The Institutional Angle in Marketing

A lot has been written, read, discussed and debated about how companies like CavinKare created an entire segment of consumers at the Bottom of the Pyramid (BoP), with innovations in product, packaging, promotion and pricing, especially in the FMCG sector. Several MNCs like Hindustan Unilever and established players tried to do the catching up game, but have not been very successful, or are forced to cater to the BoP segment at a loss simply to maintain a presence in the segment.

A paper by Angeli and Jaiswal (2013) analyses the reasons behind the not-so-successful attempts by the FMCG MNCs and interprets the findings based on institutional theory. MNCs are typically considered to have a competitive advantage by means of their presence and experience across various geographies. At the same time, MNCs also have to contend with their “foreignness” since quite often the corporate headquarters are situated in countries that are far from the markets where the game unfolds. MNCs are affected by “institutional dualism” as they try to gain internal as well as external legitimacy. Internal legitimacy refers to the company’s subunits conforming to the rules and regulations laid down by the parent company. External legitimacy refers to the responsibility of the company towards the society in which it operates.

Citing an example, the paper quotes a senior official of an MNC, stating that the MNC had to adhere to certain norms in manufacturing shampoos. While the domestic company used some cheap compounds for fragrances, to keep costs low, the MNC could not use the same since the corporate policy prohibited the use of those compounds for environmental reasons. As a consequence, the MNC could not come out with shampoos of the preferred fragrance and lost market share to the domestic company.

The paper is an engrossing and thought-provoking read. It highlights several interesting examples and focusses on the impact of the institutional paradigm on a company’s performance in the market, particularly the BoP segment. However, for this article we restrict to the internal legitimacy angle.

The dichotomy in this case is very clear. When a company’s subunit is adhering to its internal policies and being internally legitimate, it loses out on market share. The options that a marketer has in such situations are clear – lose market share or lose internal legitimacy.

Let us assume that the MNC’s subunit tries to breakaway with internal norms and, to continue with the cited example, starts using the banned compounds for achieving the required fragrances in the shampoos. It might so happen that the cheap compounds result in profitability and the subunit finds it tempting to use the same compound for shampoos meant for other segments. Soon, the compounds banned by the parent company, may be used across the shampoos category which could add a little to the profitability and also to market share.

It’s quite possible that media and social activism might one day bring out the fact the company is using harmful compounds in its products. Even as the company might then try to fight negative publicity, it would not have any logic to counter the fact. This would severely hurt its brand image, and might also give rise to suspicion about its brands in other categories. There is a strong possibility that consumers might switch to other brands and the company in question will lose market share. The loss in market share in segments where the company had a strong presence and image, would result in higher losses than a smaller dent in profitability that would arise by cross-subsidizing the brands in BoP segment.

Marketers are fully aware of the costs associated with attempts at short-term gains that might be detrimental in the long run. And it is precisely for resisting the gains-at-any-cost that institutions are put in place. While marketers ought to appreciate the limits imposed by institutional postures of internal and external legitimacy, evaluating a company purely in terms of profitability and market share might not always be right.

The writer of this article wishes to thank Prof. Anand Kumar Jaiswal, Professor in Marketing area at Indian Institute of Management, Ahmedabad for encouragement. The research paper referred to in this article:

Angeli, F., Jaiswal, A.K., Competitive Dynamics between MNCs and Domestic Companies at the Base of the Pyramid: An Institutional Perspective, Long Range Planning (2013), http://dx.doi.org/10.1016/j.lrp.2013.08.010

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Marketing Lessons from Pro Kabaddi League

Indian sports is going through some exciting times. In a country obsessed with cricket, it is heartening to see other sports getting its due recognition. Over the last few months, two sports have witnessed unprecedented attention in recent times – Football and Kabaddi.

Kabaddi has undergone an unprecedented image makeover thanks to Pro Kabaddi League (PKL). The marketing department of PKL had a mammoth task in hand which they delivered excellently.

 

Getting the 4 Ps right

More often than not, the success of a product lies in getting those basics right – Product, Place, Price and Promotion. Pro Kabaddi league got all four of them right. And here is how:

  1. Product – Prior to PKL, Kabaddi was considered a sport for the rural masses played by pehelwans in dusty arenas. It had little or no significance in the 21st century urban India. PKL launched Kabaddi in a totally new avatar. Instead of mud, it had synthetic floor. The rules of the game were modified to improve the viewer experience. The attribute which made PKL a great product was the way it was broadcasted. Multiple cameras, slow motion replays, commentary – both in Hindi and English, newly defined game statistics (Eg – number of successful raids) etc. totally redefined the viewership experience. All these factors came together to give the viewers an experience which was truly “new and improved”.1
  2. Place – Given that people had preconceived notions about kabaddi, it was important for PKL to expose people to the new avatar of kabaddi. It was necessary to induce a large scale “trial” of PKL as a product which offered entertainment. Thus, it was launched across multiple channels of STAR India. Apart from STAR Sports, it was also broadcasted on channels such as STAR Gold and STAR Utsav which are family entertainment channels. This way, PKL was able to target the consumers who do not consume sports as entertainment in their day to day lives.
  3. Price – As there are no direct costs associated with consumption of entertainment products on television, it is important to look at various perceived costs. Kabaddi has an inherent advantage over cricket here. Unlike a cricket match, a kabaddi match is of much shorter duration. This reduces the amount of time that a viewer needs to spend on a single match which in turn reduces the cost associated (in terms of time) with watching a kabaddi match.
  4. Promotion – Celebrity endorsement works in Indian market. Period. Pooling in celebrities such as Amitabh Bachchan, Sachin Tendulkar, Aamir Khan, Shah Rukh Khan, Aishwaya Rai and Abhishek Bachchan created curiosity in the minds of the Indian consumers which encouraged ‘trial’. ‘Repurchase’ was taken care of by the product quality.2                                                                 Source: http://www.thehansindia.com

 

 

The Bandwagon effect

Consumption of sports as entertainment has a bandwagon effect associated with it. The more the number of people viewing a sport, the higher is the likelihood of discussions on that sporting event happening within the community that the consumer lives in. This enhances the experience of a consumer even further. Thus, it is important that sports broadcaster get a critical mass of viewers who will increase the reach of the sport as they will have an incentive to do so. With the involvement of celebrities and the capturing of prime airtime on multiple Star Channels, Pro Kabaddi League was able to capture the attention of the critical mass. After it reached the influencers in the community, Word-of-mouth played a crucial role in helping it increase its reach substantially.

 

 

Time Time Time  

If location is what makes or breaks a real estate business, it is “Time” which rules the roost in broadcasting. PKL made some smart moves with regard to time. They launched the league during an away series of Indian cricket team. This ensured that they were not competing with cricket for eyeballs. Just like IPL, PKL also got over in a short span on time. PKL took place over 37 days which ensured that the excitement around the league remained high throughout the duration of the event and the viewer’s didn’t feel fatigued as is often the case with traditional sporting leagues in India such as I-League (football).3

 

Like always, the football world cup brought the Indians together in their four yearly lamentation about the dire state of football in India. This year, however, the Indian footballing fraternity has something to cheer about with the launch of Indian Super League (ISL) and the IPLesque glamour attached with it.

It will   be interesting to see whether the marketing folks at ISL get it right.