Tuesday, December 16, 2014

'Cheap'ster - Is Cheap Passe?

The Tata Nano was a path-breaking product. Launched in 2009, with a price of Rs. 1 lakh/ $2000 approximately, this was indeed an invention of sorts. While everyone anticipated that the Nano would be a resounding success, the car actually flopped!

Walmart was the place with “Low prices ...Always Low Prices” – a line that reinforced how cheap the merchandise was. After 19 long years, Walmart changed to become the store where you could “Save Money. Live Better”.

Coca Cola had a Rs. 5 bottle in a price sensitive market like India but pulled the sku out after some time.

Kishore Biyani was India's King of Discounts, with his Big Bazaar chain of supermarkets using the 'Isse Sasta Aur Accha Kahin Nahin' (you won't find it cheaper or better anywhere) tagline. 3 years back, Big Bazaar shed the cheapest tag to latch onto  'Naye India Ka Bazaar' (New India's supermarket)

There is a common thread, which runs across – price and interestingly the problems associated with cheap prices or being the cheapest.

The change in the Walmart slogan is representative of the times we are in (and whichever part of the world it maybe)  “Save money. Live better” is a line, which shows a clear benefit. So you don’t go to Walmart because you cannot afford to go anywhere else but you go there because you want to live better.

This new positioning is aptly aligned with what people want to do and how they want to feel.   They don’t want to be seen in place that is cheap, but in a place that sells products at great value (and not necessarily the cheapest). Which resonates with the fact that people have aspirations that will pander to their psyche.

It is important to position businesses/ brands that are more aligned with what the target customers really want to do and how they want to feel. There is a growing sophistication of customers especially with their hopes and aspirations.

Big Bazaar is pushing premium products from chocolates to linen shirts, from denims to induction cookers, from perfumes to premium crockery.  The belief is that each product will represent an upgrade to people’s lives.  Big Bazaar wants to be a ‘cool’ retailer. "As a modern retailer, Big Bazaar introduces the products of tomorrow," says Biyani.

Apart from a host of products, Big Bazaar is modernizing stores, beefing up its variety with cost not being the main factor and hoping that customers will stay loyal. "With this new campaign and the accompanying evolution in stores, we are moving to become a more product and brand-centric retailer," adds Biyani.

Perhaps the apt observation came from Biyani  -“ So whether it is products for home, fashion, food or beauty, each have been carefully selected by our merchandising teams and form a part of a storyline that captures the social change that is evident in the country,"

Both Walmart and Big Bazaar at different ends geographically sought to pull away from the bottom of the pyramid and evolve into a higher value retailer.

Moreover there is a big negative that cheap is associated with. Cheap is akin to poor or low quality, compromises in product etc., perceptions any retailer/ marketer would not like to be associated with.

This brings us to the why the Nano was a flop. Nano was very cheap. Tata made it look utilitarian. However, Indian car buyers are not utilitarian but aspirational. They want to show-off their car. Tata's marketing made sure that the car looked "cheap" and not "hip". Its USP proved to be its stumbling block, actually reducing any aspirational value that car would bring. No one wanted to be seen with the cheapest car.  Moreover the fires on the cars compounded the problem. There were serious questions about the quality of the car.

As we speak, Tata wants to start afresh. Repositioning it as a Smart City Car. Cheap has gone out of the window.  The jury is out.

And we always thought that cheap prices meant that the products were a winner!  So while price can be a strong positioning plank, it alone cannot complete the home run.

It may add further credence with the following examples:

Beefeater was an inexpensive gin in England, but when the brand was introduced in the US, it became an expensive gin, and a successful one.

Corona was a cheap, working-class beer in Mexico. But in the US, it was positioned as an expensive, imported beer. Corona went on to become the largest-selling imported beer in America and one of the top 100 global brands.

Monday, December 08, 2014

How Social is Social Media - The Non Social Problematic Aspects

Technology and the Internet have broken barriers of communication & interaction for the common person. Tools like messenger services and more importantly social media sites like Facebook; Twitter etc. are the favored destinations for many especially the youth. There is a strong preference for communicating through Facebook, Twitter apart from texting through the various apps like Whatsapp and its ilk. It is said that there are 11 different ways of staying in contact with their friends from the comfort of their sofa or bedroom.

