Tag: Interview

A global brand is bleached with the culture of the respective country

A global brand is bleached with the culture of the respective country

[Dr Michael Dorsch is the associate professor of Department of Marketing, University of Business and Behavioural Science, Clemson, USA. Dr. Dorsch’s work has appeared in the Journal of the Academy of Marketing Science, Journal of Personal Selling and Sales Management, Journal of Business Research, Journal of Financial Planning, Journal of Professional Service Marketing, and various national proceedings.]

1. How has marketing evolved over the last decade and how is it different from the marketing that was practised in the 1980s and 1990s?
Michael DorschMarketing has experienced quite a bit of change over the past two decades. During the 1980s, marketing witnessed increasing and vigorous interest in several areas including services marketing, relationship marketing, brand equity, and pricing. Prior to this time, marketing efforts focused primarily on physical goods and on marketing transactions. In addition, during the 1990s and 2000s, marketing experienced a renewed interest in the use of technology for strategic marketing decision-making; thus the notion of marketing engineering was born. Furthermore, the introduction and growth of the Internet has fuelled marketing interest in employing technology in reaching and serving customers. The past two decades have also witnessed increased attention on marketing in a global context. Technological advancements along with social and political changes have resulted in an enhanced interest in appealing to a global marketplace. More recently, the marketing discipline is beginning to place a renewed emphasis on the customer with the notion of customer relationship management and customer equity.

2. Can you emphasise the role of technology in shaping marketing thought in the 21st century?
Technology will continue to play an important role in shaping marketing practices during the 21st century. Technology refers to both expertise/knowledge and the tools (e.g., equipment and machinery) needed to accomplish marketing activities. Consequently, reliance on the role of technology will extend beyond the machinery to include attention to how the technology may be employed by both customers and businesses to make more informed decisions. I expect that businesses will use some technology to further develop their organisational learning systems. For instance, some technology is likely to be used to help businesses learn more about the market (e.g., customers, competition, and other environmental factors) in order to make more informed and timely marketing decisions (e.g., web blogs, discussion groups, customer loyalty programs, decision support systems and so on). Other technology will be used to deliver the marketing plan (e.g., e-commerce, tracking tools for monitoring the distribution of products, the use of web cookies to store information about customer preferences) and regulate the marketing plan (e.g. customer relationship programmes). Still other technologies will be used by customers, who are likely to increasingly rely on the Internet to search product information, make purchases, track their expenditures, and so on. It is also likely that consumers will increasingly rely on technology to communicate with others and to become informed of local, regional, national, and global events.

Both businesses and consumers are likely to place great importance on learning the benefits of certain types of marketing transactions, their ease of usability, and their security and privacy characteristics. Moreover, an increasing reliance on technology will require both businesses and consumers to change their marketing-related behaviours. In some instances, the behavioural changes will be minor and easily adapted. In other instances, businesses and consumers will be required to make more significant changes in their shopping/purchasing behaviours, which is likely to slow the acceptance of technology.

3. Considering the current trends, what will be the shape of marketing in the next 10 years? What will be the major forces that will drive marketing efforts in the next decade?
Given the rate of change that is occurring worldwide, it is difficult to confidently describe the shape of marketing during the next ten years. However, a few trends seem likely. In particular, the world is expected to continue to change at a fast rate in a number of environmental areas such as the technological, social, political factors. These changes are expected to significantly influence marketing activities used to appeal to the ever- changing marketplace. Moreover, the world is becoming smaller as it is easier and quicker to learn about and experience other societies. Correspondingly, it is likely that consumers in the future are likely to exhibit more global awareness (i.e., diversity). Furthermore, information is also increasing at an increasing rate, which means that data are becoming more readily available and may be acquired and processed more quickly (e.g., in real time). This trend has important implications for businesses and consumers. Businesses, for example, will need to develop more effective and efficient methods for managing their organisational learning systems (e.g., data bases). In addition, the increasing availability of information to consumers indicates that consumers are likely to become more knowledgeable about the products that they purchase and more discriminating in their choices. As consumers become more sophisticated customers, their standard of living is also likely to increase and they will be more interested in the quality of the experience rather than focusing attention on the quality of materials (e.g., products) used to create the experience. As a consequence, it is likely that experiential marketing may become increasingly important approach to serving the market.

4. How has globalisation affected marketing practices of Multinational companies? How are multinational firms dealing with the growth of emerging countries like India and China?
Globalisation is likely to have a very significant impact on the marketing practices of multinational companies, especially in terms of effectively serving diverse markets. More specifically, many countries are not at the same level of economic development, which is likely to influence the type of market offerings desired by each country. Likewise, differences in the cultural practices of each country will influence the marketing practices. Accordingly, the marketing activities that are successful in one country may not be successful in another country. Similarly, the political and legal environments also influence marketing practices. As a result, MNCs that are interested in serving emerging countries like India and China are advised to become intimately knowledgeable about the countries before formally entering market. Recognising that learning about a country before formally entering it may take considerable time and money, MNCs may benefit from developing strategic alliances with companies already serving the countries or, possibly, the country’s government itself. In this way, the MNC may make use of the existing knowledge of its strategic partner to help become established in the country that it wishes to enter. The use of strategic alliances is likely to become an increasingly common practice among MNCs.

Once a multinational firm decides to enter a new country it must carefully weigh its decisions to utilise a single marketing strategy to be applied to all countries it services or to develop unique marketing strategies that appeal to particular countries. While the first approach, i.e., a globa
l marketing strategy, is likely to be less expensive – to be successful the global brand must symbolise common desires and practices across the countries to which it applies. With the latter approach, individual brands would be created that emphasise and match more closely those unique desires of individual countries. However, the development of marketing plans that closely match the uniqueness of each country is likely to be very expensive, as unique marketing plans would need to be developed. At issue is whether the incremental costs of serving each of several countries are offset by the incremental revenue/profit realised from the incremental increase in demand. The decision of whether to use a global marketing strategy or a set of individualised marketing strategies depends on the similarities of countries being served. The more similar the countries are in terms of their environmental factors (e.g., cultural, economic, political, and technological), the more likely that a global marketing strategy will be successful. In contrast, when the countries are more diverse, country-specific marketing strategies are likely to be more effective.

5. What are the characteristics of a global brand? How does a marketer build such a brand? What challenges does he face in the process?
Most research on branding and brand equity has focused attention on branding within a single country. The notion of a global brand is relatively new and research on the creation of global brands appears to be in its infancy. Nevertheless, it may be possible to offer some insights into the development of a global brand by drawing on existing knowledge about branding. A brand is basically the name that a company assigns to one of its product offerings. The value of the brand name to the customer, which has been referred to as customer-based brand equity, depends on the type of associations that customer evokes about the company’s product offering when the brand name is mentioned.

Businesses may help customers develop strong positive associations for their brand names through promotional efforts, including favourable customer word-of-mouth communication (i.e., buzz marketing) and ensuring favourable customer experiences related to the purchase, use, and disposition of the product. From this perspective, it may be argued that the creation of a global brand requires businesses to develop a set of similar and consistent positive associations (opinions and beliefs) that connect the customer to the brand of a particular company, irregardless of the country in which the product is offered. Consequently, the development of a consistent set of customer opinions and beliefs about the brand is likely to be based on a common set of characteristics and/or experiences that are desired by each country. In this regard, a global brand may be described as being based on a set of associations that are shared across countries.

One advantage associated with a global brand is that it communicates to a common set of customer expectations that is not altered by country effects. For instance, customer expectations of a “McDonalds experience” is the same, regardless of whether they visit a McDonald’s in the US or India. Correspondingly, companies that are interested in building a global brand may need to downplay the unique characteristics and experiences associated with a single country. In this regard, it may be argued that a global brand is bleached of the uniqueness associated with the culture of a specific country.

The bleaching of a brand of those characteristics that are unique to a particular country represents a potential disadvantage associated with a global brand. Even though, customers desire consistent expectations when using a product, they also enjoy variety. Thus, bleaching a brand of country-specific associations inhibits the uniqueness of experience desired by many customers. For example, many US tourists prefer eating at McDonalds when travelling in other countries simply because they expect the dining experience to be similar to that enjoyed in the States. Similarly, many other US tourists tend to avoid McDonalds for the same reason. When travelling outside of the US, these customers seek unique experiences that are not readily available within the US and thus avoid those businesses that resemble those in the States.

6. What are the chief behavioural differences between consumers in India and those in the US? Are there any similarities? How can MNC’s from both countries manage dissimilarities in cultures while exploiting similarities between consumers of the two nations?
I am unable to provide informed opinions about the similarities/dissimilarities between US and Indian consumers or about actions that MNC may take to efficiently and effectively target consumers in each country. However, from a very general perspective, it is very likely that people, regardless of culture, have similar basic needs for food, clothing, shelter, protection, and so on. In addition, it is likely that people, in general, have a desire to be respected, to take care of family, make effective use of their resources (money, time, labour), and to self-actualise (i.e., achieve their potential and to make a difference). As a result, MNCs increase their chances of success by recognising common benefits (or improvements) sought by their consumers, regardless of culture, and then adjusting their marketing efforts (i.e., price, promotion, distribution, and product form/packaging) to match the unique circumstances of each culture. The uniqueness of a country may be attributed to many factors including geographical climate and terrain, distinctions in the cultural philosophies that guide the behaviours of a country’s inhabitants, the political climate of the country, and so on. The process is analogous to the concept of mass customisation, whereby the basic market offering is similar across cultures, but the specifics of the market offer are customized to the unique circumstances of each country.

7. What, according to you, are the strengths and weaknesses of the “Made in India” tag? What best practices would you suggest to Indian companies that wish to become internationally competitive?
This is a difficult question to answer for two reasons. First, I am unsure of the image that India has within the US. In addition, research on Country-of-Origin issues has produced mixed results. Some research indicates that the use of “Made in” labels have influenced consumer perceptions and purchase behaviours, whereas other research indicates that no relationship exists. More recent research suggests that “Made in” labels become more important when consumers are not very knowledgeable about the product and little other product related information is available. In contrast, “Made in” labels appear to be less effective when other product information is available to the consumer. In addition, the effectiveness of “Made in” labels appears to be influenced by the type of market offering. When using “Made in” labels to evaluate market offerings, consumers oftentimes base their assessments on their perceptions of the country itself. In these instances, consumers use their perceptions of a country to determine whether the manufacturing country is likely to produce a high quality form of the product. Whether a country is truly capable of manufacturing a high quality product is oftentimes less relevant then the consumer’s perception of the country’s capability. These perceptions may be derived from a number of sources including the consumer’s personal experience, experiences of others, or stereotypes created through the media. Consequently, a country’s products are more likely to be favourably received by consumers if the consumers believe that the country has the technological capabilities and expertise to manufacture the market offerings.

