Mohit Sewak

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Threats for the Indian BKO/ KPO/ BPO Industry

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After being market leaders for a long time, Indian outsourcing industry are now facing increased competition from new entrants along with rising demands for services globally. Outsourcing companies in Indian market that dominated the industry for a long time are being threatened by new players from Latin America, Eastern Europe and Asia. Outsourcing industry is transforming due to the emergence of the new providers around the world and the existing players are trying to expand their business into newer markets.

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The major threats to Indian Outsourcing are:

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Growing Competitors:

India and China have been recognized as the main offshore outsourcing destinations for a long time. While seeing the growth in this market, many other nations are moving to tap this market. Vietnam, Indonesia, South Africa, Russia and several eastern European countries are vying to have their pie in this industry. Because of too many players, there is increased competition, and increased demand for specialization and sophistication.

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Security risks both from a communication and from a privacy perspective:

There is a growing concern for IT risks to organization’s personal and confidential data. Security mega trends are Cloud computing, Virtualization, and Mobility. The increasing cases of data breaching involving personal information are affecting the outsourcing to third parties.

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Lack of R&D centers and research education:

Now the BPOs (business process outsourcing) are evolving into KPOs (Knowledge process outsourcing). Due to increase competition, the company will vouch for high quality work. To bring out the high quality task in IT field; India needs to have more and more PHDs at all level and encouraging people to take more research work and internships to take them to R&D work. Existing institutions like IITs, IISC, RECs and MCA courses must be molded in such a way so as to have the maximum output in minimum time.

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Anti-outsourcing legislation in developed countries:

New anti-outsourcing policies are being developed in western countries to discourage outsourcing of services to developing countries.

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Profiting From Data Mining

Apeoplens by SAS, IBM, Oracle, CA and Microsoft help customers gain valuable insights. Data mining is $1.85 bn industry.

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Uses of Data Mining:-

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• 1. market segmentation
• 2. Customer churn – predicting factors that cause customers to leave a business and go to a competitor
• 3. Fraud detection
• 4. Direct marketing – identify best prospects for highest response rate
• 5. Interactive marketing
• 6. trend Analysis

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Diamonds in Data Mines

Data Mining Digs In

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The Changing Consumer Perception

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India is poised to become a major Auto hub in the near future. Indian car industry is changing rapidly, so is the mindset of Indian Consumers. We, at the Great Lakes Institute of Management, took an initiative to find out that whether the changing ground realities have also changed the India Auto Consumer’s mindset vis-a-vis their perception of the abilities of various Indian and foreign Auto manufacture to deliver the much sought after attributes in a car.

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We deliberately, instead of taking individual cars, took BRANDS (as we wanted to analyse the brand perception mapping), and let the consumer decide which brand will he buy (Note: It is important to note that in some cases, though a consumer may covet a brand highly e.g. BMW, but might not intend buying it due to many reasons. So we specifically framed question to analyse the purchase intention), and the attributes for which he will go for that particular brand.

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It was surprising to find the changing perception of the consumer towards TATA, especially after it being the proud owner of Jaguar and LR on one hand, and the maker of the worlds smallest, and the most economical economical (& affordable) car Nano on the other.

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There were many more surprising results as well, have a look…

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The Result (Survey Dated 8th Decemper, 2009)

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Attribute Mileage:

Highest: MARUTI- Car people would like to buy the most for its fuel efficiency (eg. NANO).

LOWEST: FORD- Car people are least like to buy it were for its fuel efficiency (mileage).

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Attribute Safety:

Highest: TATA- Car people would like to buy the most for its Safety preparedness.

LOWEST: FORD- Car people are least like to buy it were for its Safety preparedness.

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Attribute Cost:

Highest: TATA- Car people would like to buy the most for its cost effectiveness (eg. NANO).

LOWEST: FORD- Car people are least like to buy it were for its cost (value for money).

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Attribute Comfort:

Highest: FORD- Car people would like to buy the most for its Comfort (e.g. Jaguar).

LOWEST: MARUTI- Car people are least like to buy it were for its Comfort.

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Attribute After Sales Service (Maintenance cost, frequency and accessibility):

Highest: MARUTI- Car people would like to buy the most for its After Sales Service.

LOWEST: TATA- Car people are least like to buy it were for its After Sales Service.

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The Process

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Cars Analyzed

(Survey Question: Which Brand of car will you choose?)

1. Tata
2. Honda
3. Maruti
4. Ford
5. Hyundai

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Attributes Surveyed

(Survey Question: What factor motivates you to buy this brand?)

