletely and brings it back on
EXECUTIVE VP AND
air on and off.
HEAD OF PLANNING,
Jitender Dabas, executive MCCANN ERICKSON
vice-president and head of
planning,
McCann
Erickson, the ad agency
that conceptualised the ad, notes how
the impact of iconic campaigns on sale
of products vary in different categories.
If an online retailer is able to get the
shopper to his website, his job is done
as there is a high probability of a purchase. On the other hand, a consumer
durables manufacturer can only bring a
consumer to the showroom with the
help of a great ad. You go to an e-commerce site with the intention of buying.
In that sense, online shopping is about
immediate purchase. Buying a TV or a
washing machine offline will be a considered purchase. Returns tend to look
higher in the case of underpenetrated
categories like job portals or e-tailing,
he says.
choose to stick to the

same approach (featuring
adult-like kids) to cash in
on the hard-earned likeability. Says Flipkarts
Vora, It is easy to do follow-up ad films when the
reviews of your last piece
of work are neutral.
However, its a big challenge to hit on another
disruptive idea after you
have tasted success with
one iconic ad. Adds
Singh of Info Edge,
Advertising is noticed
only when there is a need
for it. If you bask in the
glory of one iconic campaign just because it
delivered numbers, you
have missed the point.
The curse of follow-through

While in most of the cases, the spike in
sales as a result of a great TVC last for a
few months, marketers and their agencies are under constant pressure to
come up with an equally powerful follow-up campaign. Some, like Flipkart,
120
>
SAYANTANI KAR
he automobile industry in India

comes with a disclaimer. That the
looping challenges of its component
manufacturers, who supply anything from
nuts and bolts to seats to the original equipment manufacturers (OEMs), puts the
brakes on its ambitious plans. While the
downturn in 2008 laid bare the gaps in
capacity, the lack of access to capital and
over-dependence on just one or two OEMs,
the current slowdown in the automobile
industry has saddled them with excess
stock. Of course, there are long-ranging
solutions such as developing global supply
chains and strategic technology partnerships with OEMs, but what about here and
now?
A handful of component suppliers are
turning their attention to their existing
supply chains for answers. While lean
manufacturing is the way to go, some of
them are trying out a different kind of
lean not the traditional just-in-time
(JIT) by trying to decongest the
pipeline itself and looking at the Theory of
Constraints (ToC) for inspiration. ToC is
making them agile by freeing up their
working capital faster and increasing
capacity for diversification.
Satyashri Mohanty, whose firm,
Vector Consulting Group, has been
working on implementing ToC among
some of the companies, says, The
entire auto sector swears by JIT in an
effort to replicate Toyotas success in
Japan. JIT will mean that the component manufacturer produces
exactly what the OEM demands,
close to the time of consumption,
without any excess stocks. Suppliers
build warehouses nearby the vehicle
manufacturers plants for this. Yet, if
one were to survey these holds, you
will find a huge mismatch of inventory one to two months worth of
stocks for some parts, while others are
out of stock.
Inventory spells doom for suppliers of
auto components by tying up their working capital, an expensive proposition for
enterprises that are much smaller than
OEMs.
The long buffers may be a way to get
around the uncertainty that afflicts the
Go with
the flow
Saddled with excess stock, auto component
makers are looking at new ways to
streamline inventory to make their
manufacturing businesses more efficient
IMAGING: AJAY MOHANTY
121
>
tainty. The OEMs are aware;

Hemant Sikka, chief purchasing officer, automotive
and farm equipment, M&M,
says, We are striving to
make as much information
available to our suppliers as
possible.
For the tier I and tier II
suppliers who are implementing ToC, the hardwired manufacturing trigStocks should be
gers of forecasting and full
capacity utilisation are givheld to cover
ing way to replenishment
demand during
the transport time. ordering.
Niranjan Kirloskar, manIt still does not
aging
director,
Fleetexplain why any of guardFilters, a Cummins
the suppliers, as
group company, which is the
well as dealers of
largest producer of automofinal vehicles, will
tive filters, says, We realised
we could sell more without
hold months
additional investment if only
worth of stocks
we increased the chances of
supplying the right product
SATYASHRI
as and when needed by the
MOHANTY
OEMs. His second-in-comFOUNDING DIRECTOR,
Fix that order
mand, Vijay Gokhale, COO of
VECTOR CONSULTING
GROUP
Fleetguard, recalls the nightFor ToC to work, the flow of
mare of shifting orders. In
what is to be manufactured, or
the middle of the day, we would get a note
production planning, has to be reworked.
from the OEM saying that they had run
The companies, from the OEM right
out of some other component, say, a chasdown to the lower tier suppliers, generate
sis, as a result of which they had to switch
a schedule, predicting future sale based
to another platform. That meant we had
on past sale records, for the month to
to also change our production. For us it
guide their suppliers. However, forecastwas painful, because it often meant things
ing leaves a lot of scope for miscalculawe had produced would now lie around
tions and errors. If a bloated, noisy estiand we would be scrambling to make
mate reaches down-the-tier suppliers, it
something else. Our suppliers got caught
comes back to haunt the factory lines
sooner than later. Mohanty says, In the in the same vicious circle.
Gokhale explains the idea of replenauto sector, companies have a mishmash
ishment ordering: Whatever the client
of both JIT and forecasting. While compicks up from our warehouse, becomes
ponent manufacturing runs on a monthly
our order for the next day. After five days
plan, based on forecasting, the use of
the average time it takes to make one of
components on the assembly line is based
their products and transport it the new
on production requirements of the day or
filter is ready to be pulled from the wareshift. The OEM pulls parts from the venhouse. Manufacturer-forecast schedules
dors godowns, but the vendors are left
are still used but only to provision manwith a huge variation in what is conpower and raw materials at the beginning
sumed by the OEMs and what gets manuof the month. Production does not follow
factured.
it and there is no scope for more surprise.
Such changes in the OEM-demand are
Pune-based Mhetre Packaging, that
not going away any time soon. What can
supplies corrugated boxes to tier I combe taken out of the equation is the uncertransport and logistics industry in the country, but
Mohanty says they could do
better: The maximum time
taken to traverse the northsouth (longest) route by road
will not be more than 15-20
daysit can be done in less
than 10 days. Stocks should be
held to cover demand during
the transport time. It still does
not explain why any of the
suppliers, as well as dealers of
final vehicles, will hold
months worth of stocks.
It smacks of a supply chain
where stocks are pushed down
the line and not pulled by the
market demand. Push supply
chains often are in danger of
spiraling out of control if there
is a change in demand on the
part of the end consumer
because it is not easy to quickly change the goods produced
along the way.
Enter ToC.
122
ponent makers, such as Fleetguard, started by identifying the 291 parts that
moved the fastest and could not depend
on staid OEM monthly forecasts. These
needed stocks or buffers to be held. The
rest were special made-to-order parts
which would come with prior intimation.
The stocks for these parts are monitored using ToCs simple traffic-light
colour coding: green says the stocks of
that particular product are adequate for
the day, yellow says it is time for a dekko
and red says the replenishment for that
stock has been unsatisfactory and is
cause for alarm. Yellow denotes that I
have some breathing space to manufacture but red means the product has to be
not only made that day but should reach
the client the next day. Earlier, the client
would make multiple changes to even the
daily manufacturing schedule, seeing us
firefight every day, rues Dilip Mhetre,
the owner.
Vendor-managed
replenishment
ordering is being tried out by some OEMs
as well, though not always ToC-assisted.
Prashant Badiger, senior manager (procurement) of supply chain management
at AMW, a manufacturer of heavy commercial vehicles, says, Vendor-managed
replenishment is way better than the
forecast model. The latter tries to predict
what might happen. Since last year, we
have been trying to shift our tier I suppliers to the replenishment model.
The inventory of raw materials for
production at AMW was brought down by
34 per cent year-on-year by March, 2012,
as a result. Less than 30 days inventory is
now held for critical parts. Of course, the
forecasting still helps their tier 1 vendors
manage their raw materials and manpower, but consumption, that is, the supply of the parts, is done through replenishment. While Fleetguard is one of its
suppliers too, vendors who dont follow a
ToC-led replenishment model station
their representatives at AMWs factory for
stock count and quality checks.
M&M, too, is considering a move from
scheduling to replenishment at both its
own factory line as well as its suppliers.
This will minimise changes and offer
better visibility, says Sikka. For now,
bulky components which are difficult to
store such as the cockpit, instrument
>
FAC T BOX
Theory of constraints
Eliyahu Moshe Goldratt
(March 31, 1947 June 11, 2011),
a physicist-turned business
guru, had proposed ToC to
explain that a system will
always have atleast one
constraint. Otherwise, it will
go on to produce unlimited
amounts (throughput) of
what that it strives for.
This system could be
likened to a business or its
many processes, such as
(throughput) and greater

surpluses of products not sold.
supply chain, finance,

human resource
management. Hence, ToC
helps in systems
management.
The constraint for a business
could be the market, a

resource, finance, policy etc.
For a supply chain, it often is a
hindrance to the flow of
inventory, that creates less
availability of the products
needed to be sold
panels, seats are supplied JIT, while the

rest are stored and transported by suppliers.
Filtrum Tools and Components
(also tier II) VP Sandip Devkar says moving away from forecasting to the ToC-led
replenishment model has brought down
the time of manufacturing by five days.
Smooth working has ensured that even
the red alert occurrences have gone down
from 5 per cent to 1 per cent.
Mohanty says, Replenishment helps cut
down production lead times as well.
What used to take a month to supply can
now be supplied in four/five days by the
lower tier suppliers, making them more
agile. With replenishment, they just keep
manufacturing to meet the pre-determined levels.
Buffering but just

The pre-determined level of inventory is
what is called buffer. While the traditional
mass production systems called for
buffers at every stage along the production, JIT requires there be no buffers.
Another founding director of Vector,
Kiran Kothekar says, The problem with
JIT is that it is not geared to handle the
daily demand variations that we see on
the Indian auto assembly.
But wont buffers compound the
ToC works on the constraint

in five steps:
i. Identify the constraint (to
the throughput)
ii. Exploit the constraint (by
quick improvements using
existing resources)
iii. Subordinate every other
process to step 2 (align
them to support step 2)
iv. Elevate the constraint
(improve the performance
at the constraint until it
stops being one)

v. Repeat (the above steps for
the next constraint, while
aggressively improving the
current one)
ToC approaches a lean and
synchronous system in a
manner different from justin-time (JIT). JITs varied
processes focus on eliminating
waste and defects from the
whole manufacturing process,
while ToC focuses on increasing
the throughput by removing
the constraint.
excess inventory trouble? Mohanty

clients point of use, say, the suppliers
warehouse near the OEM factory. The
explains, ToC is not about building accidental buffers that sprout when producbuffer in ToC acts as the upper limit of
holding inventory at that
tion is switched between platforms, leading to unused
point, and is rarely breached.
Only when the buffer goes
excess parts of the previous
product or even finished vehidown for a given product is a
new replenishment order
cles which are not in demand
but get pushed to the dealers.
generated. Otherwise, it is not
manufactured at all.
ToC creates additional buffers
of raw materials which can be
Scrutiny in replenishment
ordering is crucial even for
held at the suppliers delivery
OEMs. For its part, AMW
end so they dont run out of
combs through orders from
parts when production plans
the parts-buying team and
change suddenly.
checks them against the next
In ToC, the buffer is the M&M, too, is
estimate of only the consump- considering a move four days planning to see if
tion during the time taken for from scheduling to there is any duplication or if
placing a new order, manufac- replenishment at
the need for a fresh component is genuine, before filing
turing and transporting it to
both its own
the warehouse. This can lead
request to
factory line as well atierreplenishment
to cutting the buffer levels by
I suppliers. Earlier, maras its suppliers as
keting forecast would have
25-50 per cent. Fleetguard
stocks no more than five days this will minimise
just led to dumping of raw
material rather than what was
worth of inventory as buffer changes and offer
while Mhetre stocks two days better visibility
being needed on the manuworth of the products it had
facturing lines by the company.
homed in on. Apart from daily HEMANT SIKKA
monitoring, buffer levels can
Vendor-managed replenCHIEF PURCHASING
ishment ensures that OEMs can
also be revised as Filtrum does OFFICER, AUTOMOTIVE
every three months to factor AND FARM
enjoy the benefits of ToC withEQUIPMENT, M&M
in new products.
out undergoing a change themselves. The senior sourcing
Usually it is held near the
123
>
manager of a leading Indian manufacturer
of both commercial and passenger vehicle,
not wishing to be named, says, The vendor-managed inventory as followed by
Fleetguard has simplified inventory management and ensured that our inventory
levels go down too. But that has not dented
parts availability. In fact, it has now
improved from 50 per cent of supply to 80
per cent of the correct supply. Kothekar
says, The ToC-assisted manufacturer has
to tell its customer to lift whatever it needs
and forget whether their production planning is adhered to or not.
ToC encourages small batch sizes and
switchovers, something that mass production cant handle. Non- repetitive,
quick switchovers can derail JIT as well,
more suited for uniform, stable manufacturing plans. ToC has helped Gokhales
team to increase changeovers, with multiple parts produced on the same line and
day. It does not let our resources to idle.
Such flexibility is now being appreciated.
Hidden capacity
Experiences of manufacturers also show
that ToC unlocks capacity. Kothekar says,
With correct order-filling and meeting
each order, the capacities across factory
line, storage and finances are released.
Gokhale says Fleetguard has been able
to release 30 per cent additional capacity
which has helped it enter the aftermarket. Fleetguards gets 30 per cent of its revenues from the aftermarket and exports.
Mhetre which was earlier dependent for
90 per cent of its revenues on Fleetguard,
now gets 14-25 per cent of revenues from
non-auto customers. Auto research analyst Yaresh Kothari from Angel Broking
says, Replacement demand insulates
component manufacturers from the fluctuations in OEM demand. During slackening demand, we have seen some of
them shut production to align their
inventories with the demand and free
working capital.
The freed up working capital as a
result of a fast moving supply chain also
helps ease the margin pressures that
component suppliers complain of.
Devkar of Filtrum says that his working
capital now turns 14 times a year. Crisils
report on Fleetguard Filters show a jump
of net sales from ~2.9 billion in 2008-09 to
grows it quicker.
Implementing ToC has its
own share of challenges, the
foremost being the change in
the
mindset
it demands. Forecasting and
investing in new capacity to
increase revenues are tenets
that have been ingrained for all
these years. Benefits for any
new processes will take longer
Moving away from to manifest and hence, the largforecasting to the
er the organisation, the lower
the chances of radical changes.
ToC-led
However, ToCs agility in
replenishment
model has brought putting a manufacturers
down the time of house in order, irrespective of
its
linked
manufacturing by customers and suppliers, could
five days. Smooth c
o
m
e
working has also
in handy. That said, analysts
Moving upstream
reduced red alert
believe that more than a
process, the challenge is to
The application of ToC is not occurrences
source accurate and timely
limited to downstream benedata. Rakesh Batra, national
fits only. The chain that links
SANDIP DEVKAR
leader, automotive, Ernst &
manufacturer with the distribYoung, says it is imperative
utor can also benefit. The prob- VP, FILTRUM TOOLS
AND COMPONENTS
for auto component makers
lem of dumping the inventory
to get such data to beef up
that has been produced but not
their production plans and train manin demand to dealers could be alleviated
by ToCs dealers management. There is a power to read it. Agility, as a result, and
delivering on time consistently, will
huge difference between ToC-assisted
boost the suppliers negotiation powers
and other manufacturers who dump
with the OEMs. Sudden changes to
stocks on us. We might be getting a
schedule and inaccurate forecasting lead
turnover discount from the others, but
that only means we have had to handle to most of the problems in this industry,
he sums up. As global auto-manufacturmore inventory to meet month-end tarers opt for fewer global platforms to
gets. It takes up our working capital and
reduce variability, JIT could become a
storage space, says Jaspreet Singh, manreality. For now, ToC can provide clues to
aging
director
of
Maini Auto
lean and synchronous supply chains.
Incorporation,
which
distributes
Fleetguards filters for the after-market
and also has a sister concern selling other
auto components. The availability of
stocks is guaranteed by Fleetguard, and if
they fall short, they pay us a penalty, instituted by them. All we have to do is follow
their system. While we need to hold products worth a months sales for other companies, we need to hold not more than a
weeks stock of Fleetguards filters, says
Singh. With Fleetguards stocks, Singhs
working capital can be rotated four times
more than others. Fixed routes on fixed
days, as guided by ToC, ensures that he
services the retail network better and
~7.4 billion in 2011-12. Profits

after tax jumped from ~107.5
million to ~756 million in the
same period. Its operating
profitability has been mostly
in the range of 13 to 16 per cent
over the past five years. Mhetre
saw a jump in revenues of 21
per cent.
The benefits for OEMs are
for all to see. AMWs Badiger
points out, Cutting down
inventory
to
30
days
(Fleetguards inventory at
AMWs factory) has helped
free up space since filters are
bulky. The free space can be
used to house parts for upcoming models without new
investments.
124
>
Running successfully
As product lifecycles shrink and R&D costs continue to spiral beyond
control, smart tweaking of existing offerings can save the day
ROHIT NAUTIYAL
n his 2012 book Likeonomics, digital

marketing strategist Rohit Bhargava
explains how relevance is the key to
building real trust and achieve likeability. The idea may not be exactly new but
it has come back into the spotlight as
brand managers and R&D heads across
industries struggle to come up with relevant offerings as product lifecycles
become shorter.
The fundamental question is simple:
how do you extend the life of a product at

a low cost. Traditionally, extension strategies have revolved around five basic models. As a marketer, you could launch a
fresh advertising blitz to gain a new audience or remind the current audience or
try brightening up old packaging and
introduce subtle changes that dont disturb the basic product or alienate your
current consumer base thus, creating
some excitement on a tight budget. If you
are more adventurous you could opt for
price reduction to make your product
125
more attractive to customers. And if you

had a sizeable budget you would add value add new features to the current
product (for instance, video messaging
on mobile phones) or even explore new
markets and try exploring overseas markets. All these strategies have their own
share of risks but can give your brand the
much needed shot in the arm.
From the looks of it, our marketers are
revising the old textbooks to come up
with smart plans to extend their products shelf-life without chivvying the
bosses for fatter product development
budgets. Mind you, the extent to which
product life spans are getting shortened
will vary from industry to industry, from
category to category. For instance,
technology and youth-driven categories like mobile handsets
and fashion call for an
>
upgrade within three to six

internal discipline and
months.
external market forces. For
On the other hand, FMCG
example, a company may be
brands, which reap the trust
organised to create and
built among its consumers
introduce major innovations
over the years, survive for
as part of its corporate philonger periods without funlosophy. So if you are a
damental changes. Consider
Hewlett Packard, introducthis example. In India, there
ing regular innovations
have been no significant
sometimes even making
modifications in the formuyour own products obsolete
lation of hot-selling brands
will all be part of a days
Customer feedback
like Maggi noodles (Nestle),
work. On the other hand, if a
data is an
Cadbury Dairy Milk and Dove
company organises itself for
important
(HUL). Innovation is not
reducing cost, it would avoid
ingredient in
always an imperative in these
introducing innovations that
our product
categories because conlead to an increase in its cost
refreshments
sumers are largely habit-driunless it becomes necessary
ven and, by inference, averse
due to external factors.
to radical changes. In 1997,
Examples would be retailers
MAYANK PAREEK
the change in Maggis formusuch as Walmart that focus
COO, MARKETING &
lation was rejected by conon offering low prices to conSALES, MARUTI SUZUKI
sumers; Nestle was forced to
sumers .
launch the old Maggi after
Smart floggers and tweakings
two years.
Barring mobile handsets, R&D costs in
At the same time, these star products
industries like automotive, FMCG and
have been indispensable items in the
consumer durables have been going
shopping list of urban consumers for
through the roof. According to KPMGs
decades. In a large measure, this is the
2012 Global Auto Executive Survey, the
result of a strong distribution muscle and
importance assigned to new products or
effective brand management. Says Harish
new technologies as a factor contributBijoor, CEO, Harish Bijoor Consults,
ing an auto companys growth is down to
The legacy of star products must be
retained to increase a brands lifecycle. 38 per cent from 44 per cent last year.
Path breaking innovation has a lower Brand management has risen to 8 per
cent from 5 per cent in 2011. A new prodacceptance rate.
uct launch in auto industry is a ~1,000The capital-intensive auto industry
crore bet materialising in three years after
lies somewhere between the two poles.
idea screening. This cost must be recovWhile engine technology may not evolve
ered within the estimated lifecycle of the
fast, steady changes in design play a critproduct.
ical role in extending the life of a vehicle.
Things are not very different in white
Siddharth S Singh, director, fellow progoods. Appliance lifecycles are down to
gramme in management and associate
nine years from 30 years, say experts. In
professor of marketing, Indian School
of Business, says, A company primarily 2010, Godrej Appliances added 100
stock keeping units under various cateconsiders the return on investment (RoI)
gories in its portfolio. Despite following a
in introducing innovations of any kind.
multi-generation product plan to launch
Major innovations do not happen often,
and are risky. Therefore, it is attractive products in line with changing consumer
lifestyle, the journey has not been easy for
for firms to introduce minor innovations
the company. Because of shorter lifecyas long as they do not have compelling
cles, we have to come up with new platreasons to introduce major innovations.
forms every three years which involves
He explains how several factors can
high cost. Also, we do product facelifts
influence the decision to improve old
on a bi-annual basis to bring new designs
products without major changes. Some
such key factors relate to a companys to consumers. The going gets tough if
126
these initiatives are not supported by volumes, says Kamal Nandi, executive vicepresident, sales and marketing, Godrej
Appliances.
Currently, Godrej is working to make
its existing range of air conditioners more
energy efficient by making technology
tweaks. A new brand launch is not always
the best way out, says the company. New
product failure rate in the US and Europe
can be as high as 50 per cent and 90 per
cent respectively. Its not much different
in India according to studies the new
product failure rate stands at 53 per cent.
In this scenario, it makes sense for a company to flog its star products by making
frequent tweaks in them rather than
invest resources on a spanking new idea.
Look at what Maruti Suzuki has been
doing in recent years. It has refreshed its
offerings from time to time to stay abreast
of new technology and push sales.
Traditionally, there has been a long time
gap between the launch of its cars. The
company sailed through during these
gaps by launching new variants (at least
two in a year) and making tweaks in the
engine, interiors and design of its hotselling cars like Alto, WagonR, Swift and
Ritz, among others. Says Sumit Arora,
research director and head of Ipsos
Automotive, Tweaking vehicles by
extending the same engine or design to
different cars in a companys portfolio
can go a long way in achieving economies
of scale. The best part is, a company can
pass on the benefits of reduced cost to
the customers.
Thats exactly what the passenger car
leader
has done with the Alto.
Last month, it relaunched its best-selling car as the Alto 800 with new features.
The new Alto is ~4,000 to ~8,000 cheaper
than the old one, depending on the variant. The idea was to push sales. The sales
of the car have been flagging for some
time now in financial year 2011-12, it
sold an average of 25,000 units a month.
The figure, so far this year, is down to
18,000 a month.
The company works on a five-year
plan for each brand to understand the
number of variants and full model
changes. Launched in 2000, the Alto, for
instance, has been refreshed eight times
the maximum for a Maruti Suzuki car
>
Major innovations
do not happen
often, and involve a
lot of risks
We have to come
up with new
platforms every
three years, which
is a costly affair
SIDDHARTH S SINGH
DIRECTOR, FELLOW
PROGRAMME IN
MANAGEMENT &
ASSOCIATE PROFESSOR
OF MARKETING, ISB
Market dynamics,
right pricing and
branding strategy
helped increase the
lifespan of our
handsets
Extending the same

engine or design to
different cars in a
firms portfolio can
help in achieving
economies of scale
AMIT MATHUR
SUMIT ARORA
DIRECTOR, CHANNEL
SALES, RIM INDIA
RESEARCH DIR & HEAD,

IPSOS AUTOMOTIVE
KAMAL NANDI
EXECUTIVE VP, SALES
AND MARKETING,
GODREJ APPLIANCES
followed by the WagonR and the Swift.