Automation is needed to manage complexity in marketing

Automation is needed to manage complexity in marketing

[Bruce Brown is managing director of Unica Corporation’s Asia Pacific operations.He oversees Unica’s sales, marketing, and business development throughout the region.]

1. Can you shed some light on critical changes that are taking place in the marketing arena?

As the business environment becomes complex, firms are operating under tighter internal and external constraints than ever before. For example, on the one hand we have multiplicity of communication channels leading to a need for higher spend in these areas. On the other hand, businesses are increasingly demanding higher and higher accountability from the marketing spend.

The major forces that have contributed to this increase in marketing complexity are:
a. Product Proliferation

Marketers today have to deal with massive product proliferation and it’s not just the sheer number of products in each product category but the different models of the same product, giving customers an almost infinite number of options. For example, in the US alone, there are about 8000 digital camera model that consumers can choose from, making the job of the brand manager rather difficult. Such a clutter on the shelf space means that marketers must work much harder to become the preferred product for the customer.

b. Multiplicity of marketing communication channels
Unlike in the past, when there were limited options to reach out, consumers of today are bombarded with marketing messages through television commercials, mailings, web sites, email, billboards, and more. The number of messages each consumer receives has grown dramatically in just the last two decades. In 1985 it was estimated that the average consumer was exposed to 650 marketing messages every day. Today it is more than 8,000. This is due in part to the increased number of channels marketers and consumers can use. For example, traditional media has become extremely fragmented. In other words, there are more and more TV and radio stations, magazines, and newspapers in the world. In 1960 there were 5.7 average TV channels in each home, and a total of 4,400 radio stations and 8,400 magazines. By 2004, those numbers had grown to 82.4 channels, 13,500 radio stations and 17,300 magazines. In the 1980s, 80 per cent of an average marketer’s target audience could be reached with one 30-second, off-peak television ad. Today, accomplishing the same reach often requires literally hundreds of prime-time commercials. In addition to this traditional media phenomenon, new media have emerged and multiplied. The most recognisable examples include web sites, SMS and email. There are many others, such as dynamic point of sale promotions and in-store kiosks. These new media further clutter a consumer’s daily life with marketing messages. The challenge this clutter poses to marketers is obvious: getting a message to register with consumers is incredibly difficult.

c. Growing consumer expectation
The growing number of marketing messages is driving consumers to take steps to control how marketers interact with them. This is done in part through the adoption of new technologies that filter marketing messages, especially from new media. The most well-known examples are SPAM filters and web pop-up ad blockers. But tools are emerging that impact more traditional media, as well. Digital Video Recorders (DVRs), such as those sold under the TiVo brand, allow consumers to eliminate TV commercials when viewing their favourite programmes. Today DVRs are at a much lower adoption rate than SPAM and pop-up blockers (roughly 15 per cent as compared to over 50 per cent according to a recent survey), but it is clear that the desire to control advertising exposure is a growing trend. In addition to adopting new technologies, consumers are demanding that marketers adhere to new standards of behaviour that put consumers in the driver’s seat when it comes to determining when and how to send messages. Clearly articulated privacy policies and “opt-out” choices are now a required practice of any company seeking a genuine and positive relationship with its customers. As a result of both these new technologies and practices, marketers today must not only identify the right target for their message and plan a strategy to get through the clutter, but also consider whether that message will actually reach its intended target.

d. Regulatory constraints
Marketers now have to comply with more regulations than ever before. Some of these regulations, such as do-not-call (DNC) lists, strict anti-spam laws and the EU’s Data Protection directives are related to the clutter of marketing messages and consumers’ desire for greater control and privacy. The effects of this type of legislation are widespread. According to a recent survey, over half of marketers reported that such legislation will impact their direct marketing programmes more in the next two years than in the previous two. No matter what the nature of the regulation, the fact is that marketers have new process issues to consider.

e. Marketing is being made more accountable
Gone are the days when you spent half you money on marketing without knowing whether it worked or it didn’t. The increasing market complexity is continuously putting pressure on companies’ profit margins and as a result departmental budgets within each enterprise. Marketing is no exception. Marketing budgets are being scrutinised by top management and marketers are required to account for their investments and demonstrate, with hard numbers, the returns they are getting. In other words, not only are marketers being asked to do more with less, but they must justify decisions and investments.

That’s the reason why marketers have to move from handling by spreadsheets or handling marketing activities manually to some sort of system that automates that process – 1000s of different contacts that need to be tailored. You can’t do it manually. You need to do it fast, to be able to turn around that do that – contact the customer quickly is impossible if you do it manually.

2. You talked about proliferation of products. What about parity of products?
You’ve raised a very good point. The product orientation does not differentiate you from your competitors anymore. You see, there is just too much out there and therefore you will have to focus on what the customer wants. This trend of moving away from product focus to customer focus is most evident in the retail banking sector where you now have segment managers, not product managers.

Take the case of OCBC bank in Singapore – they are increasing adopting EBM – where instead of making similar offers to a “segment” which may comprise of a 100,000 customers, what they do is monitoring specific events, transaction or things that the customer does – and they have 100 of business rules that are in place. For instance if a customer’s average quarterly balance crosses a certain threshold, it triggers some kind of communication. Similarly when the average account balance suddenly deviates, it triggers a service call from the bank to explore what this deviation might mean to the customer. The principle here is to “win the customer at the moment he needs the service”. Of course this requires a lot of training on the front office on what to say and what not to say

3. What is the role of new and emerging technologies in transforming the way marketing is
done today?

Technology has enabled the real shift to what we call “addressable marketing”. In the past, most of the emphasis was really about brand marketing or awareness marketing. Organisations have realised that they need to focus on their customer base. As a result, we need marketing to be more able and more accountable. We want it to be able to the return on investment on all activities. So the focus is now shifting to addressable marketing, which means targeting the customers with something that is likely to be more relevant to them. This is possible because you’ve done the analysis and you’ve looked at their propensity to buy something. In addressable marketing, we use technology to measure whether the customer responded, to which campaign did he or she respond, how long did he take to respond and so on and so forth. Having done the homework, you contact them through technology channels like SMS or email. You may even ask them how, at what time and where they want to be contacted. When you contact your customers in the way they wish to be contacted and with an offer that excites them, you are no more bothering them and invading their privacy. In fact you are providing them with a service. So technology is helping companies become more customer-centric. It is really enabling marketing to do more, and measure it tangibly.

4. What is Enterprise Marketing Management?
Enterprise Marketing Management (EMM) is software that helps marketers reduce costs, boost productivity and grow revenue across brand, interactive and direct marketing operations. EMM consists of customer analytics for understanding and anticipating customer behaviour; interaction and campaign management for implementing and executing timely, consistent communications across customer touch points; lead management to ensure leads are delivered and acted upon; and marketing resource management (MRM) for managing budgets, creative production, marketing content, and other resources. Individually or as an integrated solution, these capabilities reduce time-to-market through automation, improve customer strategies and targeting through analytics, and prove the value of marketing through closed-loop measurement and reporting.

EMM provides support for customer analysis, demand generation and strategic planning and resource management. Additionally, a complete EMM offering provides the ability to measure the performance, profitability and bottom-line impact of marketing efforts. Customer analysis includes capabilities such as data mining and predictive modelling, which provide a richer, deeper understanding of customers across all interaction touch points. It also gives organisations the ability to monitor and track segment behaviour and trends over time thereby enabling better targeting and increasing the likelihood of response to specific marketing activities. Demand generation solutions focus on acquiring, retaining and growing customer value. Strategic planning and process management solutions, sometimes called Marketing Resource Management (MRM) or Marketing Operations Management (MOM), help marketers create plans, coordinate the execution of those plans and analyse the results. These solutions streamline processes and centrally store marketing information such that marketers can quickly and easily see how their marketing efforts and plans are progressing – from tradeshows, advertising campaigns, direct mail, events, and more. By using these capabilities, marketers are able to measure the performance of all their marketing efforts, assess their profitability and bottom-line impact and optimise their investments and operations. In addition to customer analysis, demand generation, strategic planning and process management, a complete EMM solution must provide the ability to measure the performance, profitability and overall impact of all marketing efforts.

5. What according to you is the single biggest requirement that an organisation must take into consideration when adopting EMM?
A pre-requisite for doing a successful marketing automation campaign management is making sure that you develop the analytical skills. I see a lot of organisations who haven’t gained that expertise. Analytical capabilities help the marketer to customise the offer to an individual by revealing what the customer might want at various times. Such information will enable you make offers that are relevant and therefore more attractive. If you’re setting out on this path, you have to make sure that you have this capability whether you develop it in house or outsource it.

6. Using examples, can you elucidate the advantages of EMM over traditional marketing approaches?
EMM technology helps marketers bring together disparate parts of marketing; planning, designing, executing and analysing. By automating and supporting each of these areas, EMM lets executives, marketing managers, analysts, field marketers, creative designers, achieve increased effectiveness, efficiency and accountability. Here are a few examples that describe EMM in practice in planning, designing, executing and analysing.

Planning with EMM: A major retailer of electronic goods recently purchased and implemented an EMM solution to streamline and manage marketing processes and track overall marketing effectiveness. Using EMM, they are automating marketing planning, managing marketing project workflows, facilitating collaboration, optimising assets, and most importantly, notifying and alerting marketers of changes in their marketing programmes and key performance indicators (KPIs) giving the marketers greater control over the outcome of these initiatives. As a result of using EMM, this organisation has increased visibility into all marketing initiatives, improved marketing velocity and productivity and has been able to enforce best practices and processes across the organisation, resulting in significant cost savings and increased revenue.

Designing with EMM: A large resort real estate company and ski resort operator that uses EMM to identify previous guests for a specific resort who have a high likelihood of revisiting the resort from mid January to the end of April – when ski vacation bookings are slow. Individuals likely to respond were included in a targeted multi-wave "come back" campaign. The results showed that the people the models predicted would visit during this period responded to offers and booked at a rate roughly 133 per cent above those included but not identified by the models. Additionally, the booking rate was 5 per cent with an 8.5 per cent increase in skier revenue, and an increase of 3.5 per cent in actual skier visits.

Executing with EMM: A leading specialty retailer uses EMM to execute a targeted email communication to all individuals who have made an entertainment purchase online within a specific time period. Email content is dynamically selected for each individual. With EMM in place, this communication runs every Tuesday without manual intervention. In terms of results there are consistent weekly click-through rates as well as a distinct increase in customer profitability and loyalty.

