Friday, August 29, 2008

a new generation of consumers

The new-age marketer must don multiple hats of a sociologist, psychologist and anthropologist too. After all, markets and consumers are changing and to stay ahead in the race, marketers must stay on top of changing paradigms

When Toyota’s sales fell this May, the Japanese auto major immediately revamped its marketing strategy and decided to take a closer look at its potential customers. They found a group that no one had taken seriously – the African American Women. According to the 2005 US census data, it’s the black and Asian women who are better educated and earn more than their white women counterparts. From this June, Toyota launched an innovative ‘reality-game’ targeting this segment which would feature a black women and her new Camry. The aim: to change the perception of the car from suburban, solid, but boring, to urban and exciting. No one till date had focused on African American Women like this and made advertisements to appeal to them. Toyota might yet again defeat its competitors through its better understanding of consumers.

The July issue of the fashion magazine Vogue has been a runaway hit. In New York City, newsstands that carried the issue sold out within hours. The Italian Vogue’s July issue was dedicated to black models. The idea was such a big hit, and the buzz around the product was so positive that it created a demand that newsstand operators had never seen before for a foreign publication. People had to put their names on waiting lists to be able to grab a copy from the second lot of reprints. It was a dream run situation for any publication house. Yet when the issue was being launched, there was speculation that it would not sell. Everyone was proved wrong. Interestingly, there were hardly any advertisements (in this hot-selling-black-issue) which featured black models… A lost opportunity for many brands to connect with their target audience.

The world is changing

Barack Obama might just become the first black President of America. Hispanics have accounted for about half of the growth in the US population since 2000. Their buying power in increasing too, and so is the buying power of Asian Americans. Things are changing. According to a report by McKinsey, till 1985 more than 90% Indians lived on less than a dollar a day. That’s changed today and the number of deprived households has decreased from 93% to 54% of the population. Not just this, these days a global Indian earns more than a million rupees on an average.

In America, by 2040 half of all population will consist of what are now called minorities. Global fertility rates are falling constantly. In Australia, Estonia, Singapore and Scandinavian countries, birth rates have minimised to such an extent that governments in these countries have been forced to device incentives to increase childbearing to ensure national survival.

America is not a young nation any more. Its Baby Boomers (those born 1946 to 1962) are now aging. This group has dominated the demographic landscape for decades and shaped marketing strategies. It’s time marketers sit up and take note of the changing demographic trends & device strategies accordingly.

The changing consumer

Indians are getting younger and richer, Americans are getting older and richer. World over there is a change and companies are responding. With a change in demographics, comes a change in psychographics too (change in values). Baby Boomers of America today value things like increased quality of life, moral standards, balancing family & work, or issues like health and personal meaning. In contrast, the new Indian consumer values branded clothes, appreciates the convenience of packaged foods and no more considers buying gold a good savings plan or investment. The new and rapidly growing middle class may still not have deep pockets, but they certainly have rising aspirations and a whole lot of companies are filling up this void. A car is what many households desire the most. Maruti has tied up with SBI and is now offering customers a chance to buy their dream vehicle at installments that are less than those of a motorbike. Not to forget Tata and their Rs.1,00,000 car – the cheapest in the world. These companies are not working on large margins, but large volumes, and are hoping for a release of a huge pent up demand. They may just be on the right track, discovering a vast fortune at the bottom of the pyramid.

Arvind Mills has made a ‘ready-to stitch’ jeans kit for rural India (which still doesn’t trust readymade clothes and for the first time has purchasing power too). The innovation was bang-on-target and within a month more than a million of these kits were sold. Videocon has come up with a $66 washing machine, which apart from being cheap has features that suits Indians. For example, if during a wash the power goes off, the machine will automatically finish the wash. Besides, it does not have features like a dryer (which increases costs), as the Indian climate is anyway warm enough to facilitate drying clothes in the sun, all year round! As the consumer gets ready to spend, companies must not waste time and develop products to suit changing needs.

If Indians are getting affluent in India, it’s the Hispanic market that’s showing a lot of activity in the US. The media company ‘Todobebe’ realised there was a dearth of information on parenting and pregnancy in Spanish and provided the same via its print, online and television outlets. Considering the fact that the number of babies born annually in US to Hispanic parents is poised to cross the million mark this was a good move. On the other hand, there are still many companies (selling baby-related-products) who have not tuned into this market and changed their marketing strategies. This means more than just bilingual ads or translating packing & advertising text in Spanish. It means understanding their culture & responding to it. It’s like doing what Sovereign Bank has done in Boston. The bank has a 100% Chinese-American staff that understands the needs of the very affluent and vibrant Chinese-American community of Boston. According to its CEO, Jay S. Sidhu, “People have such an affiliation with that bank that they travel from far off places of Boston to bank there.”

