Neeti Gyan
Who stole my retail dream ?
- Hemant M. Mishrra
Viewpoint of Exchang4media, November 2007 issue
In the euphoria of the great retail boom, organized retail players have forgotten that India’s 12 million shopkeepers, 40 million hawkers and 200 million farmers can spoil their party. Modern retail boom is the biggest story to hit India this side of Afghanistan. Almost everyday, more encouraging figures are thrown up about this boom, which is going to change the face of India. As per the latest estimates, organized retail is USD 12 billion at present, which is expected to touch USD 75 b by 2011 and USD 175 b by 2016. India is the 9th largest retail market in the world.
And this is not enough. Organized retail is only 3% of the total retail market in India. The comparative figures for US are 85%, UK 70%, Malaysia 55% and China 17%. The organized retail segment in India is expected to contribute 10% by 2010. The retail dream cannot go wrong. The future looks so full of hope and promise.
But are we all missing the point ?
When the opposition to big retail started in West Bengal, it was dismissed as the Left parties had always been opposed to MNCs and big business. Then it happened in Kerala, where political parties along with local shop owners and merchants opposed the opening of Reliance Fresh stores in Kochi. In August 08, a one-day statewide strike was organized in Maharashtra by retailers and wholesalers to oppose the entry of big retailers, which was adversely affecting their business. Now Mayawati has stopped the operations of Reliance Fresh and Spenser’s in UP citing law and order as the problem.
What’s going on ? There is a problem nobody wants to see or even acknowledge. Retail giants are so busy working out their grand plans that they are completely oblivious of the volcano, which can erupt anytime.
I asked this question to three CEOs of organized retail. All of them were convinced that the entry of big retail is not going to affect small shop owners, as there is enough market for everybody. Their business model talks about speed, scale of operations, expansion plans and a golden rainbow at the end of all this. They seriously suspect that they are going to change the face of India. Big research agencies like Tecnopack-KSA keep doing research and confirming this misplaced optimism.
Unfortunately, nobody has done any empirical study to understand the impact on small retail shops due to organized retail. India is a nation of shopkeepers, where 12 million shopkeepers and 40 million hawkers conduct 97% of the retail business. And every time, a new mall opens, these guys get affected.
Let’s understand what happened in the US. A study by Pennsylvania State University in the United States measured the impact of the Wal Mart retail boom on the poverty prevailing in 2004.
It established that American states with a greater number of Wal Mart stores in 1987 had a higher rate of poverty in 1999, than states where fewer stores were set up. Interestingly, increased poverty from Wal Mart operations came when poverty rates nationally were on the decline.
Three reasons were given for this state :
- Worker displaced had no alternative livelihood. They were forced to work in Wal Mart stores at relatively lower wages. In India, displaced shopkeepers have no such option (working in modern outlets requires knowledge of English). So they will have to quit or continue with a lower sales volume. I spoke to such shopkeepers where large malls had opened in nearby areas. All such shopkeepers were losing sales.
- It destroyed local entrepreneurship and uneducated people could not earn their livelihood, which was bound to create social unrest. This would be more pronounced in the Indian environment where generations after generations are dependent on small business, generally retail. A no hope retail environment for young people can generate tremendous backlash.
- Thirdly, Wal Mart transferred income from taxpayers to its stockholders and consumers. In the Indian context, organized retail players are not likely to bear the economic and social cost of their nationwide operations.
I believe that this is just the beginning. Unwittingly, Mayawati has put her foot on a simmering issue. This is a social and economic issue, which can blow up any time. Organized retail players have to re-evaluate their business model and find a way to include the affected parties in their growth story. Their business model will remain incomplete without taking into account affected small business owners. Can these big players form a co-operative with the help of affected parties before they even enter an area ? The government needs to step in; big players need to understand the social and economic consequences of not taking any action.
The retail boom is good for consumers and good for the country. Can we afford to spoil this party ?
(Hemant M. Mishrra is a brand consultant in Mumbai. Before becoming a consultant, he has spent twenty-five years in marketing of consumer goods with various Indian companies. You can contact him at hemant@neeti.biz)
Restless Manager & the art of brand building
- Hemant M. Mishrra
Marketing Journal Strategic Innovator, January 2008 issue
The FMCG sector is recovering and large companies (read : MNCs) are in an attacking mode. The big question that everyone is asking is : Is there any way out for some smaller Indian brands against this onslaught ?
Brand managers in FMCG companies are confused and restless, particularly if they are custodians of an Indian brand with limited resources. To stand up against the big brands that are established is a challenge in itself and on top they suddenly find that these MNCs are turning overtly aggressive.
The ground rules of this game have suddenly changed and to have any realistic chance of surviving in this jungle, brand manages need to throw the old marketing rule-book into the dustbin. Here is the new rule-book to guide them to fare better against this onslaught.
Rule No. 1
If you are not an MNC, don't act like one. Whatever works for them is not necessarily going to work for you too. In the past, brand managers have come to me and said that HLL has taken this particular media. Logic says that they must be doing something right. I agree that it might be right for them, but not so right for you. Big brands or market leaders can get away with big mistakes and afford them too. After all, an 800 pound gorilla can sit anywhere he wants to.