Analysing with EMM: A US-based mortgage division of a diversified European financial services provider was able to minimise losses when it quickly identified a significant increase in mortgage holder attrition, using EMM technology. After further investigation, the company determined that monthly programmes targeted at mortgage holders were not effective in retaining customers. With mortgage rates changing almost weekly, the organisation needed to respond faster to competitive market conditions to maintain its customer base. By
leveraging templates, analytics, and automation found in their EMM solution, the organisation was able to rapidly execute more effective marketing programmes in order to combat competitive pressures and decrease attrition.

Street Smarts Usually Trump Academic Brilliance

Street Smarts Usually Trump Academic Brilliance

Philip Anderson
Philip Anderson | INSEAD Alumni Professor of Entrepreneurship
Philip Anderson is the INSEAD Alumni Fund Professor of Entrepreneurship at INSEAD, in Singapore. He is also director of the 3i VentureLab and director of the International Centre for Entrepreneurship, which includes the Caesarea Rothschild Entrepreneurship Centre in Israel. His undergraduate degree in Agricultural Economics is from the University of California at Davis, and he received his Ph.D. in Management of Organizations from Columbia University. Manoj Khatri caught up with him on his visit to India.

How would you define entrepreneurship in the modern business context? What are the different aspects of entrepreneurship?

That’s an interesting question because different people have different answers. For example, is the self-employed owner of a one-man repair shop an entrepreneur? Is the founder of a venture-capital backed start-up whose stake has been diluted to five per cent an entrepreneur? If you identify entrepreneurship as owner-management, only the former is, but economic policy is oriented toward creating more of the latter kind of enterprise.

For us at INSEAD, entrepreneurs build companies that are specifically crafted to exploit a particular opportunity. This gives them an advantage over older companies that were designed in response to challenges of the past and must change to adapt to today’s requirements. Entrepreneurs can build new companies. They can also rejuvenate existing companies via buyouts and turnarounds. They can also build new companies inside existing companies, which we would call corporate entrepreneurship.

There are two key aspects to entrepreneurship. The first is forming or reforming a company. The second is that entrepreneurs behave like owners, not like people who are maximizing some other shareholders’ value. They may or may not have ownership stakes that are actually significant, but their interests are completely aligned with those of the owners. They behave like principals, not agents.

What are the key forces that govern the success of entrepreneurial ventures? What makes a successful entrepreneur? Can entrepreneurship skills be learned or are they always innate?

The single most important factor is quality of management. Most ventures do not end up doing what their business plans envisioned. High-quality managers adjust to unforeseen situations; because they build the company as they go along and behave like owners, they win by being more nimble and adaptive. The next most important factor is that successful ventures attack real problems or needs that people are willing to pay them to address. Far too many entrepreneurs create value propositions that customers find "nice to have" but not "must do." After quality of management, the best predictor of success is whether a venture is attacking a problem that is causing pain for an attractive group of customers they can reach without burning too much cash.

The will to spot opportunities and take risks in order to realize them is part of a person’s overall makeup, which is partly innate and partly a product of his upbringing. The best way to learn how to be an entrepreneur is to work at the side of a successful one. The problem is that entrepreneurs are understandably reluctant to hire those who cannot help them immediately. Therefore our role in business schools is not to teach people how to be entrepreneurs. It is to impart skills and insights that allow our graduates to hit the ground running and make an immediate contribution to an entrepreneurial venture. That allows our students to learn from a veteran entrepreneur those lessons that can only be conveyed by working together.

Can you bring out the significance of the role of entrepreneurs in a developing nation like India? What lessons can we learn from the entrepreneurs of the developed world?

It is difficult for a company in a developing country to do exactly what a rival in a developed country does, because it is not a level playing field. Foreign companies have access to capital, technology, human resources, and infrastructure that often give them an advantage. Of course, Indian firms can compete on cost, but such strategies will keep Indian wage levels at subsistence levels and run the risk of foreigners pitting India against China to see who will work for the least pay. Therefore, the best way for Indian companies to create value is by seizing opportunities that foreigners have not spotted or cannot use to their advantage. Often, existing companies are not optimally configured to exploit such opportunities. Even great companies like Tata or Biocon can’t be in every business and can’t pursue every economic possibility. India needs entrepreneurs who can build companies that either do something foreigners are not doing, or that do the same thing in different ways.

There are many lessons India can learn from entrepreneurs in other countries, and it is fortunate that so many great entrepreneurs are of Indian descent and passionately desire to give back to their mother country. One of the most important is that savvy, toughness, and high energy usually count for more than sheer intellect. The most highly educated person who does well on tests often does not make the best entrepreneur. Indians are used to the idea that you need to be a top student from a top university to make it into the most prestigious companies or the civil service; the rules are different for entrepreneurs. Street smarts usually trump academic brilliance.

Another important lesson is that risk-taking and opportunism can go along with frugality. Really good entrepreneurs squeeze as much as possible out of limited amounts of cash. They leverage the money of others, and never invent the wheel when a good, cheap one is available in the marketplace. By keeping the rate at which they burn cash low, entrepreneurs can try a lot of ideas, most of which do not work, without losing because they ran out of money before they hit upon a workable value proposition.

What are the unique challenges that entrepreneurs face in a vast, multi-faceted country like India? How should an entrepreneur prepare to counter these?

Indian entrepreneurs often look to America for examples, and quickly realize that the relative homogeneity of the US can be a great advantage. Something that works in one part of the country can often be rolled out to others without much modification. The US is a national market; build a better mousetrap and you can sell it without having to reinvent your business every time you enter a new city or state.

India is a more diverse mosaic. Sometimes, expanding a business within India can be as challenging as expanding it across borders. Also, India’s infrastructure is improving, but more progress is required before it stops being a hindrance. In some parts of India, it’s easier to travel to, say, Singapore than it is to get to another domestic hub.

The most important thing to get right is the people you have representing you when you expand beyond your home region. You need key employees representing you who are in tune with other regions where they represent you, but who are still in touch with your values and ways of doing business. Pay close attention to the calibre of the people who help you expand outside your initial home base, whether you expand domestically or overseas. It is really difficult to run a growth venture in India centrally; you need to hire people you can trust and listen to what they say if you want to expand.

How does a successful entrepreneur become a successful business manager, once his entrepreneurial venture succeeds?

The real breakpoint seems to occur when a company gets past 60 or 70 employees. The company makes a transition from one where the founder/
managers know everyone personally to one where many employee relationships are impersonal. At that point, the successful entrepreneur has to make a transition from "do-er" to "orchestrator." That is not to say she or he takes a hands-off approach to the business. It means using information and control systems to supplement personal observation, and being able to communicate purpose and direction to people who do not see or work with you every day.

Someone who has never worked this way, where one has to control an enterprise indirectly instead of directly, can only survive the transition with help and mentoring. The entrepreneur has to hire and trust people who will operate on his behalf. After the breakpoint occurs, the most important skill for the entrepreneur is no longer knowing how to do everything or what to do next – it is the ability to size up people, hire the right ones, retain them, and motivate them. That’s hard to do without trusted advisors, whether they are part of senior management or provide counsel from the outside (as friends, service providers, or directors).

What are the difficulties that intrapreneurs face? What are the benefits of encouraging an intrapreneurial culture in an organisation?

On the plus side, intrapreneurs usually start with an infrastructure, working routines they can transfer from the parent company, and perhaps a well-known name on their business card. On the minus side, they often don’t have the freedom to build an organization that is precisely configured to exploit the opportunity they are pursuing. The more they have to conform to corporate guidelines and policies that were designed for different businesses, the more they are handicapped. The most subtle and difficult burdens are often cultural. It is extraordinarily difficult to build an organizational culture that fits your opportunity when the people in your organization bring with them a culture that was designed for other settings and other challenges.

There are three important benefits of encouraging an intrapreneurial culture. First, a company is more nimble when individual employees see it as their job to spot opportunities and pursue them with a sense of urgency. Many opportunities disappear in the time it takes to bubble them up to the apex of an organization and gain senior management’s assent to exploit them. Second, a company is better able to attract and keep talent when employees see that bright, opportunistic people who make money for the company are encouraged and rewarded for being proactive. Intrapreneurs are usually result-oriented, and if they are not given an alternative to corporate politics and career ladders, they usually leave before they create a fraction of the value they are capable of generating. Third, intrapreneurship is one of the great general management training grounds. Someone who has built a company inside an existing company has garnered knowledge and skills that will be invaluable when s/he takes on broad responsibilities, such as running a plant or a division. Intrapreneurs are a crucial part of your talent pool, and their experience often makes them the best choice to open a new office, launch a joint venture, turn around a troubled operation, pioneer an innovation, or undertake similar challenges that cut across functions and change mindsets.

Not Clean Bowled

Not Clean Bowled

MK: What is the right attitude to exams and results?
Harsha Bhogle:
It is easier said than done. It is easier for us to comment because we have the advantage of looking back at something. But if our experience is any indicator, students need to tackle an exam exactly the way a sportsman does a match. You prepare hard, the secret is in the preparation, and the executions often takes care of itself. I believe a student needs to replicate an exam in his preparation the way a good batsman tries to replicate a match in the nets. Confidence comes from preparation and if you are not prepared, you will be tense. Several times students have their minds elsewhere when they are studying. This is natural and I am sure we were like that as well. But if they can learn the art of giving 100 per cent while studying and 100 per cent while relaxing or doing something else, they will gain a lot. VVS Laxman, who was an outstanding student, and did very well in his class X, told me that when he was playing cricket he didn’t think of studies and when he was studying he didn’t think of cricket! harsha_at_lighthouse_seminar.jpg

MK: How does one stay motivated in spite of failures?
Harsha Bhogle:
I must admit it is difficult because even today i am disappointed if I haven’t performed. And when you are 15 or 16 it is easy to believe that the world has shut its doors on you. At such times the best thing to do is to seek inspiration elsewhere; from stories that remind you that one failure isn’t the end of the world; that most people in life have a second chance if they are prepared to search for it. Look at the recent French open final where Gaudio Lost the first set 0-6, the second 3-6 and still won the match. Or the test at Kolkata against Australia, where India, already 0-1 down in the series, were 274 behind in the first innings. They still won the test and went on to win the series. But students need to look at such Instances not out of a sense of fantasy but with a sense of determination.

