Marketing terms Simplified.......

We have been hearing the terms Market Segmentation, Targeting and Positioning quite often during the MBA course. However I was often looking for a simplistic manner in which these terms could be explained. While reading the book on Consumer Behaviour by Schiffman and Kanuk I was happy to learn these terms in there simplest form. Lets go through the definitions once more

Market Segmentation: It is the process of dividing a market into subsets of consumers with common needs or characteristics. Because most companies have limited resources, few companies can pursue all of the market segments identified and hence we come to the second term -Targeting.

Market Targeting: It is the selection of one or more of the segments identified for the company to pursue.

Positioning: It refers to the development of a distinct image for the product or service in the mind of the consumer, an image that will differentiate the offering from competing ones and squarely communicate to the target audience that the particular product or service will fulfill their needs better than competing brands. Successful positioning centers around two key principles: First, communicating the benefits that the product will provide rather than the product features. As one marketing sage pointed out:".....consumers do not buy drill bits- they buy ways to make holes". Second, because there are many similar products in the marketplace, an effective positioning strategy must develop and communicate a Unique selling proposition- a distinct benefit or point of difference. USP is also called "Value Proposition" in today's marketing world.

Although after reading this it may sound very obvious about the way these terms are defined however the reality is; it is still one of the major challenges for any marketer to segment the market and target a particular segment with a specific USP.

AIM flag flying in Table Tennis tournament at IIMA

I shall start with the good news first. Today Me and Nirav have entered into the Quarter-finals of Intra-IIMA table tennis tournament here. If we win 2 more matches we would play against each other in the finals here. It would be an irony that two students from AIM would make it to the finals here. Apparently IIMA has 660 students and 68 students are from IIMA from the total list of 70 players. Now its 8/70 left and me and Nirav are two out of those eight :-).

Yesterday we also visited the Garbas at NID (National Institute of Design) along with the other ISEP students and IIMA students. Although the music and the crowd was not up to expectations (NID is known for its sophisticated student community); we enjoyed dancing with the foreign students and the IIMA community. It was fun teaching foreign students some Garba steps and the enthusiasm was clearly visible once they got hooked to the music. However when I came back to the dorm around 1:30 am I was told by my Marketing research group that I would be presenting the case for tomorrow. It was tough to prepare on such a short notice but that being my first presentation here, I gleefully accepted it. The case was about Boston's fight against young drug addicts. With the number of young drug users increasing with each passing day, Boston's mayor was worried and hence gave a project to 5 students of Harvard MBA to come out with a plan as to how should he send an effective message to the students and what medium should he use. They were given a time frame of 5 months and a budget of US$20,000. Out of the three options i.e surveys, FGD and Depth interviews the student decided to conduct FGD (total 11) with the students randomly selected from the community school nearby, in the age group of 10-13 and 14-18 as they represented the primary group that was into drugs. However after four months of research they were not sure with the results and one of the MBA Grad even thought he already knew all the information they had collected through FGD. The insight with regards to this case was that FGD's are used generally for generating ideas. FGD's are exploratory in nature while surveys and experimentation are conclusive in nature. I am sharing the table of Qualitative and Quantitative research here.

	Qualitative (EX: Focus Groups, Depth interviews, Projective Techniques)	Quantitative (Ex: Surveys )
Objective	To gain a qualitative understanding of the underlying reasons and motivations	To quantify the data and generalize the results from the sample to the population of interest.
Sample	Small number of non-representative cases	Large number of representative cases.
Data Collection	Unstructured	Structured
Data Analysis	Non statistical	Statistical
Outcome	Develop an initial understanding	Recommend a final course of Action

Thus it is clear that FGD can not help you decide on a course of action. My recommendation was to Conduct the FGD and get some testable propositions on the basis of the insights. Finally decide the course of action on the basis of survey questionnaires. Qualitative research should always precede Quantitative research. That was all for my presentation. I am going for Garba to Karnavati club which is one of the most happening Garba events here.

