Sunday, December 27, 2009

Brand Inoculation

Brand Inoculation is one of the new concepts making its rounds in the corporate world right now. It refers to all the things the company does right now to protect the brand from future shocks. It is usually in the form of activities aimed at building the brand's cache amongst consumers and the community in general.

For example, McDonald's was a favourite target for several environmental groups. So, for the past 15 years, the company has partnered with several NGos, including Conservation International, to develop processes to reduce its impact on the environment. Once the NGOs partner with McDonald's and guide its policies, it becomes difficult for them to criticize the company later.

Brand inoculation really works. When Exxon Valdez spilled oil in Alaska, it was not spared by environmental activists and protests led to severe penalties. Exxon has already paid $12 billion in damages, penalties and expenses.

British Petroleum on the other hand, is an company which has sincerely tried to establish its environmental credentials. So, in 2005, when its tanker spilled oil in Alaska, the environmentalists gave it a lot of leeway and did not go for the jugular like they did with Exxon. Interestingly, the same year, it also had multiple expolsions in a refinery in Texas and that too was largely ignored by the environmental interest groups.

Thursday, August 13, 2009


The most common trademarks are brand names and logos. That does not mean that trademarks are restricted to that. Some companies have registered sounds: MGM has registered the roar of the lion, Airtel's familiar jingle is also registered, Tarzan's holler is registered to Edgar Rice Burroughs Corporation. One of the strangest registered trademarks is the smell of roses on Sumitomo truck tyres.

Logos are extremely important to the image of the company. Several times logos have been changed to keep pace with the change in the brand's image.

Some are quite drastic changes:

Whereas other changes are quite subtle:

Often, trademarks carry much more meaning than is evident to the casual observer:

Try to notice the arrow formed between the 'e' and the 'x' in Fedex.

Tobletone is based in Bern in Switzerland. Literally 'Bern' translates to 'Bear'. There is an image of a bear in the Alp peaks that are the logo of Toblerone.

One of the better known of such logos is that of Amazon. It has an arrow denoting 'A' to 'Z'

Wednesday, July 22, 2009

Niche Leadership...What Next??

Some companies have achieved a very high dominance in their niches but in spite of those examples, it will not be unfair to say that there is a limit to how much you can succeed in a niche. At the least, the gap between the marginal cost of gaining market share and the marginal benefit will become far less attractive after having achieved a high market share in their defined niches.

Several companies have followed different strategies to grow their business after they have reached their maximum potential in their niches:

Expand geographically

Niche players tend to dominate in a small region. With international tariff, non-tariff and cultural barriers coming down, it is easy to access similar niches in other countries and regions. Hohner in harmonicas, Tetra in tropical fish feed, Steiner in military binoculars have all achieved a worldwide market share of over 50% in their defined niche.

Expand the niche

Many niches marketers cater to aspirational groups. There would be a number of individuals want to be part of the group but cannot be because they lack certain key abilities or are not sufficiently motivated. Several companies have come up with ideas to grow their niches. Honda plans to introduce two models, CBR1000 and VR800, to tap the nascent superbike segment in India. In order to grow the market, Honda intends to include riding lessons as well, for those with no experience of riding a superbike. Other such examples are the Nikon school and the BMW performance driving school

Up-sell and cross-sell

Once a company has acquired the loyalty of customers in a niche, it can leverage its goodwill to sell other products to its customers. Harley Davidson has been doing that by selling biking accessories jackets, saddlebags, etc. Even Royal Enfield has now started drawing significant revenues from its line of add on kits.

From niche to differentiated product

Several companies have made the transition from being a niche player to being a company with a differentiated product serving the general market.
Micromax succeeded in becoming the market leader in the rural mobile phone market in India. Now, they are trying to sell to the rest of the Indian market. The clothing and sorts good industry has several examples like North Face, Underarmour and Billabong, who started off as niche marketers but now cater to the general market. Some of these have made the transition smoothly but some others have had a rough time. HTC withdrew several models which affected its image of a seller of high end, touch screen based smart phones. Several sellers of high end products tried to expand their market by introducing low priced products. Notably, fashion brands like Gucci and Burberry have suffered heavily because of this strategy.


Sometimes a company may decide that it is very well configured to cater to a niche. Rather than expand by catering to the whole market, the company may prefer to concentrate on another niche in addition to the one currently being served. Over time, the company would hope to acquire the reputation of a marketer proficient in handling niches. Infomedia 18 has six special interest magazines like AV Max, Better Photography and T3 but its publishing arm has resisted coming out with a general interest magazine like Newsweek or India Today.

Saturday, July 11, 2009

Maslow's Hierarchy

Maslow's hierarchy of needs places all human needs in a five layered hierarchy. He proposed that humans will seek to fulfill higher order needs only after their lower order needs are sufficiently met.
The hierarchy of needs, according to Maslow (in order);
Physiological needs - Breathing, Homeostasis, Thirst, Sleep, Hunger, Sex, Protection (clothes and shelter)
Safety needs - Personal security, Financial security, Health and well-being, Safety net against accidents/illness
Social needs – Friendship and Intimacy
Esteem – Need to be respected
Self actualization – Need to realize ones maximum potential and possibilities

This order is taught in basic courses in marketing as it forms one of the important frameworks to understand consumer motives. There are several examples of products being successful in the market after it was repositioned to meet a different class of needs, either higher or lower.

By its Iron Shakti campaign, Kellogg’s is trying to tap safety needs by raising concerns relating to iron deficiency in children.Mercedes Benz has really fin tuned its ability to appeal to the esteem needs of its customers. In India, Mercedes discovered that large family businesses were an important segment for them. So they are selling multiple units to them by trying to sell the S-class to head of the family, the E-class to other important members and the C-class to the junior members of the family.