MK: Do you think class X results are the most important determining factor in a student’s life? Why?
Harsha Bhogle:
No, but they are important. Anybody who thinks they are not is running away from the truth. If you have done badly the first thing you must do is acknowledge that you have done badly and not get carried away by people who say "no problem, let it be". Of course there is a problem but unless you realise there is a problem you cannot solve it. The class X results are like a blood test, you are not dead yet but they tell you if you are headed there. They allow you to make a correction in your life. If you know what you did wrong in class X you can correct it in class xii but you must know what you did wrong. A batsman who gets out the same way twice is not learning, so too a student who makes the same mistakes.

MK:What is your advice to students who are unhappy with their class X results and are feeling worthless?
Harsha Bhogle:
Allow yourself to feel worthless for a while and tell yourself you will never let yourself feel that way again. Once you experience the pain, you will know what it is and then if you are strong you can make it your biggest motivator. Again this is easily said and students who are 15 or 16 should ideally have someone around who can remind them of that. If people around them keep telling them they are useless, they will continue feeling that way. Look at Marvan Atapattu, who is now captain of Sri Lanka and who has scored six double centuries in test cricket. His first six innings in test cricket had five ducks and a single. If he thought he was worthless he would never have scored all these runs.

MK: You are a parent of a class X student. How critical is the role of parents in helping students cope with their results?
Harsha Bhogle:
Very critical. A child should know that come what may, his parents are in his team. A family is the only unit in which nobody changes sides and we should be emphasising the role of this ultimate unit instead of irresponsibly glamourising broken marriages. The parents have to be a child’s shelter and i feel sorry for people who seek attention by stating otherwise. Having said that i think parents are sometimes more at fault for they seek to fight their wars through their children, use their children’s marks as their status symbols, occasionally transfer their ambitions onto their children. And they cannot transfer their tensions onto the kids. If the captain is tense the team will be tense, if the captain is calm the team thinks there is hope. But this is an ideal situation and we have all been guilty of these things.

MK: How should one perform well, not in academics only but in all spheres of life?
Harsha Bhogle:
I guess each of us needs to find our own solution. I found that enjoying what I do, and not looking upon it as a chore, worked wonders; believing that every activity you perform is deserving of your full ability, giving it 100 per cent, is a good starting point. Also I think students should set realistic goals and parents can help hugely here. Not everyone can get 90 per cent, not everyone can score a double century, so you need to measure your marks against what you think is a fair target.

Anti-control freak

Anti-control freak

Maverick Ricardo Semler has been called the anti-control freak and the Mahatma Gandhi of the business world among others. The President of Semco S/A, Brazil, which is better known as the world’s most unusual workplace, was in Mumbai for an exclusive seminar last month, which was attended by eminent individuals from the Indian industry. Manoj Khatri captures the Maverick’s revolutionary thoughts:

On official meetings
At Semco, attending meetings are voluntary. The employees are informed about agenda of the meeting in advance. It’s common to see people walking in and out of the meeting rooms even as the meeting is proceeding. If no one turns up, whatever is supposed to be under discussion must be a terrible idea.

Once I called for a meeting to discuss what I thought was a terrific idea. We were manufacturing heavy duty dishwashers, for restaurants and hotels. I thought there was a market for a miniature version of the dishwashers for domestic use. Absolutely no one turned up at the meeting. I sent another mail, assuming that somehow my earlier intimation did not reach the people. This time, one person came to tell me that no one thought my idea had any potential and that nothing would come of it. I could do nothing to convince my own workers about my idea. A few months later, another company launched a domestic dishwasher and I went around telling people, “See, I told you.” A couple of years later, that company went bankrupt and my workers and managers responded with, “See, we told you.”

On Growth
I don’t believe there is any correlation between growth and ultimate success. The biggest myth in the corporate world is that every business needs to keep growing to be successful. There’s no indication that companies that grow do any better than companies that don’t. The ultimate measure of a business success, I believe, is not how big it gets, but how long it survives.

On Planning
Business plans are wishful thinking. Whichever part of the world you go, a manager will always submit a plan which shows a two per cent to five per cent, and in rare circumstances, a ten per cent growth. Nobody ever says we are going to make a loss or we are going to be bought out or merged or closed! Yet, a quick comparison of companies listed at the NYSE shows that there is a survival rate of a mere nine per cent every fifty years. Did the other 91 per cent not plan for the future? The problem is that no one can ever plan too far into the future. If someone asks me, “where will you be in five years’ time?” I’ll say, “I haven’t the slightest idea.” At Semco we plan only for six months at a time. That’s because we have seen that in a 12-month budget, the first six months are usually predicted as bleak and people paint the last 6 months flowery!

On Intuition
IBM developed Deep Blue – a supercomputer that lost to Chess Grand Master Gary Kasparov. Remember that Kasparov can evaluate two or three positions per second, while Deep Blue can handle 200 million. So if their chess-playing strategies were equally efficient, Kasparov would need 66 million seconds – more than two years – to examine those 200 million moves. So what does Kasparov have that Deep Blue does not? To me, the answer is intuition.

In the 90’s the Germans decided that they will monitor Soccer player performances, match venues and weather reports to close in on predictability of match reports. For one full year they researched every possible parameter of the game in order to predict the results of 13 top games of the season. Not one of their predictions came right. Meanwhile, a punter in UK got 12 out of the 13 match results right. The punter used intuition.

Let me give another example. Shell has a price prediction centre in The Hague. It employs dozens of researchers and millions worth of computers to do this. In conversation with the chief of this unit I found out that as per the research the present price per barrel of crude oil should be US$31. However the actual price prevailing was US$19 – a huge difference indeed. Incidentally, the chief maintains his own personal log book in which he had predicted the price to be US$21, which is fairly close to the actual value. When I asked him why he did not share this intuition with the Shell Board, he replied: “In a Corporation, I have the right to be wrong, but I have to be precisely wrong”

On innovation
In the year 1908 Henry Ford put up the first car production line. This car had a steel chassis, internal combustion engine, four tyres, seated four, travelled at 18 miles an hour and moved forward and backward. Ninety years and billions of dollars of research later, cars are still the same – they have a steel chassis, internal combustion engine, four tyres, seat four, in peak hour traffic, they travel less than at 18 miles an hour and move forward and backward.

Each time I attempt to remove my car from the parking spot, I wonder why automobile engineers have not invented something as simple as a sideways parking solution, in spite of having spent billions of dollars in research. Is it that difficult to implement? Imagine the time and effort it will save.

Let me give you another example. When in 1960, Gillette introduced the first twin-blade safety razor it was indeed an innovative product. However, in the 1990s, after spending US$ 608 million, six years of research by a team headed by two Nasa scientists, they come up with the next big innovation – they put a third blade between the other two!

Cars manufactured by the German giant Audi have five nuts per wheel. Four of these nuts can be opened and closed with the same wrench but the fifth nut is different for every car manufactured. God help you if you have a flat tyre and have misplaced your special wrench. Even if another Audi of the same model passes by, you cannot seek its help, as both wrenches are dissimilar. And they say, it’s personalisation.

On Recruitment
At Semco, employees make all decisions – they choose their leaders, set objectives and decide who they need and what they should be paid. When there’s a position, we post information about interviews on notice boards. All those who are interested show up and interview the prospect. The questions asked are usually not very normal.

Once we were looking to hire a CFO. The candidate who was finally selected was interviewed by as many as 37 different workers/colleagues on six or seven different occasions. So by the time the candidate was appointed, he was already familiar with most of his subordinates/ colleagues and vice versa and they’re already comfortable with each other. Now compare this with the traditional interview process where the only the top bosses and HR personnel meet the candidate one, two or a maximum of three times.

On trust and dishonesty
We cannot expect employees to be honest and sincere while we openly use corrupt practises to get large contracts and business accounts. Why would an employee adhere to the rules of honesty in which the company doesn’t believe?

Today, what generates effective power is information. And therefore when you share all information with your workers, corruption gently disappears. Transparency works wonders.

At Semco, there is little bureaucratic control beyond financial accountability; almost everything depends on peer pressure. We have a higher trust in human nature but we’re also convinced that peer control is fabulous as long as there is a common interest. If someone’s interested, the sort of corporate corruption you see elsewhere can never happen. It can only happen in places where people really don’t care, where they’re working nine-to-five and the chief executive knows he’s under the sword of Damocles so might as well make as much as he can. If he has that attitude, a lot of other people think the same way, so that system is doomed.

On giving up control
The reason why very few companies have emulated Semco is because it involves giving up the control by the people at the top. Typically, the attitude of the owners towards employees is, “You work harder so that I can buy my new Mercedes.”

I have been away from Semco for a month now – I am not carrying a notebook or mobile phone. I haven’t received one single email related to the business from Brazil. I have absolutely no control over the company. When I took over, we were pre-dominantly a manufacturing company. Today we are mostly into services. We’re into businesses that I don’t even begin to understand. There are people in the company I don’t like very much and there’s nothing I can do about it.

The fear of letting go is all that is needed. You may come up with many excuses to avoid giving up control but in the end, that is the only way you can ensure long term survival.

On dealing with resistance
When you put a frog in hot water, it will jump out. But put it in warm water and keep increasing the heat slowly and it will die without even knowing that it has.

It’s important to introduce changes slowly and allow people to get accustomed to new ways of doing things. When we first suggested the introduction of flexi-timing, the workers were extremely sceptical and for six months we faced resistance. Imagine, we are giving them more freedom and they still resist!

Vitamin King

Vitamin King

On his early life and his foray interest in Vitamin technology

I was born in Karachi, Pakistan in 1931. After partition, my family moved to India. In Pakistan, my father ran one of the biggest wholesale and retail pharmacies of the time. In 1956, after my B.Pharm, I left the Indian shores and went to London for higher education. There I acquired a post-graduate degree in pharmacy before proceeding to Germany for my doctorate in Medicinal Chemistry. After a brief stint in Germany where I worked as a professor, I returned to India, got married to a medical doctor and worked with the AIIMS as a research scientist for two years before returning to London where I joined a pharma publication in an editorial position. It was a journal that published a compilation of abstracts of world patents in medicine. Almost all major pharma companies in the world were subscribers.

As a young research scientist at AIIMS Delhi, I observed anomalies in the administration of some of the most basic vitamins and minerals. The iron administered to patients at AIIMS was at least seven to eight times more than the recommended dosage. I decided to study this subject further and that’s when my interest in Vitamins and Nutrients developed.

On how he set it up Vitabiotics

During the late sixties, I suffered from persistent mouth ulcers. I had tried lots of medicines, but nothing had worked. Finally, after having suffered for about five years, I had decided to find a cure himself – after all I was a qualified pharmacist. I invented a medicine which worked wonders – used it a few times, after which my mouth ulcers vanished completely never to return again. I applied for a British patent for this new cure for mouth ulcers and got it. Then, I tried to sell the patent but did not find a buyer. So I decided to manufacture and distribute the product myself.

