Friday, August 28, 2009

ALL CONSUMERS ARE FOOLS!

Well, almost all! It was three years and three months ago when I had covered this concept passing a conclusive judgement on the intellectual incompetence of consumers around the world. And the wonder is, while releasing this iconic issue of 4Ps B&M that contains the exclusive ICMR survey of India’s 100 Most Valuable Brands, I realised that even after so many years, nothing has changed globally, and therefore I decided to bring to you the same editorial once again in toto! All consumers surely still remain fools! Seriously believe that, and you’ve got the most astoundingly rocking and smashingly successful marketing campaign! But don’t blame me, blame Dr. Daniel Kahneman of Princeton University, who received the Nobel Prize in Economics in 2002-03, for emphatically proving the above mentioned statement... His ‘Prospect Theory’ suggests that rather than undertaking decisions just based on ‘logical reasoning’ (namely, choosing the better product over the worse), humans also include a critical factor known as ‘intuition’, which is the main reason for consumers behaving irrationally and many a time even foolishly while purchasing products and services. Some years ago, even Dr. John Nash (of Nash Equilibrium fame) won the Nobel Prize for theorising a similar concept.

Most interestingly, the ‘Prospect Theory’ has its mirror image in the competitive strategy theory propounded by Dr. Michael Porter, where he postulates that all the global theories of competitive strategies and tactical warfare can be summarised into one electrifying word, ‘positioning’, and consecutively, into another word that is mind-bogglingly changing paradigms of marketing battles in global industries and consumer spaces. And that word is ‘perception’. Porter aggressively argues that consumers do not make decisions based on which product is better, but based on which product is “perceived” as better. Amusingly, across industries, more often than not, the product which is actually worse off in quality is the one which sells more, and many times, despite being priced higher.

And it’s been the same for quite a few years. For example, in 2006, the cell phone manufacturer that had the number one rank in quality in India was Sony Ericsson (IDC survey 2006); while the company which sold the most cell phones was Nokia (with a jaw dropping 79% market share, compared to a pathetic 5% of Sony Ericsson; the figures are 64% for Nokia and 6% for Sony Ericsson in June 2009), in spite of lagging behind Sony Ericsson in quality, and in spite of a majority 60% of their sales being in the costlier priced segments. Similarly in automobiles, Toyota has been consistently ranked as number one in quality, year after year (JD Power Surveys) and in 2009 was ranked the third Most Admired Corporation globally by Fortune. But still, despite being ranked relatively way below Toyota in quality, despite not even featuring in Fortune’s Top 50 Most Admired Corporations list, despite being bankrupt, the company that has consistently been the world’s largest passenger car manufacturer for years is General Motors (August 2009 global market share: GM 18.9%, Toyota 17.5%). And if speed & technological excellence were the factors of quality, then while Ferrari has won six of the past nine years’ F-1 Grand Prix Championship, its parent Fiat’s market share globally is 3.6% only. The ‘Judgement of Paris’ wine tasting competition in 1976, covered by TIME magazine’s George Taber, which was held again in May 2006 in London, proved that California wines tasted better than French, and by miles. Guess which sells more? But obviously, the French.

The strategy these global leaders use is ‘perception’! Play on consumers’ irrationality, and one can easily change their perception about eating cancer causing burgers, drinking liver destroying alcohol, consuming pesticide infested cold drinks, munching on fungal infected and worm strewn chocolates, smoking life destroying cigarettes, doing dope etc. etc. etc.; the list is never ending and extends even to football. In the history of FIFA World Cup Finals since 1930, only three times has a team that had the best quality player (that is, the player who won the Golden Boot award for scoring the most goals) gone ahead to win the tournament! For the sake of it, guess who is the most successful footballer of all times scoring the most goals in the history of international football. Obviously, the “perceived” answer is Pele, right? Wrong! The man is Daei Ali of Iran (109 goals). With 77 goals, Pele is not even second in the list (Ferenc Puskas from Hungary is, with 84 goals)! So are all consumers fools? Like I mentioned, I know of at least two people who’ve got Nobel Prizes proving just that! And none of them is a consumer like you or me!


Share/Bookmark

Wednesday, August 12, 2009

YOU’RE A CLASSIC FAILURE, BOY!

Flying is something that I simply hate. The symptoms are always the same. My heartbeat and BP shoot up the moment the aircraft starts taxiing for a takeoff, I break into a sweat, yet my hands turn ice cold. Thus it was when last week, with great trepidation, I entered an unavoidable flight down south. It was with pleasant surprise that I noticed that my co-passenger was none other than my favourite professor from my b-school days; the wizard used to teach us astounding leadership case studies, but I liked him more because he was the easiest to irritate amongst the lot and we used to take full advantage of it. Initial greetings aside, the fleeting scowl on his face was a giveaway that he remembered me too well. Attempting to rekindle old relationships thereon, I mischievously told him how I remembered his classes even now, and he smilingly nodded back, knowing very well I didn’t mean it at all. Thereon, we kept exchanging random statements... till the point that I got this crazy devilish urge to vex him and fibbed up a make-believe grouse that despite trying very hard, I had still not been able to achieve some of the visionary things that I had been aiming to achieve by this age. He looked at me, and surprisingly said, “That’s pretty good, I say!” I was foxed by his reply. Looking at my confusion, he said, “Let me tell you a story...” And that’s how the story began...

