Jessie Paul on Services Marketing For a FlatWorld

Tuesday, January 10, 2006

shares for ads anyone?

this article by Namita Jain is interesting on two counts - it discusses the age-old dilemma of sales vs marketing investments, and two it talks about how you can barter your company for shares...
In the name of the Brand


Namita Jain / New Delhi December 6, 2005

Small companies, and those in the retail space, need to find innovative ways to finance brand building.

The past couple of months have been like the Charge of the Venture Capitalist. There have been at least two to three meetings with VCs who want a slice of the action in a couple of companies for which I consult, and the usual complement of board meetings.

The common thread running through all — besides the question of what plans the companies have for scaling up and manpower planning, supply chain and systems to supplement this scale-up — has been: what is the company’s marketing-spend currently; what is it projected to be and please, can it be increased?

The reason for this mismatch between the money the companies are actually spending on advertising and promotion and the expectation is that, traditionally, retail has low margins.

So if a company with a Rs 10 crore turnover spends Rs 50 lakh on advertising and promotion, that’s 5 per cent of the turnover going into brand building — this, often enough, is the net margin of the company. The board, however, wants more. It wants 6 per cent this year, 10 per cent next year and 12 per cent the year after. Where’s this money going to come from?

At interiors and home store Arcus, where I’ve worked, we were careful to spend only 3-4 per cent of the Rs 15-crore turnover on advertising. Similarly, at grocery chain Nanz, with a turnover of Rs 25 crore, we allocated 1.25 per cent of sales for advertising and promotional expenditure.

Obviously, such budgets could not support advertising in mass media, so we stuck to newspaper inserts and banners to announce the monthly schemes and discounts on groceries.

That brought in the customers. But we were still asked whether marketing expenditure could be increased, which led to the question, where was the money to come from — internal accruals or borrowing?

Since in the retail business, internal accruals are on the lower side, the only choice is borrowing; but a 10-11 per cent cost of capital often makes the option unviable.

In contrast, larger companies like confectionery firm Perfetti (2003-04 turnover: Rs 400 crore) spent as much as 40-50 per cent of turnover on advertising and brand building in the first few years. The payoff is evident when you consider that Perfetti now enjoys almost 25 per cent market share in value terms. The company proudly says that further marketing spends will come from internal accruals.

On the other hand, Hindustan Lever Limited’s brand Ayush (market estimates of turnover: Rs 25-35 crore) hasn’t really taken off because it was put on supermarket shelves earlier and is now being sold through the HLL direct marketing network and Ayush Therapy Centres.

However, HLL Director Dalip Sehgal has been quoted as saying the problem now is that while Ayush’s sales may be high, it is perceived by people as having failed because they don’t see 10 ads a day on television for the brand! At any rate, HLL has deep enough pockets to run these centres purely for branding purposes, if it wants to.

So the problem of increasing spend for brand building is really something that applies most directly to small companies and to the vast majority of companies in the retail space, where margins typically are wafer-thin.

For instance, one of the companies I consult with is a personal care products company. Faced with a choice, it may be advisable for it to spend Rs 30 lakh on opening a new store rather than on brand building. That’s because these sales will help subsidise the cost of setting up the factory that the company needs if it is to lower the costs of third-party contract manufacturing — besides, it also helps monitor quality.

At the same time, both the board as well as wanna-be investors point out, and managements understand, that brand building, if successful, pays for itself through higher sales. And since costs don’t go up in the same proportion, the result is a huge increase in profits.

That’s the theory. Every practical manager, faced with an outlet-versus-adspend choice will opt for the former, especially when funds are tight — as they always are. One way out, though its usage hasn’t really spread as yet, is to count part of the costs of setting up new stores as marketing expenses, especially since when these stores are set up in high street locations, they serve as advertisements as well — more people relate to the personal care products firm now that it’s opened up an outlet in a tony south Delhi market.

But since you don’t have well-known management gurus endorsing this practice as yet, I’m not sure how many investors or boards will see this as a substitute for advertisement and brand building expenses! One way this will happen, perhaps, is if managements can show that the customer retention and acquisitions from new stores are as good as from traditional brand spend, perhaps even better.

