Customer centricity is a much used and abused word. It covers a wide space. It is not a marketing buzz word. It is something that I have used all my life to drive profit and growth. It is based on the belief that if you want to get value from a customer, you must first create value for the customer.
I was making a presentation on customer centricity to a team of private equity leaders. One of the questions that came up was: Which is more important—customer centricity or focusing on the bottom line? I believe that the two are inseparable. If you want to focus on the bottom line, then you need customer at the centre of whatever you are doing.
Let me focus on three parts of customer centricity:
1) Product Innovation
2) Communication and engagement: How do we do that in today’s digital environment?
3) Reimaging marketing for Omni channel.
Product Innovation: The NASA Story
Open source innovation has become popular today. It is also called user-led innovation and crowdsourcing. NASA’s International Space Station (ISS) is powered by the sun and has solar panels. As the station orbits, some panels face the sunlight and others are in the shadow. NASA engineers wanted to develop a complex algorithm to organize the orbit in such a manner that shadowing is minimised and maximum power is generated even in the most difficult orbital conditions.
In 2013, NASA launched a public contest to solve this problem. They had a prize money which was initially $30,000. It was really strange because NASA has the best engineers in the world and huge budgets. When the contest was launched, there was a fair bit of scepticism amongst NASA engineers as well, if this would yield any output at all.
Though user innovation has been around for a long time, it accelerated in the last decade because of the advances in communication technologies.
By the time the contest finished, they had 459 competitors and 2185 solutions. The amazing thing is that half the solutions performed as well or better than NASA’s own solutions. The total cost to NASA for this was an unbelievable $80,000. That’s not even a blip on the NASA’s overall budget and it included the $40,450 paid as the final challenge award. This brings out the tremendous power of open innovation.
User innovation is not a new concept. Adam Smith, the economist in his ‘Wealth of Nations’ written almost 300 years ago, talked about the role that workers had in redesigning manufacturing processes, because they understood their job better. Eric von Hippel, American economist from MIT Sloan School of Management, has been doing a great work on user-centric innovation. In 2005, he published a book called, ‘Democratizing Innovation.’ He says that user innovation is a very powerful phenomenon and that it is both a rival to and a feedstock for manufacturer innovation.
Though user innovation has been around for a long time, it accelerated in the last decade because of the advances in communication technologies. It means that users can collaborate amongst themselves and with experts.
Sunil Gupta, in his book, ‘Driving Digital Strategy (2018),’ says that most consumers modify products when they use them, to suit their specific applications. If a manufacturer understands what modifications customers make and why, then the manufacturer can get great ideas. For instance, like what we did in Tata Tea; Mr Sushant Dash, who played a key role in that project, will share his insights (Read ‘The Making of Tata Tea Gold: A Case Study in Product Innovation’ by Mr Sushant Dash, which appears separately in this article).
• Consumers can be a bigger source of ideas. So, get a deep understanding of how consumers use and modify your products.
• The more you involve customers in the development process, the greater the chances of commercial success.
• As product life cycles are getting shorter and development resources become scarce, internal innovation is not enough.
• User-led innovation is going to be critical to support growth expectations.
• User-led innovation is not the sole preserve of digital platforms. It has yielded powerful results across a wide range of categories, whether you take clothing, automobiles, home products and B2B Industries in as wide a range as oil refining, software and chemicals.
Innovation by rapid experimentation is also picking up. The benefits of early stage learning and rapid experimentation are clear to everyone. Yet, in the manufacturing sector, I have not seen too many cases of using things like additive manufacturing, which is 3D printing, for rapid experimentation. Before these technology tools were available, we had a heavy reliance on concept testing. At best, we could consumer check a few options and by the time we got the results for that, we were more or less committed to the solution. Today marketers have the opportunity of using technology for doing rapid experimentation and thereby cutting down costs and making innovation much more real.
Communication & Engagement: The ZooZoo Way
What ads say and what consumers hear are quite different. There is a lot of talk about digital marketing. However, the click-through rate of ads remains less than 1%. A key question arises: How can businesses reach out to this skip-ad generation? Clearly, the brand-push is moving to consumer-pull. The consumer will pull only what is exciting and informative.
What ads say and what consumers hear are quite different. There is a lot of talk about digital marketing. However, the click-through rate of ads remains less than 1%. A key question arises: How can businesses reach out to this skip-ad generation?
We launched the Vodafone ZooZoo ad around 2008. Consumers loved this ad. The egg-headed creatures became the most loved characters in advertising over the next six or seven years. Originally it was designed for IPL. We were the co-sponsors for the IPL, right from the beginning. With IPL spread over 50 days and 60 matches, we do 300 ads. It has a viewership of 400 million people of which 150 million who are the core viewers keep coming match after match. If you run the same ad again and again, it becomes tedious and boring for them.
