Abstract

The Business Model Canvas also called the Pignut and Osterwalder business model consists of nine essential parts: Customer Segments, Value Proposition, Revenue Streams, Channels, Customer Relationships, Key Activities, Key Resources, Key Partners, and Cost Structure. The Business Model Canvas is a strategic management template that helps businesses to describe, design and analyse their business models. Alex Osterwalder modelled this strategic toll who is a Swiss business management theorist and entrepreneur. He designed this model as a part of his PhD research. In Osterwalder’s model his PhD supervisor Yves Pigneur has co-authored the model. This model was published in a book called Business Model Generation.

During the model development of Osterwalder and Pigneur by an amazing crowd of 470 practitioners from 45 countries contributed their thoughts and experiences. That is an inspiring collaboration. The model is in the form of a visual chart with various elements that describe the value proposition of an organisation, its infrastructure, market and finances. The objective of the model is to assist firms to align their activities through the illustration of potential trade-offs.

This article explains the basics of the Business Model Canvas. The model comprises nine building blocks. They are explained as follows:

Value proposition of the business: Apple’s value proposition lies deeply in design, branding, and innovation. Banking on creativity, the brand sets its products and services apart using aesthetics, advanced technology, and user experience. Value proposition refers to the product or service the firm intends to offer to its customers to satisfy their needs. It is unique to an organisation as it helps to differentiate the product apart from its competitors. The description may be qualitative, outlining the intended outcome and customer experience, or quantitative, describing the efficiency and price. Nike bases its value proposition on the practice of sport as a generator of confidence and success, will and effort, going against what is established, and bringing inspiration and innovation to every athlete in the world.

The business proposition (value proposition) is at the centre of the Business Model Canvas because it is the core offering that answers why customers would choose one company over another, thus serving as the heart of the business model that the other components revolve around. It directly connects the value created to the specific problems or needs of the customer segment, making it the fundamental reason for the business’s existence and the driver for all other strategic decisions.

Infrastructure: Number ofIndian organizations stand out for their strong infrastructure in word. Larsen & Toubro (L&T) is a major player known for its diverse portfolio and engineering expertise. Hindustan Construction Company (HCC) is recognized for its experience in large-scale civil engineering projects. Additionally, GMR Infrastructure and Reliance Infrastructure are also prominent in the infrastructure and real estate sectors. It’s shown on the left of the canvas.

In a value chain model, infrastructure refers to the all-encompassing systems, processes, and resources that support the entire organization and its operations, rather than specific activities like production or marketing. It includes elements like strategic management, finance, accounting, legal, and quality management, which are crucial for the overall functioning and success of the business.  Value chain consists of all processes of the business adding value to the final product/service.

The organisation’s infrastructure comprises the key activities that generate the value proposition, the key resources it used to create value for its customers, its alliances or key partner networks and the things that motivate them to be part of the business model. These describe how the company delivers the value proposition.

Channels

In a business context, channels are the ways a company communicates with, delivers value to, and interacts with its customers to fulfil its business proposition. They are the pathways through which a business reaches its target audience, provides its products or services, and builds relationships. Channels outline the ways a business communicates with and reaches its customers to deliver its value proposition. Hindustan Unilever (HUL) employs a multi-channel approach to reach consumers, including traditional retail, modern trade, e-commerce, and specialized channels like health and wellness stores. They also utilize direct selling and direct-to-consumer strategies, particularly in rural areas through initiatives like Project Shakti. HUL leverages a vast network of distributors and stockists to ensure product availability across various locations. 

Customers

On the right side of the canvas, the model analyses three aspects of the customers of the business. They include customer segments break the total market down to help identify and describe its target customers more specifically, channels of delivery connect a customer segment to the value proposition and the type of relationship between the business and its customers. For example, transactional, long-term, self-service, co-creation, etc. Considered together, these describe how the customer expects to access the value proposition. Airbnb has two main customer segments – travellers seeking accommodation and property owners renting out their spaces. Uber  connects drivers and riders. Spotify targets music lovers, artists, and advertisers. 

Revenue streams

It describes how the company makes money from its target market. For example, businesses can generate revenue through the sale of a physical product, selling a continuous service in the form of subscriptions, renting, or leasing an asset such as a car, licensing or charging fees to advertise products. For example, Tata Motors generates revenue from multiple streams including commercial vehicles, passenger vehicles, electric vehicles, and the Jaguar Land Rover (JLR) segment. They also have revenue from vehicle financing and related services. Tata Motors sells a wide range of vehicles, including passenger cars, trucks, buses, and defence vehicles. These vehicles are sold in over 170 countries worldwide, making Tata Motors one of the most globally diversified automotive companies.

Key Activities

Key activities are the essential things a business needs to do to bring its customers value. Key activities are arrived at more through acumen and enumerating the steps needed to deliver value, than by doing business research. There are 3 categories of key activities; production: designing, manufacturing and delivering a product in significant quantities and/ or of superior quality. Problem-solving: finding new solutions to individual problems faced by customers. Platform/ network: Creating and maintaining platforms. ITC’s key activities span across diverse business segments including cigarettes, FMCG, hotels, paperboards, packaging, and agribusiness. Within these, they focus on strategic analysis, supply chain management, and input tax credit management. Furthermore, ITC actively engages in social responsibility initiatives, such as watershed development, afforestation, and sustainable agriculture. 

