Rohit Deshpande

"Companies are Throwing Money at Social Media"

rohit deshpande

Rohit Deshpandé is Sebastian S. Kresge Professor of Marketing at Harvard Business School, where he currently teaches in the Owner/President Management Program and in other executive education offerings. He has also taught global branding, international marketing. In this interview he talks to Forbes India on various aspects of branding.

I came across an interesting an interesting article that you wrote for the Forbestitled “Branding Yoga: Good Business or Blasphemy?” Please tell us something about.
I wrote a case study called Branding Yoga. So my comments relate to that project. The first learning objective of the case is to ask the question can anything be branded?. The majority of the students say yes, anything can be branded. But the follow up question is, should everything be branded? And all of a sudden ethical issues and moral issues come up, in debating that question. It is a much more difficult question to answer.
Can you get into a little more detail?
The discussion broadens into this controversy over branding yoga. The particular controversy that got me interested into doing this case is something that I read about in The New York Times. There was a group of Indian Americans who had protested the commercialization of yoga and they said that it amounted to the commercialization of Hinduism. So they drew a parallel between commercialization of yoga and the commercialization of religion.
And how did that they do that?
In order, to make that argument they said that yoga is essentially Hindu and it would not exist if it were not were for Hinduism. This sparked a tremendous controversy that had to do with the history of Hinduism, the history of yoga, which preceded which one, can you teach Yoga without teaching Hinduism or is yoga all about exercise? That is really what fuels the case discussion. So, that is one set of issues that we deal with.
And what is the other set?
The other set of issues that we deal with is that there are two different branding models. One branding model is from Tara Stiles, who is a very successful Yoga teacher in New York. She is American. She is young. She used to be a model and a dancer and did Yoga herself as a way of keeping fit and started teaching her friends. They said there will be other people who will be interested. She made some free YouTube videos on this and they went viral. And then she started a yoga studio. Somewhere along the line, she became the yoga teacher of Deepak Chopra. He took lessons from her. He is a great fan of her brand of yoga and they have a joint venture . They made an iPad app, which has been very successful and even a DVD.
Which is the other model?
The other branding model is from somebody called Bikram Choudhury of Bikram Yoga. Now look at the contrast. Bikram is an American now but he was born in India. He was traditionally schooled and his brand of yoga focusses on the domain called hot yoga. It is extremely regimented and you have to be physically in a great shape to do that. And he has franchises. He has training programmes. He is much more of a yoga teacher training as a way of expanding the franchise, even though both are marketers. She is a much more of a social media type of thing. And both of them are successful. Both have attracted controversy, Bikram probably much more so, despite the fact that he is Indian and more authentic than she is.
What is the point you are trying to make?
Yoga has been very successfully branded, with different branding approaches and what makes it interesting is that in America the majority of yoga teachers don’t make very much money.
They have small studios. They are making a living. But they are not millionaires. Both Stiles and Choudhury have achieved a lot.
The ones who are not making haven’t branded yoga?
They haven’t thought about the branding aspects of yoga at all. I don’t know how it is in India, but this idea of the business of yoga, a lot of people look at it as an oxymoron.
You just talked social media. These days social media marketing is a huge thing. Does it work?
Of course it works. If done well, it works really well. There are a number of case examples of a number of companies that are doing a very good job. But it doesn’t work for everybody. Companies are spending a lot of money on social media. But a lot of it is experimental i.e. they are throwing money at something, and they are really not sure of what works and what does not work. We are at a nascent experimental stage where we are trying to figure this out.
Can you elaborate on that?
There are lots of examples of social media where the companies themselves are not sure whether the money is worth the spent. I am not sure I can isolate a social media disaster as much as companies not knowing whether they spent their money well. I would say 90% of the companies are in that group of not knowing whether they spent the money well.
Can you explain through an example?
It has to do with the appropriate success metric. How do you judge whether your social media campaign work has worked? One of the most popular metrics is the number of likes that you get. I have some colleagues who have done some research on this and they have found that likes do not translate into sales. When you think about it cognitively it doesn’t take a lot of effort to like but it takes a lot of effort, and not to mention money, to buy. Hence, click-throughs and getting sales, that is much much harder to measure.
So what is being done about this?
The companies are trying to figure out whether by spending more money they can get click-through , that is, translate likes into sales. But there are all kinds of other factors that might explain sales and how do you isolate it and so on.
Can you give us an example of a company which has used social media well?
I am developing a case on Dell. And they are considered to be a best practice example of using social media in the business to business space. What works for them is that they have a business model which is direct to consumer rather than going through retail. So they have open channel historically with their customers. They don’t get information on their customers from some sales partners, which means that when something goes wrong, they also find out very very quickly. And they have traditionally done that through their telephone lines. People call on their toll free lines when they have a problem. With the advent of social media, some irritated customers started blogging that they were upset at Dell, there is a problem that happened and so on.
And what did Dell do about it?
