Niraj Dawar, Professor at the Ivey Business School (Canada and Hong Kong), is a renowned marketing strategy expert who has also been on the faculty of leading business schools in Europe and Asia. He works with senior leadership in global companies and has executed assignments for BMW, HSBC, Microsoft, Cadbury, L’Oreal, and McCain on three continents, as well as with start-ups in the biotech and information space. His publications have appeared in the Harvard Business Review, the M.I.T. Sloan Management Review and in the leading academic journals. Most recently he has authored Tilt: Shifting Your Strategy from Products to Customers (Harvard Business Review Press, Rs 1250). In this interview he tells Forbes India why the opportunities of capturing value in the downstream are relatively neglected and have huge payouts when they are recognised.
Your follow up question to managers often is that why do your customers buy from you rather from your competitors. This is after you have asked them what business are you in. Why do you do that?
The reason I ask that question is to encourage managers to ask themselves that question because it really allows you to understand that the reasons that customers buy are related to the interaction between the firm and the customers. The reasons are often about reliability, trust, relationships, comfort, the ease of doing business and reputation. In fact, very rarely does the answer to this question has anything to do with better products or cheaper prices. The reasons are almost entirely between the softer aspects of the interaction between the buyers and the sellers.
What is the centre of gravity of a business as you talk about in your book Tilt?
If you look at the activities of a firm all the way from sourcing of their raw materials, transformation of those materials, production, innovation, and supply chains—then towards the downstream, customer acquisition, customer retention and customer satisfaction, those are all activities that the firm engages in. Not all of those activities contribute equally to the cost of the business. And not all those activities contribute equally to the value that the customer buys, sees, and pays for. And not all of those activities contribute equally to the competitive advantage of the company.
So what are you suggesting?
If we can answer the following three questions i.e. which of these activities accounts for the bulk of their cost? Which of those activities accounts for the value that the customer sees, pays for, comes back for, and becomes loyal for? And which of these activities accounts for the source of competitive advantage? If we can answer those three questions then we start to locate the centre of gravity of a business along the spectrum of value creation activities. And I believe that increasingly that the centre of gravity of successful firms is going to reside in the downstream activities, in the activities related to customer acquisition, customer retention and customer satisfaction.
Could you explain that through an example?
Imagine all Coca Cola’s assets i.e. there trucks, their supply chains, their factories, all their physical assets were to go up in flame overnight. How likely is it that they would be able get financing to start operations tomorrow? And the answer if you were to ask any reasonable manager would be that it is very likely that they would be able to get financing to start operations again tomorrow.
If you take the second half of the thought experiment and imagine that a colourless, odourless gas leaks out of a weapons research laboratory somewhere and it envelopes the world and seven billion consumers forget about the brand name Coca Cola and all of its associations. Now how likely is it that Coca Cola can get financing to start operations again tomorrow? The answer is quite unlikely. When you compare those two situations what you recognise is that sources of competitive advantage do not reside inside the four walls of the company but out there in the minds of the consumers. And they have to do with the brand and the reputation, and not the product. And that’s how a company’s centre of gravity can be assessed. So Coca Cola’s centre of gravity clearly resides in the market place.
Any other example?
If you take the entire pharmaceutical industry and map the companies according to their centre of gravity, the centre of gravity of some companies resides in the massive sales forces that they have, in the relationships they have with doctors, whereas for some other pharmaceutical companies their distinct advantage lies in the laboratory, in creating new molecules, in patenting them. The question I have is, which of these companies is in the driver’s seat? Who is acquiring whom? The answer is that the companies which have downstream assets i.e. the relationships with the doctors and the subscribers, are the ones acquiring those that have the patents. And not the other way around.
You talked about the centre of gravity of companies shifting downstream. Can you talk a little more about that?
Take Coca Cola once again. In most cities around the world you can buy a can of Coca Cola as a pack of 24 in a supermarket and it will cost you about 25 cents per can. Now consider an individual who is in a park on a hot sultry day and he has been out for two hours. He wants a Coke. He sees a vending machine and he can easily drop two dollars into the vending machine and get a can. The vending machine delivers to the customer a can of Coca Cola, at the point of thirst, in a single serve and chilled. For those reasons, single serve, at the point of thirst and chilled, the premium that is charged is 700%.
And the customer willingly pays for it…
Yes, there is a 700% price premium and the customer willingly pays that premium. Where does the value come from? The value came from a downstream activity of ‘how’ as opposed to ‘what’. It pays for the company to recognise these sources of value and to create ways of delivering and capturing that value. Many companies fail to recognise that. They build a product and they think that is the value they have created without recognising that there are opportunities around the product to develop offerings which are customised to the situation and the context of what the customer is looking for. Think about it this way, many companies spend a huge amount of money doing business process re-engineering, or reorganising their operations, or making their supply chain and operations more efficient. The result is a 2-5% cost saving,which might double their margins, which is huge. But think of the opportunities in the downstream where you capture 700% growth in value. If you compare these two, I believe that the opportunities of capturing value in the downstream are relatively neglected and have huge payouts when they are recognised.