1. Comfort
2. Safety
3. Mileage
4. Cost (Price)
5. After Sales Service

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Respondents

Number: 114

Age Group: 24 to 35

Education: Graduation and above

Profession: Management Students

Ethnicity: Indians- Representing all states of India

Social Class: Middle class and above

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Analysis Carried Out

Statistical Tool: Correspondence Analysis

Mapping Dimensions: 2

Test: Chi Square

Test Value: 73.897

Test Significance: 0.000

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Available Downloads:

SPSS Output File For the Data Analysis

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Factors affecting Impulse Buying in a Retail Store

The article “The Interplay Among Category Characteristics, Customer Characteristics, and Customer Activities on In-Store Decision Making” by J. Jeffrey Inman, Russell S. Winer, & Rosellina Ferraro, gives some intuitive insights about the effect of various factors on the unplanned behavior of the consumer.

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It proves that where factors like effect of display, inter purchase cycle and category Hedonicity, gender of the consumer, household size, store familiarity, number of aisles being shopped at, amount of time spent in the store, paying by check or by credit card instead of cash increases the unplanned behavior of the consumer, factors like use of shopping coupon, use of list, and greater shopping frequency, reduces the unplanned shopping behavior of the consumer.

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The study has significant learning lessons for both the customers and for the managers. Where customers can avoid all such steps that increases his unplanned shopping tendency, the manager has to be more creative and innovative in terms of store/ aisle design, and planning his marketing and sales activities to further enhance the customers unplanned shopping behavior at his store.

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The study also gives a very interesting insight that the consumer’s unplanned buying behavior is not affected by his being accompanied by anyone.  Here we think that measuring the age of the companion would have been very handy. Because we think that although while accompanied by an companion should decrease the tendency of  unplanned purchase, owing to rational decision making with the discussion with the companion, or due to fear of social shame arising out of unplanned purchase. Also we think that while accompanied by children, the tendency of unplanned purchase must increase due to pester effect, especially for hedonic category products (positive interaction effect). But as the age of the companion has not been taken into consideration, any effect because of it might have been averaged out, and hence the significance of being accompanied by someone id low in the result.

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Also the negative interaction between display and category hedonicity is an interesting finding, but we think other explanations for the phenomenon are possible than the one given.

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Overall, despite the limitation of being constrained to the data given in the POPAI data set, the finding is very useful as it goes a long way in educating the consumer how to safeguard them against the tendency of impulse buying.

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What is a Special Purpose Trust (SPT) ?

Example 1: – High Risk/ High Leverage Project Financing

Example 2: – Securitization of Risky Loans/ Mortgage Instruments.

Other Posts Related to Securitization:

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1. What is Securitization?

2. What are CDO/CDS/CLO/ABS ?

3. What is a SPV/SPT/ SPE/SPC ?

4. TERIM model of Securitization.

5. Advantages and Disadvantages of Securitization for different Parties ?

6. How Securitization led to the Sub Prime Crisis ?

7. What are CDO² (CDO Squares), and CDO³ (CDO Cubes) ?

8. What is Tranching ?

9. Some Global facts and figures related to Securtization.

10. Problems with Structured Finance.

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Marketing Research – The Japanese Way

Japanese style MR (Marketing Research) relies heavily upon: -

Some examples illustrating the Japanese MR Style:

1. Sony

2. Canon:

Monitoring Channels:

Strong Vertical Integration:

Generalist Managers:

Consensus based decision making and reliance on Intuitive Judgment:

Conclusion:

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Mobile Marketing: The Adidas Case Study

As Adidas cannot spend as much as Nike on marketing communications (Adidas’ annual advertising and  promotional spending is $900 million only, compared with $1.4 billion for Nike), it has adopted more innovative, yet cost-effective, ways of reaching consumers, such as through mobile marketing.

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Between June and November 2004, some researchers held more than 20 hours of interviews with five senior managers at Adidas in Europe to discuss their efforts to incorporate new technologies and media (mobile marketing) within the company’s overall branding and marketing communications strategy.
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The Objectives were:

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1. Exploiting the Capabilities of Mobile Marketing:
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Taking advantage of mobile marketing’s unique capabilities can require substantial resources, but one solution is to partner with a content provider to develop a “personal mobile gateway,” somewhat similar to Apeoplee Computer Inc.’s iTunes, through which iPod users can purchase music recordings over the Web and manage those digital files in their personal libraries.

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2. Using Universal Appeals to Tap Into Global Markets:
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In its efforts to expand its brand across markets, MTV has managed to mix universal appeals with local tastes — a tactic that could be apeopleied to mobile marketing. The prospective purchaser of a luxury car, for example, might also be interested in an exotic vacation getaway, high-end sporting equipment and financial-investment vehicles.

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3. Addressing Privacy Concerns:
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Wireless communications are typically less secure than transmissions over fixed lines, and this raises a number of privacy concerns. In addition, the capability to connect with people continually throughout the day could result in intrusions into people’s private and public spaces.

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4. Aligning Value-Chain Partners:
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In mobile marketing, the value chain can consist of numerous stakeholders. For a company like Adidas, that chain might include back-end hardware supeopleiers (Nokia) and wireless carriers (Vodafone Group of the United Kingdom in Europe and New Jersey-based Verizon Wireless in the United States), specialized interactive and mobile communications firms, content providers (ESPN), traditional advertising agencies, and perhaps even partner brands (MTV). Who, for example, should manage strategy development and execution: the brand itself or one of its upstream value-chain partners?

