Monday, December 6, 2010

Learnings from Parenthood VII

Every parent is anxious about two important milestones for their children. When the child will start walking and when the child will start speaking. Usually, if the children are asked to describe about their parents the things they mention are “My father taught me to walk and my mom taught me to talk”.  These two milestones are indeed very important for all children and parents alike.

Usual conversation of parents who have children of about age 1 starts with a simple open ended but highly evolved question “What all does your child do?”  and then the enthusiastic parents get into an evolved discussions and descriptions about what and how the child does it. The discussions go into whether the child puts the left foot up first or the right one. Whether he pushes himself up by stretching leg or pulling their hand or how many steps can he take without sitting down once…

The parents whose child has not started walking yet get paranoid. Then all sorts of theories crop up. One of the most popular theories is girls are faster than guys hence girls start walking earlier than guys of similar age. (An empirical evidence of children around me suggest that there are no contradictions to this theory but I have a great suspicion that this theory is propagated by all the mothers to sow the seeds that the fairer sex is far superior to the unfair sex! ) Once the parents who have a son,  hear this then they get even more tense. Almost all the parents I know of refer to babycenter. That I must say is a hell of child of progress tracker. It almost feels like they have some hidden camera in the house and someone is watching what your child is doing and sending to you as a mail. But even babycenter does not come to your rescue if your child refuses to walk. Parents get all sorts of toys, walkers and encourage the child to walk. They keep the children’s favorite toys on the table so that he has to necessarily walk to get them. But children are a smarter race. Soon they figure out that they can crawl upto the table stand up get the toy and crawl back. The child just does not see logic in using just 2 legs when the same thing can be accomplished much faster by using 2 hands and 2 legs. So they defy all the attempts made by their parents to make them walk. This impasse continues till one day, the child thinks to himself…hey, I am not a baby anymore, let me walk now…and starts walking.

The same thing happens to parents if their child does not speak. Actually that drives parents even crazier. The most paranoid lot visits the doctors for hearing test. I really wonder why these parents start from worst possible assumption. Also, there is this implicit assumption that the doctor will know about child better than us. But still they do it. Again from my limited, empirical sample I found that children who have a very regimented schedule start speaking much later. Children are far smarter than we think; they get everything they want without speaking, so why speak?  The children with elder brother or sister learn to speak much faster. They have a sense of competition ever since they are born. Talking themselves out is probably a necessity in overcoming the competition. I can’t figure out exactly but there is a strong correlation between time spent with grandparents and ability to speak or vocabulary. (No No I am not suggesting grandparents talk a lot) I have seen some children who have started speaking as late as year III and I have seen how their parents were paranoid about that.

What these parents don’t get is: Walking and Talking are the biggest bargaining tools that children posses. Children are much easier to deal with and manage when they cannot speak or walk. Their individuality (which some skeptical parents describe as “true colors”) come to forefront when they start walking and talking. Once they start walking you realize that the children had always wanted to go in a direction different than yours and they were unable to do so because they were in the pram. A more persuasive child would pull you in that direction while an evasive child would just start walking towards the other direction and expect you to follow. The parents would realize the all the one-sided consensus based relationship they were enjoying so far was on a thin ice. Child always had a different opinion, it’s just that he or she did not have enough skills to express it.

A great side effect of this phenomenon can be seen on the physique of the parents. Parents suddenly start getting in shape. The physical demands of parenthood are such that you might have to take off in an unspecified direction with split second notice just to ensure the child is in the line of the sight. The parents need to adjust their center of gravity in order not to lose control in such a demanding situation. They also need to work on their maneuvering skills by sharpening their ability to take sharp turns. I have always noticed that the stress levels in parents shoot up when the child stands on his feet, literally.

The situation gets worse when child starts speaking. Things are much easier to manage when the child is just blabbering. Human mind is designed for wishful thinking. So parents tend to interpret the seemingly meaningless blabbering in the way that is convenient to them. A blabbering child is the child of their dreams that always seem to agree with them or say things that they wanted to hear. The scene completely changes when the child starts speaking. All “yes” becomes “No” and vice versa.