Why are they neglected?
They are neglected because we have spent the last 250 years building factories, since Richard Arkwright, in the middle of the 18th century England, built the first one. Having built the factory one of the things he realised was that by streaming together all of the innovations in the textile industry like the spinning jenny, the flying shuttle, he reduced the cost of producing textiles by 90%. Even though he had reduced the per unit cost of production that came with the cost of leveraging. He had borrowed money to build these factories. So at the end of the month he had to pay interest regardless of whether he was able to sell or not. What happened was that his business became driven and obsessed with just one question, how much of this stuff can we sell. That was his obsession because everything else depended on that question.
And that’s carried on since then?
For 250 years strategy has been about how much more of this stuff can we sell. We have not asked the question what else do our customers need. We have not asked the question why do our customers buy from us and not from our competitors. These are downstream questions. The upstream question is how much more of this stuff can we sell or can we make a better product. We have had the factory at the centre of business. What I am arguing in Tilt is that the customer is at the centre of business.
So where does the title of your book Tilt fit into this?
Tilt is a shift in the centre of gravity from the upstream to the downstream. And I am arguing because costs, value and competitive advantage have shifted from the upstream to the downstream, management attention and strategy need to be focused on the downstream rather than the upstream. And that is why the title.
Do you see companies tilting?
I do see companies tilting. There are a lot of examples of things that companies can do to tilt. But I don’t see one single company doing all of those things. In other words, there are lots of opportunities even for companies that are doing one or two things well, to do the other things well. So Tilt is an incomplete project. It is happening but it is far from complete.
You also talk about some marketing myths in your book. Lets talk about some of those myths.
Sure.
Does a better product always win?
No a better product does not always win. If you look at the innovation graveyard, it is full of better products. What matters is the ability of a company to change and influence the customer’s criteria of purchase. Let me give you an example. For the last 25 years everybody has known that Gillette’s next product will be a razor with one more cutting edge. Why is it then that competitors have not pre-empted Gillette and come up with the next cutting edge before Gillette? Introduce five cutting edges when Gillette only had four.
Why has that not happened?
The answer is that customers only find it credible when it comes from Gillette. So four blades are better than three only if Gillette says so. There is no value for competitors to develop a better product unless Gillette develops a better product. What is driving innovation is not the better product. It is consumer’s acceptance of the better product. So downstream reasons not upstream reasons drive innovation. So is a better product the answer? No. Understanding customer’s criteria of purchase is the answer. Influencing that criteria of purchase is the answer.
Any other examples?
In case of mobile phones very recently the chip has become very important just like it became important in the PC industry during the 1990s. Now people are suddenly paying attention to questions like is it a single core or a dual coe? In fact, now we are upto quad core. Why are the cores important? There are technical reasons why they are important. For example, a mobile phone can shut down half the CPU if you are making a phone call rather than using graphics. Why is that important in a mobile phone? Because it saves battery life. And it allows you to have more functionalities with less battery life. You don’t have to recharge it as often. If you have a dual core it is a battery saving feature. If you have a quad core, it is an even better battery saving feature because you can shut-down three cylinders and run on only one cylinder when you don’t need the other three. When you need the other three they fire up quickly and you have all the four cylinders running. So its essentially that.
What is the point you are trying to make?
Right now we are upto quad core. And everyone wants a quad core phone. In China there is a company called Meizu and it has just launched an octa core phone. Consumer acceptance for octa core phones, even though everyone knows that the next logical step is octa core, is not there unless Samsung or Apple introduce octa core phones. Then it will become a criteria. Exactly like the blades. So what is more important? Is it technology? Or is the consumer’s criteria of technology? The answer is marketing. It is the downstream not the upstream.
The next marketing myth I wanted to ask you about is does it make sense to listen to your customers?
Not always. For a long time we were told that you needed to go and ask customers what they wanted. So you had focus groups. You ran surveys. You had questionnaires. All these were ways of finding out what does the customer want. That is really old technology. Today you find out what the customer wants primarily based on customer behaviour. What do they click on? Which products do they compare? Which pictures do they look for? How much do they pay today? How much are they going to pay tomorrow for same product? What is their price elasticity of demand? What is their cost elasticity of demand? You need to get deep into customer behaviour today simply by observing behaviour as opposed to asking.
Can you give us an example?
So Zara for example places products on the shelf. They will put 300 units in the store across 10-15 stores. If these units fly out of the shelf, then they put in 30,000. If they don’t sell, then they stop that product. They put in hundreds of new products every month. What flies they put in more of. What doesn’t fly, they cull. This approach is very different from asking the customer what he actually wants. In fact, it is cheaper and quicker for Zara to actually make the product and put it on the shelf and see if it actually sells, rather than ask the customer if you like the product.
