Saturday, December 26, 2009

'Size Matters' for Sundaram BNP Paribas Mutual Fund:

Sundaram BNP Paribas Mutual Fund recently launched a unique offering of PSU opportunity fund where the investors’ money would be invested only in the PSU companies. Considering that presently the only option investors have is of equity, debt and commodity funds, this can be thought of as an innovation.

As an asset class, PSUs have dominant share in four sectors, energy, financials, utilities and materials. PSUs have backing of the government and India being a developing nation where infrastructure is going to be the key growth drivers especially with so much of fiscal action happening, PSUs are going to grow exponentially. The market cap of the PSU universe has risen from about Rs. 90000 crore to Rs. 15,10,254 crore in this decade as PSU stocks outpaced the broad markets as well as private sector players. Thus investing in this class of assets is sure to give handsome returns with minimum risk.

Now getting to the advertising aspect followed by Sundaram BNP Paribas Mutual Fund i.e. a print ad in one of the dailies in Mumbai last week. They are selling the might of its multinational giant BNP Paribas which is a mammoth organization. The print ad headline being ‘size matters’. Of course size matters and with deep pockets of BNP Paribas, it surely matters more. But I find a small lacuna in this strategy because of the implantation of the print ad. It shows a sumo wrestler with this ‘size matters’ headline.

A small mutual fund can bring out a similar ad with a small sumo wrestler vs. a big sumo wrestler as shown in the picture above. This is possible in sumo wrestling since agility matters and not the size. Thus a small company can write ‘size doesn’t matter’ in the ad and publish it. It could be quite a coup of sorts.

Cola wars and technology wars (between Apple and Microsoft) are known but mutual fund wars would be quite interesting. Isn’t it?

Friday, December 25, 2009

Kareena and Sony VAIO: Two ‘size zeroes’

India is one of the fastest growing markets for personal computers. Over the last decade or so, laptops have started to be the preference over desktop PCs for the middle and upper middle class due to the crashing prices of laptops per day. It was always the preferred choice for affluent class when they even bought it for more than a lakh.

The cumulative sales of laptop and personal computers in India is around seven million and is likely to grow at 9.7 per cent compounded annual growth rate for the next five years. At present, the ratio stands at 35:65 with the dice loaded heavily in favour of personal computers.

Thus all the major laptop manufactures are present in India namely Sony, Toshiba, and Compaq, Acer, Dell, Samsung, LG, and Lenovo among others. India’s own HCL too is giving these foreign players a run for their money. Apple is a big player which though is surprisingly absent. You will rarely find a Mac unless it is bought from abroad by an Apple enthusiast.

All these players have a brand ambassador for their TV promotions. Compaq has Shah Rukh Khan which I find surprising since SRK isn’t known for this intellectual abilities with due respects. He is a fabulous performer but in films which are his domain. Acer has Hrithik Roshan whose case is similar to SRK. I do not agree to him as a brand ambassador for a laptop. Toshiba has Vidya Balan which is not just surprising but almost shocking. I really would like to know the reasoning behind her as a brand ambassador. Others such as HP, Lenovo, HCL LG, and others advertise but they do not have a specific brand ambassador.

Sony recently signed up Kareena Kapoor for launching Sony Vaio's (Video Audio Integrated Operation) new 'Size Zero’ laptops. The reason for signing her is easy to understand. It is one fo the most perfect fits for a brand. She was the first Indian brand ambassador of Sony Vaio. The actress was responsible for making 'Size Zero' a household term a couple of years ago. She is the only person who embodied what the brand stood for. And the new range of Sony Vaio's 'Size Zero' laptops is compact, classy, chic and sophisticated just like Kareena.

The audience could easily relate the product and Kareena. The TV commercial made is also classy and made considering the affluent class as the target market.

Sunday, December 20, 2009

Recession and the irony of its solution

As a layman who does not understand much of macro economics except for the easy and lucid explanations given by pundits on news channels, I find it difficult to understand the low interest policies by banks the world over to come out of the recession.

The financial and economic crisis of 2008 which engulfed the whole world resulted in recession. A depression was averted due to the timely and coordinated action by central banks the world over. This however happened due to the loose monetary policy by the Federal Reserve; the US central bank backed by the then Fed Chairman Alan Greenspan, an avid supporter of free markets and the present fed chairman Ben Bernanke, the then director on the fed board. They believed that recessions could be a thing of past and that loose monetary policy could stop the boom-burst cycles of economies. Also markets correct themselves based on demand-supply gaps and the central bank should act only as the facilitator rather than a regulator.

The low interest rate regime resulted in debt-fueled consumption by US exacerbated by the high savings in developing countries such as China, India and the oil rich countries who supported the high consumption of the US. These emerging economies had highest savings during these boom times of the last decade. When this consumption led bubble burst following the bankruptcy of Lehman brothers, the world economy was on the verge of collapse. Keynesian policies took front seat and fiscal action was the order of the day. This however was also combined with loose monetary policy so as to facilitate lending by banks who had taken a hair cut on their balanced sheets.

The thing that I do not understand is that how can low interest rate regime, leading to more lending, revive the economy which is in dire straits due to this debt based consumption? The US is buying its treasuries and non- conventional monetary policies such as quantitative easing are followed and the balance sheets of the central banks are broadened to facilitate lending. How can loose monetary policy be a solution when it was the cause in the first place?

In India, SBI is giving 8% loan to induce spending. Isn’t it similar to debt-fueled consumption? Isn’t it similar to what the US banks did by lending to customers with low credit worthiness? Should we not learn from this and look at other ways to revive the economy?

‘Live within your means’ is one of the famous proverbs. If all people follow this, we would not have the kind of materialism in the world. As Mahatma Gandhi once famously said “there is enough in this world for everyone’s need but not for everyone’s greed”. The crisis of last year clearly embodies this.

Friday, December 4, 2009

Per-second billing- non-impressive

Tata DoCoMo came up with the ‘differentiating’ factor of per-second billing to enter the Indian telecom market with a bang. It surely did hit with a bang but unfortunately could not sustain this ‘differentiating’ factor. Other telecom service providers followed suit and converted to per-second billing. It resulted in more problems for the service providers with more losses in revenues.