Says Mayank Pareek, chief operating officer (marketing and sales), Maruti Suzuki,
Product lifecycle is shortened when it
becomes too familiar in the mind of the
consumers (not obsolete) or when a better product hits the market. At Maruti,
customer feedback data is the most
important ingredient of our product
refreshments.
At times, companies try to stretch
product lifecycles by taking its offerings
to new markets with effective brand management. Around 2009, Research in
Motion, the maker of BlackBerry smart
phones realised how its market was
restricted to the affluent consumers. In
June 2010, in a bid to bring affordability
to its portfolio, the company launched
BB 8520 priced at ~15,000. This was followed by the launch of a co-branded campaign with Vodafone, which positioned
the brand as the choice of the youngsters,
and not just a communication tool best
suited for the corporate honcho.
Later in the year, component costs of
handsets saw a steep fall, resulting in
BlackBerry slashing the price of its models. Its service plans had also become
cheaper by that time. Says Amit Mathur,
director, channel sales, RIM India, This
helped in taking all our products includ-
ing the 8520 beyond metros to tier 1 and

2 cities that were warming up to smart
phones. Market dynamics, right pricing
and branding helped us increase the life
of our handsets.
According to Yamaha Indias national business head Roy Kurian, manufacturing companies must do their homework properly before zeroing on a new
product launch. On the back of design
tweaks made in the R-15 FZ series and the
Fazer in the last one year, the company
claims to have achieved a spike of 25-30
per cent in sales.
The right mix

All this is not to say companies should
stop investing in new product development and focus tactically on simply
extending the shelf-life of their faster
moving brands. Points out Singh of ISB,
To deal with rising R&D costs, companies sometimes form alliances to conduct
R&D and share benefits. They sometimes
let new ventures test innovative concepts
and products in the marketplace and then
buy them out. Other methods are moving
R&D resources to lower cost areas such as
the developing countries, working with
faculty members by supporting their
research, and co-creating products with
consumers. That said, innovation is a
127
critical decision and companies do not

take it lightly, he adds.
Smart managers know that. Pareek of
Maruti Suzuki, who spends three days in
a week with consumers from across the
country, agrees. Getting the most out of
existing products with minimum new
investment is certainly attractive, he
says, but that should not be a reason to
cut down on investments in new product development.
Of course, the spread of communications technology has made things both
easy and difficult for manufacturers.
Earlier, collaborations took longer and
access to information was limited. This
restricted the pace of innovations. Now
people can collaborate easily at a much
faster pace, in fact in real time. The access
to information is also easy. Technology
has enabled people from across the world
to work on projects all the way from
ideation to finance. While all these factors
have resulted in more and faster innovations they have also resulting in reduced
life cycles of existing products, adds
Singh.
So there you have it: enhancements
and innovations should go hand in hand
you cant win markets piggybacking
on one element and ignoring the other
outright.
>
Going solo
Dissolving a business partnership can be tricky. Drafting an exit
plan right at the outset can mean the difference between
an amicable split and a messy one in which you wind up
losing critical assets
ABHILASHA OJHA
esearch indicates that 50 to 70 per

cent of all joint ventures fail. The
most common causes of failure cited by researchers are cultural differences,
poor or unclear leadership and poor integration process. The failure rate is high,
but how you go about handling the situation can mean the difference between an
amicable split, where you run the business
as you deem fit, and a messy separation, in
which you wind up losing clients, resources
or other critical assets. The best way to handle a business breakup is to prepare for the
possibility of a separation when youre just
starting out. Sounds commonsensical but

thats where many erstwhile partners have
tripped, say experts.
Mritunjay Kapur, country MD,
Protiviti, the worlds largest independent
business and risk consulting firm, lists out
the typical reasons that have put many
business partnerships under severe strain.
They are performance parameters related
to cash flow, profitability, the gestation period of the business, governance issue (in
case of frauds, diversion of funds, right to
audit); exit clauses (the commitment of
both partners if the market and thus the
JV doesnt go according to plan); finally,
technology transfer issues (who keeps R&D
128
it at what cost, if a partner keeps it at all).

There can also be unforeseen circumstances that relate to national security
(During the 26/11 attack, one particular
company decided to end its brand new JV
with immediate effect, he remembers).
But before we move to the issue of managing a break up, it is pertinent to understand the reasons why they may break up.
Think about it: the JV, which is one
entity created by two equally talented, powerful and seasoned masters, evolves financially and successfully but not without
complexities. Far too many times, the difficulties are compounded when the joint
venture is created by potential rivals as
>
in the case of Hero and Honda, both equally successful in the business. Then, if you
treat a partnership as your special purpose
vehicle it will have a finite life, which is
over as soon as the goal is achieved, or, if
things get derailed, looks completely unattainable. Like Adi Godrej, chairman,
Godrej Group, said at the time of the
Hershey-Godrej split that JVs cant always
last forever given that they are formed for a
specific purpose.
Preet Mohan Singh, executive director,
industrials, Avendus Capital, a financial
advisory firm, feels that before understanding why a split occurs, companies
need to take one hard look at what got them
together in the first place. Any split occurs
when partners find that somewhere theres
very little real value-addition happening
in the business/company by virtue of the
partnership. In his view, a reason why JVs
are ending is because the market in India is
growing and...global companies are reluctant to share technological expertise, preferring to come on their own, take advantage of the scaled-up market. Continued
access to new technologies, emergence of a
new competitor are key pain points that
an Indian company may go through after
termination of their JVs, says Singh.
Then, specific sectors can have peculiar
pain points that should be sorted out by
partners even before they join hands. In
the area of infrastructure, for instance,
there are two major pain areas share of
control and decision making in financial, management and operational terms.
According to Rajesh Samson, partner,
infrastructure, Ernst&Young, Sometimes
one company wants to make snap decisions and often assesses the other solely in
financial terms. He adds, Most Indian
infrastructure companies would feel it not
necessary to involve the foreign partner
in day-to-day management decisions but
the latter may expect just that.
At the end of the day, the success of any
enterprise hinges one key factor-trust. Says
Kapur of Protiviti, Its important for companies in JVs to build trust and align that
trust to the overall business goals. This is a
soft but its the most important element.
He says, even as JV agreements are watertight, with the roles of companies clearly
etched out, they should offer some flexibility in accordance to how the markets
Before a split, companies need to

look at what got them together
A major problem area is that the

legal enforcement proceedings are
long drawn
PREET MOHAN SINGH

SAKET SHUKLA
EXECUTIVE DIRECTOR,
INDUSTRIALS, AVENDUS CAPITAL
CO-FOUNDING PARTNER, PHOENIX LEGAL
operate. Also, in his view, companies must

remember that they are tied together for a
purpose and if at all they need to go their
separate ways, it needs to be done with
maturity, amicably, without destroying the
value of the other partner because, at the
end of the day, they are competitors.
The onus to part ways amicably, feels
Ashok Venkatramani, chief executive officer, Media Content and Communication
Services (MCCS), lies on the two companies that once came together to create a
success story. Just like a marriage brings
together two people in a formidable relationship, a joint venture does the same,
too, says Venkatramani.
Prepare for the worst
India Inc, to be sure, has seen quite a few
break-ups. Among the more recent examples where erstwhile business partners
have opted to go their own ways are Hero
and Honda, Mahindra and Renault,
Ananda Bazar Patrika Group and STAR
India, Fiat and Tata Motors, Godrej and
Hershey, to name a few. Some of these have
been less painful than the others but all of
them have been preceded by a lot of soul
searching about whether a split could have
been avoided and media analysis about
129
what the erstwhile partners have in store.

That explains why the pre-nup has to
be watertight with legal experts drafting
exit rights in joint venture agreements
carefully. In the majority of the cases the
focus is on the following areas-the right of
first refusal, right of first offer (to safeguard
interests and prevent business to be sold off
to competitors once the JV ends), details on
intellectual property rights, trademarks etc
(vital in pharma industry where patents
are critical; or media industry where channel logos are so important), and the lock-in
period for partnerships (in infrastructure
and real estate, where foreign investors
pump in money, government regulations
stipulate a lock-in period of three years at
the very least).
These factors sum up the majority of
the issues faced by partners headed for a
split. But there are many other issues
people issues, as an expert calls them
that requires companies to approach the
whole process of break-up with a different
game plan.
Earlier this year, Star India decided to
exit Media Content and Communications
Pvt Ltd (MCCS), its news business in partnership with Anand Bazar Patrika to focus
solely on general entertainment program-
>
EXPERT TAKE
Partners are often unsure about the time a

partnership needs to flourish
Mritunjay Kapur, country MD, Protiviti, the
worlds largest independent business and
risk consulting firm, speaks to The Strategist,
about issues on which JVs have tended to trip
Increased competition and the noncompete agreement: Typically, a JV is
between two seasoned players who want to
come together to bring and grow a brand
new entity. Theres a sharing perspective
why partners come together to form an entity
that can grow a particular business. Its when
JVs start to do well that one partner might
start thinking that it can enter the market on
its own. A liberalised regime is making that
even easier in India compared to 15 years
ago, when there were stringent rules. In
splits, companies need to check on the noncompete agreement.
Governance structure: One needs to
understand just how the risks will be
managed (if at all). There has to be
understanding on the money that promoters
are taking for various transactions and
whether the government rules and
regulations are dealt with and followed
ming. The channel, now called ABP News,

didnt turn things around overnight,
admits Venkatramani. What was needed,
he says, was a transparent approach, clarity in communication (to both, the
employees and audiences) and a strategic
vision to get brand recognition (the logo
and the channel name was changed) all
over again. We identified the pain areas
even as the JV had ended; we translated
those into winning strategies, says
Venkatramani.
The channel recognised that there
would be quite a bit of unrest and uncertainty among employees who knew that a
formidable partnership had drawn to a
close forever. The company decided to take
the challenge head on. To soothe rattled
nerves, employees at the news channel
were given bonuses and appraisals before
time this year.
A bigger challenge was to project a busi-
MRITUNJAY KAPUR
Country managing director
Protivity Consulting
properly. Global investors can find it tough to

have faith in transactions etc given that they
deal in a local market.
Schedule of technology transfer path:
Indian partners may be concerned that they
are getting outdated R&D and technology
from their partner. This is critical, especially
when there is a global player that can come
with a wealth of technological expertise
(something that Indian counterparts can
benefit with) and there can be times when
ness-as-usual face to the outside world.

Nearly six months before the partnership
was to formally and legally end, the strategy to rebuild the brand was undertaken
with heavy advertising both in the on-line
and off-line space-television, radio, newspapers and social networking sites were
covered in the exercise. We needed to overcommunicate we said that though the
branding had changed, the news channels
promise still remained the same. The strategy worked, says Venkatramani.
Now comes the part about outside
stakeholders. Besides communicating
with clarity with employees, audiences,
ABP News engaged with media buyers and
advertisers who are critical in pumping up
advertising revenues for the channel. We
knew that we needed to handle the pain
areas well because not doing so could have
affected our business adversely. In less
than four weeks, we changed the logos on
130
Indian companies might wonder if they are

being shown the right technology path by
the partner. At what cost the technology
will be transferred, will it be transferred at
all, these are questions that can be raised.
Performance parameters: There can be
contrary views between companies on
various issues such as profitability, cash flow
into the company which partner is putting
how much and why. Another important
parameter is the gestation period where
partners sometimes are confused on how
much time needs to be invested in the JV
entity for it to grow.
Exit clauses: Whats the commitment when
and if the market doesnt function
according to expectation. In this case, if one
wants to exit, it needs to look at the legal
issues: right of first refusal, right of first offer
(to safeguard interests and prevent business
to be sold off to competitors once the JV
ends), details on intellectual property rights,
trademarks etc (vital in pharma industry
where patents are critical; or media industry
where channel logos are so important), the
lock in period for partnership (in
infrastructure and real estate, where foreign
investors pump in money, government
regulations stipulate a lock-in period of three
years at the very least).
all our previous videos that were on the

net. The work was immense but we did it,
he says.
Experts warn that even the best JV
agreements cant always be foolproof.
Unless the parting of ways is amicable,
there can be some pain areas in any
unwinding of business or exits...long
drawn, slow process of enforcement of contracts, regulatory issues and bottlenecks
(especially when foreign investors are
involved) and tax issues, says Saket Shukla,
co-founding partner, Phoenix Legal.
So there you have it. Its a humungous
task-picking the pieces after you have part
ways with a business partner. That is why
identifying potential pain points at the outset is important-at best, it can help partners
avoid a split. At worst, it can help partners
sidestep legal tangles in case the separation looks unavoidable.
>
Fastand
secure
More and more Indian companies are
choosing e-procurement to reduce materials costs,
slash overheads and improve supplier relationships
MASOOM GUPTE
f automation is the future of business,

digitisation of processes may be considered the first step in that direction.
Proponents of this vision of tomorrow
believe that minimising human interference
provides the dual advantage of lower costs

and higher efficiencies. An area where this
belief finds proof is procurement, as increasingly companies across sectors experiment
with electronic procurement (e-procurement) systems, moving away from the traditional ones.
Six Hills Consulting, a UK-based con-
131
sulting firm, supports the

trend, as described in one of its
white papers: The application of technology is usually focused on a businesss
core profit generating activities. However,
the cost of many secondary activities in
support of an organisations primary business can often also be greatly reduced by
>
the introduction of appropriate technology.
In particular, our own experience shows
that traditional procurement processes and
cycles harbour substantial inefficiencies
that can be removed by the introduction of
network-based electronic procurement systems.
The industry seems to have taken cognisance
of
e-procurement potential as per Ravi
Razdan,
head
systems,
Jyothi
Laboratories. He says, Bigger FMCG (fast
moving consumer goods) players were
already using such platforms; now, everybody is going in for such platforms. The
number of firms using these services globally would be more than that in India; but
India is definitely catching up. It can be
full sourcing or partial sourcing in terms of
RFQs (request for quotation) or RFIs
(request for information) but some kind of
e-sourcing platform is definitely being used
or tried by the companies now.
Traditionally, procurement meant a
series of calls to suppliers for price negotiations, follow ups on delivery, back and
forth on invoices and so on. E-procurement, on the other hand, is the business-tobusiness or business-to-government purchase and sale of supplies, work, and
services through the internet as well as other information and networking systems,
such as electronic data interchange (EDI)
and enterprise resource planning (ERP).
The internet may be used for sourcing and
supplier discovery whereas EDI may be
used to facilitate flow of digital documents.
E-procurements sell phrase is helping
you buy smarter. That doesnt mean just
buying at the lowest price, says Amit
Bhatia, group director and head of sales,
India subcontinent, Ariba, a SAP company
and provider of e-procurement services.
Buying smarter is about knowing everything about your companys spending
habits, and using that knowledge to be a
stronger negotiator. Its being connected to
a diverse network of suppliers, so you can
quickly discover collaborative partners who
can lower your costs for goods and services
while minimising your risks, says Bhatia.
Among the benefits touted by players
are: lower transaction costs, shorter order
cycle times, higher compliance levels,
lower inventories etc. But there are limitations too. Like, if the component or part
being sourced requires extensive customisation,

e-procurement may not be a viable
option. Even the scale of operations may
determine the extent of the advantages
offered by e-procurement. Like a bigger
company with more negotiation muscle
may gain more than a smaller one.
Though the smaller one could benefit
from a larger pool of suppliers to
dip his feet into.
Managing the shift

After a decade of strong revenue and margin growth, Tata Motors began 2001 with a
major challenge. Tata Motors was making
major investments in the passenger car
division to move away from the cyclical
commercial vehicles business. But the
same year, the commercial vehicles market
shrunk by 40 per cent, leading to a sharp
decline in profitability. The company decided to focus on CQD or cost reduction, quality and delivery improvement. As a step
towards achieving the C, it decided to opt
for e-procurement.
The company, along with its e-procurement partner, ran a business diagnostic
exercise with the entire purchasing team to
understand the buying pattern, business
constraints and savings potential.
E-procurement is done with a software
application and typically requires the company to align itself with one of the e-procurement platform providers. Post which,
the company can connect with the entire
pool of suppliers empanelled with the platform and take bids for its contracts.
The cost of implementation of e-pro-
132
curement systems is directly proportional

to the scale of operations of a business.
Apart from the initial payment for getting
the software, there are also recurring payments, something of a subscription fee. Or,
as Bhatia of Ariba puts it, pay per use.
The costs will, therefore, be determined by
a number of factors like the number of
users, that is employees with access in your
organisation, order sizes and frequency etc.
In the case of Tata Motors, it was found
that direct materials consumed nearly
three-quarters of the cost of a vehicle.
Therefore, the company started with cost
reduction in direct materials like forgings,
castings, fasteners, machinings, bearings,
tires and also indirect materials categories
such as lubes. To help achieve its e-sourcing goals, Tata Motors mandated that categories with annual spend greater than ~5
lakh should preferably be sourced online.
This mandate resulted in significant
improvement in e-sourcing adoption as per
the company. By 2003, the company was
running the e-sourcing programme like a
savings factory. It has since then expanded
to adoption of e-sourcing for new products
as well as international markets.
The team recommends selecting the
right categories for sourcing to get the best
return on investment. Supply-side competitiveness, business impact and ease of
implementation are key factors to assess
while prioritising the categories, says a
spokesperson. The company estimates savings of around $166 million till date via the
shift to e-procurement.
Another company that opted for e-procurement to reduce costs was Ranbaxy.
The company first set out in the direction in
2004, identifying e-sourceable spend,
aggregate spend across various plants, standardise RFQs, recommend vendors for indirect spend and evolve sourcing solutions
for strategic items sharing industry best
practices and contract terms.
Ranbaxy realised that to gain the maximum from a shift to e-procurement, it
would have to popularise the concept internally, among its employees. So
it appointed a champion to lead the esourcing initiative within the company, and
also established adoption of e-sourcing as
a performance metric for its buyers. It even
established a reward programme to recognise the best e-sourcing users within
>
EXPERT TAKE
The real danger, as with any enterprise software,

is going for the wrong model of e-procurement"
MANMOHAN SODHI
Executive director,
Munjal Global Manufacturing Institute.
Indian School of Business
While e-procurement may be hailed as

the next big cost reduction measure,
there are several shortcomings that
businesses must be wary of before
taking the plunge. Professor
Manmohan Sodhi debunks a few myths.
Are the advantages of e-procurement
uniform across sectors?
No, because not all sectors are uniform.
You would not necessarily want to use
e-procurement to source building of
bridges for instance. But for purchasing
MRO (maintenance, repairs and
operations) nearly all sectors buy MRO
Ranbaxy on a monthly basis. In order to

drive e-sourcing adoption among buyers,
the e-sourcing team conducted extensive
training programmes, knowledge sharing
sessions, and category-specific idea generation.
Ranbaxy has built up its e-sourcing initiatives in a phased manner. It is now
extending the spend management initiatives to several key global locations in the
US, Nigeria, and Romania. Without sharing specifics, Govind Jaju, vice-president,
global material sourcing and API business,
Ranbaxy, says, Investing in spend management solutions has not only helped us
realise significant cost savings, but also
products including things like office

stationery the benefits could be to all
sectors. So the answer depends on the
type of items being purchased and the
standardisation of the process necessary
to purchase them.
Is scale of operations the sole
determinant for companies opting for
e-procurement?
There are benefits for anyone. To the
extent there is a standard process, and
the process fits well with the need, eprocurement can be a benefit to
anyone. Who pays for it and how it is
implemented is a separate issue: a
web-based platform hosted by a large
buyer can benefit SME suppliers as well
without the latter incurring any
substantial costs.
How real is the benefit of being able
to connect to international suppliers
through an e-procurement portal? Or
is it just a cosmetic benefit, not
used often?
There are different levels of
procurement that can be done with eprocurement. One can simply look for
sources in marketplaces like
Alibaba.com or tie in with Tier 1
suppliers as in the auto industry. A
portal can be more than cosmetic in
being able to access suppliers
allowed us to drive best-practice processes

across our organisation. The company says
the standardisation of sourcing-related templates across all locations and departments
provides clarity on data requirements at
each stage of a sourcing project. This prevents
delays
due
to
lack
of
relevant information thereby increasing the
productivity of the sourcing function.
The real advantage

The cost differential offered by e-procurement is what often lures companies.
Speaking
about
the
cost
difference afforded by e-procurement over
traditional methods, L Pattnaik, financial
133
internationally, or at the other extreme,

be able to run reverse auctions among
suppliers internationally.
E-procurement benefits can be real
because electronic transaction can
reduce transaction and search costs. But
adding an international dimension,
especially in the Indian regulatory
environment, can only reduce
such benefits.
Can such standardisation of processes
deny businesses the pricing benefit
enjoyed through long durations of
sourcing arrangements?
The pricing benefit from non-standard
processes is illusory to both buyer and
supplier the supplier suffers from lost
profits and the buyer suffers from
possible loss in quality or unreliable
delivery. Standardisation helps by
putting better controls on prices and, in
the long run, is better for both parties.
Any other shortcomings of switching
over to e-procurement?
The real danger, as with any enterprise
software, is going for the wrong model
of e-procurement based on popular
misconceptions. IT is a tool - it should
help with what you are already doing
and not being a goal in itself. So the
danger is e-procurement becomes a
goal and people forget that they procure
different types of items differently that
cannot be all forced through the eprocurement system.
affairs and chief compliance officer,