Having studied pharmacy locally, I was familiar with the local market. I also knew that people often relied on pharmacists for such common ailments as headaches and ulcers. So I packed a dozen units of Oralcer in neat boxes and sent them to all the local chemists along with a letter and a return stamp and address. I said in the letter: "You know that nothing works for ulcers. This is the first treatment in the world that will work. If you’re happy, you sell the product, and if not, you may return the box. Only ten per cent of the boxes came back. The rest of them sent repeat orders." This was the beginning of Vitabiotics. Then, when I visited Nigeria, I noticed that there was a market for multivitamin brand there and decided to introduce a multivitamin supplement. I developed an attractive packaging for the brand and called it Omega-H3. Today, Omega H3 is the largest selling nutritional supplement in several countries around the world.

On his awards and his source of delight

I have received four awards in the year 2003. The first among the awards was The Queen’s Award for Enterprise bestowed by Her Majesty the Queen on the recommendation of the British Prime Minister Tony Blair in recognition of the company’s remarkable contribution to International Trade. Then there was the Asian Achiever’s Award for Trade and Industry followed by Entrepreneur of the Year in UK sponsored by British Telecom and GG2. And most recently in December 2003, I received the Asian of the Year 2003-2004, awarded by the Asian Who’s Who.

I was reluctant to accept the Asian of the Year award this year as I thought that it would be one award too many in a single year. Yet I was persuaded to receive it this year itself. Awards are fine…however, my true source of delight is the positive feedback I receive from the thousands of users of my products from across the world about how the medicines are benefiting them.

I remember an incident of a young girl who attempted suicide because her mouth ulcers were so bad that she felt that "life was not liveable." Her desperate attempt came after nothing had cured her. Then she was given Oralcer, and her condition improved immediately and gradually she was permanently cured. These and many other episodes are what make me really happy.

On his conviction in the power of nutrients

There are countless instances of our products working where traditional formulations have failed. I truly believe that natural ingredients like vitamins and minerals can prevent and cure of a range of health issues, from common ailments to lethal ones like AIDS. Combined in accurate quantities, they can cure as well as, and sometimes even better than, traditional medicine.

Not only that – our formulations are very safe as they are made from natural products, whereas most traditional medicines have counter effects. Take for instance Menopace, a pioneering product we developed – the first non-HRT remedy for menopausal women, which is today a market leader in UK. Today HRT (Hormone Replacement Therapy) is under serious clout. Doctors and scientists across the globe are questioning the use of HRT remedies.

What drives him…

Certainly not profitability – we sacrifice a lot even today. We don’t jump into something simply because of a fad. It’s true that success would have come to me quicker if I was more businesslike. But that’s not been my philosophy. If I am not satisfied, if I am not sure that a product will truly benefit people, I will not get involved in it, even if trends suggest that it would be profitable to do so.

I voluntarily price my product low in the developing countries. And I simply do not distinguish between nationalities when it comes to charity, social service or financial assistance of any kind. I donate money and help needy people wherever they are.

About two years ago, a young English man aged about 24 years, came to Kulu Manali for an adventure trek. While paragliding, he was lost. His mother was a nurse and father was school teacher. The boy’s parents contacted the British High Commission for assistance who in turn contacted the Indian High Commission. They were told that the search operation would cost them a lot of money, which they could not afford. When I read about this in the newspapers, I instructed my secretary to locate the hassled parents and then sponsored the entire search operation for two days. Although the search did not yield the desired results (the boy was unfortunately never found), at least the parents were satisfied that a serious attempt had been made.

On his lifestyle

I live a simple life. Nothing extravagant. I love the old and the historic. I am fascinated by antiques and ancient works of art such as ivories, furniture and paintings. This (pointing to a painting on the rear wall behind) was a jackpot! She is Gayatri Devi painted by Augustus John. I bought it at an auction in the UK some twenty five years ago. Nobody there seemed to know who she was – they referred to her as "some Indian princess". Augustus John was one of the best-known English portrait painters during the early part of the 20th century. He painted many wealthy and important people and Her Highness Gayatri Devi was certainly one such person.

I’ve also got a collection of historical books, with some amazing insights into times gone by, illustrated with beautiful sketches. These days I am co-writing a book about the role of British in the history of India.

On his children

The success of my children makes me a proud. My eldest son, Ajit Lalwanii, who is a medical doctor at the Oxford, has achieved a rare distinction of inventing a test for tuberculosis which has 99 per cent accuracy with the results being available on the same day displacing a hundred year old test that required six days for a result and has an accuracy of only 80 per cent. You see, TB was not a disease of the developed world, so multinationals never took it seriously. My younger son is now the head of marketing at Vitabiotics a
nd is doing very well.

His vision for India

I think that India’s future can be bright if only our literacy rates could go up. With a population like ours, if every earning Indian would set aside only one day’s income for a charitable purpose like education, India could attain hundred per cent literacy in five years.

Any regrets in life?

None at all. I am 72 now and I have lived a good, contended life. But I have dreams that I’d like to see coming true in my lifetime. Like Vitabiotics becoming a major International player and India’s rate of literacy nearing 100 per cent.

Low penetration means big opportunity

Low penetration means big opportunity

Manoj Khatri: What are the principal drivers that influence the underlying profitability of the brown goods industry?

Gulu Mirchandani: In the current market scenario, where the value erosion stands at 15 per cent for 2003-04, it is increasing becoming difficult to hold on to the bottom line. Nevertheless, the following are the key drivers of profitability in this industry:

Volume Growths: The low penetration levels of these products is a big opportunity area and the industry is strongly taking this route of increasing the production and sales volumes in order to make the most of the economies of scale. With increasing consumption, the raw material prices have been moving southwards, thereby enabling better profitability

Product Mix management: The challenge is to be able to have a healthy mix of high-end products contributing to the bottom-line. This can only be achieved by offering products which are unique and where the customer sees value in his purchase. The customer is ready to pay more if she feels that she is getting something, which will improve her life and enhance her lifestyle.

Product Innovations: It is also important to catch the changing trends in consumer lifestyles and offer the right product at the right time. Basically, we must innovate on a continuous basis in keeping with the changing consumer needs and to differentiate in the market.

Operational efficiency: It is important to gain overall operational efficiencies like inventory management (Overall inventory less than 15 days), debtors management (Ideally nil bad debts and zero days operation). A good, committed and loyal network also contributes significantly to the bottom line.

Manoj Khatri: Which forces (macro as well as firm-level) are likely to play a major role in shaping the future evolution of the consumer durable industry, say, with regard to growth in demand or introduction of new value propositions?

Gulu Mirchandani:Growing disposable incomes and the low penetration levels: Substantially low levels of penetration, coupled with the growing disposable incomes, will ensure greater share of wallet for the consumer durables industry. The changing lifestyles of the consumers will generate demand and need for this products. The new markets and the resultant demands will be strong influencers on this industry

Opening up of the market/easy access to multi optional inputs: With enhanced possibility of better and easy cross border talks with the suppliers worldwide, the range of offerings has gone up while the cost is coming down

Entry of new players: With the number of players increasing, there has been more action throughout the year and the industry has a buzz around it with constant high pitch communication from the industry to the consumers.

Technological advancements: Innovations and inventions will play a major role in shaping of this industry’s future. Technological advancement has always been at the back of most of the peaks in this industry’s growth. Right from the introduction of colour picture tube to the recent technological advancement of CRTs becoming pure flat, technology is the prime booster for this industry. Advancements in future technologies like the LCD panels and DVD recorders and the like will critically impact the industry. It is expected that by 2008, 33 per cent of the worldwide demand will be met by LCD TVs and Plasma TVs.

Manoj Khatri: Given the competitive scenario in most brown goods segments, what are the central challenges an electronics company like yours must address, in order to retain its price competitiveness and market share?

Gulu Mirchandani: The core to handling various market challenges is to protect the bottom line while being competitive in the market.

Constant Product change: It is critical to have constant newness in the consumer benefit offerings so as to be relevant to the consumer and to be differentiated against the competition. Also, it is important to have low turn around times on the creation of benefits for the consumer, in order to be effective and ahead of the competition.

Operations Integration and Efficiency enhancement: In order to get better return for the inputs, organisations will have to look at integration on backend (components required for the making of the product, logistics etc) as well as the front end (customer touch points, direct sales etc)

Brand Positioning: Every purchase of the consumer is not guided by the cheapest of the prices, but by the benefit that she perceives for the investment planned by her. Hence, it is critical to be appealing to the image seekers while being relevant to the value for money seeker. With lifestyles improving and becoming important to individuals’ personalities, the brand’s positioning and its relevance to the consumer will become more important than ever before.

Customer Relationship Management: The experience that the consumer goes through during the entire purchase cycle and the post purchase usage experience is critical to the organisations’ future business. Managing customer relations and the experience that is offered to her throughout will be a challenge for all players.

Channel Management: A strong influencer on the buying decision is the network, and the organisation that manages the network better, has a substantial edge over others.

Manoj Khatri: What broad strategic initiatives were affected during the last few years by Onida in order to exploit any opportunity that the market offered and also hedge against any underlying risk? To what extent have these initiatives benefited Onida?

Gulu Mirchandani:The past couple of years could be termed as the most dynamic years in the history of this industry. We have witnessed the rise of MNC brands and its adverse effect on the Indian counterparts. Many Indian brands have become almost extinct. We are probably the only Indian brand who have not only survived but have grown during this period. Today, Onida enjoys a high brand salience and is seen as a trusted and reliable brand, with a very high degree of product satisfaction among its users. These have been our key focus areas where we have taken major initiatives. Today Onida offers three principal assurances to the consumer, which is key to our success:

Brand Image – A TV today is a lifestyle statement for the consumer and hence the brand must evoke that sense of pride of ownership in the consumer. At Onida we truly believe this and hence over the years we have been investing on making the brand more modern and contemporary. Today, we enjoy top-of-mind recall and our being among top three brands of the country proves that our investments on the brand have been worthwhile.

Product – TV is seen as a high-tech product with a high risk of obsolescence associated with it. Hence a consumer tries to buy the best at the time of purchase. Onida lagged behind a bit on this parameter primarily because of the delay in introducing flat TVs. However the brand has greatly regained its technological edge in the recent past based on strong focus on Onida Black, the flat screen TV, and today we are at par if not better than the multinationals in this segment. For very high-end consumers who value technology and who would like to have nothing but the very best, we are in a process of introducing plasma and rear-projection television, which is the latest technology available anywhere in the World. Onida is a brand where lot of action can be expected in the very near future. We will touch consumers at all levels and if one is looking for any product related to consumer electronics and home appliances, Onida will definitely change his world.

