Wednesday, 2 December 2015

Desi Baba vs Videshi Baniya --- How Ramdev Baba is winning the brand war against the MNC Giants

My first impression of Ramdev Baba was quite impressive. I was 35 years old, running at the top of my career and also earning quite well. But I was also afflicted with hypertension, high blood pressure, cholesterol, triglycerides, thyroid, indigestion, insomnia, hairfall and what not. Every doctor I went to gave me pills which had to be taken for the rest of my life. I was waking up in the morning and taking five pills and then I was taking another five pills before going to bed at night. And I would inevitably wake up in the middle of the night with palpitation and nervous breakdowns making me go nuts. Sometimes I felt I would not live long. Sometimes I felt I should kill myself to get rid of all the pain. In sheer desperation, I enrolled myself in a Ramdev Baba Yoga Shivir to learn the secret of healthy living. 

And frankly speaking, I was not disappointed. What the half-naked sadhu was telling from the podium was sheer music to my ears. Breathe in and breathe out and take control of your metabolic system. Go into deep meditation and control your mind. Avoid junk food. Come closer to nature. Go green. Of course, his discourses also held veiled threat against the multinationals who, he alleged, were polluting the mind and body of the gullible customers with highly advertised and thoroughly publicized harmful carcinogens. I did start implementing some of his teachings. Although I still take the pills, I have to admit that my body, mind and lifestyle have become much healthier than before.

And this week, I happened to chance upon three cover stories done on Baba Ramdev by The Economic Times, Business Today and Outlook. The Economic Times story ‘Desi Hustle vs MNC Muscle’ focused on how Hindustan Unilever and Baba Ramdev’s Patanjali were battling to gain chunks of the rapidly growing Ayurvedic and herbal FMCG pie. The Business Today story titled ‘Baba of All Trades’ detailed on how the Sanyasi was building up an FMCG empire and launching Atta noodles to take on the might of Nestle and other MNC giants. The Outlook story titled ‘Brand Baba’ was on how the Ramdev Baba backed ‘Patanjali’ brand has seen a meteoric rise in very little time.

The facts and figures dished out in all the three articles were quite astonishing.   Although the brand ‘Patanjali’ is associated with Baba Ramdev, he does not own a single share in the company. His associate Acharya Balkrishna owns over 93 percent in Patanjali Ayurved, and his disciples and investors hold the rest. In turn, Patanjali owns 90 percent share in Aastha, the satellite cable television channel that catapulted Baba Ramdev into a celebrity Yoga teacher.  
The turnover of Patanjali has now touched 2,000 Crore with diverse offerings like food (ghee, biscuits, pineapple juice, honey, corn flakes and noodles), cosmetics (face wash, bathing soap and anti-dandruff shampoo), household products (detergent powder, dish wash bar and floor cleaner) and Ayurvedic medicines (nutrients and cures for diabetes, hypertension, cancer and hepatitis).  The company is recording a staggering 150 percent year-on-year growth in turnover and is slated to touch 5,000 Crore mark in 2016.

Now, let us take a quick look at his desi competitors and foreign MNCs. The biggest player, Hindustan Unilever, is expected to touch 35,000 Crore in total revenues this fiscal year. HUL owns an Ayurvedic personal care product line called Ayush. The other major players in the market are Dabur, Emami, Himalaya and Forest Essentials. The multinational companies that he is competing against are Proctor & Gamble(P&G), GlaxoSmithKline(GSK) and Johnson & Johnson(J&J). The total size of the FMCG market in India is estimated to be close to $50 billion.

In the case of noodles, it’s a no holds barred contest between Nestle owned Maggi and Baba Ramdev promoted Atta Noodles. The total size of India’s noodles market is estimated to be 5,300 Crore. With Maggi taking a sudden hit and forced to withdraw from India because of the Monosodium Glutamate(MSG) controversy, there was a huge void that was waiting to be filled up. Maggi was a Mother’s delight (Mummy bhookh lagi /Bas do minute), Bachelor’s delight (Kuch nahin to Maggi bana lena) and a fast food restaurant owner’s delight. But deep down in their hearts, everyone knew Maggi was harmful to health. And Ramdev Baba stepped in with his healthy proposition of Atta Noodles. The Atta Noodle from Patanjali is made from wheat, while the tastemaker is made with rice bran oil, fresh peas, beans and carrots sourced from Uttarakhand farmers. The price has been kept at a competitive 15/- a packet while competitors sell at 25/- a packet.