So don't waste your precious time and resources (which are limited) in simply aping big brands. Focus on brands or segments where you can match their fire-power. Otherwise you will have no chance of beating them.
Rule No. 2
Don't confuse brand building with airing a 30 second long television commercial. It has become so easy to make television commercials that any small / medium size company can make them and feel that brand building is being done. The bigger question however is, can you justify the entire marketing programme ? And can you sustain your advertising & promotional plan for the next three years ? It took Kellogg's more than 20 years to reach break-even in Japan. You may not even have 20 months. So dig your heels in for a hard battle and let your boss know the score. He must understand that building brands is a long-term commitment for the organization and would involve more than just TV ads. Does the organization have the patience and resources to go through the process ? One should also remember that most brands fail because advertising alone is not sufficient.
Rule No. 3
95% of the time, when we are awake, our mind is occupied with these seven issues - a happy family, a rewarding career, prosperity, health, security, good friends and feeling good. These are the agenda of life, which even your brand should address. If your brand does not address them, you simply can't win.
The next question is, how can your brand contribute towards fulfilling life interests, dreams and aspirations of your consumers ? Branding is the most critical element of your strategy and you need a very sharp yet simple positioning to compete against big brands. Not just this, one needs to engrave the brand proposition in the mind of the consumer. This is a big exercise, which cannot be left to junior executives or advertising agencies (a mistake here can destroy the brand). Everybody in the top management should get involved in this, as it is almost impossible to salvage a brand from a bad positioning.
Rule No. 4
"God is with the larger armies" is what Napoleon had once said. This is true till date. We all remember the story of David and Goliath because it is so rare. Big brands have huge advertising budgets. They buy media at cheap rates. Their foot soldiers are spread all and the retailers bend over backwards to please them as they gain maximum by aligning with them.
Fighting them is like being in a boxing ring with Mike Tyson with your hands tied behind your back. The only way to beat Mike Tyson is to have a shotgun. In corporate language, you need to have a 'powerful niche' or a 'differentiated brand positioning' to take on established big brothers. You can have a great pricing (like Nirma washing powder, Anchor Toothpaste); or great positioning (like Titan watches, of course helped by sleepy competitors); an irresistible promotional offer (Reliance Mobile Monsoon Hungama) or a superb combination of distribution, content & promotion (Dainik Bhaskar newspaper in Rajasthan and Divya Bhaskar in Gujarat). To fight big brands, you need to think differently. Do not take them head on, focus on their weak spots (even big brands have their weak points) and don't forget to pray.
Rule No. 5
It is ok to have consumer promotional offers or discounts. Every Marketing Guru will tell you that discounts / free promotions dilute the brand equity. So put all your money in advertising to promote the core value of the brand. This would be true for bigger brands but completely false for challenger brands. In today's world, brand loyalty is half dead. If that was not the case, how can one explain the weakening of brand loyalty by a two-bit plastic mug or a stainless steel spoon ? Consumers love free offers so to hell with loyalty and equity. Even India's 20 most trusted brands are having a rough time against discounts & free offers. If you have decided to fight back then take the way that nearly all the big and trusted brands have, that is by giving discounts & free offers. So don't feel guilty. A well thought out promotion can increase brand value & sales. Trust me, nothing builds a better brand equity than the actual usage of product by the consumer.
Let's not forget that the new age shopping woman is smart and is looking for additional value !
If she is finding nirvana in a Rs. 2 plastic mug ! So why do we want to question her judgement ?
There is a word of caution that is advised for using discounts : 'be relevant & don't overdo it.'
If she is finding nirvana in a Rs. 2 plastic mug ! So why do we want to question her judgement ?
There is a word of caution that is advised for using discounts : 'be relevant & don't overdo it.'
Rule No. 6
Revisit pricing. In today's context, pricing & affordability should be treated as a strategic issue.
There is no quicker way to kill a brand than increasing the price especially when the brand is under pressure. At the same time, reducing the price to corner market share (if you can afford it) could be a welcome strategic move. Consumers should have no time to think that the company has cheated them all these years. The new mantra is "if the price is great, just grab it !"
Market research can make you clueless regarding pricing decisions. Consumer affordability is the only criterion, which should dictate pricing. Talking to retailers & consumers for a couple of days will help you arrive at the price at which you can excite the consumer to buy your brand (which may not be the lowest price).
Rule No. 7
How much advertising is enough if you are pitted against the market leader or a big brand ?
Nobody knows for sure and a media agency is the last one to figure this out. Al Ries & Jack Trout in their much talked about book "Marketing Warfare" advise that a challenger should be prepared to spend at least three times more than the leader to penetrate the market. Great theory, but doesn't work in India, where a typical challenger has just 25% of the budget of a leader. Assuming you have a terrific positioning and a differentiated offering, you still need to get into the consumer's mind.
For this, don't compete with the market leader on the volume of advertising. Your threshold limit of advertising should be to advertise enough to be seen on the mental radar of the consumer. Then you can put the balance money in promoting the brand at the trade level. Think of new ideas to make your brand interact with consumers. Like providing a great experience at the retail shop ?
