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Friday, October 28, 2011

Quotes on Market Research

  • Measure with a micrometer, mark with a chalk and cut with an axe.
  • When giving a forecast give them a number or the time but never both
  • Figures don't lie but liars figure
  • It is a capital mistake to theorize before one has data. 
  • he way to do research is to attach the facts at the point of greatest astonishment.
  • Some people use research like a drunkard uses a lamppost: for support, not illumination.
  • Torture numbers, and they'll confess to anything.
  • When we cannot express something in numbers, our knowledge is meager.
  • There are three kinds of lies: lies, damned lies and statistics
  • There are two kinds of statistics, the kind you look up and the kind you make up
  • Facts are available to everyone; it is interpretation and implementation that is key

Sunday, October 23, 2011

How does their tribe thrive ?

More and more shops in Indian metros are looking like high street shops. They sell  expensive brands, products are displayed in fancy ambiance and the shops have attractive facades. They sell things like shoes, apparel, fashion, furniture and novelties. But the curious fact is that they do not seem to have too many customers who actually buy ! So, if they do not make much money; how does their tribe thrive?.

First, these shops do not invest in things that are on sale in these shops : the merchandise is funded by the vendors of the store. All that the shop owner provides in the real estate and the fancy interiors; the rest is provided by the vendors on credit. The vendors get paid well after the goods are sold by the store to its  customers in cash. In other words, the investment of the shop owner in the working capital is negative ! The shop owner in fact converts the financing provided by the vendors into real estate.

Retailing is actually a financial business. If you have an attractive shop, you can get many vendors coming to you areal estate is one of the few areas left where you can invest black money - of which there is plenty around and people who have it are looking for ways to use it rather than stash it. Hence funding is no problem. As stated above the working capital is fully funded. The unrealized returns - property appreeciation - is what everyone is after. Their only intention on a month to month basis is to break even : as long as salaries are paid and power costs are met; they are happy.

These store owners buy more real estate, buy more stock and use this higher clout to extract better price and more credit. Where does that leave the suppliers ? The suppliers have two choices - to become cost leader to compete with others, to become more innovative and different or to create a brand pull that will force the retailers to keep your stock. With decades of cost reduction, the vendors cannot really do much on costs. The pull creation is expensive. Innovation in the value chain is the real route left now to exploit.


Monday, October 17, 2011

Tips to Managers ( People and Performance)

  • Fix the problem, not the blame. It is far more productive, and less expensive, to figure out what to do to fix a problem that has come up than it is to waste time trying to decide who's fault it was.
  • Tell people what you want, not how to do it. You will find people more responsive and less defensive if you can give them guidance not instructions. You will also see more initiative, more innovation, and more of an ownership attitude from them develop over time.
  • Manage the function, not the paperwork. Remember that your job is to manage a specific function within the company, whatever that may be. There is a lot of paperwork that goes with the job, but don't let that distract you from your real responsibility.
  • You get what you pay for. Yes it is an old saying, but it is still true. Whether you are paying for machinery, software , advertising, or people you ultimately get what you pay for. Always buy the best you can afford. Quality always comes through.
  • Don't DO Anything. Your job as a manager is to "plan, organize, control and direct." Don't let yourself waste valuable time by falling back on what you did before you became a manager. We know you enjoy it and you are good at it. That's why you were promoted. Now you need to concentrate your efforts on managing, not on "doing".
  • Anyone can steer the ship in calm waters. What will set you apart in your career is how you perform during the tough times. Don't become complacent and relax just because things are going well. Plan ahead for the downturn.
  • You have to make a difference. The group you manage has to be more effective, more productive with you there than they would be if you were not. If they are as productive without you, there is no business sense in keeping you on the payroll.
  • Delegate the easy stuff. The things you do well are the things to delegate. Hold on to those that are challenging and difficult. That is how you will grow.
  • Don't get caught up in 'looking good'. "Work happily together. Don't try to act big. Don't try to get into the good graces of important people, but enjoy the company of ordinary folks. And don't think you know it all. Never pay back evil for evil. Do things in such a way that everyone can see you are honest clear through."
  • Leaders create change. If you lead, you will cause changes. Be prepared for them and their impact on people within, and outside, your group. If you are not making changes, you are not leading.
  • Practice what you preach. To lead, you have to lead by example. Don't expect your people to work unpaid overtime if you leave early every day. Don't book youself into a four star hotel on business trips and expect your employees to stay in the motel off the freeway.

Sunday, October 16, 2011

Kotler's Book is an encyclopedia and not a textbook

Batch 31 participants asked me yesterday they cannot find the MVG model anywhere in the prescribed textbook of Kotler. I had to tell them that, while it is a standard and up-to-date textbook on marketing; it is so wide in scope and meant for so many difference audiences that any one audience finds it bewildering.  I told them that is why I have created a superstructure that will enable you to understand how everything is "connected" to each other in marketing. While the word "MVG Model" is my own creation, the underlying concept is universal that the output is a function of 3 concepts Market, Value Proposition and Go To Market and that they are interconnected. If you ponder a little it will become clear that the output of your marketing activity - whether measured as sales, market share, price realization or profitability - depends on
  1. Market : This involves analyzing how many customers, their needs, their readiness, their behavior, their habits, the prices they are willing to pay, competitors and their activities, collaborators and their activities .. and choosing your target customers. There are 5 chapters relevant to analysis are 3 (Env scanning), 4 (Market Research), 6 (Analyzing consumer markets), 7 ( Analyzing Business Markets) and 21 (Global Markets). There are 2 chapters relevant to choosing target markets are 5 (Customer Value) and 8 (Segmentation and Targeting) 
  2. Value Proposition : This builds on - and is linked to the choice of the market - because you cannot create value (product, service) unless you know who the customer is, and who the competition is, and unless you are clear what the positioning is. There are 3 chapters 9 (competition), 10 (Brand equity), 11 (Positioning). Once you decide value proposition, you can work out product specifications and pricing and there are 4 relevant chapters are 12(products), 13 (services), 14 (pricing) and 20 (New Products)
  3. Go-To-Market : The value proposition needs to be taken to the right places where customers are searching for you (gathering) - or you need to search for the customers (hunting). You need to prospect, contact, communicate, convince, close and transact and set up mechanisms for doing so. There are relevant 5 chapters are 15 (channels), 16 (retailing), 17 (communications), 18 (mass media), 19 (personal selling)        