Service and Quality – Given that TV is a high-ticket purchase, the consumer needs a strong reassur
ance from the brand in terms of reliability. Longstanding brands that have proven track record of trouble-free product performance score on this parameter. Onida is seen as one of the most reliable brands in the TV category and we keep quality at top of our priority list. Like any product, electronic goods suffer wear and tear. It is how fast you address the problem that is important. We believe a satisfied consumer is the best brand ambassador we can get.

Manoj Khatri: Against the backdrop of slackening of demand in many categories of brown goods in recent times and entry of powerful MNC competitors, how are you redeploying their resources * be it with regard to ad spend, sales promotion, distribution channel or sales organization * with a view to maintaining a threshold level of growth in both top and bottom line?

Gulu Mirchandani:To start with, unlike the overall brown goods industry, colour television industry is growing and we expect the market to grow by 10 per cent this year. Industry CAGR as of now is 15 per cent, with all India-penetration of 18 per cent. So there is a huge potential in this market. Even in the metros, the opportunity is huge, with a penetration of around 40 per cent. Therefore, the industry is definitely poised for growth. The major part of the industry is expected to come from the black and white up-graders. Hence we have special focus on this segment. Our distribution strategy is to reach the rural markets and hence we have our sales and service teams spread across India through 30 branch offices, 150 service centres and 35 godowns. We are also looking into our distribution network and trying to seek other opportunities to increase penetration. Our advertising will also be focussed on both the bottom and the top end of the consumer triangle so that we get the best of both – the replacement and upgrader segments.

Another key area that we are redeploying our resources is our new businesses. We have just launched air-conditioners, which have been accepted very well among the consumers. This category is expected to grow at a very high rate in the years to come, and we expect to be among the top brands in the air-conditioning industry. We also have plans to re-launch washing machines in a big way this year. We are targeting 7-10 per cent market share in washing machine business, and have very strong marketing plans to achieve the same. Over all the brand is in the upswing and as of now we are among the top 3 brands in the country. Financially we are clocking profits every year, unlike many multinationals, which somehow lose focus on the bottom-line in their mad race to achieve market-share. So overall you can say we are having a healthy profitable growth both in terms of top and bottom line.

Superior customer experience, courtesy technology

Superior customer experience, courtesy technology

In this era of parity in product quality and product price, the only distinct competitive advantage is superior customer service. If employed sensibly, technology can be a potent instrument in effectively enabling organisations to provide superior customer service consistently.

Realising this, organisations are using technology as a competitive tool to create the customer experience that differentiates them in the market. But experts concur that technology must be used prudently, for sometimes what is designed to serve the customers ends up doing the exact opposite: disservice. Unfriendly technology, however sophisticated it might be, is as bad as poor quality service and can prove detrimental to your organisation’s image and long term survival. Organisations that employ technology will do well to remember that in the end, it is only a means to an end, not the end itself. Technology should serve the organisations and its customers, and not the other way around.

"Using technology to enable superior Customer Service" was the theme of FedEx Spirit of Success forum presented in association with The Economic Times General Management Review. Held at the Taj Residency in Bangalore, the technology hub of India, the forum showcased leading names from the industry. In exclusive post-forum interviews with the speakers Manoj Khatri asked them to elaborate on the ideas they presented at the forum. Excerpts:

Back to the Future
In December 2003, Corporate Dossier presented the first instalment of FedEx Spirit of Success in Mumbai and Delhi. Internationally acclaimed futurist Patrick Dixon took us into a journey of time and showed us a glimpse of the exciting future. He emphasised that speed will be a critical factor in managing tomorrow. "The world is changing faster than boards can contemplate. Organisations will have to become incredibly flexible, and plan for more than one vision and keep more than one business plan ready," Dixon predicted.

The Indian futurists, who accompanied Dixon in his crystal-gazing, included Sunil Mittal, the CMD of Bharti Enterprises, R Gopalakrishnan, Executive Director of Tata Sons, Arun Jain, CEO of Polaris and Deepak Puri, MD of Moser Baer. Mittal believed that "the clues to the shape the future will take are to be found in the present". Gopalakrishnan warned that low inflation and low interest rates coupled with high growth is a different reality system, but one that is here to stay. He asserted that taking a spiral approach against the traditionally taught straight line approach will be the key to unlock the future. Jain spoke about the philosophy of Lakshya, an exercise where everyone in the company was asked to predict the future of Polaris after five years. According to Jain, every organisation faces Lethargy and needs some disruptions to move ahead and shake itself out of complacency. Puri was bullish about India, the land of opportunity and the entrepreneurial spirit found in her people. In his experience in a technology-intensive domain, Puri found that the biggest problem is the short time lag between making an investment and the obsolescence of the product.

"Technology is the skeleton and customer experience, the flesh" – Shombit Sengupta, international management consultant and founder of Shining Emotional Surplus,  

In a competitive scenario, how important do you think is customer experience as a value proposition?

The service component in any business is intangible. It is employee passion that determines customer experience. Unless employees ingrain in their attitude, action and behaviour that they want to serve a customer, delivery will fail.

Technology plays a key role in the service industry, but as a skeleton. The most sophisticated technology cannot improve business if the front end of this skeleton is not endowed with flesh.

Let me demonstrate customer service experience through a luxury hotel example. Arriving at the hotel after a hard day’s work, the front desk makes you wait because international flight passengers are queuing up to check in. Then you get a digital key card that doesn’t work at first swipe, irritating you to call a passing butler for help. Once inside, your hunger awaits your figuring out the complicated telephone system that will connect room service. Your difficulty in adjusting the hotel air conditioning knob takes you back to Moscow’s -32 degree temperature you escaped from last week.

A preconceived notion exists that imposing high technology will improve a service business. But this can fall short if only the engineers, not the facilitators, understand the developed software. In the 20 or 30 customer touch points of a service business, the strategic focus should be on how to build technology to primarily deliver those 30 touch points. If technology is not designed to interface the customer’s needs and desires, it remains a mere skeleton which is totally nerveless and without flesh.

What are the special challenges of marketing and managing customer experience in a technology-driven environment?

The challenge is to first observe and diagnose the latent socio-cultural perspective of society, and see how the target customer fits in there. This enables trend identification. Understanding socio-cultural trends is the fundamental diagnosis required to cater to tomorrow’s demanding world.

Marketing strategy derived from gut feel and bolstered with expensive technology can never work. To understand real customer experience, you need micro diagnosis of the targeted and potential customer, not quantified databases or international competitive analysis gathered from surfing the Internet.

People often think that because the service industry is people driven and has minimal infrastructure investment, it can be managed very easily. So, based on this unreal idea, the service business quickly gathers competition, and a price war ensues. The spectrum of the customer’s eye is always open to this competitive world.

In marketing a service business, every different aspect of competitors needs to be minutely watched. The challenge is to understand the customer microscopically in his sociological, psychological and historical background in the enlarged competitive environment. The customer’s sociological platform comprises the class of society and environment he comes from; his psychological paradigm is his desire, need, hedonism and distress; and the historical background means the traditions followed in his country, which would obviously be different for customers in America, Europe, India or Japan.

In the price sensitive Indian market, how can companies compete effectively on technology-enabled customer service?  

If companies have not clearly understood customer need, how can they surprise the customer with service? In general the service business in India does not remunerate people properly. In the west, if a service company is asked to perform even a minor secondary service not contracted for, like couriering a letter, that company will charge handling charges for getting that secondary service executed.  

A service business must establish a tangible character and focus on it. If a service is intangible, the Indian customer does not value it. Designing a service that’s efficient at every customer touch point is a big science. The attitude, behaviour, actions and deliverables of service companies should first address customer needs and desire, and physically manifest these service qualities in customer interaction.

When the service network is driven by technology it will never work. It has to be driven by the customer’s conscious and subconscious requirement. A manual of customer service needs to be designed and the architecture of this manual must have an extensive dimension of discipline that will positively surprise the customer. It needs a tremendous micro research to be in tu
ne with a customer’s physical and psychological requirement, and make the manual accordingly.

Can technology completely replace the human factor in delivering superior experience to customers? Why?

Till the time human beings need to make physical love, technology cannot replace any delivery superiority. Technological superiority cannot give or sustain a differentiating character. It can only be the skeleton. Technology will need to be given a structure. Flesh has to be developed around it so it can be appropriated for human utilisation. It will be very difficult to have flesh devoid of human warmth in a technology enabled service.  

"Use technology to generate actionable customer intelligence" – Vivek Gokarn, CEO and managing director of SAS India

How does technology help in enabling improved customer intelligence for an organisation?

Technology plays a pivotal role in deriving customer intelligence and is catalytic in improving efficiency & effectiveness, measuring the impact of customer interactions, and effectively allocating resources; resulting in increase in customer profitability and above all increased customer satisfaction. Business Executives, Channel Managers, Product Managers, Sales and Marketing Directors all face a common challenge in deriving intelligence interpretations from their large sources of data. They need intelligence to drive their business and improve customer satisfaction, but they seldom achieve it.

To ensure that the organisations have a ‘single-view’ of all their customers, organisations need technology solutions that can collect customer data from multiple sources, analyse it, interpret customer information, and communicate the results enterprise-wide. This would enable an organisation to maximise the value and impact of every customer interaction, and provide measurable return on investment.

For organisations to achieve a sustainable competitive advantage, it is therefore imperative that they have technology solutions that can generate actionable customer intelligence, to better understand their customers and maximise customer profitability.

Which industries are most likely to benefit from using technology to serve customers directly? And which sectors can use technology only as an indirect value add to the customer?

Only by gaining deeper insight about your customers can you expect to serve them better and make their buying experience a pleasurable one. Technology is an important crux to gaining this insight. SAS today has more than 42,000 customer sites across the globe and our experience with companies across various industries – Automotive, Banking, Financial Services, Government & Education, Healthcare, Insurance, Life Sciences, Manufacturing, Media & Entertainment, Pharmaceutical, Retail, and Telecommunications – clearly establishes the role of technology to improve customer intelligence in order to improve their business performance.

In what circumstances does technology fail? What measures must an organisation take to minimise the impact of failure of technology?

