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WHEN THE TAIL WAGS THE DOG brand clutter increases and consumers leave the choice to the retailers, marketers resort to retail push. But can this be sustained? Is there a way out of this impasse?
Sushil Menon stared at Bhailal, the retailer, in undisguised surprise. This man who had always bought Reach toothpaste in large quantities, had just told Sushil: “I will take only two boxes. I have invested in Coke.” Sushil’s jaw dropped as Bhailal continued: “This market has become more dynamic than the stock market. Until recently, Pepsi and Coke were selling at the same price to me and I stocked both brands. Then Coke came to me and said: “If you buy two crates, I will give you a bottle free.” So I bought more of Coke, but some Pepsi too. Soon, Pepsi countered the offer, saying: ”Hang on, you buy two crates and we give you two Pepsis free.” In less than four days Coke came with a counter-offer saying two crates, three Cokes free. Keep only Coke and two more free. So I went and put all my surplus on Coke. The deal is very good”. That did sound crazy to Sushil. Because Bhailal had bought 500 crates of Coke and was all set to rake in gold. “Therefore, right now, I am not interested in toothpaste or sabun or jam,” he said to Sushil. With a lot of negotiation, Sushil managed to put some toothpaste into the outlet. But not all variants of his Reach toothpaste. Bhailal picked just one variant and refused the others. Sushil’s mind was abuzz. It was becoming clear to him that with the influx of so many brands and variants in the market, the retailer’s push energy would matter the most. But that did not take away his targets for Reach. Worse, Gerfeers India was now planning to launch another variant, Reach Plus, a germ barrier toothpaste with mouthwash. Sushil felt diffident about its future. Retailers like Bhailal were bound to give it a miss. Unless Gerfeers joined the bandwagon and resorted to the push strategy. The next day, Sushil called Radha Vats, the product manager of Reach. “Radha,: he said, “do you really think the consumer is going to be excited about Reach Plus? Yes, we have a good toothpaste there, but there are good brands in every category! Today, BPL is as good, so is LG and so is Whirlpool and so is everybody. You look at automobiles, appliances, white goods. There is very little to choose from as far as technology and looks are concerned. Today, everything is nearly similar and the consumer is fatigued with the choices and there is tremendous confusion. So you go and seek advice from your friendly neighbourhood retailer who has always been loyal to you and your mother.” You ask him” “Which detergent is good?” and he says: “Surf le jao.” So, you buy that. If he says, “don’t buy brand X atta, there are complaints,” you will not touch brand X atta. The brand is finished as far as you are concerned and as far as that outlet is concerned. Therefore, how are you going to ensure that the retailer nurtures your Reach Plus, along with Reach Active and Reach Supreme?” Radha had been through a similar debate with marketing. In the last eight to nine months, she had been increasingly seeing a commoditisation of brands. Typically, in categories where there was a huge brand clutter, and hence, low consumer involvement at the brand level. It was gradually leading to a scenario where the retailer’s recommendation was gaining supremacy. At one stage the choices were limited and the consumer would ask for a brand by name. That was a time when brand values were so strong in a consumer’s mind that she would ask for Dalda cooking oil, for Lux Toilet Soap, for Shakti Bhog atta, for Amul Butter. Today, the consumer is simply asking for 1
“Look at what is happening in the biscuit industry. the leader himself is selling at a loss! If he sells at par. somewhere is making it more viable for him to stock one brand over another.” Sushil could understand that. reproducible differentiator. he would have pushed my brand happily and successfully. no repeatable.” “So. salt. I can’t say if he was right about what he said. but for that moment I was willing to go by what he said. The marketer. Think of the company now. brands were unable to achieve brand loyalty.” said Radha.” 2 . “My friend who owns a large atta brand. Reason? In most of these there is very little to choose from. Shakti Bhog. butter. if he is not stocking all brands. Nihar. vokay.” “There you are!” said Sushil. atta. because I was in a hurry and. therefore?” asked Radha. and in few seconds he has got you to rethink your brand ideal. “Educated. No matter how much you shout in the advertisements. it will not be bought. Which is why he tries to get the maximum margins out of companies. After all. but at a loss. If you ask the retailer why he doesn’t have a given brand. Many marketers are aware that a retailer can choose not to sell their brand. it’s because he knows that the consumer is also becoming indifferent across brands. it is all a matter of who has the highest push energy with the retailer. Annapurna. Pilsbury. what are his options? He can go the Pepsi-Coke way. to live. is facing this very problem.2 ‘nahane ka