Another option, increasingly getting more purchase, is the one offered by The Times of India’s Times Private Treaties. I understand that many newspaper groups frown upon the practice, but what Bennet, Coleman is doing is to buy into the equity of a firm (Pantaloon, Hakoba Lifestyle, Indian Terrain and so on), not for cash, but for barter advertisement over a period of a few years. The best thing is that, as compared to other investors, TOI takes no board position and so does not try to drive a company’s agenda the way other investors try to.

It is a win-win for both sides if the brand building exercise works the way it’s supposed to. Say, company X gives a 10 per cent stake to TOI in a company worth Rs 10 crore. Now over a period of time, as new stores get set up and sales rise, the company’s value will grow to, say, Rs 30 crore, even if the TOI ads don’t help — in which case, for Rs 1 crore worth of free ads, the company’s given away Rs 3 crore to the Times.

Where it works is if, following the fact that the Times has invested in a company, its worth goes up because of the ads — say, the company that would have been worth Rs 30 crore is valued at Rs 40 crore by potential investors. In which case, the 90 per cent stake of the promoters is worth Rs 36 crore, which is higher than what 100 per cent would have been worth in the pre-Times valuation of Rs 30 crore.

Again, that’s the theory. In the case of Indian Terrain, the articles in print suggest this has not happened. In January this year, when the Times group picked up a 12 per cent stake for Rs 21 crore, this gave the company a valuation of Rs 175 crore.

Subsequently, the New Vernon Bharat Fund based out of Mauritius picked up a 22 per cent stake in the company for Rs 25 crore in May 2005, giving the company a valuation of Rs 113 crore. And finally, the Anil Ambani group picked up a 13.2 per cent stake for Rs 15.48 crore in September 2005 making this a valuation of Rs 117 crore.

Of course, to judge the efficacy of a brand exercise such as this over a period of just nine months is not fair, and it is possible the ad-brand value proposition may hold true over a longer period of time.

For company managements, and their current and future investors, however, this is another innovative brand-building route worth examining.

Namita Jain runs Abhinàm Business Management Consultants, which operates in the marketing and retail space. Email:

Wednesday, January 04, 2006

The 5 rules of propaganda

i came across these rules today and they are a must-read for anyone in PR or marketing. They are apparently from Norman Davies in his book "Europe: A History":

#1 The rule of simplification: reducing all data to a simple confrontation between 'Good and Bad', 'Friend and Foe'.
#2 The rule of disfiguration: discrediting the opposition by crude smears and parodies.
#3The rule of transfusion: manipulating the consensus values of the target audience for one's own ends.
#4 The rule of unanimity: presenting one's viewpoint as if it were the unanimous opinion of all right-thinking people: draining the doubting individual into agreement by the appeal of star-performers, by social pressure, and by 'psychological contagion'.
#5 The rule of orchestration: endlessly repeating the same messages in different variations and combinations.

Rule #2 is rarely resorted to by any sophisticated marketer. Rule #5 is a given. Rules #1 and #4 seem to be the key to success of many dial-a-quotes and celebs!

Source of the original post on these rules

What it takes to create a truly global brand
NEW DELHI: If India Inc is restless, can global Indian brands sit idle? If India is to send out truly global brands, it must look at global audiences and play to its strengths. This echoes the sentiments articulated by Corporate India. While making a global foray remains top priority for local firms, the idea of creating a true-blue global Indian brand is gaining currency. But at present, there’s not a single brand that fits the bill. Brands get a rub-off from the image of the country of origin, says Jagdish Khattar, MD of MUL. “We have pockets of excellence and we need to identify a few and flog them hard with the global audience in mind,” he adds. “Global brands are created out of areas of strengths that the world gives credit for,” says Santosh Desai, president, McCann-Erickson. “Today, we are seen as an ‘intellectual’ country, thanks to the success of the IT industry. So, the first global brands may emerge from this space,” adds Jessie Paul, CMO, Wipro Tech. A country’s brand plays a role in how a product brand is perceived. A global Indian brand has to stand out amidst a clutter of dissimilar thoughts. Harish Bijoor, CEO, Harish Bijoor Consult, says the true-blue Indian brand is not about clonal offerings. “It is the brand that represents the distinction that is India.” Gandhi is certainly one. “Gandhi never took full-page ads screaming: ‘Gandhi shining’. Gandhi, the brand, happened by an amalgam of vision, hard work and passion for positive action.” Most don’t see this happening now. They see brands wanting to adopt global best practices of branding. Adds Mr Desai, “Building brand India demands a shift in mindsets.” And it requires understanding the power of brand that has been understood by developed economies.