How did Ramdev Baba’s Patanjali suddenly come out of the blue and snatch away a major market share from the competitors? Well, it is an interesting story, told in a compelling manner in those front page articles. Everything about Patanjali has been unique, and the organization has been reaping rich dividends because of their innovative styles. 

The operating strategy of Patanjali is something that needs to be taken into reckoning. . Most of the key employees of this organization take no salaries. The rest of the employees also paid very modest compensation. They put in long hours in the organization without any complaints or grumblings, just out of love and adoration for their Guru. The Baba also has a succession planning in place --- he is preparing 500 Sadhus to run the venture in future days --- building a corporate structure with a spiritual culture. The administrative and manpower cost is barely two percent of revenue, in comparison to MNCs who spend more than 10 percent on the same.

The brand ambassador of Patanjali is of course, the Baba himself. He travels 200,000 km a year, mostly conducting Yoga Shivirs. Through these Shivirs, he reaches out to a potential mass of 200 million people, many of whom are also loyal customers of the Patanjali products. The captive television channel, Aastha, plays a key part in further promoting the Baba as well as his products. Recently, the company also started giving ads in General Entertainment Channels (GEC) like Star and Zee. The ad agency Mudra has been roped in to develop an expansive promotion strategy. The company is also looking at Southern regional channels to increase penetration in the South.

According the Acharya Balkrishna, the major stakeholder in Patanjali, product development is done based on three principles --- competitive pricing, purity of raw materials and innovation. Patanjali has successfully brought down the price of Aloe Vera juice ---one of the key offerings --- from 1200 a litre to 150 a litre by sourcing directly from the farmers. It has created a revolution in the desi ghee market, where the end product used to be largely adulterated to earn maximum profits. Patanjali has brought the consumer trust back into the desi ghee product, which now accounts for 442 Crore or 36 percent of Patanjali’s turnover.

They also successfully made amla juice and amla candies popular, thereby saving the livelihood of the amla farmers. It’s herbal toothpaste brand, Dant Kranti, also considered very effective, brought in revenues of 200 Crore in the Financial Year 2014-15.  Incidentally, Dant Kranti, is 30% cheaper than Colgate Active Salt and Dabur Red.

And strategically, most of Patanjali’s products have been kept cheaper by 15 to 30 percent in comparison to the competitors. In comparison, Hindustan Unilever’s products are 2 to 2.5 times expensive than the average market price. Patanjali is now getting ready to launch herbal chocolates, rasgulla, idli-dosa mix and energy drinks, besides the atta noodles launched to take on Maggi. There are new manufacturing units being set up in Madhya Pradesh, Gujarat and Rajasthan to ramp up the production.

The distribution strategy of Patanjali has also been unique. Initially, they were depending on their own channels of Super Distributors, Regional Distributors, Chikitsalayas and Arogya Kendras to sell the products. But the turnover actually increased when they went for strategic tie-up with retail outlets. Very recently, Patanjali has tied up with Kishore Biyani promoted Future Group to sell it’s products at Big Bazaar and other Future Group stores in 245 cities and towns.  This is going to give the Baba a big edge in reaching out to the end customers and consumers in a larger scale.

Unlike the MNC behemoths, Baba Ramdev doesn’t have an army of highly paid B-School trained marketers to sell his merchandise. But the word-of-mouth power that he commands seems to be enough to increase his turnover by leaps and bounds. He doesn’t conduct market research and test marketing; he just listens to the demands of his bhakts and launches products as per their need. The FMCG, Cosmetics and Healthcare product market is growing by 15 to 20 percent; Ramdev Baba’s Patanjali is growing at a blistering pace of 150 percent. No wonder the FMCG giants are concerned and are working on counter strategies to sustain their growth.