But the thing with Zara maybe that it has a short turn around time, which may not be possible for other industries…
The answer is that it is becoming possible for more and more industries. In the textile business, the lead time used to be six months to a year. You had to plan the next winter season in January. And, showed that the model could be broken. They went down to a lead time of three weeks. I think there are many industries which are sitting ducks because of the long lead times that they have. They are still using the old technology of what do you think customers will want. And that is not viable.
The article originally appeared in Forbes India edition dated March 7, 2014
Coca Cola
Games companies play: Why you pay more while he pays less for the same product
Vivek Kaul
Indian Railways can even spring up positive surprises, now and then.
Recently while travelling from Delhi to Mumbai I was pleasantly surprised to have been upgraded from third AC to second AC. And this of course meant traveling more comfortably.
On entering the coupe in the second AC bogie I found an elderly lady already sitting there who somehow figured out that I had been upgraded.
“How can they upgrade you? You haven’t paid as much as I have!” she said.
And she was right about it. I was travelling second AC while having paid for a third AC fare.
Nevertheless, this sort of “price-discrimination” has now become a quintessential part of our lives. Airlines are an obvious example. You could have paid many times more than the guy sitting next to you because you booked the ticket two hours before takeoff and he had it all planned out three months back. Yours might be a business trip wherein you need to be a particular place on a particular day at a particular point of time. The person sitting next to you might be simply travelling for pleasure and could have thus planned it all in advance.
When books are first launched they are typically launched in the hardback form. A few months later a cheaper paperback is launched. The hardback is targeted at an avid book reader who just can’t wait to have his hands on the book, and so is ready to pay more. When the bestselling Shantaram first came out in India it retailed for around Rs 1200 in hardback form. Prices finally fell to around Rs 400 for the paperback, which was 66% lower.
But these as I said a little earlier are the obvious examples. Companies have also started using the discriminatory pricing strategy when it comes to electronic products. This has started to happen primarily because being spotted with the latest cell phone (be it an Apple iPhone 5 or a Samsung Galaxy G3) or a tablet (the Apple iPad) gives so much meaning to the lives of people these days. Till a decade back a man’s worth was decided by what he wore. Now it’s decided by the brand of cell-phone that he carries.
What was once a luxury became a comfort and is now almost a necessity for a large number of individuals. When such products are first launched they are targeted at the “geeks” or early adopters who find a lot of meaning in their lives by being the first ones to use the latest i-Pad/i-Phone and hence are willing to pay more for it.
Companies tend to exploit this human need by charging more for freshly launched electronic products. Of course, once companies have skimmed higher prices off these early adopters, they cut prices so that you, I and everybody else, can start buying the product.
In the apparel industry, fresh stocks go for higher rates towards the beginning of a season, whereas as the season ends the same set of clothes is sold at a discount.
The logic behind price discrimination is to divide consumers into various categories and get them to pay what they are willing to pay. As Seth Godin points out in All Marketers are Liars “Ralph Lauren generates a huge portion of its sales from seconds… There are so many of these stores that many of the items aren’t seconds at all.”
So those who are price sensitive buy the “so-called” seconds, those who are not buy the “so-called” originals. Companies try and cash in on this price sensitivity of consumers through price discrimination. Anyone living in Mumbai can go to Parel and buy all kinds of things from the so called seconds shops that swarm the area and get a good discount doing so.
As Jagmohan Raju a professor at Wharton Business School says in an article published by Knowledge@Wharton “Companies…charge people different prices depending on the buyer’s desire or ability to pay…They reap wide profit margins from those willing to pay a premium price. In addition, they benefit from high volume, even at a lower per unit price, by building a wider customer base for the product later.”
But this logic doesn’t always work. Consumers may not mind discounts for senior citizens or lower prices for early morning cinema shows, but they can be touchy about discriminatory pricing.
In the late 1990s Coca Cola developed a vending machine which charged the consumer a higher price on warm days. As Eduardo Porter writes in The Price of Everything “When Coke chief executive Doug Ivester revealed the project in an interview…a storm of protest erupted.” Coca Cola had to ultimately drop the idea.
In September 2000, it was revealed that www.Amazon.com was charging different prices for the same DVDs to different customers. The company denied segregating customers on the basis of their ability to pay, something they could easily figure out from their shopping histories.
The early adopters of Appne iPhone were an unhappy lot when in 2007, the company decided to cut prices of the 8GB model from $599 to $399 within two months of launching it. The company had to placate this lot of customers by offering them a $100 store credit.
However, there are no easy ways of ensuring that your customers do not feel cheated. One way is to differentiate the offering in some way. “Companies have to sell products that are at least slightly different from each other,” writes Tim Harford in The Undercover Economist. ”So they offer products in different quantities (a large cappuccino instead of a small one, or an offer of three for the price of two) or with different features (with whipped cream or white chocolate),” he adds. The products are marginally different, but it gives the company a reliable excuse to charge “significantly” higher prices. The next time you go to a coffee shop try this little experiment by just try saying no to everything extra that the barista tries to offer you and see by what proportion your bill comes down.