I do not think this per-second billing is going to result in addition of subscribers or a churn in subscription form one service provider to another. Currently many a subscribers avail a call rate of 50 paise per minute or 30 paise per minute among the same service providers. Many of the plans include friend talk or group talk where the rates are as low as 10-20 paise per minute. The new plans of per second billing have rates of 1 paise per second which equals 60 paise per minute. Thus existing customers would not want to change over to the new plans. Moreover, with the implantation of Mobile Number Portability, I do not think there would be any churn due to per-second billing option.

Apart from this, only the pre-paid customers who are light users will find this useful. Post paid users who are heavy users would not be much impacted since the value of reduction in price would be negligible. The plans would help pre paid users who are almost 90% of the total subscribers but thinking of the future doesn’t seem to be the right idea. The only way the service providers would earn profits was if they used VAS. And thus targeting the post paid user would be a prudent idea.

The urban areas of India are congested and there is hardly any place for a new entrant irrespective of the differentiation. The rural areas are very sparsely penetrated and better infrastructure would result in addition of subscribers there. Even though the rural population are low spenders, the volumes of subscribers could do the trick for the service providers. And low tariffs could see the populace using more communications.

Thus I think, although analysts thought that per second billing would be the game changer in the telecom space in India, it is far from what is going to happen.

Tuesday, November 24, 2009

Of blood baths and paid baths:

There are more than 13 existing telecom players in 23 circles of India where the penetration in urban areas is more than 75% and in rural areas is about 12%. India, till last year, had one of the lowest tariffs in the world. Since Tata DoCoMo launched its per-second billing, all other service providers followed suit resulting in price war causing red line on the balance-sheet of already loss making telcos. Now, India has the lowest tariffs in the world with more to follow to attract customers.

The Indian market is one of the fastest growing telecom markets with 500 millions subscribers and yet a huge untapped population base. With paucity of infrastructure, telcos are increasing the customer base with future in mind. No problem till now but it starts when increasing customer base becomes the only objective with no regard for short term profitability or even sustainability. Just 2 or 4 major players in GSM and CDMA segment, things were on a tight rope for these telcos. But with aggressive new players wanting to make an impact, existing players are feeling the heat. New entrants will lose money as they fight for share, but that is something that happens to new entrants in most businesses. The smarter new entrants will likely share infrastructure and outsource most of their operations—both trends that the first generation of Indian telcos discovered only earlier this decade.

Thus with time (may be a couple of years), “voice” service by telcos will become a “commodity”. All prices will be on similar terms, distribution will be similar, and all telcos are going to increase promotion with time. Thus new entrants and existing players will have to come up with value-additions for customer delight and ways to find customer retention with the launch of Mobile Number Portability (MNP).

Value-added services (VAS) will form the core part of this strategy but it will all depend on the pricing model in this case. If the 3G auction results in players spending huge amounts of money to the government, the prices of VAS would be high thus causing a hindrance to its mass usage. The revenues for the players will not accrue resulting in more time for turning the tide towards profitability.

Thus a time will come when “voice” will be given free of cost and with the telcos charging for the VASs. It wouldn’t be a surprise of sorts and wouldn’t even be a bad economic decision since it follows on the models of other great companies such as McDonalds which does not make money on its burgers but makes them on French fires and the soft drinks, Multiplexes which do not make money on the ticketing sales for the movies but makes them on the popcorn, soft drink and the other food items available for the customer, NEWS Channels or newspapers do not make money on subscription but makes them on the ad sales.

Bottomline, a time will come when the telcos will be hoping to make money by giving the soap away and charging for the bath.

Sunday, November 15, 2009

Blood bath in Telecom sector in India:

If an industry analysis of the telecom sector in India is done, it would show the cut-throat competition that is going on for subscribers between the existing players. There are 11 existing players in the telecom space already namely Vodafone-Essar, Airtel, Aircel, Idea Cellular, Tata Indicom, RCom, Loop Mobile, Spice Telecom, Virgin Mobile, BSNL, MTNL. The industry has high entry barriers with the requirement of huge infrastructure, massive promotion due to numerous players resulting in high spending and almost commoditization of telecom services (we will discuss the commoditization aspect later). Apart from this, the high amount that is needed for buying the all too sparse spectrum. There are high exit barriers. The average revenue per user (ARPU) is one of the lowest in India resulting in red lines for the telecom companies.

Yet new entrants are planning to enter India with 3-4 big players namely Shyam Telecom in JV with Russia based Sistema, Unitech Wireless with Norway based Telenor and UAE based Etisalat going it alone soon to launch their services in this already congested market.

The huge untapped market potential has all these players wanting to enter the telecom bandwagon with an eye of the future when 3G services will bring in the revenue and profits. The only motive of these operators now is to increase subscribers. The existing players and the new entrants do not have much different to offer in terms of services. The only service they had to offer was voice-calls and SMSes. It has made a commodity of the voice-call or sms. Value-Added Services (VAS) which get the revenues for operators in other developed markets has yet to evolve in India. Partly because of its high cost to the customer and the sophisticated high-end cell phones required for accessing these VASes. Thus the only aspect they can fight is in terms of pricing. The Indian market is price sensitive in various products/ services and it is no different here. This has resulted in price wars, thus bleeding the already losing operators.

Tata DoCoMo with its GSM service was the first to launch ‘per-second-billing’ plan. This was immediately followed by Aircel immediately when they launched the 123 billing plan where after the third minute, the STD call would have local rates. As soon as Tata DoCoMo aggressively pursued the per-second billing plan, others had to follow suit to be in the race and not allow DoCoMo to run amok with subscribers. Airtel, Vodafone, Idea, BSNL, RCom too slashed rates and the tariffs fell to a world record low of 1 paise per second. With these new plans in place and mobile number portability to follow, a lot of churn might happen and telecom analysts predict a reduction of about 15% in revenues for existing telecom operators. The financial markets have taken note of it and scrips of many a telcos have taken a severe beating with Bharti-Airtel taking the brunt of it. The customers are benefiting from the price wars but it is profusely bleeding the already bleeding telcos. When will this blood bath end?

