Marketing in Recession

In my earlier post , I had pointed out some strategies for marketers to counter the recession. I think that Indian firms have realized that there is going to be a significant slowdown in the coming quarter.

Auto companies have taken a proactive step by reducing the prices. Most of the auto giants like Maruthi, Hyundai, Tata etc have reduced their prices by a significant amount. This move was further aided by the Central Government reducing the excise duty. These companies hope that the price reduction may boost sales.

But there is a limit to what a marketer can do inorder to tackle the slowdown. The marketer have limited option of reducing prices , increasing promotions etc . But these actions will not be sufficient to tackle the systemic issues that created this meltdown.

I am not an economist and hence I may not be able to give a detailed economic view of the current crisis. For that you may check out Harvard University Professor Greg Mankiw 's blog ( warning : its full of economics ) or IIM A Professor Jayanth Varma's blog ( warning : its full of finance ).

I am presenting my view about the larger issues that both the industry and the policy makers should be addressing. I am talking not as a marketing academic but as a middleclass consumer.

The current crisis that we face in India is different from that of USA. We currently do not have the sub-prime crisis . Although there is a real estate bubble, our banking system is sufficiently protected ( I hope so !) . But we face the ripple effect from the global crisis.

Indian Government has been proactive in its steps to ensure liquidity and providing confidence to the consumers and industries. To that extent, things are moving in the right direction.

I think that we have failed to understand the real issue behind this slowdown. The real problem is the slowing down of consumer demand and not the liquidity. Many marketers are pressuring governments to allow liberal credit to the consumers. That means banks will be offering easy credit to consumers which will then boost demand.

It will be suicidal to boost demand using cheap credit. The US market suffered because most of the growth was based on cheap credit.

I think that the consumer demand is going to go down more rapidly in 2009, because of the negative news spreading ( that includes this post also). If you examine the reason behind the eroding consumer confidence , there is only one - Job security.

When people lose jobs, they stop spending ( common sense). When the news of lay offs spreads, everyone stops spending and starts saving. The more the job losses, the more the fall in demand.When demand drops, companies cut jobs.....This is a vicious cycle

So when firms cut jobs, they are contributing to the bigger mess. This problem has a bigger magnitude in Indian context. Unlike USA, we don't have social security and most of the companies also doesn't provide one.

When Barack Obama talked about protecting US jobs and creating new jobs, I think he is moving in the right direction to tackle the fundamental issues.In India also , Prime Minister had made an appeal to corporates not to cut jobs ( there are political reasons for that since elections are around the corner).

It is time for the government to think about a broader social security plan in India. The National Rural Employment Guarantee Scheme is one of such initiative but not enough. I am not sure whether government is in a position to create a social security system , but some thinking has to be done in this direction.

Instead of social security , India have a provident fund system which has been made mandatory by law to certain class of employees. When economy was in a boisterous mood, we do not think about any of these things. Concepts like long-term growth, life long employment, loyalty all became old fashioned. I think this is the time where we have to revisit those old values.

Consumers tend to spend lavishly when he feels secure. Jobs offer him security. India saw a consumer boom when there was plenty of jobs. When the jobs started losing, demand also came down.

Any move to ensure easy credit without creating stable jobs will have serious repercussions. It would take an effort from both the employees and owners to start building a new culture .

I don't know whether this post make any economic sense ?... What do you think ?


Related Post

Marketing During Recession

Tempo Traveller : Quality is the Key

Brand : Traveller
Company : Force Motors


Brand Analysis Count : 363

In 1983 the Firodia group entered into a collaboration with Diamler Chrysler for the production and use of OM616 engine for their vehicles in India. This was the beginning of the successful LCV manufacturer Bajaj Tempo.

In 1987 the Bajaj Tempo launched Tempo Traveller in the Indian market. The product powered by the famed Mercedes engine created a new experience in the commercial passenger vehicle segment.

Bajaj Tempo is a serious player in the LCV market in India with a series of products like the Tempo Trax, Matador etc. But among these products, Tempo Traveller has a special place.

In 2005, Bajaj Tempo went in for a Corporate rebranding .The company adopted the name Force Motors .

Tempo Traveller belongs to the LCV category which are essentially vehicles used for commercial purposes like passenger carriers , goods carriers etc. Tata Motors rule this market .