Book publishers tend to launch a book in a hardback form. The cost of production of a hardback is slightly higher, but the price difference between a hardback and a paperback is significantly different (as we saw in the case of Shantaram earlier). The hardback is just a way of telling the early buyer that the book firm is offering him something more.
Frequent flyer programmes work in a similar way where the frequent flyer may get a cheaper rate because he is a frequent flyer and thus other flyers do not feel cheated.
Companies practice price discrimination in the hope of raising their average price per unit of sale. This of course works if the core business model of the industry is strong. But even price discrimination cannot rescue a flawed business model.
A great example is the newspaper/magazine industry worldwide. It started putting news and analysis free online while expecting those buying the newspaper/magazine in their physical form to pay a price for it. Of course consumers will take what is free and shun what they have to pay for, especially if it’s the same product. No wonder, worldwide the industry is in trouble. While it was easy to put news/analysis free online and get the so called “eyeballs”, nobody bothered to figure out how would they go about earning money doing the same?
The other example of an industry which has been disaster despite all the price discrimination is the airline industry. As Porter points out “For all their efforts at price management, competition has pushed airfares down by about half since 1978, to about 4.16 cents per passenger mile, before taxes…In terms of operating profits, the industry as a whole spent half the decade from 2000 to 2009 in the red.”
At times companies end up in trouble because of price discrimination practiced by someone else. A spate of websites which sell books at a discount of as high as 40% have been launched in India over the last few years and this has led to bookstores getting into serious trouble. People now use bookstores to browse and check out what are the latest titles to have come out and then go home and order the books online at a discount.
Price discrimination is a new game in town and impacts consumers and companies in both good and bad ways. Hence it’s important, at least, for consumers to be aware when and where are they being price discriminated. Or else, they are likely to react like the old lady who travelled with me from Delhi to Mumbai.
The article originally appeared on www.firstpost.com on November 22,2012.
(Vivek Kaul is a writer. He can be reached at [email protected])
What the BJP can learn from Coca Cola?
Vivek Kaul
It was October 1990. I was thirteen. In a pre cable TV, multiplexes and mall era, just about the only thing that got a teenager in a small town excited, was the twice a week Chitrahar on Wednesdays and Fridays, broadcast by Delhi Doordarshan.
Unless of course there was a cricket match on! But cricket was not played as often as it is today. And not everything was broadcast on the state owned Doordarshan.
Hence it was very exciting when Lal Krishna Advani arrived late one night to stay “overnight” in the guest house in the colony I lived in. Advani, during those days, was going around the country as a part of what he and the Bhartiya Janata Party (BJP) called the rath yatra.
Early next morning, before he was supposed to leave, a small crowd which included me had gathered in front of the guest house. He came out and was requested to speak a few words. I don’t remember anything of what he said except the last line, which was “saugandh Ram ki khaate hain, mandir wohin banayenge”.
He was out of the place in five minutes. But the crowd that had gathered continued to mingle around. Some were happy at having seen him. Some were amazed to know that his rath wasn’t actually one. Some women spoke about the glow Advani ji had on his face. And some others were worried. “Mandir banega ki nahi?” they asked.
I pretty much had the same feeling as everyone else, but what I was most happy about was the fact that I would be a minor celebrity in the school next day, having seen Advani when none of my classmates had.
Advani was arrested a few days later before the rath yatra could enter Uttar Pradesh. As he writes in his autobiography My Country My Life “My yatra was scheduled to enter Deoria in Uttar Pradesh on 24 October. However, as I had anticipated, it was stopped at Samastipur in Bihar on 23 October and I was arrested by the Janata Dal government in the state then headed by Laloo Prasad Yadav (sic). I was taken to an inspection bungalow of the irrigation department at a place called Massanjore near Dumka on the Bihar-Bengal border (Dumka now comes under the state of Jharkhand).”
We all know what happened in the aftermath of the rath yatra. But as I grew older, I kept asking myself, why did Advani say what he did? Why was it so important to build a temple there? Didn’t the country have bigger issues which needed to be sorted out first? And so on.
Political party as a brand
All my questions were answered the day I realised that every political party is a brand and a brand needs to stand for something. It needs a story that can be told to people, so that people can go buy the brand by supporting it and by voting for it.
In the aftermath of Indira Gandhi’s assassination in 1984, the Congress Party had swept the Lok Sabha elections, with the BJP winning only two seats. Given the sorry performance the party needed to stand for something in the minds of the Indian voter.
Brand BJP was built on the war cry of “saugandh Ram ki khaate hain mandir wohin banayenge”. This ensured that the party was able to increase the number of seats in the Lok Sabha from 2 in 1984, to 88 in 1989 and 118 in 1991.
The party espoused for causes like making temples in Ayodhya, Kashi and Mathura. It talked about banning cow slaughter, having a uniform civil code, and doing away with the Article 370, that gives special status to the state of Jammu and Kashmir. All this was music to the ears of voters across Northern and Western India and the party catapulted from being a political front of the Rashtriya Swayamsevak Sangh (RSS) to having an identity of its own.
