7 Levers
Marketers are Pulling in this Slowdown
From auto to
FMCG, insurance to telecom, every sector is hitting the brakes. Chief marketing
officers are having to work harder and smarter, and these are the seven levers
they are pulling to beat this slowdown, report Kala Vijayraghavan and Lijee
Philip
Chief marketing officers are
having to work harder and smarter, and these are the seven levers they are
pulling to beat this slowdown
BY
HIS OWN ADMISSION, MAYANK Pareek, who is responsible for ensuring that cars
keep moving out of Maruti Suzuki showrooms at a faster pace than never, says he
has no personal life today. Cars are not moving at India’s biggest carmaker
like they used to. “I am working seven days a week,” says Pareek, chief
marketing officer. “Tough times call for tough measures. We can’t be selling
cars sitting in the office.”
In August, Maruti organised about 26,000 events aimed at the consumer, including exchange melas, camps for financing and AC check-ups. “The idea is to reach every potential consumer and convert them into a buyer,” he says. It’s a challenge for every chief marketing officer (CMO) in this slowdown, and it’s not an easy one to overcome. “There are no homogenous customers,” says Sunil Kataria, CMO at Godrej Consumer Products.
In the first two quarters, the Indian economy has grown at a tepid 4.8% and 4.45, respectively. And the forecast for the entire year is only mildly better—5.3%, according to a panel advising the prime minister last week. High prices and job insecurity, in the face of economic uncertainty, has upset consumer confidence, with spends on electronics and automobiles dropping for eight months in a row. Yet, Kishore Biyani, who knows a thing or two about the Indian consumer, feels this is not the time for companies to be defensive. “It is the time to be aggressive,” he says. “If marketers keep quiet, the consumer will keep quiet. One has to behave normally during such times.” Not CMOs, though,
who are having to deal with reluctant
consumers, tighter budgets, and a
competitive and changing marketplace. Even as they pull these six levers to beat the slowdown, there’s a seventh one they cannot afford to let go off.
1. Find New Niches
Alongside marketing campaigns aimed at the consumer in general, some companies are targeting niches for growth that is more visible, is easier to record and
comes at a lower cost. For Maruti, this
thinking has seen it pinpoint and drive into
settlements, with a need and purchasing power, like priests in Tamil Nadu and turmeric growers in Nashik. “So, it’s not mass marketing, but niche marketing,” says Pareek, the carmaker’s CMO. Having a widespread network helps as such campaigns become just incremental work for a sales team. They can make a catch and return to their bread-and-butter. More recently, adds Pareek, Maruti has been adopting a similar strategy in Jamnagar, Gujarat, where groundnut and cotton farmers have seen a kicker in their incomes following a good crop and higher prices. Elsewhere in the state, its sales executives, pitching its Eeco as a cost-efficient mode of transportation, recently sold 40 vans to restaurant or motel owners on the highways of Ahmedabad and Baroda.
Similarly, earlier this year, Vodafone launched a campaign for migrant workers in mid-town Mumbai to teach them how to use a mobile application of the Indian Railways to book train tickets. “A number of these workers have entry-level phones,” says Vivek Mathur, chief commercial officer, Vodafone India. “With an application, they see the utility of a data connection against MBs or GBs of a data plan.” Godrej Consumer found new consumers for its room and car fresheners, Aer, through a new distribution channel. In the first five months of launch, Godrej was selling Aer as an FMCG product, moving it through traditional and modern trade. After its consumer research showed home care and car care to be different segments. “Car buyers are very passionate about what they use in their car and spend time in car accessory shops,” says Kataria of Godrej. “We quickly appointed separate distributors for car accessory shops.”