Multicultural marketing is the need for the day. Look at Colgate-Palmolive. With its belief and commitment to multiculturalism for over 20 year now, it’s no surprise the company enjoys a 53% market share, especially among Hispanics – Americas fastest growing and affluent community. It sponsors various Hispanic events and has extensive work force diversity programmes. According to a survey a whole lot of US businesses today are unprepared for changing workforce demographics, which is not good, as they could just be caught napping by their competitors.

Companies need to understand their workforce as well as well as their customers. After all your employees are your first consumers. With baby boomers declining, it’s the millennials who are now coming up. If the former were very ostentatious, the latter are grab-and-go and convenience oriented. Today salad-bars generate the majority of sales at corporate cafeterias. Hot food that makes up 35% of labour cost generates about 15% of all sales today. Clearly, it’s a new generation of employees, consumers societies and those who adapt and adapt fast that will survive. The rest would perish.

Just change and more change

Fast food today is considered bad. Walking into office with a burger is frowned upon, walking with a salad box or a whole wheat brown bread sandwich is trendy. It’s no accident that chains like Pizza Hut & Nandos are changing their menus too. Pepsi changed its focus from the fizzy cola to Gatorade (the health drink) and beat its old rival Coca-Cola. Tastes are changing and branding techniques are changing too. Kellogg’s has realised that today’s kids are smarter and need to be marketed to differently. Today’s children don’t just watch cartoons on TV, they watch big-budget animated movies in theaters and also are regular users of computers. Kellogg’s now has a flashy website and indulges in big budget movie tie-ups to increase its sales.

Today’s generation hates being marketed to. You do it, they tune off, so bragging about your product will not go down well with them. You need to work toward connecting with them innovatively. The web is gaining prominence as people are connecting more and more and just as positive feedback is spreading fast, so is any negative comment about your product or service. In a nutshell, all marketing theories are going to change or be modified in the near future. Your existing customers are getting older & wiser and your new consumers are those who never featured in your radar earlier. No wonder multicultural & ethnographic research is gaining prominence. Brands that understand changing needs of today’s consumers and brands that identify and quickly spot potential consumers will be the choice of this new generation of consumers.

Friday, August 1, 2008

Shakespeare needed marketing lessons

How much would you pay for a pair of shoes? $3,400? Don’t gasp. For that’s the amount a lot of people cough up for a pair of “Manolo Blahniks”. His clientele is devoted, addicted and madly in love with his creation. Kim Kassel, a former New York fashion publicist owns more than 100 pairs and finds it difficult to buy any other brand.

When Ikea, the world famous Swedish furniture retail store giant, opened its first store in Atlanta (USA), you could feel the passion, the excitement people felt. One guy went to the insane extent of pitching his tent seven days before the opening so that he could win the $4,000 gift card. Before the doors opened, there already was a long line of 2,000 customers behind him.

Harley Davidson has the most dedicated customers who also belong to its 8,86,000 strong Harley Owners Group. They meet annually and discuss and enjoy their Harleys.

When Krispy Kreme opens its new store anywhere, some camp outside it overnight, others line up for hours for the first bite of its soft sugary doughnuts.

For music lovers, nothing can beat the iPod. An Apple store is the hottest destination for youngsters, for its loaded with cool stuff. When Apple puts on its MacWorld expo, thousands flock to it and walk around as if in a trance, dazzled by the beautiful creations. If there is one company that has totally turned all business rules upside down and shown the world what innovation really means, it’s Apple. These are “cult-brands”, that have won for themselves near-fanatic followership. These brands have become cult brands because they are selling not just the product but a dream, an aspiration, a passion. So how are such brands created?

Crazily Enterprising and Obsessive

That’s the new definition of a CEO who can make cult brands. Unlike earlier norms of financial know-how being the most important requirement for attaining the top-most position in an organisation, today, it’s the knowledge of marketing, and an excellent grasp over brand building strategies that companies are looking for. You need the top guy to be one who understands the importance of investing in Brand building. Since this does not always show results in the short-run & hence requires a long-term commitment from the top, all those companies that did that, are today reaping rich dividends. When you build a brand, you build a unique identity that consumers love and respect. This differentiation helps the company survive in the long run.

“Our stores have become a gathering and meeting place in addition to the coffee,” says Howard Schultz – the CEO of Starbucks, “Starbucks represents something beyond a cup of coffee,” he adds. When people go to Starbucks, they go to not just to have a great cup of coffee [which can be easily copied by various competitors], but to enjoy its unique culture – which is the heart of the brand [no one has ever been able to copy the heart & soul of a company].

Apple is loaded with engineers. Not just engineers, but ones who have the passion to “emote,” whose eyes light up when they discuss the product features. After all, Jobs is no ordinary CEO and hence he doesn’t hire ordinary people. His genius and his obsession have given Apple its unique environment of innovation. Steve Jobs is so crazily involved with his inventions that he considers it futile to do market research or focus groups. For him, new product development starts in the gut and takes form with the help of talks & discussions with equally obsessive team mates. It’s no surprise that this year, Apple ranks the new No.1 among America’s Most Admired Companies. It also ranks No.1 among Fortune 500 companies for total returns to shareholders over past the five years (94%) and past ten years (51%).