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5. Integrating the Mobile Platform With Other Media:
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Companies should not treat the mobile platform as a stand-alone medium but rather as one component in an overall marketing strategy that must be integrated with others.

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6. Developing Mobile-Specific Metrics:
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One way to assess the effectiveness of a mobile-marketing campaign is to use traditional Internet measures, such as click-stream activity and the number of registrations, downloads and “pass-alongs.” But additional metrics that are specific to the mobile platform must be developed to fully determine the effectiveness and efficiency of mobile-marketing practices.

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The Role of Mobile Marketing in Branding

Mobile marketing enable brands to achieve three objectives:

The Future of Mobile Marketing:

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The Coming Era of Brand in the Hand Marketing

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Conceptualizing, Measuring, and Managing

Customer Based Brand Equity

Brand Awareness:

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Brand recognition relates to consumers’ ability to confirm prior exposure to the brand when given the brand as a cue. In other words, brand recognition requires that consumers conectly discriminate the brand as having been seen or heard previously. Brand recall relates to consumers’ ability to retrieve the brand when given the product category, the needs fulfilled by the category, or some other type of probe as a cue.

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Brand Image:

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Brand image is defined here as perceptions about a brand as reflected by the brand associations held in consumer memory. Along with level of abstraction, brand associations can be classified into three major categories of increasing scope: attributes, benefits, and attitudes.

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Attributes are those descriptive features that characterize a product or service—what a consumer thinks the product or service is or has and what is involved with its purchase or consumption.

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Brand attitudes are defined as consumers’ overall evaluations of a brand (Witkie 1986). Brand attitudes are important because they often form the basis for consumer behavior (e.g., brand choice).

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The different types of brand associations making up the brand image include product-related or non-product-related attributes; functional, experiential, or symbolic benefits; and overall brand attitudes.

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These associations can vary according to their favorability, strength, and uniqueness.

Customer-based brand equity is defined as the differential effect of brand knowledge on consumer response to the marketing of the brand. a brand is said to have positive (negative) customer-based brand equity if consumers react more (less) favorably to the product, price, promotion, or distribution of the brand than they do to the same marketing mix element when it is attributed to a fictitiously named or unnamed version of the product or service.

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Building Customer-Based Brand Equity:

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Building customer-based brand equity requires the creation of a familiar brand that has favorable, strong, and unique brand associations. This can be done both through the initial choice of the brand identities, such as the brand name, logo, or symbol, and through the integration of the brand identities into the supporting marketing program.

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Developing supporting marketing programs:

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Marketing programs are designed to enhance brand awareness and establish favorable, strong, and unique brand associations in memory so that consumers purchase the product or service. Brand awareness is related to brand familiarity.

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Measuring Customer-Based Brand Equity:

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There are two basic approaches to measuring customer based brand equity. The “indirect” approach attempts to assess potential sources of customer-based brand equity by measuring brand knowledge (i.e., brand awareness and brand image). The “direct” approach attempts to measure customer-based brand equity more directly by assessing the impact of brand knowledge on consumer response to different elements of the firm’s marketing program. The indirect and direct approaches to measuring customer-based brand equity are complementary and should be used together.

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Managing Customer-Based Brand Equity:

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• 1.  marketers should adopt a broad view of marketing decisions.
• 2. marketers should define the knowledge structures that they would like to create in the minds of consumers—that is, by specifying desired levels of awareness and favorability, strength, and uniqueness of product- and non-product-related attributes; functional, experiential, and symbolic benefits; and overall attitudes.
• 3. marketers should evaluate the increasingly large number of tactical options available to create these knowledge structures, especially in terms of various marketing communication alternatives.
• 4. marketers should take a long-term view of marketing decisions.
• 5. marketers should employ tracking studies to measure consumer knowledge structures over time to: -

• (1) detect any changes in the different dimensions of brand knowledge and
• (2) suggest how these changes might be related to the effectiveness of different marketing mix actions.

• 6. They  should evaluate potential extension candidates for their viability and possible feedback effects on core brand image.

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Conclusions:

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• 1. First, factors influencing the favorability, strength, and uniqueness of brand associations, a focus of much past
• research, should continue to be explored, but along several different lines.
• 2. the costs and benefits of leveraging secondary associations should be explored. For example, how and under what conditions should a firm increase the salience of source factors related to the brand (i.e.,  the company, country of origin, and distribution channel)?
• 3. One important research priority is to develop valid benchmarks for the direct approach to measuring customer-based brand equity—that is, plausible descriptions of the relevant activity (advertising, promotion, product, pricing, etc.) with no or fictitious brand identification.
• 4.  Finally, broader implications of customer-based brand equity should be explored by considering aggregation
• issues associated with brand knowledge effects on market segments or the customer franchise as a whole, as opposed to effects on an individual consumer.