2. Get Out Of The Offi ce
It took several consumer interactions for Godrej realised its folly on how to distribute Aer. But those consumer interactions were not by default, but by design. This June, Godrej kicked off an initiative called ‘conquest’, whose objective is to have five employees meet 100 consumers in a week, gather information, process it scientifically and embed it into decision-making. The mid-course change in how Aer was to be distributed was one example of Conquest at work. “The main idea behind Conquest is to pick consumer knowledge first hand and work on it swiftly,” says Kataria. “In regular research, there
is a transition loss that tends to happen as
research agencies moderate and diagnose data.” Most companies, in their own way, are strengthening their efforts to reach the consumer. In early-2013, mobile service provider Idea Cellular started participating in ‘haats’—local markets, typically organised on a weekly basis, both in rural and urban areas. Idea now sets up a permanent stall in haats in 450-500 districts, with each market serving a population of 2,500. According to Himanshu Kapania,
chief executive of Idea, 60% of the company’s customers are in rural areas.
Elsewhere, Axis Bank is also promoting more field initiatives to win new business. One such initiative aims to get more senior citizens to open accounts with the bank. Its product, called Senior Citizen Privileged Account, offers health checks, bill payment facilities, an ID card for medical emergencies and a CD of old movie songs. “Banking is not an acquisition business like FMCG,” says Manish Lath, head of marketing, retail liabilities & electronic banking, Axis Bank. “It is really a relationship business.”
3. Engage More With Sellers
Consumers are one touch-point of such outreach exercises. The other is the links between the company and the consumer: dealers and retailers. Increasingly, CMOs acknowledge, it is in their interest to do so as these two sets are influencing sales in a bigger way; they are no longer dormant channels and, today, have the power to convince consumers to choose a particular brand.
According to Nilesh Gupta, director of consumer durables retail chain Vijay Sales, Apple is the only brand that has the differentiation for a marketer to call the shots, and even that is under question today. “There is no brand or product differentiation in the market today,” he says, in the context of consumer durables. “Usually, the dealer may have the final say in the brand choice picked up by the consumer.”
So, companies are offering incentives. This April, Aircel launched a reward scheme for its retailers, targeting their wives: the wife whose husband sold the highest number of Aircel connections got a Hyundai Santro car, the runner-up got to meet MS Dhoni, captain of the Indian cricket team.
If it’s not incentives, it’s meetings. “It is important in a downturn, and amid killing competition, to have your trade channels back you solidly,” says Salil Kapoor, CMO of Dish TV. “We have been directly
meeting our top-performing 7,000
dealers of our 48,000 dealerships in
the last few days to solve on-the-ground
issues and motivate them.”
“You manage dealer problems and they will manage yours,” says Chandu Virani, managing director of Balaji Wafers. For many years now, Virani has been holding an annual meeting of 25-50 dealers, of Balaji’s 800-plus dealers; he is now increasing their frequency. There is no talk of sales. Instead, Virani listens to the problems of dealers and tries to offer immediate solutions.
4. Make A Rural Push
In today’s skidding market, the top-of-the-mind concern for dealers and companies alike is growth. Kapoor of Dish TV says market trends in India, especially in urban areas, is a partial repeat of 2008, when a feeling of gloom pervaded over India following a financial crisis in the west.
Concerns on job losses, a declining rupee and mortgages is an urban phenomenon, adds Kapoor. “Half of the problem is sentiment-driven,” he says. “But the villages are not affected by this gloom talk.” Harvests in general have been good, yielding higher incomes for farmers, and this likely to see them spend more. Dabur expects growth in rural India to be 30-40% higher than urban markets.
Pareek of Maruti says the company has identified about 300 rural niches in recent years, which account for 10% of
its domestic revenues.
These include potato growers in West Benga l, blue -p ot ter y m a ker s i n Jaipur, timber merchants in Gujarat, turmeric growers in Tamil Nadu, granite p ol i shers i n Hyderabad, painters in Madhubani in Bihar, and manufacturers of nuts and bolts in Sonepat. An August 2013 study by Nielsen, titled ‘India: Boom or Bust’, validates the rural push of companies. The report says that of the 400,000 new stores set up in India in 2012, more than 70% were in rural areas. CMOs expect companies to stay this course, not just in terms of where all they are but also in terms of what products they offer.
So, for example, Emami, Dabur, LG and Videocon are looking to go beyond small packs and entry-level products, with larger packs and mid-range products, in the belief that consumers in rural areas will start upgrading. LG plans to ship more smartphones and flat-screen TVs to villages and smaller towns in this festive season.