The leader makes all the difference. He creates an environment in his organisation, which is just right for developing and nurturing cult-like brands. Pick up any cult-brand and you will find behind it very-well-taken care of employees. That’s the first thing the leader does to start brand building. No organisation can even survive, forget about excelling, in this tough market environment if its employees – its first customers – are not taken care of. The next step is to invest in intelligent marketing strategies.

It’s a whole new world

The customer of today is different from the one of yesteryears. Today’s customer knows how to avoid marketing efforts directed to him. He has a caller ID on his telephone to block unwanted calls, a spam and pop-up blocker on his internet. He even has a TiVo which records his favourite TV programmes, minus the advertisements. Traditional branding models using traditional media will no longer work. As someone once said, “How do you become a millionaire? Become a billionaire and then buy an airline!” Then someone modified it & said, “buy a newspaper!” With advertising revenues dwindling steadily, traditional media like newspapers, magazines are singing their swan song too, making brand building more challenging.

When Wieden+Kennedy created the “Just Do It” campaign for Nike, TV & print helped spread the magic of ‘swoosh’ the world over. Today, Nike is finding itself out-of-sync with its target consumers, for they’re now tuning into different forms of media. It’s more the digital and interactive ones that have got them hooked. Almost all top brands today have started spending less & less on advertising. McDonald’s has cut its TV ads from 80% to 50%. Samsung, unlike Sony advertises on TV, only during the last six months of the year when sales peak.

Like most cult brands, Ikea too spends very less money on advertising. They prefer to generate a word-of-mouth. Johnson & Johnson, which traditionally spent a lot on TV & print, changed its media spending pattern last year. Plain advertising is no longer working and marketers need to look beyond the comfort of 30-second TV spots. The new generation is, in fact, averse to “in-your-face-marketing” efforts. One needs to think of novel ways of reaching out to today’s customers. Digital and interactive media seem to be the playgrounds for marketers in the future. It’s no coincidence that when Nike decided to expand its list of advertising agencies, it was not looking for the big ones, but those with interactive, digital and community-building capabilities. It even partnered with Apple and created an offer “Nike+iPod”, which virtually transformed running. Detroit’s carmakers, the long time pillars of print advertising, are recklessly chopping their print advertising budgets to curtail costs. Today, to survive, everyone needs to change their marketing habits and find new ways to connect with consumers.

It’s Asia’s time now

There was a time when the Big 3 of Detroit were GM, Ford and Chrysler. Whoever thought that today they would be replaced with the likes of Toyota and Nissan all Asian brands. There’s a trend. Consumers are quickly shifting from European and American manufacturers to Asian ones. China has already become the manufacturing hub of the world. However, it’s no longer satisfied with just being the “low-cost-factory” of the world. Brands are built on perceptions and most Asian brands are viewed as cheap-mass-produced goods. That’s changing. China, Korea have realised the importance of branding. Good products, well made products, will never help you survive, but a strong brand and unwavering brand loyalty from customers can help defeat competition. Using the Olympic as a new driving force, a whole lot of Chinese brands are working hard towards improving their brand identities like Lenovo and Haier. South Korean brands like Samsung are fast becoming the favoured brands of the new generation.

It’s difficult to build brands. When Hyundai first started its US operations, it was mocked at by all & even featured in the “Worst Car Ever Made” lists. It lost no hope & worked consistently towards improving its image; and today, it’s the 6th largest automaker in the world & even features in the Best Global Brands survey by Interbrand.

Different brands survive in different cultures. The good news for most Asian brands is that a lot of western brands, even the big ones, have not been able to survive on the Asian turf. Yahoo & Google may be world leaders, but in China, it’s “Baidu” that controls 57% of the Chinese search market, which incidentally is the world’s second largest Internet market. On the Indian shores, Maruti still seems to be the favoured brand when it comes to cars. Amul is still the “taste of India”. If it is the blogger community that works best in USA, which believes that everyone has the right to an opinion, then those are celebrity endorsements that work best in Asian markets in building brands. Asian markets have their own idiosyncrasies and if marketers can understand that, they can start counting the moolah as the Asian consumer today is ready to buy brands and pay a premium. He is aware and loaded! We need to start thinking about building stronger brands and making their presence felt worldwide. We need to inculcate a new culture. We have big powerful businesses but they have no global standing. It’s time to invest in branding, even “corporate branding” for times are changing.

A laptop without the Apple logo would not feel so good (even if it was identical to Apple). Where’s the charm in wearing a denim if it doesn’t sport the Levi’s tag. Yes, life without brands is not the same. Nobody wants just a great quality product, but a Brand name too. Shakespeare said decades ago, “What’s in a name? A rose with any other name would smell just as sweet.” Maybe not today. Brands are becoming the deciding factors in buying decisions. Probably Shakespeare needed marketing lessons too!

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