WUTL? is thus, at a certain level, all about interpretation, about cultural differences, about stimuli and about the different—and often unpredictable—responses they can garner. It's a film that a lot of multinational marketers could do well to watch every morning while negotiating the treadmill and every evening while sipping their low-cal beer: all those MNC executives who came, saw but haven't quite managed to conquer. Years have passed, CEOs replaced, hordes sacked, crores spent on market research and advertising, products modified, discounts offered, prices rationalised, promotional schemes with unbelievable goodies devised...
Not so long back MNCs were lining up by the dozens, jostling to get into the market in which teemed one-sixth of the earth's population. Grandiose sales targets were announced: $1 billion by the turn of the century; 40 per cent marketshare in three years; gee, great to be in India! But today, the number of discount schemes and buyback offers that these brands are offering to lure the Indian consumer must be some sort of record. "Price cuts are short-term strategies," says Kalyanmoy Chatterjee, vice-president, MODE Research, "but they indicate the panic among manufacturers."
Says Chintamani Rao, president of advertising agency MAA-Bozell: "Many MNCs enter the Indian market with the assumption: there are 900 million people, take away the rural population and even if one in a 100 in the rest of India buys our product once a year, we will make so many thousands of dollars, blah blah. This is completely fallacious arithmetic. It may sound simplistic, but this is what actually takes place in conference rooms. And if I had asked for Rs 100 for every such meeting I've attended, I would have been a millionaire by now."
But, and Rao is quick to point it out, there's more than just maths mistakes to why that one in 100 will not buy that multinational brand even once a year. What's foxing the new international manager is a simple, vital question: what does the Indian consumer want? For, very large numbers of those who do have the ability to buy don't seem to be willing to do so.
The Right Imagery: Coca-Cola, the world's No 1 brand, seems to be unable to touch enough hearts. Four years, crores spent in advertising, two chief executives and one advertising agency later, its overall market-share—Coke plus Thums Up—has slipped from 60 per cent to 53. It has persisted with a lot of its international advertising in India, but the low-key ads that work in the US—where the brand has a near-mystical status—don't serve the purpose here. Where Coke needs to excite the customer enough to try out and stay with what is, after all, to him a new brand.
Pepsi, on the other hand, has clearly been a winner in India. Secret of success: a high-octane, ear-to-the-ground advertising strategy. Starting off with the East-West fusion launch ad and some American ads dubbed in Hindi, Pepsi quickly transcreated its successful American ads using Indian stars—Michael J. Fox replaced by Aamir Khan, MC Hammer by Akshay Kumar—and then developed ads specifically for India, like the current 'freedom' campaign.
The brand was the first to use Hinglish—that urban teenage argot mixing Hindi and English ("
Yehi hai right choice, baby "), the first to carry its slogan in Tamil script on national television, and the first, in its current campaign for mango drink Slice, to thumb its nose at pseudo-Yank Indians. Over the last year or so, urban Indians have woken up the morning after every cricket match featuring India to be greeted with Pepsi banners congratulating the team if it won, or exhorting to play better next time if it lost. And, in an audacious denial of its country of origin, Pepsi has even run ads saying: "I want one rupee to be worth 35 dollars."
"The Indian consumer is absolutely different from those in other parts of the world in terms of perception and expectation out of a particular product," says a Pepsi spokesperson. "We have redesigned our entire advertising to suit the Indian market." Result: a claimed 44 per cent marketshare in cola drinks.
The Price of the Aura: Of course, Indians want to buy global brands. An American cosmetic manufacturer conducted a survey by handing out its lipsticks (without the brand name) to housewives. Half the sticks carried a "Made in USA" label while the rest said "Made in India". The first lot received no product complaint while the latter received several. Sothe aura around foreign brands obviously exists.
But many MNC marketers have seriously miscalculated how much extra they can charge for that golden shimmer. Says C.K. Sharma, managing director of market research agency MBA-Gallup: "Without exception, all MNCs target the top 1-2 per cent of the Indian market where the consumer's profile and earning capacity match with their markets in the West. So companies assume that prices don't matter. This has backfired and we see companies like Reebok back-stepping on their prices. Others are doing it indirectly by offering incentives with their products."
