Saturday, September 7, 2013

Challenge of growth in mature markets-Series 3 (Advertisements & Communication)

Advertisements of an product may turn out to be barrier for growth if the process of communication is not clear or to the point of using the product brand. For example there is an advertisement of a Jam then the communication should be to consume more of the jam which would spook up the demand of the brand and consumption. In an research it has been found that spending more on innovation rather than advertisements would lead to growth. In mature markets innovation and communication plays a significant role for a product to find a growth. In mature markets value proposition plays vital role. Price competition is based upon proper cost bench marking.

If cost bench marking is not made then innovation cost and other relevant cost would turn out to be an burden for the product which might lead the product open to the price war. In other words the product gets exposed to the price competition. Markets like India we need price to be designed based on target costing since loyalty of the customers changes with price competition. But in India I find that consumer behavior changes from place to place (example villages and cities) hence product pricing are so fragmented followed with content size. Advertisements have also taken a radical change where most of the concepts of advertisements are being focused towards getting them placed in to the consumption pattern of common people of India or classified across the client segment. During years of economic growth we find prices to scale up in India since consumption takes new height and same price comes down with different sets of content size during economic down turn in India. This is mainly being done to save the brand and its addicted consumers in India. Price reductions show that the brand has to stay within the core of the market if it wants to continue.

 Across product segments and geographies segment we find these type of differences. This was discovered by European car manufacturers after first the Japanese and now the Korean invasion: they forced all car OEM (original equipment manufacturers) suppliers to reduce their prices by 20 per cent. Portable computer manufacturers also know that they must both innovate and reduce their prices. Indeed, the price premium that pays for the superior added value is a differential concept. In various markets it has been found that price helps to categories and classifies the products in matured markets. But once the price rises above the average consumer consumption pattern then the volume start declining and product rediscovers its brand value and then battles for getting into the niche product segment. Price is also a type of communication which creates brand value for the product and classifies the same into consumer market segment.  To save the brand of an product it is prudent to make the product economically impossible for them to enter the market. 

The cost of the factors of production is the most important, which leads to a long lasting competitive advantage. Hence I was repeatedly marking that cost bench marking is the key to success of an brand. Innovation and Domination through image and communication is the another key pillar which creates entry barriers. Another segment which helps to create barriers to entry of new players is Controlling distribution is also a major handicap for new entrants.  In a market like India where basic infrastructure is of very weak an efficient distribution system would provide in my research I have found that when a product launching planning is being made simultaneously entry of competitors should be designed and the same should be communicated to every angles of the company. This is a reverse engineering process through which the competitor analysis and strategies the same is being executed. This is the practical way of communicating of the market and competition analysis.

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