A time will come when price would cease to be a factor. Differentiation would have to be actually done in services offered. But in the mean time, telcos will have to bear the harsh competition. May be consolidation would be the order of the day in the coming 3-4 quarters.

Wednesday, November 11, 2009

SBI- the Banker to Every Indian:

The world of finance and economics is very complex and boring for the layman. India is a developing economy moving from agrarian to the service sector directly giving manufacturing sector a miss in its transformation. The extent of a developed country can be gauged from the level of complexity and maturity of the financial market. Banking forms a critical part of the financial market comprising of equities, debt, commodities and a bit of insurance.

SBI is the oldest bank in India with a rich heritage of more than two centuries. It is India’s largest public sector bank in terms of balance sheet, customers, number of branches and ATMs and number of employees as well. Yet it doesn’t have the brand recall of say an ICICI or HDFC or any other foreign bank. SBI was a sleeping giant even post liberalization. Foreign banks and even Indian private banks went miles ahead in the race of brand equity and brand recall and service. SBI stood for a government bank, lethargic in its service. SBI was not the preferred choice for customers. Its scale, backed by the government made it sustainable. But since last couple of years it has woken up to the array of opportunities and turned itself into a versatile origination attuned to the needs of the changing customer.

The Indian consumer’s purchasing power and disposable income has grown exponentially in the last 5 years. The nimble and lean foreign and Indian banks have grabbed the customer with both hands. SBI lacked in this, rather all Indian Public sector banks lacked in this. Thus there was a line of PSBs outside ad agencies for changing everything from logo to the positioning and the promotional campaign. We had union bank of India, Canara Bank, Bank of Baroda among others changing their logo and using celebrity endorsements for their promotions.

SBI of late has started with a print and outdoor campaign which is drastically different. Neither are they talking about financial products, interest rates or returns nor are they going for the emotional appeal of trust, ease in service or reach of maximum ATM. The campaign is based on the value which makes all great brands i.e. the longevity. IBM, Coca Cola are century old brands. SBI is also trying to say that if we are centuries old, we are that damn good for the people. The methodology to convey this message is quite peculiar.

Motilal Nehru, one of the early Indian independence activists, Sardar Patel, architect of the integrity of India, Jagdishchandra Bose, an eminent Indian scientist, Dadabhai Navroji, founder of Indian National Congress for independence of India, Rabindranath Tagore, literature Nobel Laureate, Dr. Rajendra Prasad, Independent India’s first President, M Visvesvaraya, Engineer and Statesman were customers of SBI. This methodology is unlike testimonial ads yet it has that flavour. No other bank can boast of such an elite clientele. Thus they are trying to say that this is the clear differentiation which no other bank can claim to have.

A good and a refreshing piece of creativity and strategy. Kudos to you, SBI and their agency.

Saturday, October 24, 2009

Lux- the ‘not-so-premium’ brand:

Brand building happens over a period of time. It takes even more time if it is a premium brand. For a brand to scale up is desirable but it isn’t easy, for a brand to scale down isn’t a very good strategy unless the product has become obsolete due to technology or any other factor beyond the control of the brand manager. Scaling down is much more undesirable if it is a premium brand.

Aspirational aspect of the human psyche gives the brand the ‘premium’ effect. Till the time this aspiration to own the brand holds good; the brand retains its premium positioning in the mind of the consumer. A classic case of scaling down resulting in disaster is the Daewoo Cielo car brand in late 1990s. Sudden reduction in price made the car positioning from luxury segment to mid-level segment. The result was complete hara-kiri.

Similar is the case happening with Lux, Hindustan Unilever’s premium soap. Lux has been going through a tough time with many competitors in the same segment. Peers and Dove (cannibalization), Fiama Di Willis et al. Lux’ market share has taken a beating. Lux celebrated its 75 years in 2005 with a special ad featuring Shah Rukh Khan and 4 Bollywood actresses, Hema Malini, Sridevi, Juhi Chawla and Kareena Kapoor who have endorsed the brand at some point of time. This shows the power of Lux to get such star power in the ad. No other brand can boast of such lineage of endorsers. Lux is considered such as premium brand that a Bollywood actress is assumed to have arrived on stage when she endorses Lux.

The latest endorses is former Miss World Ms. Priyanka Chopra. Like they say a ‘Bond girl’, we can say ‘Lux girl’ for all these ladies. With this new ad, Lux has scaled down with a soap for Rs. 10/-. Thus immediately the premium positioning is lost when you can get a Lux for such a low cost. The aspiration for the middle and lower class of the populace is realized resulting in increased sales in the short term but in the long term, the affluent ladies would resist from using it.

The ad itself is pale in comparison to the sophisticated ads done earlier. The first thing that strikes you is the song used in the background. It’s a copy of the ‘Dus Bahane’ number from the Bollywood movie ‘Dus’. For a brand as renowned as Lux and its parent company being Hindustan Unilever, we expect an original sound track, not a straight rip-off. Priyanka Chopra could have been sued in a much better way.

A loser ad and loser strategy with nothing to gain but everything to lose.

Saturday, October 17, 2009

End of the 'devil' for Onida?

Onida has been aggressively marketing its consumer durables on Television since last couple of months. These include TV set, Washing Machine, Microwave oven and home theatre. But there is one thing missing in the TVC. Well, no point for guessing since it is so simple. The bald devil with horns, the most important ingredient which separated other consumer durable company ads from Onida’s. The present “Tumko dekha toh yeh Design aaya” ad is usual run-of-the-mill ad devoid of any clutter breaking copy. We will discuss the ad later but before that, why did Onida do away with the devil from its ads?

The devil was so impregnated in the minds of consumers that it reminded them of Onida. That devil stood as the Onida mascot. This unique identity separated Onida from the other ‘me-too’ products. That identity has been lost now. The devil had a top-of-the-mind recall.

The rationale given for doing away with the devil was that the emotional appeal of the ‘neighbour’s envy’ isn’t applicable in the present environment. Nothing can be further from the truth. When Onida had come with that concept, it was initial years of opening up the economy where Onida stood for class and only the rich people could afford it.

Post 2000, all MNCs have taken over that space. With increase in number of salaries, people buy these foreign brands and Onida was left no positioning. Onida could not sustain its premium positioning. Sony has taken over that premiumness which is used to impress their neighbours. Thus Onida has failed in its attempt to sustain the original ‘envy’ factor.