Michael Dell, who is the founder, is himself very active in the blog space and when he discovered this he told a team of his people that we should just reach out directly to these customers and fix these issues. When they reached out to fix these issues, the bloggers put blogs saying that here is what the company has done. Effectively, their bloggers were doing their job for them. As you know there is a lot of research that shows that restitution actually gets you a lot more business and than actually the initial sale does. And when the restitution story is being told by a customer it carries even more credibility. That is the story of how Dell got into this space. Now they have a command centre and they keep monitoring what is going on. It has to do with the complaint hotline or the repair hotline or whatever you call it, which is the history of the company. They have now translated this into the social media. They estimate that it has saved them a lot of money and a lot of loss, because of people who would have complained and gone away and scared other people from buying Dell.
Given your experience in the field of marketing and branding, which is the most frequent branding mistake that companies make?
The most frequent branding mistake is to assume that your brand is a logo rather than the personality of your product and company. To assume that its a simply a trademark and therefore it should be managed out of your communications department and maybe your legal department, rather than becoming a part of the overall strategy of the firm. In the research I have done this tends to be particularly true for technology intensive companies where the product is everything and the quality is everything. It is almost like a Dilbert cartoon which stereotypes marketing and says that marketing does not add any value and therefore branding is not very essential and it is all about the quality of the product. Companies in emerging markets are not comfortable with thinking about a brand as anything more than what their marketing people do. It is not seen as a part of the strategy of the firm. A brand is not seen as a relationship with a customer, it is seen as a trademark.
Can you give us an example which doesn’t hold true for whatever you have just said?
I wrote a case on Infosys and they have done an incredible job of making the Infosys brand mean something. Narayana Murthy in some ways represented the brand. The confidence that people had in buying from Infosys came from people who ran the company. The brand stood for more than just IT. The brand stood for the people and since 90% their sales comes from outside India, they actually had to brand India before they could brand Infosys. So there is a whole big story there of how India Inc came to be and what role Infosys played in it.
When brands become successful, the tendency is to extend it. Do line extensions work?
Line extensions do work but they don’t work in all cases. The Kingfisher story is an example of a line extension strategy that did not really work. Yamaha is an example of a line extension strategy that has worked very well. But I think the question is why the line extension? If the reason for the line extension is that you have built a powerful brand and want to milk it, then there is a chance that it won’t work. But if the purpose of the line extension is that it is something that the consumers want, then there is much more likelihood that it will work.
Any other point that should be kept in mind?
Another key part is that what does the brand mean? And does that meaning extend? The question for the Kingfisher management should have been what does the Kingfisher brand mean and how does that meaning translate from beer to airline? There are some brands that transcend the product category, in which case the brand might go across a whole variety of things. There are other brands where their meaning is very rooted in the product category, which is almost like the paradox of success. The brand is successful because people see it as Kingfisher means beer and it can’t mean anything else.
Do celebrity endorsements work?
The research on that is in this area called brand personality. Where the personality of the celebrity is consistent with the personality of the brand, it works. When there is a mismatch, then consumers are cynical and they believe that the only reason this person is speaking is because she or he is being paid for it, and they probably don’t use the brand themselves. I think that is the real issue.
Can you give us an example?
The bad example is the [James] Bond franchise. The BMW introduced a product called z3 through a Bond movie. It was for them a relatively inexpensive convertible car. This made a lot of news because James Bond was a British secret agent who used to drive a British Aston Martin and was now driving a German car. This made for good media. This was a very successful product placement. When that happened, not only BMW but a whole bunch of product companies decided that they would flood the next Bond film with product placements. There was a huge consumer backlash. Consumers were frustrated to the point that it was hurting the Bond movie franchise. People were saying that there is no way that the endorser is personally committed to all these different things but he is using it because he is being paid.
And a good example?
There are several examples of where the brand personality fits. An example of that is the basketball player Michael Jackson advertising Gatorade, which is a sports drink. And it went on for a very very long time.

The interview originally appeared in the Forbes India magazine dated July 10, 2014

Fifth anniversary of 26/11: The Ordinary Heroes of the Taj

rohit deshpandeVivek Kaul  
Rohit Deshpandé is Sebastian S. Kresge Professor of Marketing at Harvard Business School, where he currently teaches in the Owner/President Management Program and in other executive education offerings. Deshpande is the co-author(along with Anjali Raina) of the Harvard Business Review article The Ordinary Heroes of the Taj. He has also written a case study titled Terror at the Taj Bombay. 
On the fifth anniversary of 26/11, Deshpande speaks to Firstpost on the heroic behaviour of the employees of Taj Mahal Palace and Tower Hotel, which was occupied by terrorists for three days. “There was one person who was stuck at the Taj and who told this amazing story about a whole bunch of guests being surrounded by a group Taj employees, who calmed them. They surrounded them to make sure that they did not run all over the place and get into harm’s way. They later learned that these were interns, not even regular employees, who were taking care of guests,” says Deshpande.  
Give us some background how did the employees of Taj react on the night of 26/11?
The story is that the staff at the Taj reacted uniformly, and that same way was to protect the guest’s safety and to get the guests out of the hotel. Both actions came at the expense of the staff’s own safety. Several of them were wounded and a number of them were killed in the process of doing this.
Were they trained for doing this?
Staff members had no training in security measures. I interviewed people in the kitchen staff. The kitchen took the heaviest casualty. The reason for this was because guests could be taken out on to the road behind Taj through the the back passages from the kitchen galleys. So they started taking hundreds of guests out from the back of the kitchen. The terrorists got to know of this. There was a lot of media attention at that time and somehow they were signalled to this. They went across to the kitchen. The chefs formed a human barrier around the guests and took the bullets. A number of chefs were killed including the number two to Executive Chef Oberoi. There were a number of chefs who were killed and who had been working only for two or three years. Young chefs. These were people who had no training in security measures. And they were instinctively taking care of the guests, and taking them to safety.