Key Resources

Identifies the most important assets required to make a business model work.  These resources enable a company to create and offer value, reach customers, maintain relationships, and generate revenue. Key resources can be physical, financial, intellectual, or human.  In Philips India’s Business Model Canvas, key resources can be broadly categorized into physical, intellectual, human, and financial resources. These resources are essential for the company’s operations and achieving its goals in the healthcare and home care sectors.  The physical resources of Philips India’ include  manufacturing facilities, production equipment, distribution networks, and any physical infrastructure necessary for delivering products and services. The intellectual resources include Philips’ patents, trademarks, and proprietary technologies, including AI algorithms used in diagnostic imaging and digital health solutions. Philips India relies on its skilled workforce, including engineers, researchers, and healthcare professionals, who possess the expertise to design, develop, and deliver innovative solutions. 

Key Partners

They represent the external entities with whom a business collaborates to create and deliver value. These partnerships can include suppliers, strategic alliances, joint ventures, or buyer-supplier relationships. For example, P&G’s global reach is heavily reliant on strategic partnerships. A key example is their collaboration with Walmart, focused on optimizing supply chain efficiencies through data analytics and shared information systems. This partnership has led to reduced inventory levels and improved product availability for both companies. P&G partners with EY to enhance manufacturing performance and supply chain operations. This includes leveraging EY’s global experience and P&G’s certified consultants, along with tools like Supply Network Operations (SNO) and the Run-to-Target (RTT) Transformation Accelerator. The company collaborates with GLAAD to promote LGBTQ+ inclusivity in advertising and marketing, ensuring authentic and accurate representation. This partnership involves evaluating and improving representation from pre-production to post-production and beyond. It has a long-standing partnership with WWF, focusing on environmental conservation and sustainability initiatives. 

Cost Structure

The Cost Structure block on the Business Model Canvas outlines all the costs associated with operating a business. It details the most significant expenses incurred in creating and delivering value, maintaining customer relationships, and generating revenue. Understanding the cost structure is crucial for optimizing operations, reducing inefficiencies, and ensuring profitability. Bata, as a large retailer, would also have significant costs associated with its supply chain, including sourcing, logistics, and distribution. Manufacturing cost includes the cost of raw materials, labor for production, factory overhead (rent, utilities), and machinery maintenance. Since Bata has its own manufacturing facilities, these costs are crucial. Retail operation cost covers the costs of running physical stores, including rent, utilities, store staff salaries, visual merchandising, and point-of-sale systems. Bata spends significantly on marketing to promote its brand and products. This includes advertising campaigns, promotional events, and digital marketing efforts.  Bata is synonymous with the school going children for the leather and canvas shoes in India. Bata is known for school shoes around the world. For generations, Bata has been part of their childhood memories, helping millions of students step confidently into their future. With a portfolio of over 20 brands.

Conclusion

The Business Model Canvas is used by both startups and existing businesses, including large corporations. With a little adaptation of the ideas, non-profits and social enterprises can also use the canvas. The canvas is easy to draw on a whiteboard or a big piece of paper and you can use sticky notes to add ideas or details to each block. Whether someone is launching a startup or reinventing an existing business, this model provides a clear framework for mapping out who their customers are, what they value, and how their  organization can deliver that value while generating sustainable revenue. By breaking down the complex world of business strategy into nine essential building blocks, the authors offer a practical toolkit that has revolutionized how companies think about their fundamental operations.

References

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7. https://vace.uky.edu/sites/vace/files/downloads/9_business_model_generation.pdf
8. https://www.philips.com/a-w/about/our-strategy.htm
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10. https://supplychaindigital.com/digital-supply-chain/hindustan-unilever-wins-digital-supply-chain-at-p-sc-awards

Emerging out of the worst economic downturn in its history, Tolko Industries Ltd. was facing serious challenges. Tolko is one of the leading manufacturers of a wide range of forest products for customers around the world. It is a 60 years old company. Tolko’s prior strategy relied almost exclusively on sales to the U.S. and its sales dropped during the subprime crisis of US in 2007. The 3,500 employees were depressed by layoffs, and the company was challenged to retain good people.

Tolko is a privately owned forest products company based in Vernon, British Columbia. It manufactures and markets specialty forest products to world markets. Tolko’s products include timber, plywood, veneer, engineered wood products, and kraft papers. Brad Thorlakson had taken the helm as President and CEO in late 2010 and he and his team knew that the situation requires an urgent change. They realized the change needs to be such that their 3500 employees enjoy the change and get excited to work more seriously.  The leadership team has deep personal ties to the company, their fellow employees, and the communities in which Tolko operates. The ensuing strategic plan document was in-depth, but very complex. And it was clear that the documented plan was not adequately aligned to the organization’s capabilities, business lines, and leadership with the strategy. So in an attempt to align strategy to business lines and leadership, Brad asked the VP of Human Resources to update Tolko’s incentive plan to link executive performance to strategic performance.