BJP’s story was that it stood for the cause of Hindus and Hindutva. And it was not the only political party that came with a story attached to it. Almost every political party that has risen in India in the last three to four decades has had a story attached to it.
The Kanshi Ram story
Kanshi Ram launched the Dalit Soshit Samaj Sangharsh Samiti or DS4 as it was more popularly called, with the war cry “Thakur, Brahmin, Bania Chhod, Baki Sab Hain DS4.” This left no doubt in anybody’s mind that Kanshi Ram and DS4 stood for everyone who wasn’t an upper caste.
Kanshi Ram probably realised the power of the slogan he had hit upon. He came up with another slogan along similar lines when he launched the Bahujan Samaj Party(BSP). “Tilak Tarazu aur Talwaar, inko maaro joote chaar” was the rallying cry of the BSP (with Tilak, Tarazu and Talwar being the representation of the Brahman, Bania and Thakur castes, the upper castes).
Or let’s take the case of Left Front in West Bengal. The front which comprised of various communist parties stood for what the Sonia Gandhi led UPA calls the aam aadmi. It positioned itself as being pro-poor and anti big business. When the Left Front first came to power, share croppers where handed over land after taking it over from wealthy landlords. Teak trees were planted in front of homes by Left Front members where a girl child was born, so that the tree could be cut when she was of marriageable age and money for the wedding expenses could be raised.
In the late seventies and early eighties the Left brand also stood for “trade unions” which bargained hard in the interest of the workers. This over the years ensured that most industrialists shut shop and left for other parts of the country. But this didn’t really have any impact on the voter base of the Left Front which remained committed because what the Front was doing was in line with the story it had sold to the voters.
Why the story is important
The story that a political party sells to its voters is very important and it should hold for a very long period of time. Take the case of Janata Dal which was formed by the merger of the various factions of the erstwhile Janata Party, which were the Lok Dal, Congress (S) and the VP Singh led Jan Morcha.
The story that the party successfully sold to the voters was that it would introduced 27.5% reservation for other backward classes (OBCs) in government jobs, as had been proposed by the Mandal Commission.
The story was lapped by the votes and the party won 142 seats in the 1989 Lok Sabha elections.
Despite student protests erupting all across the country, starting with Rajiv Goswami burning himself in front of Deshbandu College in New Delhi, reservations were introduced. No political party could be seen going against this legislation.
The trouble was once Mandal Commission became a reality what did the Janata Dal stand for in the mind of the voter? Nothing. This soon led to the regional satraps forming their own parties like the Mulayam Singh Yadav led Samajwadi Party in Uttar Pradesh, Lalu Prasad Yadav led Rashtriya Janata Dal in Bihar and the Nitish Kumar-George Fernandes led Samta Party also in Bihar.
The end of Janata Dal led to the coining of one of the most memorable though underrated slogans in Indian politics: “Thakur buddhi, Yadav bal, jhandu ho gaya Janta Dal.” (where thakur was in reference to VP Singh who was a rajput).
Hence a political party needs to stand for something in the mind of the voter. If it doesn’t it meets the fate of a party like Janata Dal.
If it ain’t broke don’t fix it
Buddhadeb Bhattacharya became the Chief Minister of West Bengal in 2000, taking over after Jyoti Basu had been the Chief Minister for 23years. Bhattacharya tried to get big business to come back to Kolkata, so that jobs could be created.
But the trouble was Bengal was not a state used to the ways of professional business. If BPOs had to set shop then they had to work every day their foreign clients were working. So was the case with IT companies. But in a state where bandhs were way of life, how would that be possible?
Buddha Babu asked his party carder not to disturb BPO employees on their way to work on “bandh” days. This was the first dint to the Left brand. Then the heavy industry companies wanted to set shop, given that labour in Bengal was cheaper than other parts of the country and the government was ready to welcome them.
This was where all the trouble started. Almost all land in Bengal is agriculture land. And every time an industrialist wants to set shop it leads to some farmers being put out of job. Things escalated when the party carder in Nandigram resorted to violence against farmers who were protesting. The same was the case with Singur, where the Tata Nano plant was supposed to come up.
When a communist party (or rather parties) start beating up farmers, it need not be said that it does do any good to the identity and brand and the story they have carefully cultivated over the years.
This in no way means that industrialization is not important or should not have been pursued by the Left Front government, but it was definitely not done in the way it was. This of course went totally against the anti industry image that the Left Front carried in the minds of people. The same Left Front whose trade unions went cholbe na cholbe na against industries and industrialists was now catering to their demands, felt people of the state. Communists had become capitalists. The practitioners of all that Karl Marx had espoused for were now vouching for the principles of Adam Smith.
There was clearly a branding problem. The gap was filled by Mamata Banerjee who now stands for everything that the Left Front had stood for, warts and all.