That was very brave of them…
One of the people that I interviewed was the vice chairman of Indian Hotels(the company that runs Taj Hotels). He said, these are people who know all the back exits. And the natural human instinct, I am paraphrasing what he said, is to flee. So this is a very curious behaviour. The employees of the Taj Hotel chose not to flee but to stay and help guests out. And then comeback to help more guests out. Many of these people are the sole bread winners in the family. And yet they were doing this. This is counter-intuitive. There is decades of social psychology research that basically says that when there is a flight or flee response, and you are not trained to fight, so you flee.
When you started looking into the reasons, why do you think the staff reacted the way it did, inspite of the fact that they were not trained for it?
So here is the curious story. I asked this question to the senior management, when I was doing these interviews. And they did not know the answer. They could not understand it. Ratan Tata was one of the people that I interviewed. He could not understand it. Raymond Bickson who is the CEO of the company, he could not understand it. So, senior managers couldn’t figure it out. And I asked the employees. I asked why didn’t you run away. And people gave me all kinds of explanations. The General Manager of the hotel, Karambir Kang said, I come from a military family. When I took up this job as the General Manager of the hotel, my father always said remember that you are like the captain of the ship, you are the last one out. And that’s how I felt, I am the last one out.
He stayed on the ship despite what was happening to his own family. There were other people who said, they had more important things to do and so they stayed.
So basically people did what they did and they probably didn’t have an explanation…
It seems somehow what they did was instinctive. They didn’t really have an explanation for it. And we know for sure that they were not trained. But they were independently doing the same thing in different parts of the hotel. The same thing in the general part of it was taking care of the guests but it would translate into different things like calming guests, staying calm themselves, providing food and drink to people through the night. Remember, the attack at the Taj lasted three times longer than it did anywhere else. So actually it is interesting that the fatalities were not much much higher because it lasted three times as long.
So the kitchen etc were functioning?
They were functioning. There were banquet rooms that were sealed off, but they were providing sustenance to the guests in complete darkness. That was the curious part that the employees themselves could not explain.
So what is your explanation?
There is no simple explanation for it. Its a very very complex thing. In the Harvard Business Review(HBR) article that Anjali Raina and I wrote, we looked at the human resource policies, the kinds of people they recruit. How they train them. How they reward them. Undoubtedly that has something to do with it. Raymond Bicskon in his interview said, we hire nice people. You can train anybody to be good at housekeeping, but you can’t train them to be nice.
How do you hire nice people?
We get a little bit of that in the HBR article. There policies tend to be different from other companies. They go to small towns rather than large cities to recruit. This is actually counter intuitive because if you are trying to do recruit an employee who has to do a lot of guest interaction, you want someone who is cosmopolitan, can speak English fluently, can work with international clientèle, etc. You will think that you are more likely to find a person like that in big cities like Mumbai rather than small places like Nashik. They do the opposite. I think that is a part of it. I don’t think they were thinking that would lead them to be prepared for an attack like this. But they were thinking how can they have people who are ambassadors for their guests rather than an ambassador for their brand.
Why did you write only about the Taj and not the Oberoi as well?
There is no deep story to it. The background is that I was actually writing a branding case on Taj Hotels, in the spring of 2009. It was around the time Indian Hotels, had made this major strategic initiative to expand beyond the Taj line of hotels and add Vivanta, Gateway and Ginger brands. To my knowledge there is no other hotel chain in India that actually covers those market segments. So why were they doing this? I came to do that case. Every single interview that I did, the person that interviewed mentioned 26/11.
Why did that happen?
The context of mentioning that was a branding issue. We don’t know whether our brand has been forever besmirched by the tragedy. That people from here on will always associate the Taj with terrorism. The image of the Taj Palace Mumbai will always be an image coloured by smoke rising from the dome. These were the things that people I interviewed said. First, I was going to put that in the opening paragraph of the case but it did not make sense for a branding architecture case, which had nothing to do with. I asked if I could comeback and do a case that had to do with crisis management and brand resurgence. How do you bring your flagship brand back after the crisis? That was the story for the second case. The case was on the Taj. It was not a comparative case on the Indian hotel industry. It was a very simple case which had some marketing and branding angle to it and was focused on the Taj.
The reason for asking the question was very simple. After reading your case the first thought that came to my mind was how had the employees of the Oberoi reacted.
How did they react?
I don’t know.
I don’t know the answer because I don’t have the data. But here is the analytical point. When I teach this case, one of the learning points in the case is the meaning and management of culture. So normally when we teach the concept of culture in the MBA programme, our students are thinking of culture as in corporate culture. Here there are two corporate cultures. There is the Taj corporate culture and there is the Tata corporate culture. So automatically there is a nuance. Then there is the industry culture, which is the hospitality industry, under which will come the Oberoi and a bunch of other competitive hotels. Then there is national culture which has to do with values. Like one of the things that you know from this is atithi devo bhava, which is not a Taj thing. It is an Indian thing.
