Jul 16, 2008

Mktg - Brand marketing cos gaining momentum


Twenty-eight-year-old Nakul Gandhi was in for a pleasant surprise when Louis Philippe extended its brand into Lp, to target young buyers.The last time Gandhi had visited a Louis Philippe store was more than a couple of years back. Back then, he had told the salesperson that as much as he loved the brand, he would rather buy it for his father. Now, Lp was offering him just the kind of image and designs that young consumers wanted , almost as if some designer had overheard his none-too-subtle jibe. It perhaps wasn't a designer playing the part of the fly-on-the-wall , but somebody at Madura Garments must have been listening that day. And that's the advantage of having a strong and direct retail connect with consumers. "Exclusive outlets help you get cues from customers on a live basis," says Vikram Rao, business director, textiles and apparel, Aditya Birla Group, the company that owns Madura Garments. So at a time when most consumer businesses in India are still finding their feet in doing business with organised retailers - negotiating margins, cornering shelf space or learning the art of display - a few marketers have gone ahead and set up shops on their own, running retail enterprises themselves, or through franchisees. Cases in point: Videocon and Tata Tea. The reasons go beyond the clich├ęs of 'getting closer to customers' , 'providing a uniform brand experience' and 'espousing the right kind of brand values' : the objective here is spotting the next trend, test-market combinations that a retailer might otherwise hide at the bottom of the rack, pick-up consumer feedback, and even making customers co-creators . "These outlets are the ultimate in being customer-centric . Beyond being points of interaction, they enable us to pick ideas, track trends, test products and even reverse-engineer products based on feedback," says Sangeeta Talwar, executive director , Tata Tea, of the company's Chai Unchai retail format. Saurabh Dhoot, director, Next Retail, part of the Videocon group, adds: "These formats can lead to a lot of interaction with customers and help in keeping ears to the ground."Shop , skip & jump Before getting into exactly how retail is helping these companies, understanding why businesses are eager to have a retail face is important. One big reason has to do with consumers themselves. In some categories, like say cellular phones, consumer attitudes have undergone a sea change. "As a country, we are moving from a penetration economy to a consumption-led economy. Hence marketers need to move from just satisfying customer needs and desires to delivering a holistic experience," says V Ramnath , head - branded retail, Nokia India. Others see the phenomenon as being a result of value migrating to the retailer's end. "There is not much product differential in the market place. So service provides the experiential differentiator. Naturally, retail is becoming very important," says SK Palekar, senior vice-president , marketing & knowledge management, Eureka Forbes Limited growth can come only from retail. In lifestyle categories wholesale growth is restricted ," he says. Take, for example, a scenario where a brand like Van Heusen is retailed through a multi-brand outlet. It would get a maximum display of 200 to 300 square feet, and naturally only the best selling designs or sizes would be on display. As the competition is only a few feet away, no one dares take chances. In comparison, one Van Heusen exclusive outlet in Delhi is 20 times that size. "Who thought we would ever have a 7,000-square-feet Van Heusen outlet some years back?" asks Rao. For Madura, which owns brands like Allen Solly and Peter England, apart from Louis Philippe and Van Heusen, this retail play will only get bigger . At present, close to 40% of the company's sales happen through its direct retail (companyowned or company-operated ) network. Over the next three years, its retail operations will account for as much as 70%-80 % of its apparel sales, with the conventional wholesale route accounting for the rest. To set a context, three years back, only 10% of the company's business came from the direct retail channel. In some categories, though, exclusivity need not necessarily guarantee sales. As Palekar points out, consumers walk into durable stores with two-three brands already in their consideration set, and often walk out with the ones that deliver the best value-for-money . Probably why Videocon Industries, on its part, prefers to keep the Next chain of durable retail outlets as a "completely independent" operation. Dhoot says the chain maintains a supplier-buyer relationship with Videocon Electronics, as it would with any other manufacturer. Marketing consultants say this arrangement can help chains like Next to actually gauge buying patterns of consumers like any other retail channel, as the evaluation happens across brands, rather than studying buying patterns within a single brand. For Tata Tea's Chai Unchai, it's early days. But even as the company has only three outlets , post launch early this year, it is testing waters across different consumer segments. While its first outlet came up within the IIM campus in Bangalore, the other outlets have come up within an office