Day-12 and 13

The days have started getting smaller and the nights longer. Although I generally have 2 and at most 3 sessions in a day but the assignments and the work each session demands, takes me almost the entire night to complete. Generally I sleep at 3 30 am after preparing for various presentations, assignments etc etc etc. You are suppose to have a group for every subject and almost in each session you have to be prepared with some or the other submission. For me the situation had become so complex (I have 6 groups) some time back that I use to talk to a group member about a subject just to realize that he was actually in some other group with me. However the things are getting better as now I am able to relate my group members with the corresponding subject. Time for insights I got in the two days

Day-12

I had two sessions on the day. In the morning I had Strategic Financial Management where we discussed the case of AJC (Australian Japan Cable). This case was related to three companies who wanted to co-operate in the project to lay underwater broadband cable between east coast of Australia to Japan via Guam where it will link to Asian and other networks in the region. They had to do this early because demand for broadband capacity was growing in Australia in the coming three years as the supply would fall short of demand. However with the cable technology and corresponding price declines of 25% each year made commitment to such a large investment of $520 Mn a risky proposition. Also the company had to decide on the following issues as all the 3 companies were equity partners.

- Ownership structure (how many sponsors and which ones?)

-Capital structure (project vs. corporate finance, leverage, type of debt, etc.)

- Organizational structure

-Board structure (how many directors? Should they be insiders or outsiders?)

-Management compensation.

This case highlighted the importance for finding the right partners for a project which is risky in nature and how to deal with above mentioned factors before the project is started so that there are no hiccups once we embark on the project.

The session in the afternoon was on Consumer behaviour where the case was about Olmec toys. Yla Eason, an African American, wanted to come up with ethnically correct toys as her 3 year old child was not able to connect with the white He-man. She decided to come up with new toys after conducting interviews with parents and launched Olmec toys. However the question was that the retailers were not open to accommodate the toys as they thought that there was no need for such toys in the market. We discussed the same case on the next day. The question was what should be the strategy for Olmec toys to make retailers understand that a market existed for such products and how can she succeed in selling the toys.

Day-13

In the morning we had Strategic Financial Management and the case was Airbus A3XX. Airbus wanted to move into the Very large aircraft (VLA >500 passenger) segment as Boeing had a monopoly in this segment. However the initial R&D costs were very high and the demand for such planes was unpredictable. Although Airbus believed that there was sufficient demand for VLA aircraf in the market due to its superior economies and predicted high congestion in the various airports in the future. We had to calculate the number of planes Airbus had to sell till 2019 to justify the high initial expenditure. I did the sensitivity analysis for various operating margins (15% to 30%) that Airbus would need to have to go ahead with the project with a manufacturing capacity of 48 planes/year. Or if it decides to increase the capacity what should be the number of planes it should sell at a moderate operating margin of 20%. I am sharing the analysis here.

Sensitivity Analysis-1	Operating Margins	Planes sold/year	NPV	Initial Order Book
Case-1	15%	48	-4211	54
Case-2	20%	48	-2838	54
Case-3	25%	48	-1465	54
Case-4	30%	48	-93	54
Case-5	30.35%	48	3	54
Sensitivity Analysis-2	Operating Margins	Planes sold/year	NPV	Initial Order Book
Case-1	20%	48	-2838	54
Case-2	20%	60	-1701	54
Case-3	20%	72	-564	54
Case-4	20%	84	573	54
Case-5	20%	78	5	54

As seen above it was not advisable to go ahead with the project as the NPV is very negative unless you are able to achieve a extremely difficult operating margin of 30% or able to manufacture and sell 78 planes in a year. However the important insight I got from the Porf was that we did not evaluate the tax shield which the high R&D costs would have as they would be expensed in the year of development. This would help the company to show losses and hence save the taxes. After incorporating this the breakeven comes around 44 planes/year which is within its manufacturing capacity at 25% operating margin.

The next two sessions were on M&A and I was really overwhelmed by the knowledge of the professor on the subject. I came to know the difference between the terms acquisition and merger. Although people use these terms interchangeably, however there is a difference in them. When a company acquires a company it becomes its subsidiary and its balance sheet is made separately. It has no right on the cash flows of the company unless the acquired company pays dividend to the parent company which is not desirable due to double taxation. Thus in India generally companies acquire the company and than merge it. For example Reliance Communication is a result of merger of 9 of its subsidiaries. RPL was started as a new project and now it is supposed to be merged with Reliance Industries. This strategy is used extensively by Reliance to take advantage of the benefits related to new projects and then when the projects are completed take advantage of the cash flows of the subsidiary so that there is no double taxation. This also helps unlock value for shareholders.

Day-11: Some excerpts from the McKinsey Placement talk for Summer Internships.