5. Entice with the Price
The Nielsen report cited above says the companies that did well are those that “were not so aggressive on price…they recognised the pressures on the consumer”. The report says that in 2012, the five fastest-growing FMCG companies in increased product prices by an average of 8.2%, against 11% in 2011. By comparison, the bottom five companies raised prices by a greater amount —12.5% in 2012, against 9.3% in 2011. In this slowdown, price has emerged as an important lever, both as perception and as real value. The auto industry, which is reeling under eight consecutive months of declining sales, leads the way, with price cuts and hefty discounts. For example, Hyundai pitched its Grand i10 Rs 50,000-80,000 cheaper than Maruti Swift; Ford launched its new and improved Figo at its previous-generation price, of Rs 3.99 lakh; manufacturers sought to disrupt the market with aggressive pricing of brand new models like Ford EcoSport (Rs 5.99 lakh) and Honda Amaze (Rs 4.99 lakh).
In the FMCG space, bundling, promotions and discounts are galore on soaps, shampoos and laundry. So, for example, Hindustan Unilever is offering a discount on its premium detergent brand Surf Excel Matic, while P&G is
offering 15% extra shampoo on its Rs 3 sachets. It helps them the cost of crude oil and palm oil, key ingredients for soaps and detergents, have declined 7% and 3%, respectively, in the past few months.
6. Keep Innovating
Even as they play defence and keep a check on prices, the slowdown winners also turn on the offence and keep innovating, observes the Nielsen report. More importantly, they support these new launches. The new launches made in 2011 by the five fastest-growing FMCG companies grew five times in value terms in 2012, against two times for the bottom five companies in the set.
Devendra Chawla, president, Food Bazaar, a modern retailer, says FMCG companies have dared to take big bets with new product and category launches in 2013. The list of new product launches—not refreshes—in this slowdown is long and formidable. So, for example, with its whitening toothpaste, Colgate launched a new category, pricing its product at a 50% premium to other products in the market. P&G launched its big toothpaste brand Oral B in India a month back.
There’s also HUL’s hair care brand Tresemme, Marico’s Saffola Masala Oats, Engage Deo by ITC, Park Avenue Beer shampoo, Instant Chinese noodles by ITC, Dettol Kitchen by Reckitt Benckiser, Odonil gel from Dabur, Alpino chocolates by Nestle. “The consumption economy is definitely leading to consumers willing to pay for differentiated products,” says Kataria of Godrej, which has launched two new products and two product variants in the last 10 months.
At Big Bazaar, for example, olive oil sells more than Marico’s Saffola. Chawla says modern trade has helped companies drive sales in new categories: while its contribution in overall sales growth has been 7-8%, it’s been 35-50% in new-age categories such as anti-aging creams, health foods like oats and toilet cleaners. “In a way, it is a new marketing lever—focusing from general to specific, and with a long-term strategy,” he says.
7. Keep Thinking Long Term
Rajiv Bajaj, managing director of Bajaj Auto, has a different thinking on offering too many brands. “The marketing principle is that the width of the brand portfolio must be inversely proportional to the breadth of the markets that one seeks to address,” he says. “Unfortunately, most marketers lead their companies to offer more and more brands as they seek to enter more and more markets. That’s usually the beginning of the misadventure to
a sorry end.” In the domestic market, Bajaj has just two brands: Pulsar and Discover.
K Ramakrishnan, president marketing of Café Coffee Day, also stresses on holding on to the basics as a guiding force. “Life (for a SMO) has always
been full of complications
and changes, and we have to
accept that,” he says. “If there is primary focus on the value offered by the brand, I think, one is on safe ground.”