The VP of Human Resources reached out to the Institute for assistance in determining how to measure strategic performance on Tolko’s new strategic plan. While VP of Human Resources and Brad had heard of balanced scorecard, neither had thought of it as a cohesive strategic planning and management framework. After learning more about The Institute Way, Brad realized that simply aligning incentives to a complex strategic plan was not going to re-energize the company. The employees needed to see the big picture, hence the VP Human Resources and Brad opted for implementing the Balanced Scorecard for their company.

What is ‘Balanced Scorecard’? This strategic tool was first introduced by accounting academic Dr. Robert Kaplan and business executive and theorist Dr. David Norton. It was first published in 1992 in a Harvard Business Review article. Dr. Kaplan and Dr. Norton took previous metric performance measures and adapted them to include nonfinancial information.

The balanced scorecard (BSC) is used to strengthen good behaviors in an organization by unravelling four separate areas that need to be analyzed. These four areas are also called legs; they are learning and growth of the employees, business processes, customers, and finance. The balanced scorecard is used to attain objectives, capabilities, creativities and goals that result from these four primary functions of a business. For implementing the Balanced Scorecard organizations must be in a position to easily identify factors hindering company performance and outline the strategic changes to be tracked in future. With the balanced scorecard, they look at the company as a whole when viewing company objectives. An organization may use the balanced scorecard to implement strategy mapping to see where value is added within an organization. A company also utilizes the balanced scorecard to develop strategic initiatives and strategy objectives.

The Four Legs of the Balanced Scorecard are:

Financial Perspective: Norton and Kaplan regard the financial health of the organization at the top most. Precise and timely data is a must for getting always a priority, this is paramount for managers who want to get the complete picture. With the implementation of a large corporate database, the financial leg aims at creating automated processes. The financial leg tracks the financial performance of a business and its requirements which include return on investment (ROI), cash flow, financial results (quarterly and annually) and return on capital employed.

Customer Perspective: More and more, management researchers are realizing the huge importance of customer focus and customer satisfaction. If customers are not happy with a company, they easily drift to the competitor’s firm or substitution. Hence, poor performance from the customer perspective is an indicator of decline. Some of the areas assessed by this indicator include customer retention rate, delivery aspect, timely delivery, market share enjoyed by the firm, all these pointers mark the customer satisfaction degree and quality of product delivery for customers.

Internal Business Perspective: This perspective allows to measure business process needs, and its procedures. Metrics based on this leg allows the firm to know how smoothly the business process operates, in short it points at the value chain. This metric allows the firm to know whether its products and services follow the company’s vision and mission. Some of the areas that relate to internal business processes are process automation, process blockages, duplicate activities across functions, number of activities per function and process alignment.

Employee Knowledge, Learning and Growth: This perspective emphasizes on learning and growth of employees. It concentrates on the training and development aspect. Employees are the main source who help to maintain an edge in the organization’s identified business segments or the niche. This leg deals with questions like job satisfaction, training & learning opportunities for the employees. It also measures the employee turnover and level of expertise gained by them for the job. According to Norton and Kaplan, learning is considered a much more important criterion than training. Additionally, they emphasize the importance of using high performance index by assisting the employees with technology to improve their skills in order to create a better work environment.

Mapping Strategy: is an important initial task in building a balanced scorecard approach is what the Balanced Scorecard Institute calls strategy mapping in which a company focuses on their strategic objectives and then map them to each of the four evaluation areas. Information is collected and analyzed from four aspects of a business.  This strategic tool looks beyond the traditional financial measurements of performance and examines the organization’s operations from the viewpoint of the customer, the shareholder, internal processes and organizational learning. Hence it caters of the long-term health of the organization and change management. The strategic map of company involves quantitative measurements, focused communication and employee empowerment.

The commercial vehicles business unit (CVBU) of Tata Motors was among the first Asian organizations to be initiated into the prestigious Balanced Scorecard Hall of Fame, in recognition of its exemplary success with the model. The company is one of the world’s top 10 truck manufacturers and the CVBU began deployment of Balanced Scorecard in 2000, in an attempt to cure years of poor financial performance. The focus was on achieving a turnaround, and then progressing to sustainable growth. Within 2 years of implementation, the company began to show tangible improvement in performance including a 40% growth in revenue.

The BSC is relevant to both manufacturing and service sector companies and similarly to both large and small organizations. While the U.S. army, with over one million people implements it successfully, a printing press in Sydney with hardly ten employees also can use it. Both are practitioners of the program. Similarly, governments and local bodies can benefit by implementing the balanced scorecard. For example, Mecklenburg County is the largest county in North Carolina and the most urban. The county, which includes the city of Charlotte, has approximately 969,000 residents and the population continues to grow at about 3 percent a year. Mecklenburg County has used BSC successfully for its governance, Ethiopian Health Ministry also has been successfully implemented the BSC strategy.