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Blogging: A New Play In Your Marketing Game Plan

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Today marketing has gone from marketing a product to marketing a brand/ feeling and getting the customer’s experience. E.g. Master Card’s “Priceless Campaign”. Hence companies are looking at new opportunities like blogs to differentiate.

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60% US’ customers find marketing irrelevant and 70% interested in products to block marketing attempts.

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Today customers are armed with IPods, TiVo, search engines, spam filters etc. which pose challenges for marketers due to media fragmentation, clutter and resistance to commercial messages.

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So, what should be the new Marketing Game Plan to attract customer’s attraction? It is BLOGGING!!!

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Blogging is the new buzzword in the marketing arena after the invent and popularization of Web 2.0 standard. This was not so previously, because of the limitations of technology offered by Web 1.0 standards. Some of these differences are:

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Difference between Web 1.0 and Web 2.0:

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Web 2.0 is more customer centric, user generated, builds on collective community intelligence.

E.g.: – Google Ad Sense, Wikipedia(Web 2.0) compared to Britannica Online(Web 1.0), Companies like IBM, HP, GM, GE, Honda use blogs effectively.

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Blogs began in late 90s as web based Project management tools. Pyra launched blogger in 99 and was taken over by Google in 2003. Today there are more than 63.2 million blogs – 90% in US.

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6 ways in which blogs contribute to community’s success: -

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1. Provides new way to stay relevant to customers. E.g.97 year old GM stays culturally relevant using blogs

2. Blogs provide differentiation

3. Bridge the generation gap

4. Used by thought leaders to share expertise and experiences E.g.: Guy Kawasaki

5. Provide global platform to reach world audience

6. Opportunity for ordinary people to voice opinions

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Companies like Honda use blogs to specifically drive traffic to their site – Tactical Marketing.

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Used as a true interactive vehicle –E.g.GM, Boeing, Microsoft – Strategic Marketing.

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less than 5% of fortune 1000 companies use blogs strategically.

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Advantages of Using Blogs for Marketing:

1. . Help identify market trends
2. . Ability to get competitive intelligence
3. . Helps build relations and brand loyalty
4. . Feedback on products

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Limitations of Using Blogs for Marketing:

1. . Lack of control and boundaries in blogs
2. . Commitment and continuity – not managing blog properly defeats the purpose

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Making Better Investments at the

Base of the Pyramid

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The article “Making Better Investments at the Base of the Pyramid“, by Ted London, illustrates with example, how better investments can be made at the Bottom/ Base of the Pyramid (BoP), and how to do the impact assessment of such an assessment. It explains the following: -

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Who is being affected?

Any BoP venture potentially affects three groups of local stakeholders:

1. the sellers,
2. the buyers, and
3. the communities in which it operates.

How are they being affected?

Consumers may get cheaper prices and greater access to needed products and services; producers may enjoy expanded markets and higher productivity. On the flip side, however, an entrepreneur who decides to invest his own hard-earned capital in a new business may open up himself and his family to unanticipated shocks, such as those generated by health- or crop- related crises. Even when local entrepreneurs do succeed, their actions can still negatively affect the community’s economic well-being – for instance, when indigenous businesses suffer because of increased competition.

The strategic analysis: Understanding the Impact.

It does require, however, that the venture’s assessment team rigorously and collaboratively fill in the cells of the framework. List all the expected effects of the venture – both positive and negative – on local stakeholders. To avoid double counting, teams should log only direct effects in the framework – noting an increase in, say, buyers’ incomes but not how the additional income will or could be spent to improve other aspects of well-being. Listen to and respect the opinions of a variety of stakeholders – field staff, development professionals, academics, and local community members. The team should use a variety of methods to collect data – such as semi-structured surveys, focus groups, in-depth discussions, and group forums. It probably makes sense for venture managers to pay close attention to potentially high-magnitude outcomes even when the likelihood that they will happen is relatively small.

For instance, using the framework, the management team was able to recognize the potential for strife and jealousy in families and communities that weren’t used to seeing women in non-traditional roles – such as that of an entrepreneur selling wares outside the home and village.

The performance analysis:  Tracking the Impact

The process isn’t as complicated or expensive as one might think. It involves identifying and collecting baseline as well as post-intervention data on the local buyers, sellers, and communities most affected by the venture’s  activities, and, whenever possible, on a comparable unaffected group to better account for what would have happened had the venture never launched.

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Sellers:

The team members agreed that changes in the sellers’ economic situations, capabilities, and relationships could be effectively captured by measuring their incomes (a positive effect), income instability (a negative effect), and opportunity costs of not pursuing other livelihoods (a negative effect); their skills development, self-efficacy, and contentment with life; their perceptions of respect and conflict within the family; and their interactions with individuals and organizations outside their local communities.

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Buyers:

Their savings due to product affordability and convenience, and the effect that eyeglasses and vision care had on work productivity.

