Designation: President, All India Management Association; former vice president, Nokia (Middle East, India and Africa)
The Perspective: Marketing is a challenge in the face of the changing demographics in India. The task is tougher for MNCs that don’t give local competition its due.
Marketing has evolved dramatically over the last 30 years. In 1984, when I was a student at IIM Calcutta, colour television and Asian Games were instrumental in bringing about the biggest change. Till that point, distribution had been the backbone of marketing. FMCG majors like Hindustan Lever [HLL, now HUL] and ITC used to send vans to villages to show movies on products. Advertising on television was limited as it was on radio. But within a year of the introduction of colour TVs, each product category grew by 85 to 100 percent. Three companies —Vicco Laboratories, Nirma and Vicks—rode this wave the best.
Television changed the way brands communicated with consumers. During my travels in Kerala in the late 1980s, as an intern at HLL, I remember being at a shop when a boy came in and asked for Pan Jam. The shopkeeper told him he didn’t have it. But I was curious, so I asked the boy where he learnt about the product. He said, “I watched it on TV.”
In the next 15 years, as I learnt the ropes at HLL, there were several inflection points that had an impact on marketing. In 1991, the maximum retail price, or MRP, printed on each product started including taxes. Shopkeepers didn’t have to waste time and energy calculating taxes. Celebrities started endorsing brands. Amitabh Bachchan and Shah Rukh Khan were the first to understand the power of endorsements. Bachchan had a kitty of 60 brands and each one of them grew. This was unlike in the West at the time, where Hollywood actors thought appearing on the small screen reduced their stardom.
In 2003, I joined Philips, another MNC major. By then technology had become the decider in defining the lifespan of a product. Some of the early television brands, including Keltron and Uptron, didn’t exist anymore. This was changing mindsets. There was a time when businessmen believed having a licence to operate was enough to make profits. That was no longer the case. One needed to invest in R&D. The first-mover advantage didn’t work in isolation.
Technology was a huge focus area at Philips, primarily because it was changing fast. In 2002, there were 30,000 outlets in the consumer electronics sector to distribute television. Contrast that with this: Within a year of their introduction, DVDs were being sold at 40,000 outlets. Also, consumers started depending less on retailers to make decisions. Instead, they trusted the brands. They had realised that retailers would push only those that yield higher margins. Companies, therefore, took the exclusive brand outlet route—India probably has the highest number of them.
When I joined Nokia in 2006, many thought that I had made the wrong decision. But I was confident. In one of my first presentations to the senior management of the company, I told them the market will expand from 60 to 800 million in our lifetime. No one believed me but it has happened. This is the result of a combination of factors. The government brought in a new telecom policy. Handset makers introduced affordable products across segments. And the network providers focussed on building infrastructure and created talk plans that attracted customers. The whole industry gained in that first phase and telecom became the poster boy for growth in India.
STEEP LEARNING CURVE FOR MNCs
While the 1991 reforms opened up the economy, I believe that the 2001 BRIC report by Goldman Sachs got India far more attention and created interest among international investors. It was the biggest advertisement for India and got the multinational companies excited about the potential.
Now an MNC is ruled by Wall Street, City of London and Hong Kong. The investors there reward predictability and abhor the uncertainty of the emerging markets. In India, one needs patience and it can take up to 10 years for a business to click. This country’s market is a value market which bears fruit by working with ambiguity—you have to be comfortable with it.
MNCs understand each other’s strategies. But local competition plays by different rules and should not be underestimated. For instance, in the handset market, you have to give full marks to the local entrepreneur who first spotted the trend of dual SIM.