The above list is incomplete and this will always be the case. The new retail boom has given a never before chance to brands; even to those small brands which cannot afford mass media to interact with consumers. The marketing rulebook needs to be updated every three months (or every three weeks). Building a brand without new rules of the game is like boiling an egg on an electric guitar.
Boiling an egg on an electric guitar
21 Hot Brand Building Strategies for SMEs
- Hemant M. Mishrra
1. Branding is not a buzz word. It is a way of life. Your corner barber shop needs it. Airtel also needs it. Either you believe in it or you believe in planned death.
2. It is a myth that only big companies can indulge in brand building exercises. Big companies have become big because they did a lot of brand building when they were small.
3. Every small action which sends a positive signal to the outside universe is branding. Every negative signal you send out has to be compensated by at least ten positive signals. This math is simple.
4. Your telephone operator gets 200 calls every day - 90% of the people who call will never visit your office. If she has a pleasant personality and great conversation skills, you get 200 opportunities to market your company to potential customers.
But unfortunately, this point is altogether missed by most small businesses. I have seen disasters happening when incorrect information is passed on in an almost rude manner. Ditto for the front desk receptionist. These two critical positions should be managed by the CEO himself - from interviewing, selection and training. Trust me, your future depends on it.
5. Your waiting area defines you. Nobody cares if your back office looks like a pig sty; your reception area is your key branding opportunity. Even if you are a small business, you still can afford a decent sitting place with polite people. I have visited a Rs 100 cr company, who has made the reception near the lift along the staircase passage. Visitors are expected to sit in hot conditions, whereas all employees are sitting in cozy air-conditioned rooms. Who will do business with them, unless you need to clear your overdue hospital bills ?
6. Don’t confuse advertising with branding. You advertise to create awareness which is also essential. Relevant and personal advertising will sell your product. Cute advertising will get your agency some awards in Goa and no sales.
7. Twenty percent of your customers will give you eighty percent of sale. This old rule still works.
If you are the CEO, don’t delegate this part, handle this yourself and treat these customers like your sons-in-law.
8. Don’t make stupid promises to your customers. Make promises which you can keep. Credibility is a key element in brand building.
9. Branding is about your stationary, your visiting cards, your internal memos, your logo, letters going out of your office with no spelling errors and a lot of smiling faces.
10. Make a remarkable product. Branding is about making a great product and charging the right price. When you don’t brand, you are forced to sell at a low price. Think Apple I-pod, Dell Notebooks, Avon Cosmetics, Dabur Vatika and one million more successful products.
11. I have seen more unhappy customers due to a bad return policy of the company than everything else put together. When the product is returned, it is your fault. It could be due to over-stocking, old stocks, bad packaging, lousy planning by your sales team or your business partners or none of the above - still it is your fault. So replace everything gracefully, no questions asked. Customers will love you for this.
12. Consumers do not buy only brands, they buy companies. Company branding is as important as product branding.
13. Don’t try to fool customers. You may succeed for some time but you will be found out sooner than you expect. It includes incorrect product claims, unclear policies which could affect relations with trade partners and unethical advertising. Good brands don’t need these props.
14. The big irony is that most of the small businesses expect immediate returns from any branding activity. Branding is like building a factory - you can’t start production and start earning before the factory is ready. And it takes time to build a factory.
15. Traditional advertising has stopped working (TV, press radio, outdoor etc.). You have to find new ways to reach your customers. Think of modern retail, multiplexes, google advertising, social networking sites, fan clubs, loyalty programmes, in-film advertising, e-mail, mobile marketing and the list grows.
16. Be consistent and predictable when sending out messages to your customers. Consumers hate surprises, unless it is a very pleasant one. Typically, consumers start noticing your advertising after 6-7 exposures. They start taking you seriously only after 8-13 exposures. Most small businesses do not advertise enough to make the needle move. Anything below threshold is a waste. I know one dozen more exciting ways to burn money.
17. Today’s customers get bored easily. Give them a good story. Great marketing is all about great stories told to them in different ways.
18. PR (Public Relations) is the most under-rated branding tool. Advertising will create awareness, PR will sell the product. In a small business, the CEO is the key PR person. Sell your company through social communities, business forums and networking. One Owner-CEO of a small company admitted that he spends almost two hours a day only networking. The Golden rule - network and network more.
19. A well orchestrated word-of-mouth campaign can act like a bush fire to promote your brand. Women get influenced by word of mouth three times more than men. If your product is used by women, use women’s clubs, kitty parties or referral incentives to spread the word about your brand. It works like magic.
20. Research is a controversial subject. Small companies do not need big research. Big companies use research as a safety net. As Peter Van Stock, CEO of Jones Soda says “Focus groups are like toilet papers. They are only used to cover your ass”. In case you need to know some basic insights, just talk to your ten best customers.
21. And finally, a word about marketing ethics. When you were small, you behaved because mother was watching you. Now everybody is watching you. Don’t do anything which will make you uncomfortable if it comes on the front page of tomorrow’s Times of India.
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