What are you trying to suggest?
If one thinks of a cultural explanation for the behaviour of the staff at Taj on the night of 26/11, it could be explained by a multiple culture interaction. If it was the hospitality culture that was dominant, one would expect the same thing to have happened at the Oberoi. If it was the Taj culture that was dominant one would expect this not to have happened at the Oberoi. If it was the Tata culture that was dominant one would have expected this to happen if Tata Tea, Tata Motors or TCS had had a crisis of similar proportion. I don’t have data for this but this is a part of our discussion in class, where students are actually trying to grapple with this notion and their learning expands beyond just going to the immediate i.e. what happened in that hotel. For us the learning is not about what happened in that hotel, but is this actually learnable, scalable and generalisable, outside of that hotel. That’s the classroom learning.
When you discuss this case, what kind of explanations people come up with for the behaviour of the Taj employees?
One particular explanation is that this is a one off that could only have happened at that particular hotel. It has to do with the 105 year old history of the Taj Palace hotel in Mumbai and the positive memories especially people in Mumbai associate with it. So, it couldn’t have happened anywhere else. It wouldn’t happen here, at the Taj Land’s End (where the interview took place) for instance. That’s one explanation.
There are explanations that say that this is all about India. It couldn’t have happened outside of India. There is something about the Indian culture that explains it. To some people its regional culture in South Asia or Asia in general and one would not expect this in the West. Then there are people who say this is trainable. This is coachable. This is to do with how you recruit people, and how you train and reward them. So there is a very very wide range of explanations.
You also briefly talked about the Taj brand being tainted with terrorism. How was that overcome?
One part of our discussion that we have during the case study is how do you get guests to comeback to the hotel, after a tragedy like this? This goes back to the issue of the brand being connected with terrorism and therefore people not wanting to go there because they were scared. Taj did an incredible job of reassuring people. If you recall there advertising campaign, they anthropomorphised the building and made it speak in the ad. It basically said, I have withstood generations and seen ups and downs of Indian history and I will stand strong. It was a defiant message, but it was as if the building was speaking. It struck a chord with people, to the point that when the Taj reopened, there were local people who went and lived there. This is an amazing story of resurgence. Also, it is worth remembering that this is happening at the nadir, the low point of the global financial crisis. Hospitality was one of the industries that was impacted the most dramatically. That means what? Luxury hotels occupancy rates were at an all time low, and then this thing happens. This could have wiped out the Taj brand completely. The fact that they rebounded and rebounded in such an amazing way, I think is a testimony to people’s connections with that company, with the hotel, with the staff and what they did in terms of actions and so on.
Anything else that you would like to add?
The other part of the story that comes out here is the Tata story that goes beyond the Taj. The Tata group is known for taking care of its employees. So there is a loyalty that Tata employees have towards their company and towards the Tata group. People that I was interviewing said that they were working for a higher purpose. And after the 26/11 you might know that the Tatas set up a fund to pay the medical expenses of those affected. What is interesting is that the fund covered not only the medical expenses of the Taj employees but everybody and anybody who was affected. This means that they were paying the medical expenses of not only the people who were at the railway station but presumably other people who were Oberoi employees. And that’s just mind boggling.
The interview originally appeared on www.firstpost.com on November 26, 2013
(Vivek Kaul is a writer. He tweets @kaul_vivek) 
 

FDI debate: Why Sushma should get the stupid-statement award

sushma swaraj
Vivek Kaul
It’s that time of the year when awards are given out of for the best things and possibly the worst things of the year. And the award for the most stupid statement of the year has to definitely go to Sushma Swaraj, the leader of opposition in the Lok Sabha.
During the course of the debate on the government decision to allow foreign direct investment into multi-brand retailing or what is more popularly referred to as big retail, she said: “Will Wal-Mart care about the poor farmer’s sister’s wedding? Will Wal-Mart send his children to school? Will Wal-Mart notice his tears and hunger?”
These lines sound straight out of a bad Hindi movie of the 1980s with dialogues written by Kadar Khan. Yes, Wal-Mart will not care about the poor farmer’s sister’s wedding. Neither will it send his children to school. And nor notice his tears and hunger simply because its not meant to do thatThis is because Wal-Mart is a selfish company interested in making money and ensuring that its stock price goes up, so that its investors are rewarded.
The same stands true for every Indian company which is into big retail (be Tata, Birla, Ambani or for that matter Big Bazaar). No company, Indian or foreign, into big retail or not, is bothered about the tears of the farmer. And neither is the government.
Let’s look at some other things that Swaraj went onto say. “The remaining 70 percent of the goods sold in these supermarkets will be procured from China. Factories will open in China, traders will prosper in China while darkness will befall 12 crore people in India,” she declared.
Already a lot of what is sold in India comes from China. Around three weeks I went around several electronic shops in Delhi trying to help my mother choose a refrigerator. Almost all Indian brands had compressors which were Made in China. If one takes the compressor out of the equation what basically remains in a refrigerator is some plastic and some glass. And all that is Made in India.
My television set which is a Japanese brand is also Made in China. A leading Indian electrical company buys almost all the irons that it sells in India from China and simply stamps its brand name over it.