Most companies in 21st century use software solutions to track data related to the balance scorecard. As data is entered or collected it is computed within the balanced scorecard. The “Balanced Scorecard Institute” is quick to point out that software solutions do not create a balanced scorecard on their own. Companies have to develop their system and then use the software as part of implementation.

Consumerism promotes both social as well as economic conditions which encourages the buying of goods and services in ever-greater amounts. And, consumerism implies better economy of a nation. The term refers to the consumer protection which seeks to defend and inform consumers to be informed of practices as honest advertising and packaging, product guarantees, fair price, and enhanced standards of safety. In this regard it is a movement or an array of policies having a mission of regulating the products, methods, services, and standards of sellers, manufacturers and advertisers in the buyers’ interests. As per economics definition, consumerism means economic policies of laying importance on consumption. In a sense, it is believed that the consumers are free to make choice and should dictate the society’s economic structure. The term “consumerism” had been first used in the year 1915 and referred to “advocacy of the rights and interests of consumers” defined in Oxford English Dictionary. Consumer protection plays a crucial role in building a fairer, safer world.

In the developing countries, consumers are yet to grow to be mature in their decision making. Consumers need to think seriously regarding their requirements. Most of the products are purchased by the consumers based on herd mentality; if neighbors buy something, or friends buy then even I want to buy. Also, there are many products in the market that signifies the status symbol like food processor, microwave, home theatre, dining tables etc and the consumers are ready to purchase these products even without having much demand. Some life-events influence consumer behavior; these life events which otherwise can be rationally handled; need, arousal, information, search need to be evaluated while looking at alternatives which does not happen.

In India there are strong and clear laws to defend consumer rights. Out of the various laws that have been enforced to protect the consumer rights in India, the most important is the Consumer Protection Act, 1986. According to this law, everybody, including individuals, a firm, a Hindu undivided family and a company, have the right to exercise their consumer rights for the purchase of goods and services made by them. It is noteworthy that, as consumer, one knows the basic rights as well as about the courts and procedures that follow with the infringement of one’s rights.

In general, the consumer rights in India are listed below:

• The right to be protected from all kind of hazardous goods and services: Goods or services that can be proved hazardous to the safety or life of a person offered for sale, unknowingly or knowingly, that cause injury to health, safety or life. According to the Consumer Protection Act 1986, the consumer right is referred to as ‘right to be protected against marketing of goods and services which are hazardous to life and property’. It is applicable to specific areas like healthcare, pharmaceuticals and food processing; this right is spread across the domain having a serious effect on the health of the consumers or their well being viz. Automobiles, Housing, Domestic Appliances, and Travel etc. When there is violation of the right then there occur medical malpractice lawsuits in the country. It is estimated every year that thousands or millions of citizens of India are killed or seriously injured by immoral practices by doctors, hospitals, pharmacies and the automobile industry. Still the government of India, known for its callousness, does not succeed in acknowledging this fact or making a feeble effort for maintaining statistics of the mishaps
• The right to be fully informed about the performance and quality of all goods and services: The right to information is defined as ‘the right to be informed about the quality, quantity, potency, purity, standard and price of goods or services, as the case may be so as to protect the consumer against unfair trade practices’ in the Consumer Protection Act of 1986. In the market place of India, consumers get information by two ways namely advertising and word of mouth however these sources are considered to be unreliable but still this word of mouth is quite common here. Because of this, the Indian consumers hardly have precise and complete information for assessing the true value, safety, suitability, reliability of any product. Usually the hidden costs can be found, lack of suitability, quality problems and safety hazards only after the purchase of the product.
• The right to free choice of goods and services.
• The right to be heard in all decision-making processes related to consumer interests.
• The right to seek redressal, whenever consumer rights have been infringed.
• The right to complete consumer education.

The Consumer Protection Act, 1986 and several other laws like the Weights, Standards & Measures Act need be formulated further to make sure that there is fair competition in the market and free flow of correct information from goods and services providers to the ones who consume them. In fact, the degree of consumer protection in any country is regarded as the rightly gauged which accelerates progress of the country. There is high level of sophistication gained by the goods and services providers in their marketing and selling practices and different types of promotional tasks viz. advertising resulted in an increasing requirement for more consumer awareness and protection. The government of India has realized the condition of Indian consumers therefore the Ministry of Consumer Affairs, Food and Public Distribution has incorporated the Department of Consumer Affairs as the nodal organization to protect the consumer rights, redress the consumer grievances and promote the standards governing goods and services provided in India.

If there is infringement of rights of consumer then a complaint can be made under the following circumstances and reported to the close by designated consumer court:

• The goods or services purchased by a person or agreed to be purchased by a person has one or more defects or deficiencies in any respect.
• A trader or a service provider resorts to unfair or restrictive practices of trade.
• A trader or a service provider if charges a price more than the price displayed on the goods or the price that was agreed upon between the parties or the price that was stipulated under any law that exist.

