Talk of Many Things

In the context of oil, a recent Swaminomics column in the Times of India made a passing reference to the notion that “price controls do not quell inflation, and abolishing price controls won’t accelerate inflation”.

Politicians and the average reader aren’t the only ones who’d disagree, as the author fears. I can easily imagine many marketers and others raised on cost-plus pricing model to find this notion highly counterintuitive. I can imagine them arguing along the following lines: If the cost of oil contributed five rupees to a soap’s selling price of 20 rupees, then a two rupee increase in the purchase price of oil would result in an increase of the oil component’s cost to seven rupees, thereby forcing FMCG manufacturers to hike up the selling price of their soap to 22 rupees.

This argument is valid in a cost-plus pricing regime where price is calculated after toting up all input costs and applying a ‘reasonable’ margin (which somehow people always tend to assume to be in the region of 10, 20 or max. 30%).  While cost-plus pricing may have been the only pricing mechanism used in the good-old days, it is not commonplace in today’s marketplace. Value-based pricing is the most widely used model now. Though it has been entrenched in the developed Western markets for a long time, value-based pricing has gained a lot of traction even in emerging markets like India for over two decades. 

Adopted for almost all B2B categories and even in bread, soap and other B2C items that are considered as basic necessities, value-based pricing bases the price on a number of external factors like brand value perception, competing prices, value of pain solved or gain delivered to customers using the said product or service, and so on. As a result, you don’t have to look too far to spot product and service categories where the sum total of all input costs is below $10, but average selling prices often exceed $25. While input costs have not (yet) exited the pricing equation, they play a very limited role under the value-based pricing model, which also goes by the alternative name of ”what the traffic can bear”. 

Therefore, in the modern world where value-based pricing is the norm, an increase in the input cost does not push up the cost of production to anywhere near the prevailing selling price. So marketers in many product and services categories aren’t under any great pressure to increase selling prices, especially if that created the risk of losing customers. Which is why decontrol in prices of basic commodities like oil doesn’t automatically mean an upward tick in wholesale or consumer price indexes.

The Economic Times does it again!

Can anyone explain the connection between the headline and the text of this article?

Subscribers of NetFlix (USA), LoveFilm (UK), BigFLIX (India) and other DVD-rental services would be familiar with queues. They browse titles on the service provider’s websites and add the ones they’re interested in into a queue, from which the service provider makes shipments, depending upon availability and other criteria related to the subscriber’s plan.

The same concept is followed by Librarywala.com, the first and only online book rental service I’ve ever come across. With a decent collection of books and a range of attractively priced plans, Librarywala promised good value for money and I signed up soon after it launched around a year ago.

My experience with Librarywala has been mixed.

On the positive side, it has lived up to the promise of offering a good assortment of books, including latest ones, so I’ve always been able to fill my queue with enough titles to last the following 3-4 months (btw, to quote a contrasting example, my LoveFilm queue was never more than a month deep – admittedly, in part, due to my more restricted taste in movies).

On the negative side, Librarywala has rarely met its committed delivery period of 24 hours. And, recently, my queue seems to be hijacked because

1. I started receiving books that I’m quite sure I never added to my queue.
2. Books that I hadn’t added to my queue and never delivered to me suddenly started appearing in the list of books to be picked up from me.

Looks like I’m the victim of ”q’jacking” – if I may coin such a term.

The way the system works, the moment a book is shipped from Librarywala’s warehouse – but before it’s delivered to me – it disappears from my queue, so a review of the queue post my receipt of the book doesn’t prove anything. My emails to Librarywala pointing out these incidents of suspected “q’jacking” have their staff flummoxed. Their lack of response suggests that, even with access to richer information they’re bound to find in their internal audit trails and elsewhere, they haven’t been able to unearth something concrete one way or the other.

While I resolve my issues with Librarywala, let me hereby alert other subscribers to the clear and present danger of “q’jacking” in online rental services!

If credit cards don’t lead to overspending, then Kwedit needn’t lead to any spending.

Positioned as an alternative payment method for purchase of virtual goods used in online games, the newly launched Kwedit only extracts a promise from you to pay in due course. If you break your promise, it doesn’t threaten to send goons to your house to collect. Instead, it affects your online reputation by lowering your so-called “Kwedit Score”. You might be tagged as a credit risk in the Kwedit world as a result, but your kneecaps will be intact. 