NOTICE, though, that Baskin Robbins, Kellogg and Revlon are still priced significantly higher than their Indian rivals, and the cans still cost nearly double what bottles do. Obviously, many Indians are willing to pay more for foreign brands. The crux is the price-value equation that the consumer works out in his head, consciously or unconsciously, every time he surveys his options. And here, the Indian is turning out to be savvier than all the imported statistical marketing models and jargon-dripping theories would have it. "Indian consumers are very mature and smart in estimating value for his money," feels Ashit Mallick, director, AIMS Research.
A Bigger Bang for the Buck: "It's a myth that price is more important to the Indian consumer than quality," says Ashok Chhabra, manager, public affairs, Procter & Gamble. P&G introduced Whisper sanitary napkins some years ago at a higher price than market leaders Carefree and Stayfree. Admits a rival: "Whisper was of better quality and anyone who tried it would be hooked." Today, Whisper rules the roost with a 48 per cent marketshare despite still being priced 15 to 20 per cent higher.
"While the Indian consumer doesn't look for life-long durability in products like he did earlier, he refuses to compromise on quality," says Rajesh Srivastava, vice-president, DCW Home Products. Brands like Wrangler and Pierre Cardin came with a bang and haven't been heard of since. Pierre Cardin opened impressive-looking outlets but stocked clothes which seemed leftovers of earlier seasons. Research on Wrangler jeans indicated that buyers complained of poor fits besides not getting the right 'feel'.
Rajeev Karwal, Indian operations marketing director for Korean giant LG, notes that in the absence of a system like in the West where a customer can always return a product, no questions asked, the Indian consumer has to be more careful while buying. "He thinks twice or thrice before deciding, and only when he is totally satisfied does he invest. And mind you, when he's satisfied, the price is not always a factor. There are Rs 60,000 TVs which are selling." Foreign TV brands like Akai, Thomson and Samsung have together pushed the collective marketshare of the Indian brands down to 55 per cent from 75, reveals Mallick. As he explains: "Good quality MNC brands have fared well in the replacement market where the consumer is looking to upgrade his purchase." In consumables, liquor brands like IDI's Gilbey's Green Label, Smirnoff vodka and Archer's Peach Schnapps, all priced exactly right, have been well-received. And despite low exposure to the upper-end range in refrigerators, Indians have been lugging home 300-litre and larger models.
Says Rao: "MNCs probably look at the people at Sahar airport with their cartons of Sony and Panasonic TVs and think all they have to do is ship in the cartons. But when an Indian consumer sees the Sony or Panasonic along with Philips, BPL, Videocon and Onida, he is not willing to buy it at that price locally. Those marketing these products didn't realise what they were up against before entering India and believed in simplistic market research and unrealistic expectations."
A survey conducted by Korean
chaebol Samsung revealed that as much as 73 per cent of Indian consumers are more sensitive to features than to country of origin. "The exposure to information about products from different parts of the world has made the Indian consumer expect top-class quality and after sales service from the companies," says R. K. Caprihan, Samsung deputy managing director.
Two unfortunates suffering from the information explosion are Peugeot 309 and Mercedes. For, with access to information has come the unequivocal consumer demand for state-of-the-art. "Though the 309 is a solid, dependable car for Indian conditions," says Hormazd Sorabjee, editor,
Auto India, "the customer knows that it's been phased out in France. So he's annoyed at being treated as the buyer for leftovers. The Mercedes E220 is just a one-generation-old car, yet we aren't accepting it. Sales are in double figures a month." While planning strategy, several MNCs have categorised India under the blanket "developing country" label. Says Sharma: "Product portfolios introduced in India are often developed looking at other emerging markets." Products need to be altered or modified to meet the Indian consumer's need. And a few superficial changes may not suffice. A fridge marketer, for instance, points out how foreign products have the same plastic fixtures as in western markets. But Indians use steel utensils instead of glass or plastic ones, so the load's significantly heavier.
KELLOGG came in with a pedagogic hardsell. It told the Indian consumer to change his most personal breakfast habits if he cared for a nutritious start to his day. He was not only told that the Kellogg form of cereal was the best, but was also advised to have it with cold milk, anathema to Indian healthcare beliefs. "In the food or healthcare or baby care business, there are strong cultural practices which Indians are not willing to change easily," says Rao. "MNCs fail to realise that there are several things we do, not because we are a poor country and have no option, but because they are possible and preferable."
