Most e-commerce companies don’t get marketing basics right

Wednesday 23rd, March 2016

Marketing – focus on the basics

This short clip from Professor Philip Kotler, the doyen of Marketing helps to re-focus attention on the marketing basics.

Prof. Kotler makes the point that marketing strategy really boils down to a simple formula – CCDVTP. In other words, ‘Create, Communicate, Deliver Value to a Target Market at a Profit’.

Not exactly rocket science, is it? But, it is surprising to see how many new-age companies particularly in the e-commerce business seem to ignore basic marketing concepts. We think there are three fundamental marketing concepts – product management, brand management and customer management – that all companies have to learn to successfully manage.

Building brands – Rome was not built in a day

Conventional marketing wisdom was that you came up with a product idea, which you then tested and launched in the market. With the age of the Internet and social media, companies now have an opportunity to co-create products by listening to customer-speak. While approaches to product management may change, there has to be a sound product management strategy in place.

However, Henry Ford’s old saying “If I had asked my customers what they wanted, they’d have said a faster horse” is still relevant. Fine-tuning a product idea, tweaking the offering and rolling it out in its final form takes time and effort.

Which is why it is surprising to see why new-age businesses that harness the Internet or use apps to deliver a service seem to be in a tearing hurry to scale up. To be sure, it is the idea that made them so compelling in the first place – whether it is a Facebook, a Uber, a WhatsApp or any of the other recent examples which have tasted success.

For every success though, there are probably a hundred failures littered by the side. And these were the companies that either had a me-too idea or did not put in sufficient thought into creating a differentiated product or service.

Are you communicating your value proposition with clarity?

No brand – from the traditional giants to the new-age companies – has as yet figured out a way to build a brand using just digital media. To be sure, digital and in particular mobile is the new frontier and most companies are experimenting to find out what works and what doesn’t.

The key factor though is in communicating the value proposition and doing so clearly. In India, e-commerce brands like Flipkart, Snapdeal and others are relentlessly pursuing a policy of discounting. This may have worked in the early stages as a hook when it was essential to promote online as a more attractive option to offline shopping.

Unfortunately, as most of these companies are beginning to discover discounting is not a strong value proposition. It makes consumers fickle and completely devoid of any long-term loyalty. In recent months, it seems clear that online retailers across categories have begun to cut back on the percentage of discounts being offered.

The other factor is that these companies are funded by venture capitalists who are only interested in valuations and how quickly they can make a profit on their investment and exit. The lucky ones manage to raise substantial funding which allows them to launch lavish branding/communication campaigns, but they’re living on borrowed time.

Show me the money!

As Prof. Kotler clearly says, a fundamental rule of marketing is that you sell at a profit. How else is an organisation to re-invest capital back in the business, fund its research and downstream activities if it is not in sound fiscal health?

Once again, it seems clear that e-commerce companies are throwing common sense and caution to the winds. Look at the numbers being reported by these companies, quarter on quarter and it is clear they’re bleeding badly. And yet, there is no attempt to stem the losses because that would lead to loss of market share.

The sad part is that most promoters along with the people who fund them seem to be in the business for the short-term. They are setting themselves up as acquisition targets and retire to their Mediterranean villas where they can sip their pina coladas!

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