Daikin, says, It is easily between 10-15 per
cent. Its huge and we have experienced it.
Or as Hemang Marfatia, deputy general
manager, finance, at Lupin, Unimark
Pharma, says We saved on an average 1215 per cent in the capital goods and about 23 per cent in the raw material purchases.
New vendors were found for it which saved
a lot of manpower.
Sometimes the cost advantage cannot
be easily measured. Take the case of L&T
Heavy Industries. Pinakin H Desai,
deputy general manager, L&T Heavy
Industries, says, In the traditional legacy
of sourcing through email, the negotia-
>
tion is without any time and cost limit.
(With) e-sourcing, there is a fix time window for bidders to submit their bid along
with a specific price purely driven by
the market during the event/e-auction.
One can also conclude the bid online.
Hence, there is an initial investment for
adoption of this technology, but just over
a period of six weeks it was possible to
recover the amount spent and it is indeed
an investment rather than a cost incurred
that reaps you benefits in the future.
Even the absence of no absolute cost
savings is not a problem. It also helps you
in a way that if it does not lead to your saving, it leads to you to price discovery. You
dont know the price of the good in the marketplace but if two suppliers are fighting for
a good, you get to know that you arent paying high or low but paying what is the market rate, says Razdan. He adds that costs
saved via e-procurement wont be uniform
across sectors. It depends on the category
you are using e-procurement for. For
instance, if the category is low margin, the
saving potential is low. If the margin is high,
like it is in services, the potential is definitely more.
E-procurement benefits are not restricted to only large scale players. Even small
and medium enterprises can benefit from
it. The experience of Hemas, a Sri Lankabased medium-sized group, bears it out.
Manual procurement process (MPP) was a
time consuming and labour intensive
approach. Much effort and expense went
into ensuring the quality and integrity of
the materials sourced through the MPP.
The inefficiencies due to lack of transparency in the negotiation process caused
an adverse impact on the bottom line. As
our corporate sourcing requirements escalated, the cumbersome MPP weighed us
down, says a spokesperson. This prompted the company to move from the conventional decentralised MPP to an automated
alternative. A key advantage of moving to
the e-procurement systems for the company was the opportunity to connect with
domestic and international suppliers
simultaneously, while bringing transparency to the entire system.
A key word here is transparency, something that can add significant value to
your business, both tangible and intangible. E-sourcing removes preferences
towards brands, historic biases, face to
face negotiations and brings in transparency, visibility and accountability in
spends of any organisation, says Bindi
Thakkar, marketing, HDFC ERGO
General Insurance. Companies can track
spends across centres online, spends that
initially happened at individual pocket
level leaving much room for manipulation. In fact, this benefit of the system is a
key reason for even government departments opting for e-sourcing.
The benefits of e-procurement cannot
be denied. But one must understand that it
requires a long-term commitment and
much training on the company and supplier side for both the parties to be on the
same page and avail of the benefits of the
process.
134
>
Learn
to stretch
success
Like any new venture,

brand extensions are risky;
but the the rewards of
success are substantial
MASOOM GUPTE
ccording to prevailing business wisdom, its a lot easier and cheaper to

build on the success of an established brand name, such as Dove, than to
build a new one ground up. Brand extensions are more than twice as likely to be
successful than products that start their
lives as completely new brands.
Understandably, many companies are turning to extensions to boost sluggish sales of
established products. A new study by market research agency Nielsen corroborates
the view: the study shows brand stretches
contributed almost 30 per cent to new
launches in 2011 and their incremental
sales contribution stood at 38 per cent in the
same year.
Arun Chogle, client business partner,
Nielsen, says, Growth comes disproportionately today for many leading brands
from their extensions as compared to the
parent brand. He highlights another finding of their study: stretches have five times
higher success rate than new launches. So,
if one of the ten new launches is successful,
one of two extensions will be successful in
comparison.
Traditionally, the reasons for stretching

a brand included the ability to drive growth
by leveraging equity of the parent brand,
efficiencies of scale and most importantly
the general belief that extensions attract
faster consumer adoption. However, many
attempts at brand stretch fail in the marketplace. In an earlier column on brand
extensions for Business Standard, Anand
Halve, co-founder, chlorophyll brand and
communications consultancy, said,
Consider some of the brands that according
to Brandz were the worlds most valuable
brands in 2011: Apple, IBM, McDonalds,
Vodafone, Coca-Cola. If brand extensions
was the magic solution, youd have seen
dozens of extensions of these brands across
marketing landscapes far and wide. CocaCola potato chips, McDonalds T-shirts,
Vodafone TV sets, Apple refrigerators...
His point being that a strong parent
brand cannot naturally translate into a successful extension. There are traps and many
of them. Brands can stretch themselves, but
135
how thin and how far without snapping are

critical questions.
So how can firms and their brands avoid
pitfalls and best manage brand extensions
globally? In her column, How far can a
brand stretch?, Rohini Ahluwalia, associate
professor of marketing in the Carlson School
of Management at the University of
Minnesota, said, Stretching a brand
makes it important to target an audience
that will be able to process and understand
the relationship of the brand to the new
product. She added, Getting it right the
first time is crucial, because early success
with a target audience can help with future
extensions. And the broader a brand gets,
the easier it is to stretch next time.
There may be no formula to making this
choice but there certainly are rules that one
can follow to ensure a favourable fate.
Ensuring success
Healthy parents beget healthy children. In
the brand kingdom, a strong parent brand
>
BRAND STRETCHES ARE DRIVING GROWTH

38.0
27.7
28.4
2009
2010
29.6
32.2
2011
2010
2011
% CONTRIBUTION TO
INCREMENTAL SALES
% CONTRIBUTION TO BRAND
65% OF SUCCESSFUL STRETCHES HAVE A PRICE

PREMIUM INDEX LOWER THAN PARENT
SUCCESSFUL
PARENT BRAND
LESS SUCCESSFUL
117
121
134
AVERAGE PREMIUMISATION INDEX TO CATEGORY

failed to take off, the brand hit it off with liqcan ensure at least to a certain extent
uid soaps and hand sanitisers. The brand
a successful extension. There is the track
then went on to launch a variant, Dettol
record to fall back on and, on a more pracSkincare, which was positioned as a milder,
tical side, an existing distribution network to
more caring variant of the brand. Despite
scale up operations. But that is not always
heavy marketing and advertising support,
enough.
the variant has not been able to replicate the
Consider Anglo-Dutch company HULs
success of the original product. Professor
soap brand Dove, for instance. The brand
Anand Kumar Jaiswal, faculty,
may have started out with
marketing, IIM Ahmedabad,
soaps, but today its portfolio Strong parent
spans the breadth of personal brands dont always explains the reason: Dettol is
identified with germ killing by
care, with body washes, lotions, translate into
consumers. And germ killing
shampoos and deodorants. successful
as an action is possible only
Some of the extensions like extensions. How
when the formulation is strong
shampoos are more successful thin and how far
and that translates into harsh
than others. But all these exten- without snapping
products. The consumer is
sions have benefitted from the is critical
then obviously confused with
equity of the parent brand and
this duality of the product image.
its original promise that it has one quarYou can draw a simple lesson from the
ter moisturising cream.
experience of Dove and Dettolthat there
Then, even Dove has made some costly
must be a fit between the parent and the
mistakes. In 1965, Unilever introduced Dove
extension, either physical or conceptual.
dishwashing liquid. When the product
An example of the physical fit is where the
failed to woo consumers, the company cut
parent and the extension are in close proxits price to make it more attractive. What the
imity in terms of usage say, bread and
company had obviously not bargained for
butter, explains Jaiswal. However, this
was that such a move would muddle Doves
physical fit can limit your ability to stretch.
image in the consumers minds, as being
Conceptual fits can widen the playing field
associated with an inexpensive as well as a
premium product a harsh, grime-clean- considerably. That said, the fit cannot be
cosmetic in nature. Neither should it try to
ing dish washing soap as well as a gentle
challenge the logic of a category.
moisturising soap. The extension did not
Take the example of Maricos cooking
go down well with the consumers and was
oil brand Saffola. Saffola has been posiduly withdrawn.
tioned on the health platform, and it has
Perhaps closer to our times is the examworked hard to symbolise a healthy lifestyle.
ple of Reckitt Benckisers antiseptic liquid
When the brand launched a baked snack
brand Dettol. After a series of extensions
called Saffola Zest sometime back, it failed
like mouthwashes and shaving creams that
136
to make to take off. The company missed

out on a simple truth: people who are conscious about health dont gorge on snack
foods, explains a brand consultant.
In other words, the company misinterpreted the category of snacking. But Marico
has come back with a bang with Saffola
ready-to-eat oats in flavours suited for the
Indian palette. Oats are seen as a healthy
breakfast option. That takes care of the conceptual fit. And the flavours take care of the
general resistance to the product from the
Indian palette due to its relative bland taste,
says Harish Bijoor of Harish Bijoor Consults.
Another example of text-book extension
again from the Marico stable is the
extension of Parachute to the skin care category. Parachute is known for bringing to
consumers the goodness of coconut. With
Parachute body lotion we decided to extend
this benefit to the skincare category since
the benefits of coconut for good skin are
fairly known. The coconut oil proposition
helps us distinguish ourselves in the market,
as there are no coconut-based skin care
products currently available, explains
Sameer Satpathy, EVP and head, marketing, consumer products business, Marico.
While there was a fit, he says, there were
limitations in terms of consumers sensory
expectations from the product. Body
lotions are expected to be fragrant, a quality not often associated with coconut, he
adds. The brand had to therefore devise a
new sensual persona for the product, right
from the packaging design to the product
communication. But since it was
Parachute, sticking to the goodness of
coconut philosophy of the parent brand
was inevitable.
Studies show brand stretches tend to be
more successful in an evolving or highly
fragmented category. Where the category
is new, the presence of a known name will
draw consumer attention. And in case of
the latter, where there isnt strong loyalty
towards any one brand, a known brand can
help break the clutter.
Experts also say if you are looking to
extend your brand to an unrelated category,
the move should be backed by considerable
marketing muscle. And if the brand can justify the connect however tenuous it is
through compelling advertising, the consumer will eventually relent. Here consider
Amuls foray into frozen pizzas. This dairy
>
EXPERT TAKE
How far is too far?
for a world-class flying

experience, and can only extend
Alpana Parida, president, and
into air-related businesses.
Priyanka Shah, GM, strategy, DY
Over-extending the brand or
Works, look at some successful and
using it indiscriminately is
some not-so-successful extensions
potentially prone to failure. Take
and draw some key lessons
Lifebuoys first attempt at launching

a talcum power under the same
t is difficult and expensive to
build a brand. High media clutter,
brand. The product was positioned

on the family health platform in
high shelf-clutter and high mind-
ALPANA PARIDA,
PRIYANKA SHAH,
space clutter (coupled with ever
PRESIDENT, DY WORKS
GM - STRATEGY, DY WORKS
clear dissonance with the core
shortening attention span by
proposition of the talcum powder

category beauty. The variant was
consumers) makes for very few
struggling to be profitable. Or that
design but the Tata Gold Plus brand
discontinued and re-launched as
successful new brands in the
Wipro should be only applying
stands for trust. As for Rolls Royce, it
prickly heat powder, which
country. It can be argued that apart
thought to their IT business and not
is the ultimate super luxury car.
supposedly resonates better with
from a very select handful that
to diapers and soaps? Ponds
Does that equity help in the space
the core values of the Lifebuoy.
includes Fastrack, Caf Coffee Day
stretched the brand from its iconic
of aircraft engines? If Rolls Royce
Even where the brand name
and Big Bazaar, there are no truly
Dreamflower Talc to the new age
had stood for technology or
seamlessly extends across
successful new brands out there.
Age Miracle/Perfect Radiance range.
innovation, it could traverse the
categories, it is important to not fall
The lure of brand extensions is
The brand has not as much as
course to not just aircraft engines
into a click and extend trap such
understandable as it utilises the
stretched, but has snapped into two
but perhaps any high-end
as the one Himalaya has fallen into.
current equity of a brand and
the two Ponds stand for different
equipment; but luxury makes the
Himalaya sells a range of
leverages it for brands to foray in
things.
stretch not so successful.
herbal/ayurveda product across
other categories.
So, what are the principles of
The closer the new product
hair, skin and oral care under one
successful brand architecture? The
connects with the existing core
umbrella brand. While it is a great
sometimes, disastrously. Nirma, a
answer lies at the core of the brand.
value proposition of the brand, the
brand extension strategy, there was
brand synonymous with detergent
Tata, for decades, has stood for
more likely it will be able to
needed a visual demarcation as the
powder (every time we hear Nirma,
trust. Since that is at the core, the
diversify. For instance, Kingfisher
sea of sameness makes it difficult
the next line washing powder
brand extends anywhere where
(its current troubles
for the consumer to navigate across
Nirma follows tunefully in our
trust is important. Trust, however, is
notwithstanding) as the King of
a shop shelf and new variants
minds) launched Nirma Shudh Salt.
basic. It works for generic products
Good Times, can expand into
invariably vanish without a trace. In
Does that mean Titan known for
such as salt but does not work
different categories such as liquor,
such cases design solutions are
watches should not enter
where the consumer seeks more
airline, calendars and Formula 1; as
required to maximise opportunity
eyewear? Titan Eye is, after all,
than trust. Tanishq stands for
against Jet Airways that only stands
for the brand.
Brand extensions fail,
co-operative is the first brand that comes to

mind when you think of milk and related
products. But frozen pizzas? While cheese is
a key ingredient of the pizza and Amul
enjoys considerable trust in the category,
the association doesnt seem very strong.
Pizza just isnt a category consumers identify Amul with, says a brand consultant.
But things can change if Amul decides to
really go for it and puts some muscle behind
its pizza. After all, it has tremendous distribution clout.
Reverse mentoring
A lot has been written about how the parent
brands equity can help the extensions. The
success of an extension can also have a pos-
itive rub-off on the parent brand, say experts.

David Aaker, vice-chairman of Prophet and
the author of Brand Relevance: Making
Competitors Irrelevant, says in his HBR blog,
An extension can enhance the brand associations rather than detract from it. Consider
Disney, a maker of cartoons, which expanded into the Disneyland theme park and TV
series and later into retail stores, more theme
parks, resort hotels, a retail store chain, a TV
channel, cruise ships, and Broadway theatre. All these extensions enhanced the
Disney brand by reinforcing the fun, family,
wholesome Disney image, enriched the
brand with symbols, characters, songs, and
experiences, and provided huge amounts of
brand exposure.
137
What is true for Disney may not be true

for another brand in another category.
Jaiswal says academic research has shown
that products that have become generic to
the category (examples: Xerox for photocopying, Bisleri for bottled water, Pampers
for diapers) have lower or limited stretchability. Reason: consumers find it difficult to
associate these brands with any other category, except the original one.
The last word then is: brand extensions
may not always work. They may even fail
horribly or backfire. But staying aloof when
competition is relentless is not such a great
idea either. As they say, the best way to learn
is from studying mistakes other peoples
mistakes.
>
Measuring training
effectiveness
To make training successful, the objectives must be clearly

understood at the outset and regularly matched with the
larger organisational goals
ABHILASHA OJHA
ven until a few years ago corporate

training programmes in India stood
for elaborate off-site jamborees held
typically in an easy year when the frontline managers were well on their way to
meeting or better still, exceeding their
agreed-upon annual targets. Many multinational companies and a handful of
large local ones would ferry their
employees to exotic locations, check
them into swanky hotels to sit through
fancy programmes designed specifically for those occasions. Once the employees were back in their offices and at their
work stations the most interesting things
wound up lost or forgottenit was business as usual.
Today, that is all pass.
Smart companies realise that one-time
induction training or annual process training programmes are inadequate when it
comes to improving people and processes. Thanks to the focus on building a sustained learning environment, employee
training in India has come out of the HR
closet and grown into a ~5,000 crore business and shows a massive potential to grow
further. The potential can be gauged from
the fact that it is a $100 billion-plus industry in a market like the US. Says Pallavi Jha,
chairman & managing director, Dale
Carnegie
PHOTOS: THINKSTOCK
138
Training India, Training equips individuals to become more effective and take on
more significant challenges. It also acts as
a coping mechanism by assisting them in
learning new skills as the nature of their
work and the organisation changes.
However, training or learning, as
some experts call the process/exercise is
not without its share of challenges. To begin
with, tracking the training process, getting optimum feedback, understanding whether the process has
been successful in delivering real
time results is critical, or it can be
a waste of time, money and energy. Effectiveness is usually gauged
on two parameters on the
degree to which the programme achieved the stated
objective and on the ratio of the
cost of the training to the return
(that is, cost savings, increased
productivity etc).
Those in the business say the reason why it is difficult to track whether
a particular programme in a company at a certain level is
even working is that
>
often the nature of the programme is not

specific, and that it is intangible (see
box). Simply put, unlike product, sales or
technical training, which teach about specific skills, workshops on leadership, team
effectiveness, attitudes, ethics, integrity
and diversity are intangible in that it is
tough to gauge the benefits as the result
could vary from individual to individual.
Abhijit Bhaduri, chief learning officer
and head of corporate human resources
development, Wipro Ltd, points to a key
facet of training. Skill-based training is
always easy to measure, he says. When we
teach people presentation skills, we can
video tape them in the beginning and then
repeat the same at the end of the workshop. The difference is noticeable, substantial and measurable. Bhaduri adds
that people require different training programmes at different stages in their career.
At Wipro, there are programmes that are
designed for first-time people managers
and which then follow the person as he/she
becomes a manager of managers or a functional leader, a business leader and an
enterprise leader, he says.
Offering different types of training modules at different stages in an employees
career can, in fact, help in building a robust
leadership pipeline, adds Gurunandan
Savnal, founder, People Sys, a company
specialising in training, thus cutting attrition rates, growing revenues, and ensuring
a healthy workforce and environment.
Training should be aligned to business and
linked to strategy and later,

tools should be used to actually check the
return-on-investment (ROI), he says.
The Strategist spoke to companies
across sectors that have not only managed
to develop robust training programmes but
have also been able to quantify the results
in some form. Some of these are companies
that were confronted with training tools
that have become static or obsolete, but
were able to tweak them to produce the
desired results. We document the experiences of four companies from different sectors to demonstrate the unique needs of
every segment and how best to answer
them.
Offer a dynamic programme

Consider Philips. Till about a few years ago,
its training modules it has separate training programmes for entry-, mid- and senior
level employees was concentrated on
139
classroom learning. However, with a

younger workforce that is tuned to the social
networking culture, the company gradually altered the way it imparted training. From
70-80 per cent classroom-oriented training, Philips has moved to the 70:20:10
method with 70 per cent on-the-job training, 20 per cent focused on leadership-led
training and 10 per cent classroom learning
component. Companies spending more
on leadership-led training and less on classroom learning are more likely to emerge
successful, says Yashwant Mahadik, VP
and head of HR, Philips India.
At Philips, he says, the emphasis is on
identifying the learning styles and needs of
people. So, instead of cramming employees into auditoria and boardrooms, Philips
decided to create training capsules for
the workforce based on anytime, anywhere learning. For the sales staff, for
instance, Philips has training capsules
(online videos) teaching them things like
how to effectively fold a shirt after it is
ironed. We found that the same thing
taught in a classroom was less effective
than this, says Mahadik.
Similarly, for some of the sales personnel at Philips, 7-15 minute podcasts
form part of the training modules; these
could be different for entry, mid and
senior employees. So, while a new
employee in sales will get podcasts
focusing on etiquette, marketing jargon
and other such, seniors could listen to podcasts emphasising on improving revenue
realisation, decision-making skills, building
capabilities, etc. Our training methods,
which used to be classroom-based, use
much more advanced technology , which is
also preferred by employees, says
Mahadik.
In another instance, Philips understood
that it needed the services of management
experts and academicians to tailor-make
programmes for its top-line management.
The result was an executive programme
customised for Philips by Indian School of
Business, Hyderabad. It emphasises on
experiential learning, especially for the
mid- and senior-level employees, explains
Mahadik, adding that the tracking methodology is simple and effective reporting
back the progress through feedback and
actually tracking business results to determine the result of a programme. Training
>
EXPERT TAKE
The intangible benefit

Jha tells The
Strategist that a
successful corporate
training is work in
progress
How can
companies track
training and ensure
PALLAVI JHA
it delivers concrete
Chairman &
results?
managing director,
The Dale Carnegie
Dale Carnegie
approach to
Training India
training is planned
in the context and
the culture of the organisation. As a
process, we gain an understanding of
the real life workplace challenges, both
from the participants and the
stakeholders, to align the content
which is simulated in workshops. The
training then builds upon the
participants own experiences and a
collaborative learning environment is
created. It prepares participants to
overcome workplace challenges. Posttraining, we guide the participants in
applying the learning at the workplace.
has reduced attrition rate at Philips by

roughly 50 per cent in the last two years.
Customisation is key
Savnal of PeopleSys says the effectiveness
of training programmes can be best tracked
if they are customised to suit the needs of
individuals based on the specific problem
at hand. Sometimes the results are apparent if it is an one-time module designed to
address a specific dilemma, like the one
PVR Cinemas faced with its multiplex in
Baroda.
The multiplex in question was on the
verge of shutting down. The overhead costs
were high, the front-end staff was illequipped to provide customer satisfaction
and the manager was rather unenthusiastic given the poor footfalls.
With just three months to script a turnaround, the training team at PVR got into
Which companies have robust training

programmes? What sets them apart?
Most of our clients have a robust
learning and development (L&D)
strategy. Companies like Vodafone, Axis
Bank, Mahindra & Mahindra, and Wipro
Technologies use their training
programmes to build commitment,
manage attrition, enhance
engagement, and create career and
succession plans. These companies have
aligned the L&D strategy to the overall
company goals and embraced a profit
centre approach.
How does Dale expertise help
companies?
Training programmes largely fall into
two broad categories: product, sales,
and technical training; and more
intangible workshops on leadership,
team effectiveness, attitude, ethics,
integrity and diversity. The results of a
training session on a new product can
be quantified easily via sales volumes.
However, to gauge the benefits of
intangible training programmes is
complex as such training manifests in
different forms for each individual.
Therefore it becomes imperative for
companies to establish metrics that
action. The team realised that the frontend staff needed a training module that
not only emphasised grooming, behavioural etiquette but also offered detailed
knowledge of the food and beverages
offered. Thanks to the customised modules, the mid and senior staff figured that
they could reduce manpower and bring
down electricity bills by simple measures
like shutting two exits and continue working with just two. A management call was
taken and despite the multiplexs poor
performance, salaries of the employees
across the board were increased to give
them a boost.
Gradual increase in footfalls, a decline in
the number of complaints and successful
third party mystery audits were some of
the methodologies that helped the management team to track the success the
training modules. Now PVR increases its
140
connect such intangible training to

goals like improved sales, generating
new customers and increased
productivity. To measure training
effectiveness, we use Kirk Patricks
model, Waterfall Model, Business
Improvement Discussions, etc.
Would you agree that training usually
results only in a short-term boost and
needs to be tracked continuously?
Individuals need ongoing training to
help them become more effective.
Training also acts as a coping
mechanism by assisting in learning new
skills. Not all training will have a shortterm impact. A successful training
strategy is always work in progress it
helps to adjust to changing job
demands, creating a pool of readily
available talent, who are ready to step
into new roles as and when the needs
arise. The training cycle isnt complete
without an evaluation of training
effectiveness, which leads to decisionmaking and planning. A flawless
execution of the talent management
strategy helps the companies to achieve
objectives and gives them an intangible
edge over their competitors.
training budget by 10 per cent annually.
Make them time-bound

R Padmanabhan, senior vice-president,
HR, learning and development, HDFC
Bank, says the trick in managing a successful programme is to do more with
less. So impacting more employees effectively, without spending too much is the
answer to successful training. The key to
effective training function, he adds, is
active participation by all stake holders,
including learning managers, HR managers and learners managers. Senior leaders are actively engaged at every stage, right
from need identification, conceptualising
the training programmes...and while conducting sessions. At HDFC Bank with
its induction, on-boarding and behavioural training programmes like service excellence and leadership programmes for var-
>
ious levels employees are mapped to a
training manager and the learning graph of
all employees is tracked with updates available through intranet. The exercise ensures
that all concerned participants invest time
and effort in the tracking process.
HR managers or the team that assesses
training needs in an organisation and
designs and manages such programmes
must remember that while the main ingredients of a training module may remain
constant, the methodology used needs to
evolve continuously given the pace at
which technology is evolving.
Something McDonalds India kept in
mind while managing employee training.
Given its young workforce and in keeping with its global philosophy, the company works closely with management
consultants and industrial psychologists
to help understand how the countrys
workforce is evolving and how their needs
and aspirations are likely to change. We
believe in catching people young and
watching them grow, says Seema Arora,
director, people resources, McDonalds
India (South and West), explaining how
the training modules at the outset (even
for fresh entrants) prepares the young
team to take up leadership positions within the organisation and to this end tracks
their growth, potential and performance
periodically.
In a tie-up with Welingkars Institute
for Management, McDonalds has evolved
a completely customised management
programme for its young employees who
may have wanted to study MBA at some
point in their careers. Its a carefully
crafted programme that encapsulates an
MBA curriculum (with emphasis on HR
management, legal, financial, people management and other skills) but with a focus
specifically
on
the
McDonalds
culture. To be sure, it has turned out to be
one of the more successful programmes,
says Arora.
An in-house talent committee and leadership team representing both the restaurants and the companys corporate office do
a quarterly review of the training programmes. Arora says there are roughly 200
training days in a year.
As is evident from all these examples,
what sets the successful companies apart is
their ability to keep a tab on the changing
aspirations of their people and their ability
to quickly adapt their training modules to
the emerging needs. And above all, in their
ability to gauge the effectiveness of such
programmes.
141
>
Limiting consumer choice

The ability of a brand manager to handle product
complexity and proliferation can result in cost avoidance
and better control of operations
MASOOM GUPTE
o the consumer loves being spoilt for

choice, right? Say she walks into a store
to buy tea and is faced with 20 different flavour options. Does this array of choice
really please her? Or simply muddles her to
the point where shed choose to just stick to
one basic flavour rather than experiment
with another, more exotic one? This delicate
balance between offering too much and too
little is a constant in every products life
and also a starting point of stock keeping
unit (SKU) and variant rationalisation.

