When in Rome…

When in Rome…

When developing nations like India began to open up their economies to foreign direct investments, many economists argued that rich multinationals will swamp these markets and liberalisation will sound the death knell of local brands. More than a decade later, nothing of the sort has happened. In fact several large companies have failed to make a major dent in the Indian market, leave alone acquire leadership positions. Many who entered with a mindset of “might is right” had to alter their strategies dramatically. Clearly, even as globalisation is the favourite buzzword of economists and politicians alike, business managers and marketers around the world have discovered, often painstakingly, that the world is far from being one homogeneous market.

When in India, do as the Indians do…
Centuries ago, in 387 AD, when St Augustine arrived in Milan he observed that unlike the Church at Rome, the Milan Church did not fast on Saturday. He consulted St Ambrose, bishop of Milan, who replied: “When I am at Rome, I fast on a Saturday; when I am at Milan, I do not. Follow the custom of the Church where you are.”1 Eventually this comment metamorphosed into “When in Rome, do as the Romans do”. The bishop’s words have since then become an oft-quoted piece of advice. And the advice is perhaps most relevant to marketing professionals of the 21st century.

Product managers from MNCs will do well to commit this adage to memory, especially if you market your products to a heterogeneous country like India. For some time now, India’s appeal as a market has increased manifold. And why not? The Economist Intelligence Unit forecasts an average of 6.9 per cent real GDP growth for India from 2003 to 2008. Combine this with a GDP growth that is more than double that of the United States and the United Kingdom during the past decade and you know why India is one of the world’s most promising and fastest-growing economies, and why multinational companies are eagerly investing here. Yet the performance of these multinationals has been not been consistent. While some of them have managed to decode the Indian Consumer Code, many others have failed to create a dent in the market, leave alone significant market shares – and this despite the huge investments of time and capital.

Experts concur that one of the primary reasons these companies have failed to take off in India, in spite of being successful in other nations, is because they did not localise their product offering.

Merely bringing a tried and tested product from another country need not succeed in a country like India, which has its own idiosyncrasies. Any strategy must be rooted in a detailed understanding of the customer and market conditions. Companies that have resisted the lure of replicating their global product offerings, and have instead spent time and energy understanding the Indian market, are the ones that have managed to make their mark. India’s purchasing power lies in the middle and lower income groups and a company that ignores these high-volume segments may have to sacrifice significant revenues and profits. Targeting these segments requires that the company understands the buying psychology of the typical price-conscious Indian consumer.

A new country, especially a diverse one like India, should not be treated as merely a new market where you extend your existing business and marketing models. It should be taken as seriously as launching a new business, with an exhaustive business and marketing plan. The management of an MNC will do well to keep in mind the following considerations while developing their marketing mix for India:

1. Product
Just because your product offering has been successful elsewhere it does not mean that it will be lapped up by people from another country, who believe in a different set of values, hail from different cultures and have their own tastes and preferences. Real Value vacuumisers, launched in the mid-1990s, bombed despite the product being very effective in what it claimed to do. What Real Value failed to consider was that Indians like their food freshly made and will never be comfortable with the idea of storing food in containers. Yet there are companies like MTV India, Nokia and McDonald’s that understood the local preferences of their Indian consumers and modified their offerings accordingly.


The Taste of India
Local flavour Nestle, the global food major, realised that it is hard to neglect the ethnic Indian food market. According to KSA Technopak, this market is estimated to be to the tune of Rs 6,50,000 crore in India. After finding success in the packaged curd segment, Nestle India is now in the process of test marketing ‘Lassi’ in Maharashtra thereby competing with players like Amul and Britannia. The ethnic Indian food market includes dairy products, ethnic snack foods and staples. Nestle India has also joined hands with South based retail major Nilgiris to co-brand a whole range of dairy products like dahi, paneer, ghee and milk.
Source: Do Indians Make the White Elephants Dance! By AGV Narayan

2. Advertising and Promotions
According to one study, customers are four times more likely to make a purchase when they are addressed in their native language. Localising an advertising or marketing message is crucial to the success of the brand. Just like while finalising their product offering, a marketer must understand the deep-rooted values and its culture to ensure that their communication does not offend their sensibilities. Coca Cola and Pepsi realised this early and Indianised their advertising by roping in Indian cricketing and film celebrities, which the Indian audiences relate to easily. When Kellogg’s launched in India, they tried to position themselves as lighter, and therefore, better than parathas. It backfired, because parathas are a habit with Indians, a part of their lifestyle. Kellogg’s learnt the hard way that it can be an interesting addition to the breakfast options in India, but can never replace parathas and idlis.

3. Pricing Strategy
There’s no denying the fact that Indians are a price-sensitive, value-conscious lot. Brands that have failed to take this into account have faced problems. On the other hand, companies who have responded to the price-sensitivity of the Indian market have done well. (See Box Kellogg v/s Paratha and Idli).