I have seen numerous interactions between people over social media - best friends, husband - wife, mother and son and so on. Social media interactions seem to dominate any conversation or social interaction. And giving the ease at which technology facilitates this, social media interactions is growing to be the norm. Facebooking, Tweeting, Whatsapping etc. are some of the terminologies, which have made an entry into the normal parlance.

I personally have a bad habit of checking my smartphone regularly both for official & personal purposes, to the point it has reached levels of irritation with the family.

This comes to larger issue on whether social media destroying our interpersonal social skills?
A couple of years back, the online multiplayer casino Yazino conducted a study. The highlights are:
  • More than a quarter (26%) of people spend more time communicating with friends online than in person
  • One in 10 (11%) adults is more likely to stay in at the weekend and catch up with friends online than go out to meet them in person
  • Almost three quarters of people (71%) text friends and family every day, with almost a third (31%) sending messages through social networking sites
  • People are as used to seeing their friends’ online avatar as they are their face. We are now just as likely to SMS or email a friend, as we are to call them. 
  • People increasingly prefer quick and frequent engagements with instant updates on news than a prolonged chat and are also finding new ways to catch up with friends from their comfort of their sofa.
  • Email is the primary means of communication between friends for 27% of people, with typewritten messages replacing conversation. 
  • 1 in 5 Britons uses wall posts and status to engage with those close to them and a further 18% use live chat and instant messaging.
  • 3% of people use Twitter to communicate with friends and family on a daily basis
  • 11% of people organize their social life via Facebook and other social networking sites.
  • 1 in 20 missed out on a party or event because they missed the Facebook invitation.
  • 1 in 4 people spend more time socializing online through sites like Facebook and Twitter.

One in 10 (11%) people are more likely to stay in ‘sofalising’ at the weekend, catching up with friends online, than going out and meeting people. Perhaps it could be huge costs associated with going out, some may be due to laziness and some could because they prefer to interact virtually. Some ‘sofalisers’ take it to the extreme, with 3% of adults spending more than 25 hours each week engaging with friends online. If that is that enough, you notice guests paying more attention to their smartphones rather than interacting with the people around them.

The results of the study are uncomfortable. As this trend seems to be increasing day by day, does social media make people 'social' enough'? Does social media have an impact on inter-personal interactions?

Paul J. Zak, a professor of neuro-economics at the Claremont Graduate University has been conducting studies on comparisons between relationships over social media and relationships in real life. The basis of testing for such interactions is the release of dopamine when people interact with other both online (social media) and offline (face to face).

One of Prof. Zak's test was on journalist Adam Penenberg, asking him to engage his Twitter followers for 10 minutes. Penenberg used the time to respond to a few strangers’ tweets and to make a 122-character joke about the way his GPS pronounces words. Zak tested Penenberg’s blood both before and after the exercise, and found that in just those 10 minutes, Penenberg’s oxytocin levels rose by 13.2 percent and his stress hormones decreased by about 13 percent. According to Prof. Zak, the oxytocin boost Penenberg got from this mediated social interaction was similar to what a groom experiences before his wedding. This shows that the intensity is the same practically.

The propensity and intensity to interact would increase given the online explosion but this cannot be at the cost of face to face/ inter personal interactions. There is something personal about face-to-face conversations that is lacking with online interaction.

On the flip side, some research indicates that the more people are engaged online, the less engaged we become with people in real life that makes us even lonelier. Kind of an irony!

Russell Clayton, a doctoral student at the University of Missouri, found in his new study published in the journal Cyber psychology, Behavior, and Social Networking, social media use can affect romantic relationships. When a couple is spending all of their time on social media, they might not be spending as much time with one another. And worse still, if they’re posting about their relationship issues on social media, those issues can snowball. Clayton found similar results for Facebook users, and in both studies, high social media use by both partners was a strong predictor of infidelity, breakups, and divorce.

Japan has some very interesting statistics. It is the most Twitter-using country in the world on a per capita basis. About one in three Japanese people who have an Internet connection use the service. Japanese is the most tweeted language after English and the top five most active accounts on Twitter are all based in Japan. Japanese characters, which can carry long, complex connotations, also mean that Twitter’s 140-character limit is not as constraining as it is in other languages. Yet Japan has recently become one of the loneliest countries in the world (if you equate “loneliness” with “being single”), where 61 percent of unmarried men and 49 percent of unmarried women aged 18 to 34 were not in any sort of romantic relationship—a 10 percent increase from just a decade ago. In fact, one in three Japanese under 30 reports never having dated at all. Maybe Twitter provides an alternate source of oxytocin for some of these single people.