To a certain extent though, SKU rationalisation cannot be done away with in
India since a majority of the product categories are still in the growth stage and have
single digit penetration rates in most cases.
It is therefore driven more by the stage of
evolution of a market. India is a complex
country. While modern trade (restricted
mostly to larger metros currently) drives
consumption and opportunities to upgrade
(through larger pack sizes), rural markets
need more penetration packs, says Sameer
142
Satpathy, EVP and head, marketing, consumer products business, Marico. To this
end, different SKUs serve different needs.
Like, say, a large bottle of shampoo at a modern trade outlet, a medium-sized one at a
local chemist in a metro, a smaller one at a
mom-and-pop store and sachets for
rural markets.
This is quite at variance with the mature
global markets, where pack sizes are fairly
standardised now, says Harminder Sahni,
MD, Wazir Advisors a large pack at the
bigger marts and a smaller one for the more
>
local versions. However, as consumers and
markets evolve, this will be a natural progression for the Indian market too.
Variants, however, are a different ball
game. They may be launched to add excitement to a brand or a category and wrest shelf
space from another player. But as Professor
Swapna Pradhan, head, retail management
at Welingkar Institute of Management
Development & Research, says, At some
point, brands realise that not all products
or variants launched by them are cash cows.
From a profitability standpoint, some will
naturally be more vital than others and must
be focused on. This is where one needs to
rationalise the offerings. And a call must
be taken on the laggards whether they
ought to be done away with or retained and,
if so, at what cost. Simply put, it is the Pareto
principle at play, where 80 per cent of your
sales come from 20 per cent of your variants. The other 80 per cent variants is where
harsh decisions must be taken. That said,
doing away completely with these variants is
not an option either, especially since these
may be the ones that attract, say, a premium
set of consumers or sustain consumer interest in the brand through the novelty factor.
Supply chain constraints

The pressure to rationalise SKUs and variants is driven as much by an internal
requirement of streamlining processes and
supply chain management for fast moving
consumer goods (FMCG) and food and beverage (F&B) brands as it is from the retail
end. Shelf space, at the end of the day, is
finite. A store that is 10,000 square feet in
size and can house 8,000 SKUs cannot
overnight house more than that.
Rationalising the stock available is very relevant from the retail side, says Devendra
Chawla, president, food and FMCG category, Future Group, that runs supermarket
chains like Big Bazaar and Food Bazaar.
Interestingly, while shelf space is limited,
the number of brands and their variants are
growing. Retailers take stock of whats selling and whats not every four to six months
with products churned accordingly. This is
critical for FMCG categories that see more
failures than launches. As Chawla indicates,
almost 85-90 per cent FMCG product
launches fail in India.
There is a constant pressure on retailers
to control dead inventory for these cate-
sumers mind. Something that Parachutes
gories a challenge exacerbated by their
body lotions have been doing. The brand is
perishable nature and expiry dates. So,
available in variants such as summer fresh,
though a company may want to stock all its
deep nourish and soft touch. The variants
20-30 SKUs with the retailer, he may restrict
are placed on shelves according to seasons
the choice to the fast moving ones with some
to optimise stock availability and avoid
thrown in to shore up the variety.
confusing the consumer in any way. The
It may be argued that in India most
corollary to this is that when competition
brands get just 5-10 per cent of their sales
launches variants or new SKUs, the
from organised retail; the rest come from
trader may take money out of the funds
general trade. But, where modern trade
allocated to you, to test out the new offerfaces shelf space restriction, general trade
ings, says the brand manager. The retailer
also faces an additional monetary constraint. The proprietor of your neighbour- knows very well what works with his customer and this is where stock management
hood store has a budget allocated to each
becomes critical.
brand. His purse doesnt expand in tandem
At times, variants just dont work and a
with your portfolio breadth, says a brand
different approach to grow may be warmanager for a leading potato chips brand.
ranted. Take Nestl instant noodle brand
Brands as well as the proprietor will
Maggi. Over time, Maggi has launched varihence chart out the priority packs. Take the
example of Lays potato chips manufactured ants such as masala, chicken, sweet and
sour and capsicum. Of these, only two have
by PepsiCos foods division Frito-Lay.
survived masala and chicken, and masala
Competitors say that the brands priority
continues to be the flagship flavour, conflavours are American Style Cream and
tributing 70-80 per cent of the brands sales,
Onion, Classic Salted, Magic Masala and
say analysts. The brand has experimented
Spanish Tomato Tango. These flavours will
with more variants, such as the
definitely be stocked with every
Rationalisation
a garlic- and onion-free ones
outlet. The availability of the
aimed at Gujarat, in particular.
baked variants will, however, of SKUs is
While some of these still exist,
vary depending on the type of important in a
others have been discontinued.
outlet. Other variants that are market like India
The brand has since experilaunched by the companies to as a majority of
mented with several brand
coincide with an event and test
the product
extensions in the form of
marketed to check consumer
ketchups, soups, soupy noodles,
acceptability, are pulled out of categories are
pickles etc, some successful,
the market quickly if they dont still evolving
others not so much.
work. If they work, though, with single digit
Sometimes, F&B brands can
theyd be elevated to a priority
penetration rates
also end up being victims of
pack status.
their own brand building, becoming synTest marketing comes handy here and
onymous with their core flavours so that
the finance department in the companies
new ones simply dont go down well with
cracks the whip on sticking to budgets. If
consumers. Consider Parle Agros mango
you have money, you can launch variants.
But, when sales are slowing down, finance drink Frooti. The brand experimented with
variants, introducing flavours such as
will hardly let you run amok. You need to
orange and pineapple. It even went on to
show results with your test marketing to
launch a sweet-sour variant, Frooti Green
convince them to loosen the purse strings
Mango. But the consumer found it difficult
for a more big budget launch, says the
to identify the mango Frooti with any
marketing head of an FMCG company.
other flavour and the variants had to be
Focus on season
scrapped. The company has done well with
the SKUs of Frooti though, introducing pet
Every brands variants can be categorised as
bottles for home consumption and slim
core, seasonal and trial. The seasonal and
paper cans with a pull tab, targeting
trial variants are the ones that brands use to
teenagers who felt the unit that came in
wrest away additional shelf space from the
Tetra Pak packaging and had a straw
trader. Seasonal variants can also be used to
attached was kiddy.
avoid any kind of confusion in the con-
143
>
Dos and donts for brands looking to rationalise portfolio

Keep it shallow but go wider: In the quest to rationalise SKUs,
Dont ignore the retailer: The most affected party in case of surge of
companies tend to cut on the options available to consumers. The
SKUs by various brands and categories is the retailer be it traditional
approach should be to offer more real options than SKUs. The basic
kirana or a modern retailer. All retailers have limited and expensive
premise is that SKUs exist to service particular needs of consumers.
shelf space, so companies should not ignore the retailer when
So, as long as the need is there, the brand services that need, the
conducting SKU rationalisation exercises. In the era of too many
SKU can exist. In the case of a beverage brand, for instance, the
options (new categories, more brands and variants) vying for the same
need may be to have distinct flavours, not different pack sizes,
shelf space, it is vital that companies and brands tread carefully to
which may be 50ml more or less than other SKUs.
ensure that the full range and variants of products are on display.
Different strokes for various markets: Some SKUs work somewhere
Dont vacate space for competition: In the urge to fine tune their own
and others work elsewhere. A company can have a portfolio
supply chain and garner some cost savings at the back end, companies
comprising of several SKUs and offer them for different markets as
should not end up rationalising to the extent of vacating shelf space for
per their distinct needs. Hence, any particular market or a
the competition. This could lead to unintended outcome of losing sales
consumer segment may be exposed to roughly 12 SKUs out of 20
and market share, which in turn can be detrimental for the brand.
while in other markets only 10 out of total SKUs may be offered.
Dont confuse the consumer: Several times, brands, in their
There is no reason to push all of them in all markets. Though
enthusiasm to service every single micro consumer segment and their
brands start with this intention, lack of control and eagerness to
all possible needs stated or unstated tend to add too many SKUs to
maximise returns creates problems.
the portfolio. This ends up not only complicating life for all
Keep consumer at the centre of SKU strategy: Brands exist to serve
stakeholders in the value chain but also ends up confusing the
consumers and good ones end up belonging to customers as much
consumers. Sometimes, less is more. Giving clearer choices to
as to the brands managers. So, SKU rationalisation has to have
consumers is a far better way to handhold them in selecting the right
consumer and her needs right at the centre to ensure that she is
one for them versus bombarding them with so much that they leave
never alienated in the fervour of rationalisation. Many times,
without picking any.
simple ABC analysis leads to elimination of an SKU that may add
Dont be led by competition: This is the worst thing that a brand
little to revenue but is fairly critical from the point of view of
manager can do to a brand but it is ironical that it happens every day
the consumer.
around us across several segments and various categories. Never ever
Run the commercial benefit test: All efforts to rationalise SKUs
let the competition drive you into deciding whether you should add
should lead to measurable cost savings or margin benefits to justify
or eliminate SKUs. The competing brands may have their own
the effort and the risk of losing some consumers and shelf space at
reasons to launch or remove a variant and it may be justified.
the retail end. Every single decision should be evaluated on the
However, the addition or removal of an offer is only one part of the
commercial benefit test to ensure a reasonable cost benefit
story that is generally visible to competition, which could be
equation. Let the numbers do their share of talking too.
misleading. Instead, it makes sense to follow the consumers.
Since F&B products are taste driven, consumers may not substitute one brand/variant with another as easily, says Pradhan of
Welingkar. So, one who likes orange juice, for
instance, may not pick up a guava variant if
the orange one isnt available. This also
applies to an intensely personal category
like cosmetics. If a particular make up brand
that suits ones skin type is not available, the
consumer may not pick another in a jiffy.
For some categories though, like shampoos
or body washes, consumers may not be that
specific in their choice and could switch
between brands and variants of the same
brand. This can, however, pose a completely different challenge, with variants eating
into each others market shares, with specific
data, then, not being available on consumer
usage patterns.
Data is critical
Unavailability of data is a major concern for
FMCG players as they must rely on the
retailers to rationalise their stocks. In the
absence of real time data, retailers can end
up taking arbitrary decisions on discontinuing the variants. There can be multiple
reasons for a variant not selling lack of
proper display, pricing or promotions by
competitors, says a former key accounts
manager, modern trade, for an FMCG
brand. At times, he adds, the retailer may
even try to put variants down, in a bid to put
players against each other, browbeating
them into paying up higher margins.
Sometimes, retailers may purposely try to
push out a variant if the margins arent good
enough. Sometimes, this can also be done to
give mileage to private labels.
Private labels though arent an immedi-
144
ate threat as per Pinaki Ranjan Mishra,

Ernst & Young partner and national leader,
retail and consumer products practice. The
market leader brands do not really have to
worry about private labels as they are the
footfall drivers. Its those lower in the pecking order who need to be concerned as they
can be at conflict with the private labels,
says Mishra.
Whatever the compulsion, dealing with
proliferating SKUs is not as simple as just
dropping some units. The answer is to narrow component selection and finished
goods offerings to a few units because excessive item counts can bring supply chain
improvement effort to its knees.
>
Twist in the tale

RAJARSHI BHATTACHARJEE & ROHIT NAUTIYAL
s a US army veteran, William

Sundelius (name changed), knows
the importance of being prepared
for eventualities. Discipline has been his
guiding principle in life. At 85, still a strict
disciplinarian, Sundelius prepares for the
biggest eventuality death. His coffin is
chosen and paid for online, and the writing

on his tombstone decided. Its the sort of
preparation his peers in large part of Asia
cannot imagine. Online undertaker services are big money spinning businesses in
the United States and many parts of
Europe, but the business model is uncommon, and even taboo, in many other societies.
145
Technology and the internet may have

put the marketplace at the consumers fingertips, but she is as picky when it comes to
assimilating new product or business ideas
online as she is offline. A business model
that has been successful in one market may
not be able to replicate that success in
another a lot depends on the access of
the net, cultural backdrop and maturity of
>
HealthcareMagic, and they need not pay

for a second opinion or for
chronic disease care. We start- anything extra because whatever money
one pays for the premium include the
ed with an India-focus but
charges for this service, adds Sinha.
soon realised that the maximum traffic is from the United
Big fun at sachet price
States. He believes that the
Indian market will be ready for
The profile of online gaming consumers
such a service pretty soon.
may be similar across geographies, but
Until then, the focus is to build
the revenue generation model for this
a stronger footprint in the US
industry segment is quite different in
where consultation charges
India from the West. Whats unique about
In group buying,
can be as high as $100 per
India is the micro-transaction on mobile
customers dont
patient.
the in-app purchase model, to which
pay the entire
In fact, most new entrants
customers in the West were introduced
are eyeing the US market as
only recently. In this model, a consumer
amount upfront,
they believe it will take quite
pays a small subscription of ~30 per
but just a token
some time before the business month or ~10 per game on an internet
money
model becomes viable in India.
connected mobile device. While paid
Are Indian consumers
casual gaming is still not a big thing in
RYAN VALLES
sceptical about medical advice
most part of the globe, the same has been
Waiting to take off
CEO,
doled out online? Kunal Sinha,
driving the online gaming industry for
DEALSANDYOU.COM
CEO
and
founder,
In the internet-age, it is perthe last five years or so.
HealthcareMagic.com, an
Manish Agarwal, CEO, Reliance
haps the doctors who have
Indian website that connects online users
taken the biggest leap of faith with webEntertainment Digital, likens this to the
with registered doctors, talks about the
sachet phenomenon in the fast moving
based applications reaching out to
imperatives of the Western consumer. In
consumer goods (FMCG) business. Be it
patients with voice and video chat along
the Western world, consumers have easy
games or caller ring-back tones or any othwith emails. According to the American
access to the internet. Also because of their
er value-added services, the Indian conTelemedicine Association, around one
family and social set up, one cannot ask
sumer is willing to pay a small amount or
crore people benefit every year from remote
too many people around. Thats why in the
sachet price to the mobile service
medical services in the United States. Jon
West people turn to online and we see high
provider for each new unit of content conLinkous, CEO, American Telemedicine
traffic in the US-based websites. In the
sumed. He adds, In the West when one
Association, adds, In terms of the actual
Indian context, people usualplays games online, one doesconsumers benefiting from talking about
ly do not go online for any
nt need a micro transactional
health to someone online, it is somewhere
health related issues; instead
carrier billing because credit
around 4,00,000 people in the US who
they prefer to visit a physician
card penetration is very high
receive such services and the number is
in person, says Sinha.
there. Everybody purchases
growing rapidly. Very recently, an
HealthcareMagic, howevonline and has his credit cards
American insurance company, WellPoint,
er, is not giving up. It has
registered with the online
announced that it will cover online web
tweaked the business model
store, which leads to a seamcounsels done by a company called
from being a lead generaless transaction. In India, since
American Well. Linkous also indicates that
tion tool for hospitals, it has
credit card penetration is low
development of standards privacy and
now started charging patients
and people are averse to
clinical protocol warrant great emphasis
for consultation and also
putting their credit cards
in all geographies.
As the concept
takes a percentage of the doconline, mobile carrier integraHowever, the phenomenon of the ewas unique, we
tors fee. The website has also
tion makes the transaction
doctor is still a few years away in India.
seamless.
There are quite a few such ventures in India started co-marketing its prodinitially kept the
ucts with the offerings of
Gaming on internet-conbut they get the bulk of their revenues from
subscription fees of
some insurance players. If
nected
devices is estimated
clients
abroad.
Consider
BharatMatrimony
you buy ICICI Lombard insurto be a ~750-800 crore marDoctorSpring.com, a Bangalore-based
low to induce trials
ance policy, by default, the
ket in India currently. The
online medical consultation start-up that
services of HealthcareMagic
bulk of the money comes
receives almost 80 per cent of its customers
MURUGAVEL
comes bundled with it. All
from the game consumer;
from the United States, and the rest from
JANAKIRAMAN
ICICI Lombard policy holdadvertising accounts for ~45India and other geographies. Dr Deepu
FOUNDER, CONSIM INFO
ers receive a user ID and pass50 crore. Interestingly, many
Sebin, medical head, DoctorSpring, says,
word
to
access
Patients normally come to our platform
consumers play the trial vera market/region. Industry
players also identify perceived usefulness, the ease of
use and security/privacy concerns as some of the key factors that influence consumer
behaviour online.
Little wonder, online business owners are tweaking
some successful and some
not-so-successful business
models of the West to cater to
the fastidious Indian consumer. Here we will discuss
three online business models
that have shown great
promise in India with minor
or, in some cases, heavy-duty
tweaking.
146
>
sion of a game and do not
purchase it at the end of the
trial period. Given that industry players aver there wont be
a huge surge in subscription
revenue for games in the near
future, the advertising revenue will continue to hold
ground.
It happens only in India
In all of the above cases we

have seen how some ideas
from the West have been
imported to the country in
an avatar that is acceptable
to the average Indian online
consumer. Here is one business model that is a roaring
success in the country but is
Choose your discount
unlikely to work in another
Casual paid gaming market. We are talking about
Discounts continue to attract
is a big opportunity the business of online matricustomers across geographies,
in India but is not
and Indian customers are no
mony. Online matrimony
different. The business model
websites started mushroomthe way people
of group buying pioneered by
ing around the turn of the
play games in
Groupon in the US revolved
century. Today there are a
the West
around one deal a day. In India,
number of portals like
multiple deals are offered
Jeevansaathi, SimplyMarry,
MANISH AGARWAL
simultaneously by group buyLifepartnerIndia,
CEO, RELIANCE
ing companies. Group buying
VivaahBandhan, offering
ENTERTAINMENT DIGITAL
is largely mobile-driven in the
match-making services makUS and major markets in
ing it a ~500-crore business
Europe. It is still a web-based model here
in the country.
the simple reason being mobile payments
Leading
players
like
have yet to take off in the country.
BharatMatrimony.com and Shaadi.com
Also, in the US, a customer makes the
could see a huge potential in Indias matchcomplete upfront payment to the group
making market in late 90s which was
buying website, who in turn pays the mertotally offline then. This was going to be
chant later. In India, most group buying
quite different from the online dating websites follow a margin or token model. In
sites in the West, where a concept like
the US, say, for a dinner which is ~1,000
arranged marriage was unheard of.
equivalent, the deal says, pay ~ 600 for
According to Murugavel Janakiraman,
~1,000 worth of dinner at X restaurant.
founder, Consim Info (a signature
Here ~600 is paid upfront to the website or internet conglomerate managing brands
the group buying company and the group
such as BharatMatrimony.com and
buying company will pay an amount to the
IndiaProperty.com), online matrimony
merchant and keep some share of the paygave control and convenience to prospecment as its own fee. In India, a similar offer
tive brides and grooms who had little say in
will say, pay ~600 for ~1,000 worth of dinmatch-making previously. Initially, we
ner; pay ~50 online and the remaining at
focused on promoting language-based
the merchant location.
matrimony services. As the concept was
Ryan Valles, CEO, DealsAndYou.com,
unique, we kept the subscription fees of
explains that the advantage of this model in
BharatMatrimony low to induce trials. All
India is the breakage. After buying a deal
you had to pay was ~300 till the time you get
online, a customer may choose not to avail
married, he says. More than 15 years down
of the deal or is unable to visit the merthe line, the company charges ~2 lakh for
chant for some reason. If the customer
quarterly membership of its elite matridoesnt visit the merchant location, only
mony service. For BharatMatrimony, the
the token money will be lost. In the full-paybiggest differentiator lies in promoting
ment model, the upfront payment becomes
regional matrimony. The company has an
a risk.
active user-base of 2 million customers.
The reason why deal sites offer this forWhat made online marriage portals
mula is simple: people in India are most click with the Indian audience? While datoften uncomfortable disbursing a large
ing is the first step towards marriage in a
amount of money upfront, that too online.
majority of societies across the world, it
147
was never a part of the Indian culture. In

fact, the idea of getting to know someone
before you marry is frowned upon in some
regions even today. Online matrimony
websites emerged as a middle path for
prospective brides and grooms, who now
had
the
option
of
dating before exchanging vows.
Obviously, the end objective is marriage
here. The only challenge faced by all the
start-ups in this space was the number of
users who chose to sign up initially.
People were suspiciousmany thought
only the so-called desperate people
would go online to get married, says a
sales executive with a leading matrimony
site. Over the years, things have changed
with growing penetration of the internet
in tier 2 cities.
As a rule, a matrimonial site obtains
more than 90 per cent of its revenues from
subscribers, while the remainder comes
from the advertisements. This recessionproof business model is witnessing yearon-year growth of 27 per cent. Even when
players like BharatMatrimony and Shaadi
have made inroads in markets abroad,
more than 80 per cent of their subscriber
base continues to be Indian. According to
Gourav Rakshit, COO, Shaadi, going forward, mobile has the potential to quadruple the subscriber base. Also, alliances
with pundits and marriage bureaus can
be crucial in building alternate revenue
streams for online portals.
>
Reasons
to be optimistic
One right ad campaign, without other kinds of marketing support,
can push up sales of a brand for a considerable period. The formula
isnt that complicated
THE STRATEGIST TEAM
FINANCE
ts been quite some time since the Indian

manager has been able to approach a new
year with unflinching optimism. The year
2013 might just be different. Not convinced?
Heres a list of things that could make life
easier for the Indian manager this year. Read
on and you will change your mind.
As a new business manager, the first

thing you must be in tune with is the state
of macroeconomics and microeconomics.
If early indications are anything to go by,
2013 looks decidedly better than 2012.
148
Reforms momentum
The winter session of Parliament has

proved fruitful with policy decisions
being pushed through, including extremely conscientious ones such as foreign direct
investment (FDI) in retail. Chief financial
officers (CFOs) of companies across sectors
are watching this trend with interest as it
means a general improvement of the macro
>
environment and a reinstallation of faith in

the Indian economy. They are hoping for the
momentum to gather steam in 2013.
The Budget
This could possibly be the last Budget

that the UPA governments finance
minister announces ahead of the Lok Sabha
elections of 2014. It can be the Budget that
either sets the industry for or against the
government. Against this backdrop, companies are hopeful of the Budget being lined
with sops for the industry in the form of
more tax-saving options, duty cuts, exemptions etc.
Softening interest rates
A high interest rate regime is seen as

a major reason for the current slowdown in the economy. CFOs are hopeful
that interest rates will start softening in
2013. This should ease considerable pressure on businesses. This could have a cascading effect increasing disposable
incomes and improving the consumers
spending power. These factors could work
to push up demand.
Input costs easing
With inflationary pressures easing,

companies are looking forward to a
fall in input costs. This should put the pricing power back in the hands of CFOs, who
expect better margins this year. When input
costs rise, companies respond quickly by
hiking product prices. But when raw material costs fall, companies dont always pass
benefits to the customer. In the short term,
this will also help CFOs loosen the purse
strings in terms of new launches, marketing
and advertising.
INFORMATION
TECHNOLOGY
Stronger rupee
The rupee is seen as getting stronger

this year on foreign capital inflows.
For consumers, a weak rupee means higher prices because it raises costs of raw
materials for companies. Last year, an
area where consumers felt the maximum
pinch was in the fuel price hike. Already
analysts are saying the worst could be
over for India Inc.

