When the going gets tough...

When the going gets tough...
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First Published: Wed, Dec 24 2008. 09 50 PM IST

Harikrishna Katragadda / Mint
Harikrishna Katragadda / Mint
Updated: Wed, Dec 24 2008. 09 50 PM IST
Whether one likes to admit it or not, the fact today is that the world is in a recessionary mode and India is no exception. There will be winners and losers and mindset is what that will distinguish them.
India is a young country and most have not experienced the pain and agony of a global recession. US President-elect Barack Obama recently said, “At this defining moment, for the world we once knew is entering into a period of the unknown”. The Bric economies—Brazil, Russia, India and China—are also slowing. Several companies will not survive. Indian companies must take immediate notice. Like the Japanese and the Arabs before them, Indian companies have also boldly ventured overseas in a big way. They have paid top dollar for marque assets, but late in the economic cycle and are now facing a sharp downturn. This downturn is compounded by a global and local contraction of leverage, removing an important lifeline to battle tough times.
Harikrishna Katragadda / Mint
So what should a company do to emerge a winner?
A winning strategy can be crafted by addressing the fundamentals of business construct as encapsulated by the 6 P’s: product, promotion, price, proposition, place and people.
As for the first “P”, product, one needs to stay focused on profit and volume-delivery which mostly reside in the core portfolio consisting of the fast-moving SKUs (stock-keeping units or pack sizes) in most companies. Most often, the higher-end SKUs deliver greater margins and better value. Distribution and visibility of these SKUs should continue unabated. Format innovation can be a further stimulus. This will enable the consumer to stay within the brand franchise by moving to a more accessible pack size.
Never reduce its standards. Product quality is the hallmark of any brand. Even in times of financial downturn, savings at the cost of quality in product and packaging must be avoided. The way to maintain customer loyalty is by format innovation, as mentioned earlier, and not by compromising on quality. De-emphasize any new product innovation so that resources stay focused on proven fast-moving SKUs. This is not the time to launch a new brand.
One has to be creative and focused during a promotion drive under a recessionary cycle. The immediate instinct is to cut back on advertising and promotion. However, this may not necessarily be the most prudent thing to do. Building equity can result in a stronger position when the economic cycle turns. Maintaining relative share of voice-matching competitor reductions so that relativity remains can be a more meaningful approach.
Experiential marketing can be expensive. But it has the ability to create a sure-fire impact and reach the target consumer effectively with a sniper approach rather than machine-gun fire.
Refrain from deep discounting, so the consumer does not get “trained” to expect every day low prices which devalues the brand.
Pricing is another issue to handle with tact. Lead the price up but be ready to bonus-back by having the confidence that competition will follow suit. Remember they have the same margin pressures. Create a price ladder by introducing lower- and premium-priced variants. Simultaneously maintain price relativities versus key competition. Maximize opportunities for standard price brands and lower unit-price variants and formats.
The proposition then would be to direct all value messaging to the “front of the house” so that value-conscious consumers, who are most likely to switch, will remain in the fold. Gifts with purchase work well. Deliver higher perceived value to consumers through gift packs and limited editions, etc. Move from emotional connect with consumers to a direct tangible benefit. Communicate these in a focused fashion, ensuring the message is easily understood.
Place becomes crucial to engage with the customers. Show visible leadership with customers, especially the value channels, e.g., Metro and Big Bazaar. Achieve this by constant and consistent dialogue with these customers, thereby building an effective and profitable relationship with them. Be the first to identify changes in consumer shopping behaviour. Spend quality time in the market place; be at the “Gemba” with the consumers. Keep talking to multiple constituencies to form a 360-degree perspective. It is better to be armed with more marketplace information than less. Do not over-stretch distribution—be where it matters and cut uneconomic cost of reach.
Recognize people and keep celebrating people’s achievements. This will infuse pride and sense of ownership within the organization. Invest in the team and create a sense of “family” and “home”. This joint ownership will enable delivery even in a downturn.
And remember the speech that Hillary Clinton made at the Democratic National Convention in August, where she quoted Harriet Tubman’s advice: “If you hear the dogs, keep going. If you see the torches in the woods, keep going. If they are shouting at you, keep going. Don’t ever stop, keep going. And even in the darkest moments, find the faith to keep going.”
Asif Adil is managing director, Diageo India Pvt. Ltd. Comment at theirview@livemint.com
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First Published: Wed, Dec 24 2008. 09 50 PM IST