It would be a cliche to state that India has changed and is changing at a rapid pace. It would also be stating the obvious that finally, corporate India is facing true competition almost across all sectors of the economy, and that there are no obvious winners or blue-chips any more if one were to see the recent performance of the traditional role models such as Hindustan Lever Ltd (HLL) and Nestle. In this environment, what should be the course of action for firms engaged in marketing consumer goods and services? |
The starting point would be to realise that the Indian consumers are no different from consumers in most other markets across the globe, and are becoming increasingly savvy when evaluating the price-performance ratio for the goods and services. All things being equal, Indian consumers are also no different from their international counterparts when they seek increased value each time they buy any particular product or service. Companies that have acknowledged this painful (to them) fact and have reoriented their businesses to rise to this challenge are the ones that have been successful. |
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Unlearning the lessons from previous successes is the next step many companies should contemplate. For example, HLL's very successful multi-tiered distribution model has been the subject of case studies in leading business schools in India, and the role model for many other businesses. |
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For decades, HLL has had one of the most extensive market intelligence collection systems in place, including the private VSAT-based information management infrastructure (with a national footprint) that was probably set up in the early 1980s. However, in today's context, perhaps the same distribution model, as well as the market intelligence system, is one of the millstones around the HLL leadership's neck. |
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The response time from this distribution system for the introduction/testing of new products is probably too slow. Managing based on the market information system is probably akin to driving by looking at the rear-view mirror, rather than anticipating what could be coming up around the next bend in the road. |
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In the last many years, businesses such as pan masala makers pioneered the concept of single-use sachets and then FMCG companies jumped into the fray by offering everything from shampoos to soaps to biscuits in single-use packaging, essentially to increase their penetration among lower-income groups and rural markets. |
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However, there is no real evidence (at least in the public domain) if this increase in penetration has led to increase in profitability (volumes have certainly increased in many categories) since higher penetration achieved through the sachet/single-use packaging could have come through higher packaging/distribution/marketing costs, thereby impacting margin beyond acceptable limits while increasing the complexity of production planning, logistics, communication, etc. |
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Understanding the role of brands from the Indian consumer's perspective and the changed relevance of various tools in building such brands (beyond just advertising and promotions) is yet another area where many Indian companies need to "unlearn" their learning from the past successful decades. |
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The last area to unlearn would be organisation structures themselves. Structures based onstrategic business units create undesirable power centres and perhaps more top management attention is diverted in managing internal conflicts. Flatter, cross-functional organisations are the need of the day. |
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What are the lessons from the current lacklustre performance of the icons of the very recent past? The most important would be for organisations to develop a culture of using "business and intuitive" intelligence""rather than just market research""so that there is a better anticipation of opportunities and challenges. Companies should build businesses to last, and not lasting business processes. |
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Increasing consumption (perhaps by offering extra large volume size at an attractive incentive) could be a better option for some, rather than focusing only on increasing penetration. A redefinition of the role of advertising and promotion in the context of building brands and retaining customers is certainly in order. |
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Learning from successes in other sectors, e.g. the Korean companies in consumer durables and automobiles, Indian and international IT/ITES players, and others, can provide valuable direction in creating organisation structures more relevant to the current needs. In short, companies that are currently struggling to grow and retain profitability have perhaps no option but to first reinvent themselves! |
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Arvind@ksa-technopak.com |
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