Why do FMCG companies survive every single downturn and come out on top? Is it purely because an average consumer cannot ‘NOT buy toothpaste’ but can cut down on his eating out?
A simple question, which has a very complex underlying principle behind it!
That actually leads to the second question: Have today’s corporations understood the fundamental difference between Production concept & Marketing Concept?
For the uninitiated, Production Concept is ‘You can have any colour you want so long as it is black’. The classic line from Mr. Ford when he rolled out his assembly line Model T. We have progressed far beyond that to have product teams which will gauge the consumer requirement and comes out with products which will suit the customer ‘best’ without rocking the apple cart too much on the assembly line. Simply put, marketing concept has customer inputs in terms of needs and plugs them with offerings.
So what is the reason for today’s perils? Especially the ones of the economic kind?
The last few decades have seen the emergence of a key entity in every corporation. Finance! With this function at the helm, every organization is focusing more and more on investors, investor relations and shareholder value. Great idea! But somewhere this strikes an imbalance (at least in my mind) with respect to the raison d’etre of a ‘going concern’. Agreed everyone is in business to make money. But money doesn’t grow in trees. And for all those who thought it did, we have the results to see. Bad loans! Bad loans packaged as assets and sold to some unsuspecting customers (investors)! Asset (even if non-existent) re-packaged and sold to insurance companies and voila! No asset! No investor! No value! Just jingle mails and worldwide economic downturn.
(Though this sounds like a ‘rare emotional outburst’, I believe there is a grain of truth in the above paragraph)
Going back to the question about Marketing & Production concept, I believe a sweeping generalization would point to a simple ‘No’. Here’s why!
- So long as an organization is looking at only the books and not the consumer, peril is staring from right behind their necks.
You can make cars, toothpastes, gold ornaments, provide mobile telephony or stitch footwear on the road. Customer comes first. LUMP IT! No two ways about it. If you are worried only about your books and your investors, you can find a good chef, cook them fine and then count bars. Be my guest! In the same vein, FMCG firms, which focus more on the fundamentals of the marketing concept – of looking at the customer – is the real ‘going concern’ and have always been the bell weather stock of every single market in the world.
The man on the road is a simple guy. More complex your offering to understand and more difficult the usability, less successful your product / offering is. This is very typical of many industries of today. Again FMCG scores here. There will always be the ‘vanilla’ offering which is the chasis for products, product extensions and brand extensions. But the offering is very simple. A toothpaste is a toothpaste is a toothpaste. Though the paste becomes a gel handling an ‘inherent need’ to provide freshness, the fundamental job is to keep the dental combination clean. Simplicity is key! And it comes only from a customer facing function. Not that looks internally.
Looking internally narrows the focus of the organization. Remember the footwear soldiers who were sent to an island where no one wears footwear story? Though it is meant to change the mindset of the sales guy, here’s my take on it. The company that will send the man to the island with no footwear habit is looking at the customer. The one who is bothered only about their books will probably look at it as an expense.
Any corporation which looks at growing, must grow the size of the pie, unless you want to run into ‘competition commission’ and its equivalents. Agreed that it costs, but is it a cost really? Aren’t they investments, which will reap returns later? Agreed, one needs to be prudent with investments, but if there is only production concept, then such requirements of capital would be considered costs and if there is a marketing concept prevalent in a corporation, such an investment would either prove to be worthwhile or leave a failed marketer.
If you disagree, let’s have a friendly chat!
- Looking beyond this (and probably the next) quarter
Marketing concept also widens your scope of time. An organization that looks internally ends up looking no further than this quarter or the next. Best case, the end of the year for the sake of annual reports and P&L statements. Organizations where the marketing function rules roost, ends up surviving longer than the ones which look at the books and no beyond! Coke, Levers, P&G and closer home, the Tatas & Birlas and someone from my home state, Sundarams. They have survived the test of time and have remained sustainably profitable over prolonged periods despite the many setbacks purely because they have taken ample care of their customers. They may have had rough patches, but have always been able to get back on feet like the Incredible Hulk, dusting themselves off to see another day, month, year, decade et al.
Does this mean that they don’t show profits every quarter? No way! They do. They may not show as much as the top profitable company in that quarter. But they are predictable. Slow, but certainly sure. Haven’t we read the rabbit & tortoise story folks?
So where do we look when we need solutions? Internally or externally? Who runs an organisation? What are the priorities?
It may not be the panacea for all ails that our world is facing today. Starting from large corporations to small ones, the fundamental thought should be at looking at customer needs. And so long as that is maintained, which will be from customer facing entities like Sales & Marketing, Customer Services & Products functions, the performance of the organization in the longer run will more often than not be met with success.
So a quick question to all the CEOs.
While Sales by virtue of being a revenue function has its share of the limelight, do you still consider Marketing & Customer Services to be a support function?