Saturday, October 15, 2011

I am Fear - that's who




"I am fear. I am the menace that is invisible to the eye but sharply felt by the heart. I am the father of despair, the brother of procrastination, the enemy of progress, the tool of tyranny. Born of ignorance and nursed on misguided thought, I have darkened more hopes, stifled more ambitions, shattered more ideals and prevented more accomplishments than history could ever record. I assume many disguises. I masquerade as caution. I am sometimes known as doubt or worry. But whatever I'm called, am still fear, the obstacle of achievement. I know no master but one. It's name is understanding. I have no power but what the human mind gives me, and I vanish completely when the light of understanding reveals the facts as they really are, for I am really nothing."

Tuesday, October 11, 2011

Last minute 2 lectures on strategic cost management


Introduced the concept of V-P-C (Value-Price-Cost) through taking an actual case of ECOSS ( a new case authored by me being published by Richard Ivey). The class grasped the point quickly that the "negative features" of village tourism - like not having a TV, not being able to order food a la carte, not having a swimming pool - are actually positive features for some type of tourists who have "been there and done that" and realized that all hotels are the same but staying with people is an experience. Thus, for such customers, ECOSS need not fear of competition from 5 star hotels even if they exist. Hence the principle that "Value is subjective, Cost is Objective and Price is your decision". I took examples for B2C and B2B businesses to explain this.

From a purely economics point of view the "customer gets the product for which he pays a monetary price". From a strategic perspective, the value (defined as something for which the customer will pay money for) is driven by 4 drivers ( product, facility, expertise and image) and the price is driven its own 4 drivers ( money, time, hassles and risk ). I gave plenty of examples of each of these 8 things. I normally use this framework to show that there is really no commodity in actual life - it is we who make anything into a commodity by not being able to differentiate.

The real challenge lies in figuring out which drivers add more value than they add to the costs. The business lies in the skill to recognize which costs are value creating and which costs are non-value creating. You can create "positive net value" by retaining (or even increasing) the costs that create net value. Net value can also be added by reducing costs (or even drop) which do not create a proportionate reduction in the value. Both cost increase and reduction can increase profitability. ( I could have introduced prof Kano's model but did not ) (but you can) 

I defined the objective of the course as "being able to identify which costs you should incur more / less of so that the net impact is positive on P&L and B/S". I also introduced the concept of financial and intangible assets. Intangible assets being relational, structural and human".

I also mentioned about inside-out costing - that in a seller's market you can incur whatever cost you want and add your profit and still sell at the resulting price. But in a competitive market you are squeezed by markets on both sides - customers will pay you only a competitive price. And the vendors too will charge you what your competitors are paying. Both the prices and costs are not controlled by you and what remains is the price. Therefore the key to operating in competitive markets becomes aiming at the right markets and positioning yourself well so that you get the right price and incurring only those costs which create net positive value.  

I also took the example that the value is holistic and not attached to a feature. If you see the feature of an expensive car being non air conditioned you would laugh till you realize it is a formula car! Same for shopvac

Monday, October 10, 2011

When will iPhone 5 come and what will it be like?

Apple is really good at managing the portfolio of all segments of customers. Consider the latest baby from the stable of Apple. Most marketers would have called the phone as "iPhone 5" and probably this strategy would have sold more of the product. But Apple is cleverer than that!

If they had called their new product as "iPhone 5",  their signal to the market would have been that here is the next generation phone. What is wrong with that ? Everything; if you are an existing iPhone 4 user because you bought it just an year ago and are still under the 2-year warranty. You would not like being made so obsolete so soon by the brand you trusted.


The naming of the new phone as "iPhone 4S" clearly suggests they do not want the market to see it as a new generation phone but as a "tweaked upgrade". Its target audiences are primarily 70 million iPhone users who bought it before "iPhone 4" was launched - and of course 1 Billion Non-smartphone users and  of course smartphone users of other brands and platforms - Blackberry, Android and Nokia. When so many segments are still open, why would anyone make existing customers cross?

What will be the right timing for the iPhone 5 - the "next generation" - to come? I think it will be in the latter half of 2012. The iPhone 4 was released in the summer of 2010 and I suspect the people will begin coming out of warranty that time. What will iPhone 5 be like? It has to meet the following challenges : it has to be significantly better for iPhone 3G and 3GS users. It has to attract non-smartphone users to want to upgrade to it or the free 3GS instead of an Android phone. It has to be better then Android and Blackberry.

Thursday, October 6, 2011

Motivational Quotes

"A person who never made a mistake never tried anything new."
- Albert Einstein

"Life is 10 percent what you make it and 90 percent how you take it."
- Irving Berlin

"You have to expect things of yourself before you can do them."
- Michael Jordan

"You'll see it when you believe it."
- Wayne Dyer

"Desire is the starting point of all achievement, not a hope, not a wish, but a keen pulsating desire which transcends everything."
- Napoleon Hill

"Set your course by the stars, not by the lights of every passing ship."
- General Omar N. Bradley

"The bad news is time flies. The good news is you're the pilot."
- Michael Altshuler

"Even if you're on the right track, you'll get run over if you just sit there."
- Will Rogers