Now to talk about the new ad, it shows a young couple (seemingly newly wed) talking about the various products of Onida in its different ads. Thus the target market seems (intentionally or unintentionally, I am not sure) to be young newly married couples without children. Had they shown a middle aged couple with one or two children in the ad, this anomaly or doubt would not have cropped up. Apart from this, young couples nowadays are well aware of the various brands and they know the attributes and benefits of all. So technologically they know the quality of foreign brands is much better than Indian. It is a very mediocre ad with no creativity.

Onida needs to rethink its promotional message and go for a much more precise and focused outlook.

Monday, October 12, 2009

Mobile Number Portability- is it the game changer?

The current market scenario in the telecom industry is bubbling with activity with new players entering an already congested market. The telecom industry is in the ‘growth’ stage of its life cycle. Thus the only objective for the companies is adding new customers and increasing its customer base. Retention of the existing customers, atleast the post-paid whose Average revenue per user (ARPU) is almost three times the ARPU of pre-paid customers, isn’t on the agenda of the telecom players. But it could soon change post the implementation of Mobilenumber portability. Some of the post-paid customers especially the corporate ones are high value customers with billing in the range of Rs. 20000-40000 per month. There is hardly any differentiation in service for the post-paid customer vis-à-vis the pre-paid ones.

Mobile number portability could alter the scenario especially for these high value customers. A churn of pre-paid customers won’t hurt the players much but post-paid customer churn would certainly hit the revenues in the immediate time past MNP implementation. These high value customers indirectly subsidise the pre-paid customers in the urban and rural areas.

India has one of the lowest tariffs and it is further going to go down with the increasing cut throat competition. The pre-paid customers do not add much value in terms of revenues although it gives the company a better reach. It is the post-paid customers who need to be taken care of. Price wars have already been started by Aircel (after 3 minutes, call STD at local rates), Tata DoCoMo with per second billing and Tata Indicom with billing based on number of calls as against the number of minutes you speak, to gain a larger share of the market. If Vodafone-Essar, Bharti Airtel and ADAG group’s flagship RCom join the price war, prices could reach unsustainable levels with a blood bath in the industry and only the big players surviving through consolidation being the only mode of survival.

MNP thus is surely going to give sleepless nights to the top management of the big players. Brand building would give way to building brand equity through better service and customer loyalty. Differentiation of services would be the order of the day in the not-so-distant future for these players. Keeping the post-paid customers happy with customised offerings would have to be the way forward. Happy customers rather than ‘just’ more customers would have to be the motto, just like in any other service industry.

As tariffs go down, pre-paid customer would find post-paid options much better which would not only increase usage for the customer but also make complete utilisation of the infrastructure for the telecom company. Only Vodafone seems to have understood the future. It is leading the pack towards changing the way people use phones. It launched with much fanfare and effectiveness its Value-added services campaign with the adorable Zoozoos. This means that they are targeting the post-paid customer who uses the VAS. This would mean more revenues. Pre-paid customers just use the caller back tune VAS. Thus Vodafone is looking at the future 5 years down the line where it wants to be ‘different’ from the ‘me-too’ players.

Sunday, October 11, 2009

Relevance of colours in our lives:

Do you remember the days around two decades back when we had just black & white televisions? Colour TVs had to be imported and were a status symbol in the drawing room. Don’t we reminisce when we see our black & white photographs? It was until Kodak entered India that we got colour photographs. When we buy a consumer durable such as TV, refrigerator, washing machine, don’t we fret over the colour of it? Many a times women change the brand for want of a specific colour. Why do you think women take such a long time to chop for clothes? Colour forms the most integral part of the attire apart from the design. Don’t you take days to decide the colour for our abode? Colour denotes our personality and our style and way of thinking.

Each colour has a peculiar function to when we go socialising or even for a business meet. There goes a saying “when in doubt, wear black”. We do not want colourful attire at an inappropriate place or an inappropriate time. Black solves the problem of a faux pas.

Colours add vibrancy to our lives. It acts as a differentiator for each and every materialistic need or rather ‘want’ of ours. This ‘want’ for appropriate colour has been used by marketers since time in memorial and will continue to be used.

The ads for apparel, show fabulously dressed models with an aura of confidence to get that aspirational feeling to the customer. Currently Videocon and Sony Bravia TV ad shows colours in its ads. The Bravia ad has colour as its theme with the tagline “See more colours”. It shows colours formation in a breathtakingly beautiful way. The non-stop paint company ads lead by the India paint giants Asian Paints and Kansai Nerolac followed closely by Berger and ICI paints talk about colour.

Corel Draw software in computer for creative drawing in ad agencies and Adobe Photoshop has millions of colour combination. The vignette effect and the shine visible for the print in 2D format are exciting to say the least.

This liking for colour has been manifested in humans time and again. Colours truly enlighten our lives and make them vibrant and exciting.

Friday, October 2, 2009

Targeting of Unit-linked Insurance plans (ULIPs):

The biggest innovation for the insurance industry over the past couple of years has been the Unit-linked Insurance plans (ULIPs). It was fuelled by a booming stock market. It is seen as a direct competitor to the Mutual fund industry with value addition of insurance as well. However the downward spiral of the markets after the recent crisis has directly affected the ULIPs where the majority is invested in the Equity markets.

To be different from competition and get people to buy ULIP products, two things can be done:

1. Understand consumer behaviour and appropriate targeting-

There are 3 types of customers for ULIPs- General public accounting for almost 90% of the buyers who are unaware of the intricacies of this financial product and are conned by salespeople. These people are influenced by peers and hearsay. These are the type of people who have stayed away from ULIPS recently resulting in the dip in sales.

Second type is the informed public who account fro about 5-7%. These people have become conservative in investing in ULIP and are very circumspect and waiting for equity markets to resurrect.

Third type is the High-net worth individuals (HNIs) who account for just 1-2%. The next point will elaborate on the same.