Me in Pink

Have worked as a techie, then in advertising and then into marketing of IT Services. Been an interesting few years as the Indian IT industry has matured and marketing is finally seen as a respectable career! India has also come a long way in the past 10 years. Fun being a part of the action.
Views expressed in this blog are purely mine, and do not represent those of my employer. Posted by Picasa

IIM Calcuta: Cicero's Senate Debate

IOCL 'Cicero's Senate: Women Achievers Panel Discussion' Held at Intaglio 2005-06 at IIM Calcutta
The highlight of Day 2 at IIMC Intaglio was the Panel Discussion by Women Achievers. The six participants came from a rich variety of industry backgrounds and provided a pot-pourri of views on the aspect of leadership in today's rapidly changing world. Prof. Anup Sinha's expert guidance and moderation enabled the panel to integrate it's views and emerge with a clearer understanding of what it takes to be an effective leader.
Kalpana Morparia, Deputy Managing Director, ICICI Bank Ltd., opened the discussion. She emphasized the importance of empathy in a leader and added that ICICI encouraged their leaders to show empathy towards their team members. Ruthless market forces demand a "Quarter-se-quarter-tak" (from quarter to quarter) mentality wherein organizations and their leaders are under tremendous pressure to show profits in each quarter. Consequently, there is a tendency to compromise the work-life balance and discount non-work related activities. In such a scenario, it is very important for big leaders to show empathy.
Jessie Paul, Chief Marketing Officer, Wipro Technologies, asserted that one could be a leader in any field provided one is passionate and enthusiastic about working in that field. "Leaders must be experts," she said. They must have sufficient mastery over the specific subject area / activity so as to be credible. She also spoke about the importance of trust and delegation. Good leaders must place their trust in others; otherwise no one will be willing to work for them.
Shabnam Mallick, International Programme Officer, United Nations, brought in her unique experiences from working in the non-profit sector. Comparing leaders in the non-profit sector with their counterparts in the for-profit sector, she said that the former usually start with less authority and usually need to earn their authority. Deference to CEOs is minimal at the beginning. Moreover, she said non-profit sector leaders need to be adaptive to change and also comfortable working in contexts lacking a universal measure of success. Specifically, she emphasized the following: (1) Leaders should think of wider repercussions during decision-making (2) Corporate responsibility should become a way of life, and (3) Growth should be well-distributed. Nina Nagpal, Senior Vice President, Morgan Stanley, said that leadership is all about dreams and visions. Leaders must dare to dream and strategy is a by-product of vision. Furthermore, leaders must be able to see the need to create more leaders.
Farzana Haque, Global Decision Manager, TCS, clarified that leadership is all about execution and not about hierarchy or designation. One who can get the work done is the leader. Also, she compared leadership levels to the layers of an onion because leadership exists and is needed at all levels. She corroborated Jessie's point earlier that the leader must establish his/her credibility and that can only be done by way of a proven track record, expertise and hands-on skills in the given field or subject area. Her punch-line was that when everything goes wrong and plans fall apart, the one who shoulders the blame is ultimately the real leader.
Finally, Jayshree Mohanka, Senior General Manager, Eveready Industries, mentioned that leadership is no longer merely transactional but is becoming increasingly transformational. Leadership ability is reflected in the courage with which one fights for one's visions and dreams.
As summed up by Prof. Anup Sinha, it is difficult to teach leadership by way of lectures in a course and so the insights provided by the speakers are extremely useful to everyone when exercising leadership in their day-to-day lives.