India shining
The year was 2004 and I was travelling in a local bus in Hyderabad, excited about the new mobile phone I had bought. The phone suddenly buzzed and it was a Delhi number, the first call on my new mobile. I picked up the call and heard the voice on the other end say “main Atal Bihari Vajpayee bol raha hoon”.
It took me a few seconds to realize that it was an automated call in the voice of the Prime Minister of the country asking the voters to vote for the BJP led National Democratic Alliance (NDA) in the upcoming Lok Sabha elections.
The party had decided to abandon its soft-Hindutva branding and decided to go in for what it thought was a more mass market campaign of “India shining”.
The party lost the elections and has been in opposition ever since.
What BJP can learn from Coca Cola
Donald R Keough, a former president of the Coca-Cola Company, in his book The Ten Commandments for Business Failure elaborates on what happens when the story associated with a brand is changed.
A slew of research and consultants told the top brass at Coca-Cola that people were looking for more sweetness in the product. This led to the launch the ‘New Coke’.
What followed was a disaster that went totally against what the consultants had predicted. People did not like the tinkering. And some of them started to hoard old coke, before the stocks ran out..
One day an old woman called a Coke call centre. Here is how Keough recounts this touching story.
. “It was an eighty-five year woman who convinced me we had to do something more than stay course. She had called the company in tears from a retirement home in Covina, California. I happened to be visiting the call centre and took the call. “You’ve taken away my Coke,” she sobbed. “When was the last time you had Coke?” I asked. “Oh, I don’t know. About twenty, twenty-five years ago.” “Then why are you so upset?” I asked. “Young man, you are playing around with my youth and you should stop it right now. Don’t you have any idea what Coke means to me?”
This made the top brass at Coke realise that they are not dealing with a taste or a marketing issue, but the idea or the story behind Coca-Cola. It was the “real-thing” and the consumers did not want any fiddling around with it. Immediately a decision was made to bring back the old Coke as “Coca-Cola Classic”.
To conclude
As marketing guru Seth Godin writes in All Marketers are Liars “Great stories happen fast. They engage the consumer the moment the story clicks into place. First impressions are more powerful than we give them credit for.”
Given this getting rid of first impressions in the minds of the voter is very difficult. This does not apply for the Congress Party, which has been around for so long that it doesn’t really stand for anything and hence can change forms like a chameleon.
So if the BJP has to pose any sort of challenge to the Congress led United Progressive Alliance (UPA) in the next Lok Sabha elections it needs to go back to what it has always stood for in the mind of the voter: Hindutva. Like Coca Cola, it has to go back to stand for what it used to in the mind of the voter.
What it needs to decide on is the degree of Hindutva? Does it want to follow the hard line approach that it did in the late 1980s and the early 1990s with slogans like “ye to kewal jhaanki hai, kaashi mathura baaki hai” or does it want to follow the soft Hindutva strategy that it did when Atal Bihari Vajpayee was at his peak.
Given this, there is no one better than leader than Narendra Modi who can project the attributes of the pro Hindutva line. The trouble of course with Modi is that he comes across as a hardliner. Hence it’s important for Modi and the BJP that the spin-doctors of the party get to work immediately trying to soften up his image, so that his acceptability goes up across sections he is not currently popular with.
(The article originally appeared at www.firstpost.com on June 6,2012. http://www.firstpost.com/politics/political-brands-what-the-bjp-can-learn-from-coca-cola-333964.html)
(Vivek Kaul is a writer and can be reached at [email protected])
“Marlboro is probably the best example of the power of a visual hammer”
Laura Ries is a globally respected marketing consultant. Ries has run Ries & Ries, a consulting firm with her partner and father, Al, since 1994. Together they consult with Fortune 500 companies on brand strategy. Her new book Visual Hammer is just out. “The critical missing piece in most marketing programs is a powerful visual that can drive a brand into the mind,” says Laura. This book outlines the steps a brand needs to take to develop a visual hammer.
In this interview she speaks to Vivek Kaul.
Excerpts:
You talk about marketing messages from companies ignoring half of the prospect’s brain. What do you mean by that?
Everyone has two brains, a left brain and a right brain, plus the corpus callosum connecting the two brains. The left brain is associated with verbal messages; the right brain with visual messages and is also the site of your emotions. If a marketing message is totally verbal, it ignores the right brain and especially the right brain involvement with “emotion.” What things do people remember the best? Those things that have an emotional connection. The day you got married. The day you had an automobile accident. The day you graduated from college. Etc. A totally verbal message is usually flat and unemotional. That greatly hinders the memorability of the message.
Could you explain this through an example?
The old-fashioned Coca-Cola bottle (which the company calls a “contour” bottle) communicates the fact that Coke is the original cola, the authentic cola, the real thing. Coca-Cola has also used the verbal (“the real thing”) but it just doesn’t have the same emotional impact of the bottle itself. Of course, the best strategy to use would be both. The Coke bottle (the visual hammer) and the verbal nail (“the real thing.”) They reinforce each other.
You say that most marketing messages are abstract ideas built around concepts like good consumer service, superior reliability, dependable performance etc. Why is that?
