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Volume 1, Issue 2

MAGMA MAGazine of MArketing An initiative by the SIMSREE Marketing Forum

Business News Yum! Food’s exponential growth

Flicking the middle finger

In spite of 80% wage inflation and 8% rise in commodity prices, robbing the major growth factors for any company in China; thanks to its aggressive marketing strategies, Yum! Foods, which owns and operates the KFC, Pizza Hut and Taco Bell brands, has managed to drive sufficient demand to achieve a 30% growth in profits in the 4th Quarter of 2011 over the same period last year. The parent company based in Louisville, Kentucky acknowledges that China has become a major growth driver for the company. Due to this phenomenal rate of growth, the company is able to open an average of 4 new restaurants every day outside the USA.

The before mentioned gesture has received a lot of media attention lately after pop star M.I.A extended her middle finger to the crowd during her performance at this year’s super bowl halftime show. This has caused the American television network airing the show to go into damage control mode causing a huge PR nightmare. BBC attempts to track down the origin of this gesture and to answer the ultimate question: Is this action really offensive?

Samsung Galaxy Note arrives in the USA

Tata Starbucks arrives in India

Samsung Galaxy Note GT-N7000, available worldwide since October 2011, has finally arrived in the USA. This phone has created waves worldwide dues to its unique 5.3 inch screen which pits the phone against conventional phones as well as entry level tablets. A 1.4 Ghz DualCore CPU, 400MP Graphics Rendering Capabilities, a super AMOLED screen and a unique Spen stylus had made this phone an instant hit with gaming and multimedia aficionados. The phone was launched with a 90 second SuperBowl ad-spot which poked fun at Apple fans. Watch the ad at:

The global coffee magnate Starbucks has signed a 400 Cr. Rs . 50:50 JV with Tata Global Beverages. It is all set to arrive in India with 50 outlets to be opened in this year in Mumbai, Delhi and Bangalore. Starbucks is looking forward to leverage Taj and other lucrative properties to widen its reach. Although their pricing strategy is not yet set out, they have said that they are looking forward to position the chain as an aspirational brand focusing on creating a unique experience for its customers.

Sydenham Institute of Management Studies, Research and Entrepreneurship Education

Volume 1, Issue 2

The secret of flying high By Jinali Parekh, Member Worse, costs continue to rise: Delhi Airport recently is that it is serving one of the world’s fastest growing announced it would introduce a 340 percent hike in economies yet it is estimated that the industry has airport charges from 1 April, spread across two accumulated losses of nearly 15,000 cr in 2010-11, years. up from 7,038 cr in 2009-10. The country's biggest carrier, Air India accumulated Let’s have a look at what went wrong in the first losses of Rs 13,500 cr and country's second largest private sector airlines Kingfisher accumulated losses place. of over Rs 4,000 cr right now, Indigo Airlines is the There are a lot of factors that have come together only profit making airlines with a yearly profit of Rs and impacted the airline industry. One of them is the 650 cr.

The greatest paradox faced by Indian Aviation Sector

valuation of the rupee, which has fallen substantially against the dollar over the past year. Most of the airline companies’ costs are in dollars and therefore their bottom lines have taken a hit because of the rupee’s fall. Fuel is another cost that has proven to be unmanageable for the airlines. Jet fuel, like petrol, is not subsidized by the government and bears the brunt of high prices/taxes to enable oil marketing companies to sell diesel, kerosene and cooking fuel (domestic LPG) at subsidized prices. Fuel costs have risen to almost 30% of total cost for airlines in India compared to around 10-15% for airlines in other parts of the world. Direct investment by foreign airlines could perhaps help, but that proposal has also stalled after the furious uproar that followed the proposal to introduce FDI in retail. The airlines have also suffered because of the price war. This has proved to be beneficial to the travelers but all airlines have made almost nothing out of the huge growth in domestic travel because of the low fares. Looking at all the above issues, the only way to achieve profits in the current aviation sector is redefining business models and a proper focus on effective cost cutting India currently has one of the highest operating cost environments for airlines anywhere in the world.

Air India has always been monopolizing government’s attention and creating problems for the private carriers by discounting fares that they are forced to match. If strong reforms are not implemented to curb this, there is no way the situation can improve by pumping more tax payer’s money into problem-ridden aviation sector. Government intervention can at best be only a temporary measure to infuse liquidity, but it will not guarantee the industry’s revival. But will all this help in any way? The main factors resulting in higher costs of airline industry – fuel, aircraft leases and maintenance are not going to be solved with the continuous decrease in India’s growth rate and a weak government plagued by corruption and scandals. Kingfisher's poor financial performance stands in contrast to its award-winning performance for service. It is the only Indian airline and one of seven globally to have a five-star rating from UK-based aviation consulting firm Skytrax. But Kingfisher may be a victim of its business model that focuses on the upper-end flier market that was decimated during the slowdown of 2008-2009. But Vijay Mallya showed that he is determined to stick to his model by announcing closure of Kingfisher Red, the lowcost arm.