He was born at an underprivileged medical center. Even as a baby, life was anything but sweet for him. His parents divorced within three years of his birth. Although his mother remarried, she unfortunately married a man who was known to be jobless, and who got into the habit of coming home drunk every night – in fact, during a drunk-driving incident, the man had both his legs amputated and died soon after. As a young lad, struggling to keep up with social questions about his multiracial heritage, he became addicted to alcohol, marijuana and cocaine during his teenage years, which he later said was his “greatest moral failure.” He also became an uncontrollable chain smoker who couldn’t quit smoking despite trying too many times. He even lost his mother to ovarian cancer in 1995, much before he had anything signify cant to achieve. But failures are what taught this man the beautiful attitude of sincerity. That belief is what led Barack Obama to win the Illinois senator seat in 1997; that belief is what led him to convince a totally opposed state assembly to pass a bill that forced police to videotape all interrogations to reduce torture and deaths in custody, especially of blacks; that belief is what led him to run the Presidential elections in 2008 despite being trounced devastatingly in the 2000 Congressional elections and despite being told a few years back by his media consultant that he stood very little chance as his name sounded too similar to Osama Bin Laden.

If Obama had an underprivileged childhood, Steve Jobs went through worse. When he was born, his mother was an unwed graduate student who put him up immediately for adoption as she did not wish to rear him. Ironically, Steve wasn’t even the first choice of his adoptive parents as they had actually wanted a girl. Steve’s ‘new’ mother was just a high school pass-out, and his father wasn’t even that. Later on in life, Steve Jobs did join college, but dropped out within six months as he couldn’t see the value in it. But despite dropping out, Jobs continued dropping into classes that interested him. He would sleep on the floor of his friends’ rooms and returned Coke bottles to earn 5 cents per bottle to buy food. Every Sunday night, he would walk seven miles across town to get a free meal at a Hare Krishna temple. The learning from that part of his life and those ‘dropout’ classes is what gave him the zeal to co-found Apple in 1976, market its Mac products too passionately, and make the cover of the TIME magazine by the age of 26. It’s common knowledge now how Steve Jobs was fired from his own company by Apple’s board of directors, a failure that drove him again to found Pixar and NeXT, two more iconic companies, before he was reinstated storybook style as Apple’s CEO! A pancreatic cancer patient (one of the most dangerous cancers with the lowest survival rates), Steve Jobs also had a liver transplant earlier this year. And he has already joined back for work! “Living every day as the last day of your life,” is the very statement Steve Jobs says has been driving his ambitions through all his failures since the age of 17.

From Milton Hershey of Hershey Chocolate Company (whose businesses went bankrupt three times before he finally made it big) to Henry Ford (who failed twice before Ford Motor Corporation was born) to Abraham Lincoln (who lost seven times in the Presidential elections before he finally made it), all successful people have been the biggest failures at one point or the other in their lifetimes.

My professor was almost done speaking and strangely justifying to me why when he kept reemphasizing that I was an utter failure, he actually meant good. Well, I seriously didn’t know how to take it. Before I could poke him further, the plane hit the biggest godforsaken air pocket I’ve ever experienced in my life and started rocking and rolling better than Elvis could ever have done in his dreams. And then, suddenly, the aircraft plunged into a dramatically sickening dive; and I did likewise into a crazy bloodcurdling banshee scream. With cups, and my whole life, streaking in front of me, I couldn’t help but astonishingly notice the professor calmly smiling away to glory. It looked totally ridiculous. Didn’t the professor realise we all were well on our way to Kingdom Come? Sniggering, he shouted to me through all the noise, “Live every day as the last day of your life!” It sounded insane and totally inappropriate. I shouted back, “Sir, if I don’t make it alive through this rotten flight, how the heavens do you think my failure to survive will ever make me hugely successful?” The prof shouted back through his guffaws, “Son, your ‘failure’ could result in somebody else’s success! Your sacrifice could very well help rewrite future safety rules to create the most successful airlines in safety standards...” If I had to understand what being a failure meant, that moment in time encompassed it all; a moment when I decided that if I were to escape the crazy air ride, I would never ever trouble any professor of mine, especially this one. Well, as is obvious, I escaped; but I have to confess that the talk did have some advantage at least. These days, whenever my sweetest wife accuses me during our classic championship bouts of being the biggest loser in life, she just can’t get it why my face starts glowing with pride. Last I heard she was growling at me that this was going to be the last day of my life... That’s the way we husbands live it all the time honey, that’s the way we all live it...

Share/Bookmark