sabun’. The same way he is now pushing Coke”. All atta brands. it is the same. Because in their category. I stopped him and said: ‘Don’t give me OK. but he will continue to lose money. he had been with a biscuit company four years ago. “What are we seeing. Aahar. if it is not available on the retail shelf. he says are losing huge sums of money in this struggle for retailer attention. he is having to sell to the retailer.” he said. Name it. “if I had agreed to discount Reach to Bhailal. Somebody. He now said: “I too have been experiencing this dissonance for sometime but I am unable to translate it into strategy. atta. the retailer has no use for him. biscuits. at one rupee lower than the leader! Mind you. Which is what is happening in white goods. Rose. All these are categories where the lack of a clear rational. my family has know him for 15 years. Which would explain why Coke and Pepsi are having to wage a war for every bottle they sell. jams. “But the dealer called for an OK water filter. Adil Mistri who had walked in a few minutes ago. Every biscuit is at a 50% discount to the retailer or has a consumer offer on it. “I asked for Bajaj’s water filter because I carry the memory of it being dependable. “I don’t think he changed my brand preference. Naturally. Radha had seen this just two days ago when she bought a water filter. was listening to the discussion keenly. and this important. His own brand is on the brink of closure. Same for colas. he is finished! So what is his choice? Sell. he is verily going to tell you that either the distributor is inefficient or that the brand has complaints. Consumers were easily switching brands. urban elite. “Every marketer is suffering losses. “We are seeing a phenomenon where the retailer is becoming a very important part of the marketing mix. biscuits. to survive. Today.” said Sushil. I want Bajaj. jams. she thought. edible oils. “but he did change my buying decision for that transaction. there is so little to choose from. And it took him two seconds to change your brand preference”. the name to trust. Bajaj is also manufactured by OK.” he said. that apart. despite so many brands and brand values. If he sells one rupee above the leader. “You were spending a thousand rupees on a product. “I was taken back at the ease with which he said” ‘Believe me.“ she explained. Also. emotional differentiator has rendered them sheer commodities at the retail”. MBA. “Why. ketchups.” Now do you see the power of the retailer?” said Sushil.” said Sushil now.
” “Then what options do I.000. So. What does he do? Marketers have always kept their retailers on a 5-7% margin on all branded goods. So. “Many are doing it successfully. say. But give them a good deal – five bottles per crate – and they will influence the buyer to switch. “One. its deliverables. even before I have launched Reach Plus. rather what consumers should buy.3 Adil nodded in agreement. “suggested Sushil. but can be put out at a 30-40% discount. many of which are on the same platform as Reach Plus. The management of these companies is being evaluated on their ability to achieve the initially forecast market potential. because he knows that 80-90% of the times. “Thirty percent of the times he will be able to get his consumer to switch to the deal-offering soap. Radha. “Then go through the retail. four million to five million?” “The challenge is the retailer. packaging and delivery. go and discount my brand to the consumer: ‘Buy one and get one free.’ Any promotion that offers value for money (VFM). I can go to the retailer. like Baron Electronics. 3 . what does a marketer do? Irrespective of whether he puts money on the TV ad or not. its output. I have to push through the clutter and get the consumer to prefer me over others.” she said. Lux. if you have a product that is equally good in terms of features. but Baron offered a 29-inch TV at Rs. the buyer will ask for a nahane ka sabun. have?” asked Sushil. give him a lot of money and say” ‘Push my brand and make a lot of money. If that is so. yet he pushed an OK. where should he put his money? Should he put it into TV ads. Where is my differentiator? Knowing I don’t have one. how will this happen?” “Now look at it from the retailer’s point of view. or Cinthol or Palmolive. I have to first get the retailer to prefer me. choose me over other brands he could stock.K. right? Why? Because there is more money on an OK. but not sustainable in the long term. particularly the new entrants who want to create a big market for themselves. “Now if my atta friend doesn’t have a discernible differentiator any more and he has only that much in his budget to spend. Your retailer said Bajaj and OK are similar. and cause substitution of the brand.” said Adil. Now a lot of these guys are saying.’”