2. Sectoral choice availability-

Presently a customer doesn’t know which sector his investment is done. He just gets daily updates in the Net Asset Value (NAV). For making ULIPs attractive for HNIs, three things can be done- give option of sector such as infrastructure, banking, PSU, FMCG or telecom or commodity markets. They can be divided according to growth fund where there are high returns but commensurately high risk too. Then their can be safe and fixed returns funds with minimum risk. And finally exotic funds with exponential growth options where the money would be exposed to high risk and complex financial products such as Credit Default Swaps (CDS), commodities, bonds, currencies among others.

Both these methods are possible. Only appropriate data needs to be collated.

Lastly Perceptual Mapping also can be done but it is from marketing point of view only and has to be done every 3-5 years or if you have changed your value proposition. Just like what Bajaj Allianz did with its digression to emotional appeal from a practical one.

Sunday, September 20, 2009

Paint companies- on the prowl:

It would be difficult for you to miss the paint ads on Television. They are all over the place. No genre of channels are left untapped, be it sports, news, GECs, or even Cartoon network or regional channels.

Two Indian paint giants, Asian paints and Kansai Nerolac Paints are looking for one upmanship in this festival sector. No one wants to be left behind in the endeavour to increase the market share and imprint the brand awareness. This is more true than ever for these two companies with the global paint giant, Sherwin-Williams entering India. They have bought Nitco Paints in 2007 and are waiting for the opportune moment to start aggressive marketing campaigns. They have adopted the inorganic growth path to give them a firm footing from which to start attacking the Indian giants.

Asian paints have 3 new ads currently broadcasted. First is the ultra sophisticated and fabulously made Royale Teflon ad with Bollywood superstar Saif Ali Khan. It wouldn’t be an over praise or exaggeration if it is said to be one of the most well executed ads in India. Contract Advertising should be duly credited for this fabulous work. Second is the Apex Ultima ad and third, the Tractor Emulsion ad. The tractor emulsion competes on price. The ad says “sirf dikhne mein mehenga hai” (only expensive in looks). Both the ads have high recall value.

Kansai Nerolac launched its lead free paints ad. It is sure to increase the sales for Kansai since people are very health conscious. Kansai has also bought back its Nerolac jingle with a new creative. The creative isn’t too good but the jingle “jab ghar ki raunak badhani ho, deewaron ko jab sajaana ho, Nerolac Nerolac” has very very high recall value. This is sure to boost Nerolac’s brand equity and awareness in the market to take on Asian Paints.

Both the companies have a clear cut differentiation factor. Asian Paints has the Teflon trademark and Kansai Nerolac has ‘Lead free paints’. Asian Paints too have now started using lead free paints in their ads but in a less visible manner. Sherwin-Williams has to come up with a better differentiator when it decides to go public in terms of brand awareness.

The coming few months until Diwali ends and late November, be prepared for an onslaught of paint ads on the idiot box. Nippon paints though not a big player in India as yet too has started its Television ads which are indeed quite creative.

Sunday, September 6, 2009

Innovation for Insurance industry players:

Each of the companies in the industry has their own core competency. Each of them fights on their basis of one of 4Ps of marketing, Product, Price, Promotion or Place. And if it happens to be the service industry, you can add 3 more Ps of People, Process and Physical evidence. The insurance industry is no different. LIC banks on its trust factor, Bajaj Allianz on its product customization, ICICI Prudential on Price, HDFC and SBI on emotional appeal. So what should a company do more to get extra from its products?

A comparative analysis of the 4Ps but taken two at a time can be done. On one graph plot price vs. product and on the other, place vs. promotional spend. The gap in each graph can then be explored to make a niche for you and increase chances of growth.

Following are the factors that can be taken for each P:


1. Riders i.e. how many, less is better for customer understanding, but more riders done simplistically for a better product offering.

2. Liquidity: more the better for the customer but it increases chances for redemption resulting in loss for the company. A trade-off between liquidity and redemption pressures has to be arrived at.

3. Flexibility: switching cost and types


How much is the cost for the product. An oblivious point to mention but listed for a comprehensive structure.

Frequency of premium- people do not like to be reminded of premium payment frequently. So ideally it should be once or twice a year.

Place: i.e. the distribution reach

1. Sales force strength in numbers

2. Indirect channels

3. Direct channels

4. Bancassurance

Promotion: advertisement spend (easiest to compare)

Thus weightage to each factor helps in plotting the graph and arriving at the gap mentioned initially.

Monday, August 31, 2009

Helicopter 'Ben' is back:

The reappointment of Ben Bernanke, six months ahead of his term end has significant importance. Not just for his appointment but for the time of announcement. Doing it ahead of time shows that the Obama Administration is not getting into the politics of it all. He has not appointed a Democrat.

This decision has been welcomed and hailed by a many a economists and central bankers, the world over. He has had his share of critics which isn’t a surprise considering the type of decisions he has had to make. But by and large everyone seems to understand the importance of continuation especially at a time when things are looking up and sooner some hard steps would need to be taken. Who better than the person who initiated the steps in the first place. Following are the reasons why I think this is a good decision:

1. As mentioned earlier, continuation plays a crucial role when large stakes are involved. And in this case, it is the US economy, the largest in the world and it has a direct impact on the rest of the world economy.

2. He is a student of the Great Depression of 1930s. He would never have thought that he would be the person steering the world economy through a similar crisis or rather I should say, a collapse. There cannot be a better person, atleast academically to continue the process further.

3. He was on the Board of Directors of the Federal Reserve under the then Fed Chairman Alan Greenspan. He has seen from close quarters the things that have gone wrong. Thus he knows the exact way to get out of this rut.

4. This is his plan of action. The plan for massive fiscal stimulus which he convinced the US Congress for, the monetary easing through unconventional means such as quantitative easing and the buy back of US treasuries. He has openly talked about the reasons for him doing what he did and the results he expects from the decisions. These are unprecedented times which call for unprecedented ways of communication for which Ben Bernanke has succeeded.

5. He knows the time when recovery has reached a level from where the actions have to be withdrawn i.e. the fiscal and monetary actions. The slush liquidity has to be absorbed and let the real economy take over.

6. He is a stable person intellectually without getting swayed by short term gains. He thinks long term. His possible replacement could have been Larry Summers, economic advisor to President Obama who is outstanding economist but a bit temperamental and volatile. His elevation could have increased political interference in the working of the fed. This decision to retain Ben Bernanke has clearly avoided this situation.

