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Thursday, November 22, 2001

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Of markets and consumers

Shunu Sen

After the terrorist attacks on New York and Washington, politicians are predicting that the world will never be the same again. While I do not wish to debate the above statement, my question is on something related - consumer behaviour. Do you think that American consumer behaviour, spending and buying will be affected by the terrible events of September 11. If yes, how and why? Is there a lesson for marketing practitioners in India?

(V. Chandrasekhar, Visiting Faculty, Loyola Institute of Business Administration (LIBA)

I believe, without doubt, that consumer spending in the US in many categories will be adversely affected by the events of September 11. However, we must first keep in mind that consumer spending had started to recede even before the terrible event. While there was some debate as to whether the US was technically in the grip of a recession (which is defined as three consecutive quarters with negative growth) or merely a slowdown, there was already a drop in consumer spending.

What happened since then is that things have gone from bad to worse. The events, as we may call them, have had a hugely negative effect on individuals, which in turn has reflected adversely on consumer spending, which has now reached an all-time low. At this point of time, analysts are already predicting a negative growth in this years Christmas sales. What is even more worrying is that no one knows when things will improve, particularly in the areas of travel, entertainment and consumer capital goods. The Americans have become so paranoid about travel that they just refuse to leave their homes. Vacations have been cancelled and all professional engagements outside the US are being refused. The extreme example, I suppose, is the case where the annual Davos Conference, held each year in Switzerland, has been moved to New York and is still being referred to as Davos 2001.

As the US is the largest market in almost every single category, whether it is travel or cars, cough drops or colas, this behaviour has adversely affected consumer and trade sentiments worldwide. In fact, some countries, such as those in South Asia, which depend on the US for a significant part of their GDP, have suffered the most. It has affected China and India, particularly in certain segments such as software in India and US exports in China.

The lessons for marketing practitioners in India are interesting and, perhaps, not fully appreciated. India is a large market for many categories and is in a different stage of development compared to the US. During a period of slackening demand, marketing practitioners are truly tested and the men are separated from the boys. Because, under such circumstances, it is only the marketing people who have the responsibility to create consumer confidence and develop a market preference for the brands they control.

It is no coincidence that in India during the last quarter, in spite of the difficult market conditions, marketing-oriented organisations are focusing their scarce resources, whether they are people or money, on the task of market creation and brand preference. Hindustan Lever, for example, has decided to focus its entire advertising budget on 30 brands nationally, and a further selection on a regional basis. A number of initiatives are being taken for the growth of the market. Initiatives such as low-priced ice creams, lower unit size products, retail distribution by village women in Andhra Pradesh and developing strategies that would exploit the rural market at a time when the crops have been good are a few. In other large consumer products businesses, whether they be white goods such as LG or food products such as Britannia, there is a lot of stress on developing new markets and using branding as a technique to appropriate a leadership role in these markets for ones brand. We will see, as time goes by, more and more companies doing so or moving into areas which represent growth. For instance, Bajaj, a brand which virtually owned the scooter category, has reinvented itself to compete with Hero Honda in the below 175cc scooter market which was growing at a phenomenal rate. This has not been easy, particularly with the marketing people who have long been used to a situation where all scooters were Hamara Bajaj.

I believe the time has come for the marketing people in India to recognise that their main task is to help develop markets and only then create brands which would become synonymous with the market itself. At the same time, the brands should retain a distinct identity and offer a reason for purchase which is unique to the brand itself.

This does not mean that the task is done in a sequential manner. Brand development and market development in a large number of categories are two sides of the same coin and it is critical that the marketing (or branding, as I prefer to call them) team looks at its task in a multi-dimensional sense rather than a more conventional uni-dimensional view.

This means that in a country such as India, we cannot really differentiate between the act of making a market grow from the task of developing a strong brand. If marketing is seen from the perspective I have recommended, we should have little to fear from the fallout of September 11 except the terrorists themselves, which firmly falls outside the scope of marketing.

(The author is CEO, Quadra Advisory, a strategic marketing consultancy. Readers may send in their questions on marketing issues to The Editor, Business Line, 859, Anna Salai, Chennai 600002 or e-mail them to bleditor@thehindu.co.in.)

 
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