Marketers are no longer in charge of their brands: Jagdish N Sheth

Interview with Charles H Kellstadt Professor of Marketing, Emory University, Goizueta Business School

There is a shift from the marketer being in charge to the market being in charge, Jagdish Sheth tells Sonali Chowdhury

The 2008 financial crisis and the ensuing global economic slowdown have made consumers much more conscious of value for money. Analysts say that's a global trend and not just valid for India. That said, how are Indian consumers different in the way they consume, save and invest?

All over the world, the largest market segment is the value segment. Then there is a premium segment, where customers look for exceptional performance and are willing to pay higher prices. At the lower end, which is the price segment, the customers are willing to compromise on the quality of a product because price is the dominant factor. So there are three segments dominated by value, price and performance.
 

In India, we generally have two extreme markets - the luxury segment and the highly unorganised segment, where there is no quality assurance - it is dominated by product prices. But this price segment could be easily taken over by a branded company through a better product or packaging. Even in the US, during the recession of 2008-09, more people started shopping at Walmart, a value brand that offers very competitive prices. We have created this myth that Indians are more value conscious. We are big bargainers. All cultures began with bargaining in the consumer markets but in the advanced countries the shopkeeper economy has changed into modern retailing, which has stopped bargaining.

It is like having a good, better and best segment when you plot price versus quality or performance. The premium segment is always 15-20 per cent of the market; the value segment is 50-60 per cent of the market while price segment is under 15 per cent. So companies can adopt three brand strategies to target the three segments separately. You can use a suggested price and offer discounts like what the e-commerce companies are doing. The other strategy is to show customer the value of your product, how it is far superior to other products and offer a reason why the consumer should pay a certain price for it. The third would be to add some value to your offering so that you can command a higher price.

You have said that several areas of marketing expenditure have received academic attention: advertising, sales promotion, selling and personal selling costs, distribution and new product development and that in each case, the lack of productivity of these functions has been raised as a key issue. Has marketing failed to keep up with the changing times?

Marketing practice is the same as it was 100 years ago. It was organised around the concept of branding as opposed to selling to create loyalty. The biggest change is the rise of social media. It is not just whom you are communicating to but also about other users and buyers who are influencing other buyers. What used to be simple word of mouth earlier is today much bigger and the problem is you are not in control. It is the users who are in charge. Marketers are no longer in charge of their brand. There is a whole shift from the marketer being in charge to the market being in charge. The third change is the penetration of branded products in the rural markets. As more rural distribution systems are put in place, more such markets will have access to brands. So the key strategy in marketing will not be branding but distribution. Mobile technology, social media and distribution will drive key changes in marketing going forward.

You just said that social media has changed the rules of the game. How important is it for the product, marketing and technology heads of an organisation to collaborate to deal with these changes?

Latest research shows that 40 per cent of the technology budget goes in the hands of the chief marketing officer (CMO); so there is a disconnect in the sense the CMO is never an expert on technology and the technology head would have no idea about marketing. The problem is also that the traditional technology officer only knows about enterprise technology but what we need now is mobile and cloud computing capabilities because that is the demand of marketing services. Of course, marketers are using social media but what is important is how do you leverage them as a communication channel. Marshall McLuhan had said that the medium is the message but for the first time it is the message/messenger who is creating the medium. With technology there is no restriction and marketers can create as many mediums/channels as possible.

So what is the biggest challenge before marketing today?

The biggest problem that marketing faces is that our accounting systems are organised around products; so you know the profitability around products but not around customers. In a business to business market, it is easy because of the limited number of accounts/customers. In case of e-commerce, it is becoming possible because you have profit and loss understanding of each consumer account. With more digitised offerings, you get consumer level profitability data but the marketing process is still not account oriented, it is geared towards activity-based targeting. Companies should organise the marketing department around each account for better customer targeting.

In your book The Accidental Scholar you have mentioned inventors generally are not good entrepreneurs and entrepreneurs are not good managers. Why do you say that?

An inventor is obsessed with creating something new while entrepreneurship is more about leveraging resources like capital, technology, talent etc; he is more of a catalyst. An inventor is more like the creator of an ingredient while the entrepreneur is more like a chef who picks up ingredients and puts them together into a recipe of business success. An entrepreneur is good at making business sense, in fact, a good inventor must pass on the entrepreneurship to someone else - In the Silicon Valley, many people who have started something new have taken on the role of the technology officer in a company.

MASTER OF THE GAME

• Sheth is known for his scholarly contributions in consumer behaviour, relationship marketing, competitive strategy, and geopolitical analysis
   
• Before joining Emory's faculty in 1991, he had 30 years of combined experience in marketing from the University of Southern California, University of Illinois, Columbia University, and Massachusetts Institute of Technology
   
• Professor Sheth is the recipient of the two highest awards given by the American Marketing Association: the Richard D Irwin Distinguished Marketing Educator Award and the Charles Coolidge Parlin Award