While the overall economy looks to be
in better shape, at the organisation level
too, the manager today is much better
placed with smarter tools and key lessons
from the past. Take a companys IT backbone. There are five technology trends
that can make the managers life easy in
the new year.
Cloud-based services
Virtualisation of desktops
Big data
We are at an inflection point where

the delivery and consumption of
technology and its business model are
being redefined. The way infrastructure is
built, applications are developed, and information is delivered, are changing.
According to an HP study, in 2013 cloud
computing will shift from delivering small,
consumer-focused services to sustaining
secure, predictable and reliable enterprisescale workloads. The emergence of cloudbased services will help CIOs buy capacity
as and when required and will also help in
scaling up without investing in headcount.
IDC says virtualisation of desktops is

an important trend that will continue
to make life of the manager easy in the coming year. Virtual desktops can help managers cut cost dramatically. It liberates IT
staff and drives mobility. Virtualisation can
help businesses pursue brand new opportunities.
In an age when changing customer

sentiments play out over the web,
phone calls and emails, big data will be the
important tool for the smart manager. The
new era of converged storage will provide a
modern design approach built from the
ground up for the needs of virtualisation,
cloud, and massive content pools.
Managers will be expected to adopt data
analytics tools to understand their customers, identify trends and make accurate
forecasts.
a ready infrastructure to store and back up

data. In 2013, managers can continue to benefit from scaling up without impacting capital investment by outsourcing data centres.
HUMAN RESOURCES
10
Improved training
This year will see the use of new

training modules, incorporating
concepts of social media and cloud computing. HR can grab this opportunity to
create competitive advantages for organisations. This may include competencybased talent sourcing wherein the selection is based on having the right talent on
the right job and at the opportune time.
So, the manager has a better economy
and better data to back up decision-making.
11
Mobility
With more people accessing the

web through a mobile phone than
through a computer, we can expect to
see greater use of mobile devices to carry out transactions, pay bills, shop and
interact with organisations.
The Bring Your Own Device (BYOD)
phenomenon where employees bring to
work devices they have purchased themselves will continue to gain momentum.
Agreed, its a challenge allowing employees
to take advantage of powerful personal
devices while ensuring control and security of company information and applications, but the line between personal and
business use of devices is blurring. It has
become almost impossible to separate
social and work use of devices and prevent
people from sharing information.
RETAIL & ADVERTISING
Data centre services
On the network side, managers can benefit from world-class data service centres that rent out space and capacity. IDC
says outsourcing data centre services can
dramatically cut costs and allow CIOs to have
149
12
The consumer connect
The most crucial lesson that marketers learnt in 2012 is that there is
no such thing as a mass consumer and that
>
means they cannot mass market. It was no

surprise to see customers briefing the tailor
(read marketer) on stitching specifications
for clothes in Vodafones Made for you
ads. Today, in categories such as telecom,
online travel, FMCG, etc, holding on to consumers attention is a tough challenge. So
what is the way around? Many marketers
went back to the consumer and asked them
for suggestions.
As a corollary, many crowd sourcing
platforms and tools sprung up. Marketers
are not simply asking consumers to offer
suggestions on logo or pack design. They are
suggesting communication ideas and offering cues on how to reach them. Next step?
Product development? Dont be surprised
its already happening.
executives could have knowledge on areas

other than their core competency.
13
We live in a wired world where

national icons are created and cast aside in
a day. Brands have to be in sync with this
new reality. With on-ground innovations,
many companies (P&G, Tata etc) have successfully created revolution for their
brands, making them a part of consumers
collective consciousness. The right use of
social media for sales, marketing and customer service will be a game changer for
consumer brands in 2013.
More confidence in self
You cannot rely on just one

source of data in marketing
research. These were the last words of the
old-fashioned media planner who was executed by the new crop of TAM clerks. The
dead will rise in the new year. And why
not? Both clients and advertising agencies
have had problems with the research
methodologies of external agencies. To a
certain extent, both can be blamed for this
as it made the way things function simpler. The good thing is media agencies
have realised the severity of the situation
and set the ball rolling for a change in the
latter half of 2012 by building internal
capabilities for research. With more digitised homes in 2013, the year will see advertisers, agencies and broadcasters collaborate for robust research.
14
Best of both worlds
Advertising has truly become an

equal opportunity business. With
independent agencies like Scarecrow and
Curry-Nation proving their mettle, today
clients are more open to exploring partnerships beyond global ad networks. In
fact, independent agencies are giving the
networks a run for their money. Creative
pitches will see participation from a healthy
mix of networks and desi creative hotshops.
Advertisers will benefit from this healthy
competition by achieving better creative
output within modest media spends. This
will make agencies invest in talent and
focus on multi-disciplinary training so
15
Better remuneration
While the average agency commission is still as low as 2 per cent

of media billings, the industry is optimistic
about achieving 5 per cent by the end of
this year. Eventually, better remuneration
will be reinvested in bringing quality talent
onboard. With the government easing the
way for FDI in certain sectors, retail advertising is expected to take off on a big way.
But only agencies and marketers that are
nimble and think on their feet will be able
to reap the benefits.
16
17
Rise of the collective

consciousness
No last-mile headache
Delivery is often the make-orbreak factor when it comes to running a successful e-commerce venture. The
cost of shipping, the time taken to deliver,
and delivery methods all decide whether
the customer will come back to you or not.
Amazon, for instance, set a trend by offering free two-day shipping with its prime
membership. Now shoppers are opening
up to placing orders with retailers and getting their package delivered to an alternate
location. If this takes off in India, the lastmile headache will be a thing of the past for
online retailers.
PRODUCT
MANAGEMENT
18
Frugal thinking
The last few years would have
drilled the idea of thinking frugal
150
in resource management, in product

development, in marketing deployment...
you name it. This kind of thinking is going
to be a key differentiator in the years to
come. A frugal mindset is essential in a
manager to drive volumes and achieve
profitability. Managers have learnt to take
decisions keeping in mind the various
costs, strike a balance between automations and manual involvements, should
one buy or make etc.
19
Online-offline integration
Even until a few years ago retailers

spent a lot of time trying to make
their online stores look and act like their
brick-and-mortar stores. Now theyve sort
of reversed course. The challenge, as they
see it, is in extending that online shopping
experience characterised by personalisation, interactivity and layered with data
into a physical environment. 2013 will
see the beginning of seamless integration of
the offline and the online experiences.
20
Generation diversity
This is the new buzz in corporate circles in India today. This

is the new generation, the generation of
people born after the 1990s that is expected to enter the workforce over the next
few years. This workforce will be highly
flexible and versatile in terms of the newage technology. It is up to the smart manager to get the best out of them.
Not to be a downer or anything, but,
in conclusion, blind optimism is not
enough to see us through. Lets just hope
the positive mood that we begin the year
with is channelled into sound business
strategy.
>
nyone who has spent time in

Mumbai has encountered the dabbawallas, the army of about 5,000
white-dressed men who have been delivering lunches throughout the city, from
homes and cafeterias to the workplace,
every day for 125 years. It looks like a simple
act, but the dabbawallas have become so
proficient at it that they have achieved sixsigma status in the 200,000 lunches they
deliver per day, making an error just once in
six million lunches. It is a testimony to the
power of focus and constant improvement.
Yet, even their world is not a static one.
The dabbawallas have had to evolve continuously, and ever faster, as smartphones,
the internet, and new forms of fast food
have altered their customer needs and their
competitive environment. These disruptions are not like the chaotic, repeatedly
disrupted mobilephone business, but even
lunch delivery has new forces and new
technologies that require fast adaptation.
Indeed, in a faster moving and more uncertain world, the ability to anticipate and
adapt relative to the competition is becoming an increasingly important determinant
of winners and losers.
Our recent book, Repeatability, is based
on years of research on the relative ability
of hundreds of companies to adapt. We
arrived at three conclusions of special
importance to Indian companies today.
First, the accelerating rate and heightened uncertainty of change (evidenced in
everything from plummeting product
cycle times to the increased speed at which
competitive positions change in most markets) provide a premium to simpler business models with strong, crystal clear
sources of differentiation. Companies like
IKEA in furniture, Scania in trucks,
Amazon in online retailing, Asian Paints in
coatings, or Four Seasons in lodgings have
such clarity and focus. These businesses
have an organisation that better understands their customers and what is happening at the front line better than the
competition and can adapt faster than
more complex or bloated rivals.
Consider that in the average company
today, three employees in every five say
that they have no idea what the company
stands for uniquely, or what its strategy is.
When that is true, complexity becomes the
Dont fight
the future
Authors Chris Zook and Nikhil Ojha say the
ground will continue to move under our
feet. But continuous improvement is the
best way to survive and thrive in times
of rapid change
151
>
Chris Zook
silent killer of profitable growth. As in the

biological world, complex organisms are
much more challenged to adapt.
Simplification takes courage, but it is at
the essence of the ability to see and
embrace change. Those that do not, wage
a losing battle against an inevitable future.
Second, we found that investment in
systems to measure and drive continuous
improvement in the customer experience
and in costs faster than rivals is becoming an
increasingly important source of competitive advantage. Our research showed more
than seven-fold difference in how we rated
learning systems in the best performing
versus worst performing companies.
For instance, Amazon has invested heavily in real-time learning systems online. An
additional one-tenth of a second in the time
it takes a web page to load can lead to a one
per cent decline in customer activity. As a
result, the company has about 500 metrics
that it tracks every day, the majority of them
relating to the customer experience. Many
companies pride themselves on moving
from quarterly to monthly customer feedback sessions. Due in part to the simplicity
of its model, Amazon measures a feedback
loop in tenths of a second. It is no wonder
why Amazon is rated at the top of most customer satisfaction lists and why traditional
book retailers are in disarray.
A faster rate of continuous improvement in most industries can be a powerful
competitive weapon. By taking advantage
of innovations in supply chain, materials,
and even design, for instance, the inflation-adjusted cost of IKEAs iconic Billy
Bookcase has declined by almost 80 per
cent over the past three decades. It is no
Nikhil Ojha
wonder that no one is able to copy IKEA

and that IKEA (soon expected to enter
India) has had a profit margin and growth
rate that has been more than twice that of
the industry for 25 years. It is the power of
a simple repeatable model fuelled by a discipline of constant improvement.
Consider Apple. The first thing that Steve
Jobs did when he returned as CEO was to
radically simplify the product line to four
major products and eliminate corporate
activities that were not absolutely essential
to them. As devices become commoditised,
we believe Apples competitive advantage
will move towards its knowledge of and endto-end approach to the customer through its
retail outlets and iTunes store.
During the past year, we have personally led more than 150 workshops and presentations on the findings from
Repeatability to groups of executives in 20
countries. By far the most common questions we heard relate to the third key area
of our findingsdisruptive innovation.
They often cite the case of mobile phones
in the 1990s when Nokia controlled over 90
per cent of the global profit pool and was
able to invest whatever it needed. Yet, even
though Nokia possessed some of the key
early technology, the company today is in
disarray and has ceded virtually the entire
profit pool to smart-phone innovators like
Apple, Google, and Samsung. Nokia failed
to mobilise its organisation around reinventing the future. We refer to this as the
Engine 1 versus Engine 2 problem in
business and believe it is the toughest challenge facing complex companies today
how to redesign their model for past success far beyond what continuous improve-
152
ment would allow.

Less than one business in a dozen faces
massive disruption like Nokia did, but all
businesses are threatened by it to some
degree or other. It comes in many forms
from the emergence of the hybrid car in
the automotive industry (where incumbent Toyota has adapted well), to the shift
in profit from hardware to software in computing (where IBM has made the transition), to the movement of media and information online (where most newspapers
have struggled mightily). In each case, it
was not the entire business model that was
replaced, but parts of it. And there were
usually years of warning. It was typically
not the time needed to react (Nokia engineers were talking about smartphones over
a decade ago), nor the resources to invest
(Nokia had the cash), nor insufficient capabilities (Nokia had the early touch pad for
phones). Rather, it was the organisational
ability to change and the will to reinvent
the future rather than resisting it.
Finally, we found that companies that
have been the most adaptive to major
threats were the ones that had better early warning systems to identify the big
threats, talked about them openly, and
forced reaction. These capabilities have
taken many forms. In the case of IBM, it
was a formal part of the planning process
to tap into almost 100,000 employees perceptions and concerns. Other times they
were built around an annual top-management offsite that brought in the independent views of outsiders to shake things up.
But always, they instilled what Andy
Grove, founder of Intel, referred to as
paranoia about disruption. Learning systems are becoming the critical tool for sustaining competitive advantage across more
and more companies. The three elements
that we highlight in Repeatability the
power of simplicity, the art of continuous
improvement, and early-warning systems
will increasingly be the difference
between one-hit wonders and enduring,
repeatable success.
Chris Zook is a partner in the Amsterdam office of
Bain & Company and a leader of the firms global
strategy practice. He is co-author, with James
Allen, of Repeatability (Harvard Business Press,
2012). Nikhil Ojha leads Bains strategy practice in
India and is based in the firms New Delhi office.
>
Got bad online
reviews?
Companies are exposed to the
wrath of consumers on
social media like
never before.
Heres what the
smarter ones are
doing to handle
such feedback
effectively
ROHIT NAUTIYAL
y now the whole online world

knows what Samsung India did to a
few independent bloggers at last
years IFA conference (Europes premier
consumer electronics trade show) in
Berlin. And how rival company Nokia saw
a golden opportunity and turned into a
guardian angel for the stranded bloggers
who chose to vent their anger against the
Korean company on social media. Cut to
January 10, 2013, the day when Nokia
announced the launch of Lumia 920 in
India on Facebook. The post attracted
more than 600 comments within a few
hours. While a majority of the comments
fondly welcomed the new addition to the
Nokia basket, some comments criticised
the company for poor service for the existing ranges and the high price of the new
handset. Within minutes the more
scathing comments disappeared.
These two instances are more or less
representative of the way corporations
across the spectrum in India are dealing
with online feedback. The whole feedbackresponse process is tactical, if not completely knee-jerk. Experts say, thats the
first mistake companies and brands tend to
make online not having a game plan. As
online search expert Mike Blumenthal recommends in Responding To Negative
153
>
Reviews Your Prospects Are The Real

an understanding of what
changing. Bangalore-based conAudience, Never respond to reviews unless action to take, when to take it,
sultancy ODigMa is currently
you can own the issue, describe how future
and why. That explains why
working on a tool that will capcustomers will not have the issue, and offer
the feed-back response
ture key data for brands on
to fix the issue. He also recommends that process in most companies is
social media by scanning frewhen you do respond, you write with your
still rudimentary. Advertising
quency of user visits, the use of
prospects in mind.
agencies in the digital space
right content and sentiment
There is a good reason why companies
even complain that many of
analysis. This data will be availneed to be proactive and set in place systheir clients dont even log on
able to clients in the form of daitems and processes to deal with online
to their social media accounts
ly reports. This data can be cusfeedback effectively. A recent study by
regularly, let alone make it Brands cannot
tomised in more than 40
Cone Communications shows four out
part of their brand building expect consumers
dimensions on the basis of age,
of five consumers change their minds
strategy. Also, there is a lot of to understand
gender and time, says Advit
about a recommended purchase based dependence on real time
Sahdev, founder, ODigMa.
their intent on
solely on negative information they found
reports compiled with help of
But first, which are the social
social media
online.
advance social media tools
media sites that corporations
Now consider the strength of the social
like Radian6, one the most instantly. This
rummage for feedback and how
media population. According to industry
popular paid software. What makes it difficult
do companies spot trouble? For
estimates, more than 60 million people in
they fail to understand is to know what will
monitoring, social media platIndia are present on various social media
while such tools provide 80 click with
forms are constantly scanned
platforms like Facebook, Twitter, YouTube,
per cent accuracy with algo- consumers
for defined keyword combinaGoogle+ etc. No matter how attractive this
rithms that look for certain
tions: brands (brands, product
figure may seem to companies looking to
keywords, phrases and punclabels, product names), major
MANMEET
reach out to a captive audience with their
tuations, support of human AHLUWALIA
competitors and strategic issues
brand message, it presents immense chalinterface is vital. No software
(brand values such as sustainHEAD OF MARKETING,
lenges in terms of devising the right social
is adequate here. Besides, in- EXPEDIA
ability, innovation and key marmedia strategy. Almost all of the users are
house social media redressal
ket issues such as price-perforon the social media platform to stay in
teams are as small as two members in many
mance ratio, friendliness). Companies can
touch with friends, track and update their
companies.
listen to conversations about their brands
activities, or follow groups and communiManmeet Ahluwalia, chief marketing
on social media with help of free and paid
ties, besides looking for information about
officer of travel portal Expedia, takes pride
tools.
brands, products and also provide their
in being a marketer who is always on his
While Google Alerts and Social
feedback. So any attempt by brands to
toes when it comes to social media.
Mention are free tools, companies prefer
bombard them with irrelevant
Consumer feedback is more
working with software vendors to have
information will be sabotaged.
important in service categories
access to customised data. Social Mention
Says Bhupendra Khanal, CEO
than in any other. At the same
allows you to easily track and measure
and co-founder of media montime, one cannot expect the
what people are saying about you, your
itoring platform Simplify360,
consumer to understand a comcompany, a new product, or any topic
Today, social media is a big
panys intent on social media
across the webs social media landscape in
concern for the CEO, even
instantly, be it engagement or
real time. It monitors more than 100 social
more than the CMO. So there
sales. This lack of understandmedia properties including Twitter,
are no surprises when we see
ing makes it difficult to know
Facebook, FriendFeed, YouTube, Digg,
heads of social media in variwhat will click with consumers
Google etc. Google Alerts is avoided by
ous organisations reporting
on social media websites, he
marketers for its lack of accuracy.
The post
directly to CEOs.
says.
Once companies collect data from the
liberalisation
That said, observers say
This brings us to the allvarious sources mentioned above, they
companies in India are just
important question of return on
slice and dice it to meet various objectives.
generation is
about waking up to the threat
investment.
Like
many
other
For instance, a travel portal will pick up all
glued to social
of negative conversation on the
things
in
communications,
negative comments related to its various
media platforms
social media. Siddharth S
returns cant be quantified
offerings on a daily basis. This data will be
and we cannot
Singh, director, fellow proimmediately, says Singh of ISB,
classified under the services available on
ignore it
gramme in management and
but it would be foolhardy to
the portal flights, hotels, sightseeing,
associate professor of marketignore the medium, thanks to
among others.
MAYANK PAREEK
ing, Indian School of
its sheer reach.
After following up the complains with
Business, says, At this point
Another challenge is that
the concerned service departments, feedCOO, MARKETING AND
SALES, MARUTI SUZUKI the social media interface keeps
in time, most companies lack
back is provided on how to improve opera-
154
>
EXPERT TAKE
Companies are yet to figure what clicks on social media
Internal capability of companies

to handle social media strategy
has always been frowned upon.
Share your experience.
First thing we tell our clients is to
listen carefully to whats being
said about them on social media
platforms. Every company does
not have the resources to build
internal digital capabilities and
so its right for them to look for
consultants to devise their social
media strategies. Social media in
India at this point is mostly run
by marketing or digital marketing
agencies. There are a few SMBs
and startups who engage with
their own customers online.
These are folks who grew up as
digital natives, who now
own businesses.
Companies with a social media

strategy in place are much better
equipped to handle the
negativity. Having a sound
strategy in place will guide team
members toward a unified
response and will save time and
resources once a crisis hits.
Companies will be able to
communicate their message
much more quickly and gauge
response in real time. It is also
very important to have an
ongoing listening mechanism
that gives companies an early
warning on potential issues
before they become a crisis. We
often see companies ramp up
their social media engagement
in response to negative
messages going viral, and we all
know many crises start online.
Genesis B-M advises clients on
how best to leverage social
media to help mitigate the
negativity, and move past it
when it comes. Essential to this is
flexibility and an experienced
team. All social media channels
are not the same and require
specially tailored content to best
reach those key audiences.
How do you deal with the

negativity prevalent on all social
media platforms? Is it possible
to offer customer service online?
A recent Pitney Bowes Software

research established how there
are gaps between what
marketers think work on social
unique activity, that represents

an opportunity for real-time
feedback and customer
response. The increased
awareness and consumer
engagement that follows leads
to more purchase consideration
and sales whether its a
service or a product the company
is promoting.
YU YU DIN,
Digital strategist,
Genesis Burson-Marsteller
Din tells The Strategist that

companies with a sound social
media strategy are better
equipped to handle negativity
Which of the following three is
priority for marketers using social
media in India awareness,
engagement or sales?
These three priorities are not
mutually exclusive, but instead
represent a process through
which social media is increasing
its function as a key channel of
communication. Social media
has become a priority because it
represents an opportunity for
dialogue, not just a way to
broadcast a message. For a
company to be able to reach its
target audience and actually
engage them in dialogue or a
tional efficiency. So the data serves a dual

purpose: customer complaints are resolved
and the company learns to fill the gaps in
its services.
To a large extent, companies in India
have been collaborating with social media
agencies to listen, monitor and respond to
online conversations.
Currently, the priority is to create
brand engagement, which does not come
easy. For instance, no matter how well a
company performs in terms of creating
original content (in form of videos, trivia,

contests etc.) on social media with the
purpose of engagement, users may choose
to ignore and force the brand to address
specific concernsbe it with the product
availability, after-service and so on.
At the cutting edge

None of the companies The Strategist
spoke to while putting this article together were open to discussing the investment in terms of money or manpower
155
media and what consumers

expect. Please comment
Social media is evolving very
fast. My first exposure to it dates
back to 2001 with an account on
bolt.com. Since then a plethora
of social media websites have
come into the scene including
Friendster, MySpace, Facebook
and Twitter. As a marketer its
important to understand where
your target audience is and how
social media strategy is a
combined function of
communications, marketing
and customer service. Let us not
forget that we are talking about
a growing medium where
benchmarks are not set. For
instance, in e-mail marketing
you know about open rates,
click rates, whats driving traffic
and whats not. In the case of
social media, we are still
figuring out engagement
and awareness.
As an industry, we are still
struggling on what works
eventually. Analytics is very
important in India where more
than 140 million people are
online. You need a right person
to understand, slice and dice this
data so that it becomes useful for
a brand. Many players from India
and abroad are doing some
great work in this space already.
that goes into tracking online conversations and generating response. Some
told us that it came out of the overall marketing and communications budget while
others said the spends were decided
according to the event or the immensity of the situation. But what came
across clearly is that companies do understand that social media has firmly established itself as the ultimate amplifier. And
that speed is an absolute clincher in dealing with any negative feedback.
>
And some of them are working to stay
on top of emerging opportunities. Maruti
Suzuki, for instance, has made social
media integral to its overall communication strategy. A daily social report is sent to
the designated product managers by the
companys social media agency. Depending
on the severity of the issue, the product
managers help with inputs to answer the
queries.
The acknowledgement time to the customer is defined as one day. It means that
every customer complaint/issue posted
online is acknowledged within 24 hours.
Though the complaint resolution time may
depend on the complaint itself, it is closely monitored.
Mayank Pareek, COO, marketing and
sales, Maruti Suzuki, says, he is glad that
the customer is at least talking to Maruti
on social media even if she is complaining
about a service station in Raipur. The
post-liberalisation generation is always
on social media platforms and we cannot ignore them. Last year, we launched
the New Swift on Facebook with more
than 4.5 lakh users logging on to watch
the webcast event. Still, we could have
done better by engaging users innovatively.
The social media is at the centre of Tata
Docomos strategy to engage with the
youth. In fact, it is the No. 1 brand page on
Facebook today. A company spokesperson
says, We continuously track and measure
our engagement levels using advanced
social media analytics and platform specific tools. This helps us asses the reach
and impact of various activities at a discrete (even single post) level and assess the
impact generated (say traffic generated for
a product or service promotion to our website) from social media. We regularly use
social media to co-create products and
advertising with consumers. Such efforts
help us boost the innovation funnel both on
creative and product streams and help us
stay close to the consumer and her emerging needs.
The company claims that pilots run to
assess the direct sales potential of social
media have thrown up very encouraging
results and how there are plans to harness
social media as an active channel to generate leads/sales in the near future.
Held last year in New Delhi, Nestles
creating shared value forum
(based on Michael Potters
thoughts) brought together
opinion leaders from South
Asia and beyond to discuss
the fundamental issues such
as the role of business in society, nutrition, water and rural
development. The task at
hand was daunting as Nestle
Feedback process
is under constant attack
across the globe from NGOs
is still rudimentary
and various interest groups.
as most firms lack
Three teams, including
an understanding
Genesis Burson-Marsteller,
of what action
GBM Digital and Nestle, came
to take
together to conceptualise and
execute the whole event.
SIDDHARTH S
Despite having a state-of-theSINGH
art social media listening setDIRECTOR, FELLOW
up in Switzerland, the compaPROGRAMME IN
ny was cautious about how to
MANAGEMENT AND
engage with the online audiASSOCIATE PROFESSOR
OF MARKETING, ISB
ence during the event.
As part of the event strategy, social media platforms like Facebook
and Twitter were monitored with the help
of Radian6. Twitter feeds were projected on
a large monitor and a webcast was done.
While its not possible for every company to
achieve this level of sophistication in terms
of technology and internal managerial
capabilities, the best way to start is by listening to what consumers are saying on
the social media platform.
156
>
One versus
many
The Strategist looks at the recent
experiences of TataDoCoMo and Bajaj Auto to
check if the textbook assumptions about umbrella versus
multiple branding stand true on the ground
MASOOM GUPTE
he standard view of business
growth is that growth is always
good, bigger is always better and
that companies must grow or die. While
every company aspires to grow its business, an expanding business brings with
it a host of new risks: too many people,
too many locations, too many products
and at times, too many brands to contend with.
At least for marketing managers the
choice is clear: they have to decide whether
they prefer the simplicity of unified or
umbrella branding or the frenetic juggling
of a multi brand portfolio. The choice
appears simple but it is not one that can be
settled by the flip of a coin, or the roll of a
dice. In The New Strategic Brand