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Community:

The team recognized the importance of changing communities’ attitudes toward women who worked as entrepreneurs and took on non-traditional roles outside the home and village.

Case of PEACE and Du Pont’s Pioneer Hi Breed International

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The partners knew it would take time for the seeds to be accepted and had figured the pilot would be more of a learning experience than a profit-making one. If the partners had undertaken a strategic analysis of the venture’s effects on poverty alleviation, specifically looking at economics, capabilities, and relationships, they might have gained the following insights about its initial business model.

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Doing business with the venture put them at greater economic risk, given the larger initial investment required. Pioneer’s seeds at first were an unknown in the eyes of the local community; the farmers weren’t sure how best to use them to maximize their yields. Getting their seeds from PEACE instead of the local traders, for instance – they could find themselves cut off , unable to procure the rest of their farming supplies from traders bearing grudges.

The primary purpose of the BoP Impact Assessment Framework is to give managers a standardized approach for understanding the whole story. For managers, development groups, and funders, it can also generate some important insights into the types of organizational designs that are most likely to succeed with the base of the pyramid.

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Understanding the Relationships Among

Brands, Consumers, and Resellers

The article “Understanding the Relationships Among Brands, Consumers, and Resellers“, by Frederick E. Webster, Jr., says that the retailers keep some of this surplus for themselves and pass some onto their end user customers. In sum, retailers and consumers gain, while national brand manufacturers lose as large retailers gain more power and control in the marketing channel. At the same time, it is clear that the consumer’s value equation has more variables in it than price. Lowest price is not the only definition of value for most consumer segments.

There is often an implicit assumption that the brand is strictly a relationship of the manufacturer with consumers that competes with the retailer’s relationship with the consumer for consumer loyalty. Lost in the argument is any consideration of the value of the manufacturer’s brand to retailers in building their relationships with customers. For the past 100 years, manufacturer “pull” (mass communication) replaced reseller “push” (personal selling) as the main influence on the consumer. National brand marketers focused on the consumer as their customer, not the retailer’s customer. It is common to refer to “trade leverage” as a major benefit of branding to the manufacturer, a source of power over resellers.

Today, there is growing evidence that many major packaged-goods manufacturers have changed their thinking to define their customer as the reseller, not the end user/consumer. They therefore adopt the point of view of a business-to-business marketer as well as a consumer marketer. They must focus on enhancing the profitability of their  customer–the retailer, as opposed to thinking of products more narrowly in terms of the value they offer to end users. It must be recognized that both the manufacturer (brand) and the reseller deliver value to the consumer, and consumer buying motivations involve both sources of value.

There is a fundamental problem of integrating the elements of push and pull into the brand marketing strategy; relationships with the consumer and with the trade must be managed in an integrated framework. Pricing issues are a central element of this problem, as consumers, retailers, and manufacturers compete for their share of the value being created by the brand. Traditional theoretical approaches to the study of marketing channels have tended to focus on conflict, rather than cooperation. The traditional definition of a brand as a guarantee of consistent features, quality, and performance to consumers largely ignores its function as a pledge of support to retailers.

Push strategies require higher margins for retailers to support their selling efforts, while pull strategies require higher margins for the manufacturer to support advertising and other mass communications. In point of fact, of course, virtually all marketing strategies are blends of push and pull elements, and the test of marketing management knowledge and skill is to get the balance right given the unique requirements of specific markets. Traditional ways of thinking about branding have largely left the reseller out of the equation. First and foremost, the manufacturer must realize that its customer is the reseller, not the consumer. Fundamentally, the value of the brand to the reseller must be related directly to the value of the brand to the consumer, not just price and promotion.

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On the Permanence of Stored Information

in the Human Brain

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Article details:

Many people believe that information that is stored in long-term memory is permanent. And forgetting is nothing but retrieval failure. This article evaluated the evidence and concluded that, contrary to apparent popular belief, the evidence in no way confirmed the view that all memories are permanent and thus potentially recoverable.

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So what are the implications ?

To justify the failure (of retrieving previously stored information and conjecture as to what circumstances might have caused information stored in memory to irrevocably destroyed), they came up with a conclusion that there “SUBSTITUTION” might have happened.

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The misleading information might have irrevocably replaced the original information in the subject’s brain. When the memory of an event is called to consciousness, there appears to be a potential for substitution to occur. Therefore it is reasonable to suppose that memory is not necessarily permanent.  However the article states that co-existence along with substitution is possible and they are not mutually exclusive.

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What does co-existence mean?

Events like A – B (A related to B) and A- C (A related to C), responses can be simultaneously stored in memory. But there may be situations when, or circumstances where memory processes one instance or event alone, and forgets or erases the memory of other instance.

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“Often, however, real-world coexistence is logically forbidden. The automobile that was involved in the accident that we recently experienced stopped either at a stop sign or at a yield sign, but it did not stop at both. The shirt worn by the thief was not simultaneously green and blue. In such instances, the most economical procedure may be to dismiss one memory in favor of the other, much as a computer programmer will irrevocably destroy an old program instruction when a new one is created.”