complex and a mall.One of the big objectives of the Chai Unchai venture is to connect with youth in a differentiated manner. Talwar points out that the rationale to set up Chai Unchai was prompted by the fact that the out-of-home food and beverage segment is "large and growing." To top this, the Tata Tea portfolio was tea, coffee and even water, so the company was gunning for a larger share of throat. But out-of-home tea consumption was largely happening at the corner teashop where the consumer rarely knew - or bothered to know - what brand of tea was being served. "Tea tends to hide in the pan that it's boiled in, unless it's a teabag. Chai Unchai attempts to make tea more poignant and front-of-face , yet unpretentious," says Talwar. At Chai Unchai outlets , the company is offering not just tea and snacks at an average billing amount of Rs 40. It is also experimenting with other cold beverages. Talwar says that the learning process is huge. "We will adapt to various elements of the mix and optimise ," she says. One of the Chai Unchai outlets, for instance, is bang in the middle of a food court, with brands like McDonald's and KFC in the vicinity - the flow of customers will be easy to track and even compare. One of the important lessons that the company has picked up is that instead of investing heavily in fixed assets, an outlet of Chai Unchai can easily be unscrewed and transported to another location - like a piece of do-it-yourself furniture. While Tata Tea is mastering the entire business of out-of-home tea retailing, others like Nokia and Madura Garments are making incremental gains. "As the moment of truth happens at the retail end, branded retail becomes key," says Ramnath of Nokia. The company uses customer feedback in both its product and service offerings, and dovetails it into the back-end . Looking for cues are very important for Nokia, as emerging trends play a huge role in new product introductions. And the company introduces new products by the dozens - at one product every week, Nokia introduces 52 new models every year. While successful models last for 18 to 24 months, with the maximum value coming in the initial four months, unsuccessful models can die in as little as six weeks. Hence, the retail end proves to be extremely critical . Company executives say that using customer feedback, Nokia is now looking at introducing localised pre-loaded music and ringtones. Madura Garments has examples where the retail store triggered an alarm or became a laboratory . In the case of Louis Philippe, the starting point of introspection was that few young men were visiting its outlets. As research found that the brand was seen as a label worn by executives above 35 years, it soon paved the way for a newer extension that caters to the younger audience . At present, Lp has six stores. Rao claims that soon the company will launch Lp Luxury, for the upmarket buyer. "The strategy is to serve multiple customers and also be available on multiple occasions for the same customer," he says. Similarly, company executives say the planned extension into the women's range came about when it was observed that trousers with smaller waist sizes were flying off the shelves at Allen Solly outlets: women were picking those up for themselves. Also, Van Heusen has been extended into Vdot, a lifestyle range for men. Rao says, "Vdot has Swarovski crystals on a party shirt. Few would have imagined that a Van Heusen would have that." The accent on retail has also helped Madura cut spends on advertising as a percentage of overall sales. In the past, when most of its sales were through the wholesale route, the company invested 10%-11 % of sales on advertising. Now, it spends only 7%-8 % of sales on advertising. "Still there is scope for improvement. International apparel companies spend only 3%-4 %," says Rao. Company-owned retail might have strong fringe benefits like gaining consumer insights. But it cannot be all encompassing. "Feedback and insights cannot be the single largest causal factor for huge investments in retail," says Puneet Avasthi, vice-president , retail, of market research agency IMRB. He adds that other research initiatives like a web-enabled direct feedback mechanism , market research for post-purchase experience are some aspects that are equally important. Also, relying purely on retail-based research means feedback can be captured only from consumers visiting the store. "Own retail channels are an excellent medium to romance the target customers. The flip side to this is that the brands are not in a position to cover the entire target audience. Moreover, customers shop in multiple locations. Hence, consumer insights from other channels like trade and department stores would also be required," Rao concurs. That said, the opportunity that companyowned retail stores provide is undeniable. "But most companies are doing nothing of that opportunity . Being physically close is not the same as being customer-focused ," says Shripad Nadkarni , director, MarketGate Consulting. He cites the example of the airlines industry in the US. "Airlines are the closest to customers. Yet, in the US, the service standards of most airlines are below expectations," he says.

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