Management, author Jean-Noel Kapferer
writes that the decision regarding the
number of brands to be retained is closely
linked to an analysis of the brands function in its respective market. Every market can be segmented, by product, customer expectation or type of clientele. This
does not mean, though, that a market
divided into six segments, for example,
should necessarily call for six brands. This
depends on their function (do we need
endorsing, umbrella, range or product
brands?), he elaborates.
So how does the marketer resolve this
dilemma? Anand Kumar Jaiswal, associate
professor of marketing at IIM
Ahmedabad, explains the basic rationale
157
that often leads to the choice between

umbrella and sub-branding. With
umbrella brands, one is investing in just a
single brand and leveraging its equity
across various categories. In the long run,
one can economise advertising and new
launch costs on the back of this investment. There is, however, the risk of any
single failure affecting the overall equity of
the brand, given its interlinked nature. To
restrict the risk to the parent brand, the
marketer might opt for sub-brands.
Additionally, it is also to reach out to different segments. It is not always possible
to make the parent brand reach out to
every segment or category of consumer.
Different sections want different things
and one must strategise based on that,
>
benefits of the shift as well as bring them on

tion helped us increase our consumer reach
adds Jaiswal.
board about the changed protocols. At the
multifold overnight. We could transfer the
Take the case of Marriott Hotels. There
strengths of one business to another. For
company end, there was the integration of
is the Courtyard Marriott for business travthe back-end customer support operations
instance, GSM is stronger in prepaid. We
ellers and Residence Inn by Marriott, an
for which extensive training was required.
could bring this advantage to CDMA as well
extended stay option. Both these subChanges were made at every footprint to
as cross sell our services, says Sandhu.
brands are endorsed by the parent and yet
Consider this: Total retailer associates
reflect the integration.
maintain their own distinguished persona
While Tata Teleservices chose to leverof Tata Teleservices is around 5 lakh. Of
and value proposition in the consumers
age its assets by bringing its brands togeththese, only 1.5-2 lakh were selling recharges
mind.
er, Bajaj Auto went on a diametrically oppofor CDMA. Reason: every retailer holds an
A complete break away from the parent
site path focusing on its
that is the creation of an
sub-brands,
Pulsar
and
individual brand would not
In case of two-wheelers, the
Discover. Bajaj Auto, the makers
be possible for Marriott in
sub brands are model names,
of the iconic Bajaj Scooter, is a
this case. Primarily because
which target a different
leading two-wheeler maker that
here the consumer is lookconsumer segment
had always harped on the mothing for her needs to be met
er brand Bajaj to transfuse indiwithin the universe of
K SRINIVAS
vidual product lines with the
Marriott-backed service
same values of trust and
guarantee. The endorsePRESIDENT, MOTORCYCLE BUSINESS,
BAJAJ AUTO
Indianness. The philosophy, say
ment is necessary. In
insiders, changed when Rajiv
effect, branding strategies
Bajaj assumed a more active
must be guided by, as well
The business integration helped
role at the company.
as geared towards, achievus increase our consumer reach
these sub-brands are
ing a larger goal.
multifold overnight
endorsed by the parent and yet
Let us consider the
maintain their own distinexamples of telecommuniGURINDER SINGH SANDHU
guished persona and value
cations
player
Tata
HEAD, MARKETING, TATA TELESERVICES
proposition in the consumers
DoCoMo and two-wheeler
mind.
major Bajaj Auto, two
A complete break away
brands that have chosen to
Using the group name, Tata,
from the parent that is the cretake completely opposite
lends an air of quality and trust
ation of an individual brand
routes around the same
would not be possible for
time to illustrate the dos
where required. But it may not
Marriott in this case. Primarily
and donts of the branding
always be necessary either
because here the consumer is
journey. And yet, each has
looking for her needs to be met
valuable lessons in store for
SAGAR MAHABLESHWARKAR
within the universe of
future managers.
NCD, BATES CHI & PARTNERS
Marriott-backed service guarChoosing my style
antee. The endorsement is
necessary. In effect, branding strategies
Tata Groups telecom interests covers the
electronic voucher denomination (EVD)
must be guided by, as well as geared
entire gamut from GSM to CDMA to inter- used to recharge customer SIM cards.
towards, achieving a larger goal.
Earlier, the retailer had to invest in two
net connectivity businesses. To the layman,
Let us consider the examples of
separate EVDs to be able to offer GSM and
this can be translated better by a mention of
CDMA top-ups. And since prepaid is not telecommunications player Tata DoCoMo
its brands like Tata DoCoMo (GSM), Tata
and two-wheeler major Bajaj Auto, two
Indicom (CDMA) and Tata Photon. Yet, two
very popular with CDMA customers (as it
brands that have chosen to take completeis used mostly for fixed lines), few opted for
of these three (one completely and one parly opposite routes around the same time to
top-ups for CDMA. Post the business intetially) are now defunct. To be sure, the
illustrate the dos and donts of the branding
gration, the same EVD can be used by
brands, not business interests, are defunct.
journey. And yet, each has valuable lessons
retailers to top up both.
Mid-2011, the company embarked on an
in store for future managers.
A mid-way shift in branding strategy
ambitious plan of integrating the three busirequires enormous planning though and
nesses under the flagship of Tata DoCoMo.
Choosing my style
cannot be sprung upon stakeholders sudSo out went Tata Indicom and Tata Photon.
denly. Sandhu says, The company did
The decision to integrate the three busiTata Groups telecom interests covers the
nesses was led by various factors, says extensive legwork with distributors and
entire gamut from GSM to CDMA to interretailers before the branding exercise. net connectivity businesses. To the layman,
Gurinder Singh Sandhu, head, marketing,
There were presentations to explain the
Tata Teleservices. The business integrathis can be translated better by a mention of
158
>
EXPERT TAKE
The shift towards umbrella branding is inescapable

intangible value that is created by the firm
hould a firm organise all its market offerings
through the marketing effort. Brands like Rayunder the common umbrella brand name
Ban or Raymond add a certain intangible value
(for instance, Tata) or should it maintain a
to the underlying product. Many customers
portfolio of independent brands (Fanta, Sprite,
may not recognise sunglasses as Ray-Ban by
Kinley, etc. by Coca Cola)? What is the right
appearance and suiting as Raymond by touch.
approach? The truth is somewhere in between
But when the brand identifier is there (a logo or
and the classical answer is it depends. The
a name or other insignia), the customers have a
brand must add value to the marketing effort
higher recall, they have an associated vivid
and if it does, it makes sense to use an
imagery, an assurance of consistent quality.
umbrella brand. The brand Dove, when it
This results in preference for the
appears on a bottle of body lotion or
brand and willingness to pay a
shampoo, communicates certain
premium.
ideas about the product. The name
Since brands are expensive to
Johnson & Johnson, when it
create and maintain, it makes sense
appears on a bottle of baby oil or a
for a firm to leverage the strength of
pack of ear buds, carries positive
an already established brand across
associations and the customer is
product categories. Most firms
prepared to pay a premium for it.
maintain portfolio of product
These are cases where the umbrella
variants and brands. Managing
brand has added value. There is a
several independent brands as
leveraging effect of the brand; a
separate entities without
premium for the product obtained ANANDAKUTTAN
B UNNITHAN
cannibalising each other is not
and brand is strengthened. But
PROFESSOReasy. The media is fragmented;
this need not be the case always.
MARKETING, IIM
managerial bandwidth available is
If the brand is diluted as a
KOZHIKODE
a constraint. The focus a brand
result of the product association,
needs from the marketing and
or the brand has specific
sales organisation may not be easy to provide.
meanings that do not rhyme well with the
Many firms can find the challenge of managing
product category, umbrella branding is not
multiple brands intimidating. Therefore, the
good strategy. A Harpic chocolate or Dettol
trend towards umbrella brands is inescapable
ice cream may never be attempted.
and has many advantages economies of
Brands are not just labels to discriminate
scale, ease of management, and higher
product offerings in the market. May be this
customer recall due to higher available budget.
was the beginning of branding brands as
The challenge is how to organise many
identifiers. But today, brands represent the
its brands like Tata DoCoMo (GSM), Tata

Indicom (CDMA) and Tata Photon. Yet, two
of these three (one completely and one partially) are now defunct. To be sure, the
brands, not business interests, are defunct.
Mid-2011, the company embarked on an
ambitious plan of integrating the three businesses under the flagship of Tata DoCoMo.
So out went Tata Indicom and Tata Photon.
The decision to integrate the three businesses was led by various factors, says
Gurinder Singh Sandhu, head, marketing,
Tata Teleservices. The business integration helped us increase our consumer reach
multifold overnight. We could transfer the

strengths of one business to another. For
instance, GSM is stronger in prepaid. We
could bring this advantage to CDMA as well
as cross sell our services, says Sandhu.
Consider this: Total retailer associates
of Tata Teleservices is around 5 lakh. Of
these, only 1.5-2 lakh were selling recharges
for CDMA. Reason: every retailer holds an
electronic voucher denomination (EVD)
used to recharge customer SIM cards.
Earlier, the retailer had to invest in two
separate EVDs to be able to offer GSM and
CDMA top-ups. And since prepaid is not
159
offerings, sometimes cutting across product

categories, into a common consistent
architecture (brand architecture). This is where
umbrella brands and sub-brands help. The
umbrella brand could be the corporate brand
under which there are multiple sub-brands
(Mahindra, Ford, Apple iPad and iPad Mini).
Maruti Suzuki balances many close variants like
A-Star, Alto, Estilo in a narrow price range
targeted at very similar demographic profiles.
Umbrella brands could be independent of
corporate name. For example, Lifebuoy, Close
up or Dove these are not corporate brands
but powerful brands that straddle across
product variants and categories.
How can a firm manage a portfolio of
brands? The decision must be based on two
criteria: 1) What are the brand meanings?
2) How do these brand meanings fit with the
product offerings?
It means, there is a synergy between the
brand and the product. A brand can have a
specific imagery that is bound to a product
category or a benefit. Such narrow meanings
restrict the extensibility and usefulness to serve
as an umbrella brand. So, Dettol might make a
good umbrella brand for anti-septic products,
health soaps, but never for ice creams. The
perceived fit and synergy is not there because
of the specific imagery customers have about
the brand. Umbrella brands tend to be
defined and managed at a broader level with
more abstract meanings and symbolism. Such
meanings make the transferability across
categories easy to navigate.
very popular with CDMA customers (as it

is used mostly for fixed lines), few opted for
top-ups for CDMA. Post the business integration, the same EVD can be used by
retailers to top up both.
A mid-way shift in branding strategy
requires enormous planning though and
cannot be sprung upon stakeholders suddenly. Sandhu says, The company did
extensive legwork with distributors and
retailers before the branding exercise.
There were presentations to explain the
benefits of the shift as well as bring them on
board about the changed protocols. At the
>
company end, there was the integration of
the back-end customer support operations
for which extensive training was required.
Changes were made at every footprint to
reflect the integration.
While Tata Teleservices chose to leverage its assets by bringing its brands together, Bajaj Auto went on a diametrically opposite path focusing on its sub-brands,
Pulsar and Discover. Bajaj Auto, the makers
of the iconic Bajaj Scooter, is a leading twowheeler maker that had always harped on
the mother brand Bajaj to transfuse individual product lines with the same values of
trust and Indianness. The philosophy, say
insiders, changed when Rajiv Bajaj assumed
a more active role at the company.
(Rajiv Bajaj officially took over in 2005
when his father, Rahul Bajaj, stepped down
after 35 years at the helm.) He wanted to
create a distinct identity for their motorcycle brands, away from the Bajaj name,
which was used far too liberally for everything, from bulbs to electrical appliances to
financial services.
He felt the brands equity was spreading too thin. The final straw came in the
form of the companys hyped XCD (Exceed)
brand failing to cut ice with consumers
around 2007, says an observer. The company suffered its worst setback during this
period when its sales dropped 23 per cent
(market leader Hero Honda had recorded a
growth of 12 per cent that year) in 2008-09.
Since then, the company has studiously
followed a two-brand approach, focusing
on Pulsar and Discover. It has dropped the
name Bajaj from all communication and
those associated with the brand say that
nothing would make Rajiv Bajaj happier
than the two brands making their mark
without the backing of Bajaj.
Bajaj Autos marketing strategy is something of a cross between sub-branding and
individual (or multi-) branding. K. Srinivas,
president, motorcycles, Bajaj Auto,
explains, The strategy of Bajaj Auto is different than that of other two- wheeler manufacturers in India. For other two-wheeler
manufacturers the sub- brands are model
names. For example, Hero manufactures
the following 100cc bikes HF, Splendor,
Passion. These are model names. It manufactures many such models. At Bajaj Auto,
we follow a strategy of creating categories.
Hence, for us, Pulsar stands for sports bike.
Discover stands for commuter bikes. Under
each of these categories there are multiple
models (like Pulsar 150, Pulsar 180, Discover
4G, Discover 5G, etc). Each of these models in turn, targets a different consumer
segment. The Pulsar 200NS, for instance, is
a state-of-the-art model targeted at the
higher end of the consumer spectrum ;
whereas the Pulsar 135 is targeted at the
fresh college graduate who is price- and
image-conscious.
Milind Bade, ex-head, marketing, Bajaj
Auto, in a previous interaction with
Business Standard had said, A brand
has to have two things a TG (target
group) and a promise. When the subbrands are so distinct in their promise and
have such distinct TGs, the individual
strength and positioning of the subbrands have to be focused on, independent of the larger umbrella under which
they fall. Were going the FMCG way by
doing this.
The two approaches, experts concur,
are in line with the theoretical approach to
the subject. Telecom is quite commoditised today. People are looking mainly at
tariffs and network quality. There isnt
much variation in this category. So bringing
together multiple brands and leveraging
the equity across the board works well for
the company (Tata DoCoMo), says Jaiswal.
Indeed, leveraging a strong and established parents reputation offers a clear
advantage, says Sagar Mahableshwarkar,
national creative director, Bates CHI &
Partners. He has been associated with various Tata Group brands like myriad products from the Tata Motors stable, Taj
Hotels, Tata AIA, the insurance business,
previously Tata AIG etc. Using the group
name, Tata, lends an air of quality and trust
where required. But it may not always be
necessary either. Consider Tanishq. It
would always need the assurance of being
a Tata product, given the delicate nature of
the category. Whereas Fastrack, thats an
everyday kind of product category and
caters to a completely different audience. It
doesnt need the weight of Tata behind it,
says Mahableshwarkar.
That said, association with an umbrella
brand brings with it a certain amount
of limitation in the form of a certain sensitivity to the group DNA. Like, it cannot
be flippant or immature, says
160
Mahableshwarkar. It can be tongue-incheek for sure but not offensive. Any

advertising for Tatas must carry a sense of
responsibility, he adds, which explains
why Fastrack can be irreverent in its communication.
Given its backdrop, Bajaj Auto might be
correct in its new approach of defining
the value proposition of its brands and distinguishing them in the minds of the consumer. However, it has not been able to
shake off the Bajaj association altogether.
The ambition of Mr Bajaj of separating the
Bajaj from Pulsar and Discover is lofty and
to a certain extent impossible to achieve,
says a marketer previously associated with
the brand. Auto as a category signifies an
investment close to the consumers heart.
He wants a reassurance of quality and trust.
And he needs something larger than a
Pulsar and Discover for that. He also points
out that automobiles be they two- or
four-wheelers arent exactly a one-time
purchase-and-forget-it kind of a product
category. It is not like a shampoo or soap
that you buy, use and move on. In automobiles, there are company designated
showrooms, sales personnel, service centresall these touchpoints represent Bajaj
Auto and not a subbrand, he adds.
Whether they pick the umbrella or subbrand route, marketers must note that it
will never work in isolation, especially for
high involvement categories. There will be
certain interdependence. Like a Tata
DoCoMo may be an umbrella brand from
its vantage point. But from a conglomerate
point of view, it is a subbrand itself, drawing on the Tata equity. Similarly, Pulsar
and Discover cannot break their umbilical
chord with Bajaj completely ever.
>
Leveraging China
Micromax build a successful brand by harnessing the advantages
China offered. Now it is time to change the script
ABHILASHA OJHA
he history of Micromax (2011-12

revenue: ~1,978 crore), which ventured into the mobile phone market in 2008, is one of the most fascinating
success stories in the Indian consumer
electronics industry. In barely five years,
the company has come to occupy the third
position (by volume) in the mobile handset
market in India and is at No. 12 globally. It
leads the Indian tablet market with a share
of 18.4 per cent, ahead of veterans
Samsung and Apple. The Gurgaon-headquartered company owes its success not
just to the ticket it puts on its products or

the speed with which it puts new designs
on the shelves but to how it has managed
these two crucial product inputs by leveraging China. To be more specific, the
labour cost advantage and the production
flexibility that China offered.
Big deal, you may say, given that almost
every other handset brand in the world
manufactures its products in China. Right
from the Apples to the Samsungs to many
of our home-grown brands like Karbonn, a
whole host of players reaped Chinas arbitrage advantage. But here is the stumper:
the strategy that offered Micromax its
161
biggest advantage in its first five years is

under threat and it will require a re-examination by the company and a number
of other multinationals with Chinese
production of their overall supply-chain
strategies.
The reason is simple. At Shenzhen,
where some of Chinas largest electronics
manufacturers are located, the minimum
wage is set for a 13.3 per cent hike from
this year a move that could have a ripple
effect across the worlds major technology
companies. According to some estimates,
between 2005 and 2010, basic manufacturing wages in the country have soared
>
EXPERT TAKE
What is the alternative to China

would be a thought more than
hina is established as the worlds
just optimistic.
manufacturing floor in no small
What specifically works against a
measure. This position has been created by
possibility of manufacturing moving out of
the marrying of global market forces and a
China is the pace at which not just
sovereigns intent. At least either of the two
technologies but also market shares are
must shake for an upset to happen. If
changing in todays world. In a matter of
another force could at all make it happen,
just over five years, we have
that would be a highly potent
seen at least two erstwhile
combination of a disruptive
mobile phone leadersNokia
technology and a process, say
and RIMslip almost to the edge
advanced 3D printing
of oblivion. And just when one
combined with an ultrathough that Apple was headed
automation.
to become an undisputed
Until then, global
leader in the smart phone
companies can still afford to
segment, Samsung has worked
take baby steps in building
hard and offered some real
production capabilities in
threats to its competitor.
alternative sitesoften in the
In such rapidly shifting
countries of their origin, for
market equations, no one
various political and social
company would have the
reasons. These sites could act
cushion, breathing space and
as test housesand even as
courage to build a new or
full-blown units for niche
DEEPAK KUMAR
parallel supply-chain
productsbut to hope that
FOUNDER ANALYST,
ecosystem. Any such move
they would rapidly scale into a BUSINESSAND
MARKET.NET
would be fraught with the risk
mainstream phenomenon
roughly 70 per cent. Eventually, Indian

companies sourcing products and components from China need to develop local
infrastructure. The reports of underage
labourers and inhumane work conditions
at some Chinese factories can have a
cascading effect on the reputation of
brands that source from China, says
a telecom expert.
What has made Micromaxs life a little
more complicated is its recent entry into
categories like tablets and LED TVs. In
short, if you were to add the increasing cost
of monitoring suppliers and of compliance,
that labour cost advantage Micromax
enjoyed when it started out looks even
more precarious.
To understand what Micromax needs
to do here on, we need to first understand
how the company harnessed China to reach
the Top 5 bracket in the Indian mobile
phone market. In an earlier interview to
The Strategist, Rahul Sharma, co-founder,
Micromax, had said: The strategy is sim-
ple: create high volumes, reach the customer base through effective distribution,
give them products that are innovative and
cost-effective. Finally, create a strong
brand. Micromaxs strategy of associating
with Bollywood and cricket has also helped.
The companys advertising and marketing
spend last year, according to experts, was to
the tune of ~150 crore, which would be
roughly what Britannia or Heinz spent on
their brand communication that year.
What has also set Micromax apart is the
speed at which it has been able to put products in the market and its tremendous
reach. According to Mritunjay Kapur, country MD, Protiviti, the worlds largest independent business and risk consulting firm,
Players like Micromax are constantly
pushing the product profile they have
been able to identify their markets well and
be where the customer is. So, where
Micromax takes barely a month or two to
launch products, another big international brand requires roughly 18 months for a
162
of exposing ones existing market share to

the competition.
As of today, it would take no less than an
industry, supported by the sovereign will of
an economically capable country, to build a
manufacturing base and ecosystem as costcompetitive as Chinas. Could the US or
Europe do that today? Even if theres
political will, the cost advantage would
be missing.
The alternatives would again shift to
Asia. And if so, wouldnt it be logical for US
companies to stick with China?
For India as a country, that still becomes
reasonable, given the huge domestic
demand to match a supply. But for that to
truly happen, the supply-chain too will
need to be developed locally.
As of now, most of the material parts are
imported from China. The new telecom
policy does incentivise local manufacturing
in letter, but much needs to be done in
terms of spirit. The step would include
building the skills base as also developing
special manufacturing zones what exists
now is insufficient.
similar product to go through the retail

pipeline.
In effect, Micromaxs growth strategy
has followed three clear stages, explains an
industry insider. When it started out, the
company picked handsets from China,
rebadged them and sold them in the India
market. In the second stage, it realised the
need to do extensive research in terms of
Indian consumers demands and product
development. Now it has crossed over into
a new phase, where the company has started following a mix-and-match strategy
getting some products manufactured in
China and other countries, sourcing components from abroad and manufacturing
some of the newer lines in India.
HITTING A HOME RUN