It’s why Bajaj feels marketers should think less about the world and more about their brand. “When there are too many competitors and not enough customers, CMOs need to heed (marketing guru) Jack Trout’s advise, ‘differentiate or die’, and reorient their organisations from being manufacturers and sellers of products to becoming an engineer of categories and a marketer of brands.” Marketing consultant Suman Srivastava feels marketers are probably making little headway in unconventional ways to reach the consumer because the marketing tools being used today are primarily for FMCG products and evolved in the 1960s, for a different consumer. “Today, FMCG is just one of the various product categories,” says Srivastava, founder of Marketing Unplugged. “The world has changed and the CMO has to change dramatically too. Their immediate instinct is to control the communication to the consumer like speaking from a podium; they are not having a conversation with them.”
In August, Maruti organised about 26,000 events aimed at the consumer, including exchange melas, camps for financing and AC check-ups. “The idea is to reach every potential consumer and convert them into a buyer,” he says. It’s a challenge for every chief marketing officer (CMO) in this slowdown, and it’s not an easy one to overcome. “There are no homogenous customers,” says Sunil Kataria, CMO at Godrej Consumer Products.
In the first two quarters, the Indian economy has grown at a tepid 4.8% and 4.45, respectively. And the forecast for the entire year is only mildly better—5.3%, according to a panel advising the prime minister last week. High prices and job insecurity, in the face of economic uncertainty, has upset consumer confidence, with spends on electronics and automobiles dropping for eight months in a row. Yet, Kishore Biyani, who knows a thing or two about the Indian consumer, feels this is not the time for companies to be defensive. “It is the time to be aggressive,” he says. “If marketers keep quiet, the consumer will keep quiet. One has to behave normally during such times.” Not CMOs, though,
who are having to deal with reluctant
consumers, tighter budgets, and a
competitive and changing marketplace. Even as they pull these six levers to beat the slowdown, there’s a seventh one they cannot afford to let go off.
1. Find New Niches
Alongside marketing campaigns aimed at the consumer in general, some companies are targeting niches for growth that is more visible, is easier to record and
comes at a lower cost. For Maruti, this
thinking has seen it pinpoint and drive into
settlements, with a need and purchasing power, like priests in Tamil Nadu and turmeric growers in Nashik. “So, it’s not mass marketing, but niche marketing,” says Pareek, the carmaker’s CMO. Having a widespread network helps as such campaigns become just incremental work for a sales team. They can make a catch and return to their bread-and-butter. More recently, adds Pareek, Maruti has been adopting a similar strategy in Jamnagar, Gujarat, where groundnut and cotton farmers have seen a kicker in their incomes following a good crop and higher prices. Elsewhere in the state, its sales executives, pitching its Eeco as a cost-efficient mode of transportation, recently sold 40 vans to restaurant or motel owners on the highways of Ahmedabad and Baroda.
Similarly, earlier this year, Vodafone launched a campaign for migrant workers in mid-town Mumbai to teach them how to use a mobile application of the Indian Railways to book train tickets. “A number of these workers have entry-level phones,” says Vivek Mathur, chief commercial officer, Vodafone India. “With an application, they see the utility of a data connection against MBs or GBs of a data plan.” Godrej Consumer found new consumers for its room and car fresheners, Aer, through a new distribution channel. In the first five months of launch, Godrej was selling Aer as an FMCG product, moving it through traditional and modern trade. After its consumer research showed home care and car care to be different segments. “Car buyers are very passionate about what they use in their car and spend time in car accessory shops,” says Kataria of Godrej. “We quickly appointed separate distributors for car accessory shops.”
2. Get Out Of The Offi ce
It took several consumer interactions for Godrej realised its folly on how to distribute Aer. But those consumer interactions were not by default, but by design. This June, Godrej kicked off an initiative called ‘conquest’, whose objective is to have five employees meet 100 consumers in a week, gather information, process it scientifically and embed it into decision-making. The mid-course change in how Aer was to be distributed was one example of Conquest at work. “The main idea behind Conquest is to pick consumer knowledge first hand and work on it swiftly,” says Kataria. “In regular research, there
is a transition loss that tends to happen as
research agencies moderate and diagnose data.” Most companies, in their own way, are strengthening their efforts to reach the consumer. In early-2013, mobile service provider Idea Cellular started participating in ‘haats’—local markets, typically organised on a weekly basis, both in rural and urban areas. Idea now sets up a permanent stall in haats in 450-500 districts, with each market serving a population of 2,500. According to Himanshu Kapania,
chief executive of Idea, 60% of the company’s customers are in rural areas.