Consumers International (CI), the global federation of consumer organisations, set out to consider the state of consumer protection around the world through a global survey of its member organisations. Seventy consumer groups from 58 countries participated in this research, which covers a wide range of consumer protection issues. The results provide an discerning global snapshot of consumer protection across a wide spectrum of countries, and an invaluable contribution to CI’s work on consumer justice and protection. The results of this survey also come at an important time in the ongoing international development of consumer protection. The key principles of consumer safety were initially being protected at an international level in the UN Guidelines for Consumer Protection (UNGCP). Since being established in 1985, the UNGCP now forms the basis of consumer protection legislation in many countries around the world. CI and its member organisations are contributing to this process to ensure that the guidelines are revised to reflect the reality faced by consumers in the 21st Century.

Conclusion: While the business world is experiencing the how consumerism is changing the way the world shops because of the consumer’s ability to get information about whatever he wants, whenever he wants and this power has given the consumer an unprecedented strength. In markets with highly transparent prices, they are kings. And we see highly transparent markets only in developed countries. The implications for business are colossal; threatening for some and welcoming for others. For instance, the huge increase in choice makes certain brands more valuable, while some lose their value. And as old business divisions crumble, a strong brand in one sector can kill other brand’s potential. Look at how Apple has used its iPod to take away business for portable music players from Sony; Starbucks is aiming to become a big noise in the music business by installing CD-burners in its cafés; and Dell is moving from computers into consumer electronics.

A Brand Ambassador is someone who, at the most elementary level, symbolizes a brand in a positive way; he/she embodies a brand. The brand ambassador communicates the message of a company to consumers or people who would be interested in buying the company’s brand after learning about it. Thus, BA puts a human face on the multi-million dollar corporations because consumers associate with them more effectively.

The affinity consumers have for certain celebrities can greatly influence their purchase decisions. People perhaps feel that, “If the product is good enough for her, its good enough for me.” This philosophy is often the force behind advertisements for makeup, skin creams, lingerie, banks, eatables, beverages and attire. The brand ambassadors infuse confidence in the consumers to use a product/service. Essentially, the celebrity’s testimonial adds instant reliability to a small or big brand.

That’s why brand ambassador is a part of the company’s marketing and sales team. Celebrities endorse for products in lieu of heavy money. Therefore, they automatically become responsible if the brand turns out to be spurious/bogus/contaminated. It’s simple, before endorsing a product it’s their responsibility to check the credibility of a product/service. In the recent Maggi Noodle’s fiasco, the Uttar Pradesh Food and Drug Administration’s decision to recall packets of Maggi Noodles for reportedly having monosodium glutamate and lead more than permissible limits, film star Madhuri Dixit, who endorsesMaggi’s brand of ‘nutritious’ oats noodles is in trouble. The Haridwar FDA has issued her a notice  seeking an explanation as to how the noodles are nutritious, and on what the basis Nestlé is making such a claim. If she fails to respond within a fortnight, a case could be filed against her, according to officials of the FDA.

Can ambassadors simply shrug off their responsibilities when the brands endorsed by them turn out unauthentic?  Misrepresentation of products, especially in the food sector, is a serious issue, and not as silly  as many would like to believe. In February 2014, last year, the Central Consumer Protection Council, under the leadership of former Union Food Minister KV Thomas, decided  unanimously to propose laws to hold celebrities endorsing products also liable in cases of misleading advertisements. The rationale behind this decision of the CPCC was that celebrities had considerable influence over consumer choice, and that there must be some form of liability for the endorsements being made.

In US, Kellogg’s popular Rice Krispies cereal had a crisis in 2010 when it was accused of misleading consumers about its immunity boosting properties. The Federal Trade Commission ordered Kellogg to halt all advertising that claimed that the cereal improved a child’s immunity with “25 percent Daily Value of Antioxidants and Nutrients — Vitamins A, B, C and E stating the claims were “dubious.” Ironically, just a year prior, the company settled with the FTC over charges that its Frosted Mini-wheats cereal didn’t live up to its ads. The campaign claimed that the cereal improved kids’ attentiveness by nearly 20%, and was shot down when the FTC found out that the clinical studies showed that only 1-in-9 kids had that kind of improvement and half the kids weren’t affected at all. Now, we just cannot imagine this kind of strictness and vigil in the Indian administration. Our laws are indistinct and lack spirit to take up firm steps.

There is a notion that brand ambassadors can’t generally be tamed. The ad agencies do speak in favor of their models. When the going is good, everyone wants to be party to the success, but, when the going gets bad you can test the actuality of people. The celebrities behave larger than life. They should be held guilty for false advertisements because they exploit their fan following and their popularity. The fans revere them so much; they follow their personal lives and their styles to no end. Tiger Woods was a brand ambassador for Gatorade, Gillette, Accenture, AT&T, Gold Digest and Tag Heuer. After his plentiful extramarital affairs were revealed, the majority of these brands discontinued him as they found it difficult to continue him as their brand ambassador.