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The Mismanagement of Customer Loyalty

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Following Hypothesis were tested: –

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Claim 1: It costs less to serve loyal customers:

This is not true. In fact, the only strong correlation between customer longevity and costs that we found-in the high-tech corporate service provider-suggested those loyal and presumably experienced customers were actually more expensive to serve.

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Claim 2: Loyal customers pay higher prices for the same bundle of goods:

It was found that the customers regularly guarantee greater frequency of purchase in return for lower prices.

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Claim 3: Loyal customers market the company:

It has been proved that if managers are investing in a loyalty program for its supposed marketing benefits, then they are looking at a potentially misleading indicator.

Customers may well buy all their groceries at the same supermarket out of inertia and convenience.

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Knowing When to Lose a Customer

The most common way to sort customers is to score them according to how often they make purchases and how much they spend. Many tools do that; one of the most familiar is called RFM (Recency, Frequency, and Monetary Value Analysis).

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So just why is RFM such a poor way to measure loyalty?

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One problem is that patterns of buying behavior for frequently bought goods are quite different than those for infrequently bought goods.

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The second main drawback of scoring methods like RFM is that the monetary-value component is almost always based on revenue rather than profitability.

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From Measurement to Management

After analyzing your customers’ profitability and the projected duration of their relationships, you can place each of them into one of four categories, as shown in the matrix “Choosing a Loyalty Strategy.”

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Turning True Friends into True Believers:

In managing these true friends, the greatest trap is overkill. At the catalog company, for instance, we found that intensifying the level of contact through, for example, increased mailings were more likely to put off loyal and profitable customers than to increase sales. People flooded with mail may throw everything out without looking at it. Sent less mail, however, they are more likely to look at what they get.

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Enjoying Butterflies:

The classic mistake made in managing these accounts is continuing to invest in them after their activity drops off. Any such efforts are almost invariably wasted; our research shows that attempts to convert butterflies into loyal customers are seldom successful – the conversion rate was 10% or lower.

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Subcultures of Consumption

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Ethnography of the New Bikers

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1. the overall structure of the subculture
2. its ethos (i.e., its underlying values and their expression and maintenance),
3. its impact on the lives and identities of individual consumers, and
4. its articulation with marketing institutions.

1. structure,
2. ethos,
3. transformation of self, and
4. the role of marketing in the subculture of consumption.

Structure

The structure of the subculture, which governs social interactions within it, and which we now address, is a direct reflection of the commitment of individuals to the ethos. The concentric social structure consists of members of the inner circle (hard core) demonstrate a commitment to punk style and ideology that is full-time and enduring. The soft core is formed by those whose commitment to punk Styles and values is less complete and whose roles are subordinate to and dictated by the hard core. Research indicates a complex social structure of multiple, coexisting subgroups that claim the biker designation and don the biker uniform (i.e., some combination of jeans, black boots, and Tshirts. a black leather jacket, and a vest that may carry insignias of club affiliation).

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Each subgroup Has its own separate hierarchy. Moreover, although each subgroup is highly committed to the Harley-Davidson motorcycle and to a related set of consumption values, each subgroup also has its own unique interpretation of the biker ethos (cf. Fine [1979] on the idiocultures of Little League baseball teams), and each pursues its own charter or purpose. The subculture of Harley owners cuts across many social categories, yet within its various subgroups there is a propensity toward homogeneity.

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Hierarchy within structure:

Each subgroup within the HDSC maintains a formal hierarchy of officers that is subsumed by an informal hierarchy based on within-group status. Status is conferred on members according to their seniority, participation and leadership in group activities, riding expertise and experience, Harley-specific knowledge, and so forth—in short, and the results of an individual’s commitment to the group’s consumption values. Visible indicators of commitment include tattoos, motorcycle customization, club-specific clothing, and sew-on patches and pins proclaiming various honors, accomplishments, and participation in rallies and other rider events. The status hierarchy is also reflected in the group’s riding formation.

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Barrier to entry:

The structural integrity or exclusivity of the HDSC and its subgroups is protected by barriers to entry. New members rarely, if ever, are recruited aggressively. The club does not approach you; you must approach the club as a supplicant.

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Ethos

Part of the reason for the existence of the HDSC is that certain people have found embodied in the Harley- Davidson motorcycle cultural principles and categories that resonate with their own needs and values. Each subgroup within the HDSC is committed to the same set of core values, but each group interprets them in a manner that is contextually consistent with the prevailing life structures (i.e., ages, occupations, family structures) of its members. The values that make up the biker ethos touch on virtually all aspects of members’ lives, including the social, the political, and the spiritual. So strong is the Harley-Davidson motorcycle as an organizing symbol for the biker ethos that it has become, in effect, a religious icon around which an entire ideology of consumption is articulated.