In general, a major corporation would first develop a verbal strategy for a brand. Then the company would “sell” the verbal idea to top management before they bring in an advertising agency to develop the idea. And since most corporate executives are left brainers, they readily accept verbal ideas. There is a lot of evidence that top management is dominated by left brainers. Right brainers are usually introverts and not very talkative. Left brainers usually are extroverts and very talkative. Now which type is likely to make it to the top of any organization? A quiet, introverted left brainer. Or a talkative, extroverted right brainer. When a CEO makes a speech, he or she usually stands behind a podium and reads from a Teleprompter or from a script. Totally word-oriented and a sure sign of a left brainer.
But exceptions are always there…
There are exceptions. Steve Jobs of Apple was a right brainer, but of course, he was once fired from Apple. After he returned to Apple, his “speeches” involved a screen 40-feet wide and enormous visuals, not exactly the type of speech a left brainer would make.
Could you share some of the most abstract marketing messages with us?
Here are some recent slogans from major global corporations. starting with the letters A and B.
ABB: “Power and productivity for a better world.”
Accenture: “High performance. Delivered.”
Acura: “Advance.”
Air France: “Making the sky the best place on earth.”
Audi: “Truth in engineering.”
BlackBerry: “Be bold.”
Bridgestone tires: “Your journey, our passion.”
British Airways: “To fly. To serve.”
None of these slogans can serve as verbal nails because they are not specific enough. They are typical abstract ideas that need to be brought down to earth before they can be visualized. I could go through the rest of the alphabet and give you dozens of similar slogans. All abstractions.
You write “Words are what they use the most and are most familiar with. Yet there is a lot of evidence that visuals play a far more important role in marketing than do words”. Why do you say that?
The reason Visual Hammer is such a helpful concept is that very few companies are actually using visual hammers. That’s why successful examples are few. The lime in the top of a Corona beer bottle. There were dozens of Mexican beers imported into America, but until the arrival of Corona none used a visual hammer. The lime help to communicate the fact that Corona is an authentic Mexican beer. Thanks to its visual hammer, Corona went on to become the best-selling imported beer in America and the best-selling Mexican beer on the global market. It also was ranked by Interbrand, a branding consultancy, as the 86th most valuable brand in the world (and the only Mexican brand on the list) worth $3.9 billion. The last time I was in Mumbai, a diner at the table next to us ordered a Corona beer. And sure enough, the waiter served the beer with a lime on top of the bottle.
Any other example?
The red soles of, a French designer who regularly tops The Luxury Institute’s index of “most prestigious women’s shoes.” In 1992, he applied red nail polish to the sole of a shoe because he felt the shoes lacked energy. “This was such a success,” reported Mr. Louboutin, “that it became a permanent fixture.” The red sole was the hammer, but what was the nail? It was the stiletto (heel heights of 120mm or more) which Louboutin helped bring back into fashion in the last two decades. To build a brand you need both: The red sole and the stiletto. Let me give you another example. BMW, for example, owns the word “driving,” an achievement that lifted the brand from nowhere into the world’s largest-selling luxury-car brand. But what put the “driving” idea into the minds of consumers? What’s was BMW’s visual hammer? It was a long-running, consistent series of television commercials showing happy owners driving their BMW vehicles over winding roads. “The ultimate driving machine” was the nail. But it was the visual hammer was put that idea into the mind.
You write in your new book “Unless there is an instant connection with a verbal idea, a visual becomes nothing but wasted ammunition in a marketing war.” Can you elaborate on that through an example?
There is a lot more to say about how visuals are received by the brain and how verbal messages are received. For example, you are driving down a street and a stoplight in front of you changes to “red.” Your foot hits the brake . . . without conscious thought on your part. That’s the right brain at work. If a stoplight used words (Stop, Caution, Go) instead of visuals, your left brain would have to first translate those type-set words into “aural” sounds that your mind could understand. That takes time and effort. You might be reading an article and you get to the end of a paragraph and suddenly think to yourself, What was that all about? In other words, it takes effort for your left brain to understand printed words. With a visual, however, your right brain can almost instantly understand a visual and react to it.
How is that linked to building a brand?
In building a brand, however, visuals are only effective if they “say something” about the brand. Advertising is filled with visuals, but very few visual hammers. It’s only things like the Coke bottle (authentic cola), the lime on top of a Corona (authentic Mexican beer), the TV commercials showing happy BMW owners (the ultimate driving machine), which hammer the nail in.
You have repeatedly talked about the visual hammer hammering the verbal nail. What do you mean by that?
The Marlboro story is probably the best example of the power of a visual hammer. We don’t like to feature it, however, since smoking is such a health hazard. Before Marlboro was launched, there were four exceptionally strong cigarette brands in America: Lucky Strike, Camel, Chesterfield, Winston. All of these brands were “unisex,” in the sense that they appealed to both men and women. In general, they pictured both men and women smoking.