In the passenger carrier segment, Tempo Traveller occupies a niche. It belongs to the premium range of people movers . Tempo Traveller holds more than 80% share in its niche. It had virtually no competitors till Tata launched its LCV passenger carrier Winger. The total passenger LCV market is around 15000 units.

Tempo Traveller although popular in the people - mover segment, has its presence in the goods carrier segment also. The brand is also a major player in the ambulance segment.

Since this brand is in the B2B space, there is little promotional activity in the advertising front. For Tempo Traveller, the brand has immense visibility because it was existing in the market for two decades. The brand also has a reputation for its quality, ruggedness and reliability.

In 2005, Tempo Traveller also had to rebrand itself. Tempo is a brand name owned by Daimler Chrysler. Hence Daimler wanted Force to drop the term 'Tempo 'from the brand name. Hence now Tempo Traveller is known as Traveller. But for the customers, still the brand is known as Tempo Traveller.

Although the brand is having huge equity, there were concerns over the outdated engine and the looks for the brand. There was a feeling that the product was dated. Hence Force motors recently did an extensive make over for the product. The entire look of the vehicle was changed and the company introduced the latest CRDI engine from Mercedes for the latest version.

The new look and the updated engine for Traveller is expected to take the brand to new levels of growth. Traveller is a brand that was built solely on performance.

Brand Update : Complan

Complan has never been an aggressive player compared to the market leader Horlicks . This explains the reason why such a powerful brand is languishing in a distant position of 15% market share compared to the 60 % share of Horlicks.

While Horlicks has been breaking new grounds with a series of variants aiming at the entire family segment, Complan was lying low all these years. The major happening for this brand in 2008 was the launch of the new flavor Kesari Badam . In the promotional front, the brand was in a low key mode continuing with the extension of its earlier campaign focusing on EXTRA growth.

Today's newspaper had a stunner ad from this brand. It was a front page solus advertisement in the Malayalam Daily with a direct comparative ad targeting Horlicks.

What was striking in that ad was that Complan has put a direct comparison with Horlicks by showing Horlicks brand on the ad and then comparing the various attributes. I have seen such explicit comparative ads in automobile sector . In most of the comparative ads, the name of competing brands will not be directly mentioned to avoid litigation. The ads will either use letters or dummies for comparison.

The ad copy asks the readers to chose between the " low cost health drink " and " Complete Growth " . Then the ad talks about why Complan is better than Horlicks by comparing both in the parameters like
Main Ingredients
Protien Content
protien Quality
Number of nutrients .

The ad also reinforces the new positioning " Grow Twice Faster ".

Complan is also running a TVC around the same theme. The TVC is almost a Cut- Copy of the Horlicks' earlier campaign of " Taller, Sharper, Stronger ". The ad shows the before-after results of two samples and claim that Complan users grow two times more than the non-users.

I was wondering why this sudden provocation. A google search indicated that Horlicks has been running a campaign digging at Complan's main attribute of ' 23 vital nutrients '. I have not seen that ad of Horlicks.


The ad spoke of the high price of Complan and was claiming that Horlicks had more than 23 nutrients but costs less than Complan.

Complan had challenged this in Mumbai High Court but the ruling was not in their favor. Hence the brand has taken the war into the public.

Price always have been the weak point of Complan. Those who has used this brand know that its good but was terribly expensive compared to the other highly advertised brands. More over the brand was a little confused regarding its positioning and communication. However, the current spat has bought some life into this brand. It will be interesting to see how Horlicks reacts to this direct attack.


Related Brand

Complan

Horlicks

Brand Update : Setwet Zatak

Paras Pharma has been promoting its deo brand Zatak aggressively during the last two years. Its campaign featuring foreign models have been popular among the target segments. Moreover Paras has been able to give an international look for this Indian brands.

Last month Zatak has released a new television commercial which is a spoof of the popular Axe commercials. The ad has generated lot of media interests with various business portals discussing this move.

The ad shows a skinny man literally using the axe ( not the deo but the real one) in a movement that is the same as that in the Axe commercials.Then two girls walks towards him and the man thinks that they are coming for him but they walk past him towards another hunk ( the Zatak guy).