Sydenham Institute of Management Studies, Research and Entrepreneurship Education

Volume 1, Issue 2

On the other end, the rest of the Indian aviation industry has done well as low-cost carriers. Jet now runs more than half its services under the low-cost brand it started in 2009, Jet Konnect.

suppliers by buying 100 new A-320 jets from Airbus, purchasing at volume to ensure a lower price and a partnership-type commitment on maintenance — thus reducing its cost of operations before it sold its first ticket.

It is in tough times like these that comparatively newer and smaller IndiGo Airlines has proved to be innovative and shot up to the top of the food chain by reinventing the low-cost airline model — slashing costs where its customers wouldn't feel the pinch.

Indigo turned regular business travelers into loyal customers because it never acted like a budget airline. The rapid turnaround of its planes (22-25 minutes against an industry average of much more than 30 minutes) was the key to the company making Started in 2006, Indigo has built a viable business over money. They also have a good replacement policy the past five years. Kingfisher, in contrast, entered the where the airplanes, which are more than 5 years old, business by acquiring the low-cost Air Deccan in 2005. are either returned back to the manufacturers or they Both airlines have operated have been sold at a lesser price to other countries’ in the same business airline companies. environment. If anything, Kingfisher held two IndiGo differentiated itself from the advantages. One, it inherited word go. It has positioned itself the infrastructure, staff and as an airline that is always expertise from Air on time. And it follows Deccan; and two, Mallya its positioning like a religion. forged an alliance with Jet The aircraft is always near Airways, the nation’s biggest, capacity. Even if it takes off to smoothen out any late, it makes up for lost time competition. during the journey and never Still, Kingfisher eschewed the fails to announce that it has low-cost model and appears to arrived on time at the have concentrated on forcing destination, followed by its its airhostesses to wear recently received awards designer outfits two sizes and accolades. It consistently smaller and signing up drives the ‘on time every time’ cricketers for its commercials. notion home and gives Indigo, on the other hand, built a powerful low-cost the impression that the customer is part of a model, even though it may be forcing some of its prestigious service. airhostesses to wear standard wigs. For communicating the positioning, a smash hit Still, the contrast between Kingfisher and Indigo is television commercial was premiered in March 2010 telling. While Kingfisher is teetering on the brink, having the tagline “on-time”. With conveyor belts and Indigo is believed to be readying an initial public assembly lines and workers indistinguishable in their offering. uniform spiffiness, the ad projects assembly line efficiency. Toward the end of the TVC, the voiceover The key innovation was simple. Like Tata Motors did quips in an upbeat voice, “We become the world’s with the Nano, Indigo leveraged India's huge potential most powerful economy … on time.” market to form a cost-cutting partnership with And so brand IndiGo is served up with a side of Sydenham Institute of Management Studies, Research and Entrepreneurship Education

Volume 1, Issue 2

futuristic patriotic pride. How’s that for subliminal?

And as a nice little addition, flight attendants manning the beverage carts addressed even lowly economy Despite market instability, this India's youngest airline class passengers by name (with the aid of the seating has completed a successful first five years of domestic chart). operations and set trends considered fresh for the Indian aviation industry. These include the much- IndiGo has thus proved that innovation is the only blogged-about cute hair-dos for airplane crew. And thing that survives even in toughest of times. Also adverts like "Sleep with your wife tonight" which won companies should not shy away from cost cutting. All IndiGo airlines an award at the world low-cost airlines the external factors affecting the industry are Asia Pacific awards in 2010 in Singapore. affecting this airline too, but it has found a way around them and the other airlines should definitely Apart from a wonderful positioning, perfect take a cue from this. communication and an efficient operations strategy to back the positioning, another thing that highlights IndiGo is its attention to detail. It went beyond the basics to reinvent the first-time flyer segment. In a country where other carriers shared passenger-stair vehicles and the top airline still had to have disabled passengers carried up the staircase to plane by ground crew, Indigo brought in larger passenger ramps from day one. Similarly, the company equipped check-in staff with hand-held scanners that allowed passengers without baggage to avoid the dreaded scrum at the counter. IndiGo has roving “check-in counters� where passengers with only cabin baggage can check-in with an IndiGo official with a handheld device, rather than lining up at the check-in counter. It also gives the customers the freedom to carry their own eatables and snacks on board

Sydenham Institute of Management Studies, Research and Entrepreneurship Education

Volume 1, Issue 2

Exploiting Emotions It is often said that, we marketeers and specifically advertisers are in the business of appealing to the emotional side of the consumers. One would say that we are playing with their emotions. But at what point does it cross the line between “playing with their emotions” and “toying with their emotions”. Harish B. from the Marketing Practice blog talks about the recent controversy regarding the latest campaign of Birla Sunlife featuring India’s youth icon Yuvraj Singh.