A lot of pitchkaris that get sold around the time of Holi and diyas and electronic lighting that get sold around the time of diwali are also Made in China. As a quote from a story that appeared in The Times of India story earlier this year went “It seems that ‘Made in China’ has researched our festivals and sensed the need of the customers. For the past 10 years, the business of local sprinklers is decreasing due to stiff competition with Chinese sprinklers. We are facing huge loss, plastic powder through which the pichkaris are prepared locally are bought at Rs 100 per kg while at the same time, there is no subsidy or relaxation on the name of festival,” shared Bihari Lal, a local manufacturer and trader of sprinklers.” Chinese made colours also available during Holi.
And none of this has been brought to India by Wal-Mart. It was brought to India largely by Indian entrepreneurs and traders, a lot of whom form the core voting base of the Bhartiya Janata Party (BJP) and also fund the party to a large extent.
Made in China has become a part of our lives whether we like it or not and it will continue to remain a part of our lives, with or without Wal-Mart. If Wal-Mart does not supply us with Made in China goods, the Indian entrepreneurs and retailers will surely do, primarily because Chinese goods are cheaper than the Indian ones. Hence, what Swaraj wants us to believe is already happening with no Wal-Mart in sight.
The other point that comes out here is the ability of Wal-Mart to source stuff from China. This is not rocket science. Indian retailers can also do the same thing. As Rajiv Lal of the Harvard Business School told me in an earlier interview “If Wal-Mart is operating in Brazil there is nothing that Wal-Mart can do in Brazil that the local Brazilian guy cannot do. If you want to procure supplies from China, you can procure supplies from China as much as Wal-Mart can procure supplies.”
Swaraj also talked about predatory pricing that Wal-Mart would resort to. “These supermarkets introduce predatory pricing. At first, they will introduce such low prices, that will finish the rest of the market. Then when the customer has no other choice, they will keep hiking prices and looting the people,” she said.
This statement is also misleading As Rohit Deshpande of the Harvard Business Schoool told me in a recent interaction that I had with him “ For a company like Wal-Mart historical strategy is fairly easy to understand. It is to make a major branded product available cheaper. So you will have a wider assortment of branded product than any of their competitors that’s the first thing. The second thing is that they have private label. They keep increasing the percentage of their private label within each of their broad categories. So the consumers get trained to come to the store because they can find an assortment of branded products. And once they become loyal to your store then they find that they can make price comparisons within the store and they end up buying your private label. And then your margin is really so much better. It’s a strategy that has worked well for Wal-Mart.”
So for this strategy to work Wal-Mart has to ensure that they stock private label goods (basically their own brands) which are cheaper than other brands. Hence, Wal-Mart might decide to stock it’s own brand of soap which is lets say cheaper than Lifebuoy. For this strategy to work their own goods will have to be cheaper than other branded goods. Hence, it can’t keep increasing prices and keep looting people as Swaraj wants us to believe. Indians aren’t exactly idiots.
Also, if you have visited any of the big retail shops over the years you would have realised that these shops have been increasing the number of private label brands that they sell. As of now this is largely to limited to things like pulses, noodles, sugar etc. The point is that big retail in India is following the same strategy that Wal-Mart does worldwide.
The other interesting point that comes up here is that Wal-Mart is able to offer low prices primarily because of two things. One is the fact that it gets its real estate cheap because it typically sets up shop outside city limits. And two is the fact is the homogeneity of the population when it comes to consumption.
A typical Wal-Mart in the United States is situated outside the city, where rents are low. But such a strategy may not work in India. “It’s not easy to open a 150,000 square feet store in India. That kind of space is not available. They can’t open these stores 50 miles away from where the population lives. People in India don’t have the conveyance to go and buy bulk goods, bring it and store it. They don’t have the conveyance and they don’t have the big houses. So it doesn’t work,” explained Lal.
This is something that marketing guru V Kumar agreed with when I interviewed him sometime back. “Even if Wal-Mart is there in every place, the way they are located is typically outside the city limits. So only people with time, motivation and a vehicle, will be able to go and buy things. And the combination of these three things is very rare.”
The other factor as to why Wal-Mart may not be able to offer very low prices in India is because there is no homogeneity when it comes to consumption behaviour leading to a situation where the company may not have the same economies of scale that it does in other parts of the world.
As Kumar told me “Does the country as a whole consume common things or there are regional biases? In a country like Brazil people eat similar foods that every retailer can sell.” In India clearly things are different. “In India between South, East, West and the North, there is so much heterogeneity that you need localised catering and marketing. So consumption behaviour varies therefore unless you are willing to carry heterogeneous products in each of the locations it is tough,” said Kumar.
The point I am trying to make is that Wal-Mart is not such a big fear that it was made out to be by Swaraj. They do make their mistakes as well. As Deshpande told me “They have had hiccups in the interest of scale and cost efficiency. They have sometimes pushed products that did not make sense for the local market. An example, I believe it was in Argentina, where Wal-Mart, around July 4(the American independence day) had a lot of American flags shipped into their stores.