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Core Values

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Personal Freedom:

The dominant value in the ethos of the HDSC is personal freedom. Two kinds of personal freedom are particularly important: liberation (i.e., freedom from) and license (i.e., freedom to). Virtually every biker identifies strongly with the motorcycle as a symbol of freedom that contrasts starkly with the automobile (“cage” or “coffin” in biker vernacular) as a symbol of confinement. Two systems of symbols embody the value of personal freedom; they are the spread winged Harley eagle and the Harley-as-horse metaphor.

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Machismo:

Members of the HDSC value manliness. Expressions of machismo abound. A popular T shirt in Harleydom proclaims that “Real Men Wear Black.” The concern for what real men do pervades virtually every aspect of the biker experience.

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Transformation of Self

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The stages traversed are: -

(1) experimentation with the biker identity,

(2) identification and conformity, and

(3) mastery and internalization.

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Becoming a member of a subculture of consumption generally means entering at the bottom of a status hierarchy and undergoing a process of socialization. Socialization brings about a transformation of the individual that entails an evolution of motives for involvement and a deepening of commitment to the subculture and its ethos.

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MARKETING AND SUBCULTURE OF CONSUMPTION

By understanding the process of self-transformation undergone by individuals within a subculture of consumption, a marketer can take an active role in socializing new members and cultivating the commitment of current ones. Harley-Davidson cultivates consumer commitment through means such as supplying a steady stream of information geared to the needs of newcomers and providing a full range of clothing, accessories. Subcultures of consumption provide opportunities for marketers to engage them in symbiotic relationships. Marketers who understand the structure and ethos of a subculture of consumption can profit from serving its needs. In addition to providing necessary objects for the functioning of the subculture, marketers may also assist in the socialization of new members, facilitate communications within the subculture, and sponsor events that provide havens for the activities of the subculture. In return marketers may accrue increased customer loyalty, publicity, and consumer feedback, among other benefits.

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Affective and Cognitive Factors in preferences

Food preferences changes from place to place. Humans by birth don’t like chilli pepper. But in the case of Mexicans, they like chilli pepper once they mature. If it is possible to change an innate aversion to something like chili pepper, then it should be possible to change almost any attitude and any preference.

Significant affective factors such as parental reinforcement and social conformity pressures, identification with the group, machismo and so on. This paper, “Affective and Cognitive Factors in preferences” by Robert Zajonc and Hazel Markus, stresses on affective factors. In doing this, the authors do not intend to negate cognitive influences on preferences nor minimize their importance. Cognitions that have generally been taken to be the very basis of this preference can actually occur afterward – perhaps as a justification.

Acquiring preference through Exposures

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When objects are presented to the individual on repeated occasions, the mere exposure is capable of making the individual’s attitude toward these objects more sensitive. This is called as Exposure effect. When confronted with a familiar object, the individual was said to experience a warmth, a sense of ownership, a feeling of intimacy.

Preferences acquired in infancy and childhood are formed primarily on affective basis. By the time the child develops an extensive knowledge structure about chili peppers – i.e. before he learns to discriminate among them, identify various subtle features and discover all their uses – his preferences for them may well be completely established.

It is possible to change preferences by cognitive means alone only in early stages of preference formation, because even when a preference has been built up from cognition, its affects may become partly and fully autonomous and independent of the cognitive elements that were originally its basis. Social psychologists have tried to see what information could be given to a person so that he would become fond of some item. They asked how should this info be imparted and for best results, who should do it. Needless to say, the method of attitude change by means of persuasion has not met with a great deal of success.

It is quite reasonable to say that when a person “stores” affect, what he stores is the motor tendencies and other somatic manifestations. The behavior patterns are hard to change and hard to overcome by persuasion. The headphone experiment (where people said that they heard better when nodding than when they where shaking their head) proved that attitudes can be changed by simple things and he approached properly could be improved to a great extent. Motor basis of preferences says that change in preference can be accomplished by attention to motor correlates.

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Better Advertising Planning Grid

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The article “Better Advertising Planning Grid”, by John Rossiter, and Larry Percy, says that the manager now needs a more comprehensive model which accounts for the major differences in how ads work depending on the advertising situation. Purpose in this article is to present and discuss a newer and improved alternative advertising planning grid based on the work of Rossiter and Percy (1987), which we call the Rossiter-Percy Grid.

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These sections discuss:

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(1) Brand awareness as a necessary precursor to brand attitude;

(2) the involvement dimension of brand attitude;

(3) the motivational di-mension of brand attitude;

(4) advertising tactics based on the grids; and

(5) theoretical extensions of the Rossiter-Percy Grid.

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Article mainly criticizes FCB grid on various parameters and explains why Rossiter-Percy grid is better.

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The areas of contentions are:

Brand Awareness as a necessary precursor to Brand Attitude

The Rossiter-Percy Grid posits brand awareness as a necessary communication objective for advertising, prior to brand attitude. Brand attitude without prior brand awareness is an insufficient advertising communication objective. Various other devices, such as bizarre

executions and jingles, are also recommended for specific types of advertising where they may be appropriate to increase brand recall.

