Business Daily from THE HINDU group of publications
Monday, Sep 18, 2006
Marketing - Insight
Columns - American Periscope
Reality check your buying decision
When you experience something, you appreciate it better. Sales persons know this. Even as you walk along the aisle of a clothing store, admiring the jackets on the rack, the salesman will try to slip one on your shoulders, for he knows that when you try it on and look at yourself in the mirror, you are likely to buy it. The salespeople at Grand Sweets in Chennai are constantly trying to get you to sample their latest delicacy so that you will buy it, temporarily forgetting your cholesterol levels.
Morgan Spurlock is a filmmaker who likes to experience things. He was first inspired to experience what happens when you follow the sales offer called `Super Size' at McDonald's. Rather than buy the regular size, the chain entices you to buy a larger size for a nominal increase in price. They sell more, you eat more, everyone is happy!
With a reputation for selling high-fat food, McDonald's is normally cause for jokes about the health consequences of eating its fare. So Spurlock took on a challenge of eating only McDonald's for every meal. He had a camera record his progress, and fortunately was under medical supervision since his body was not too happy with the experience and was telling him so! His experience, which became a successful film Super Size Me, and nominated for an award, is a daunting case study of bad eating habits.
Taking the idea further, Spurlock now runs a television series called 30 Days, where he picks people with a point of view and lets them experience the reality of living through it.
A recent episode was on outsourcing. It starred Chris Jobin, a software engineer, whose job in the US was outsourced to, that's right, Bangalore. Needless to say, Jobin is upset about losing his job, especially now that he has a girl friend and a child to look after. So, Spurlock convinces him to move to Bangalore to work there and experience the reality of his situation.
We see the rest of the film through Jobin's eyes. He lands in Bangalore and lives with a middle-class family whose son and daughter-in-law are making it in this world, thanks to the tech boom. Jobin applies for and is selected for a call centre job; he even undergoes accent training .
Along the way, he gets to see the dog hunting down a rat in the apartment he stays in, the poor state of civic services uncollected garbage on the roads among other things chaotic traffic, slum dwellers living next door to gleaming office complexes , the janitor in his office who shares a hut with several people and is glad he has a job, and so on.
The underbelly of the rising powerhouse that is Bangalore convinces him that Bangalore needs his job more than he does. He is glad to be back in the US after 30 days, to be in an environment where he can re-invent himself and make a different career if need be, with less effort than in Bangalore.
The sobering experience makes him change his opinion.
The social argument
The by-product of Jobin's experience is a liberal message stop complaining and help folks out there. Remember those ads showing children with distended bellies to motivate you to donate to a charity? Not very different. Perhaps Spurlock's film will also help tone down the rhetoric against outsourcing that is bound to grow as we get closer to US elections in November.
The justification for outsourcing moved from one of obtaining low cost of products and services to that of getting not just low cost but also high quality. This argument says let's outsource since they need the job more.
What does that do to the justification for making a purchase decision? Does one look at a shirt made in Honduras and make a decision to buy it because those in Honduras need a job?
A US news magazine created a sensation sometime ago when it revealed the dreadful conditions in the manufacturing centres in China which turned out reputed US brand names in footwear and apparel.
The options facing the buyer are growing. A business newspaper reports that a maker of specialised devices for medical companies gives its customers a choice of where they want the product made: Either in California or for 25 per cent cheaper in India (or Taiwan).
Everything else remaining the same, economists who swear by the rationality of the purchase decision will argue that the customer will buy the lower priced product.
So by giving the choice and the price benefit, the manufacturer is offering an additional dimension to his customer either way my product will perform the same, but you can be patriotic and buy a `Made in US' product at a higher price (and keep the jobs home), or you can buy the `Made in India' product and support them.
To be fair, the decision is apparently more rational than I project; it is between lower costs in India, complex tooling in Taiwan, versus an opportunity to see the product made in the domestic location. But you can appreciate where this argument is headed.
If the customer wants to trust the supplier that the product will be as per specification and does not have to frequently visit the site, India would be the attractive low-cost location. If it is a medical device, and I have doubts about the quality of a product, should I choose California?
The Spurlock film and the device manufacturer are introducing more variables in the buying process that will continue to complicate the buying decision. Looked at differently, Jobin's shock at the chaos on Bangalore roads can well serve as an entry barrier.
No rational thinking manager would want to trade the orderly flow of traffic on Silicon Valley's roads for Bangalore's, right?
So, for an intermediary who has the skills to negotiate the local difficulties and deliver on at least a 25 per cent cost advantage, it is a competitive advantage to be based in Bangalore!
Another firm, E-Loan, offers customers a choice, to have their loan papers processed in India, which would be faster, or in the US.
Apparently, about 80 per cent chose the India option and the company, which charges the same, quietly pockets the benefits of the lower costs of processing in India.
The customers get the benefit of speed, the company makes higher margins, and those who have their papers processed in the US feel they have kept the jobs home. Everyone gains!
(The author is professor of international business and strategic management at Suffolk University, Boston, US. His Internet address is firstname.lastname@example.org)
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