Before I start with McKinsey Summer internship pitch, I would like to share one of the most fascinating event last night. IIM-A has its own Music Club and they keep on organizing some Programs as and when time permits them. Last night was a live performance of the Music band with a mix of Soft Rock, A.R Rehman and Mohammad Rafi songs. Sounds a totally unusual mix but that's what made it worth attending. The band was totally professional and it was as good as it can get. I was able to see some versatile students who were equally talented in each attribute. They could play drums, guitar and sing at the same time. It was difficult for me to judge what was the best. It was an hour of fun and masti. Then Me and Nirav went for a game of TT and this time the score line read 9-0. I was able to raise the bar of my game after the ignominy I faced the last time we played against each other. I came back around 12 and made the PPT for the presentation for Consumer based business strategy today on the topic Providing and Communicating value. My part was to discuss how advertising helps communicate value and what makes it ineffective. The examples given in the reading were of Volvo, Nike and Nissan. I managed to download the advertisements from the net and incorporated them in my presentation. This would have been the first time in this term that someone would had used video for the presentation however most of the time was spent on discussing Southwest Airlines case and what option should it go for out of the 3 options available. I think we have already discuss the case at AIM and so wont be going into details of the case.

Coming back to Mc Kinsey, I saw the ad on the notice board around 4 30 pm about McKinsey coming for a pitch for the futchas(firs year students) here for summers at 5 30 pm. Obviously with my interest in consulting I was not going to miss it. In the haste I was not able to take the permission from the placement committee here but they were kind enough to allow me to sit for the discussion. The placement committee has strict rules here and they operate by these rules. I was able to learn the various positions where a graduate MBA can find himself in consulting when he joins a firm like McKinsey. Mr. Prashant Gupta who is a partner at McKinsey was very frank in sharing how tough the job of a consultant is and what McKinsey does to help you manage the stress while you are on your job. They have a 60 hr work week which does not include the traveling. You are supposed to be traveling extensively as a consultant and should be prepared to stay away from home most of the time. The most impressive thing about McKinsey is that it encourages the new employees to have experience in various sectors and it is only after a year or two that the employees can choose either to work in a similar way or to focus on a particular sector. When asked about the the things that differentiates McKinsey from the rest, he spoke about two particular things:

1. Value system at McKinsey and.

2. The Salaries.

Overall the entire session was extremely interesting and enlightening. It lasted for more than two hours but I dint even notice that so much time has passed by. This session has added to my passion towards joining a Consultancy firm. Whether it is McKinsey or something else is to be seen. I hope Marcus can come up with some Miracle to bring McKinsey to AIM during the placement season.

My Interview to IIMA for media cell article....

IIMA media group wanted to take interview of the students coming for ISEP. This may be published in one of the leading newpaper here. I participated in it. Here are the questions I was asked and my responses to them...

Why did you decide to pursue your exchange programme in India? *

I completed my education in India and worked with Essar Steel for 4 years before I decided to pursue MBA with Asian Institute of Management Philippines, which is one of the top ranked B-School in the Asia Pacific region. However, given a choice, I want to work in India again after my MBA. Being an emerging country with high economic growth, India has immense opportunities in store for MBA Graduates. My objective for pursuing MBA at Asian Institute of Management was to have a global perspective which I can bring with me when I work here in India. I would be graduating in December 2009 and would like to understand the market dynamics here in the 3 months before I apply for a job where I can implement the learnings during the MBA course to the best of my potential. This is the reason I chose to have my exchange programme in India.

Why did you choose IIMA? *

Once I decided to pursue exchange in India, IIMA was an obvious choice. There is no doubt in my mind that it is the Best B School in India. I knew coming to IIMA would give me an opportunity to study with the cream of India and would help me network with the students here who are tagged to be the future business leaders of the country. Although it was not easy to opt for IIMA as one had to be in the top 10% of the batch at AIM, but the efforts I put during my MBA course at AIM paid huge dividends and I finally got the opportunity to come to IIMA.

How has your experience in India been?

Having completed my entire education in Gujarat had given me the chance to travel parts of India generally and Gujarat particularly. However India is so rich in diversity with many cultures and beautiful places that it is almost impossible to experience India entirely. I have made friends from IIMA and other students who have come for exchange here and we have decided to explore as much places as we can whenever the hectic schedule at IIMA permits us.

How has your experience in IIMA been?

The experience at IIMA has been very enriching. Although it was not so difficult to adapt to the work load here as I have been habituated to it at AIM, but adapting to the new environment in terms of faculty and pedagogy was a bit demanding initially. I should thank the students at IIMA particularly who have helped me overcome any difficulty I had. They have been very approachable and have pro-actively tried to make us feel comfortable. There are enough ways in which you can be relieved of your stress as the environment at IIMA is very dynamic. You can play sports, get involved in some groups or just share entertainment material like songs and movies with the entire community whenever you want. Plus the best part at IIMA is the availability of good Indian food which I was largely missing at my institute.