Pankaj Ghemawat, the youngest person to become a full professor at Harvard Business School makes an interesting point in his book Redefining Global Strategy. As he writes “When CEO Lee Scott (who was the CEO of Wal-Mart from 2000 to 2009) was asked a few years ago about why he thought Wal-Mart could expand successfully overseas, his response was that naysayers had also questioned the company’s ability to move successfully from its home state of Arkansas to Alabama…such trivialisation of international differences greases the rails for competing exactly the same way overseas at home. This has turned out to be a recipe for losing money in markets very different from the United States: as the former head of the company’s German operations, now shut down, plaintively observed, “We didn’t realise that pillowcases are a different size in Germany.””
Wal-Mart had to pull out of South Korea as well in 2006.
Hence, Swaraj could have clearly done some better research before making one of the most important speeches of her career. She could have read the recent column that P Sainath wrote in The Hindu , where he talks about Chris Pawelski, an American farmer and the onions that he produces.
As Sainath writes “While the Walmarts, Shop Rites and other chain stores sell his (i.e. Pawelski’s) kind of onions for $1.49 to $1.89 a pound, Pawelski himself gets no more than 17 cents. And that’s an improvement. Between 1983 and 2010, the average price he got stayed around 12 cents a pound. “All our input costs rose,” he points out. “Fertiliser, pesticide, just about everything went up. Except the price we got.” Which was about $6 a 50-pound bag. Retail prices though, soared in the same period. Distances are not the cause. The same chains sell cheap imports from Peru and China, driving down prices.”
The other interesting point that Sainath makes it that companies even dictate the size of the onions he produces. As Sainath writes “Pawelski held up the onion. “They want this size because they know you won’t use more than half of one of these in cooking a meal. And you’ll throw away the other half. The more you waste, the more you’ll buy.” The stores know this. So wastage is a strategy, not a by-product.”
Such examples on Wal-Mart and other big retail chains are not hard to find. A Google search throws up plenty of them. A speech against the negative effects of big retail should have been full of such examples instead of saying things like whether Wal-Mart will be bothered by farmer’s sister’s wedding. 
The article originally appeared on www.firstpost.com on December 5, 2012.
(Vivek Kaul is a writer. He can be reached at [email protected])

“Swami Vivekananda was a rockstar before they had a term like that”


Rohit Deshpandé is the Sebastian S. Kresge Professor of Marketing at Harvard Business School where he currently teaches in the Owner/President Management Program and in other executive education offerings. He has also taught global branding, international marketing, and first year marketing in the MBA program. In this interview to Vivek Kaul he talks about the provenance paradox, as to how companies from emerging markets find it very difficult to establish their brands globally, even though they have both the human as well capital resources required for such an effort.
Excerpts:
What is provenance paradox?
I have been interested in looking at the marketing problems of companies from emerging nations. The background is my previous work profiling the most successful companies in the world and doing that I found that these successful companies came from the developed world.  So they came from the United States, they came from Europe and Japan and so on.  The next phase was to identify who the next great multinationals are going to be. And my intuition was that they are not going to come from the developed world but they are going to come from the developing world given that they are hungrier, they are more innovative, and many of them have huge domestic markets, which is how these other companies from the developed world that I studied got started. They had access to big domestic markets.
What happened next?
When I started doing that work the marketing challenge that I found was a branding one. These companies from emerging markets wanted to build global brands and for some reason had difficulty doing it. So if you look at any ranking of the top 50 or the top 25 global brands, the BRIC nations (Brazil, Russia, India and China) are conspicuously absent, which is surprising because countries like Brazil, China and India, and to some extent Russia, have significant resources they can expend. This includes human resources as well capital resources. So it doesn’t seem to be a question of money.
Expend on building a brand you mean?
Yes. Expend on building the brand. That’s the barrier. It is not a question of ambition. It was a paradox and I couldn’t understand it. These are aspiratonal, ambitious, well resourced companies that don’t seem to be able to build global brands. Or at least not yet. One hypothesis when I was initially presenting this work was that people said that it takes a long time to build a global brand and that’s why. And it turns out that if you look at the top brands there are some that have come up in the last five years. On the technology side Facebook is a company that has built a global brand fairly recently. Google, has build a global brand in quick time.
Even a company like Apple which was down in the dumps…
Has risen to the top, number two, number three rank now. Excellent example. So it’s not a question of time. There is something else going on. The other thing that I noticed was that there is like a small area around Milan in Italy that has a bunch of them and they all happen to be in fashion, Armani, Versace and so on. And so I came to the provenance paradox. Why is it that when you say Made in Brazil or Made in India or Made in China people somehow discount? Is this soft racism? And that is one possibility. The fact that something is coming from China or from India, makes people say that it is just not good enough.
Even in India we don’t look up upon something that says Made in China…
The funny thing is that even in China they don’t look up to Made in China. You want to hear a story?
Yes…
I was talking to the person who runs the Asian operations for Prada. She was telling me that they are running short of artisans in Italy who can work with leather, silk and so on, to make purses. They have lost a generation of young people in Italy who have gone to work in factories. She said that the place that we find them is in China. They have retained these skills and they are cheap. The problem is she said that if it is a Prada bag or Prada shoes, that says Made in China, not only will they not buy it in Europe, the women don’t buy them in China  as well. So extremely affluent women in China will not buy Made in China. So yes this provenance paradox is a real problem and it’s a problem within the countries itself.
Can you give us some examples of the provenance paradox?