Watch the commercial here : Zatak Spoof

Although many reports suggest that Zatak is taking on the competition head on with Axe, I have a different view. Zatak is a small brand compared to Axe. Paras also has limited resources to fight the mighty giant HUL.So this strategy is aimed to gain more eyeballs at the expense of the big boy Axe.

I don't think that Paras is aiming to dethrone Axe from its leadership position not in the near future.

What could be the options available for a challenger brand in a category which is dominated by a big company ?

One option is to start small and carve a small market without directly competing with the leader or to attack players of its own size or local and regional players.

Another option is to go in for the frontal attack which is a high risk, high pay-off strategy. This strategy will work effectively if the current leader is not serving the customer segment properly . ( source - Philip Kotler's Marketing Management )

Zatak has chosen to attack Axe directly . Although it is a high risk strategy , for a brand like Zatak, it has some advantages.

This strategy reinforces the positioning of the brand . If you look closely , Zatak is having the same positioning as Axe. i.e Girls Chasing Boys.

Zatak has been driving this positioning using its various commercials. The current campaign is pitching the brand opposite to Axe and hence conveying to the customers that Zatak is the alternative to Axe.

Deodorant is a category where customers are loyal but willing to experiment. Since the investment is low, customers tend to try in new fragrances and brands. But most of the customers have their favorite brands and fragrances.
In the market Axe has been dominating and there are virtually no strong alternative for Axe except may be the Cinthol brand which was relaunched using Hrithik.
So by attacking Axe directly, Zatak is putting itself into a position alongside Axe. So even if it does not become number 1 it can be a successful number II

Now the risk is with regard to HUL's response to this spoof. Afaqs report says that HUL currently is not planning to retaliate. But it will definitely watching the moves of Zatak. Zatak should also be careful not to take these spoofs too far with follow ups. Too much spoofs can give a perception that Zatak cannot exist on its own.


Related Brand
Setwet

Group 4 Securicor : Private Security

Corporate Brand : G4S ( Group 4 Securicor)

Brand Analysis Count : 362

26 November 2008 was a day that has changed the life of an Indian forever. When 10 terrorists terrorized our financial capital , killing hundreds of innocent citizens , millions were watching those horror moments on television. An average Indian, suddenly was stripped of the false sense of security that he had.

The very fact that Indian security establishments was clueless about the entire event came as a rude shock. The fact that these terrorist held Mumbai siege for three days also throw light on the efficiency of our counter -terrorist mechanisms.

After seeing all these , I feel unsecure as a citizen. I am not sure how our policemen is going to protect us with his cane Lathi against the ultramodern Kalashnikovs.

As per the news reports, Mumbai terror attacks has left corporates scrambling for security cover. This is boom time for the private security agencies in India.

Indian security services business is huge . According to various business papers, the size of the market for Private security services is around Rs 22,000 crores growing at 25 %. Most of this market is unorganized and the organized security services market is estimated to be in the range of Rs 10,000 crores.

Group 4 Securicor ( G4S) is the market leader in India. Most of you may have seen the security guards from G4S manning the numerous ATM machines across the length and breadth of the country.
G4S is a global firm. and is the World's largest provider of private security services.

According to Wikipedia,the origin of this company is dated back to 1901 in Copenhagen. The company was called as Falck and was founded by Marius Hogrefe .
Group 4 was a security company founded in Belgium. In 2000 both these firms merged together to form Group4Falck.
Securicor was another firm founded in London by the Philip -Sorenson family. At that time the company was known as Securitas International. Later there was a split in the family business which gave rise to two companies Securicor and Securitas. The Securitas went on to form another company which is called Group4Securitas.

In 2004 , Securicor merged with Group4Falck to form Group4Securicor.

The Indian arm of G4S was formed in 1989. The company is the largest private security services company with operation in almost all states. Although the visible part of the businesses are the private security guards we see in companies and ATMs, the services offered by private security firms are vast.

Listing below are some of the services provided by these firms :

Cash Services : Includes cash processing, transportation, retail cash management, ATM guarding valuable escort services and treasury management.

Manned Security : Mobile petrol, VIP security ,Reception, Quick response ,detective services ,route vehicle controls, company security etc.