We believe that the four cornerstones for success of any technology are Usability, Manageability, Scalability and Interoperability. Usability ensures that the user experience is appropriate for every audience – saves businesses time and money in training; Manageability means that the organisation can easily manage the entire system with a minimum of resources and training; Scalability of technology signifies that the product set can grow with an enterprise without losing efficiency no matter what the data requirements are or may become; and Interoperability defines the Integration and communication with software and data from different data sources.

With these cornerstones in place, technology solutions can combine enterprise data management, advanced analytics, and campaign planning and management, to synthesise customer data across various lines of business and across all customer interaction points, including Internet, call centre, and Point-of-Sale data. By integrating online and offline customer information, organisations will have the ability to predict customer’s behaviour across all channels, targeting the right customer at the right time.

"Exploit technology to forge strong customer relationships" – Ashok Waran, Senior Director of Oracle, North America India Operations

What role is technology playing in the changing marketing dynamics? How important is it to manage customers in the current competitive scenario?

Customers are closer to companies than ever before, whether the company knows it or not. They know your processes, your competitive advantages and your competition better than ever before. They have access to information in an unprecedented scale with the advent of Internet.

There is also an information overload happening at the same time. Traditional methods of reaching out to customers may not be as effective and there is a need to change the game. The very technology that makes for information overload can be harnessed by companies to differentiate. This necessitates a new way of looking at business and ensuring that a holistic approach is taken to strengthen each and every arm of the enterprise. This means, "everyone does marketing". Marketing is then all about building customer satisfaction, value and retention. Technology enables the way we interact with our customers and allows companies to do things they never attempted before. Today, almost any level of customer interaction can be conceivably achieved through technology. It is up to the enterprise to re-design their operational models and tap into what is available. A sterling example of this is how Dell’s business model differentiated itself with other traditional computer manufacturers by reaching out to each customer to create a value proposition for that customer. Technology is the primary enabler for Dell.

You referred to customer, organisational and technology realities as factors for evolution of CRM as a strategic response. Can you elaborate on this?

The customers of today are more demanding than ever before: they are smarter, more price conscious, less forgiving, more prone to change their suppliers and are approached by many more competitors with equal or better offers. This means that that the organisational response must be holistic, working across departmental boundaries. They need all advantages they can muster, to create an effective value delivery chain that increases the product’s, or service’s, perceived value at each step of the system. Technology enables this, but the culture is something only the organisation as a whole can deliver. With increasing globalisation of businesses and technology the product as a sole differentiator is a rare phenomenon. More likely than not, there are several close competitors and the differentiator is the end-to-end service. There is no greater commoditised product than a PC, and Dell’s business model is a great example that builds differentiation.

In what circumstances does CRM fail? And when does it succeed?

The best relationship marketing today is driven by technology. CRM fails when it is seen as a point solution or a "me-too" implementation. It succeeds when it is implemented as a business strategy encompassing people, processes, making it cross functional and creating a customer-oriented corporate culture.
Using a case example, can you demonstrate the positive impact of CRM on the bottom line?
Take one of the most price competitive, non-differentiated products – the PC as an example. Let’s take the Dell story to illustrate how understanding your customer’s needs can create a consistent positive bottom-line.

The Dell model is a very efficient "made-to-order",
highly efficient, low cost distribution system characterised by direct customer relationships, build-to-order manufacturing and products and services targeted at specific market segments – the quintessential CRM. Dell broadly segmented its customers as "transactional" or "relationship" or a blend of both. Dell targeted the educated "transactional" customer rather than the neophyte. "Relationship" customers were a key component of Dell’s success story. Dell allowed these customers to configure, price and buy systems at approved, discounted prices, track orders and inventory through detailed reports and gave access to service and support teams.

The results of this approach were that in three years since Dell adopted this model, its stock climbed 2000% and ROIC was 186% – the highest in the industry by a long margin.

Capital One’s 40% year-by-year growth is another case in point.

Technology is a key driver
According to managing director of FedEx India Jacques Creeten, FedEx relies heavily on technology to deliver superior customer service. Technology is one of key drivers of FedEx and it spends about USD 1.3 billion per annum on technology development, employing close to 5,000 information technology professionals to develop this technology.

Creeten spoke about how FedEx has always used technology to improve efficiencies inside as well as outside the organisation. But he insisted that even though technology is extremely important, the human factor cannot be disregarded. "Even today, if you make a mistake, the way you react and the way you recover and fast and efficiently you do that, still requires the human element. To facilitate superior customer service requires, you require not only technology but also reorganisation and redeployment of people to make the organisation more customer-friendly and the people more customer-focussed," Creeten emphasised.

Creeten believes that technology not only enables your organisation but also your customer. It gives your customer much more power and much more flexibility than ever before. But, as customer experience becomes evermore important, you cannot count on just technology to make that happen for you. It is, in the end, just a tool that helps you run your business in a better way. You still need to hire excellent people and invest in building their skill sets to enable to them to use technology to make the right decisions.

Generic positioning platforms will not work any more

Generic positioning platforms will not work any more

MK: Can you chart the evolution of liquor industry during the last 10 years?

Alok Gupta:
The alcoholic beverage segment represents a vastly different scenario today in comparison to a decade ago. Since last 10 years, the Indian liquor industry has evolved at every stage. To start with, the industry has changed from being "seller’s" market to a "buyer’s" market. Consumer groups, which earlier were targeted as one large demographic island, have got fragmented into distinct psychographics’ groups. Brand and media proliferation, information boom and easy access to wide variety of brands have all had a significant impact on the buying behaviours of consumers, who are now clearly seeking "value" over "price". In many ways this reflects branding of a commodities market which was dominated by heritage brands.
Sociologically, the country has undergone a sea change. Lifestyles have changed drastically. Today, drinking in moderation is not looked upon as a social taboo. Youngsters today are often seen sharing a drink with their parents which was unheard of a decade ago except among a very few upper class families. Social drinking among women is also on the rise.

Unlike a decade ago, the consumer today also has a number of options in terms of brands and segments – A fast emerging change is in terms of flavour substitution depending on consumption occasion. Earlier an average consumer would stick to a preferred flavour say a whisky or rum but now the flavour basket has many more like whites, wine, RTD etc. Marketers need to understand the trigger for such switches and evolve the marketing initiative.

Market is fiercely competitive and marketers are fighting for value share, value paradigms are being redefined, new fronts of customer engagements are being created. In the market, where the imperatives are neither PCC nor penetration driven, the fight is for market shares and larger share of the organic growth.

MK: What forces drive the liquor industry in India?

Alok Gupta:
Some of the key drivers of the liquor Industry are Duty structures, Excise rules and regulations, product-pricing, marketing initiatives to promote the brand and to communicate with the customers, distribution and several regulatory issues like licenses to manufacture, labeling etc. On issues of excise and duties, these are fast coming to WTO levels. The industry does not have many entry barriers and with the opening up of the economy there are multiple ways of market entry; it could be Bottled in India (BII) or Bottled in origin (BIO) or Bulk import and locally bottled.   While this will enable world class quality brands entering India, there is a fear that the stagnating markets overseas may trigger dumping of cheap liquor into the Indian market, which will not be a healthy trend for both the Indian consumer as well as the domestic liquor players.  

MK: How many segments, branded or unbranded, exist in the liquor industry and in what proportion are they growing? How are the brands of UB groups performing vis-à-vis the competitor’s brands?

Alok Gupta:
The IMFL industry in India is estimated at nearly 84 million cases and is growing at 8 per cent per annum. Consumption is largely skewed towards whisky, which accounts for over 60 per cent of the market. Brandy accounts for 21 per cent, rum for 14 per cent and Whites (Gin, Vodka, others) for 5 per cent.

The UB Group Spirits Division (UBSPD), which comprises McDowell and Co Ltd and Herbert sons Ltd, is likely to cross 35 million cases in 2003-04. Growing faster than the industry average of 6 per cent, the Division further consolidated its leadership and grew its market share to 37 per cent. UBSPD ranks as the fifth largest beverage-alcohol group in the world. Last year, we registered a record growth of 14.5 per cent. We hope to grow in volumes this year too.

UBSPD is the dominant player in the spirits market in India with the other players at a distance. We dominate the market not just in market shares but also in our manufacturing capacities, product ranges and distribution strengths.

MK: What are the marketing challenges that a liquor company faces (with specific reference to India – constraints on mass advertising, social responsibility and consumer preferences)? How is UB group dealing with these challenges?

Alok Gupta:
A highly regulated environment and poor shopping infrastructure in the Alco-bev industry is unfortunately diametrically opposite to the direction India is heading. Consumer today is demanding more and more information on products and services and in absence of a communication platform the industry faces a major handicap. The industry body CIABC has proposed a Self Regulation Code, which has been drafted after a careful study of similar platforms across the globe, and being followed both in the western and the eastern economies. We are hopeful that one day such a code will become a reality.

We are a firm believer in investing in social-awareness programmes and have in past run campaigns on "Responsible Drinking." As a policy, we do not sponsor or organise events at college level. In addition, we take all necessary precautions to ensure that we do not hurt anybody’s social or religious sentiments.

MK: What, according to you are the key performance metrics against which a firm must excel in order to be the leader in your industry? How does a firm set benchmark against each of these performance metrics?

Alok Gupta: The Indian consumers have come of age today. The entry of international players has increased the consumer expectations. As the leader, UBSPD remains aligned with the evolving consumer expectations and the market realities.  

1. Marketers today need to look at the industry with new lenses and break away from the traditional price-value equation and start creating value for which the consumer will happily pay the right price; this will considerably enhance profitability also.

2. Focus on brand building, create unique and relevant proposition to command a larger market share. This will reduce dependence on the highly regulated trade and bring down the cost of sales.

3. Balance the short-term with the long-term; while one must focus on today, it is imperative for the marketer to plan for tomorrow, especially in view of the opening of the market, as duty trade barriers will slowly disappear.

4. Adopt and customise global benchmarks, both for products and the overall product experience. To sum it up, the company that aligns it’s thinking to global levels but connects with the consumer at a local level will thrive.

MK: What are the value propositions that a firm in this industry can draw on, to create a distinctive positioning in the minds of the target customer groups? How does possession of a number of power brands, help in building market share and obtain price premium?

Alok Gupta:
Business model and strategy are not independent of the social and economic milieu we operate in. Value proposition would obviously depend on the target consumer group. One thing is however sure: generic positioning platforms will not work any more; proposition will have to be based on consumer insight and marketers that commit themselves to this process are more likely to succeed.