Lastly, it is better to be a bit conservative in the approach to appoint such an important designation rather than being experimental. A new person brings a new thought process with a new way of doing things. Present conditions require more pragmatism than experimenting. Thus this is the best that could have been done.

Sunday, August 30, 2009

Recession may be Hayekian:

Everyone is upbeat about the revival of the economies the world over. India post-general election 2009 is feeling better with its stock markets almost on the verge of a bull rally if not a bull market. Ben Bernanke, the Federal Reserve Chairman whose term has been extended for another 4 years by President Obama last week, sees the “green shoots”. Japan posted a slight growth in its GDP numbers. France and Germany are officially out of recession with modest growth.

This is all the good news. But the underlying question is: is this growth sustainable? Nouriel Roubini, Economics Professor, Stern school of business, New York, who predicted the collapse feels that this could be a W-shaped curve. He says that the growth is due to the massive fiscal stimulus and the loose monetary polices by governments and central banks respectively, the world over. It isn’t based on fundamentals of the economies. Thus he feels that when the stimulus is reduced and the tightening of monetary policies is done, it should result in a recession again. This growth is catalyzed by fertilizer and performance enhancing drugs i.e. low interest rates and the slush liquidity with quantitative easing. In short, all actions are being taken with the recession being thought of as one which has a solution in Keynesian policies.

But is this a Keynesian recession? Political parties and businessmen the world over like it to be Keynesian since it can immediately be stimulated and the political bosses are in the executioners’ position. This recession though seems like a Hayekian one where there is wide misallocation of resources.

Hayekian recession is of the type when there is gross misalignment of resources i.e. structural changes in the economy and they take more time to recover. A fundamental issue is affected and merely pumping in money will not change the situation.

The current recession, as mentioned earlier, seems to be a structural one. Cheap money from Asian and OPEC countries entered US. These countries tried to keep their currency under-valued to gain cost-advantage. China has kept its Renminbi and Yuan low and has most of its foreign reserves in US treasuries. This money sent long –term interest rates in the US tumbling. Thus people bought houses and invested in stocks, commodities resulting in a bubble in assets, stocks and commodities. It was exaggerated by financial innovation but based on unsound economic fundamentals. The Keynesian stimulus being used is re-fuelling those bubbles again due to slush liquidity. This could also result in inflation rearing this ugly head if timely withdrawal of the stimulus is not done. Political will, will stop the withdrawal but the central bankers have to do it, for long term good.

The resulting collapse now is Hayekian which will take more time to recover. The US will need to save more and the rest of the world needs to spend more. The early this happens, the early the imbalance will be restored for sustainable growth.

Wednesday, August 19, 2009

Battle for water purifier:

The rainy season from June to September in India brings with it a host of water –borne diseases. During these months only, people wake up to the dangers of the deadly water –borne diseases. Thus it is an ideal time for water purifiers to promote their products since they will find maximum takers. This is what has happened with two water purifier companies, Hindustan Unilever and Eureka Forbes, aggressively promoting their products.

First it was Hindustan Unilever’s PureIt coming up with the 1 crore safety challenge. And then Eureka Forbes launching its ‘agar isse advanced purifier mile toh paise wapas”. Let us analyse each challenge individually.

Hindustan Unilever’s PureIt has so many caveats that no one will be able to win the challenge. The challenge consists of proving three things in any other water purifier. First, meet USA’s tough germkill criteria; second, having advanced switch off facility; third, needs no electricity and no running water. These issues are very difficult to prove for any person living in India. Moreover, the challenge is for a period of just one month, till 31st August only. There isn’t enough time for anyone to prove the claim. Thus it is a very good marketing gimmick where people will believe them for the simple reason that they are comparing themselves to the strict US norms.

Eureka Forbes' challenge about ‘isse advanced’. They have not mentioned about the conditions which make it advanced. At least PureIt has mentioned about the factors.

The claim by PureIt is much more eye catching. ‘Paise wapas’ technique has been used before but ‘one crore’ challenge is a first-timer. This is sure to grab more eye balls than the ‘paise wapas’ challenge.

Ethically speaking, both challenges are not right. It is a con game played by these products. Legally there is nothing wrong but ethically there is. But ethics has never been a necessary criteria for corporate, be it abroad or in India. The ill-informed consumer is always a taken for a ride. The only succour in this battle is that, whatever be the claim, a water purifier is indeed necessary.

Monday, August 17, 2009

Reebok- It’s you vs. everyone"

The footwear industry in India had not been promoting their stuff on the television scene. The premium brands such as Nike, Reebok, and Adidas were spending less on television and more on billboards, print, internet and other forms of media. Nike and Adidas have been concentrating on team sponsorship for cricket teams and tournaments along with kits sponsorship, logos on bats, pads, helmet and other cricketing accessories.

Puma which is coming to India very soon has resulted in atleast one brand, Reebok upping the ante. The latest TV commercial to have hit the idiot box shows girls locking up all the houses of the locality so that they are the only one to get their hands, or rather their legs in the Reebok shoes. One of the girls gets the 40% off poster which she intelligently hides from the prying eyes of her competitors.

Following are a few of the things of note in the ad:

1. With a discount of 40%, a premium brand has gone for massive sales promotion. This is complemented by television ads mentioning about the sales promotion. It seems a first time where a sales promotion has been promoted through Television in a campaign style inspite of television being the costliest medium. How this affects the brand equity of Reebok remains to be seen.

2. The ad tagline “Its you vs. everyone” is an attempt to put the usual way of informing the customer about the sale is an unusual way i.e. through exclusivity or the offer i.e. unlimited stocks. This is a better and much effective way.

3. It tries to show the ‘envy’ factor where the customer is shown to do everything and anything possible to grab that brand.

Reebok also did the Mahendra Singh Dhoni/ Bipasha Basu campaign which although was ‘hot’ on the celebrity quotient, fell cold because of no creativeness in the ad and no clutter breaking copy.