Marlboro narrowed the focus to men only. (Another strategic concept that we strongly recommend for an also-ran brand.) In other words, Marlboro wanted to become a masculine cigarette. And the cowboy is perhaps the best visual to use to communicate the masculinity idea.) In America today, Marlboro outsells the next 13 cigarette brands combined. Marlboro is also the largest–selling global cigarette brand.
Why is it very difficult today to put a verbal idea into a consumer’s mind without a visual hammer?
The world is awash in words. This is especially true because of the Internet. Consumers are drowning in Emails, Tweets, Facebook pages and other web-oriented media. To cut through the clutter with a verbal message only is extremely difficult unless you have a revolutionary development. And if you have a revolutionary development, you probably don’t need much marketing help. In 2010, the five largest advertisers in America were AT&T, Verizon, Chevrolet, Ford and Toyota. Together these five brands spent $6.9 billion on advertising. What was the verbal idea, or slogan, used by each of these brands? I’ll guarantee that few consumers would remember. Here they are.
AT&T . . . “Rethink possible.”
Verizon . . “Rule the air.”
Chevrolet . . . “Chevrolet runs deep.”
Ford . . . . “Drive on.”
Toyota . . . “Moving forward.”
None of these slogans can be effectively visualized into a hammer. That’s why, in spite of the $6.9 billion, most consumers don’t remember them.
Could you share some marketing messages from companies which have good visual hammers and why do you think they are good?
In general, it is difficult to create a memorable visual hammer. One exception is for leader brands. Any simple visual used consistently with a powerful leader brand can become a visual hammer.
The “Golden Arches” of McDonald’s.
The “Swoosh” of Nike.
The “Tri-Star” of Mercedes-Benz.
What these visual hammers are communicating is “leadership,” and leadership is probably the most important verbal idea for a brand. If consumers perceive your brand to be the leader in a category, your brand can maintain that leadership for decades. Hertz in rent-a-cars. Kleenex in pocket tissue. Heinz in ketchup.
You say that unlike a verbal idea, a visual hammer can cross International borders with no translations necessary. Could you explain that through an example?
The Coke bottle, the Marlboro cowboy, KFC’s Colonel Sanders, Mercedes-Benz’s Tri-Star, Corona’s lime are all global visual hammers that say something about the brands. Coca-Cola is sold in 206 countries and 74 percent of the company’s revenues come from outside the United States. Coca-Cola can use the same contour bottle visual in every country, but trying to translate a single slogan into dozens of different languages would be very difficult. And sometimes a verbal slogan just cannot be translated into another language. For example, my dad (marketing guru Al Ries) wrote a book called “Bottom-Up Marketing,” a verbal idea that works well in English. But the Spanish translators of the book couldn’t find any Spanish words that could capture that idea. (They were all vulgar expressions not suitable for a book title.)
Coca-Cola’s exceptionally-strong visual hammer puts its major competitor in a difficult position. What should Pepsi-Cola do?
Narrow its focus. In general, you cannot find a visual hammer with a broad conceptual idea. You have to narrow that idea. For example, BMW could have used “performance” as its verbal strategy, but how would you visualize that verbal idea? Instead, they narrowed the focus to “driving,” an aspect of performance. That allowed them to run “driving” TV commercials to drive in the idea to prospects.
So what is Pepsi-Cola’s new verbal strategy, just announced last week. “Live for now.” How can you visualize a conceptual idea like that? You can’t. Years ago, Pepsi-Cola had a verbal idea that could be visualized. “The Pepsi Generation.” In other words, Pepsi was appealing to the youth market, the Pepsi generation, a narrow-the-focus concept. That idea could have been easily visualized. As a matter of fact, even today, most consumers remember The Pepsi Generation, but none of the dozens of other slogans the brand has used.
You write “Today, “The real thing” lives on in newspapers, magazines, books and television shows in spite of the fact that Coca-Cola used the slogan only once, for just two years, more than 40 years ago.” The real thing was a slogan that Coke used just once for two years, 40 years ago. But it lives on. So why does the company keep coming up with all these different slogans which no one can remember?
The dominate concept in the advertising field is “creativity.” Ideas are evaluated based on how creative they are. But what is creativity? An idea is usually considered “creative,” if it’s “new and different.” An old idea used before can never be considered “creative.” That’s why Coca-Cola refuses to use it. There’s also the influence of the advertising agencies that handle big accounts like Coca-Cola. Advertising agencies live or die based on their abilities to win awards in the annual creative contests. And you can’t win an advertising award if your advertising is not creative. Take Marlboro which has used cowboy visuals ever since its launch in 1953. I don’t believe Marlboro has ever won an advertising award because its advertising is not “creative” in the usual sense of the word.
(The interview was originally published on May 14,2012, in the Daily News and Analysis (DNA). http://www.dnaindia.com/money/interview_marlboro-is-probably-the-best-example-of-the-power-of-a-visual-hammer_1688368).
(Vivek Kaul is a writer and can be reached at [email protected])