Elsewhere, Axis Bank is also promoting more field initiatives to win new business. One such initiative aims to get more senior citizens to open accounts with the bank. Its product, called Senior Citizen Privileged Account, offers health checks, bill payment facilities, an ID card for medical emergencies and a CD of old movie songs. “Banking is not an acquisition business like FMCG,” says Manish Lath, head of marketing, retail liabilities & electronic banking, Axis Bank. “It is really a relationship business.”
3. Engage More With Sellers
Consumers are one touch-point of such outreach exercises. The other is the links between the company and the consumer: dealers and retailers. Increasingly, CMOs acknowledge, it is in their interest to do so as these two sets are influencing sales in a bigger way; they are no longer dormant channels and, today, have the power to convince consumers to choose a particular brand.
According to Nilesh Gupta, director of consumer durables retail chain Vijay Sales, Apple is the only brand that has the differentiation for a marketer to call the shots, and even that is under question today. “There is no brand or product differentiation in the market today,” he says, in the context of consumer durables. “Usually, the dealer may have the final say in the brand choice picked up by the consumer.”
So, companies are offering incentives. This April, Aircel launched a reward scheme for its retailers, targeting their wives: the wife whose husband sold the highest number of Aircel connections got a Hyundai Santro car, the runner-up got to meet MS Dhoni, captain of the Indian cricket team.
If it’s not incentives, it’s meetings. “It is important in a downturn, and amid killing competition, to have your trade channels back you solidly,” says Salil Kapoor, CMO of Dish TV. “We have been directly
meeting our top-performing 7,000
dealers of our 48,000 dealerships in
the last few days to solve on-the-ground
issues and motivate them.”
“You manage dealer problems and they will manage yours,” says Chandu Virani, managing director of Balaji Wafers. For many years now, Virani has been holding an annual meeting of 25-50 dealers, of Balaji’s 800-plus dealers; he is now increasing their frequency. There is no talk of sales. Instead, Virani listens to the problems of dealers and tries to offer immediate solutions.
4. Make A Rural Push
In today’s skidding market, the top-of-the-mind concern for dealers and companies alike is growth. Kapoor of Dish TV says market trends in India, especially in urban areas, is a partial repeat of 2008, when a feeling of gloom pervaded over India following a financial crisis in the west.
Concerns on job losses, a declining rupee and mortgages is an urban phenomenon, adds Kapoor. “Half of the problem is sentiment-driven,” he says. “But the villages are not affected by this gloom talk.” Harvests in general have been good, yielding higher incomes for farmers, and this likely to see them spend more. Dabur expects growth in rural India to be 30-40% higher than urban markets.
Pareek of Maruti says the company has identified about 300 rural niches in recent years, which account for 10% of
its domestic revenues.
These include potato growers in West Benga l, blue -p ot ter y m a ker s i n Jaipur, timber merchants in Gujarat, turmeric growers in Tamil Nadu, granite p ol i shers i n Hyderabad, painters in Madhubani in Bihar, and manufacturers of nuts and bolts in Sonepat. An August 2013 study by Nielsen, titled ‘India: Boom or Bust’, validates the rural push of companies. The report says that of the 400,000 new stores set up in India in 2012, more than 70% were in rural areas. CMOs expect companies to stay this course, not just in terms of where all they are but also in terms of what products they offer.
So, for example, Emami, Dabur, LG and Videocon are looking to go beyond small packs and entry-level products, with larger packs and mid-range products, in the belief that consumers in rural areas will start upgrading. LG plans to ship more smartphones and flat-screen TVs to villages and smaller towns in this festive season.