The results for the Reebok campaign are awaited, not just on sales but also on the brand equity for Reebok

Friday, August 14, 2009

NTT DoCoMo- A world leader has arrived in India:

Last week saw the world leader of technology entering Indian telecom space. NTT DoCoMo Inc, a Japanese telecom giant joined hands with Tata Teleservices Ltd (TTSL). and has been given the license to launch GSM services in 19 of the 22 circles.

This will provide expertise to TTSL in the GSM Segment which will herald a new beginning for India. A true world leader in 3G technology has indeed arrived in India and this is sure to give sleepless nights to some of the executives at other telecom companies in India.

The 3G strength of DoCoMo which is readying itself for 4G in their Home country will help TTSL in its GSM endeavour and give a Philip to its under performing CDMA segment. With the spectrum allocation for 3G more than 3 months away due to the matter being transferred to the empowered group of ministers (eGoM), the time delay is inevitable. The formalities itself will take up this time. Then you have the base auction price to be decided and the allocation of how much spectrum to whom. Spectrum is a national asset and can be used only once. Thus arriving at the right valuation is most necessary and critical for Indian treasury.

When the spectrum is finally allotted, TTSL will surely get a head start over other telecom service providers in terms of technology, content and speed which are most essential for delivery of good Value-Added Services. It can also help in terms of promotional campaign to take on Vodafone which is aggressively pursuing the VAS segment. People would believe the promotion since they appreciate and are in awe of the technology expertise of Japanese companies.

The recession in the last10-22 months has not affected the growth of the telecom sector. The prime reason being the vast potential present. Only the metros and some major towns are congested with majority of players operating and virtually all people having a cell phone. The tier II cities and towns and rural areas are yet to be penetrated intensively. Thus the telecom sector has continued to grow with Bharti Airtel leading the pack with 100 million cutovers touched last month.

The entry of DoCoMo isn’t at all surprising. More players will enter India as the foreign direct investment (FDI) restrictions are relaxed in due course of time. There is talk of Etisalat (UAE giant), and AT&T (the US giant) entering India soon. Even Indian business houses are applying for spectrum to jump on this bandwagon such as DLF, Videocon, Shyam telecom, and some yet to be announced names.

With the increase in players vying for the same pie, naturally the competition would increase resulting in price wars. This augurs well for the Indian customer.

Sunday, August 9, 2009

Growth Drivers of the Indian Telecom Market:

  • High Disposable Income: The growth in GDP has resulted in increasing disposable income among the individual population. Therefore the young Indian population is increasingly investing more money in various entertainment and communication services thus fuelling growth of the telecom sector.
  • Mobility and Connectivity: The growing need of high mobility and staying connected is the prime driver for the entire category. This is true for people from different age groups and occupation. This innate need coupled with availability of handsets and connectivity at affordable price points has triggered the growth of telecom in India.
  • Investments in Telecom Industry: All major telecom handsets manufacturers – including Nokia, Samsung, Motorola and LG - have their presence in India, along with the leading global service companies and infrastructure majors, such as Vodafone, Singapore Telecom, AT&T, Ericsson, Alcatel and Siemens.
  • Government Initiatives: Government also has supported the growth of this sector by coming out with a number of initiatives for the low end subscribers of rural India, and Universal Service Obligation (USO) fund was one such initiatives. The USO fund was an initiative taken up by the government to increase rural tele-density.
  • Gradual Progression in Telecom Sector: There have been major regulations and events driving the extra ordinary growth of Telecom sector from the year 1999 to 2008. High level of competition has lead to price reduction and increased affordability. In order to capitalize this opportunity of meeting the consumer needs in highly competitive market the operators have reduced the tariffs to attract consumers with low purchasing power primarily in semi urban and rural India. In fact lucrative offers like being paid for incoming calls have transformed the scenario completely.

Operators are tailoring service packages for low-end users making mobile service more affordable like:

Ø Micro Prepaid Cards: Recharge options as low as INR 10 (USD 0.25)

Ø Life Time Validity: All operators offer a “lifetime prepaid” plan which maintains the phone number for life for free incoming calls if recharged every 3 or 6 months

Ø Full Value Recharge: Talk time of value equal to the recharge amount

Ø Free In-Network Calls: Some operators have started free unlimited local in-network calls

Ø Group Calls: Unlimited calls among a limited set of people at a particular cost.

Ø Bulk SMS Pack: Plans customized for bulk SMS within a specified area at a much lower cost

Sunday, August 2, 2009

Return of the Vodafone pug? What is Vodafone thinking!!!

The pug in the Vodafone advertisement became a celebrity around two years back. You had children demanding their parents for a pug. They shouldn’t be blamed because the pug was indeed so cute and adorable. Right from the first ad with that small boy running on a nature’s trail or helping out the girl with her daily chores in the ‘Happy2Help’ campaign, the pug made a place for himself in our hearts. It had a great recall value, first for Hutch and then for Vodafone and that is precisely the reason Vodafone thought of continuing with the pug after buying Hutch.

Vodafone surprised everyone with the Zoozoo campaign for Value-added Services (VAS) launched in a blitz during IPL 2009 in South Africa. There were 30 different types of ads depicting each of the Value-added services. The Zoozoos became an instant hit. They were so adorable and cute just like the pug although not real characters that everyone went ga ga over them. There were articles written on blogs, in newspapers, discussions on Radio and the Zoozoos were all over the place. Vodafone O&M (who made the concept) would have been surprised at the result, of course pleasantly. They were the talk of the town. The Zoozoo recall value has reached such high proportions that it had almost made people forget about the pug. They became synonymous with the IPL.

I thought it was a strategic move by Vodafone. One, they were moving towards post paid customers who are going to increase with time by offering them Value-added services. This would bring them bigger revenues. This seemed a long term strategy, say 10 years long. Second, they moved away from the pug which essentially was a ‘hutch’ pug.

With the Zoozoo identity, Vodafone now stood for the Zoozoos. They were successful in changing the perception of customers from pug to Zoozoo. Doing it in such a short span of time, kudos should be given to the team at O&M for conceptualising such awesome characters.

Unfortunately, much to a disappointment of many a marketing people, the pug is back again with the small girl to ‘help us’. This is totally inexplicable. After such a successful transition, why would you want to go back to the pug? It would have been understandable to go back to them had Zoozoos failed to create an impact and the transition.

