Just a phone, and time-tested strategies stand altered

FOR A better part of the last two decades, Hindustan Lever (HLL) has been the employer of choice for elite B-school students wanting to make a career as marketers. Success in the fast-moving consumer goods (FMCG) sector was a marketer’s true test and HLL’s mammoth and legendary marketing machinery the tribe’s benchmark. Three years ago, when CEOs of Coca-Cola India and PepsiCo made strategy presentations, most statistics about penetration, purchase frequency, and consumer response to the brand were relative to HLL’s. Circa 2007, it seems almost impossible to kick-off sundry marketing and retail summits in India without making glowing remarks about the exploding mobile phone market and its posterboy Nokia. Move over FMCG, it’s the era of FMCD (fast-moving consumer durables) aka mobile phones. Clearly, for marketing heads and CEOs of companies across the mass consumption category ranging from FMCG to automobiles to consumer durables, the 160-million big-and-growing mobile subscribers market, and the success of handset makers such as Nokia and Motorola is the new marketing gold standard as they look to take a leaf or two out of their marketing rule book. Consider this: in 2006 handset sales doubled to 65 million, and by the end of this year, nearly 95-million new handsets are expected to fly off the shelves — a 46% increase. It is expected to stabilise at a compounded annual rate of 30% over the next five years. The air-conditioners market was a distant second with a growth of nearly 30% last year, with a comparably tiny base of 2.2 million units. Colour televisions, the only other durables category that is comparable in terms of the volume, grew by a piffling 8% in 2006 with sales of 12-million units. Two-wheelers and passenger cars have witnessed a steady growth of around 20% over the years. “It would be myopic and dishonest to say that the mobile handsets market or Nokia in particular is not the new benchmark for us. The way Nokia changed the rules of the game by introducing hugely successful 1,100 black and white phone just when everybody was convinced colour phones was the way to go, should be a strategy benchmark for every marketer. Also, in recent times, Nokia has burst a myth, which had almost become a truism for Indian marketers that there is bound to be value erosion as volumes increase,” gushes LG India’s marketing head Sandeep Tiwari. At a time when marketers are grappling with the problem of positioning various brands or products in their portfolio in the right way, Nokia has shown the way to effectively straddle the entire price spectrum of mobile phones. “The beauty of Nokia is that as it manages to sell its phones with equal ease to a CEO and his chauffeur. The topend N series peacefully co-exists in the portfolio with the less expensive, entry level Starsky model of phones,” says the marketing head of a rival handset maker. Although the introduction of Nokia’s ‘made-for-India’ 1100 model and colour handsets priced below Rs 3,000, launched by other manufacturers proved to be the market’s high octane fuel, companies have done a remarkably good job of preventing massive value erosion which has traditionally been the Achilles’ heel for marketers in any high growth market. Handsets costing less than Rs 3,000 account for 70% on the market, and nearly half of these cost less than Rs 2,000. Yet the average cost of a phone sold in India is Rs 5,000. In case of CTVs, the average price selling price has come down consistently to Rs 8,000 today. Nokia India’s MD D Shiv Kumar rather modestly says that handset-makers, such as his firm, are successful because they are just tapping a huge consumer need. “But, we have certainly set new benchmarks when it comes to retail experience and product replacement cycles,” he concedes. Consumers, in a market such as India, changing phones as frequently as within 8-12 months has certainly stumped analysts the world over. “At the end of the day, all businesses are fighting for a share of the same wallet. The competition today is not just restricted to one category, but across categories. Mobile companies have set standards in oneon-one marketing. They have been able to increase business by reaching the customer directly as they connect well with customers. FMCG companies today are learning to go beyond the point of sale by reaching the consumer directly. Handset makers have been more successful than others in reaching the bottom of the pyramid by slashing prices and increasing penetration. Not just FMCGs or durables but there’s a huge learning here for the financial services firms as well,” says Technopak Consultants chairman Arvind Singhal. Understandably, mobile phone companies, both manufacturers as well as service providers, rely heavily on innovation. The shortening of the handset replacement cycles is also helped by the fact that manufacturers introduce an array of new models in every price category almost every six months. “Over time, mobile phone companies have taught us the importance of constant product innovation to keep the consumer engagement alive. At Wrigley, even we target 20% of our sales from new products each year,” says Wrigley India MD Arun Hegde. Handset-makers have also redefined the way to crack the youth segment for marketers. “The moment you enter the IT or mobile phones market the age of your target group gets halved instantly. The precision with which Nokia addresses it’s target group through its communication and marketing strategy is clearly unmatched,” adds Tiwari. “We have been proactive in reaching the correct consumers, and effectively demonstrating the use of relevant features for that target group. Selling a technology-driven product is in a way akin to selling microscopes. But we have managed to bring mobiles into the consumer space and made it ubiquitous,” explains Motorola India director marketing Lloyd Mathias. Today’s wellness mantra too seems to be piggybacking on beep therapy. Ask Dabur’s VS Sitaram, who heads the company’s consumer care division, and pat comes the reply: “The learning from mobile marketers for a wellness company like us really is convergence between different technologies and how various media can be converged to target youth.” Mr Sitaram’s argument, of course, rests on two pivots — convergence and youth. Mobile marketers have been successful in converging technologies such as text and music for a wide swathe of the youth segment. Over time, handset-makers and network marketers, specially CDMA operators, have also learnt the art of bundling services and handsets, thereby drawing up a completely new roadmap for other verticals. “Bundling is still at a very nascent stage in India owing to extremely high operating costs and some of the lowest tariffs for operators in the world. There’s also the added challenge of nearly 30% government duties and levies each year that the industry as a whole faces,” claims Cellular Operators Association of India (COAI) director general TV Ramachandran. “Handsets have played a vital role in positioning the category as young. In the west, there is almost 100% bundling. Bundling has an element of subsidy which makes it attractive for the subscriber. In India, we’ve stayed away from bundling owing to very low tariffs on one hand and high operational costs on the other,” says Bharti Airtel director marketing & communications Hemant Sachdev. Although the IT industry predates the mobile revolution in so far as bundling goes, the two can’t be compared. Simply put, there are 6.5 million PCs in the country compared to 160-million mobile phones.

Courtesy: EconomicTimes