Allen Solly, Color Lab, Market Segmentation, Customization and Powershift

This season, Allen Solly ready to wear brand of apparels has unleashed a kind of color revolution. Take a look at its advertising campaign, ‘Catch a color and we’ll match it’. A print ad released in news daily shows a young man donning oversized shades on his nose, in twenty something is shown to be confidently crossing a road with his head turned to his right (looking at the traffic or onlookers) against the background of a Victorian structure. The picture of the model in the ad shows him in a  close up shot from tip to toe with a accentuated focus on what he is wearing- mosaic of colors- red jacket, sky blue shirt, peacock blue pocket handkerchief, mustard trouser, light brown socks, and blue shoes.  Allen Solly has launched ‘the color app’ which can be used to ‘create your signature colour’ which the company will dye for customer. It certainly is a step forward for a brand which brought the concept of ‘Friday dressing’.

Ready to wear apparels came in fixed sizes and limited range of colours.               This new strategy introduces a paradigmatic shift in the way ready to wear apparels are produced and sold. As a marketing strategy readymade brands gave customers value by way of providing something ready to wear (instant gratification) but it came with a severe limitation of limited color choice (production constraint).  This strategy involved reconciling two opposing forces that reside in any business- production seeks efficiency by reducing variety (larger production cycles of limited range) but marketing seeks effectiveness  by offering what customers want (customer differences push for choice).  Hence a business organization is typically pulled two directions- the internal forces create pressures in favor of mass production of one thing but external reality (market) seek production as per individual customer’s needs/wants.

It is for this reasons the strategy of market segmentation is called a compromise between efficiency and effectiveness.  Customer would be best served when he or she is provided with a product or service crafted or created according to his or her unique needs. That is each customer becomes a segment of ‘one’. The other extreme is when one product is offered to all customers irrespective of differences in them. This is exemplified by the classic statement that Henry Ford made “Any customer can have a car painted any colour he wants so long as it is black.” Getting close to customer requirements is inevitable in competitive markets. The best insulation against competition is to serve customers better than competition by getting closer to his or her requirements. 

Industrialization which gave birth of large corporations dismantled the one to one marketing that prevailed in old era characterized by craft (furniture, buggy, shoe, jewelry). Consider tailors of the past who provided custom fit service or shoe makers who designed shoe as per feet size.  This direct relationship was broken apart with the arrival of industrial mass production.  But it arrived with a compromise; product and production instead of customer began to assume central position in the business universe.  As competition began to intensify, business tried to juggle opposing goals by adopting a strategy called ‘mass customization’. This is an attempt by firms to deliver variety (customization as per customer needs) retaining the mass production model.  The mass customization strategy may come in different shades- made to order/ build to requirements (enabled by modular production, FMS, computerization) to giving customers an opportunity to individualize non-core aspects of a product (common in cars, houses).

Allen Solly’s strategy follows a co-creation model (also followed by Levis) by which customer is given opportunity to collaborate in production process of product by which he can create wardrobe in colors of his unique tastes and preferences.

Looked at differently it is symptomatic of a power shift- customers are now beginning to run factories without owning them.

Cross badging, consumer segments and killing two birds with one arrow

Market segmentation sits at the heart of marketing strategy. Segmentation is essential because consumers are not homogeneous. That is, they respond differently to one market offering. Segmentation is in a way a compromise between effectiveness and efficiency. Mass marketing is efficient strategy because one product is offered to all consumers irrespective of their difference. However, customization is effective because product is designed as per unique needs and wants of each consumer. But constraints at the production end often obstruct firms in their path to customization. Flexible operations permit variations of a product in which common production platform is used. This a common practice in durable products like cars, computers, televisions, mobiles and air-conditioners. This way a firm manages to extend multiple responses to cater to different consumer groups. Consider HUL has four different detergents that cater to different segments: Wheel for economy, Rin (whiteness seekers) and Surf for mid price, Surf Excel for the top end quality.

Segmentation is proper when it is based on real consumer differences. Real differences manifest in heterogeneous demand. This prevents use of one strategy (marketing stimuli) in different segment. Effectively it implies in marketing you can’t kill two birds with one arrow. Wheel does not offer correct solution to the needs of Surf Excel consumers and vice versa. Often segmentation studies reveal interesting picture of consumer differences. As consumers move up the income ladder, consumption begins to acquire psycho-cultural overtones. Consumer preferences begin to shift from real product differences to symbolic because they want their brands to reflect their personality and lifestyle. Quality excellence is essential first step in marketing to these segments as a result it ceases to be a differentiator. Consider the case of luxury perfumes, clothing, bags, shoes, and bikes. Most Italian brands provide exceptional quality of fit and fabric but their differentiation lies in heritage and signature. Similar is the case with Swiss watch brands.