. Point is. and it is available.000 . then what will it take to increase sales to Reach from. with high recall. he will buy maybe more of the deal-offering soaps. it really does not hurt them. Profits are not material at this state. I must discount it?” she asked incredulously. not Lux.” Radha shuddered at the idea of a VFM OFFERING. he still has to contend with whether the retailer will push his brand. The market has eight other toothpastes. because that’s where his volumes will come from! Volumes are not coming from advertising pull any more’ these are highly salient brands. look at it from the company’s point of view. then you are in business. Moreover. if it costs them a couple of million dollars. In such a scenario.18. the marketer. Similarly. “consider the future of Reach Plus.” said Sushil. even if there is a demand for.’ Three. “Therefore. A retailer is in the business to make money. But to make a big difference as a VFM brand you had to offer big discounts. “The danger is that you have to significantly discount your brand.’ Two. “He decides what to sell. And all these are comparable on price. All others were giving you a 21-inch TV at Rs. mine is the best.20. “he said. but get the topline (sales). to get noticed. “O. I can go on the pull strategy – cover TV and magazines with my ads and say: ‘Buy mine. or put it in the retailer? Which option has a surefire hit rate? Or should he resort to consumer promotion?” Therefore. ‘forget the bottomline. say. For that.
it was simply because I found a differentiator – the retailer. But how? Discounting my brand to the retailer. get some pull. And if I was able to achieve that growth. then the only person who will ever make money is the retailer. don’t buy Petal. not the company! It’s a self-regenerating exercise. continue selling my brand. ” Because between the end consumer and the retailer. Now. and my retailer is already saying. after 12 months of high.” “How?” asked Sushil.” Sushil now turned to Radha: “So you see? If you have to do a successful business with a product that does not have a plus. “It is true that the retailer can be influenced with money. To now say: ‘Hang on. each one of them went berserk to get volumes. sell my television. as they all considered the rhetoric. he picks up 1213%! So is there something we are missing? Is this sustainable? Why is it that today. now that I have displaced competition. “I won’t be surprised. “Very simply. the growth. and he is not manufacturing. the mileage I desire. Yes. now that brand acceptance levels have been reached.You give him that and you go home without profits. What the Cokes and Pepsis started is now being followed by everyone.” said Adil. get some brand saliency. or sell only my atta.’How can you? Does Reach have a pull in the market? Now Way! And if you don’t have a pull energy. He is simply breaking the bulk.5% and tell his consumers: “Sorry. where. Will you do it Radha?” asked Sushil.’ There is a complaint about its quality. You will die. “said Adil. But where do I go from here? How long can I sustain this trend? For the time being it is an advantage because I have managed to decimate competition to a large extent in my market. it is the retailer who is benefiting. I have to drop some of these volumes. Do you know what? He will go back to brand X even if he is also giving 7. or sell my Coke. Because he knows that will squeeze his earnings. and for every unit of my brand that you sell you get 20-30% more margin that you get on competition.” said Radha. And for this. ‘I am finished!” “Naturally.” said Adil.4 “Now. So you cannot have a profitable business solution with a push strategy. I just had a taste of that from Bhailal. who now appears to be a better bet for raking in sales volumes.50. And if I have to fight the way the market is demanding. give me exclusivity. not distributing. let us get back to the earlier 7. sold my brand and made more money and keeps coming back for more! Why? Is my brand better than that of my nearest competitor? No! I can do a hundred blind tests. so he bought my brand. he ploughs these back into the retailer. I can tell you no consumer will be able to tell my brand from brand X. then you have to go through the retailer.” “Of course. A manufacturer strives at cost effectiveness.0. That is what triggered this marketplace madness. then you have to get it from pushing. he will eat you up. today. in the supply chain. And what is the best way to do it? Go to the retailer / dealer and say. Then Adil said: “If you do that you will lose the direct touch with the consumer. given the window of 8-10 years that these top managers were given by their foreign parents.” “And here is the bad news. I have the volumes. the retailer demands more than his pound of flesh.” 4 . thus giving him higher margins. “the last few weeks I am being pushed by my commercial department to take a price increase of Rs. if I were to go back to my retailers and say: ‘Okay friend.5% margins. if you don’t continue feeding the giant.There is no way out! You have shown your parent firm a certain volume that you can achieve. The person who is gaining is the retailer. His contribution to the supply chain virtually tends to zero. If you do that. the biggest gainer is the retailer? What will happen if we don’t pamper the retailer?” “But then what is a marketer supposed to do?” asked Sushil. ‘nahin saab’. but instead of passing on the savings to the consumer. “How else do you think I managed to increase sales of Petal soap by 250% in Delhi metro in just 12 months? Unprecedented? Yes. A silence pervaded the room. he is.
