Guest Post - Consumer-centric Market Analytics - Rajaram Kudli

Consumer-centric Market Analytics

Helping Marketers & Consumers survive the Recessionary forces gracefully

By Rajaram Kudli

Price has always been a key dimension of competitiveness in free market, and, pricing has become a scientific art of deception. Isn't the modern pricing mostly determined by demand-supply-information-psychology-marketing, driven by business objectives of maximizing revenue/ profits/ market share et al and enabled by market research & market analytics?

Pricing & Revenue Optimization (PRO) solutions based on the Price Elasticity of Demand models are employed by the marketers to decide on pricing that maximizes revenue or profits or both across consumer segments. Its about figuring out how much can be sold at which price-point to which consumer segments, and cost or value of the product doesn’t find a place in the equation.

Market Mix solutions are employed by the marketers to figure out which channel of marketing returns higher lift in sales to help allocate marketing budget, which again doesn’t consider competitive value of the product.

The too familiar Everyday-Low-Price betrays the competitive pricing driver, and wonder why there’s no Everyday-Right-Price ?

Imagine what it would do to pricing, if the consumers are as informed as the marketers are about which demographic segment they themselves belong to and why they buy what they buy ? and, what are the componets of the price they pay for goods...? Ever wondered what proportion of price of any consumer product is for its quality vs for its marketing cost & brand value? and, is it value-for-money for the consumers? With all my analytic abilities, i haven't been able to figure out ....

Quality and consumer perception are also said to be the weapons of the free market as the pricing is, but both of which cannot be quantified like the price can be and they both suffer at the altar of cheap. And, what about the 'cost of creating consumer perception of superior quality or value which doesn't exist' - which, finally gets passed onto the consumer anyway?

If only we could turn around the Market Analytics to help marketers and consumers to arrive at the happy-middle-ground of value-for-money and vice-versa, wouldn’t it help both to survive the recession more gracefully? A couple of paradigms to consider -

1. Competitive Intelligence for Consumers: Help consumers evaluate the quality & value of what they buy. Competitive Intelligence is a paradigm that's another construct of Market Analytics for Marketers, which could be re-oriented to consumers and delivered directly online or through consumer forums or by marketers themselves at the point of sale.

2. Survival Intelligence for Marketers: Help marketers avoid incurring the cost of deception and share the benefit with the consumer. One could build a pricing solution based on Income Elasticity of Demand models (sort of anti-model to the very familiar Price Elasticity of Demand, which is the premise of consumer retailing & marketing), that captures the relationship between income levels of the consumers and demand for products. A positive Income Elasticity of Demand denotes quality goods and a negative elasticity denotes inferior goods. Such a solution helps determine Pricing-for-Value of goods and still realize the maximum business potential in the times of recession, most immediately reflected in income-levels of the consumers Of course, this could be The Solution for the miseries of bottom-of-the-pyramid consumers, which form the largest consumer segment.

Either or both of the above solutions could be integrated with Loyalty Programs – the emerging tool of marketers to maximize sales and profitability by increasing loyalty of consumers to retail brands.

 

About the author
Mr.Rajaram Kudli is an Analytics SME, and is currently driving several key initiatives in Business Analytics as an Analytics, Education & Innovation Consultant at Independent Consultant. He was instrumental in setting up and driving the highly successful Retail - CPG and Analytics team in his capacity as Program Director at Symphony Services.
Mr.Kudli's core competencies include Business Intelligence/Analytics - Supply/ Cost/Operations/ Customer/ Market Analytics Solutions consulting; Business Consulting & Analytics Solution R&D for Commercial Products/ Industrial Processes; Education, Learning & Development.

Customer Expectations

Last week my parents were scheduled to board a long distance train, but unfortunately the train was late by 15 hours. This we realised after driving 18 kms through Bangalore's messy traffic. Best practice would have been to call up the railway enquiry and seek an update on the timings, which we ignored and directly drove off to the station.