I realized this when I was confronted my child when I least expected it.  I used to tickle my child in a certain way, he would laugh a lot and make a lot of blabbering sound which I used to interpret as “I want more, Papa don’t stop”. I could also see certain excitement in his eyes and go on and on and my child would laugh his heart out. The fact of the matter was I used to enjoy that game perhaps more than him. When I tried the same game he could speak I was in for a shock. My child told me “Papa, don’t do it. I don’t like it” My interpretation of his blabbering and reading of eyes was all in vein, the reality was completely different.

A Speaking child is very powerful. He is able to communicate his likes-dislikes and stop his parents from doing unwanted things just by saying a few words. All parents have this innermost desire to be better parents than their own parents. No matter how well they were raised, they always remember the mistakes that their parents did and vow to themselves not to repeat them for their own children. (My empirical evidence suggests that most of the parents are successful in avoiding mistakes that their parents did but land up making newer mistakes which their children must correct in the due course. ) All parents want to be fair to their children and don’t want force them to do anything that is they don’t want to. They are happy with their performance as their parents and are secretly patting their backs till the child opens his mouth and starts speaking. First signs of cracks in their parenting start appearing when the child starts speaking.

My biggest learning from the parenthood is each parent must learn to enjoy, savor, relish, appreciate, take pleasure in, value and be delighted with the period of time when the child is not talking or walking. Every parenting book, website, doctors mentions that each child is unique. Still we parents try to compare them and make them fit into the same imaginary mould that is either designed by conventional wisdom or some child progress benchmarks or We forget the joy of parenting. We are pushing our little ones into the competition zone mercilessly even they can barely walk or speak.

Fellow parents, that is the most enjoyable part of the parenthood. Go ahead and convince yourself that the child wanted to go exactly in the same direction as you turned the pram. If the child is not speaking or walking when the babycenter expects it, don’t worry. One day nature would take over and things will be alright. Till then don’t have doubt whatsoever in interpreting the blabbering in the way you want. Because, once the child starts speaking and walking things are just going to go downhill.

Enjoy Parenting!!

Sunday, December 5, 2010

Learnings from Parenthood II

Part II (end of 1 month)

  • Babies don't negotiate. (No. Don't try it again)

  • Almost anything can be achieved if one can cry loudly enough

  • Changing diaper is a process not an event. You think you have cleaned up the mess but you have merely laid clean platform for next mess to be deposited

  • Volume of crying is directly proportional to bargaining power

Learnings of Parenthood I

Part I (end of 1 week)

  • Babies are not fair. They take some actions and blame you for the results. (just like our clients)

  • Problem identification is always a trial and error affair where errors > trials

  • The joy from addressing the root cause to put a crying baby to sleep > joy of closing $1 million deal

Thursday, December 2, 2010


(Published in Top of  Mind, Nov 2010)

When TOP OF MIND called me to figure out if the current growth rates of the Indian car industry were sustainable, I responded with an emphatic ‘YES’! India has just started stretching its legs! The official Frost & Sullivan estimate for the growth of the passenger car market in India is 18 percent (CAGR). And these estimates are not founded in optimism, but grounded in reality.

The Indian car market is really in a state of infancy. The penetration is so low in comparison to not just developed markets, but even those in comparable stages of evolution. The number of cars per thousand, in India, is between 12 and 13. In a market like Thailand, this number stands at 25 to 30. In markets like Malaysia, there are 250 cars per thousand people. In developed countries like the US and Australia, the figure stands at a whopping 500!

Affordability of various customer groups in India is improving. As more Indians become more affluent, the number of cars will go up. We may not have a car for every two people immediately, but the number cannot remain at 12 or 13 per thousand. So if one is wondering if the high sales figures we’re seeing in the market now represent a peak that will start waning, they couldn’t be more wrong. It is a intermediate peak, from where the number of cars sold will go up further steadily.

Various markets across the world follow a typical curve for growth of automotive markets. The graphs below indicate Penetration of car per thousand Vs per capita GDP on PPP basis. The curve indicates the path the market is likely to follow as the per capita GDP increases.  