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The involvement dimension of Attitude

It is consumer’s level of involvement in making the product or brand choice. FGB conceptualization of involvement is inadequate on atleast three counts.

Firstly, a consumer could be quite an experienced buyer of the product category such that it has become low involvement, yet become highly involved when a new brand enters the category. The second problem with the FGB conceptualization of involvement is that it confuses product-category involvement with various brands’ involvement. Third problem with the FCB conceptualization of involvement is that involvement is seen as a continuum, despite the dichotomous-looking diagram they use to portray their grid.

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Motivational Dimension of Attitude

Product or brand attitudes are distinguished not only by the level of involvement in making the choice but also by the purchase motive which caused the attitude to be formed initially. Qualitative researchers spend a good deal of their time trying to identify purchase motives, and advertising agencies, too, are always seeking these “triggers to action.”

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The FCB Grid’s classification of “think-feel” does not allow for differences between product-category and brand-purchase motivations.

FCB matrix considers think and feel as the 2 primary factors motivating purchase, but there are so many other parameters too. Rossiter-Percy grid gives wide array including informational and transformational motivators. A further difficulty with the FCB approach, and with that of many other writers who have focused on “emotions” and “feelings,” is that the writers tend almost always to be referring to positive emotions or feelings when they use these terms. Yet another difficulty with the motivational dimension in the FCB Grid concerns measurement.

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A final criticism of the FCB Grid’s conceptualization of the “think-feel” dimension is that it correlates highly positively with the “involvement” dimension.

The Rossiter-Percy model allows product-category purchase motives and brand purchase motives to differ, whereas the FCB approach does not. Rossiter and Percy’s model identifies eight operatively distinct purchase motives, in comparison with the FCB model which distinguishes only one “think” motive and several “feel” motives and cannot measure the obviously important motive of social approval.

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FCB grid doesn’t tell advertisers what they should do once they identify the quadrant.

The low-involvement tactics tend to focus on just one or two benefits as in the typical consumer packaged-goods (“USP”) type of approach. On the other hand, the high-involvement tactics tend to focus on the multiple-benefits type of approach which characterizes the carefully considered comparative decisions.

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Overall, therefore, a further advantage of the Rossiter-Percy Grid is that it can accommodate other theoretical constructs in consumer decision-making and advertising.

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The Quest for Customer Focus

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Getting closer to customers is not just a matter of installing a better CRM system or of finding a more effective way to measure and increase customer satisfaction levels. Tools and technology are important. But they’re not enough.

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Example of Continental Airlines-

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One of the first things it uncovered was a service mess that was costing the airline millions of dollars every year. Continental took a systematic look at how passengers were treated when a plane was significantly delayed, when they were bumped from a flight, or during some other unfortunate event. What it found was that compensation was offered on an arbitrary basis by the gate agent, and, somehow, the lowest value customers were, on average, receiving the highest compensation. Worse, some passengers were finding ways to be doubly compensated; a customer who was bumped from a fiight might first approach a gate agent, pick up a voucher for a free flight, and then minutes later telephone the airline and ask for another. The representative answering the phone would have no way of knowing that the same request had just been filled. Now everyone who is delayed for, say, nine hours gets the same compensation, and when a gate agent hands a passenger a fight voucher, that transaction is reflected immediately in the customer  information database.

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Another example, Royal Bank of Canada (RBC)-

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To the company’s surprise, a survey of more than 2,000 current and potential customers revealed that people didn’t choose a bank on the basis of how convenient it was. Instead, what customers wanted was a bank that demonstrably cared about them, valued their business, and recognized them as the same individuals no matter what part of the bank they did business with.

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Customer focused companies consistently embrace three concepts. First, they know they can become customer focused only if they learn everything there is to learn about their customers’ at the most granular level, creating a comprehensive picture of each customer’s needs-past, present, and future. Second, they know that this picture is useless if employees can’t or won’t share what they learn about customers, either because it’s inconvenient or because it doesn’t serve their interests. Finally, they use this insight to guide not only their product and service decisions but their basic strategy and organizational structure as well.

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There are four distinct stages on-route to becoming Customer focused companies –

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1. Communal Coordination –

Creation of a centralized repository of customer information, which records each interaction a customer, has with the company. As volumes are high this stage can take even more than 4 years.

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2. Serial Coordination –

Coordinating gets a little trickier as the centralized coordination role expands to manage not only the continued collation of data but also a sequence of tasks performed by certain functional units so that information can be analyzed and the resulting insights shared throughout the company.

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3. Symbiotic Coordination –

Move away from the one-way information flow that characterized the previous stage toward a dynamic give-and-take.

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4. Integral Coordination –

Here employees are given the autonomy and latitude they need to focus on the customer in virtually every action. At this stage, companies are coordinating key activities across vertical and horizontal boundaries, which are in many cases irrelevant to customers.

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