In the ZooZoo campaign, we did two new executions every week. In the semis and finals, we would run all the ads together. ZooZoos became iconic and viral. We were able to leverage them across all channels. We had 20 million followers on Facebook. The Hindu BusinessLine reported that the ZooZoos stole the thunder in the IPL. ZooZoos became part of the conversations. Thus, if you want to break through the clutter and the skip-ad generation, you need to do breakthrough advertising.
L’Oreal’s Dermablend ad uploaded on YouTube got 25 million views. To go viral, you have to do something unusual and take some risk which is over-rated at times.
In product demos, Home Depot collected 4 million views on how-to videos. Providing useful information is one way of reaching out to this generation. Creating communities and advocacies is another option. Chalk paint brand by Annie Sloan engages ‘furniture distressing’ enthusiasts across platforms. If you have a dull product like soap, you can broaden your message. Dove’s ‘real beauty campaign’ goes beyond product and category to create a conversation on how women and society view beauty. Though it looks simple, such a campaign is not that easy. The caveat is that it has to be real, consistent and true to your brand. It takes lot of time.
There are many who tried at this and failed. Pepsi in 2010 put up 20 million dollars and invited ideas from people for doing social good. Many ideas that came had nothing to do with Pepsi. Some like reducing obesity were in conflict with Pepsi’s selling. Finally, the venture came to nothing. Moment-based marketing is another big thing which is coming up. Red Roof Inn has many hotels next to airports. They track flight cancellations and sends messages to stranded passengers on availability of rooms using geo-targeting. They have been able to drive up the traffic by 70%. This can also be done by digital tracking. For instance, if somebody wants to buy a car, they are most active in searches three months before the purchase. The idea is: Can you target the customer at the right moment?
With mobile phones, 92% of the time is spent on apps. So what can be done to run ads on apps? The first is banner ads. If you want to avoid beaming an irritating ad, you need to move to storytelling and storymaking and creating communities.
The Making of Tata Tea Gold: A Case Study in Product Innovation
Tata Tea started in the early 80s as a plantation company. The management realised that real money was not so much in the plantation business but in the brands and packaging part. So they forward integrated and launched brands in 1985.
There were two sets of brands that the company had. One was Tata Tea, which is now called Tata Tea Premium, which was a national brand. We also had specific brands in the South catering to the regional preferences like Kannan Devan in Kerala, Chakra in Tamil Nadu and Gemini in AP. The launch of the Tata Tea brand by itself was quite innovative and in many ways, is a great story of consumer centricity.
Tata Tea realised that one of the most important things the consumer wanted was freshness in the tea and that was something the consumer was not getting then. So we set about solving it and created some of the competencies on which the brand grew.
The Four Core Competencies
1) Plantation sourcing was a big differentiator from the competition because Tata Tea brands were sourced from their own gardens. They were grown and packed there. So the freshness story was amplified.
2) Tata Tea was one of the first brands that got into polypacks. It was then seen as a major innovation (it has now been phased out due to environmental issues) and a big differentiator in retaining freshness as compared to the carton packs.
3) Tata Tea name was a strong brand.
4) Because of the plantation background, they had a good understanding of blending teas and the consumer requirements of each region.
Thanks to these core competencies, Tata Tea brand had grown from 1985 to late 90s. The company grew in double-digit both top-line and bottom-line, and took on competition quite robustly. However, by late 90s, there was a glut in the commodity market. Tea was available quite cheaply because of the Kenyan and Sri Lankan tea imports. Our export market nearly collapsed. Even within the domestic scenario, due to better crop production facilities, there was much larger production and hence a glut.
The challenge is that tea is a habit like reading a newspaper and people are averse to changing their habits. Since the early 30s when the category took off, there were just two or three big innovations.
The polypack was no more a differentiator as anyone could do that even at the back of their houses at a low cost. The strong brands gave way to a proliferation of local brands. Every city had six or seven of these brands. They offered high discounts for both the trade and the consumer legs, and the brand name did not stand for much at that point of time.
Obviously, the company was on the defensive. That was also the time some of us like Vivek Mathur and I joined the company in early 2001. It was the first time that the company reported decline in growth of the brand. For 16 years, they had grown in double digits. It was a huge shock to the system. They launched brands like Agni to take on the local brands.
HUL, the other competition at a national level, faced the same issues with their brands. To counter the local brands, they launched A1. However, the low price, mass brands did not help the company because the locals did a better job. So the only option for us to be on the offensive was to do innovation.
We did incremental innovation by modernising the packaging and redesigning the packaging graphics, bringing in both emotional elements and functional benefits in terms of body and mind refreshment. We put more money to build brand equity.
We were lucky in roping in a young tennis player for our new advertisement. It so happened that a week later, the player reached the quarter finals in the Australian Open to take on Serena Williams. It gave us a lot of publicity. The player was Sania Mirza, our brand ambassador.
Such incremental innovation is very important and we as marketers need to do it regularly. But it has limitations. It helped us to stabilise the business and stop the decline. But to get back to high growth rates, we needed some disruptive innovation.
The challenge is that tea is a habit like reading a newspaper and people are averse to changing their habits. Since the early 30s when the category took off, there were just two or three big innovations. Tea was not a category known for innovation.