Marketers have not found it sustainable to try to sell products by overtly positioning to satisfy physiological needs. Most physiological needs like hunger and thirst are very easy to satisfy and thus, such positioning will not give any long term advantage to the marketer. On the other hand, a physiological need like sex has several complex sociological connotations and most marketers would have a nightmare dealing with it.

The main criticisms to Maslow's theory:
  1. It does not sufficiently account for taste or aesthetics. If taste is clubbed with self actualization it weakens the whole model. But how else would you explain the idiosyncratic preference for a red t-shirt over a green one.
  2. The model has been developed after observing exemplary people like Einstein and Eleanor Roosevelt. Generalization to common people may be unjustified.

Thursday, July 2, 2009


The customer lifetime value (CLTV) is a metric that is used by a number of companies to direct their marketing investments. BMW, the high end carmaker, uses the general formula of CLTV to direct their customer acquisition costs. leverages its customer data to accurately work out the value of its customer base.

These examples of companies using CLTV are few and certainly fewer in the Asian context. The main reason for that is that companies treat their marketing investments as short term investments. There are certain marketing investments which have an impact over a long period of time. Unfortunately, general accounting principles allow marketing investments to be treated as a short term expense, so there is a focus on their immediate payoffs.

There needs to be better communication between the finance and marketing departments to enable a long term view of such investments. Another important measure would be to quantify and express customer equity (the sum of the CLTVs of all the firm's customers) as an important intangible asset of the firm

Also it is important to note that all revenues because of the customer will not come from the customer. There will be other revenues because of word of mouth publicity, network effects, collateral advertising, etc. For example, an additional customer in Ebay does not pay Ebay directly but results in indirect revenues like commissions from sellers, ads, etc.

Using the CLTV concept, Pepsico recently concluded that Diet Pepsi, rather than regular Pepsi, is its number one soft drink.

Recently, mergers & acquisition dealmakers have relied on extending the concept of CLTV to value a customer base. It is rumored that CLTV based recalculations pushed Vodafone's valuation of Hutchison Essar from $10 billion to over $20 billion within a period of 6 months.

Working out multi-year impacts of marketing investments will not lead to an increase in marketing budgets but will lead to re-allocation of marketing expenditure based on the true value of the investments.

Hans Rosling: Presenting Data

Sunday, June 28, 2009

Introduction to marketing

Core Competency

One of the most misunderstood management concepts is that of core competency. The following three features define a core competency:

  • It is a source of competitive advantage
  • It cannot be easily replicated by competitors
  • It is applicable across a wide range of fields

The concept of core competency does not tell companies not t diversify. Instead, it gives companies a framework to aid in rational diversification. Several companies have used this concept to diversify meaningfully. Honda defined its core competency as its ability to make great engines and it has used this rationale to get into new businesses like generator sets, lawn mowers, outboard motors, etc. ITC has defined its core competency as its distribution reach and has used it to expand into other FMCGs like mints, salty snacks, biscuits, etc. 3M has defined its ability to innovate as its core competency and its product range is consequently mindboggling.

Several other companies have also expanded successfully by using other rationale to map out their growth. Reliance has used the concept of backward and forward integration. Telco has expanded their passenger car business to offset the cyclical risk they face in their business of commercial vehicles.

It is important to note that not all businesses need to have a core competency. It is not strange for a successful company to have no core competencies. Similarly, a given company may have more than one core competency.

‘Core competency’ does not say that you should stick to your original business and not expand. Instead the message is to find out:

  • What is it that you do better than others that makes you successful in what you do
  • In which other sector will it also help you to be successful

Now you have a valid reason to expand.

So Coco Cola is not an example of a company that is sticking to its core competency. At best it is an example of a company that either failed to identify its core competency or one that is cautious in its expansion plans.

Marketing Myopia

Written by Theodore Levitt in 1960, Marketing Myopia is probably the most influential article on marketing. Many argue that it signaled the birth of modern marketing thought.

Marketing myopia occurs when the marketers start concentrating on the product they are selling and forget about the customer needs they are serving. According to Levitt, sustained business growth depends on how broadly you define your business and how carefully you gauge your customer’s needs.

For example, all sellers of magnetic tapes were in trouble when music CDs came about and were able to serve the customer’s need for listening to music in the privacy of their homes in a better manner (Earlier, magnetic tapes had similarly displaced vinyl records). The firms which were better able to meet the challenge posed by CDs were those that made the transition early. Similarly, the new challenge for the same industry is from MP3 players and new digital music storage devices.

So, the prescription is that the company should define its business and their competition according to the customer needs it serves and not according to the product they currently sell. For example, Mercedes sells cars but the needs they cater to are varied, like mobility, comfort while travelling, convenience and status. So, the competition for Mercedes is not only from other carmakers but also from sellers of luxury goods like Rolex and Louis Vuitton.

Another important learning from this concept is that if you are unsuccessful in marketing your product then it means that in the perception of your customer, you are not able to serve her needs well. So, to ensure marketing success you have to tighten your product to ensure that you are able to better serve your customers’ needs than your competition. For, example when Lucky Goldstar’s first came to the Indian market, their consumer durables were unable to gain any significant market share. After revamping product features, introducing new models and upgrading its distribution system, LG (formerly Lucky Goldstar) became a market leader in several product categories.

Sometimes, companies have to take very drastic action. When Bajaj made the transition from scooters to motorcycles, it was still the number one seller of scooters in India but it recognized the changing customer preferences. The scooter manufacturers who failed to see the writing on the wall are still suffering.

Finally, it must be stressed that the concept of Marketing Myopia does not encourage diversification. It talks of shifting one’s focus from product to customer needs. That may or may not result in diversification.