Despite all the positives, Baba Ramdev did have his fair share of controversies.  His proclamation that Yoga can cure homosexuality drew a lot of flak from the media and the critics. FSSAI (Food Safety and Standards Authority of India) was not too pleased when he announced the launch of Atta noodles without getting the required approvals. The Indian Medical Association (IMA) has written to the Government demanding strict action against him for claiming that yoga can cure cancer, diabetes and heart disease. As per the Drugs and Cosmetics Act, no one can claim complete cure for 54 listed diseases and all these three are included within them. But, all these have been brushed off as minor faltering in comparison to the mega successes that he achieved.

Though Ramdev baba is quite appreciative about his Indian competitors, his is going all out to curb the domination of the MNC majors in the Indian consumer markets. His objective, he says, is to instill swadeshi pride so that Indian money does not go out of the country. And, at this moment, it seems it is Baba Ramdev who is winning the brand war against his foreign counterparts.  He is launching Powervita to take on Cadbury’s Bournvita and GlaxoSmithKline’s Horlicks. He is coming out with Yoga Wear and Sports Shoes to counter Nike and Adidas. He is launching a beauty care line called Saundarya which will directly compete against Lakme, Avon and Oriflame. No wonder, the MNCs are having sleepless nights trying to gauge what he will do next to upstage their apple-cart.

Sunday, 15 November 2015

Want to enhance Brand Equity? Grab the Magic Word!!!

Once again, during this Diwali, Salman Khan has stolen a million hearts with his blockbuster “Prem Rattan Dhan Payo”, and his producer, the Barjatyas of Rajshri Productions are laughing all the way to the bank. The movie, which has been lambasted and derided  by the movie analysts and box office pundits because of a wafer thin storyline, no hummable songs, very predictable climax and sloppy dialogues, has grossed ₹40 Crores ($6 million) on the opening day and more than ₹100 Crores ($15 million) till now. How did the much criticized movie get the mojo in the box office?

Well, one of the factors that contributed to the mega success of this movie is the word “Prem”. Salman Khan, in the past, has been associated with this name in fifteen movies, out of which three have been mega blockbusters --- namely, Maine Pyaar Kiya, Hum Aapke Hain Kaun and Hum Saath Saath Hain. The name “Prem” evoked nostalgic fond memories in the heart of his fans, who rushed to the theatres to see their favorite matinee idol recreate the magic of the rejuvenated Prem. And who cares for storyline, script, characters, songs, background score and exotic locations when “Prem” bhaiyya is entertaining you in full swing?

And, it is not the first time that a brand has got its marketing strategy right with a catchy word. Coca Cola, who was trying to make an aggressive foray into the rural and semi-urban Indian households in 2003, understood that when a guest walked in, the Indian host would always ask “What would you like to have --- Thanda ya Garam? Thanda would imply anything from refrigerated water, soft drinks, fruit juice, sherbet, squash, coconut water or chilled beer. And hot would mean anything ranging from tea and coffee to alcoholic drinks. With this insight, Coca Cola unleashed the fun filled ad “Thanda Matlab Coca Cola” with Amir Khan dressed as a Mumbai Tapori, Punjabi Farmer, Bengali Bhadrolok, Bihari Contractor and Hyderabadi Shopkeeper, that left the audience in splits and also increased the market share of the soft drink beverage brand. The brand association with the word “thanda” was so powerful that it took Pepsi years to counter the challenge posed by Coca Cola.

But it was not the first time that a beverage brand had stirred up excitement among customers with a bewildering yet memorable word. The soft drink brand 7Up created a similar frenzy in 1967 when they introduced themselves as the “Uncola”. While the customer had heard of Coca Cola and Pepsi Cola, they started wondering --- What is this brand which calls itself the Uncola? Getting the customers puzzled with is catchy word helped 7Up to convert themselves from an uncool brand to a hot selling soft drink beverage as the sales skyrocketed. It soon became the third most preferred beverage drink of the 1970s.  

In India, a similar positioning strategy using word imagery was done by Anchor, the electric switch and accessories maker. In 1996, the company decided to go for an unrelated diversification and started making toothpastes.  The oral care market, which was dominated by big players like Colgate Palmolive, Hindustan Unilever and Dabur, had little room for a new entrant to elbow in. Anchor found that one of the main ingredients of toothpaste was dicalcium phosphate which was sourced from animal bones, while a vast majority of the users were vegetarians. With this insight, they came out with an interesting brand proposition positioning Anchor toothpaste as “vegetarian” toothpaste. The word “vegetarian” resonated so strongly among the consumers by questioning their ethical values that it soon became the second best-selling toothpaste in Gujarat and Rajasthan.