Kellogg v/s Paratha and Idli

The case of Kellogg, the US cereal giant, demonstrates that it is not only local competitors who can sense the need for mass marketing and deliver it. Kellogg, lured by the prospect of a billion breakfast eaters, ventured into India in the mid-1990s. Like many of its counterparts, Kellogg’s market entry strategy proved unsuccessful and, after three years in the market, sales stood at an unimpressive $10 million. Indian consumers were not sold on breakfast cereals. Most consumers either prepared breakfast from scratch every morning or grabbed some biscuits with tea at a roadside tea stall. Advertising positions common in the west, such as the convenience of breakfast cereal, did not resonate with the mass market. Segments of the market that did find the convenience positioning appealing were unable to afford the international prices of Kellogg’s brands. Disappointing results led the company to reexamine its approach. Eventually, Kellogg realigned its marketing to suit local market conditions: the company introduced a range of breakfast biscuits under the Chocos brand name. Priced at Rs 5 for a 50-gram pack (and with extensive distribution coverage that includes roadside tea stalls), they are targeted at the mass market and are expected to generate large sale volumes.
Source: Strategies for Entering and Developing International Markets by David Arnold

Almost every successful MNC worth its salt has altered its pricing strategy in India. McDonald’s current campaign in India promoting their “Happy Price Menu” shows how critical pricing is to successful operations in this country. Sony Corporation, known to believe in premium pricing, has launched its low price, feature stripped variants in the highly competitive consumer electronics industry. Ford’s Ikon is positioning itself as a sedan available at the price of a small car.

4. Distribution
As stated earlier, India’s markets revolve around the middle and low-income segments. These segments reside largely in small towns and villages spread across the length and breath of our country. Geographically, India is not only diverse, but it is also the seventh largest in terms of sheer size. By 2007, middle and high-income households in rural India are expected to grow from 80 million to 111 million, while in urban India they are expected to grow from 46 million to 59 million. Therefore, the absolute size of markets in rural India is expected to be double that of urban India. Moreover, different regions in India are as good as different markets, each with its own peculiarities. MNCs often find it extremely difficult to manage this diversity.

HLL: Here, There, Everywhere

HLL’s key strength in a vast country such as ours has been its unmatched distribution reach through a stockist network of 7,000 and a retail reach of over 1mn outlets. It is the only company, which distributes its products to more than 50,000 villages. Innovative programmes like Project Bharat have been undertaken which aim to make available to every consumer in the remotest corner of the country, products that meet his day-to-day requirements. HLL’s management is known for its marketing savvy. It has over the years studied and understood the Indian markets as no other MNC player has. It has adapted its products to suit the Indian tastes. A lot of wars have been played and won on the price front, acknowledging that the Indian consumer is extremely price sensitive. The financial strength to cross subsidise new initiatives with existing profitable businesses has enabled the company to achieve its zeal of being the dominating player in all markets that it enters into.
Source: Indiainfoline.com

FMCG MNCs such as Colgate-Palmolive and Hindustan Lever Ltd have always known the importance of rural and semi urban markets in India and have strong distribution networks. Their success in India can be largely attributed to their widespread distribution networks.

Conclusion: Building global brands in local markets

So how does one go about building a global brand with so many local considerations? Marieke de Mooij, president of Cross Cultural Communications Company and author of Consumer Behavior and Culture: Consequences for Global Marketing and Advertising answers, “A global brand is one which shares the same strategic principles, positioning and marketing in every market throughout the world, although the marketing mix may vary. It carries the same name and logo. Its values are identical in all countries, and it has a substantial market share in all countries and a comparable brand loyalty.” Sony stands for technological edge and quality across the globe, though in India it fixed its price to suit the Indian market. Kellogg has changed its advertising positioning in India to focus on health instead of convenience. Coke’s Thanda Matlab Coca Cola is a unique positioning only for India. MNCs have so far been humming the “Think Global, Act Local” mantra. Perhaps its time for them to memorise a new mantra, “Think Local, Act Global.”

References:
1. www.trivia-library.com
2. The Right Passage to India by Kuldeep P. Jain, Nigel A. S. Manson, and Shirish Sankhe, The McKinsey Quarterly, Web exclusive, February 2005
3. Strategies for Entering and Developing International Markets by David Arnold, Published by Financial Times Prentice Hall

2 Replies to “When in Rome…”

  1. Profound and insightful! “Think Local, Act Global.” An apt mantra for the times, indeed!

    The importance of getting under the skin of your customer can’t be overemphasized.Of course, it goes without saying,”Know thy customer, know thyself, take it from there, and chances are you’ll pull it off nicely”.

  2. Thanks for the kind words, Nidhi.

    I am reminded of a statement made by one of the senior executives of Pepsi (or was it Coke?). This was many years ago, when the Cola war was at its peak. He said something like, “Our main competitors are Chai (tea) and Nimbu Pani (sweet lime water).” What a lot of MNCs fail to understand is that we Indians are very accommodating. We will try all the new stuff you introduce, but we will not leave what is so intrinsically Indian. We enjoy Pepsi and Coke. But we also enjoy a hot cup of chai on a rainy day, and a cool glass of nimbu pani to beat the summer heat.

    MNCs must learn (and indeed many have already learnt) to co-exist with Indian alternatives rather than compete with them.

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