Ed Keller and Brad Fay in their book - "The Face-to-Face Book: Why Real Relationships Rule in a Digital Marketplace" suggest that our conversations in person are much more powerful than those online. 'Decisions we make are based on true interpersonal influence: social influence, which happens most often, and most powerfully, face-to-face.'

Their study indicates that 90% of the influential conversations that we have every day happen offline, while only 8% are online. 'Whilst social media is big and growing, in comparison it is still significantly smaller by the analog world in which people live and interact ' explain Keller and Fay. In effect, social media interaction is good but not as good as a one to one conversation with your friend.

Given all this back and forth, there are some side effects that cannot be ignored. While technology easily increases the number of other people we can interact with, consumers especially the youth are becoming increasingly dependent on social media for inter personal interactions because they are not geared to handle face to face interactions. There is a deficiency hugely as a result of this dependency. For the development of a person, social skills are a requirement and any disruption can lead to negative results. This can result in a class of people who cannot interact with each other face to face. Lack of social skills is a very disturbing trend, which can affect the balance in society. The physicality of the interaction cannot be technology or social media but real, live face-to-face interaction.

Lack of opportunities to develop face-to-face social skills can lead to many unfortunate side effects including loneliness, shyness, depression, suicide, bullying, and violence. Many of the gun attacks in the schools and colleges in the USA are a result of the social problems the youth face.  As mentioned earlier, social support is required for the development of the youth as they take larger adult roles. However increasing social isolation, fragmented families, weak (online) relationship which are more transient in nature result in adults with poor social skills far removed from the realities of society.

The late Stanley Greenspan, a clinical professor of Psychiatry, Behavioral Science, and Pediatrics at George Washington University Medical School warned, “as children become more alienated from the lives of others… we can expect to see increasing levels of violence and extremism and less collaboration and empathy. Children need to grow up amid a network of close interactions with adults.” Until recently, he observed, “even in cities, families spent their days mostly within the compass of neighborhoods one could easily traverse on foot… Ordinary life thus naturally and routinely provided the conditions that the complex human nervous system needs to fulfill its potential.”

The easiest comparable example is the car, which was actually meant for long distance transportation, but unfortunately it is used even for very short distances. This can be directly co-related to the obesity epidemic prevalent in most nations. Likewise via media communication has largely taken the place of face-to-face interaction for many, resulting in social ill health especially in youth.

We need to take this seriously and for start here are some simple suggestions

1. Step away from the smartphone - Keep your phone away. Have some 'free from phone' time. Cut all digital interactions during that time.

2. When spending quality time with friends or family, refrain from constantly checking and responding to emails or texts or logging onto social media. Replying to a quick text or email during downtime is fine, but don't make it a habit. Make a conscious effort to be present with the people you’re spending time with. Encourage others to do the same.

Nothing replaces a face-to-face interaction no matter how much technology helps. There is a unique thrill to such experiences, which are more memorable, and these cannot be ever replicated or substituted by technology.

Monday, December 01, 2014

India Post - The Chance to Make Itself Indispensible

There has been a lot off buzz when India Post collected Rs 280 crores through Cash On Delivery (COD) for e-commerce firms in the last year. While this surely something to crow about, this is just a small drop in the ocean. However this perhaps assumes much more significance on the way forward for the organization.

To give an introduction - India Post has about 1.55+ lakh post offices of which 90% are in the rural areas, making it the world's largest postal network. On an average, a post office serves 21.21 sq. km area and about 7,175 people. It also has cash handling services like core banking solutions, money transfer and a robust account system. Apart from this it has insurance and other services.

India is at the cusp of the ecommerce wave.  The e-commerce business in India was about $ 6 billion (approx. Rs. 37,344 crores) in 2012 and is expected to touch $76 billion (roughly Rs. 4,73,024 crores) by 2021 of which distribution, delivery and logistics constitutes around 12 percent. Presently ecommerce only contributes approx. 2% of the total retail market. With all the hype around it shows the enormous potential which exists in India.