Smart alecks who’ve spoiled their Kwedit Scores by reneging on their promise(s) would be able to start on a blank slate by creating another Kwedit account using a different name and email. But, they’d quickly realize that the ‘blank slate’ extends to their online game: they wouldn’t be able to resume playing at whichever advanced level they’d reached while playing under their former identity. When they log on to the game with their new identity, they’d be bumped off to the first level like any new player. Since that’s so “uncool”, it acts as a deterrent to gaming Kwedit. 

Kwedit says it’s meant for people who don’t possess credit / debit cards. However, it’s bound to tempt one-off gamers who do. After telling themselves “why pay by cash when you can pay by credit (card)” every time they’ve used their plastic in the past, they might suddenly start asking themselves, “why pay by credit (card) when you don’t have to pay at all (by Kwedit)?” As Mike Arrington points out in a recent blog post on TechCrunch, Kwedit poses the risk of cannibalism, “where a user chooses Kwedit instead of paying directly even though they have a credit card”. This would result in lost revenues for gaming companies. Without convincingly refuting this charge, Kwedit’s founders claim that it would eventually prove to be revenue positive. 

Going by the  rapid revenue growth of Zynga and other players, the online gaming industry has clearly established that it can attract enough customers who are willing to pay by GenY Mobile Payments if not by credit cards, debit cards and other conventional payment modes. Against this backdrop, it might prove exceptionally challenging for Kwedit to persuade online gaming companies to add Kwedit as one more payment method, especially when it poses the risk of tempting otherwise-paying customers to Kwedit, and thereafter into defaulters.

Kwedit might want to expand its target market to other forms of virtual goods where merchants would benefit more obviously from Kwedit’s ability to tempt users away from other payment methods. One low hanging fruit is American media companies who’re planning to charge their readers for access to online news and articles. Although many players in this market are apprehensive that their moves might drive their readers away – resulting in lowering of advertising rates – they’re forced to try out something in this direction because they recognize that their present practice of giving away content for free threatens their very existence. Unlike onling gaming companies, the key challenge for these media companies is not how to prevent paying customers from turning into non-paying ones. Grappling with the problem of converting non-paying customers into paying ones, they might find Kwedit’s allure working to their advantage. Kwedit offers them with a novel payment method that could convert a portion of their website visitors into paying customers – some because they can’t resist the novelty of Kwedit, and others, because they might not have a ”rep to protect”!

Here’s a quick tip for long time users of WiFi printers and all-in-one devices: Whenever you change the password of your WiFi router, remember to enter the new password in your WiFi device as well. Otherwise, the device will stop working. In hindsight, this is obvious but not when you’re frantically trying to troubleshoot the problem using guidelines that tend to led you astray. 

While installing my HP Officejet J6400 / J6488 WiFi All-in-One (AIO) device comprising of inkjet printer, scanner, copier and fax, HP’s engineer had entered the WiFi password, that was how the AIO could connect to the wireless network, and I’ve been able to use the device successfully for a long time. But, since the AIO was installed more than a year ago, I didn’t remember to change the password on the AIO after recently changing the WiFi router password. As a result, when I tried firing a printout today from my Notebook PC via WiFi for the first time after changing the router password, I discovered that I couldn’t.

HP’s standard troubleshooting steps are: install the latest updates, disconnect the device, remove the power cord, reconnect the power cord after 60 seconds, uninstall the device driver, reinstall the device driver, etc. After trying out the first few steps and getting nowhere, I decided to sit back and think about this problem from first principles. Thankfully, I realized the obvious just before succumbing to the time consuming next step of uninstalling and reinstalling the printer driver. 

After running the Network Configuration option from the AIO’s setup menu and entering the new WiFi router password there, the device is back on the network and is working fine.

If only HP’s website had pointed out this most obvious solution, I could’ve saved a couple of hours of my time and around 100MB from my broadband quota!

According to a recent report, FMCG companies have started manufacturing store brands for leading retailers in India and elsewhere.

As I’ve written in the past, store brands – also called house brands or retail private labels – are a powerful weapon in the armor of organized retailers to compete with kirana stores (India’s version of mom-and-pop stores) that control more than 85% of the Indian market for retail goods. Store brands are common in milk, juice, eggs, medicine, soaps, lentils, stationery, apparel and other fast moving items. They’re traditionally - but no longer necessarily – packed in plain boxes or bags and bear nondescript brand names owned by retail companies if not the name of the retailer itself. Since retailers incur little or no advertising costs for selling store brands, they can afford to price them significantly lower than leading FMCG brands, even at a comparable quality.