Some of the reasons marketers say is that it was a temporary campaign and it was never a strategy to move away from the pug. Zoozoos were specifically for the VAS purposes. It seems O&M team thinks that whatever they do will turn to gold. This seems to be an exception though, atleast as far as I think. Return of the pug will not affect sales but it will affect Vodafone’s long term prospects and what they had set out to achieve.

This action has given a chance for the other service providers to position themselves as VAS providers. Aircel, especially, should make use of this opportunity since they have the widest range of Value-added services. There last attempt at positioning as VAS providers was overshadowed by the Zoozoos. They should go all out now to take the place which rightfully can be claimed by them, simply for the type of VAS they can provide.

Reliance Communications too can do it. They have launched there high speed internet card. This is the right time to go for VAS since with time, the internet penetration in India will increase and with 3G coming over, speeds will increase, prices will drop and more people will use internet on their phone.

Vodafone have themselves to blame. It is a cardinal sin to move from identities. Only time will tell the implications of the return of the pug.

Sunday, July 26, 2009

Why Insurance Sector Is Bullish and Poised For Growth:

Life Insurance Is the Most Preferred Investment Option by Indians

(A study by AC Nielsen Co., Nielsen Life 2008 survey)

The vast array of investment options available in the Indian market today is an indicator of the robust growth the market is experiencing. As the different financial categories jostle to win consumers’ confidence and trust, life insurance still reigns as the preferred investment instrument

Nielsen Life 2008 is a syndicated study to provide insurance players an understanding of the overall Indian insurance market. It gauges awareness, perceptions, concerns, motivators/barriers, satisfaction levels and usage towards insurance among retail consumers.

List of future investment instruments in percentage by respondents:

Life insurance (30%)

Bank Fixed Deposits (11%)

Gold (7%)

Property (7%)

Life Insurance Child Plans (6%).

Remaining 62% is spread over other financials such as equities, debt instruments etc.

In the wake of the global financial meltdown, most investors are looking at options which help them safeguard their capital. Life insurance is seen to be one such avenue.

The three key triggers for buying life insurance are Family Protection in case of untimely death, Retirement Corpus and Securing Child’s Future.

Interestingly Insurance for Child emerged as a key trigger compared to the previous leg of the survey in 2004. Tax exemption as a trigger to purchase insurance has dropped significantly compared to 2004.

Monday, July 13, 2009

Unique “Idea” ID:

Over the last year, it would have not missed Abhishek Bacchan as “Sirjee” solving the identification problems of the villagers by giving them unique identity of their cellular telephone numbers. It was a very creative concept. The data though isn’t available to ascertain whether it resulted in sales for Idea cellular.

Idea cellular is showing new ads taking credit for the unique ID project of the government. The Unique Identification Authority of India (UIDAI) is an agency that will provide unique identity cards to citizens to ensure that the benefits of the government's flagship schemes reach the people. It is under the chairmanship of legendary IT personality Mr. Nandan Nilekani.

With these new ads, Idea cellular is trying to relate itself to the government program which would give them credibility and a natural association with the program in the mind of all Indians. The program is a pioneering effort and if Idea can pull off this coup of association with the unique ID project, it would always remain in the annals of history as associated with this project.

Wednesday, July 8, 2009

First mover advantage- make sure you wrestle the advantage:

Al Ries and Jack trout in their book “Positioning” said that “it is better to be first than it is to be better”. The book gives the examples of IBM being first in mainframe computes, Kodak first in photos, Ford in cars among a lot of other great examples. This concept talks about the first-mover advantage and how advantageous it is. We will look at this concept from Indian point of view specifically related to the television content since the advent of satellite channels.

Can you name the first General entertainment channels in India? Zee TV. Although star plus, Sony TV and the latest Colors have made inroads in GECs, it was Zee which started the entertainment revolution through shows such as Tara, Banegi apni baat, zee horror show etc. Zee TV is still among the top 3 is not the topper. Star plus was an English channel showing programs such as Bold and Beautiful, Baywatch. The converted star plus to a Hindi channel and started a new channel called star world for such English programs. This is an example of starting a ‘new category’ which will be covered in another literature part.

Can you name the first saas-bahu show which catapulted star plus into the limelight and helped it overtake Zee TV? Kyunki saas bhi kabhi bahu thi (KSBKBT). It, along with ‘Kahaani ghar ghar kii’ and ‘Kasauti zindagi kii’, spawned a new genre of shows and there was a rush of “me-too” shows on other channels too. Some of them were successful and some weren’t. These three shows continued to rule the roost for the next 8-10 years with hundreds of episodes. Did some one say first mover advantage..

Can you name the first reality show on Indian television? Kaun Banega Crorepati (KBC). It not only extended the lead which star plus had over other channels but also took them miles ahead of competition. Is there any other reality show which could create that magic and the Television rating points (TRPs). Hardly any. ‘Sawaal ek crore ka’ and ‘jeto chappar padh ke’ on Zee TV and Sony failed miserably. Even Shah Rukh Khan as host of KBC couldn’t bring the TRPs. ‘Dus ka Dum’ and ‘Kya aap panchvi pass hai’ were successful but not as much. Did anyone say first mover….

Which was the first laughter show? Laughter Club on Star one. The ‘me-too’ products such as ‘comedy circus’, ‘hans baliye’, ‘chote ustad’ and others haven’t been as famous as laughter club.

Which was the first sports channel? Star sports. New sports channels such as Ten sports, SET MAX, DD Sports, Zee sports haven’t been as successful. People remember Harsha Bhogle from star sports only and too a certain extent, the noodle straps by Mandira Bedi on SET MAX.

Which was the first cartoon channel? Cartoon Network. Hungama, Nickelodeon, Jetix, Disney channel also were launched but ask any child and the first name he would say is ‘Cartoon network’. Although ‘Shin Chan’ is famous, for children, cartoon means only Cartoon Network. First mover advantage isn’t it…

Third goes to show that the concept of first mover still holds true and will continue to do so since people often remember the first new thing that they see or feel. First impression shouldn’t be the last impression but unfortunately it becomes the first impression, although unintentionally. Thus it is better to be first than it is to be better.