At the station, neither the enquiry counter representative nor the station manager had a clue why the train was late, and they even had no answer when we pestered for an alternative. We had no other option but to tuck our tails and head home. None of the passengers raised a hue and cry, no one asked why a text message was not sent to the passengers scheduled to travel about the inordinate delay, why an alternative train arranged (called rack) to help the hassled passengers.

WHY?

The answer is straightforward. Being a public sector organization having no accountability and customer service being of least importance, the Indian Railways care a hoot about its passengers. Even the passengers, had no expectations from the Railways. And hence the muted reaction.

Customer or passenger delight would have been in the form of having special counters for this particular train, providing discount vouchers towards food, or free stay at the nearby hotels or a simple apology would have worked wonders.

Now if the same have had happened with any of the leading domestic airlines, the passengers would have gone hammer and tongs, and would have raised such a hue and cry that even the ever eager news channels would have pounced upon this and would have termed it as "breaking news". The passengers would have demanded for the audience of the top honchos of the airlines to escalate their respective grievances.

In short they would have made the life of the airline front -end staff, a living hell, and would have demanded for reimbursements, or alternative arrangements, or even threaten a lawsuit for deficiency in customer service.

All this arises out of service expectations, the passengers based on experience do not have any expectation from the Railways, the least expectation is a safe journey, but in case of airlines the expectations are multifold and sometimes over the top.

Will there ever be customer based accountability in the Railways? It could just be a distant dream, and passengers will continue to leave through this nightmare of severe deficiency is customer satisfaction for years to come.

Shopaholics & Kleptomaniacs

India being branded as a nation of shoplifters is something which no one would be proud of, except for the news channels. The survey which was conducted by Britain's Centre of Retail Research observed that the shrinkage rate is 3.2%, the least being that of Taiwan at 0.89%. It would interesting to understand the methodology adopted to arrive at these figures.

Indian retailers have comprehensive standard operating procedures in place for inventory reconcilliation, but it has been observed that some of the SOPs are not followed dilligently. This could be one of the reason for high shrinkage levels. For grocery retail, surviving on very thin operating margins, to have state of the art anti - pilferage mechanism is quite a difficult ask and is not considered cost effective.

Usually, a vigilant security offcial is bestowed with the responsibility of verifying the receipt / bill against the shopping trolley. And since there is human intervention, the chances of errors are very high. Not to forget, these officials, must have been on their feet for close to 12 hours at a stretch, and with no weekly day - offs, the stress levels are considerably high.

During my tenure as Store Manager, I came across incidents wherein the billing assistant would have missed scanning an item, but a vigilant check-out official would have identified the same, and done the correction.

There was also this incident, when a regular customer, purchased 5 cartons of beer, but the billing assistant billed only for 3, and even the check out official missed out on this. This was a grave oversight, and could have resulted in a lot of shrinkage, if it had not been for the customer who was very kind enough to come back the following day and point out the error to the Duty Manager.

Once a parent and his toddler were shopping and the store's plainclothes' security official notified the Duty Manager that the toddler had pocketed a chocolate bar. Once the duo were near the checkout, the security official sought permission from the parent to frisk the child. The parent insisted that the child was innocent, but gave into the request and was very embarassed when the choco bar was found on the toddler.

Catching professional shoplifters sometimes turns out to be a very precarious situation, with the accused threatening the security official and the Duty Manager with dire consequences. There have been incidents were much celebrated and permanent staff have been caught red-handed, which severely dented the trust factor. And then there are habitual shoplifters, who are also called kleptomaniacs, who do it for the sheer joy of it. And such people could belong to any social strata of the society.

Pilferage could happen at any stage of the supply chain. The only way out is to ensure that the systems in place are strictly adhered to, and also reward the store personnel who would have identified the theft. Providing feasible benefits to store staff like medical insurance, higher education reimbursements could be an indirect process to prevent pilferage by employees.

Retail in India is evolving. The markets where the shrinkage rates have been reportedly less have matured over a period of time. High levels of shrinkage could be part of growth pangs, but we would have to be vigilant and ensure that such unnecessary distinction is avoided next year.