Another multinational company that has reaped benefits of powerful word association has been Cadbury. The brand very rightly understood that the main challenge in India came not from rival confectionary brands like Nestle, Amul, Parle and Perfetti but from the Mithaiwallas and sweetmeat makers. In India, every occasion like birthdays, marriage, festivals, passing exams, getting jobs and winning matches is celebrated with a box of sweets. Cadbury rightly understood that to get a bigger market share in India, they would need a stronger bonding with the word “Meetha”. With this realization, they have been releasing ads featuring Amitabh Bacchan with the tagline “Kuch Meetha Ho Jaaye”, and riding the pinnacles of success.  

How do you get the right word that will give a clear message to the consumer about the brand proposition? While there are many popular word association techniques used by marketers, brand managers, ad agencies and market research companies, the ZMET (Zaltman Metaphor Elicitation Test) is perhaps the most structured tool that uses metaphors to compare between two unlike entities. But ultimately, it is a deeper understanding of the consumer psyche that will help the brand to get the right word that will stir up the excitement in the consumer’s mind. Whatever way it is, the underlying message is that one single powerful word is more effective to garner more brand equity than sentences and paragraphs running into volumes. And that is exactly why “Prem” bhaiyya will come back, year after year, to entertain you and earn his moolah, irrespective of whatever the film critics might have to say!!!     

Monday, 9 November 2015

From Cold Calls to Customized Offerings --- How Marketing has evolved over the years

We have all read in our textbooks about the different strategies of marketing --- from Product Concept to Production Concept, Marketing Concept, Sales Concept & Social Marketing Concept. The Marketers have tried different kinds of tools over the years like highlighting USP (unique selling proposition), offering price cuts, free gifts and bundled products; creating interesting ads and promotion campaigns; and also disguising sales as a social initiative. 

But the two particular tools that many marketers have been fond of regularly using are making cold calls to customers and doing door-to-door sales. And both have been so irritating and disgusting that many customers have even hurled abuses at the hapless sales people. No wonder, most of the students studying in B-schools literally dread to take up a “sales job” even if they are lured with lucrative remuneration and incentives. And I have actually come across housing societies who put up boards “Dogs and Salesmen not allowed”.

However, the one thing that every person in an organization accepts is that it is the salespeople who bring in the cash to the organization. And hence it is an integral part which no organization can dispense with. On, the other hand, most of the marketplaces today have become customer-driven where push strategy no more works. 

Customer are looking for specific products and services that are likely to provide solution to their problems and are slamming the door on the salespeople who try to fool the customer with deceptive offerings. In this regard, it has become more imperative for marketers to thoroughly understand the need, want and demand of the customers before they design or launch a product or services. 

CK Ranganathan, the owner of CavinKare, found that people in the rural areas of Tamil Nadu, wash their hair with soap. When asked why they do so, they replied that it was too expensive to buy a bottle of shampoo. With this insight, he launched Chik shampoos in sachets at a price point of One Rupee, which started becoming more popular than the shampoos of HUL and P&G. Very soon, these multinationals also started selling shampoos in sachets to get a firm foothold in the personal care market.

Sachin Bansal and Binny Bansal, the founders of Flipkart, faced an impediment while trying to sell books and other products online. Customers would come and check the products in online portals but buy them from physical stores. On probing why they did so, they replied that they were apprehensive that their credit or debit card would get hacked. With this insight, they introduced COD --- Cash on Delivery --- and their products started getting sold like hot cakes.

Nissin in Japan observed that people were so busy rushing for their work in the morning that they mostly miss breakfast. With this insight, they launched cup noodles, which became a big hit among commuters. The Swiss Watch industry made a spectacular comeback, after having been mauled by the Japanese digital watch makers, when they understood that a watch is also used as a fashion accessory, apart from being a time keeping device. Coca Cola, Pepsi, McDonald and the international food and beverage makers have understood that people are becoming more health conscious and have come up with low calorie beverages and food items. Kellogg’s understood the obsession of women to remain slim and came out with Special K for weight loss.   