The biggest hurdle to this trend would be lack of infrastructure development. It is not keeping in pace with the market growth rates. (may be you can elaborate on that)

New Markets

So where is this new market coming from? Is it from the second or third car for the house being bought? Is it the bike user graduating to buying a car? Or is it a new segment that never thought about a car ever, but is suddenly waking up to the idea of owning a four wheeler?

It’s actually a bit of everything. In India, there is a new segment emerging at every layer of the pyramid, climbing one step upwards on the consumption front. So there’s a new segment fuelling demand for cars, there’s one driving growth of two wheelers, and one driving sales of bicycles! Take the Tata Nano for example. In some cases, it has become the fourth car in the household. In others, it’s the first car for those who aspired to buy one. And then there are others, who never thought of buying a car, who own one today. Take, for instance, the case of a 65 year-old gentleman, who hadn’t thought of buying a car, never felt the need for it. Suddenly, there’s something that lures him in terms of affordability, he finds that the vehicle is easy to handle, and he buys in for the convenience of a car at his disposal.

And it is not that the car market is growing at the cost of two wheelers. There’s growth all around. If there’s a new market for cars, the same is true for two wheelers too.

Role of Marketing

If one contends that the demand we’re seeing is a function of incentives and promotions and marketing campaigns, I beg to differ. Marketing has some role to play in the growth of an industry, but it cannot create demand per se. The fundamental economic factors need to be in order. And they are very much in order in the Indian market.

Marketing cannot invent customers. But, with a great product and marketing campaign, what you can you can do is pre-pone the purchase. Someone looking to buy two months later will buy today, if incentivised enough. There is a notion that some of the discounts and promotions create demand - that is not true. The purchase happens earlier, and when you withdraw the offer, the sales figures drop.

The More the Merrier

The Indian customer is finally getting to pick and choose from the best there is in the world, besides the home grown auto majors like Maruti (Suzuki), Tatas or M&M. The number of players today reflects an integration the Indian auto industry with global markets. All the players who are present in other markets have entered the fray, and it is exciting times for car buyers. They are being spoilt for choice the same way their counterparts in other markets have been for some time now! It’s about time too.

In mature markets, the top three players will have, at best, 30 to 35 percent of the market. In India, Maruti, Hyundai and Tata Motors have, between them, 70 percent of the car market! This is unique to the Indian market and it also reflects the potential that exists to grow with the market. I would dare say that the number of players in India hasn’t hit the ceiling yet!

But it won’t be cake walk for the new entrants. In China, they’ve figured things out. With everything from sourcing to distribution in place, the task now in China is one of execution. In India, new entrants will be finding their feet in terms of sourcing, production, positioning, distribution and after sales, among other things. The established and entrenched players enjoy the advantage of having figured things out earlier.

Rising Prices? No Big Deal!

Rising prices in the auto industry is a function of rising input costs. And at most times, the price change would be a collective decision by the industry, because the rise in input cost affects everyone. Also, the price rise is typically never more than 2 to 5 percent. So when the price rises from say, Rs. 3,00,000 to Rs. 3,15,000, the impact is minimal. Yes, there will be an impact, but it will be a short term impact. One has to look at it relatively: If both Maruti’s and Hyundai’s prices have risen by Rs. 15,000, and I have already decided to buy one of the two cars, I am not going to stop from buying because of the price hike.

What will affect demand are things like a huge hike in the Excise Duty, for example, by the government. If the duty goes up from 8 percent to 16 percent, then we have a problem. Minor changes in pricing will not result in more than seasonal fluctuations.

Seasonality of Purchases

This exists across markets: there are times when it is considered auspicious to buy a car, and there are periods when people avoid making any kind of purchases! Indians would be only too familiar with the entire concept of ‘auspicious day’ to buy something. What’s interesting, is that even in Singapore, we have a month called the ‘Hungry Ghost Month’, when people avoid purchases altogether!

So how should marketers and auto companies handle such beliefs? You can’t, obviously, wish them away! What marketers need to do is account for these seasonal fluctuations. If there is a community that believes in not buying a car in a certain period, can we look at other segments that do not share the beliefs of that community? There is a need to adjust not just production, but also promotion, according to the pulse of the market and such seasonal variations. Segments that do not follow that belief of ‘Don’t Buy period’ can be incentivised during this period.