Retail Advertising

When I did my internship with a leading Indian grocery store, my discussions with the business team were peppered with a lot of curious questions. One of them being, why isn't the retailer investing in radio ad jingles and outdoor media, viz., billboards,etc.,. The response I got was very reasonable - the margins in grocery retail are very meagre and moreover being a neighbourhood store format, newspaper inserts and monthly newspaper ads met their customer traffic and average bill value targets.

This was 10 years ago. Indian retail has undergone a sea change since then, and now most of the outdoor ad space is taken up by one retailer or the other, announcing launch offers or season sale. Even the radio air waves have been innundated with retail stores' advertisements.

With the number of players multiplying rapidly, the nascent but fast evolving retail landscape in India has forced major retailers to loosen their purse strings and they are now going all out to woo the customer.

Will all this advertising work? It will, it has. But after the initial hype and hoopla, it is the capability of the retailer to deliver on his promises of assortment, EDLP, and providing the best possible shopping experience to the customer, which would keep the cash registers ringing.

A Proud Retailer

Few days back, I visited a retail outlet which was recently launched, and opened to customer traffic. Having been associated with two Hypermarket launches during the initial years of my retail career, it was a nostalgic moment.

The thrill of few sleepless nights, ensuring that shelves are adequately stocked, promotions have been planned and implemented effectively, ensuring that sufficient stocks are available, are some of the key challenges for a store launch. Such thrill and excitement cannot be matched to anything, and is an amazing experience.

And over the years, retailers have brought in impeccable planning processes which have almost weeded out the eleventh hour glitches, but nothing prepares one for facing an irate customer, or a law and order situation or dealing with local government authorities. Retail equips and empowers store personnel to think on their feet, and this learning is priceless. People management is one of the key drivers of retail business, and it comes naturally to retailers.

And I take immense pride in the fact that I belong to the same flock.

Proactive Customer Service

During one of my recent interactions with a leading Indian retailer, I was asked what is the fundamental difference in processes between North American and Indian Retailers. It was an interesting question, and my answer was straightforward, NOTHING! I went on to point out that Indian retail has evolved over the years, and Indian retailers are as technically adept as their western counterparts riding on the back of investments in state of the art retail solutions.

But I also pointed out that even if process and technology wise Indian retailers are more or less at par, proactive customer service is one critical area where Indian retailers are lagging a wee bit behind their North American counterparts.

Last year, I purchased a weather temperature reader from a leading retailer, and later I realized that it was reading the same irrespective of outdoor or indoor temperatures. Now, I had misplaced the receipt / bill, and couple of months later I was not sure if the  retailer would take the product back without the original pack. With a sense of trepidation, I walked into a different outlet (not the same store from where I had made the purchase) and explained the customer service desk my predicament. And true to the outlet's “no question” asked return policy, the friendly desk representative, took the product back and issued a gift card

And this is not the lone example, at a Starbucks outlet, the billing assistant, was unable to process my membership card due to a technical glitch. A steady stream of customers was building up, and gauging the impatience of the customers in the queue, he promptly said to the folks behind me that whatever they order will be “on the house”. An average Starbucks grande coffee costs around 3 USD, and there were close to 6 customers, and that would have added upto not less than 20 USD, which is quite a lot of money.

I hired a cab once, and it arrived 45 mins late, and of course I did not mind, but on reaching my destination, the fare was 23 USD, and the driver refused to take the fare from me saying that since he was late, he is not going to charge a single penny. Amazing!

These examples explain the stupendous success which most of the North American businesses have enjoyed. It is not about processes, but consistent proactive customer service and customer gratification. For them, a customer is not a one – time customer, but one who would bring them more business for years to come. At times such flexibility in return policies have been taken for granted by customers and misused but that has not deterred business firms. Proactive customer service is a legacy, which has been inherited by generation next.

There are countless instances where Indian retailers have walked the extra mile to satisfy their customers, but such practices have not been consistent. Being a retailer myself, during my initial days in my role as a store manager, I would have refused quite a few returns because the stipulated time duration set for returns would have lapsed. Going by the book was the order of the day, because such a stance was a result of impending consequences if we display a wee of bit flexibility in policies.