One of the strategies to fire at two targets with one bullet is cross badging. This involves when a product of one firm is also sold by another firm in cosmetically changed form. One of the old examples of this strategy has been GM’s Prizm and Toyota Corolla. Geo Prizm was same as Corolla in terms of basic design. This strategy allows a firm to increase market participation by increasing its bouquet without making corresponding investment product development. Prizm allows GM to participate in sub-compact sedan segment and Toyota gains by getting a cut from sales pie of its modified Corolla. But moves of this kind can damage the cross badged brand in absence of appropriate equity insulating measures. Although Prizm and Corolla are same cars with different names yet the latter sells much better. Brand name ‘Prizm’ itself insulates Toyota from possible damage to its equity and at the same time it does not allow GM to directly plug into its huge trust (built quality) factor.

Cross badging is a common practice in car industry. For instance Maruti’s A Star is corss badged as Nissan Pixe in Europe and Toyota IQ goes as Aston Martin Cygnet. In India the cross badging is employed to its maximum by Nissan Motor and Renault. Do you get confused between a Nissan Micra and Renault Pulse; Nissan Sunny and Renault Scala. If yes, then cross badging strategy has not worked well. The internal similarity in terms of production systems is fine but if brands have overlapping image it is a sure recipe of branding disaster. Confusion is the biggest enemy of branding. Consider the case of Skoda Rapid and Volkswagen Vento. Do get confused? Probably not, their brand imagery acts to insulate one from the other although they come from the same stable.

Cross alliances and technology sharing permits firms to cross badge products with an unprecedented ease. But the real reasons for cross badging should not be internal. The differences in the market or consumers should be at the center of cross badging decisions not the manufacturing.

Tata Motors, Sales slide, and Dichotomy between a cab and a car

Last week one of the news dailies published a news item titled ‘Tata Motors struggling to reverse sales slide: aggressive marketing and deep discounts not enough’.

The car industry is passing through a rough patch. A variety of macroeconomic factors and buyer sentiments are working simultaneously against the industry.  The data released (Jan 2013) by the industry body revealed that auto industry has gone down to its lowest growth rate (close to 3%) since 2002-03. Inflationary pressures, economic uncertainty and customer sentiments are externally imposed constraints which seem to be discouraging people to indulge in big ticket buys.  Industry leader Maruti reported clocked in almost similar unit sales this Jan (compared to last year), Hyundai registered 1.45 % increase. But Tata Motors experienced a huge slide by a massive 61% against the previous year’s figure.

This kind of situation elicits two kinds of responses. It is not uncommon for managers to search and use tools of immediate sales revival.  Consequently marketing aggression degenerates into excessive use of sales incentives aimed to trigger impulses in favor of promoted brand. Common to car industry are tactics like free insurance, music systems, interest free loans and service package. But the reality of competition is harsh. Any attempt to disturb the market equilibrium by use of tangible or economic value manipulation is quickly copied and neutralized by other participants in the industry.  This brings us to the question why Tata Motors’ decline is disproportionate to overall industry and other players there in?

Tata Motors created a huge splash at the time when Indica was launched (1989). It’s punch line ‘More car per car’ said a lot about the vehicle. Here was product which packed everything more-space, price (less), mileage, trust- to appeal to value sensitive middle car buyers.  The measure of trust that potential buyers reposed in Tata brand can be gauged by huge booking figure (over a lac) which Indica received within weeks of its announcement. Soon after its launch Indica went on to become one of the top selling hatchbacks in India. Later Tata Motors moved up the product spectrum by launching other models like Indigo (three box sedan), Indigo CS(compact sedan), Indigo Marina, Manza, and Aria.

At the heart of Indica’s appeal was trust which flowed from identity that this brand drew straight from company name TELCO. Tata Motors was previously named as Telco which produced commercial vehicles, primarily trucks. The engine of Indica was developed internally which was based on the engine used by the company for its pickups and SUVs. It was a logical extension of the company to move into technologically adjacent market by derivation and modification of what moves the vehicle. Externally, to customers, the Tata name allowed this off spring to tap into huge equity reservoir developed over the decades.  So the name (market assets) and engine (internal capability/ asset) combination created an irresistible offering. So strong has been the link between the offspring and the mother brand, that even now the brand is called ‘Tata Indica’.