Looking for Disruptive Innovation
When we studied the way consumers were using tea, we realised that one of the prevalent habits in households mainly in the northeast was that they mixed two kinds of tea—one, the Assam tea or CTC and the Darjeeling tea or longleaf. They believed that Assam tea gave them strength and taste while the longleaf or the Darjeeling variety gave them the aroma and flavour. They mixed them in different ratios of 70/30, 80/20 or 90/10. This gave us the idea for our disruptive innovation. In a couple of centres starting from Delhi, we used a method called sequential recycling and experimented with various components of Assam and Darjeeling tea. We invited housewives, set up kitchens for them and provided them with utensils, milk, sugar and water to replicate their daily preparation of tea in their houses. We encouraged them to try different blends and give feedback in real-time if it met their expectation. We had our blenders who were then and there making changes in the components.
We finally arrived at the right blend from this user led innovation and settled at 15% long leaf Darjeeling orthodox and 85% high grade Assam CTC.
We got lot of insights from this experience. We understood that there are three or four critical things at getting it right. We understood that the longleaf is important not just for the aroma or the flavour that comes through but the visual clue was equally important. We also learnt that aroma is just an indicator of great taste and it is not an end benefit.
In the user-led innovation, we had long leaves which were golden or green or greenish. When one opened the pack, one immediately realised that this tea was very different from all teas they had used in the past. That is how we launched Tata Tea Gold, a premium blend completely developed by the consumer. This was the first launch that the company did in 15 years.
The communication depended on which school of advertising you belonged to—Tata or HUL. The Tata School will have its ad themed around a single girl dancing in the garden and HUL School will pitch it around a housewife in a social setting. But for the first time, we changed the category cues and came out with an ad in a social setting on the theme, ‘You’ll regret saying no,’ to showcase Tata Tea Gold.
We did sales 3x the target. We launched it in October 2013. We were out of tea by the following Feb or March, though it was off season. We priced at 15% premium and managed a gross margin which was 30% higher. This brand has gone from strength to strength and today it is one of the largest brands in our portfolio. It is a huge brand upwards of 500 crores. We proved that we could create a larger portfolio using innovation as a way to conduct business within the company. It showed results over a period of time. In 2007, we became volume leaders overtaking HUL and in 2011-2012, we became value leaders.
Customer-Centricity Across the Buying Journey: Reimagining Marketing for Omnichannel
The customer today, in search of the product, jumps across physical and digital channels. So how can we reimagine our marketing for this Omni-channel? Let me focus on three areas:
• Our Opportunity
• Customer Journey
• The Future
It takes a crisis to change our mindset. Covid-19 has been a perfect storm of sorts for us to embrace digital. Satya Nadella said during our Quarter 2 results, “We have seen two years’ worth of digital transformation in two months.” In the seven months of the pandemic, we have actually achieved 10 years of growth in digital. The reason for this is that we are living in a world where we are digitally and socially connected.
We need to get into the minds of the shoppers to find out their habits. We are going into an era where there will be far more online shopping, and mobile is going to be the centre of gravity. In the next four years, in India, we are going to have 400 million digital wires. This is a huge opportunity.
The old customer model was about mass production and mass communication. Today the consumer is the channel. The consumer is on a connected journey always. They move between online and offline constantly. These connections create a network effect. For this, you have to keep the customer at the centre of everything that you do.
If people cannot go to the store, then you have to bring the store to the home. We can use the concept of video call and extend it to shopping.
E-Commerce has done a great job so far. But what is important is how to deliver a great experience online. For this to happen, you have to eliminate points of friction and interruptions and make it easy for customers to buy. You have to walk in the shoes of the customer.
• Too many choices
• You cannot touch and feel the product online
• The recommendations can be irritants
If you search for buying a laptop, you will get a flurry of options. Buying a PC online can be more complicated than buying a car. We have to make use of technology, like conversational AI, to make it useful for the customer to shop online. By asking simple questions, we can frame the customer’s behaviour and offer suitable choices.
What can we do to get a feel of the product online? We can use augmented reality to showcase all the features of the product. If people cannot go to the store, then you have to bring the store to the home. We can use the concept of video call and extend it to shopping. A retail assistant can talk to you while you are shopping online and provide a one-on-one consultation to help you find the best product.
Post-pandemic, we need to reimagine and align with the future of the shoppers.
Irrelevant offers suppress the buying momentum of the buyers. The offers have to be introduced at the right moment in the customer’s online journey. You can make use of the power of AI to offer intelligent offers and choices. The conventional marketing funnel makes use of the broadcast model. The new approach is totally driven by the consumers.
Talking of the future, we all have a choice: Taking on the baggage of the past or reimagining the future. Post-pandemic, we need to reimagine and align with the future of the shoppers. So we need to bear in mind that:
• Customer behaviour is constantly changing
• We need to meet the customers at where they are in their journey and deliver a friction-less experience.
• Along with our partners, we need to reimagine that customer experience.