Strategic Thought Transformation - The IIPM Think Tank

S U R V I V A L S T R A T E G I E S
marketing jargon as value for money. In fact,
it is a marketing oxymoron that a brand will
work only if consumers are convinced that it
gives them value for money. Value for money
as a proposition is not valid only in rare cases
when the brands are so iconic & expensive
(Armani, Jaguar, Ferrari, Louis Vitton) that
Asian consumers who buy them, willingly pay
a heavy premium for the social status that the
brands provide in an aspirational society.
This behavior has been characterized by
the famous social scientist and economist
Thorsten Van Veblen as ‘conspicuous consumption’,
explaining the seemingly irrational
behavior of consumers who seem to demand
more of a luxury product even as prices rise.
Yet, for the vast majority of upwardly mobile
Asian consumers that constitute the critical
foundations of a mass market, Van Veblen’s
conspicuous consumption clearly gives way
to the straightforward and traditional conflict
between price and demand as laid out
as gospel in economic theory.
And it is here that many multinationals
have failed to read the Asian consumer. The
Indian market is replete with many such examples
of foreign brands falling flat because
brand managers and marketing pundits failed
to pay attention to the value proposition. Way
back in the 1980s, the largest selling soft drink
concentrate brand Tang was launched with
much fanfare in India. Local brand Rasna was
the only effective competition. Tang managers
were so cock sure of the power of the brand
that it was priced at several times higher than
Rasna per unit. The value conscious Indian
urban consumer was not impressed and Tang
was one of the first powerful global brands
to bite the dust in India.
When the global giant Pizza Hut entered
India, the prices were incredibly high by Indian
standards. The fast food chain had to
reduce prices on basic pizzas to Rs.50 before
it found success. Nike launched in India with
a minimum price in excess of Rs.2,000. The
same story: It had to adjust to the demands of
the value conscious Indian consumer before
it tasted a modicum of success. Lacoste is
another powerful global brand that has been
on the fringes of the Indian ready made garments
market for almost two decades because
it sadly failed to pay attention to the most
important value proposition.
In sharp contrast to these, the Italian multinational
Perfetti seems to have well understood
the extent to which value for money
and price matters to the Indian consumer.
Perfetti has launched a series of brands that
peddle for either 50 paise or one rupee per
unit. This value for money approach has been
largely responsible for Perfetti’s success in
the Indian market where it is the undisputed
leader. LG is yet another example of nurturing
success by paying attention to the value
for money penchant of the Indian consumer.
Against its global strategy of positioning itself
as a premium brand, LG has positioned itself
in India as a price warrior. The strategy seems
to clearly work because while LG trails comfortably
behind fellow South Korean brand
Samsung in global markets, it is equally comfortably
ahead of Samsung in India and is the
Foreign brands fall
flat because brand
managers and
marketing pundits
fail to pay
attention to the
value proposition
clear market leader.
The Indian examples could also be truly
representative of most countries in the Asia
Pacific region. So lesson number two for
multinationals that want to do well in these
markets: don’t price your brands out of the
market. That brings us to the third and most
difficult lesson to define: how can one ensure
that there is a strong emotional connect with
the Asian consumer and that her loyalty is
guaranteed for a long time as a result. The
Eye on Asia survey clearly reveals how Asian
consumers are significantly different from
their Western counterparts when it comes
to attitudes and social behavior and unlike
Western consumers, an overwhelming majority
of Asian consumers give extraordinary priority
to family relationships and bonding. So,
purchasing decisions are often not as highly
individualistic as in the West.
An MNC that can tap into these cultural
traits will deliver the most successful brands.
In the Indian context, McDonalds and Nokia
are two examples of how emotionally connecting
with the consumer. McDonalds has
consistently positioned itself in India not as
a place where you go for a hurried bite, but
as a cool hangout place for the entire family.
Nokia, in turn, has used its marketing and
advertising campaigns to tap into the inherent
pride that Indians feel about their country.
For MNCs across the world, this third lesson
is not as easy to learn as acting local and
charging the right price. For each country in
the Asia Pacific region has its own unique cultural
heritage that needs to be understood and
marketing communications suitably amended
so that there is an emotional connect between
the brand and the consumer.
Of course, there is much more that companies
and brands need to implement in terms
of strategy if they want to remain successful
during the 21st century. But as the Eye on
Asia survey indicates, the cardinal sin would
be to forget the three fundamental-and maybe
clichéd lessons that are thrown up by the survey.
Yet, as the string of foreign brand failures
in Asian markets indicate, maybe the three
lessons are not so clichéd after all!
Vareen Gadhoke is a Professor
of Quantitative Techniques at
The Indian Institute of Planning
and Management, New Delhi
An IIPM Intelligence Unit Publication STRATEGIC INNOVATORS 21