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Why brands must react to salary cuts

Shivaji Dasgupta, Managing Director, Inexgro Brand Advisory, writes on the shrinking wallets and how brands must recraft customer experiences to stay relevant

Shivaji Dasgupta

In most, I dare say all, Indian households a mammoth re-budgeting exercise is currently underway. The designated villain is indeed the salary cut or a more dire setback. Even the rock-firm Government job is not an exception. Quite intuitively, backed by sufficient evidence, the discretionary expense is under scathing review and the necessity is also being evaluated. Brands must take careful note of developments and suitably evolve their ‘business-as-usual’ customer offerings.

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For starters, we must recognise the imminent action points of the urban customer, as per common sense and societal norm. Home and car EMIs cannot be halted, nor can school fees, insurance premia, staff salaries and utility bills. Although people like us are frenetically squabbling for reductions, notably with education authorities and landlords. Naturally, nutrition and nourishment must continue, but a downtrading syndrome may well emerge, more on this shortly. While for the classic indulgence expense, the scissors are tearfully in play, any lifeline offered by brands will be lovably welcome.

On downtrading the pattern is predictable, lesser-priced offerings offering similar solutions will be rapidly adopted. The scotch drinker switching to IMFL, daily basmati becoming everyday short-grained, eating out moving to ordering in, shower gel solidifying as soap and the PVR junket replaced by Amazon Prime. This pattern is certainly irrevocable in the short run and companies must quickly fine-tune their portfolio strategy – ideally ensuring that the customer descends to a member of the same family. Which means that every higher-priced SKU must have a viable safety net, either pre-existing or an outcome of circumstantial mind-games.

If you cannot afford a buffet in Mainland China, then a home delivered Bento Box at half the price will keep everybody happy. PVR and its ilk must move hastily to the streaming entertainment business, also considering mini theatres in apartment blocks. When organic food makers diversify to mainstream staples, there will be desirable continuity. Entry-level pricing of premium fashion must dip further, in tune with enhanced inventory and styling. Johnnie Walker may be tempted to launch an Orange Label, priced attractively lower than the costly Red. Examples are many, but the principle remains the same — we cannot prevent the customer from downtrading, but we can certainly stop her from taking business elsewhere. Also, most crucially, this will hopefully be a short-to-mid-term scenario, the restoration of salaries will resurrect the primacy of choice, till then hold on we must.

The technique of experience alliances, a disruptive customer-centric form of bundling, can be rather useful for all businesses. We are all totally familiar with linear aggregation, the oil-rice-sugar combo or the gel-shampoo-facewash trio, a pattern emulated by the biryani-kebab unification. Now for a moment, imagine the potential gambit of Swiggy in the business of almost everything, post the stores extension and the lockdown. Quite effortlessly, a family serving of biryani from BBK can be merged with the staple ensemble from Spencer’s at a unified rationalised price point – the luxury converging with the necessity, swinging the verdict emotionally and economically. The Hollywood face cream as part of a sanitisation kit, the H&M beachwear set infused in the MMT 3-star ‘driving vacation’ package, the gourmet chips stealthily partnering breakfast batters – the possibilities are reasonably limitless.

Another useful strategy of the packaged foods and FMCG business is SKU flexibility – keeping effective prices low while manipulating the volume of content and thus the cost. Interestingly, this works on both axes, at times it pays to aggregate and at other times to miniaturise, which must be thought through sharply. Indulgence may thus be divided into staple indulgences and exceptional indulgences – using a combined measure of price, convenience and desire. Dairy ice cream, chocolates, dim sum and pizza, scotch bottles, perfumes may benefit with shorter units – celebratory and occasional in pattern. Udon noodles, beer cases, shampoo packs, daily basmati and digestive biscuits, digital entertainment packs in macro packs– more habitual and thus tougher to let go off. The restaurant may well consider the five and not fifty course eat-all-you-can, do note that these ideas are about value renovation, never ever about price cuts.

Lastly, and foremost for service businesses, there is a nascent opportunity in innovating the lifeless terms of engagement. Hotels, restaurants, taxi services, technical manpower, beauticians are notoriously inflexible in consumer liberties – contractual terms more stringent than NASA. As car-led travel opens up, hotels must be flexible about all day check in-check out, cooking and outsourcing meals, maximum persons per room, facilities for nannies and so much more. If the restaurant is famous for food and has a liquor licence, guests must be allowed to bring their malt bottles, which will arguably lead to larger dinner orders. Beauty parlours must permit employees to officially do home service, on a licensing model. Airlines and portals to stop making absurd money from rescheduling, nobody sadistic or devious, any more, to book without proper plans.

In all of the above, I wish to make a simple yet urgent point. The wallets of Indians across segments have shrunk dramatically, especially for discretionary purchases. If brands sit back and just do standard marketing and advertising, a debacle is in the offing. Instead, the best minds must recraft customer experiences, to earn a place in her shrinking and discerning basket. This will help businesses stay profitable and in turn retain jobs and bolster the economy.

A salary cut can be both demoralising and frightening in terrible tandem. Brands can truthfully soften the blow by making indulgences accessible, sensitively and responsibly. Not a single idea in this piece is about discounting, for the answer lies in inspirational value-addition.  

(Disclaimer: The opinions expressed in this article are those of the author. The facts and opinions appearing in the article do not reflect the views of BestMediaInfo.com and we do not assume any responsibility or liability for the same.)

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