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Transcript of Dhithi
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operationsimprovment
innovation
finance Department of Management StudiesIIT Madras
The DoMS Magazine
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1 Entrepreneurship @ IITM
5 Football Transfer Market
7 Government Bond Market in India
9 Crashing Into A Big Fat Greek Wedding
11 'Independent' Directors - Torchbearers of Corporate Governance
13 Online Channel Marketing
16 Consider This, In Exchange
An interview with Prof. L. S. Ganesh
By Vivek B. S.
By Prof. Thenmozhi M. & Karthika Nair
By Medha Satish Kumar
By Navneet Bhatnagar
By Vijay Menon
By Preetha Menon
Professor -In-Charge
Faculty Co-ordinator
Coordinators
Prof. G. Srinivasan
Prof. Rahul MaratheProf. Rupashree Baral
DoMS Interface TeamDesign Team [Amit, Prerna, Rupam, Suyash, Pawan]
August-September 2012Version 12.1
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Dear Readers
Department of Management Studies has always encouraged ideas and we have taken small, but sure steps towards innovation. Dhithi is a small effort in this direction. It is an endeavor by the DoMS family, to highlight the expertise, work and interests of this community of managers at IIT Madras. Dhithi serves to communicate our views and perspectives on the corporate world at large. From tracking the bond markets to football transfer markets, from entrepreneurship to corporate governance, it covers a wide spectrum of management concepts and thought processes.
I hope Dhithi will be an instrument of knowledge sharing amongst all those keen followers of the industry. We invite you to share your comments and suggestions on improving our initiative.
Best WishesG. SrinivasanHead, Department of Management StudiesIIT Madras
HOD’s Message
The DoMS Magazine
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“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.“
- Charles Darwin
Team Dhithi
The theory of evolution is not only true for animals and plant species in the natural world but also true for products and services which form a part of the business world. That's what has happened to 'Dhithi', our own business magazine this time.
It has evolved design wise with a greater emphasis on user-friendliness in terms of readability of the magazine, with more images, better presentation and style. On the content side the magazine has been aligned with the interests of the consumer.
The focus of the magazine is around two broad areas. One, is to enrich our understanding of the external world and two, to express our learning's to the business community for the general benefit of all.
But, this is just a step forward. As more editions are released we will strive to use our learning's in refining the magazine and improve its intrinsic value to our consumers.
From the editors desk
The DoMS Magazine
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@ IIT Madras
The IIT Madras Cell for Technology Innovation, Development and Entrepreneurship Support(C-TIDES), helps actualize this statement with its purpose of creation. C-TIDES is a student-led initiative trying to instill a spirit of entrepreneurship in students and faculty at IIT-M by promoting research, incubation and consultancy for start-ups. Over the years, many entrepreneurial ideas have been selected, entrepreneurs mentored and start-ups launched at the incubation facility, housed at the Department of Management Studies, IITM. Following are the excerpts from an interview with Prof. L.S Ganesh, Dean (Students) and Professor-in-charge of C-TIDES, on the relevance of C-TIDES and entrepeurship in educational institutions.
Genesis of C-TIDES goes back to 1960, when the students of IITM showed some early interest in learning about entrepreneurship. The initiative was mainly led by the under grads as they have both the time and resources that this entrepreneurship demands. It started out as the
1. What sparked the creation
of C-TIDES?
Entrepreneursh i p Engagement Forum which in late 90s was transformed into C-TIDES. A long w i th this forum, IITM was one of the oldest institutions to h a v e M . S . Entrepreneurship course, which even though low key was an extremely successful program. So things were working in synergy between M.S. Entrepreneurship and C-TIDES in order to promote the spirit of entrepreneurship among all IITM students and faculty.
Until 2008-2009, C-TIDES was mainly involved with conducting national
2. It has been 14 years since
the inception of C-TIDES in 1998.
What major changes have taken
place so far in C-TIDES according
to you?
“Entrepreneurship is neither a science nor an art, it is a practice.” ~ Peter Drucker, "The Father of Modern Management."
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competitions like Breakthrough and Genesis as well as lectures, interactions and workshops with industry personnel. There used to be 8-9 activities spread over one academic year. The present model is ' re la t ionsh ip-based ' and the Institute's students are expected to benefit through internships, live projects, opportunities to develop case studies, and also enjoy the positive image that will emerge consequent to successful incubation. In 2009, we moved from the competition mode to actually setting up incubation facilities. The incubation centre was formally inaugurated at DoMS, both as a physical and business entity. They were provided with the necessary infrastructure along with advice in various aspects of marketing, finance, HR, operations and to some extent, law. It started off with 2 or 3 incubations – EcoLogin Tourism & Travels, Bodhbridge Educational Services, Life Online, etc. Presently the incubation centre houses about 10 different start-ups and all of them have been doing exceptionally well. Many of them have even won national and international l eve l awards . For example , Bodhbridge Educational services was placed in NASSCOM's “Emerge 50” in 2011, Sea6Energy was awarded “Emerging Company of the Year” in t h e c a t e g o r y o f I n d u s t r i a l Biotechnology, in India Bio 2012 held in Bangalore, VDime Innovative Works was awarded “Best Mobile Enterprise product or service” in the Digital Awards made by the Internet and Mobile Association of India, etc.
3. What is role of DOMS in C-
TIDES?