In India in 2012, actress Genelia D’Souza was summoned by court for allegedly making false promises through ads and brochures for a real estate company in Hyderabad. Andhra Pradesh High Court demanded her explanation as brand ambassador for a project called ‘Anjaniputra’ located close to Hyderabad Deccan when the project seems to have gone bust. This is the latest in how society and the laws in India are dealing with the extremely doubtful advertisements. It is a matter of time before similar questions are raised by other consumers who are swayed into investing in products or services, by fraudulent advertisements endorsed by celebrities who are supposed to also be role models.

The Home Trade scam of 2002 had the celebrity endorsement  of three big celebrities, Sachin Tendulkar, Hrithik Roshan and Shah Rukh Khan. Having created not a single product, the company made away with thousands of crore rupees of investor money, and celebrity-endorsed brand building  was a crucial part of their operation. Activists have also been speaking out against ads for sauna-belts, medicines, Hanuman-chalisa yantra and gem-stones on TV screens.

How can celebrities vouch for the authenticity and effectiveness of that product with great confidence without checking them? Like with politicians, an advertisement and the celebrities involved in it can simply be voted out. They can be thrown out in disgrace. This message is clear; the company and ad agencies cannot work on the premise that the consumers are fools. They better learn to respect their constituency, i.e. the consumers.

Due diligence should be exercised before making of an ad. All stakeholders must share their responsibilities. The three stake-holders in ad making are advertiser, advertising agencies and the media. Let’s understand this straight: in advertising, there’s a big difference between pushing the truth and making false claims. Most of us have some or the other time in our life been victims of false advertising. Are we going to take it lying low or question the companies to change their marketing policies? Can we allow the companies to continue to prioritize profits over the consumers?

In progressive countries like America and Europe companies need to face harsh penalties. Companies are made to pay up the consumers for cheating them.
Dannon’s popular Activia brand yogurt lured consumers into paying more for its purported nutritional benefits when it was actually pretty much the same as every other kind of yogurt.

In Canada and America law suits were filed against Dannon for falsely touting the “clinically” and “scientifically” proven nutritional benefits of the product.  In spite of the company got a famous spokesperson, Jamie Lee Curtis, for the supposed digestion-regulator, some customers didn’t buy it. Do you know that a class action settlement forced Dannon to pay up to $45 million in damages to the consumers? The company also had to limit its health claims on its products strictly to factual ones.

In another case, hundreds of car owners were extremely disappointed to find out that Hyundai and Kia Motors overstated the horsepower in some of their vehicles. In 2001, the Korean Ministry of Construction and Transportation uncovered the parody, which for some models was as much as 9.6 percent more horsepower than the cars actually had. A class action lawsuit in southern California claimed the companies were able to sell more cars and charged more per vehicle because of the false claims. In the end, the auto powerhouses had to pay customers; the settlement estimated to be between $75 million and $125 million.

In India, to protect rights of consumers the process of filing complaint and finding resolution needs a drastic improvement. Strict guidelines should be made and law suits must be resolved in minimum a week’s time. Then, we might find respite from getting cheated recurrently by companies, their advertisements and savvy brand ambassadors.

The term Marketing Myopia was coined by Theodore Levitt in his research paper published in 1960 in Harvard Business Review (HBR) which suggested that businesses will succeed only if they give the customers what they want. The businesses should meet the customer’s needs, to succeed in market.  A business live and dies by its customers and marketers don’t have a whole lot of room for errors to take care of them.

Levitt appealed the marketers through his paper to have a broader view of market. He called the narrow view of marketers of not giving consideration to customer’s likes and dislikes Marketing Myopia. According to Levitt, narrow-mindedness of marketers leads to failure only. Complacency in terms of a product orientation – wherein marketers are more concerned with product quality, product precision and uniqueness of product and when all efforts go in making the product with distinct benefits, the customer direction is often lost. When marketers are infatuated with consistent product improvement and they typically believe that an ideal product will sell itself shows their shortsightedness.

Similarly, when marketers concentrate on the manufacturing process keenly to make operational efficiencies and production optimization they tend to lose the customer focus; their key objective centers on production improvement processes. This orientation was prominent during the industrial era and in the capitalism period of the 1950s.

In the 1930’s, competition had increased to a great extent; the marketer’s basic focus remained on production precision and in many segments the demand remained unfulfilled. Automatically, firms started adopting sales orientation. When marketing idea rests only on the selling of goods or services which means when marketers concentrate only on pushing sales without really bothering to offer the products and services as per customer’s requirement the marketing focus is lost.

Levitt presented his viewpoints very accurately in his famous paper titled “Marketing Myopia” that contentment of the marketers in terms of product, production and sales is a pure illusion which can cause their failure in market. In my opinion Theodore Levitt was the original Marketing Guru; because this famous paper of Levitt marked the beginning of the modern marketing movement 54 years back. The concept is based on pragmatism. The paper was based on primary data collected from the oil companies. Levitt had redefined the oil companies business as “energy business” than just petroleum selling companies. The CEO’s of oil companies then started concentrating on vision and mission with a new spectrum.