A Customer at Every Price Point

This is one of the things that makes the Indian market unique - within the same segment, the market leader, Maruti, has a multitude of offerings. In effect, there is a car which is Rs. 50,000 or Rs. 75,000 more than the next model from the same stable. A car buyer can choose from an Alto, WagonR or A-Star, going up to the Swift, if compact is what he is looking for. While this can at times confuse the consumer, it gives the company a presence at every possible price point, with variants to boot. In other markets, the models are not priced so close to each other, but variants would.

This is something that has worked wonderfully for the car maker in India. It is also reflective of the Indian market, where there is a customer available at every price point! Having a range of products within a segment helps make the brand stronger, because you can address various customer segments within a particular range. There’s virtually no gap in the portfolio of Maruti in India.

In terms of the overall number of models available, across players, it is bound to go up further. In comparison with the US, Australia or even Malaysia, Indians still have fewer models to choose from. As the market progresses, the number of models will go up too.

‘Indians are Value Conscious’. Who Isn’t?

Across the world, customers seek value, and this is true of automobiles too. There are many countries where Value-For-Money (VFM) is the most important criteria affecting choice of car. We have an award at Frost & Sullivan called the VFM Awards, in several markets like Malaysia and Singapore. In the Malaysian market, there is a company called Peruguva VIVA that has come out as the top rated company consistently. In Malaysia, the affordability is pretty high, but consumers still seek VFM.

In the US market, the fastest growing cars last year were Hyundai and Kia. These represent VFM. They were growing at 10 to 12 percent when the rest of the auto companies were registering a drop in sales.

Made in India. Sold The World Over.

The domestic sales of cars in India are higher than its exports, and that is because the domestic demand is so high. That is not likely to change because the domestic demand is not going to dry up soon. However, there is huge potential for India to emerge as a small car hub - that export potential is real and is being reflected by developments already.

The export potential is determined by the kind of product you have competency in. Across industries, and especially in manufacturing, it is about having the competency across an entire supply chain. Thailand, for example, ha the entire supply chain for manufacture of pick-up trucks. It has hence become the production hub in the region for pick-up trucks.

India has developed that potential for small cars and foreign companies are paying attention to this aspect too. On the exports front, export-focused models are being manufactured in India, whether it’s the Hyundai Santro or the Maruti Suzuki A-Star. Very few countries have the competency to be a small car hub. We will see foreign players enter India not just with an eye on the market, but also with strategic intent like production of certain types of engines. The vendor community that services the auto industry stands to benefit, even as exports from the region will benefit the nation.

The Top of the Pyramid

The top end of the market, which is addressed by players like Mercedes, BMW, Audi and Lexus, is still largely untapped. Luxury or premium cars, as a percentage of cars sold worldwide, is hardly 3 to 5 percent. Manufacturers catering to this segment are sensing this opportunity. For these companies, the absolute volumes that India’s upper crust and upwardly mobile represent is exciting, even if it is not so large as a percentage of the population.

What is the motive to buy luxury cars? The motives are the same as the ones that give customers the propensity to indulge in other premium and luxury goods, coupled with the ability to buy. So as a category, and as a paradigm, luxury is something that is bound to grow in India. It is only natural that luxury cars will grow with the trend.

Road Ahead

From the products perspective, India is unique in terms of the number of small and medium-sized cars of the total cars sold. There is an obvious skew towards small and medium-sized cars, possibly because of the large middle class belly that exists and the narrow roads in our country. In that sense, the Indian car market is charting its own course.

Things are looking good for the Indian car companies. The total demand in a market is defined by what we call the Gompertz Curve, which evaluates penetration of cars against disposable incomes. The Indian market is pretty much following this curve and is expected to in the future as well.

This indicator of future demand has been quite accurate in other global markets as well. So, there’s enough reason to cheer the market on, as more and more people get behind their new set of wheels. Common sense tells us that the need for mobility is so high, that people will need to commute, and when they can afford it, would like to do so in the air-conditioned comfort of their cars.