“What they don’t teach you at Harvard” by Mark H McCormack is a must read. If you don’t have the patience or need an Indian version of that, naru is the man. He is a demi god who can guide you thru the complex, often treacherous world of Indian business.
How often do you meet someone?
Who made millions?
Who lost his loin cloth?
Who fought back and gained a reputation?
Who takes everything in a stride?
Who loves dealing with curved balls?
Who jokes and smiles about his misfortunes?
naru is all this and much more. I am happy and everyone who meets naru will be happy, because he is a rare phenomenon, he is unique and he is a great motivator. I wish I had a recorder and recorded his whole session, because his voice, his words and his wisdom is in league with best of the best orators, management gurus and philosophers. Few (rather lots of) snippets from his session in CBS.
Where are we heading?
Any book worth its dime will tell you that, we had different era’s in the marketing evolution, product era, sales era, marketing era etc. but where are we heading is what political thinkers and management gurus can predict. They love the game of guessing where we will be five or ten years from now. They are the astrologers of the marketing world; they have lots of science and analysis to support it. As per naru that next age of marketing management is customer group management. Customer group management is all about addressing the needs of a specific group of customers, the communication vehicle and every aspect of marketing revolves around the customer.
Tax laws and logistics:
Well, who needs a session my Philip kotler if he is going to talk about the same things that appear in the 13th edition of marketing management? So naru thru some light on, how we Indians can get over any law barrier and make a profit in business.
Arbitrage – the ability or the process of using your knowledge to get thru your local tax laws and tax rules, obviously not all or the good ones, but those that are colonial in nature.
The tax structure is 3 tier in nature. Central tax that is paid at the time of manufacture, State taxes which is sales tax. Then we have the local tax which is octroi.
What is wrong in this, if it is uniform in nature, nothing is wrong. But things work differently within each state. Then there is huge difference between the states. Bombay has a different octroi rate than that of thane. So what does our smart business man do, he gets goods delivered to thane and then moves his Bombay requirements either legally or illegally using C & A agents.
What happens if the state has a higher sales tax, well dump your goods in the neighbouring state which has a lower sales tax and repeat the above mentioned show. For example the arbitrage earned by dumping goods in Orissa and selling it in west Bengal is close to 21%. Hence, depots by companies are to avoid tax not to evade tax. C & F agents are a matter of convenience.
Since laws and taxes have an impact on the price, management pricing strategy is good for your grades, not for your business in India. Your profit margin is directly proportional to your arbitrage.
Lets think of a scenario, your whole operation is in the south, you want to sell your product in the north east. It is easy to find a channel of distribution, but a distribution is never closed till the reverse flow of cash happens. you trust a retailer and you also believe in the law, that’s a deadly combination. The first thing the retailer will do is, sell your product and empty his bank account from which he has given you a check. You start the court room drama and end up with overheads and earn a far lesser share of your money. So this gave rise to open cheque book system, open credit or cheque system and document thru bank system (with the help of freighters approved by banks).
Value in the value chain or supply chain always shifts to a place where there is shortage.
Organised retail, why is not working today?
Today it is at 3% of the total retail sector. To understand the scenario better, we need to ask further questions. How much volume can a modern retailer sell in order to compete with kirana store? What if the manufacturer is giving higher margin to organised retailer? ( then the organised retailer will sell to kirana stores). We are also forgetting the whole sale dealer in places like koyembadu, parrys etc. they operate on unbelievable margins, which benefits the retailer and the end user. Hence market is in a flux. For modern retail to succeed, the market needs to be in equilibrium. Hence there is a very good opportunity for private labels. But we have a greater threat of price undercutting.
Where there is a market, role of distribution will follow.
There is a good market for coaching institutions that help students prepare in entering I I T and other premium institutes in India. how does this help the country and what is the distribution? Only one student per hundred enter the premium institutes. people bring bright students from different parts of the country, coach them and train them. So a good pool of talents gets nurtured. When 99 out of hundred miss the premier league bus, they end up in the open market. The institute direct this talent pool to second and third tier institutes and make a kill. The second and third tier institutes get good talents who are then recruited by good employers, this brings a good reputation for the institute. By this a new distribution channel and value chain is created.
Why do we see so many restaurants fold up?
In restaurant value of the value chain rests or is captured by the real estate person. hence when a leader like McDonalds says that they are not in the food business but in real estates, better give some taught. It is becoming increasingly difficult for one outlet restaurants to survive because every one is hustling for the street level space. Hence chains are the only way out. Once you set up your first outlet and build a brand name, you brand power builds loyalty and pulls in customers wherever you are, so then you can move into less costly real estate places. If you have brand power a real estate person will be willing to give you a lower price, because he knows you will increase his value by bringing in more crowds. So always have a strategy towards real estate handling and movement.
How about franchising?
Franchising is possible only when the franchiser has a core competency and product or service is replicable. Franchising also requires entrepreneurial abilities form the franchisee, so that they grow together rapidly.
What is so difficult or so interesting about sales?
For every thousand person there is one retail outlet. If you want to find out how many retail outlets are there, just divide the total Indian population by thousand, so go find the outlets to make a sale. As a manager better have the tie muscle to prove that you can do a 60 call per day schedule, so that your rep can do it too. Sales job require leadership skills to do anything up front and to live the life of your subordinate. As an MD you should be the person up first and up front.
How do you work the market or what is your sales strategy?
Only one product companies can have a push strategy. A sales rep or a company who gets customers thru pull strategy can never push. A company should have one pull product, this will in turn support other push products or give us an opportunity to cross sell or up sell. After creating a pull product or if your product is a pull product, when you enter new market you need to push. Purchase pattern of a kid is different from a mother, the kid puts the money in your hand and then makes a choice, the mother or adult will never give you the money until he or she has made a choice. So be sure of your target consumer. If a product generates at least one customer of high value to the retailer, then that product gets an entry in that retailers shelf, because the retailer would not wish to loose the customer because of this product. Retailer is king in impulse products. Customer is king in the case of adult products. An adult product seller will be treated well by a retailer, where as the salesman dealing with impulse products have to make a fresh pitch on every visit. For impulse products every sales has to be won from retailer to retailer. Hence efficiency and cost of distribution goes up with impulse goods, because of attrition.
All good things must come to a close. This session came to a close, with Mr. naru explaining to us how a company which was not able to meet the demand, ended up having a years stock, in just three months time. This is because the brand ambassadors who represented the brand got into a controversy, which ended their career and bankrupted the company.