5. Entice with the Price
The Nielsen report cited above says the companies that did well are those that “were not so aggressive on price…they recognised the pressures on the consumer”. The report says that in 2012, the five fastest-growing FMCG companies in increased product prices by an average of 8.2%, against 11% in 2011. By comparison, the bottom five companies raised prices by a greater amount —12.5% in 2012, against 9.3% in 2011. In this slowdown, price has emerged as an important lever, both as perception and as real value. The auto industry, which is reeling under eight consecutive months of declining sales, leads the way, with price cuts and hefty discounts. For example, Hyundai pitched its Grand i10 Rs 50,000-80,000 cheaper than Maruti Swift; Ford launched its new and improved Figo at its previous-generation price, of Rs 3.99 lakh; manufacturers sought to disrupt the market with aggressive pricing of brand new models like Ford EcoSport (Rs 5.99 lakh) and Honda Amaze (Rs 4.99 lakh).
In the FMCG space, bundling, promotions and discounts are galore on soaps, shampoos and laundry. So, for example, Hindustan Unilever is offering a discount on its premium detergent brand Surf Excel Matic, while P&G is
offering 15% extra shampoo on its Rs 3 sachets. It helps them the cost of crude oil and palm oil, key ingredients for soaps and detergents, have declined 7% and 3%, respectively, in the past few months.
6. Keep Innovating
Even as they play defence and keep a check on prices, the slowdown winners also turn on the offence and keep innovating, observes the Nielsen report. More importantly, they support these new launches. The new launches made in 2011 by the five fastest-growing FMCG companies grew five times in value terms in 2012, against two times for the bottom five companies in the set.
Devendra Chawla, president, Food Bazaar, a modern retailer, says FMCG companies have dared to take big bets with new product and category launches in 2013. The list of new product launches—not refreshes—in this slowdown is long and formidable. So, for example, with its whitening toothpaste, Colgate launched a new category, pricing its product at a 50% premium to other products in the market. P&G launched its big toothpaste brand Oral B in India a month back.
There’s also HUL’s hair care brand Tresemme, Marico’s Saffola Masala Oats, Engage Deo by ITC, Park Avenue Beer shampoo, Instant Chinese noodles by ITC, Dettol Kitchen by Reckitt Benckiser, Odonil gel from Dabur, Alpino chocolates by Nestle. “The consumption economy is definitely leading to consumers willing to pay for differentiated products,” says Kataria of Godrej, which has launched two new products and two product variants in the last 10 months.
At Big Bazaar, for example, olive oil sells more than Marico’s Saffola. Chawla says modern trade has helped companies drive sales in new categories: while its contribution in overall sales growth has been 7-8%, it’s been 35-50% in new-age categories such as anti-aging creams, health foods like oats and toilet cleaners. “In a way, it is a new marketing lever—focusing from general to specific, and with a long-term strategy,” he says.
7. Keep Thinking Long Term
Rajiv Bajaj, managing director of Bajaj Auto, has a different thinking on offering too many brands. “The marketing principle is that the width of the brand portfolio must be inversely proportional to the breadth of the markets that one seeks to address,” he says. “Unfortunately, most marketers lead their companies to offer more and more brands as they seek to enter more and more markets. That’s usually the beginning of the misadventure to
a sorry end.” In the domestic market, Bajaj has just two brands: Pulsar and Discover.
K Ramakrishnan, president marketing of Café Coffee Day, also stresses on holding on to the basics as a guiding force. “Life (for a SMO) has always
been full of complications
and changes, and we have to
accept that,” he says. “If there is primary focus on the value offered by the brand, I think, one is on safe ground.”
It’s why Bajaj feels marketers should think less about the world and more about their brand. “When there are too many competitors and not enough customers, CMOs need to heed (marketing guru) Jack Trout’s advise, ‘differentiate or die’, and reorient their organisations from being manufacturers and sellers of products to becoming an engineer of categories and a marketer of brands.” Marketing consultant Suman Srivastava feels marketers are probably making little headway in unconventional ways to reach the consumer because the marketing tools being used today are primarily for FMCG products and evolved in the 1960s, for a different consumer. “Today, FMCG is just one of the various product categories,” says Srivastava, founder of Marketing Unplugged. “The world has changed and the CMO has to change dramatically too. Their immediate instinct is to control the communication to the consumer like speaking from a podium; they are not having a conversation with them.”
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