There are 3 major problems that can restrict the growth:
  1. Internet penetration  
  2. Logistics support in the rural areas
  3. Financial interactions
  • Internet penetration would increase with the increasing sales of smartphones, which the telecom providers are gearing upto with increased emphasis on data. Apart from this, the government plans to cable most rural areas to increase connectivity.  There still exists the provision to provide desktops/ laptops in designated locations within rural areas that are secure but also accessible to the public.
  • Logistics support - While the private sector logistics players are growing rapidly, the ecommerce biggies like Flipkart, Amazon, Jabong etc. have developed their own delivery systems but there remains a huge task of reaching to the length and breadth of the country. There is both a financial viability and physical implementation that prohibits a service provider from opening a branch.
  • Financial interactions - Leave alone credit card penetration, the number of people who have a savings account in nationalized banks are limited both in urban and rural areas.  Even though 8 crore new accounts have been opened there still remains a huge task to get every household on board across the country. Moreover Indians seem prefer cash as a payment option and that too after seeing the product (hence COD).
It is very co-incidental and also fortuitous that the India Post system can solve the 3 problems mentioned. They have the physical infrastructure to keep PCs at the post office, provide the last mile support for delivery of products and also be the point of cash collection (COD).

This cannot happen by a mere wish. It requires investments in terms of infrastructure, training of the personnel and also up-gradation of the existing systems. And perhaps most importantly changing a mindset to a market savvy one.

It is not to say that some of the initiatives have not been encouraging.  Speed Post, introduced
approximately 20 years back has been showing good numbers - around 2 billion units per annum but the private operators have long overtaken this. And so is Business Post that offers value-addition to all business mail in the shape of collection, insertion, addressing, sealing etc. However other postal products have really not shown results.

On the financial services front India Post has already become the organization used for payment of wages under the Mahatma Gandhi Rural Employment Guarantee Scheme. It is also associated with Aadhar -  Unique Identification Authority of India (UIDAI) & Pension Fund Regulatory and Development Authority (PFRDA) to participate in the New Pension Scheme. Postal Life Insurance is also providing impetus. Post Office Savings Bank (POSB) is the oldest and the largest banking institution of the country, which has taken small savings operations to even the remote villages. With 250 million accounts, POSB has the largest amount of deposits. And this is perhaps one of the biggest success stories.

However there is a lot, which needs to be done. Corporatization along with private sector investments
could be a way of further enhancing India Post. Many countries have already started or completed the process of privatization of their respective postal systems.  They need to benchmark against existing players in logistics and financial services so as to upgrade their systems and processes. But fundamentally it is about the mentality. There has to be dynamism and professionalism so prevalent in private sector organizations.

The department has to reinvent itself with greater autonomy and professionalism. Since it is a government run organization, political necessities outweigh practicality.

From a reinvention perspective, here are a few suggestions:

  1. Logistics 
  • Be the last mile for the in-house Speed Post while also providing the same services to private players
  • Provide cash on delivery for all logistics providers
  • Warehousing
     2.  Financial Services
  • Transform itself into a mini bank
  • Leverage itself to market other financial products like insurance policies, mutual fund etc.
  • Brown labelled ATMs
     3.  Miscellaneous
  • Provide internet access to villagers both for B2C and B2B activities e.g. providing rates of pulses in the wholesale market
  • Ticketing - cut down the time to book transportation tickets.
For achieving this there has to be a serious mandate to transform the organization that is not bound by political exigencies but by practicality and commercial considerations. It is not an impossible task as other countries have shown.

Friday, November 28, 2014

Great Product! Great Deal! But Have You Forgotten the True Expectations of the Customer?

The Tata Nano was a great product at a great price. Launched in 2009, it was the cheapest car in the world. History was being created; a blue ocean in the midst of all the other colored ones. Success was a forgone conclusion and there were many reasons why it should be and only one of them was that India had a population of over a billion plus and a billion aspirations.

History of a different type was created and for all the wrong reasons. Most of the ingredients for success were there except that the Tata's got the positioning wrong. Nobody aspired to buy the cheapest car. A car satisfied aspirations and the Nano certainly did not. A car was to be shown off and clearly showing off the cheapest car was not one of them.
Cut to the special Flipkart Big Billion Day. For the value conscious Indian consumer this was the ‘mother of all deals’. With discounts upto a steep 90% this was truly a steal.  While many could avail these huge discounts, there were scores who could not, many received sub standard products, and some are still to receive the products even after one month of the sale.

While it may not be obvious there is a common
issue that comes through – understanding the expectations of the customer. I am sure that there would have been multiple levels of market research but somewhere in the intellectual discussions, the true expectations of the customer was missed.