“X Today. eaten by rats. Branded commodities. I am not putting up a Dove or a Fair & Lovely. “What do I do? Reach Plus does not have a differentiator. The Indian market had become a huge basket of multiple offerings. X Ultra. my own wife walks into an outlet and looks around to see which toothpaste comes with a free toothbrush! The whole marketing mix is now becoming a challenge. your theme spends are going down. I know. Each begging for either consumer or retail attention. stolen. Where is this going to end? All I know is that I am fighting a price increase with my commercial department and bravely even asking for 75 paise more to entice my retailer because I have to get my sales volumes in! If I lose my job.500 SKUs. You are adding to my complexities adding brand after brand. “we are talking of an inflation figure of 3% even with petrol and diesel prices going up! Which is why we are in a scenario where TV’s cost less than they did in 1991.” “Which is why. that means your brand building.” Radha sighed. on offerings. So. But the question is. If you decide to go for the long term. the distributor was not king. salt. Pepsi and Coke would have started making profits. jams. “The reason why there is no answer is because there is a big conflict between short-term and long-term gains. obsolete. you are spending on schemes. the consumer is not showing clear loyalty.” said Adio. because you have not control. to any retail outlet and watch how people buy. toothpastes. especially for commodity brands where there is not plus. And if you are in an aggressively competitive environment like Coke and Pepsi are. bread. but I have to meet targets and retain my job. And in all these there was zero brand loyalty. it is the retailer who is making the difference. then this carries on. oils. invisible. “Yes. If this is what you are doing. And then all hell breaks loose.” said Sushil. With competition getting aggressive. it won’t surprise me!” he laughed. “It has come to a point where your own margins are not enough! You are not asking for budgets to advertise or to run a promotion. the manufacturer was not king. biscuits. because everyone is pumping in money like never before. You are not marketing any more. I know. Suddenly. Shouldn’t you give me a good reason to keep them all?” 5 . As if in sync. Sushil said: “For. Which is why we are talking of scenarios where people are discounting everything that is available. then in the short term you don’t even kickstart your brand! And everyone wants immediate saliency and loyalty from the consumer.” said Adil.5 Radha’s mind ticked away. All these TVs or refrigerators.5 very soon he wants 6. the consumer was not king. they may get old. X Super. X Active. The consumer was confused because he did not see any clear differentiator across brands. atta. But in the long term this is not sustainable. tomorrow he will want 5. Today. “Look where it has taken you. the retailer will ask for 5%. what is happening? You are no more building the brand and your soap has become a commodity!” “Now you are getting the point. how does one get out of that?” “If there was an answer.” said Radha. X Supreme. your spends on creating an image for your brand are going down – can’t you see? Instead. lost. The retailer was king and master puppeteer. With zero brand loyalty. ‘give me a good reason and I will push your particular brand. The question usually is ‘offer kis pe hai?’Why. mused Radha. where your competitor is equally aggressive. The other point is. there is not limit to greed. the prospect of Reach Plus seemed forbidding. the brand is not showing clear differentiator: the consumer is saying ‘Koi bhi de do’ and the retailer is saying. How do I launch a me-too successfully?” And in the background they all could hear the retailer whining. Why do you have so many types? In my small shop I have keep 2. butters. New XX Plus. shampoos. low-priced detergents.
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