One reason for the shortsightedness is due to unpredictability of the future. While this is a justifiable concern; in spite of a whole range of sales prediction techniques available in the market, the sales cannot be forecasted precisely.  But, the other view point is that when the market changes, it offers more opportunities to marketers; though it is not easy to win the market by creating an entirely new product category. Therefore, concentrating on the offering as per the customer’s need in the initial stage is a must.

In 2007, when Microsoft launched Windows Vista, the media and the public had high expectations. So did the company, which allotted $500 million for marketing research and predicted that 50% of users would run the premium edition within two years. But the software had so many compatibility and presentation problems that even Microsoft’s most loyal customers revolted. Vista flopped, and Apple’s Mac OS X desktop operating system clicked, causing many consumers to believe that Vista had even more problems than it did. Apple’s entry at the right time when market revolted against Vista gave it advantage of prohibiting Microsoft’s monopoly to a great extent.

The elements of a product such as core of the product – the ingredients, shape, size, color, design of product, the pricing and the packing of product matters.  As the business moves through the stages of product development, in the initial stage itself an understanding of the product development strategy helps. Making a good or even superior product cannot ensure that anyone will buy it. But, understanding of market, and the understanding of what consumers want does help in positioning of the product on the right plank.

Two strong reasons for marketing myopia:

Lack of depth in understanding the target market:  Marketers must know what makes their consumers buy their product. Which problems of their consumers need to be solved? Understanding the perceptions of the consumers helps in designing the products.  This is not an easy task with most products. When products fail, it is difficult to pinpoint which customers’ i.e which segment caused its failure. It implies ‘everyone’, which in fact means no-one. ‘Everyone’ includes the entire distribution approach, promotional strategy and the after sales service strategy. For example, if the product is a medical product, then the chain includes the channel partner who sells the product, the hospital that buys it, the doctors who uses it and the patients who benefit from it. All of them are involved in failing the product. They are all involved, but each must be considered independently while deciding the strategy. All of these players have different needs. Each player’s need requires to be understood. A detailed dialogue with each one and a detailed observation of each one will make the job easy.

Often marketing research is skewed when questions are not asked pin pointedly. When questionnaire is administered with blurred objectives the intent gets misunderstood. New products can take on a life of their own within an organization, becoming so hyped that there’s no turning back. Coca-Cola’s C2 (diet Coke) brand was a failure because of the fact that C2’s benefits weren’t distinctive enough. Coca-Cola identified a new market: 20 to 40 years old men who liked the taste of Coke excluding its calories and carbs and liked the no-calorie aspect of Diet Coke but they did not like its feminine image. C2, which had half the calories and carbs and all the taste of original Coke, was introduced in 2004 with a whooping $50 million advertising campaign. But, the product failed miserably due to skewed understanding of what customers really wanted. The budget couldn’t overcome rejection of the hybrid drink; the customers wanted full flavor with no calories or carbs, not half the calories and carbs. Friends, but the low-carb trend was short-lived. Positioning a product to leverage a fad is most common mistake made by marketers.

Absence of value proposition in pricing: The exercise on pricing process by which a company adds value to a product or service includes designing of product, production, distribution, marketing, and the provision of after-sales service. The pricing is also based on how each participant is going to make money from the product and what precision each of them is going to lend in making the product valuable for the final consumer.  This should be a formal process with a spreadsheet that quantifies the value proposition and commercial model. In 2004 P&G launched a scent “player” that looked like a CD player and emitted scents (contained on $5.99 discs with names like “Relaxing in the Hammock”) every 30 minutes. The company hired the singer Shania Twain for its launch commercials. This confused consumers, many of whom thought the device involved both music and scents, and the ambiguity caused failure of the product.

P&G lost heavily even because of its ambiguous pricing: hiring the celebrity singer, the advertisement campaign, the channel partner’s cost everything.  When a product is truly revolutionary, it requires a special handling. A strong educational campaign of how to use the product perhaps would have helped in boosting the sales of the product. The pricing of the product was randomly misunderstood by the consumers.

There are umpteen cases of product failures and product success; the fact remains that an organization needs to select and develop a product as per its target market’s taste, determine right price, select the ideal distribution channel to reach the place and develop and implement the right promotional strategy.

Organizations can avoid becoming myopic by listening to what the customers are saying; never stop evolving. Be mindful of new trends and remember those trends may live for long or die shortly. Keep adding new products to portfolio – practice self cannibalization, by doing so, they can enjoy bigger market share by gaining fresh frontiers. Listen to experts – be updated about new trends, new development on Internet – websites, blogs, micro blogs and industry analysis.

Marketing plays fundamental role in economic growth in the present global world.  It is therefore basic reason for studying marketing. Marketing stimulates research and new ideas resulting in new goods and services. Late Peter F. Drucker considered marketing to be the responsibility of the managing leadership within a business, not a separate function; he believed that sensible marketing strategies ensure planned economic growth in the developing economy where the scarcity of goods, services, ideas and excessive unemployment create hurdles in the growth of society. Good marketing efforts are needed for mobilization of economic resources for additional production of ideas, goods and services resulting in greater employment. The fundamental objectives of most companies are survival, profits and growth. Marketing contributes directly to achieving those objectives and is in fact seen as a key to profitability.