Yuvi has been endorsing the Birla Sunlife brand for some time now. The old campaign ran on the theme of highs and lows of the life and how one should prepare for such events. It was aired when Yuvi was in a bad patch and was kept out of the team because of poor form. The ad really struck a chord because here was one famous cricketer who was criticized by all for his poor form.

Many brands have used celebrities for their campaigns when these celebrities were recovering from such serious health issues. Celebrities like Lance Armstrong and Lisa Ray are examples. Some of the reasons why this particular campaign failed to hit its mark are : 1. Many viewers thought that Birla Sunlife has tried to gain advantage of this current situation by rerunning the old ad. This is a glaring error in term of the execution of the campaign because the agency or the client did not think of such a perception

This time around, things were different. Yuvraj was diagnosed with cancer and is undergoing treatment in US. There is a huge wave of sympathy, prayers and sadness among the millions of cricket lovers for this flamboyant young cricketer. Surprisingly the ruthless marketer in Birla Sunlife Insurance began to 2. The timing of the ad could not have been worse. flood the channels with a follow-up campaign. The This ad would have been a huge hit had the release new campaign, though in same line of the older coincided with Yuvraj's complete recovery. version, is very striking and all the more disturbing. 3. The brand bombarded the channels with high The initial response was surprise and disgust. “How frequency which gave the impression that it was can a brand run a campaign like that when he is sick trying to make maximum mileage of the entire and undergoing treatment?” Some concluded that episode. Birla Sunlife is exploiting a very sad situation to its advantage. Now ET and Business Standard 4. Even if the celebrity would be supporting such a newspapers have reported that the entire campaign campaign, the brand should have resisted the is done with the concurrence and support of Yuvi. temptation to take advantage of the situation. But the question remains: “Has Birla Sunlife has done the right marketing move to run such a hardhitting campaign when the entire cricket loving Indians are praying for this cricketer's health?”

Even if the intention of the brand was good, it failed to convey its good intentions. And in doing so, what could have been one of the most remarkable campaigns in the category, has simply gone south.

References Read the original article at: Read the ET article at: Watch the old advertisement at: Watch the new advertisement at: Sydenham Institute of Management Studies, Research and Entrepreneurship Education

Volume 1, Issue 2

The first P: Product We

are all aware of the 4P marketing mix model. Over the weeks, we will be taking a detailed look at all the four P’s one by one. We begin with: Product.

Core Product

When we introduce any new product in the market, we must try and answer the following 4 questions: 1. Who is the product aimed at? 2. What benefits will the customer expect? 3. How will you position the product in the market? 4. What differential advantage are you offering over you competitors?

Core features & benefits

Actual Product Augmented Product

Philip Kotler suggested that a product be viewed at three levels

Level 3: Augmented product - What additional non-tangible benefits can you offer? Competition at this level is based around Level 1: Core Product - What is the core after sales service, warranties, delivery and so on. benefit your product offers? Level 2: Actual Product - How is your product different than your competitions’? The strategy at this level involves branding, adding features and benefits to ensure that their product offers a differential advantage from their competitors.

Before placing a product into the market, a marketer should decide what differential factor would be the selling point of the product. The various differentiating factors might be : Design (Apple), Quality (Toyota), Features (IBM), Core Competency / Sustainable Competitive Advantage (Google), Price (Wheel) or Branding (Coco-Cola)

Thanks for your response Two weeks back, we released the inaugural issue of MAGMA. We were surprised and completely overwhelmed by the response we have received. Many students have approached us with a lot of feedback. We have received quite a few critiques, but, pleasantly enough, a lot more words of encouragement. A lot of people have expressed their interests in getting involved with MAGMA and we are happy to receive all this help. EVERY person at SIMSREE is welcome to get involved with MAGMA in whatever capacity they would like to, after all MAGMA belongs to all of us. We look forward to receiving articles, suggestions, comments and any other contributions from you. Send in your articles to: Sydenham Institute of Management Studies, Research and Entrepreneurship Education

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