How do you rate the different characteristics of IIMA?

As I have already mentioned the students here have been very approachable and helpful. Since day-1 they have made efforts to make me feel at home. I would not comment much on the quality of students as it is a well known fact how rigorous the entrance exam(CAT) and demanding the course structure at IIMA is. The facilities are quite good here with various recreational activities being available in the campus itself. The internet and the library facilities are world class. However with the soaring temperatures in Ahmedabad I would have liked if the institute can provide Air-Conditioners in the dorms. This would really make the life of students easy during the summers. Last but not the least the faculty here is World Class and it has been a great experience to learn from such faculty who is an expert in their domain.

What do you think makes IIMA special?

The one thing that I felt makes IIMA special is the tradition prevalent here and the camaraderie shared among the students. The juniors and seniors form a very good bond with each helping the other in whatever manner they can. Also most of the activities done inside the Campus are driven by students and I can clearly see how efficient a B School can be when the student community is highly empowered.

What is the thing about IIMA that you like the most? Dislike the most?

The students and the faculty is something I like the most here. I would not say the thing I dislike about IIMA but it’s the thing I dislike about Ahmedabad in general i.e the heat in Ahmedabad (even now it is quite hot). I would be very happy if the institute can provide some relief to the students in regard to this problem..

Day-9 and 10

Finally my stay at IIMA has reached two figures today. I was not able to write the blog yesterday as we had gone out for shopping and eating at a very happening place here at Ahmedabad known as CG road. After coming back Me and Nirav went for a game of TT. I had decided I wont be losing to Nirav anymore but fortunately for him we had too many players playing there and hence had to play doubles. FYI there is an Intra IIMA TT tournament starting today and we both have taken parts in singles and together we would be playing doubles as well. So it would be AIM Vs IIMA from tomorrow. I have been placed in the first half of the group table and Nirav in the second half (These guys want me and Nirav to play finals in the singles :-))))))). Now some serious stuff

Day-9

I had 3 lectures yesterday(1 session of MRIS(marketing research) and 2 session of IMEC(Internet marketing)). In MRIS we discussed the case of Kendal vetmat. Kendal was company which manufactured products for the dairy segment and the agri segment. However with its dairy segment not doing well it wanted to venture into new market. It found a new partner in American Inka whose product was a mat which was used by veterinarians for keeping the animals patients clean. They sold this product in Europe. John Buckingham was a manager at Kendal and he was sure that 24000 Veterinarian doctors in US would also like this product and wanted to launch this product in US. Currently 92% doctors in US were using paper as it was very cheap to use. John wanted a marketing research agency to tell him how should he market his product, at what price and how does he position it. However the Marketing research conducted a usage survey with 59 doctors in the whole US and concluded that there were some cleaning problems with the present product and very few doctors are interested in buying the Vetmat at the current price. They recommended not to go ahead with the product launch. This created a dilemma for John as he was previously very sure about the product success. If he goes ahead with the launch and the product fails he could be in trouble as he already knew the results of the marketing research. If he does not launch the product he would not be able to meet his targets for the year and the much optimism and excitement he shown earlier to his boss would go down the drain. The class discussed the flaws in the Marketing research process and finally most of us concluded that John should go ahead with the product. The Prof actually said that the product was launched in reality and was a reasonable success. The learning was that every Marketing research study should be studied well before believing it blindly. The decision maker should be aware of the methodology and should know the flaws with the Marketing research. Also the problem definition should be very clear before we conduct the study. John wanted the agency to tell him how he should market and position the product. He never asked the research team whether he should launch the product or not. Thus both the decision maker and the survey agency should agree on the problem strongly before conducting a Market Research.

The next 2 sessions were of IMEC and the Prof taught us more about Internet technology. Not much to discuss on this.

Day-10

Today also I had same classes and in MRIS we discussed the problem definition for a Mobile Company in Geneva. One of the MBA student who was doing a research for the company had found from a survey in UK that not many people understand the different tariffs of Mobile companies, the difference in different mobile brands and the technology that they adopt. He wanted to conduct a Marketing Research for a mobile company in Geneva and the problem was how to define the problem. All groups of MRIS are suppose to come up with a questionnaire tomorrow regarding the survey and define the problem for the Management team and for the Marketing Research team.