In a way, the changes in Micromaxs growth
strategy have followed the evolution of the
mobile consumer in India. When it started
its journey in 2008, the mobile phone market in India was pretty much a sellers mar-
>
ket. Consumers were adapting to what was

ence designs initially preferring to simbeing offered, Micromaxs Sharma told
ply give instructions to its third-party manThe Strategist in an earlier interview. We
ufacturers in China its winning strategy
worked the other way round, trying to
was to quickly start its R&D facility, create
understand what the consumers needs
prototypes and instruct contract manufacreally were. This focus on the consumer
turers on what the company expected.
led to the launch of its first product a
The real clincher for Micromax was in
phone with a 30-day power backup.
identifying the Tier I rung of manufacturers,
People in Indian villages needed mobile
and then getting those manufacturers to
handsets with enormous battery backup
work on our specifications, our innovagiven the precarious electricity situation,
tions, added the former Micromax employexplained Sharma.
ee. Right at the outset, Micromax took pains
According to Anshul Gupta, principal
to mark out those manufacturers in China
research analyst, Gartner, a technology
who were working with global brands.
research firm, by getting products manuFoxConn, the worlds largest contract manfactured in China, Micromax could offer
ufacturer, for instance, has been associated
products at a price about 40 per
with Apple products, accordcent less than what other global Re-shoring
ing to the employee. BYD, simplayers were offering. An Apple makes sense for
ilarly, has been associated
or a Samsung, which were also
with Nokia production and
goods, which
getting their products manufacalso works on Micromaxs
tured in China, would demand a incur higher
handsets, he adds, saying that
mark-up based on the brand val- transportation
the company never bothered
ue; for a newcomer like costs
with the Tier II or the Tier III
Micromax that was never an
manufacturers where inferior
issue. So they could offer similar features at
quality of chipsets etc are used.
a lower price, says an industry hand.
For us, it was always the top tier of
The basic strategy of Micromax has
manufacturers those who worked for
been affordable innovation, says an ex- the Apples and the Samsungs of the world
employee of Micromax. In his view, the
that had to design our products too, says
strategy at Micromax has always been clear:
this executive, adding that typically
to look at four critical components of a
Micromax orders 5,00,000 handsets at the
phone which also determine its price.
entry level from their contract manufacThese include the screen, the camera, the
turers in China at one go. The volume
chipset and the memory used in the device.
growth in turn ensures better cost efficienIts here that the cost of each model of
cies. In 2011, for instance, Micromax
handsets is determined. Deepak Mehrotra,
shipped four million handsets worldwide in
chief executive officer at Micromax, says the second quarter. It cornered 8 per cent
the company is driven by what customers
share in the home market, grew 48 per cent
want. So, the cost is also determined to
annually and continues selling roughly 1.5
what the consumer back home expects.
million phones every month in most of the
So, if my target consumer doesnt particcountries that it operates in.
ularly require a great camera feature,
Besides leveraging the cost effectiveness
instead of giving a 8 megapixel camera, our
of China (Tier I manufacturers in China
handset will have a 5 megapixel one, which
can typically charge $17 upwards per handwill obviously bring the price down,
set, says the ex-employee of Micromax), the
explains Mehrotra.
company has worked hard at securing sound
Pick up a box (of a mobile handset from
and formidable partnerships, especially with
any company) and you will see most are
the chipset manufacturers, points out
produced in China. The country clearly has
Mehrotra of Micromax.
built economies of scale and knows how
ON A NEW WICKET
to play it right. Why just us, manufacturing
Micromaxs focus these days on is building
across categories is done in China, thanks
its manufacturing infrastructure in India.
to the cost efficiencies, eco-system and how
It is a consumer durables company diverthey come together, says Mehrotra.
sifying into other categories, says Gupta of
Though Micromax didnt create refer-
163
Gartner. Micromaxs facility in Himachal

Pradesh already manufactures television
sets and some tablet models.
Micromax now cannot afford to be just
another fringe player that manufactures
products in China and sells them in India,
says Kumar Kandaswami, senior director,
Deloitte in India. Eventually, India needs
to script a China story in terms of manufacturing its products at home, he adds.
The reason is obvious: China is losing the
advantage of labour cost arbitrage, a reason
why even companies like Apple and GE have
decided to decided to shift product lines
from China. Because Chinese wages are rising rapidly, says an analyst, it makes sense
to return manufacturing of a wide range of
goods, with moderate levels of labour content and high logistics costs, to India. Reshoring may also make particular sense for
bulky goods, like television sets, which naturally incur higher transportation costs.
There are many hidden factors involved in
sourcing heavy appliances from outside suppliers, says a senior marketing executive
with an appliances company. These variables include greater supply chain complexity, longer cycle times, quality issues
and responsiveness to local demand. A local
supply chain makes it easier for a company
with a wide portfolio to respond to any sudden supply chain disruption or other unpredictable event.
Not everyone thinks the China story is
over though. Amitava Chattopadhyay,
INSEAD Chair Professor in marketing
and innovation, for example, says,
China is a cheap manufacturing base
for almost anything toys, cars, electronics. so, work will continue to happen
in China.
But global players are setting up and
growing their own facilities or scouting for
opportunities in countries such as Vietnam,
Indonesia and Cambodia to have greater
control over cost and quality. Wherever
you get economies of scale, it is good. It
could be in China, Taiwan, or elsewhere,
says Mehrotra.
Ultimately, analysts believe that the correct balance can be struck through careful
planning. And while Micromax grapples
with supply chain issues, what works in its
favour is that it is no longer a single product
company and faces dilemmas that many
other brands confront.
>
BRYAN A PEARSON
| PRESIDENT AND CHIEF EXECUTIVE OFFICER |
LOYALTYONE
MostIndian retailers
stop atrewards
Companies are struggling to use the customer information they glean through
loyalty schemes in a meaningful way, Pearson tells Masoom Gupte
Why do loyalty programmes as a
tool for engagement continue to
underperform in India?
Lets begin with just plain loyalty and first
understand how it must work. Loyalty programmes are mostly launched as a part of
a brand initiative. Brands start thinking
about connecting with the consumer and
what they can do to enhance the brand
connection with her. Here, we move to the
mechanics of what role loyalty is going to
play within that environment. This is generally about what we call value exchange. In
most instances, the first step in the reward
process is about giving currency back to
the consumer or may be discounts.
When you get through this stage to getting data about customers in place, one
finds the more sophisticated players moving upstream. This is the second R in the
process, known as recognition. It is all
about knowing who your best customers
are and how you differentiate a programme for them. This, in its ultimate
form, gives what we call relevance marketing. Put simply, based on what you
shop at my store, your preferred products
and services, what are the benefits that I
can provide to you, is what is relevance
marketing.
I see that across the spectrum, most
Indian retailers stop at rewards. There is
tremendous opportunity for those looking
at proprietary programmes (each retailer
having its own individual loyalty programme) to look at how they can leverage
the gains from the recognition and relevance steps and how they can use them as
THE LAST
WORD
differentiators from what they are doing

today.
The buzzword today is big data. What
role can loyalty programmes play in
beefing up this big data repository?
Big data involves the accumulation of a very
broad swath of information across an enterprise. The issue, even globally, is that there
are very few companies that are utilising it.
It is evolving and I think in another fiveten years we will be in a very different position. Currently, most companies are struggling to use the customer information that
they have, even through loyalty schemes in
a meaningful way.
164
Looking at the customers shopping

patterns to understand your business from
a different perspective creates dramatic
opportunities for a retailer in general. For
instance, weve worked with our clients to
design their price and promotion strategies
after studying the shopping patterns of the
consumers and how they react to pricing in
different categories. We have studied how
this information can be used to focus on
assortment strategies and where one
should put what in the stores. All these are
questions that can be answered by elements of customer information.
Freeing up this information can help
create a powerful enterprise asset. The big
>
data piece is all about visibility: how are you
using the information to understand customers better.
There is big data and then there is the
right data. Do you think Indian
retailers are moving in the right
direction?
The conversation we are having with many
Indian retailers, in fact, is about how does
one collect that bedrock of consumer information. In India, the amount of data collected is extremely low and the updation of
that data is almost non existent. A large
chunk of the data collected is, in fact, quite
irrelevant and never updated. So that data,
which is not current and dynamic, is actually worse than no data.
What weve found is that behavioural
data is a strong predictor of future behaviour. Collecting a birth date, for example,
doesnt say much about the person. It is just
a point in time. Instead if we look at the
customers historical purchasing data, it
will give you a lot more insight into what
stage of life one is in. For instance, studying
the purchase basket of the consumer over
time can help you understand whom is she
shopping for. Is she shopping for herself or
for her children or other family members
and friends? Such information can probably
lead brands and companies to a whole new
approach towards the customer in question, instead of sending her just flowers on
birthdays and anniversaries.
What is the potential for coalition
programmes in India?
Weve done extensive research among consumers and found that there is a high level of interest in shared currency being used
across retail touch-points. This could be
because when one looks at the broader
Indian population, a very small percentage
uses organised retail for the bulk of their
shopping needs. Most people use a balanced approach towards what they buy
from their local kirana stores and what
they buy from larger, organised outlets.
This Indian customer who goes to an
organised retail outlet once a month or
maybe once a quarter is one of the reasons
for low participation in standalone programmes today. A coalition programme in
this scenario is a way of saying, earn a little across places and in the end get some-
thing meaningful as a reward for your
efforts vis-a-vis a standalone programme
where you may earn a discount but which
may not be too significant owing to the
low quantum of transactions.
From the retail standpoint though,
many feel that managing loyalty
programmes and analytics in-house is
better. What can retailers gain from
coalition programmes?
I think the key here is shared learning that
an external provider will have by way of
working across a number of categories and
geographies. If retailers only stick to data
analysts, they will fail to open up to the vast
breadth of experience that another knowledge partner can bring to the table. They
will not get a 360 degree view of their customers for example, what car does the
customer drive, how many credit cards
does she have, where does she holiday,
what else does does she do and what else
are her key shopping patterns?
This information is possible with coalition programmes, which in turn, can help
in determining information on just how
the customer behaves outside stores. This
is the benefit of a shared model where data
is invariably shared across retailers.
In India, coalition programmes can
work for two reasons consumers participation in loyalty programmes will get a
boost as they will see the opportunity as a
part of a larger pool of opportunities. And
the second advantage will be that the data
pool, which sits beneath the shared currency, can provide much better insights.
Can you elaborate on how getting a 360degree view of the customer really
benefits the retailer?
Let us consider a case study. Say, the retailer is planning to bring down a premium
player to India. The first question the other
player will have is that how many in the
database will be ready customers for the
brand. Here, if you have access to data
beyond just the consumers purchasing pattern in your store, you can ascertain the
number of premium buyers in your database. The data, such as what car they have,
where they holiday, their frequency of shopping at other specialised retail outlets, can
help in getting a rounded profile of the consumer. This will help in finding whether
165
Bryan Pearson - the

loyalty expert
| With more than two decades of experience
in developing customer relationships for
some of the worlds leading companies,
Bryan Pearson
is an expert and author in the fields
of enterprise loyalty and coalition
marketing
| As president of LoyaltyOne, he heads six
global enterprises, leveraging the knowledge of 120 million customer relationships
over 20 years to create relevant communications and enhanced shopper experiences as per the company.
| His book The Loyalty Leap: Turning
Customer Information into Customer
Intimacy was published in 2012 by the
Portfolio Imprint of Penguin Group in both
US and Canada. The book draws on
Pearsons first-hand experience in building emotional loyalty in an information
age. The book claims to reveal how shopper data can be used as the cornerstone
upon which to build intimate customer
relationships.
the customer really fits the profile of this

brand you plan to bring down.
How will foreign direct investment
(FDI) in retail change the loyalty
landscape in India?
With (FDI) in retail coming into the market, things will change. A number of
Western retail players will enter the market. Theyve either worked in partnerships
or behind the scenes with brands. To that
extent, India has been insulated till date.
There are some very sophisticated players
like Tesco that have mastered the migration value chain in loyalty. So, every market Tesco enters, it launches a Tesco Club
kind of loyalty programme. It is way high
up in the recognition and relevance levels.
The Indian retail community must
prepare for the fact that the market is
opening up and how these retailers operate. It is part of their arsenal in the markets
they enter. And so if you are not looking at
ways to differentiate your loyalty programme, then you may end up falling
short of what may be the norm in this
competitive market.
>
GUEST COLUMN
Learn to manage
the millennials
The highly competitive Generation Y presents great opportunity to
the HR manager with its need for constant learning and the ability
to multitask. Is todays manager ready to harness their potential?
A Gen Y team at work in

Googles Gurgaon office
BS PHOTO
t the cost of sounding repetitious, it

is important to emphasise the point
that every generation is a product
of its times, the dynamics of which have a
formative role in defining its values. The
generation before ours, for instance, was
familiar with hardship. Hardship that

could only be overcome with steadfast discipline and industry. Hardship, which
would eventually result in a secure public
sector job (in most cases, for life), a comfortable home, and a pensioned retirement
166
with children and grandchildren. The new

generation, they thought, would continue the tradition.
We did not. So, when I meet people of
the brave new generation, brimming with
confidence and a sense of entitlement, I
>
stop myself from issuing a truism of my
own. After all, the generation before mine,
perhaps, felt the same way about me in
the 1970s. Only, my contemporaries didnt
have the options or the information that
have the millennials spoilt for choice today.
As an observer of the human psyche,
both by profession and by choice, I recognise that every generation brings its own
unique counterpoint to the world in general, and the workplace in particular. But no
single generation, so far, has demonstrated
the desire or the potential to transform the
paradigm of work like the Millennial, Y,
Peter Pan or No Collar Worker generation. See, this generation wont even agree
on a name!
To know these people is to recognise
that they are born into the most child-centric generation yet. Little wonder then that
60 per cent of the millennials polled in a
recent survey said their parents were their
best friend. This is a generation that does
not want to leave home and if it does, it
returns soon enough. Raised as winners,
these youth evolve into high-performers,
albeit high-maintenance. That means they
will perform, but only in the right conditions, on their own terms. So, work cannot
consume personal life and fun is nonnegotiable. This is sure to put employers in
a bit of a bind. Thousands from this generation join our organisation every year
and make it their own, compelling us to
change at times subtly, and several times
radically.
I am inclined to believe that the starting
point is a rethink of the workspace as a
place that mustnt sequester talent behind
cubicles and meeting rooms, but enable it
to collaborate, exchange, and even socialise
in a liberating environment. That done,
organisations are ready for the next phase of
transformation. This generation believes
that only results are a barometer of ability.
Thats why smarter organisations have
already established a results only work
environment (ROWE) system, where performance is measured by the business
impact achieved. While organisations take
their time restructuring the workplace and
performance paradigm, HR practitioners
are already considering the following realities when they harvest the crop of 2013:
Script their success: The new generation
expects to make an impact from day one. If
the job doesnt pack enough punch and
face, once-in- a-while mentoring model will
doesnt devolve responsibility, its injured
not work for those who want constant feedself-worth begins to assert itself. If the job
back and learning. Create a matrix mentordoesnt visibly serve a larger business puring structure, which allows these employees
pose, instant gratification withdrawal sympto connect with different mentors based on
toms start to appear. Striking that right balcontext and need.
ance between autonomy and support,
Unleash: The strong individualistic streak
commensurate with the individuals skill
is often a faade for an entrepreneurial spirand capability is key.
it a survey of 500 Generation Yers comStaying hands-on while allowing
pleted early last year revealed that 69 per
talent in the room to succeed on its own
cent wanted to set up shop. Rather than
strength, connecting its individual goals to
enforcing conformity, leverage this asset,
the larger ones at the business level and
because it could be the source of your organmaking sure these goals,
isations next killer idea.
though challenging, are all
Balance: If theres a clich that
attainable and then tracking
best describes this generation, its
progress through this plan are
that it doesnt live for work; it
some of the essentials.
works to live. In the survey menTalk back: See something
tioned above, a sequel to one conworthwhile, say so immediateducted in 2007, work-life balance
ly! This generation needs
was unseated as the number one
instant and constant feedback,
priority by paid holidays.
an LOL or an OMG for every
Organisations that respect and fuleffort. Of course, there will be
fil this generations expectations
times when failure must be
for a life outside of work are likely
dealt with too. On those occato have a more engaged workforce.
NANDITA
sions, hold it accountable. Its GURJAR
Its a great idea for enterprises to
not enough to say You botched
engage with the whole person,
SENIOR VP &
up. Scrutinise the what and
and not just the professional side
GROUP HEAD HR,
why together. Discuss what INFOSYS
of the person.
happened and what each side
Lend purpose: Theres an idealist
believes went wrong. Then outline the conhidden in every product of the millennial
tribution system how the system and
generation. These people want their actions
the employee may have contributed to lead
to serve a greater purpose than just a bigger
up to the current scenario. The point is,
bank balance or faster career growth. And
acknowledge the disappointment but dont
this desire to do something meaningful
dwell on it. There are other success stories
through work is quite genuine. That means
waiting to be scripted.
its members will naturally gravitate to
Let them juggle: For a generation with an
organisations that share their values.
intrinsic need for constant learning and an
I see before us a great opportunity to
in-built ability to multitask, todays chalcollaborate with this entitlement generlenge is tomorrows routine. From an HR
ation. After all, we can deliver staid serperspective, this is either an impossible sitmons about the 10-mile walk, or simply
uation or an unmissable opportunity to
help them soar unfettered on the wings of
channelise this energy into cross-discipli- their talentand then feast together on
nary assignments, to simultaneothe fruits of joint success. Id choose the latusly engage these employees and build their
ter.
skills.
Mix and match: Despite being highly competitive, this generation works best in a collaborative environment. If you dont put
these young employees in a team, chances
are they will assemble their own, irrespective of the task at hand.
Mentor: Enable mentoring; virtual, constant and diverse. The traditional face-to-
167
>
K. RAMAKRISHNAN
| PRESIDENT-MARKETING |CAFE COFFEE DAY
To be a leader, you have to

be ready to supportfailure
From a cyber caf that also served coffee to the countrys largest caf chain,
it is innovation that has driven Caf Coffee Days growth,
Rakamrishnan tells Abhilasha Ojha
When a brand is small, it is
easy to have control over
quality. How has Caf Coffee
Day maintained quality while
expanding rapidly?
Coffee is our middle name and that is our
mainstay. Our coffee is grown on our
estates (Chikmagalur); it is roasted and
packed centrally and then sent out to our
cafs across India. A fundamental rule
for brands to ensure quality is to have
strong control over the basic, most important ingredient that is offered to the consumer (in our case, coffee). What is also
key to sustaining quality is to look at
processes very closely, in detail. At Caf
Coffee Day, for instance, in terms of not
just our coffee but also our food, we have,
in the last one year, centralised the
process in that the food reaches our distribution centre and from there it is sent
out to cafs. For a brand to succeed, not
just processes need to be in place but also
the training of people who define the
brand needs to be closely looked at. In
sectors like retail and hospitality particularly, employees at the front end become
the face of the brand. They reflect the
brand and so their training becomes
important. At Caf Coffee Day, we have an
evolved and a strong training structure.
We focus less on classroom learning and
emphasise on-the-job learning, learning
by observation and through tools and
THE LAST
WORD
SAGGERE RADHAKRISHNA
168
>
learning aids that are visual in nature.
We have more than 1,400 cafs currently,
and by 2014, we want the number to grow
to 2,000 cafes. So, training the people and
our growth will go hand-in-hand.
Brewing the
business
| Caf Coffee Day pioneered the caf concept
in India in 1996 by opening its first outlet
on Brigade Road in Bangalore. It was a
coffee
shop-cum-cyber cafe
When one is a leader, others just

follow. How do leaders go back to the
storyboard and constantly innovate?
| From a handful of cafs across six cities in
the first 5 years, CCD has today become not
At Caf Coffee Day, for instance, you
only Indias but Asias (by number of outare expanding services and offerings
lets) largest retail chain of cafes with over
and selling even coffee machines and
1,420 cafes in 185 cities. Caf Coffee Day has
not just a cup of coffee.
four cafes in Vienna, Austria.
See, whatever has been your strength,
| The chain has also acquired a Czech
whatever has taken you from point A to
Republic-based coffee chain with 11 outlets
point B, need not necessarily take you to
spread across Prague, Brno and Olomouc
point C. Never stop being a student, keep
| Caf Coffee Day grows the coffee it serves
learning, that is the key. Then, its also
across its cafes. It also offers its consumers
essential for companies (and not just
the option of purchasing packaged coffees.
leaders in the category) to have a back-up
| The range of merchandise now also extends
plan. At Caf Coffee Day, at any given
to coffee makers, including the recently
point of time, we have lots of pilot projects
launched Coffee Day WakeCup machine
that, if successful, can go national easily.
| It recently announced Lounge Journals, an
But, what it fundamentally means is that
innovation that allows customers to interact
our brand is always experimenting. For
with photographers, writers, musicians,
dancers and other creative professionals
example, most of our cafs were table service models. We realised that at any given point of time, our team member was
going back to the storyboard) is to conmaking 14 visits to one table (going
stantly experiment, keep learning and
with the menu, returning back
be happy to support failures.
to take the order, returning
Failure is the process of
We look at
back with the order, bill,
experimentation
and
ourselves as a mass
cash). We figured it was
learning. If you dont fail,
brand that addresses
not good either for the
you dont learn. So
students, executives
team member or for the
many
drinks
we
and homes. Wherever
customer. We eliminatlaunched, we had to
there is need for a
ed the process and now
pull back, drop from the
coffee, we should
our cafes are semi-table
menu list because they
be there
service model in that the
didnt work. So many
consumer places the order
locations we had to pull out
on her own but we deliver it to
from because they didnt
her at the table.
work. But let the experimentation
We are considered a youth brand but
happen, believe in it.
we address every segment. We look at
ourselves as a mass brand that is addressAchieving stickiness towards a brand
ing students, corporate employees, offices
is tough, especially for youth-centric
and homes. Wherever there is a need for
brands. How can brands then create
a beverage, there should be a need for
and grow a loyal base of consumers?
Caf Coffee Day. Thats how I see it. Our
We need to constantly maintain quality
lounge concept, for instance, is totally
standards and not just look at consumer
different. Its a caf which is a hangout
growth but also consumer connect. So,
zone with a purpose. We have other modfor a youth centric-brand like ours, our
els targeting hospitals and offices. We give
focus on digital media and social media
vending machines for coffee delivery
becomes very important. Actually, it is
within offices.
what keeps us on our toes all the time. We
The key to leaders being successful (or
already have 3.2 million likes on
169
Facebook and, through this engagement,

we are in constant touch with a huge base
of people who are our valued consumers.
Given that we are a growing brand, slipups are inevitable but through the social
media, we ensure that we rectify errors
and mistakes. One of our consumers, for
instance, put up a picture of sofa sets and
chairs in our caf in Udaipur, remarking
unhappily that they were not in the best
shape, and were old and worn out. We got
proactive and within a few days, we
replaced them with brand new sofa sets.
A few days later, a picture was uploaded
by the same consumer, with a comment:
CCD heard me. So, yes, the target agegroup consumers on the social media
may be unsparing but to be fair, they are
also willing to give a chance to the brands.
And through such endeavours, connect
with brands happen. From fumigating
flies in one caf within minutes to making
sandwiches available at another caf, as a
result of social media, as a connection
with our core consumer, the bond with
the brand is only getting strengthened.
Co-creation is also critical for youthcentric brands. In fact, on our social
media pages, we are clear that we are happy to see people conversing. We only
moderate when we feel we really have to.
We provide sparks for conversations and
get a sense of subjects that our core consumer may be interested in. Our music
playlist, food menu, and many other
things have been co-created with Caf
Coffee Day fans. When we changed our
food menu last year, it was based on feedback on the social media. We invited people to test our offerings offline and then
share their views online. So, the constant
mix of online and offline initiatives can
help strengthen the bond, particularly
with the youth-centric brands.
You have employed many differentlyabled people at your cafs. How can
companies make CSR relevant rather
than just be a token exercise for the
benefit of the companys image?
We at Caf Coffee Day do CSR from the
heart. There are three broad spokes of
corporate responsibility for us employability, education and hunger. In all these
aspects, we do relevant work. We are
proud of our silent brewmasters. They
>
may be differently abled but their sense of

smell is so heightened that they genuinely are fantastic brewmasters, they
make very good coffee. We have identified that strength. We have a vocational
training college in Chikmagalur where
we train youth who are in tough circumstances (children from broken homes, or
of parents who might be offenders and
are in jails). We provide them with free
training, accommodation and food to
make them employable in the hospitality
industry. We also award scholarships to
children in need. We have tie-ups to provide food on a daily basis through money
gathered at different cafs. So, yes, we
continue on this path because there is
need to train and employ people.
Coffee consumption is growing yearon-year, according to the Coffee
Board of India, so is the competition
among cafs. How are you, as the
largest coffee chain in India, gearing
up for the challenge?
We started as a cyber caf in 1996. At that
time, the assumption was that internet
would not be too easily available for retail
customers in India. So, we let internet be
the centre of our business and surrounded it with beverages. In two-three years,
however, internet became freely available
and the model (of internet with beverage
at a caf) was replicated. Thats when we
tweaked and said, okay, coffee will now be
the centre of our business and everything
else will surround that. From 2000-2005,
we stuck to this and also ended up
expanding to different parts of India.
However, we found that we needed to
change that approach too. So, we became
beverage agnostic, in that conversation
became the centre of our business and
we surrounded it with the beverage,
which was coffee.
So, what was happening throughout
was reinvention and being relevant with
the consumers. I think, brands always
need to experiment and reinvent themselves. We were successful as a cyber caf
but we took the initiative and simply
decided to make a flip and do something
else. Coffee is in our genes anyway, flips
just happened.
170
>
GUEST COLUMN
The world survived