Now, if a store brand delivers the same quality as an FMCG brand at a lower price, it’s sure to take market share away from the latter. As a result, store brands have traditionally been viewed as rivals to FMCG brands. By manufacturing store brands, FMCG companies seem to be consorting with their traditional enemies. It would be interesting to understand their undelying motive for doing so. Is it, as the official line goes, to keep out other players and fuel upsell of their own brands in other stores? Or, are there deeper factors at play?    

During the recent recession, as in the previous ones, consumers reportedly switched to value brands. This would’ve resulted in store brands gaining market share at the cost of FMCG brands and in under utilization of production capacities at FMCG companies.  Unlike in the previous recessions, according to this recent McKinsey report, consumers are not likely to return to their free spending days even when the economy recovers. Which means that FMCG manufacturers’ return to full production capacity is a long way off. This realization could’ve triggered the move by FMCG companies to start manufacturing store brands for their traditional rivals as a stop-gap measure to improve their capacity utilization, even if it meant adoping the “if you can’t beat them, join ‘em” policy.

I was initially shocked to learn from this report released by ThreatMetrix last week that financial services firms worry more about fraud than customer convenience.

On second thoughts, I shouldn’t have been surprised - after all, banks seem to be getting singled out for criticism for all kinds of fraud. Even when people handover their Internet Banking usernames and passwords to Mint, Wesabe and other P2FMs (personalized personal finance managers), often against the advice of their banks to never share this information with anyone, only banks seem to be getting blamed should a fraud happen. As this post in Finextra and the accompanying comments indicate, it’s all fine and dandy for these P2FM startups to remain opaque about the investments they’re making to protect the account access information from being hacked by cybercriminals, but banks are supposed to spend time and money to introduce features to prevent frauds.  

Against this backdrop, kudos to HSBC for going out of the way to boldly declare last week that security should not come at the cost of convenience. This was accompanied by the launch of a secondary password feature that seeks to boost online security without adding to inconvenience.

Around four years ago, HSBC distributed hardware tokens – free of cost, if I might add – as an additional level of security to its customers in India for accessing their checking, savings and credit card accounts (it’s another story that, two years later, HSBC’s branch situated right in the basement of their global headquarters in Canary Wharf in London could only offer rudimentary security by way of good-old username and password for customers in the UK). Personally, I’ve been satisfied with hardware tokens: they provide two-factor authentication which is the gold standard of online security. However, since it’s likely that many customers might have complained about finding it inconvenient to carry around an additional device, HSBC recently launched the secondary password alternative, which delivers strong enough security, at the same time allows customers to ditch the hardware tokens.

As I’ve written in the past, most web applications, online banking and shopping websites force users to choose between convenience and security. So far, only BOKU, Zong and other Generation Y Mobile Payments and a couple of alternative payment providers seem to have struck the right balance between security and convenience. With the launch of the secondary password feature, HSBC is the only bank I know that is making steps in that direction.

Hopefully, more banks will follow HSBC’s lead, so that in the not-too-distant future, most banks will not only succeed in combating fraud but also manage to deploy frictionless online interaction solutions in order to deliver a superior online banking customer experience.

Brands like Xerox, Maggi and, to a lesser extent, SAP, virtually represent entire product categories. With a dominant market share,  such generic brands have not only enabled their owners earn huge revenues in the native product categories – Xerox in photocopiers (viz. getting a “xerox” copy even if you use a Canon photocopier),  Maggi in noodles and SAP in ERP - but have also helped them enter new product categories through brand extensions.

If you take the example of Google – the ultimate generic brand of the past decade – it dominates Internet search so strongly that it has become a verb – you no longer search for something on the Internet, you Google it.

Surely, it’s every marketer’s dream to create a generic brand?

I’m not so sure.

Apart from search, Google owns Google Docs, Google Mail, Google Sites, Google Translate, and many other products that are unrelated to search. However, it’s not a secret that search advertising contributes to over 90% of Google’s revenues. It is tempting to ascribe this lopsided revenue distribution to the relative newness of Google’s non-search products – “when will they come out of beta?”, I hear many of you ask.

But a recent experience makes me wonder if there are more fundamental factors at play behind the negligible contribution of non-search products to Google’s topline.

My company recently partnered with a leading computer technology college toward development of a widget, which is soon to be launched as a GTM360 marketing solution (for those interested, called EMAIL360, this email uploader widget will enable websites to collect visitor contact information in a highly frictionless manner). Since Google Gadget was one of the sources of insight regarding architecture for this widget, the research paper based on this project cited Google as a reference. 