Now, the marketplace is being dominated by players who understand the customer needs and provide customized offerings. Flipkart, Amazon and Snapdeal do not make cold calls to any customer; neither do they send any direct selling agent to customer’s homes. Instead they use high decibel advertising to pull the customer towards their site, offer customized products and solutions and give them mouthwatering deals which they simply can’t refuse.  All this is done using technology-backed tools like SEO (Search Engine Optimization), Recommendation Engines and Market Basket Analysis (MBA).

Search Engine Optimization (SEO) is the process of maximizing the number of visitors to a particular website by ensuring that the site remains high on the list of results returned by a search engine.  This is done by using smart keywords that are likely to be picked up quickly by search engines, building relevant content in the website, conducting high powered link building campaigns and providing the accurate meta keywords and meta tags. SEO is basically a way to remain on the top of the heap in Google searches and ensure that the brand has a higher visibility than the competitors.

Recommendation Engine is a software tool that analyzes data available about a particular customer and builds algorithms to make suggestions to him/her based on his/her choices and preferences. The recommendation engine is both collaborative and memory-based. It identifies the customer based on the IP address, and throws in propositions that might interest him/her, based on the earlier interactions or transactions that the customer might have done on the site. One of the reasons why Google trumped over Alta Vista was because it had a more powerful recommendation engine and gave more relevant search results to the web browser.   

Market Basket Analysis (MBA) is another powerful predictive analytics tool being used by Flipkart, Amazon, Snapdeal and other online marketers to motivate the buyer to go for higher volume of purchase. This is a data modelling technique which recommends a set of products or services which has close correlation with the product or service that the customer is currently looking for or has made a purchase. For example, a customer looking for a flight ticket on from Delhi to Mumbai is also given offers on hotel stay and cab services in Mumbai. And often, Yatra and MakeMyTrip bundles the offer on Air Ticket + Hotel + Cab and throws in an attractive discount which becomes a tempting deal for the customer. By using market basket analysis, the portal ensures that they increase the basket size of customers as well as prevent the migration of the customers to rival competitors.   
Last year Diwali, Flipkart surprised their competitors by announcing a Big Billion Sales day. Although their site crashed and there were numerous customer complaints, the brand did make a splash and created a distinct identity. Very soon, Amazon and Snapdeal also followed suit and announce their Mega Sale day. 

But the company who stole the show in this year's Diwali has been Paytm. This company has a mobile wallet service with which customers can do shopping. For most of the shopping done on Paytm, the company gives cash back to customers which is stored in their mobile wallet and can be used for future transactions. This gives absolute delight to the customer who now gets motivated to buy more and is a master stroke for the seller who gets a bigger order. The combined effect is a win-win proposition where both the buyer and seller both get satisfied and form a better bonding. This is in stark contrast to the tele-callers and direct sellers who make life miserable for the reluctant customer. 

To succeed in the market place, it is now imperative for the brands to move over from cold calling to offering value to the customer by customizing the offerings as per his or her needs. And technology, in the form of data analytics, is always there to help the marketer refine his or her strategy to suit the needs of the customer.

Friday, 25 September 2015

Rich Businessmen and their Loss Making Ventures --- The Intriguing Paradox!!!

Most of the newspapers and news channels yesterday carried the story that Mukesh Ambani has been named India's richest for ninth year in a row with a net worth of $18.9 billion while the Flipkart founders Sachin Bansal and Binny Bansal made their debut on the country's top 100 rich list with a net worth of $1.3 billion each. The other billionaires from India who made it in the list of top 100 richest entrepreneurs are Sun Pharma's Dilip Shanghvi ($18 billion), Azim Premji ($15.9 billion), Hinduja brothers ($15.9 billion), Shapoorji Pallonji Mistry ($14.7 billion), Shiv Nadar ($12.9 billion), Godrej family ($11.4 billion), Lakshmi Mittal ($11.2 billion), Cyrus Poonawala ($7.9 billion),  Kumar Mangalam Birla ($7.8 billion) and Rakesh Gangwal of Indigo Airlines ($1.6 billion).