2012, so can telecom
A litany of bad news throughout last year has put the Indian
telecom sector under stress. But there are some bright spots
on the horizon and with strong government support, the sector
can overcome its year of doom
the higher side. Operators already burn 2012, the telecom sector in India came
dened with increased debt and margin
under intense scrutiny due to a number
pressures chose not to bid for additional
of reasons ranging from cancellation of
spectrum, indicating lack of worthiness
2G licences, ambiguity in implementation
as well. The muted response to the auction
of key policy measures and dip in wireless
forced the government to reduce the base
subscriber net additions. Topping them all
price of spectrum in the 1,800-MHz band,
was the spectrum auction debacle. These
by approximately 30 per cent in the four
events have stolen the limelight from the
circles. For example, in the Delhi
National Telecom Policy (NTP),
circle, reserve prices reduced
the draft of which is hailed as profrom ~6,93.1 crore to ~4,58.1
gressive and encouraging for the
crore. Also, pan-India reserve
sector in the coming decade.
price of spectrum has been
The most significant miss in
reduced from ~14,000 crore to ~
the year was the feeble response to
12,000 crore. The result stymied
the 1,800-MHz spectrum auction
the governments efforts of
in November that raised only
meeting its fiscal deficit recov~9,407.6 crore, which is less than 25
ery target.
per cent of the governments
Policy uncertainty has been a
expectations of raising approxicontinuous theme in the sector
mately ~40,000 crore. There were
in 2012, even after the launch of
no bidders for GSM spectrum in PRASHANT
SINGHAL
the Draft NTP in October 2011. It is
four circles Delhi, Mumbai,
a concern for operators as major
Karnataka
and
Rajasthan. PARTNER IN
Moreover, there were no takers for MEMBER FIRM OF operational and strategic deciERNST & YOUNG
sions are largely dependent on it.
the 800-MHz spectrum band across GLOBAL
For instance, implementation of
all circles, due to withdrawal by
an M&A policy has paused conpotential bidders from the auction
process. The auction of spectrum was main- solidation in the industry. 3G roaming
ly due to the cancellation of 122 2G licenses pacts among operators is another area that
has embroiled the operators in a legal tusof nine operators, allocated in 2008, by the
sle with the government. The when and
Supreme Court of India in February 2012.
how of policy implementation needs
The spectrum auction results indicate
more clarity.
that the reserve price of spectrum was on
171
Wireless subscriber net additions were

negative (loss of 20.5 million) for the first
time in the month of July. This marked the
end of the positive growth momentum in
subscriber additions that the country witnessed so far as part of the wireless boom.
The wireless subscriber net additions have
steadily declined month-on-month from a
high of 20.21 million, in March 2011.
Subscriber losses continued in August and
September as well. Incumbents have mainly attributed the loss to deactivation of inactive subscribers and the fact that new operators have ceased to rollout services in new
circles or stopped operations in existing
circles, due to the licence cancellation and
profitability concerns.
The significance of key performance indicators (KPIs), such as average revenue per
user (ARPU) and minutes of usage (MoU),
have been diminishing over the years.
Commonly used external metrics, such as
ARPU, fail to give investors a full picture,
given the recent inactive subscriber deactivations and dual-SIM phenomenon.
Operators are moving to newer metrics such
as average margin per user.
The past year induced negative sentiment in the sector and affected investor
confidence. As a result, international interest in the India telecom market is gradually waning. Unless the government makes a
strong move to support the sector, telecom
>
BS PHOTO
may follow the aviation sector, which

despite being opened up for FDI has not
seen much of an interest. 2012 will be
remembered in the history of Indian telecom for all the wrong reasons.
Amidst the gloom, though, there were
few bright spots that hold significant
promise for the future growth of the sector. Launch of commercial 4G/LTE services in Kolkata and Bangalore was the
highlight of the year. India became the
only country in the world where 4G/LTE
service was launched within 1.5 years of
launch of 3G services. India also finds its
place among a handful of countries that
has launched 4G services using the TDLTE technology on the 2,300 MHz band.
4G/LTE significantly enhances the user
experience by offering improved data
speeds and latency, multi-player games,
seamless streaming of videos and video
chat in high definition (HD). For the operator, LTE improves spectral efficiency,
reduces opex and is an important differentiation in wireless broadband.
The reduction in 3G data tariffs in the
first half of 2012 was a key inflection point
and is expected to increase the uptake of
3G services, which was lagging so far. Price

cuts of approximately 4080 per cent,
compared to introductory offers by almost
all the operators, has lowered one of the
primary barriers of adoption for 3G services in India. Consumers can benefit
from lower differential cost in switching
over from 2G services and increase perceived value of the service. The current
3G tariffs are one of the lowest in the
region when compared in relation to voice
tariffs. Mobile data traffic is steadily
increasing. According to Nokia Siemens
Networks MBit Index, the combined 2G
and 3G mobile data traffic in India
increased by 54 per cent between
December 2011 and June 2012. The concerted shift to data services is gradually
picking up for Indian operators.
In 2013, we are going to see some key
trends and a number of policy initiatives
being implemented. Mobile tariffs are
expected to increase. The increase may
not be substantial in absolute terms, but
operators could reduce discounts and
free call allowance, and introduce lower
validity packs. This is expected to
increase the average revenue per minute
172
(ARPM) for operators. However, the flip

side is that data revenue growth is likely
to be at the cost of margins.
Operators would increasingly focus on
revenue growth rather than on absolute
subscriber growth. Overall, the non-voice
revenues of operators would continue to
grow. 3G service uptake is expected to
pick-up backed by price cuts and increasing coverage. Category B circles would
continue to witness strong mobile data
growth.
The year will also see launch of LTE
services by the remaining operators. LTE
service is priced at a premium over 3G
and 2G services and it is expected to take
around 23 years to become a mass market phenomenon in India. 3G is expected
to dominate the small-screen segment of
the market while the dongle market is likely to witness enhanced competition
between 3G and LTE players.
Just like the world has survived the
end of ancient Mayan calendar this year,
we hope that the hardships faced by the
Indian telecom sector comes to an end
and 2013 sees the much needed revival
for the sector.
>
BIJAEI JAYARAJ
| MANAGING DIRECTOR & CEO | LOYLTY REWARDZ
Aunified loyalty programme

doesntworkin India
While the Indian retail is waking up to customer relationship
management, coalition loyalty programmes remain a far cry,
Jayaraj tells Rajarshi Bhattacharjee
Long-time sales and customer-service
professional Jeffrey Gitomers book
says, Customer satisfaction is
worthless, customer loyalty is
priceless. How relevant is Gitomers
contention in the context of the Indian
market?
Let me explain it to you a bit differently. I

grew up in a small place in Kerala. As a kid,
every shopkeeper in my neighbourhood
knew me. They knew my father and my
grandfather. I also knew the shopkeepers
and their families. That is how retail used
to be. The Indian retail business was run in
a network, knit together in a very personal manner. Post globalisation, what we are
seeing is a rapid depersonalisation in
Indian retail. There are thousands of companies catering to crores of customers
every day but the companies dont know
who those customers are. When a cus-
THE LAST
WORD
173
>
tomer walks into a retail store, the shopkeeper doesnt know who she is, what she
buys or why. But companies cannot afford
not to know their consumers.
What can bridge the gap today is technology-based consumer relationship management (CRM). If you look at advanced
markets, the concept of loyalty, of CRM is
very advanced. In India, companies are just
waking up to the realisation that if their
customers suddenly stopped coming, they
wouldnt know where to go and look for
them. There lies the whole relevance.
Today, even though organisations are growing, sales are growing, one needs technology and processes in place to manage their
relationship with their customers. Thats
where the modern industry of loyalty is
getting created.
To answer the second part of your question, the concept of CRM is nascent in
India. Its a newborn industry but growing
rapidly. So this country has the scope to do
a lot more in customer loyalty-related activities.
How can brands differentiate
themselves based on loyalty
programmes?
Fundamentally, a brand is a business entity. If a brand sells 1,000 crore units a year,
it needs to know who its loyal customers are
and who are the new customers that are
yet to develop loyalty towards the brand.
May be, 20 per cent of the buyers have generated 80 per cent of the sales for the brand.
So it becomes essential for the brand to
reach out to its top 20 per cent customers.
What are the areas where loyalty
programmes tend to fail?
Customer loyalty, as a concept, is not very
relevant and will fail in situations where
there arent frequent purchases, like buying
a house or a car. In this context various other factors may play a key role, but not loyalty.
Do you think loyalty programmes
is the only tool to garner customer
loyalty? If not, what are the
other tools?
Do you think giving a customer one or two
points on a purchase of ~100 or ~200 really
creates loyalty? Absolutely not. Loyalty programme is a basic platform to do a whole lot
tool to know your consumers.
Introducing Bijaei Jayaraj

| Bijaei Jayaraj founded Loylty Rewardz
Management Pvt. Ltd four years ago with
an eye on the still nascent consumer loyalty
and relationship management business
pie.
| Today, Loylty Rewardz has captured around
60 per cent of the market share, running
loyalty programmes for a cumulative card
base of 175 million credit or debit cards in
India.
| The company has processed over
219 million transactions, awarding over
8.1 billion loyalty points, with over
11 million transactions worth over
~2,000 crore as monthly process
| Prior to founding Loylty Rewardz, Jayaraj
worked with Jet Airways as the head of its
loyalty programme, Jet Privilege, and with
MasterCard Worldwide as the head of
MasterCards relationship with the State Bank
of India.
| While at MasterCard Worldwide, Jayaraj was
twice conferred with the MasterCard SAMEA
Star Award (South Asia, ME & Africa) and once
with the APMEA Star Award (Asia Pacific, ME &
Africa) for his achievements for MasterCard
businesses worldwide
| Jayaraj, who has worked in the advertising
industry in Muscat, Sultanate of Oman, and
with McCann Erickson Worldwide (FP7) in
Dubai, UAE, holds a masters degree from
Jawaharlal Nehru University, New Delhi. He
was also a member of the founding class at
the Indian School of Business, Hyderabad
of other thingsunderstand your consumers, their buying behaviour, likes, dislikes, age, demography, anniversary, thus
displaying to them that you know them
very well. Loyalty programme is a story
around which you do all these activities.
The loyalty points are like the glue sticking
all these activities together.
Loyalty programme is the only tool in
this direction. If you want true loyalty, you
need a loyalty programme. One can talk
about delivering quality goods and services,
timing, fair price, etc to garner loyalty, but if
you dont know who the customer is, you
cant deliver efficient services. To offer efficient services you need a loyalty programme. If you dont have a database, you
dont know the repeat purchasing behaviour of your customer, how will you offer
efficient services? A loyalty programme is a
174
Would you agree that retail and airlines

have made better use of loyalty
programmes than others?
Airlines, yes. Globally, this is one industry
that has deployed loyalty programmes successfully. But the picture is not the same
for Indian retail. There are many retail
companies that do not have any loyalty
programmes. However, I see a huge potential in retail and in the next five years we
are going to see a dramatic improvement
in CRM strategy of retail companies.
How mature is the loyalty programme
strategy in the Indian banking sector?
It should have great potential as a
segment since consumers are most
careful when it comes to the safe keep
of their hard earned money.
The banking sector in India has millions of
consumers unlike the retail sector, which is
highly scattered. We have a strong presence in the banking sector and are helping
it to realise its potential.
The sectors that are yet to realise the
potential of CRM includes hospitality that
gets frequent travellers. A potential sector
need not be an organised one. It can be a
single hotel that can get to know details,
including food and accommodation preferences of customers.
Are unified loyalty programmes, where
the customer will be offered one loyalty
programme for a range of
enterprises/merchants, the future?
A unified loyalty programme, or coalition
programme, doesnt work in India. They
work well in mature markets. In Indian
retail, which is a $450 billion industry, the
organised sector is only about $30 billion.
In mature markets, there are large coalition programmes where multiple organisations say, a petroleum company, a travel company, a bank and a retailer come
together and create one big loyalty programme. India is not ready for this because
none of the organised players in retail today
has the scale to reach even a fraction of the
total market.
Looking at the future, if the Indian retail
industry gets itself organised rapidly, there
will be possibilities of introducing unified
loyalty programmes. But I doubt it. It will
>
take time. Ten years down the line, perhaps yes. In a fragmented retail market like
India, you need an innovative model that
may not be a true-blue coalition programme having different databases but
stitched together in a common platform.
What are the scalable technologies in
loyalty programmes available today?
What kind of data intelligence do such
technologies deliver?
There are various kinds of loyalty programmes. Take Loylty Rewardz. We run
loyalty programmes for 175 million debit
and credit cards in India. We process about
11 million transactions every month. The
total value of those transactions is around
~1,700 crore every month. When you are
going to the scale of a billion, you need significant database to put in all these records.
At the end of the day, loyalty is like
banking debit and credit some
points in, some points out. Add a million
and it becomes an extremely complex situation. We have awarded a cumulative
7.8 billion loyalty points in India so far.
For those kind of points you need significantly strong and stable technology platform together with a strong network,
database management, security and
infrastructure to track all these.
How does it help? If you take a bank
that has 2 million customers, do you know
the top 20 per cent customers? The bank
with 2 million customers is making a ~100
crore profit every year. If you dig deeper
you will realise that 20 per cent of the customers gives ~80 crore revenue. Of the rest,
about 10 per cent might have been retained
at a loss. The bank has no way of differentiating and understanding who is better
and who is not without tracking the customers behaviour, quantifying their activities and profitabilities. The bank here
needs to differentiate the more profitable
customers and treat them better. The idea
is not to treat the less profitable customer
badly but to treat your more profitable customer better.
175
>
Many organisations tend to walk a safe path by plotting their innovation graph as continuous
improvement of what they have delivered well. However, this can only lead to slight
process or product improvement; it can rarely catapult an organisation to an entirely new league
Disrupt to innovate
hen Clayton Christensen first
Re-shaping human habits
defined disruptive innovation,
Seismic shifts in the way humans lived
in his 1997 best-seller The
have happened through disruptive innoInnovators Dilemma, he referred to it as
vation. At a time when the world was riddisruptive
technologies.
den with oligarchy, Rome disrupted the
Understandably, as most of the changes
political thinking with democracy. When
that we see in our lives today is brought
the world thought that wars freed counabout by the increasing use of technolotries, Gandhi disrupted with his idea of
gy.
non-violence. When knowledge was
Consider the revolutionary power of
transferred from one guru to a few discithe internet, VOIP telephony, reduced
ples, Nalanda University introduced
health risks with non-invasive surgeries
organised, large-scale education model.
disruptive innovations continue to
Printing press, steam engines, electronic
change the canvas of human
storage, organised farming,
lives. They redefine what we
telephones and the internet
thought we wanted by painthave all had disruptive
ing a new shape and form of
impact on the way we lived.
possibilities.
Innovation is the byword
Re-imagining consumer
expectations
of this era. Industries, markets, advertising or art
Disruptive
innovations
everybody is out to do someinvade a market, and wipe
thing different; to try and
out existing order. Take the
leapfrog ahead of competiexample of the now ubiquition. However, many organitous TV. When the concept
sations tend to walk a safe
was first introduced, it
path, by plotting their innoturned the idea of visual
vation graph as continuous
entertainment on its head.
improvement of what they
Till then, people were used
have delivered well. Now the
to flocking to live shows
problem lies in the fact that NITIN MATHUR
now this miracle machine
this can only lead to slight SENIOR DIRECTOR AND
beamed music, videos and
process or product improve- HEAD OF MARKETING,
movies right into their own
ment, it can very rarely cata- INDIA AND SOUTH EAST
living rooms. This spelt a
pult an organisation to an ASIA, YAHOO!
completely new set of rules
entirely new league, as a dis live shows and acts could
ruptive idea can.
no longer succeed by only improving
The tremendous pace of change in
their performance, they had to take into
todays world needs no emphasis. More
account comfort, convenience, ease of
disruptive thoughts and solutions are
access to cater to this changed audience.
needed to address real-life problems. The
Long-term effects, post tipping point
winner is not the one who prepares for
One challenge that companies often face
change, but the one who accelerates to
is that the initial quality of the disruptive
reach it faster and be in a position to
innovation may result in limited use, and
define it.
176
could be less appealing to established

customers. Take the example of digital
photography. While it has been tagged as
a disruptive technology for a decade now,
it took time for large-scale adoption
because it required not just devices that
would take digital photos, but also called
for a supportive ecosystem. For example,
digital photography contests, integration
of cameras into mobile phones, increase
in instances of citizen journalism, etc.
However, even with gradual adoption,
the very advent of this technology spelled
doom for photo-film manufacturers.
Interestingly, digital as a medium also
rode on the new breed of amateur photographers who started exploring their
skills, due to the immediate results digital could deliver. That set in motion a
phenomenon which couldnt be reversed.
Today, digital is so prevalent that not just
photography, even video shoots for documentaries, corporate videos, and low
budget movies are all done on digital.
In fact, look at the internet itself
starting as the preserve of the few, it has
now spread to all corners of the world,
and is now used not just to communicate,
but to consume content, discover communities, and even report revolutions. It
has disrupted the very way in which mass
media operated two-way communication has become the new order, and other media are now looking at ways to not
just deliver, but also interact.
Every disruptive innovation has a tipping point. And once it crosses that, it
can effect changes with a broad brush.
Problem of continuing to improve

Sustained innovation endorses the
thought that if we consistently improve
what we offer the customer, it will bring
about a natural adaptation to changes
around. Nothing could be further from
>
the truth, because it doesnt take into
account disruptions which break through
suddenly. Like a new technology enabling
a new way of life.
Take the advent of mobile telephony
and the mobile internet. The entire reality has changed with the mobile
explosion we now see in India.
Now imagine, if internet
companies
only
focused on improving their PC experiences in a repeatable model, where
would they be? A
demand for on-the-go
consumption doesnt mean
just extending content from a
PC mode to a mobile, it actually means building experiences
which move seamlessly across
screens. It means taking into account
how people actually live in the midst of
enabling technology and how that may
impact business models. And thats why
at Yahoo!, mobile-first is what we aim to
achieve for all our properties and services.
For example, in the recent coverage of
the Olympics, we not only delivered experiences for the PC, tablet and the phone,
but also developed a seamless transition
from the mobile device to the connected
TV.
I didnt know I wanted it

Disruptive innovation can delight and
win over the consumer, by surprising
them with a desire they werent yet aware
of. The way the iPod swept users off the
floor, by redefining the way people listen
to music. Remarkably, this wasnt a userneed per se before it was delivered to
them. And no wonder they were thrilled.
What the iPod also did is deliver a
punch to conventional wisdom, which
dictated that every new version of an electronic item had more features than the
previous. This is what continuous
improvement meant for device makers,
till the iPod proved less is more, throwing the idea of repeatability out of the
window.
Delivering short-cuts; making things

cheaper, faster, easier
Disruptions are built on the why-not
principle. They aim to deliver a

cheaper, faster, easier experience
built around an insight into consumers lives. For example, printing was
once a herculean task requiring days of
preparation. Laser printing technology
up-ended this. Simple, efficient and
handy, it went on to conquer offices, and
homes. Grabbing this opportunity, a new
set of entrepreneurs were born who
offered easy laser printing integrated with
quick deliveries.
Leveraging parallel thinking to win

the game
Sustained innovation, by its very nature,
is limiting because it calls for thinking
along a set trajectory. There can be very
minor change in direction. But disruptive innovation has no such compulsions.
Havent we witnessed this in meetings
and workshops? Someone surprises us
with their different take and walks away
with the prize. Nothing has more potential than the parallel approach to a set
thinking. Thats the kind of surprise that
disruptions deliver, and unlock value.
While repeatability might work for organisations that are already at a certain level of acceptance and scale, and have
propositions geared to delight the cus-
177
tomer, the threat of disruptions always

looms large. A disruptive innovation has
the power to be the David to an established Goliath-like organisation.
With technology continuing to gain
importance in our lives, it is imminent
that disruptive innovations will gain
ground, and keep shaping new business
models and products that challenge the
status quo and rock the rules of the game.
As Thomas Edison once remarked about
his laboratory, There aint no rules
around here. Were trying to accomplish
something!.

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LIGHTS CAMERA ACTION

SEGMENT & RULE

THE NEW FRONTIER

THE LEADERSHIP PIPELINE

CLICKING ON A NEW CHAPTER

WALKING THE PRICE TIGHTROPE

BUILDING THE PERFECT PROPERTY

MADE IN INDIA, ONLY FOR INDIA

IN SEARCH OF A BUSINESS MODEL

FROM CUSTOM MADE TO CUSTOMER MADE

ORGANISING UNORGANISED MARKETS

MANAGING CUSTOMER EXPECTATIONS

DEALING WITH DISCOUNTS

WINNER TAKES ALL

LOOK WHO`S TALKING

MANAGING REMOTE WORKERS

SOLVING THE INGREDIENT BRANDING PUZZLE

WINNING THE RELATIONSHIP GAME

THREAT AND OPPORTUNITY

LOW BUDGET BIG BANG

MAKING VARIABLE PAY WORK

PUTTING BIG DATA TO WORK

CRACKING NEW MARKETS

THE REWARDS OF LOYALTY

WHY GOOD ADVERTISING WORKS

GO WITH THE FLOW

FAST & SECURE

LEARN TO STRETCH SUCCESS

MEASURING TRAINING EFFECTIVENESS

LIMITING COSUMER CHOICE

TWIST IN THE TALE

DONT FIGHT THE FUTURE

GOT BAD ONLINE REVIEWS

ONE VERSUS MANY

MOST INDIAN RETAILERS STOP AT REWARDS

LEARN TO MANAGE THE MILLENNIALS

TO BE A LEADER, YOU HAVE TO BE READY

A UNIFIED LOYALTY PROGRAMME

DOESNT WORK IN INDIA

A bunch of new production houses and young artistes are

Surinder Films and Eskaay that has

UP, UP AND AWAY

NO. OF MOVIES MADE

More than 100*

fame with dexterity.

Dhirubhai Ambani Groups Big Pictures,

States and the United Kingdom which

I expect the industry to grow at

I expect the industry to grow at 70-80 per cent annually

young generation. That is what I am doing in my own productions.

Given a high level of penetration and very little in terms of product

the slogan from the Head & Shoulders ad

ness, dryness, damaged hair or lack of

Market size (in ~ crore)*

Sachets contributed 74 per cent to the

Overall, there are two approaches

Backpacks seem to be the new

choice of weapon or source of strength,

director, Samsonite South Asia, that

sioned an in-house study to gauge the

of cheap knock-offs. This is a very cluttered category, the biggest challenge

Thums Up moves away from its individualistic,

leave their legendary rivalry behind. It