One of the first ones I encountered was Café Columbia, which is a social enterprise of the federation of national coffee growers in Columbia. The coffee growers have small plot of lands. So they formed a federation to help them market the product because they did not have the resources to market the product. These guys realised very quickly that they have a problem because they wanted to export and Columbia is seen as the exporter of the other “cash” crop. So in a country like the US which is the largest coffee consuming market in the world they couldn’t get any real penetration.
What did they do?
They hired an advertising agency on the Madison Avenue to create an advertising campaign around this fictitious coffee grower from Columbia called Juan Valdez who took great care of the coffee beans and picked up the best ones as he wandered through the hills. People developed a tremendous affection to this character and which passed onto the brand. They build something called 100% Columbian Coffee which is the brand. They had the country of origin in the name of the brand. And it’s an ingredient brand, meaning, that they don’t sell to retailers directly. They sold it to Nestle, who would put it into their Nescafe brand of coffee and said Nescafe 100% Columbian.
Any other example?
Let me give you another example that is very different. Corona beer. Does Corona sell here?
Yes.
The advertising for Corona doesn’t mention the country of origin, which is Mexico, at all. In fact what they do is they play off this whole lifestyle theme of vacation on the beach. The creative strategy for their advertising is sun, fun, beach, and vacation in a bottle. They have been extremely successful with it. People project themselves into those ads. The beach doesn’t have to be in Cancun (a seaside city with beaches, situated in Mexico). It could be in Riviera. It could be in Kerala. It could be anywhere in the world. But they built a successful brand by not saying anything about the provenance (i.e. the country of origin) and it is intentional. That’s what they wanted to do. They did not want to be clubbed with other Mexican beers which tend to be cheap. These guys price premium and they price the same level as Heineken in the US. And Heineken had been the number one imported beer brand in the US for fifty years since prohibition. They overtook them.
Any other example?
The third one is a case study that I have just finished and which I am teaching for the first time here tomorrow. It’s on Infosys. I knew that they had built a global technology brand but they had spent hardly anything on marketing or on advertising. In fact they don’t spend any money on advertising. I said how is it possible?  When I looked at their space there are other companies in that space which are spending a lot. Like there major competitors would be IBM and Accenture for instance, and they are spending tonnes and tonnes of money. These guys don’t spend.
So what do they do?
What they do is that they build personal relationships with their buyers, which is just amazing. They narrow cast this thing down. They know there target market very well which is really few companies. They know that there are five people who make purchase decisions within IT and they go after those people.  There information systems are just fantastic. They are serving clients who compete with each other on different floors of the same building. Just think about the security issues here. The amount of trust that they have engendered is absolutely fantastic. They build a trust mark and not a trademark.
Examples that you have given till now are on the positive side. Can you give us some examples on the negative side?
There are several companies that have had a really really hard time building a global brand. I have written a case study about the number one ultra premium vodka from Russia. It’s called Russian Standard. They have not been successful in the US market. A product called Grey Goose, one of the successful vodkas in the US, comes from France. Then there is Absolut which comes from Sweden. There is a product called Chopin which comes from Poland. They are all really good expensive Vodkas but they don’t come from Russia. So these guys said provenance is so important because people should know that vodka should be Russian. They are drinking French vodka. French champagne is okay. But French vodka? But Russian Standard has had a hard time. Americans are either not comfortable drinking a Russian product and still feel a little jingoistic about this. Or they don’t care where the product comes from.
Any Indian examples?
The Tatas have been trying to build a global brand. There issue is that they have so many different companies and they all have different brands. Let me talk about Taj Hotels. In the US they have acquired three properties. They acquired the old Ritz-Carlton in Boston and rebadged it. They acquired The Campton House in San Francisco and rebadged it. So the two hotels became the Taj San Francisco and Taj Boston. And they acquired The Pierre in Manhattan and it is still The Pierre because the co-op that owns it refused to allow the world Taj on it. So it’s the Pierre, a Taj Hotel company or something like that. And then it’s a Tata company. So there are three brands. There is The Pierre, there is the Taj and it is to be called a Tata Enterprise as the case is with all the Tata companies.
So they have got a problem then?
I remember talking to Ratan Tata once and he was talking about the acquisition of Tetley, a very huge Tata Tea enterprise. Should it be Tata Tetley or will that damage the Tetley brand?  They acquired Land Rover and Jaguar and they have been in automotive for a very long time. Should they be badging it Tata Land Rover? From your face you have already expressed an opinion, which I think they share. So they have had a problem building a global brand. When you grown by acquisition you acquire some brands that have their own equity, do you impose your own brand on them or you connect it in some way. It’s not that it cannot be done. Lenovo did it as an example of a Chinese brand because they moved out of Thinkpad which they used to make.
Since we have been talking about the Tatas, do you think the Tata Nano as and when it does manage to go abroad will face the provenance paradox despite all the publicity that it got initially?
The Nano will certainly encounter the provenance paradox and it’s a question of how they are going to get around it.  Geely, which is one of the largest Chinese automobile companies, has had a hard time penetrating outside China . So what they did was that they bought Volvo, which is a very well known Swedish company and they now have dealerships that sell both Geely and Volvo. The hope is that by association people will associate Geely with quality which is what Volvo is all about. Volvo is known for safety, durability and quality. Whether it will work or not we don’t know.
Something like a Yoga which has been a very successful Indian export to the US. Why did that not encounter any provenance paradox?