Though McDowell’s Signature is positioned on the platform of "Success" the communication strategy is based on the consumer insight that in today’s context, success goes beyond material wealth and its apparent symbols and trappings. Success today is all about new rules – it is about new ideas – and this forms the backbone of the "The new sign of Success" campaign in which real life individuals, who stand for such success, ha
ve been showcased as "Signature success icons". The campaign inspires and produces an emotional connect and more importantly, is relevant to the target consumer leading to brand adoption and loyalty and, to some extent, even word-of-mouth.

Given the market realities, UBSPD has consciously followed a strategy of being present at different price points across different flavours. Our focus on building brands has given us an enviable portfolio of as many as eight "millionaire" brands, the fourth biggest basket of brands in the world. We have identified a set of Power brands to provide a range of solutions to meet the mood, occasion, expectation and retain the consumer. Another significant advantage is trapping higher value as the consumer moves up the economic ladder. UBSPD is the leader and trendsetter in India, and we have no intention of reducing ourselves to a niche player.

MK: Finally, what are the core value propositions of the UB Group and how are they different from competitors?  

Alok Gupta:
Our core value is to continuously adapt to the changing consumer and therefore to stay relevant, in a unique way, in the fast changing socio economic and cultural context. We believe in offering a wide range of products to be able to meet the demands of all types of consumer groups. Innovation has always been our thrust area and as market leaders we are focused on challenging the paradigm. This allows us to stay in the lead all the time. As of now, we are close to being the fourth largest liquor marketer in the world. Quality delivery has always been recognised as the most important imperative. Efficient and friendly servicing of the market ensures that we have the nest support of the retail and the on-premise network.

Services are performances, not manufactured products

Services are performances, not manufactured products

Dr A ParasuramanManoj Khatri: What are the special challenges of marketing and managing services in today’s technology-driven environment?
Dr. Parasuraman:
The proliferation of technology-based systems offers tremendous opportunities for companies to communicate with and serve their customers.   At the same time, technology-based systems are not a panacea.   There is a real danger of companies going overboard in this regard.   For instance, all too often companies are overeager to migrate all customers to self-service systems because of the potential for reducing costs.   A case in point is banks – several of the larger U.S. banks started forcing customers to complete their banking transactions via ATMs, telephone-banking systems, or online banking; customers preferring to interact with human tellers had to pay a fee!   While this strategy appealed to techno-savvy customers who preferred to deal with technology rather than with tellers, it enraged others who did not take too kindly to being charged for personal service.   Capitalizing on growing customer frustration, smaller banks started emphasizing personal service and boosting their market shares.   Reacting to this backlash the larger banks are now increasing – at no small expense – the number of bank branches and branch-based personal services.  Companies would do well to recognize that not all people – both customers and employees – might be equally enthusiastic about technology-based systems.   Findings from some of my recent research strongly suggest that there are distinct segments of people with differing levels of "technology readiness" [TR], which refers to an overall mental inclination to embrace and use technology-based systems.   TR is not synonymous with technical competence – there are a lot of technically competent people who may still resist technology due to psychological or personal reasons.   An important challenge and priority for companies is to understand the TR profiles of their constituencies and to take a measured approach to migrating from traditional to technology-based service systems.

Mk: How can service quality be defined and improved when the product is intangible and non-standardised? How can the organisation ensure the delivery of consistent quality service when both the organisation’s employees and the customers themselves can affect the service outcome?
Dr Parasuraman:
Services are indeed performances rather than manufactured products.   As such, in contrast to product quality – which is typically verified in the factory by examining whether the final product conforms to design specifications – the only meaningful way to judge service quality is to examine the extent to which the delivered performance meets the customers’ expectations.   In other words, the performance that customers believe an excellent service organization can and should deliver is the true standard for assessing service quality.   Therefore, gaining a good understanding of customers’ service expectations, as well as variations in those expectations across different customer segments, is essential for improving service quality.   Consistently delivering superior service quality is much more a matter of meeting and exceeding customers’ expectations rather than simply conforming to company-defined specifications.   One of the biggest shortcomings of service companies is a failure to understand accurately what’s important to customers.   Service companies are often quick to institute so-called service improvements based on assumptions about what’s important to customers.   To illustrate, a well-known four-star hotel in Spain in which I was a guest some time back offered a choice of ten different pillows to customers!   This unusual service might have really "wowed" me except that this same hotel failed to meet some of my basic service expectations (e.g., it neglected to give me a wake-up at the time I had requested one).   So, instead of pleasing me, the choice of a wide variety of pillows – a nonexistent expectation in my case and, I suspect, in the case of most hotel guests – actually magnified my frustration with the hotel’s failure to meet my basic expectations!   Another imperative for improving service quality is to "manage" customers’ expectations by making realistic rather than exaggerated promises, and by proactively educating customers about the their roles and responsibilities in obtaining service.

MK: How can new services be designed and tested effectively when the service is essentially an intangible process?
Dr Parasuraman:
Although services are intangible, principles and approaches that are analogous to those pertaining to new-product development can be used to design and test new services.   For instance, a technique called "service blueprinting" can be used to diagram an existing service process – by essentially mapping the various service steps and their inter-relationships – and to identify opportunities for streamlining and/or creating new versions of the current service process.   In addition, service companies can develop and systematically evaluate prototypes of new ways of delivering their services.   For instance, Bank of America has an "Innovation & Development" team that is charged with developing and testing different bank-branch formats consisting of various combinations of technology- and human-based processes.   New bank-branch prototypes are first evaluated, and if necessary refined, by bank employees; they are then subjected to "live" tests with actual customers in several locations in the Atlanta, Georgia. The new formats are rigorously evaluated in terms of customer reactions as well as financial metrics, and the most promising ones are identified for a market-wide roll out.   Citibank, which pioneered the introduction of automated teller machines, is another example of a service company that uses systematic and rigorous consumer research to evaluate new service-delivery systems.

MK: Pricing a service product is tricky because it is difficult to determine the actual costs of production. In such a scenario, what factors should be considered while determining a pricing strategy of a service product?
Dr Parasuraman: Pricing issues are indeed more complicated in the case of services because the "raw materials" – employees’ time and effort – are more difficult to track down on a transaction-by-transaction basis.   However, this does not necessarily mean that such tracking is impossible.   For instance, call centres can – and many do – keep track of the average time for, and hence cost of, handling different types of inquiries.   Through the systematic use of activity-based cost-accounting principles one can get at least a rough estimate of whether the price per transaction or customer covers the cost of delivering the service.   A more critical issue in the context of pricing services is whether or not a service company has an overall pricing strategy.   Because customers cannot examine a service prior to purchasing and experiencing it, the service’s price – along with its brand name – is a strong, and at times only, clue to first-time customers about what the service will be like.   The potential role of price as a quality signal is an important, but frequently overlooked, strategic consideration in setting prices.   Another obvious factor to consider is competitors’ prices for similar services. However, relying solely on and blindly matching competitors’ prices can be detrimental because it increases consumers’ price sensitivity, making it increasingly difficult to compete on anything other than price and to recover the cost of providing the service. Unless a company has a substantial cost-advantage over its competitors, competing solely o
n a low-price basis can suicidal. A more balanced pricing strategy that carefully considers cost of service provision, along with the implicit signals the company wishes to convey to its intended consumer targets, will be a much more appropriate and sustainable.
MK: Because most services are delivered in real time, service employees are a critical part of the product itself. How should a firm select, train and motivate the right employees so that the service level delivered is the same as the service level conceived by the management?
Dr Parasuraman:
Since a service is a performance, delivering excellent service can be considered as being similar to producing a play that captivates the audience. As such, consistent delivery of superior service requires that the actors (employees) are carefully cast (recruitment and selection), well choreographed (training), fully cognizant of how their roles interrelate (teamwork), and provided with the necessary behind-the-scenes support (incentives/rewards).   Thus, just as producing a successful play calls for considerable effort and hard work up front by the production company, consistently delivering quality service calls for true commitment on the part of the management.   Moreover, the service level and attributes specified by management must be aligned with customers’ expectations. Understanding what is truly important to customers in terms of employee-delivered service, translating that understanding into concrete service specifications, and then sparing no expense in ensuring that employees are able to meet those specifications are the hallmarks of true commitment to customer service.   A company that epitomizes such unwavering commitment is Southwest Airlines, the most consistently profitable air carrier in the U.S.   They have a distinct customer-oriented, fun-loving service culture, which they preserve with a passion because it is a key ingredient of their competitive advantage.   To continue to nurture this culture the company use a rigorous, multi-stage employee-selection process that includes such novel steps as including loyal customers as interviewers in order to ensure that those who are hired will fit into and foster the firm’s corporate culture.

MK: How does the firm communicate quality and value to customers when the offering is intangible and cannot be readily tried or displayed?
Dr Parasuraman:
In the case of services, "the proof of the pudding is really in the eating."   All marketing communications, regardless of how creative and clever they are, can at best only make promises to consumers about how good the service will be.   Making good on those promises heavily hinges on excellent execution, which, in turn, depends on the quality of the customer-facing employees, regardless of whether they are in marketing or some other functional area.   The best opportunity to truly "market" a service by demonstrating its quality and value is during its actual delivery rather than prior to purchase.   Moreover, excelling in service delivery is critical for another important reason – namely, current customers who are highly pleased with the service may be the best "marketers" of the service by virtue of their potential for generating positive word-of-mouth communication, which is a powerful promotional tool for recruiting new customers, perhaps even more powerful than company-generated promotional communications.
MK: In the Indian context, where price plays a major role in purchase decision, do you think companies can effectively compete on service? Why?
Dr Parasuraman:
I do believe that Indian companies can effectively compete on service; and they should strive to do so.   Competing on service doesn’t necessarily have to be expensive. Some aspects of providing good service (e.g., treating customers with respect) cost little, if anything.   Moreover, some forms of poor service (e.g., being rude to customers) may actually increase costs (e.g., the time and effort needed to handle complaints from irate customers). Ensuring superior service quality has much more to do with consistently meeting customers’ service expectations than with delivering the most expensive or luxurious service levels.   A case in point is Southwest Airlines, a company I have already mentioned.   They are a low-priced, "no frills" airline (e.g., they don’t offer pre-reserved seats and have limited, if any, food and beverage service on their flights); but they consistently deliver the level of service promised to and expected by their target segments (e.g., friendly treatment by employees and a "fun" experience during the flights).   Southwest Airlines have also done a good job of educating their target segments about what they can and cannot expect.   Such proactive and honest communications help "manage" customers’ expectations by keeping them at a reasonable level; this, in turn, paves the way for meeting and exceeding those expectations.   In short, low prices and good service are not incompatible; companies competing on low prices just have to do a good job of managing their customers’ service expectations and then capitalizing on every opportunity to exceed those expectations.