"Many MNC food companies," says Sharma, "just look at their portfolio in Mexico, and then make some changes in the taste and flavour, add some pepper, remove some tomato and launch it in India. They just move stuff to India under the assumption that what is acceptable in another developing country on the same latitude is acceptable in India. Doesn't work that way." High-handedness is another problem. Whirlpool apparently demanded advance payment from traders for its products when the norm is a month's credit at least. It has since shifted to the "payable when able" principle. Panasonic entered the market on strict cash-on-delivery terms with the trade. Recently it reportedly relented to giving credit periods of 15 to 30 days, sometimes accompanied by cash incentives.
Adapting pays rich dividends as the Indian consumer definitely comes to meet halfway. P&G launched Ariel on what it believed was a very strong wicket: a spoonful of Ariel would wash as many clothes as a fistful of conventional detergents, and the housewife would no longer need to use a bar soap along with her detergent. Thus, the apparently higher-priced Ariel was actually cheaper than most conventional detergents. Didn't work. But P&G responded with Ariel in sachets to induce trial, Ariel Super soaker as the economy variant and finally Ariel Bar—if the housewife insisted on using a bar soap, she might well buy it from P&G. Ariel now enjoys a 12 per cent value market share.
The Waiting Game: The bitterness of the disappointment is usually directly proportional to the size of the expectations. "Sometimes it may not be the tough consumer but ridiculous targets," feels an MNC manager. Wild projections of Indian buying power were reinforced by various management consultants hired by MNCs looking to enter India. It suited the consultants to paint India as the next El Dorado.
Srivastava assesses the real market for most premium MNC brands to be about a fifth of the official estimates. Says T.K. Banerjee, vice-president and business head, refrigerators, Godrej-GE Appliances: "The entry of new products initially met the pent-up demand in the top-of-the-line product segments. Further inputs only ended up confusing the customer." But for those with unrealistic targets, sales have to be concluded at any cost. Generally it means heavy schemes and price-offs. Warns Sharma: "Inevitably the brand gets linked to a scheme and business will decline if the scheme is discontinued." This, predict many, could be the fate of the likes of Akai.
Where targets have been realistic, performance seems to have been fair. Avers Brian Senior, chief executive, Allied Domecq Spirits & Wines, which markets the Teacher's Highland Cream Scotch whisky: "We had realistic targets and achieved them despite increasing competition." Teacher's, claimedly, sold about 24,000 cases (against a targeted 30,000) to get 35 per cent of the super premium scotch segment. This, despite high duties which make a bottle cost close to Rs 1,100.
The other factor that slows down MNC entrants is India's sheer size. To create a sales and after-sales service network spanning the country can take up to five years. One solution is to tie up with an established Indian company—or buy one, as Coca-Cola did with Parle and Whirlpool with Kelvinator. GE tied up with Godrej to cover each other's weak points. Godrej-GE Appliances, with GE's technology and Godrej's distribution and after-sales network, now offers fridges from 100 litre to 754 litre, covering the entire spectrum.
But there are Indian partners and there are Indian partners. A poor choice leads to a frustrating loss of time. LG burnt its fingers with its first alliance with Bestavision and lost another year negotiating with the C.K. Birla group before deciding to go it alone. Sony entered in partnership with the company that ran its after-sales set-up in India but, after failing to make any headway in the market, has decided to go it alone. Daewoo picked up more than 90 per cent of the equity in its Indian company when its partner DCM proved unable to invest in the company's growth plans.
Several others have lost valuable time due to a strategy that seemed absolutely logical: when setting up Indian operations, let an Indian run the show. Why lose time while a European or American struggles to figure out the nuances? But trouble is, most of those chosen to lead the Indian forays were expatriate Indians who were Indian in name alone. An American consumer durables giant chose a man who was actually a third-generation American, his grandfather having emigrated from India some 60 years ago. The focus on sending an Indian, or at least a South Asian, was so obsessive that many were not even marketing professionals.
Kellogg's Damindra Dias was a finance person while Jaydev Raja of Coca-Cola was essentially an operations man. Market observers feel that several of these CEOs also saw their Indian stint as a short-term posting. "They wouldn't want to jeopardise their golden careers by taking risks or radical decisions," sneers a marketer. "Ironically, they came with closed minds while foreign executives have proven to be more open," says another.
Beyond the Numbers: In his classic book Riding The Waves of Culture, Fons Trompenaars describes the new breed of international managers thus: "They all know that in the SBU, TQM should reign, with products delivered JIT, where CFTs distribute products while subject to MBO.