In the case of Nano, while I am sure that the customers would have agreed with the size, pricing and features, what research perhaps would have not thrown up is that was it aspirational enough. With Flipkart, all customers would have loved the idea of a deeply discounted sale but after sales service, quality of products, timely delivery would have some of the issues that would have been given the cold shoulder.

This brings up larger questions - Are we trying to understand the customer properly? Are we asking the right questions? These questions are yet to be answered.

This probably amplifies the pitfalls of research or lack of it. Asking the right questions seems to be the perennial problem with all marketers. It is really unfair to blame market research agencies for this as the actual brief goes from the marketers themselves. Marketers do have the tendency to gloss over certain issues by looking at the 'larger picture' but then forget that small parts make a large picture!

Thursday, February 06, 2014

The Update Itch - The Psychological Urge to be Upto Date

When I bought the iphone4S I think the phone had iOS4 but with the numerous updates my phone now runs on iOS7.

Anyone with a smartphone would have downloaded numerous apps. All apps have their regular updates. Updates which bring in changes in their functionality and form. Anyone with a laptop would have to update their OS regularly.

Till a few years, when our world was restricted to laptops/PCs, the reason best attributed to updating the software was increased security and ofcourse correcting some bugs. These updates were few and more a hindrance. However what was arguably a choice earlier has now taken a different turn.

The other day, I overheard a conversation between a couple of 20 year olds who were discussing functionalities of their smartphones and apps.  The focus of the discussion on the recency of the apps and the updates done. To my surprise, the discussion meandered to the fact that of one of them did not have a particular update, without being derogatory, it was told that he was missing something and was 'inferior' in a sense. His reaction was incredulous and more "how could I miss it?".

Coming to think of it, I actively wait for updates across all my gadgets and get a child like satisfaction when I do so. While I do understand that there is technical reason to update there also psychological reasons.

It is as if I am with the 'with it' crowd. I like to believe that I am technologically savvy and are regularly updated with the happenings in the tech world. A kind of a one upmanship! When a couple of my colleagues happened to convey the same feelings I sensed that humans seemed to get a psychological pleasure from updation and it was not restricted to me alone!

The new paradigm seems to be one of constant improvement from a temporary status quo. With every updation comes a certain upgrade both technologically and psychologically.

A comparable example is the craze amongst smartphone and tablet users to buy another model every few months. Every change in the gadget is a moving up in the aspirational space. However there is a dissonance here - the updation of the physical aspects of any product like a phone or camera are limited in scope and when it is possible the upgradation is minimal. Customers are thereby in a sense, cheated of the total updating experience.

Updation is a cheaper way of upgrading. There are minimal costs infact none in most cases. And since updation is practically free there is actually lesser guilt or none at all. Compare this with high costs incurred in buying a new product and selling or discarding the older one.  There is a huge cost implication along with the negative psychological  implications.
Given this new behavior there are implications which manufacturers need to focus on:

  • Quicker updates - Customers are now expecting even more quicker updates (atleast in the software space) - There have been instances where the apps have been updated every week. As a customer I expect each update to be significantly better than the earlier one. 
  • Higher expectations - Since I expect each update to be better than the preceding one the expectations are far higher. Manufacturers cannot afford to provide an update which only updates a few cursory changes and worse if the update creates problems.  
  • Faster response times - manufacturers need to respond faster to customer preferences. The new normal is immediate and hence the manufacturers have to be on guard not only to customer choice but also to changes in the every changing dynamic environment.
  • Faster 'new' products - since the response times will be faster the products will evolve faster. Every update will add a new dimension and it will not be surprising that the product will undergo a complete metamorphosis after a couple of updates.
  • New functionalities - if the product needs to look & feel new, the manufacturers will need to create newer capabilities and functionalities. The more it is perceptible the better it will be for the manufacturers. 

The New Product Paradigm
Constantly Evolved Product - The old normal of a product which once bought cannot be updated is changing. A product which evolves with time will be the accepted standard. In the connected world, all physical products with even a little amount of connectivity will have to evolve with times.
It is easier for these products as the user experience can be changed over a period of time. Would not be surprised if the washing machine, microwave or even the car started behaving like my Kinect does.

The Age of Distrust and The Age for Trust

Loss of Faith The last few years have seen an increasing ‘loss of faith’ against politicians and media (because all communication happens ...