Tata being a strong player in commercial segment wanted to move into burgeoning car market.  At the heart of this move were synergies which could be harnessed. Car enjoys a lot of engineering commonalities with commercial vehicles. So to an automotive engineer, a move from commercial vehicle to private vehicle is incremental. The reality in customer mind may not be the same. The customer point of reference to perceive a car (Tata’s car) is likely to be radically different. The term car evokes a very different normative frame, which is created by other brands in the category. A car in customer’s imagination is everything but not anything associated with commercial vehicle.  A car is an identity expression device; it is an instrument of indulgence.  What appears to be a smooth transition internally is not so externally in the mental world of customers.  Hence Indica made a lot of sense to commercial segment (cabs) but fails to excite a typical car/sedan buyer. A quick car ownership survey can establish this fact.

In the world of marketing the idea of creating a brand that appeals to all is very un-marketing. It is counter to the concept of segmentation and targeting. It for this reason, brands especially with the symbolic core have to erect barriers which prevent it from going to non-customers.  Consider how car Audi, Skoda and Volkswagen are strategically positioned which may share internal commonalities but are very different from one another in terms of appeal and appealed.

Brawn, Brain, Strategy and Micromax

What do you call a company which manages to touch Rs 2000 crore revenue and achieves third position (volume) in an intensely contested industry in just five years? The answer can be none other than, brilliant.

When it comes to thinking about electronics space only giants of the world come to mind like Samsung, Apple, Sony, and Intel. And narrow this search down to the field of mobile phones, the mind does not stray beyond a small but firmly established brand like Nokia, Samsung, Blackberry, HTC, Sony and Apple. Try stretching the category further the list gets enlarged with more brands but only with powerful (in own way) like LG, Motorola, Philips, Dell, and Acer. Prima facie it appears as if the industry is only meant for big and powerful hence a simple ‘to enter or not to enter’ analyses would yield a negative result. Any entry in such a situation is likely to invite fierce retaliation aimed to prevent the entrant from getting a toe hold in the market. The battle could really be bloody especially when players are armed and have deep pockets. But then, the joy of winning is in outmaneuvering and outwitting the big. When physical resources can’t be matched, the fight should be shifted from brawn to brain.

An opportunity identification exercise normally fails to yield structure defying perception and hence hints at the most obvious clusters of customers. The ‘most obvious’ ways of looking at the market creates majority fallacy (the attractive segments get more competitors than what can be absorbed). So when everybody is going up, it may be a good idea to go down. When competition is about ‘value enrichment’, ‘stripping down’ may make sense. A fresher structure defying perception is what is required to apprehend an idea which has been escaping the attention. So what makes Micromax, an Indian start up take plunge in a market of ‘big boys’ and steal the thunder under their nose?

Consider the implicit and tacitly agreed code/ structure: quality and price are positively correlated, aesthetics (form) is for the top tier and bare functionality is for the lower ends, new and innovation take time to diffuse (or reach the lower end of the market, cautious buyer); brand building (customer pull) is meant for the top players, push is the strategy at the lower end; and post purchase care is the preserve of top end brands. The codes of operation in a market evolve after a complex negotiation between the structural impositions and market considerations. Now consider how Micromax’s strategy is based on the reconciliation of the irreconcilables. An appropriate brand name (unlike Lava or Fly or G- Five, right for the technology space), functionality fused with aesthetics, and brand esteem (sign off ‘nothing is anything’, association with cricket events- IPL and Akshay Kumar).

First of all is Mircomax a challenger brand? Probably not. The brand did not rub the established players the wrong way by choosing to target the customers left out by them (deemed unattractive). It is first phone was aimed at rural market packed with a huge standby time (X1i- to take care of electricity problems) priced affordably at about two thousand rupees. It hit at the uncovered flank. Then their strategy moved on to target lower end of the segmentation spectrum.

The common wisdom narrowly limits the concept of value to price if the brand targets the economy segment. Micromax recast the value equation and focused on the total value proposition (TVP) rather than price proposition. The brand focused on maximization of TVP by simultaneously focusing on price as denominator and brand attributes as numerator. Factor in qwerty pad, dual sim, battery life, built quality (touch and feel), operating system, processor, brand esteem and confidence with the reasonable price. This is true for their other products like tab. People tend to be value sensitive not price sensitive.