IMEC was again some lecture on Internet and Mobile technology and there was no case discussion.

Now I would be going for my TT practice as I want to at least reach the Semis......

Day-8:Nirav Turned the Tables today......

The day started with Strategic Financial Management where we discussed Calpine Corporation. Calpine wanted to grow rapidly in the power sector by investing in new plants. It had 3 options for raising funds.

1.Project Finance(Making a special Purpose Vehicle for each project and borrowing from bank)

2.Corporate Finance(raising money from the bond market by issuing a fixed income bond)

3.Revolving Finance(Having a revolving finance arrangement with a bank)

We discussed the advantages and disadvantages with each of the options and also calculated the cost of borrowing in all the 3 options. We finally came to a conclusion that Revolving Finance option was the best option for Calpine at that point of time as the Project Finance had many restrictive covenants attached to it. This could hamper its strategic objective of rapidly growing in the power sector of US. Also as the Bond rating of Calpine Corporation was BB there was high risk of it being downgraded if it issued a bond. Revolving Finance was very attractive as it has the qualities of both Project Finance as well as Corporate Finance. Like Project Finance it can avail the loan from the bank for a portfolio of projects(rather than 1 project) and can re-borrow again once it had re-payed the previous loan to fund new projects. Also like Corporate Finance there are no restrictive covenants which allowed Calpine Corporation to continue with its strategy.

The next session was on Consumer Behavior and I was really engrossed in the discussion which we left yesterday on the Retail sector of India where the players were Subhiksha, Reliance Fresh, Future Group's Fair price stores, RPG Groups Spencer Retail. We discussed the positioning of each of these players in the retail sector and the strategy followed by them to support their positioning. We also concluded how Subhiksha and Spencer failed to achieve its objective as they did not target any particular Market segment and did not communicate any strong value proposition through which it can have loyal customers. A table to give you a brief idea about the course is shown below.

After the class I and Nirav decided to play TT. I am happy to share that Nirav turned the tables today and won 2 games (the final score was 4-2). However the most enjoyable moment for Nirav and disappointing for me is when I challenged Nirav and told him that I shall beat him under 10. I was doing very well in the first half of the game and was leading 11-3. But Nirav took away the match from there on to finally win it 21-17. He not only crossed the 10 mark but also beat me. I actually learnt a lesson that there is a thin line between attitude and arrogance which I crossed today and as a result paid the price. But this has also instigated me to play well as now I have a new challenge which was largely missing before. I would update you with the scores of our game at regular intervals. Nirav if you are reading this please prove to me it was not a flash in the pan.

Retail Store	Positioning	Strategy to support the Value Proposition
Subhiksha	“Shopping that allows the consukmers to save so that they can spend the savings elsewhere to improve quality of life”	· Prices that is lower than the Kirana stores with whom they were competing initially. · No frills shopping and distributing the margins to the consumers. · Comparision of prices and the final savings shown with every bill. · Store personnels helping consumers with their buying decisions that increase their savings.
Reliance Fresh	Positioned as a store primarily providing fresh vegetables at much lower prices as compared to the local hand-cart or small shop vendor.	· Buying vegetables directly from farmers and selling them in the retail store making the middlemen redundant. · Products limited only to food and convenience. · Only fresh vegetables and fruits kept. The rest of the vegetables were sold to vendors or consumers at a very low price at the end of the day. · Each store having catchment area of 2 kms thereby positioning itself as a substitute of hand-cart or small shop vendors.
Futures FP	Postitioned itself as a ‘frugal’ store that provided the best ‘value for money’	· Prices 10% lower than competitors in National brands and 20% lower in Private brand. · Shops size that were small and resemebled ration shops. · Merchandize stocked on the floor or on purely functional shelves in the same cartons in which they arrived. · Charging consumers for plastic bags . · Tagline”Saare Jahan se Saasta”. · Stocking only handful of brands.
Spencers	Positioned itself as an upscale Retail store catering towards the need of lifestyle oriented consumers who were wiling to pay extra for Superior quality.	· Having international brands with high quality. · Prices that are higher than other retail stores but are cheaper than small retail shops keeping the same brands. · Trendy and sophisticated stores with all the amenities like AC, Wash rooms, and Drinking water facillities. · Charging Parking fees that makes people from low income group reluctant to shop. · Having upscale eating and beverages joints that adds to the shopping experience of the consumer.