However, this reference was promptly rejected on the grounds that a research paper was expected to go beyond listing the zillions of websites that show up when you Google for ‘widget’. The examiners wanted a reference from a company that had a strong presence in widgets and, because Google only meant search to them, it didn’t qualify when it came to widgets.

This illustrates the challenge that Google faces while trying to gain mindshare in product categories outside Internet search. How well Google overcomes this challenge might determine when its non search products will make a significant contribution to its revenues – if ever.

The story doesn’t end there: When presented with a screenshot of the EMAIL360 landing page from GTM360’s website, the college’s brass accepted GTM360 as a fitting reference for widgets!

When someone rejects a reference to Google and accepts one from GTM360 in its place, you know there’s a big downside of being a generic brand!

Like me, most automobile drivers might find GPS navigation systems more useful to reach a particular place rather than to find the way to the general area in which the place is located, for example, 98 Meridian Place rather than Docklands in London. Similarly, when they’re driving from one city to another, they might be able to reach a city (say, London) with minimal use of GPS whereas they’d find the gadget indispensable in finding the way to a specific area (e.g. Docklands) within the city. The same holds good with maps of public transport systems, especially when it comes to tubes that run below the ground most of the time, thus leaving their commuters with very little sense of the area surrounding the destination station.

From these examples, it seems evident that directions for the proverbial “last mile” leading up to a particular place are more important than those for the earlier part of a journey. Then, how come when you ask people for directions, many of them ask you, “where are you coming from?” Is it because giving directions is an art, which only a minority of people has mastered?

Whenever someone wants to know where I’d be coming from before they begin to give me directions to their office or home, I suspect that I’ve encountered the majority. I renew my search for the rare person who knows, like the Cheshire-Cat in Alice in Wonderland, that the route to anywhere really “depends upon where you want to go” and can start giving directions by anchoring the destination by relating it to landmarks that anyone would know in its vicinity. 

If only the staff attached to India’s Finance Minister had kept this in mind, the honorable minister wouldn’t have landed up in the wrong Trident hotel located in (a placed called) Nariman Point in Bombay / Mumbai, some two hours away from the newly built Trident hotel in (another place called) BKC the inauguration ceremony of which he was to attend last month! Maybe, like street addresses that begin with the door number (e.g. 98 Meridian Place), then go on to the area (Docklands) before finally mentioning the city (London), hotels should also mention the area first viz. call it BKC Trident instead of Trident BKC? In case brand managers fear that such a change in the naming convention might lead to a relegation of their brands, I refer them to this article in the Economic Times, which holds that the Trident incident “must be seen as a pitfall of overbranding by hotels”.

“Executive mandate” is often cited as a critical success factor for virtually all kinds of information technology projects.

Whether it involves the development of custom solutions or implementation of ERP or any other type of packaged software, ”top management commitment” – which is another term by which executive mandate is sometimes expressed – often finds a mention in many lists of top criteria for ensuring success of a technology initiative.

Such lists also include other criteria, some of which are specific to the nature of the technology and the industry to which the company belongs, and others that are more generic and apply across a wide range of technologies and industries. But, executive mandate ranks near the top in most of them.

Take for example, the following list of factors for overcoming organizational inhibitors in a business intelligence implementation project for the retail industry.   

In this list extracted from the recent report “Using Business Intelligence to Help Control Outcomes in an Uncontrollable World” published by Retail Systems Research LLC, “Executive Mandate” ranks at #1 position with a towering lead of 33 points over the second-ranking factor which is related to data quality.

With such and other research reports placing executive mandate at the top of the table, it’s natural to expect that package implementers and system integrators would be highlighting the need for garnering top management commitment during project kickoff meetings and at other key stages thereafter. In fact, in all the hype, you can’t be faulted for jumping to the conclusion – not intended by research analysts, I’m sure – that the customer simply has to wave some magic wand and top management commitment will follow. 

Except in a few companies that exhibit an autocratic style of management, executive mandate cannot be won in isolation. In most companies, as best-in-class program managers are aware, top management commitment is closely linked to the status related to shared goals, change management, well-trained employees, data quality, usable analysis tools, and other prerequisites. Given that most of these feature in the list of critical success factors, executive mandate is not mutually excluded from them.

Agreed that most of these prerequisites are internal to the customer organization, but package implementers and system integrators can go beyond their traditional arm’s-length entreaties about the role of executive mandate and differentiate themselves by acting as catalysts for its achievement. By actively engaging with key customer executives during the normal course of program delivery, they can pave the way for fulfillment of these prerequisites, which will accelerate securing top management commitment.