Now look at the intriguing paradox. Mukesh Ambani’s Reliance industries Limited (RIL) made a consolidated profit of ₹23,566 Crores in the Financial Year 2014-15, the highest made by any company till now. Dilip Shanghvi’s Sun Pharma, which acquired Ranbaxy for $4 billion, made a net profit of ₹4,541 crore. While Lakshmi Mittal’s Arcelor Mittal reported a net loss of $1.1 billion in 2014-15, his personal fortune also declined by $4.6 billion, pushing him down to the 5th spot among India’s riches tycoons. Raakesh Gangwal has been a new entrant to the billionaire club, all thanks to his Indigo Airlines recording profits for the ninth consecutive year, with net profits standing at 1,304 crore for the year ended 31 March, 2015.

All these facts follow a logical sequence and pattern. What defies logic is the entry of the Bansals of Flipkart in the billionaire club. Flipkart reported a loss of  344.6 crore in Financial Year 2012-13 and loss of  719.5 crore for the year ended March 2014. The figures for 2014-15 are yet to be published. 

Flipkart makes a loss of approximately ₹5 per order. This loss is due to the cost incurred in making customer acquisitions, funding mark downs, making free delivery and product return charges. What keeps their business running is the huge money poured in by the investors who believe that there is a pot of gold at the end of rainbow. The company raised $2 billion in 2014 which leapfrogged their valuation to $12 billion by the end of 2014. So although the company is yet to record a single rupee as profit, their owners have already been crowned as the paper billionaires. Many experts are already predicting a dotcom like shakeout that happened in 2001 throwing out a lot of companies that were running on illogical business models and gravity-defying valuations.

And it’s not only Flipkart which is making the experts beguiled about the E-commerce business model. Amazon and Snapdeal numbers also reveal intriguing facts. As per figures released by Morgan Stanley, Flipkart is the market leader in the $6.3 billion Indian E-Commerce market with a 44 per cent market share by Gross Merchandise Value (GMV).  Snapdeal follows next with 32% share of GMV. Amazon, which achieved $1 billion sales in 2014, is ranked third with 15% share of GMV. 

That was the sunny side. Now look at the financial figures. In 2014-15, Flipkart ran losses of ₹719.5 crore whereas Snapdeal lost ₹265 crore, and Amazon ₹321 crore. A recent report in Times of India (20th August, 2015) says that the losses made by Snapdeal might have skyrocketed to an astronomical ₹1,350 Crore, as per data given by Hong Kong Stock Exchange. The more fascinating fact is that, Amazon, the global entity, actually made profit this year after twenty years of consecutive losses. The Amazon shares jumped up by 14% based on this news.

These huge losses mainly occur because of the deep discounts on products given by the E-Commerce companies. They make up the difference between actual price and selling price by paying sellers and charging the cost to promotional expenses. An article published in Business Today (17th August, 2014) say that Flipkart, Snapdeal and Amazon burn more than $100 million of cash every month. Flipkart has the highest cash burn rate.

Although these companies have tried to sugarcoat this bleeding of money by calling it ‘gap funding’ to the sellers, the fact remains that they are getting dragged into a financial trap from which they might never recover. The investors have also now started asking questions about how and when these companies are likely to break-even and deliver profits.

Now look at the personal fortunes of the maestros of E-Commerce.  As stated earlier, the personal net worth of the Bansals stand at $1.6 billion. Jeff Bezos of Amazon is the fifth richest person in the world with personal fortune of $50.3 billion. In comparison, neither NR Narayanamurthy, Nandan Nilekani or any of the Infosys founders are yet to make it to the top richest list although Infosys has made a net profit of ₹12,249 Crores in the Financial Year 2014-15. Ratan Tata is not even a billionaire although Tata Sons have made a profit of  ₹9,060 Crores in 2014-15.

Although it is too premature to pronounce a judgement whether the rich promoter-loss making venture business model will sustain in the long run, all eyes will actually be on the financial liquidity situation in the global market place. And if the China Crisis, Arabian Turmoil and the European Slowdown casts a long shadow on the global economy, the tap providing easy funding from investors might just run dry forcing these loss making ventures to cut down on their lofty ambitions.