Marketing strategies represent the plan by which the firm delivers its value to the customers. In Michael Porter’s value chain, Marketing & Sales function occupies the core functions of business after inbound logistics and operations. In today’s business environment marketing is considered crucial – all functions such as sales forecasting, advertising, appointing sensible marketing channels, distribution and CRM are prioritized. Developing marketing strategies and implementing them will only help organizations to get sustainable results in our businesses.

The marketing function requires flexibility and imagination; it cannot remain stagnant, it needs subtle changes as per the environment. Here is an example – Technology maverick Michael Dell founded Dell Computers in 1984. The company was based on the direct-to-consumer model, which eliminated the retailer, allowing for price discounts and constant customer feedback. In 1988, spurred by growing investor interest in technology stocks, the company went public. But it wasn’t until 1991, the height of the 1990-1992 recessions, that Dell chose to make its most aggressive marketing move up to that time, and take on the established computer giants. The campaign coincided with the introduction of its first notebook computer. In 1991 when advertising in the entire computer hardware category was down by 17.5% over the previous year. Apple, Digital, IBM and Tandy – some of the category’s leading spenders went on investing and pouring money in their promotional efforts. Contrary to this, Dell instead kept its pace on eliminating the middleman while offering superior customer service. This and other few innovative strategies put Dell for the first time in the Fortune 500 roster of the world’s largest companies.

Marketing is speaking the consumer’s language; reaching out to them the way they want and communication with them in their fashion. These days the tech savvy consumers turn to online sources for information, which requires a company to establish an effective web presence to reach them, with an interactive site. Using Facebook or Twitter for marketing is one of the latest marketing trends. Many marketers have taken it well and therefore invest a lot of money into twitter advertising, knowing that it is particularly easy to gain the attention of a younger generation through advertising. Digital marketing is the in-thing. World recognizes Procter & Gamble (P&G) as the biggest advertising champion; hence any move by Procter & Gamble (P&G) is closely watched. A lot of attention has been paid to its recent announcement that it will cut $10 billion from its marketing budget over the next five years. Procter & Gamble (P&G) is a smart brand builder. At one of its big events in USA, Procter & Gamble (P&G) declared that it does not intend to focus on digital marketing but it recognizes that it exists in a digital world. Procter & Gamble (P&G) believes in adapting to the consumer behavior and it flexibly redesigns its promotional strategies.  Procter & Gamble (P&G) has adopted digital marketing in markets like Brazil, China, and India where digital marketing offers the best way to engage with consumers. In urbanized markets like the US, Tide and Bounty will continue to rely on TV commercials along side with digital integrated promotion as part of a multichannel brand-building plan.  P&G will look for opportunities to drive smaller brands with smaller budgets like Aussie and Old Spice through digital.

A good marketer can sell a comb to a bald man. Here’s how Coca-Cola’s COO, Steven J Heyer very elegantly describes the aerated drink as “Coca-Cola isn’t black water with a little sugar and a lot of fizz anymore that one of your movies is celluloid digital bits and bytes, or one of your songs is a random collection of words and notes. Coca-Cola isn’t a drink. Coca-Cola is an idea. Like great movies, like great music, Coca-Cola is a feeling.” This says it all. Marketing does the job of a dream merchant.

You can be a copy cat if required; everything fair in love and war when it comes to marketing. Since marketing evolves effective delivery of information to a targeted market which stimulates a demand for a product or service, the ability to effectively identify and reach that market is crucial. ITC in last few years filled it soap product line with products like Essenza Di Wills at the top end, followed by Fiama Di Wills in premium segment, Vivel in mid-segment and Superia at the entry level. ITC followed in the footsteps of HUL by offering each segment a product which suits the customer’s wallet. The retail shelves consist of a dozens of soaps from like Lux, Dove, Pears, Hamam, Breez, Rexona and Ayush and dozens of soaps from ITC. You have the Vivel with its variants like Sandal Sparkle, Sheer Crème and other variants priced at Rs 17 onwards seems to be in competition with Lux’s variants. These marketing wars are so fizzy and at times self-indulgent too.

A study by Harvard researchers several years ago found that in many product classes, consumers “lack either the ability or motivation to conduct a price comparison.” Their conclusions are still true today. We either can’t – or won’t – scrutinize a product price.

And how would you view this piece of advice from Robert G. Allen – the famous author of Multiple Streams of Income, and Nothing down “No matter what your product is, you are ultimately in the education business. Your customers need to be constantly educated about the many advantages of doing business with you, trained to use your products more effectively, and taught how to make never-ending improvement in their lives.”

The market consists of aware, alert, vigilant and watchful customers and also of gullible, trusting, naïve customers; God knows whether marketer are teaching the customers or customers are teaching the marketers??