The brand managed to create a pull by shifting customer thinking away from the price to the’ form and functionality’. This imbued the brand with aspirational value within its class. Take a look at brand’s A70 ad which showed an i-phone look alike with a headline which read ‘i-phone with a scribble ‘can afford this’in between ‘i’ and ‘phone’ making a complete line ‘I can afford this phone’. This strategy of linking Micromax with the iconic ‘Apple’ brand (incomparable) cleverly makes it comparable (similar strategy was used by Avis once upon a time ‘we are number two … therefore we try hard’). Twinkle Khanna acted out as endorser for its ‘Bling’ range, especially designed to attract women customer. The ads using Akshay Kumar seek to transform customer experience by instilling pride of brand ownership (‘Hide anything but your phone’ and ‘If you have it, flaunt it’).

Another distinguishing aspect of Micromax is its branding strategy. The brand instead of putting all product variants into one umbrella has very carefully adopted sub branding strategy to clearly signify segments and their propositions (avoid confusion). Consider sub brands in its range include Bling (style conscious urban women ), Ninja (android phone for working professional), Modu (technology enthusiasts), and Superfone (people who want applications). The company has been creating a portfolio of brand that is sync with emerging demographics and consumer life style. As dividing line between customers get sharply etched the use of one brand runs counter to market reality.

Starting as a mobile instrument player, Micromax has moved vertically and horizontally in the market- space of its origin. Its quest of growth has found expression in its expansion into adjacent space of tablet market (Funbook). The company has met with fair amount of success in the tablet space. In its latest move the brand has been extended into television monitor and home theatre space. Tablet and mobile phone appear to be in close physical and mental proximity hence success in one category may rub off equity well in the other. It is worth watching how this plunge of Micromax works out in consumer electronics space.

Often success breeds its own seeds of failure. The move to create a ‘be all’ brand militates against the idea of market fragmentation. One of the oldest icons of consumer electronics has been Philips. The news that Philips is moving out of consumer electronics was painful reminder of the fact that one brand cannot hold it all.

Brand, Focus and Sacrifice

If you are not growing someone else is. This phenomenon can be psychologically very discomforting. This relativity in the market gets the managers to be possessed by competition. The Boards which set their eyes glued on the stock prices and market capitalization send memos down the hierarchy to grow and grow fast. The ultimate point of where marketers and customers intersect is a mental spot called brand. Brands create revenue streams and hence are also the growth drivers. One of the shortcut growth strategies is to expand the number of products that a brand offers to the market. But such tinkering with the brand with an eye on the stock market but away from consumer often sows the seeds of decline for the enterprise as a whole. A strong business cannot be built on the foundations of weak brands.
Consider the following:

• When you want to buy a T shirt would you like to go to a Woodland store?
• Would you consider a brand like Jaipan (mixer and grinders) while buying a mobile phone?
• What would be your perception if Bata also sold jeans and formal wear?
• When looking for a perfume, would you like to consider Lee Cooper?
  How about Pepsi selling urban wear?

Branding is about appropriation of an idea which is both relevant and different. The idea should be relevant from the customer perspective and different from competitive angle. Brands are built by establishing a differentiating idea. Consider the following brands and their appropriation of differentiating idea: Band Aid, Dettol, Marlboro, Nike, H&S and Duracell. What makes a brand successful also imposes a constraint. An attempt to increase the revenue by hanging different products on the brand can lead to idea dilution and thereby weaken the brand in prospect’s mind. The market logic often runs counter to the financial logic. How good an idea is to offer vanilla in a Coke bottle or synthetic running shoe in a Woodland store? How about Levis formal wear or a A luxury car from the stable of Maruti Suzuki? Branding success comes from carving out a narrow idea territory in prospect’s mind. It is inappropriate for a brand to transcend this territory. But if a brand does try to jump over, it seriously endangers its strength.

Branding is about focus not spread. Strong brands are built on the principle of sacrifice. Jack Trout suggests that taking everything can be bad for business and giving up can be good. Stretching a brand can erode or damage or dilute the very idea on which brand success is build. Hence firms must learn to sacrifice. Three forms of sacrifice are: product sacrifice, attribute sacrifice and target market sacrifice.

• Some brands have product at the core to their identity. Branding success in these cases is built on a differentiated product. Consider KFC (Chicken), Duracell (alkaline batteries) Indigo (economy travel) and McDonalds (burger).
• At the core of some brands is the pull based on a product attribute. Staying close to such attribute is the reason why these brands remain successful. Consider H&S (antidandruff), Volvo (safety) and Rolex (prestige).
• Then comes target market sacrifice. Brand should stay focused on their target segment an attempt to get new customers from a different segment may alienate brand’s original customers. When Kingfisher name was hung on an economy carrier what effect would it have had on customers true to Kingfisher brand? Consider the effect of Lux (beauty bar for film stars) trying to woo men. Brand must stay true to their target customer.

Are you reminded of brands that suffered because of the violation of the law of sacrifice?