The story of yoga in the US goes back to Swami Vivekananda. He was the one who popularized India, Indian philosophy, Hinduism, eastern spirituality and a part of that was yoga. It had to do with meditation. It had to do with breathing. It was more of pranayam rather than the asanas. When he came to America he was so charismatic. He was a rockstar before they had a term like that. There would be audiences overflowing in Chicago, Los Angeles, New York etc. They would come to his lectures. He would be wearing a saffron robe and a turban and he would talk about his stuff. For the intelligentsia and the affluent it became a kind of a chic thing to explore India. This is way before the Beatles came to India for Maharishi Yoga.
This was the late 19th century…
So this was how it got started. Now fast forward to the last ten years or so. Yoga devotees in the US are largely the women. It is seen as a form of exercise that is low body stress, very healthy, and more natural exercise than what had been popular before and to some extent and still is, which is aerobics. Before that it was running. So yoga is seen as a better form of exercise than those and that is a big part of why yoga became popular. It does not anymore have a connection with Hinduism. And therefore not as much of a connection with India. So provenance has been disconnected from yoga.
And that has happened over a long time period of time?
It has happened over a long period of time but the popularity of yoga is relatively recent. It is now a $6billion per year industry in the US. And it’s a pyramid and only a few people at the top are doing very well. And there are lots of yoga teachers who are working out of a mall and who are eking out a living, but they don’t make much money. An example of someone who has done really well is Bikram yoga. I don’t know if you know Bikram Choudhury. So he has this particular kind. It has to be at a certain temperature. It is only 26 asanas. Then there is Tara Stiles. She is Deepak Chopra’s yoga teacher. She doesn’t say anything in Sanskrit. It is very new age. She uses social media a lot to communicate. So I think yoga been disconnected from provenance.
You write that Indian and Chinese firms that face the provenance paradox currently can learn a lot from the Japanese firms of the 1950s and the Koreans of the 1980s. Could you discuss that in some detail?
The Korean studied what the Japanese did and what the Japanese did was at the low end. You enter at the low end and come up with a really really high quality product which doesn’t break down. You offer it really cheap and nobody wants the low end because they are all busy moving up into the high end. They have got legacy investments so they got to charge higher prices. So you get in. You keep improving your brand and you gradually keep moving up.  The Japanese moved up as high as the market would let them. So in the case of Toyota it was Lexus. In case Honda it was Acura and in case of Nissan it was Infiniti.
And the Koreans learnt from this?
The Korean car manufacturers watched that and they are now outsmarting the Japanese in many ways because they are coming in with the same low end strategy but they are moving up faster. And they are moving up faster, so far at least, keeping the same brand. So Hyundai has been very successful. Kia has been very successful. The other examples from Korea are Samsung and LG in electronics. What they did is they looked at what Sony did and what Matsushita and what Panasonic did and they are copying that strategy but going one step better. So the Japanese are in a little bit of disarray right now for a variety of reasons and Koreans are overtaking them. Samsung is now taking away significant market share away from Sony.
So how would it work in the context of let’s say an Indian IT company like TCS?
We have already seen the IT companies like Infosys, TCS and Wipro, doing a very good job at the low end, which is basically what they were doing with call centre kind of work and business process redesign work. But moving up the chain is proving to be difficult. So here you are not just moving up in price but you are moving up in the nature of the service being offered because now you are getting into strategic consulting work which is a sort of the domain of the IBM’s consulting services or Accenture’s consulting services. And that’s become an issue. Also what has happened is a lot of these competitors like IBM and Accenture have said you know what if it is a labour cost advantage, let’s invest in India and set up huge operations there.
Yes that is true
So IBM’s largest employment is in India now. Accenture has huge investments here. And then what makes it even more serious for companies like Infosys and TCS is that many of their key clients have said that we will set up our own IT operations in India. And they call them captive. And they are saying that we don’t have to worry about somebody else’s security systems or value systems for that matter. We will train them. They are our employees. Fidelity which is a very large financial services institution headquartered in Boston has significant investment in India and they are planning to increase their headcount here. And a lot of that work was being done by Infosys.
So basically Indian IT companies cannot move on the up end and are also being hit on the low end?
That’s right. That is the big picture. All these strategies work for a while but then somebody figures it out. It is so dynamic and that’s what makes it so exciting.
Can you tell us something about the course you are teaching in India? 
It is a course that was designed at the Harvard Business School to cover topics of ethics and corporate governance. These were topics that were not being covered in any significant way in our curriculum. And after some history of trying to cover them within mainstream subjects like marketing ethics for instance or financial ethics, we decided to come up with a full course.
It’s a compulsory course?
It’s required first year MBA course. It’s taught not as ethics but it’s taught as a leadership course. And so one of the frameworks that we use is what we call the three lenses of leadership. And the three lenses of leadership are financial lens, the obvious one, the legal lens and the ethical lens. And the notion is that in framing problems you want use all three lenses. Students like to come to a business school because they like to learn about the financial lens. They are really not thinking about the legal lens. And they don’t even know how to formulate questions around the ethical lens. And that’s what we talk about.
The article was originally published on www.firstpost.com with a different headline on November 26, 2012.
(Vivek Kaul is a writer. He can be reached at [email protected])