Security Systems : Alarm services, electronic security, fire alarms, perimeter protection etc
Other security consultation : Risk assessment, training etc

( source : G4S website)

Yesterday there was a news in CNBC talking about the increased demand for private security in the wake of the Mumbai terror strike. The increase in enquiries for private security was in the range of 5 times the average rate. According the Tops Security Services, the enquiries have increased from 50 enquiries per day to 400 enquiries per day after the Mumbai terror attacks.

Although the market is attractive, it is not without problems. The private security services is a human resource intensive business. The security agencies rely on Ex-military personnel for their staffing requirements. Now there is a trend of recruiting ordinary people and provide them training and then employing them as guards.

The major criticism against these firms are their treatment towards these employees. There are reports that the employees are given a raw deal with negligible pay and no employee benefits. The staffs of these firms are largely non-unionized and hence had to suffer the poor wage and lack of benefits.

The silver lining is the emergence of professional firms like G4S, Tops Security and Lancers which takes the employee welfare seriously . Even big firms like GMR group has ventured into the security business. These players are expected to professionalize this emerging industry.

The private security business is regulated by the Indian Private Agencies Act (2005) which has laid down certain conditions and parameters for regulation of this business. This act ensures that only players with sufficient infrastructure will be able to start this business. The act also restricts the entry of foreign firms to this industry.

Another issue that is facing these private security firms is the ability of the guards to face terror strikes like the Mumbai attack. Indian laws prevent the private security staff to be armed with sophisticated weapons. So most of these guards are armed with sticks while the new generation thieves and terrorists are armed to teeth with AK 56 rifles and grenades.

Seldom we see the ads of these security firms. These firms operate in a B2B environment and rely on references and direct marketing. In any high-contact service businesses, the employees form an important part in the marketing. For these service firms, the employees form the brand. Hence much care is taken on the grooming of these employees. Even the uniform of these guards create an impression about the security service firms. Most of the security service firms make sure that these guards are well trained and groomed.


These private security firms can play a big role in the internal security infrastructure in India. We have to take some lessons from the West where these security firms are closely associated with the Government security agencies in providing security cover to major commercial centers. There are instances where USA Government rely on firms like the Blackwater Group to provide security to vital installations in Iraq.

Carona : RIP 1953-2003

Brand : Carona
Company : Carona Ltd

Brand Analysis Count : 361


Carona was a heritage brand of India which was once the second largest footwear company in India. The brand is now no more. Carona is one of those brands which could not withstand the competition which came after 1991.

Carona was a brand which thrived during the license raj. The brand thrived along with Bata. Infact Carona was fighting head on with the market leader Bata. In my home town , Carona store was just opposite to the Bata store. There were only two choices for quality footwear Bata and Carona.

Carona in a way imitated Bata in every possible manner . The shops and the products were extremely similar. When Bata launches one style, Carona quickly followed suit. Both Bata and Carona was instrumental in popularising canvas shoes in India. These shoes was a rage among kids at that time .

In 1992, Carona tried to tap the premium segment by launching the German sports shoe brand Puma in the Indian market. This was to counter the popular Power , Northstar and Hush Puppies brand from Bata.

Carona made a big mistake while launching Puma. The company felt that the Indian consumers will fall for the global brand . The Puma brand was priced above Rs 600. At that time the Bata brands like Power and Northstar was retailing in the range of Rs 200 -300. Puma was a big flop in the Indian market because of wrong pricing. The joint agreement was revoked by Puma in 1998.

The environment changed drastically during late 90's with the market opening up. All the footwear companies faced the issue of tough competition and increased costs. The cost was primarily attributed to the heavy workforce that these companies had.

New brands like Liberty, Action, Lakhani etc began to corner the market with new designs and fashion. Foreign brands like Nike ,Reebok and Adidas began to market aggressively which further worsened the position of Carona.

Both Bata and Carona went in for big trouble those days. Bata had the backing of their foreign parent which helped them sail through the restructuring exercise. Carona did not had that luxury.Bata was able to sustain itself by launching new models at affordable price ranges. But Carona was not able to excite the market with new launches. Both Bata and Carona had its own showrooms which became expensive to maintain. .Carona went in to BIFR fold in 1998.

In 2003, BIFR recommended closing down of Carona. BIFR noted that Carona Management did not have the will or the capacity to sustain the company. Carona went into eternal sleep in 2003. Carona was a brand that failed because of mismanagement. Somewhere the company lost its control over the costs. It failed to understand the competition and respond to it.