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We are seeing a shift of power away from the companies to the customers: Naresh K Malhotra

Interview with Regents' Professor, DuPree College of Management

Rajarshi Bhattacharjee 

Consumers in India and around the world have become more value conscious post a protracted slowdown, says Dr Naresh Kr Malhotra, Regents' professor, DuPree College of Management, Malhotra is also a visiting consultant for business, non-government and government organisations in the US and around the world. During a recent visit to India, he spoke to Rajarshi Bhattacharjee about the relevance of marketing research during economic uncertainties.

How can marketers leverage marketing research to reduce the risk of product/ business failure during a slowdown?
Marketing research is all about the things that help in making better decision that does reduce — if not completely eliminate — the risks associated with decision making. So even during an economic slump, marketing research is important. There are systematic procedures for determining what kind of research should be undertaken during specific market conditions.

If you look at more innovative and more creative firms, what they try to do is, use the ‘down period’ or ‘slump times’ to actually increase their market share. They come out stronger with what they are doing because other firms or weaker competitors cut down. And the easier things to cut down are the activities that have long-term impact and are not immediately felt. So they tend to cut down on marketing research because the impact of it is long term. But the more innovative firms actually increase their marketing and marketing research expenditures during slow periods so that they cater to the customers better and capitalise on the weaknesses of the competitors and grab a bigger share of the market.

In a globalised era, how important is it for companies to adopt a cross-cultural marketing research projects that go beyond states/provinces or ethnic groups?
Because of globalisation, cross-cultural marketing research, sometimes called international marketing research, has become extremely important. The growth in the marketing research industry is coming more in cross-cultural research compared to domestic marketing research. The successful entry of Procter & Gamble (P&G) in China can be an appropriate example for this. When P&G was trying to enter the Chinese market, it was said that P&G will face a big challenge as its products are more expensive than the Chinese ones or its other counterparts and that it caters only to the affluent consumer segments.

But P&G, being a good marketing firm, and realising the value of marketing research, chose to ignore the advice and did detailed marketing research. They spoke to the Chinese consumers, tried to understand their values, how they go about making decisions, their challenges in life etc. One of the important challenges for Chinese consumers that was largely unaddressed was dandruff. Chinese people have jet-black hair and so the dandruff stands out. Different shampoo brands were available in the market at that time in China, but with a substantial focus on the middle-class segment of the market. P&G found that the Chinese are quite willing to spend up to six times the price of local brands for a shampoo that is effective in fighting dandruff.

Based on all this information, P&G chose shampoo as the entry category and used Head & Shoulders as the entry brand in China. The launch was very successful and today P&G has managed to capture around 70 per cent share in the shampoo market in China.

Another example can be the entry of Unilever in Japan. Unilever aimed to enter the market through the detergent category and had information that the Japanese are convenience oriented and freshness and fragrance were important to them. Based on the information they had, without undertaking systematic marketing research at all, Unilever launched a detergent in tea bag-like sachets that can be put into the washing machine and cloths will come out fragrant. But the product failed because they didn’t take into account the fact that the Japanese use low agitation washing machines and the detergent doesn’t dissolve adequately in such machines. The fresh-fragrance positioning also failed because the Japanese people prefer hanging cloths out on a clothesline than using driers.

On the other hand, before entering the Japanese market Johnson & Johnson did extensive market research with Japanese housewives, about their problems, issues and challenges. Johnson & Johnson found that women are sensitive to their environmental issues and the disposal of tempura oil (used for cooking) was an issue. The feedback that they got from the housewives was, if it could be solidified somewhere it could be disposed as a solid waste like other garbage. Johnson & Johnson developed a product which, if added to tempura cooking oil, solidifies the oil and can be disposed like any other solid waste. And the product was very successful. So the same market in the same country delivered different results for the two companies — the right kind of market research being the deciding factor.

How has the integration of social media in recent times redefined the basics of market research globally?

Let me put it this way: it is rapidly changing. To make a statement that social media had no impact on marketing research is not true, and to say that social media has radically changed marketing research technologies/procedures will also be incorrect. Marketing research is about obtaining information from the respondents. Typically what researchers do is prepare questionnaires, give it to respondents and analyse the responses. But social media is a domain in which conversations are taking place naturally. There is a wealth of information out there in social media and it can complement standard market research procedures, which I also expressed in the recent edition of a marketing research book.

Social media can be a good additional source of information for marketing research professionals. What one can do is monitor the conversations that are taking place in the social media — all the blogs, micro blogs, Facebook etc. Researchers can also develop and refine the expertise to analyse qualitative information available in the social media. In the near future we will see that social media as a domain in which to conduct marketing research is becoming more and more important.

What are the latest technologies global companies are adopting to win a marketing edge over competitors?
We are in a technological age. Social media is only one among the many gifts of technology. Together with the consumers, companies also update themselves with the latest in the technological domain to be on par with the market demands. We have seen Philips, for example, that had in the past made many technological innovations that excelled and successfully introduced those to the marketplace. The key is one needs to know how to cash on technology in a marketplace that can meet the needs of the consumers. In order to do that one has to rely on marketing. I would say that marketing research can give the guidance on how to translate technological developments and available technologies in production and business processes that will cater to the needs of consumers in a competitive marketplace.

Have you identified any structural shifts in the urban consumption patterns in India as a result of the economic slowdown?
What has happened is, consumers have become more value conscious. What we have seen in recent years is that consumers have become more knowledgeable and have also become more demanding. Now you can go on the internet anytime and get information about products, stores, compare prices and so on. What we are seeing is a shift of power away from the companies to the customers. But the most distinct change that we have seen is that consumers have become more value conscious. This is true in many parts of the world including India. If you look around now, how many ‘sale’ offers do you see around in the retail stores across markets? Almost throughout the year the ‘sale’ phenomenon continues. This is because marketers have realised that if they want to cater to the value-conscious consumers, they will have to increase the value of their products and services.

First Published: Mon, January 30 2012. 00:53 IST