The Department of Management Studies (DoMS) is a benefactor to C-TIDES. It enables student-led start-ups to flourish by providing the required physical infrastructure for free. Also every start up has a faculty member as a mentor. DoMS has played a crucial role in providing spatial infrastructure, connectivity and sound support. They have access to all utilities of DoMS as well as free advice from our management professors! The members of the start-ups of C-TIDES as well as the members of Rural Technology and Business Incubator cells of IITM Research Park are also allowed to attend classes at DoMS for free. Apart from this, DoMS is the coordinator for the MS Entrepreneurship programme at IITM, which has a natural affinity towards C-TIDES activities. So there is added advantage for housing the incubation facilities at DoMS.
The primary aim of C-TIDES was to maximize the success rate of enterprises and it has succeeded in doing the same. Among the 15- 16 enterprises that are or have been engaged with C-TIDES, around 5 of them have won international and national awards. This is a remarkable achievement for any incubator facility, so DoMS can take pride in the fact that it enabled the success of these enterprises. To give C-TIDES a
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maximize the success rate of enterprises and it has succeeded in doing the same. Among the 15-16 enterprises that are or have been engaged with C-TIDES, around 5 of them have won international and national awards. This is a remarkable achievement for any incubator facility, so DoMS can take pride in the fact that it enabled the success of these enterprises. To give C-TIDES a distinctive feature we are planning to provide a separate area in DoMS just for the enterprises and this would further improve their operational efficiency.
This is a project coordinated by Prof. Thillai Rajan of Department of Management Studies, IITM. This initiative has been set up with the assistance of the Ministry of Micro, Small and Medium Enterprises, Government of India. It is an incubation scheme that provides funds to select institutions. Around 30 institutes across country are selected to receive these funds. They have to submit their business proposals and the selection committee would look
4. Please tell us about the IIT Madras- MSME incubation initiative launched by DOMS and C-TIDES together, which provides funding up to Rs. 8 Lakhs for ventures? into the quality of the proposal, the risks
involved, the possible returns and the efforts required and award the funds to selected applicants. It supports ventures in any sector such as biotechnology, information technology, engineering, business management, etc. These incubations can leverage the extensive contacts and alumni network of IIT Madras for advice as well monetary support for the further stages of their enterprise. The incubation centre also provides greater visibility to these startups.
From a national perspective, it is very critical to promote entrepreneurship. The fact that India ranks very low in global competitive index is a sad story considering the standards of our educational institutions. We know we are capable and it has been demonstrated by the fact that many Indians have occupied leadership positions in some of the most reputed
5. What will you suggest to a
student who aspires to become
an entrepreneur?
,
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web:facebook:e-mail:
www.facebook.com/CTIDESIITM
www.c-tides.org
firms in the world. But as a nation we are at the bottom of the heap from the perspective of start-ups and new enterprises. To turnaround such a sorry state of affairs, the entrepreneurship aspirants need to keep certain facts in mind.
1. Know, realise, assimilate and feel the shame in our country's competitive
position. We should use this shame as the motivation to create
something new.
3. Branding is another important aspect. We should not only create value in
product or service, but also inculcate trust in the market for our brands.
Following these steps will throw open the doors to a fantastic world of
opportunities.
There will be a wider scope for competition within and outside India. This
requires a lot of motivation, value creation and branding as well as
tremendous preparation.
It would help mould the fence sitters into dedicated entrepreneurs.
Key elements of entrepreneurship are value in market, risk of value, cost of
value and returns to us and the society.
- Based on the Interview taken by DI Team
2. Think value. We should use value transfer as a basis for competition.
This requires us to understand and discover customer needs so much so,
that even the customer says “I didn't realize it, but I need it”.
4. Sustainability- Nowadays, at policy level, be it global, national or
regional, moderation is the mantra to tackle the rising sustainability and
green issues. Sustainability and green ideas should be key aspects of our
value creation.
Read and assimilate Indian National Industrial Classification. At the
granular level, develop an understanding of India's position in each
industry, in terms of import, indigenous and export content.
This will help young individuals to identify the industries to which they can
contribute using their background knowledge and competence. It will also
help them to understand the competition, supply chain, value chain and the
future of those industries.
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F tballTransfer Market
he football transfer market is one of the most interesting off field
activities that happen in club football. Clubs can buy and sell their Tplayers to other clubs for a certain amount of money or for free, if the
player is out of contract. Sometimes, players have forced their clubs to leave them, to
join other clubs in between contracts in the post-Bosman era. As a result of this,
millions of dollars are spent on transfers, making this activity a very significant one.
English clubs lead the way in transfers owing to their buying prowess. Chelsea and more recently Manchester City have gone on a spending spree and shaken the stalwarts of English football like Arsenal, Manchester United and Liverpool, who are struggling to come to terms with this insane spending. To quote some facts, Manchester City has spent an astounding £930 million, turning a mid-table team into a title winning side in just 5 years. This is just an instance of what money spent in the transfer market can do. To just put things into perspective, Arsenal FC, a team consistently in the top 4 in the
Premier League has spent less than £400 million in the past 15 years. This just shows the absence of parity among Football clubs.Players have a very commanding presence in the transfer market. More recently all the top clubs like Chelsea, Manchester United, Manchester City and the likes were interested in signing the famous footballer,Eden Hazard. In this scenario, the player got the choice and he decided to join Chelsea. In 2001, Zidane chose to go to Real Madrid from Juventus for a then world record of more than £44 million. It turned out to be a masterstroke for Real Madrid as they won the Spanish league and the
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league soon and the merchandise of
Zidane began to sell like hot cakes.
David Beckham and Cristiano Ronaldo
were bought by Real Madrid for huge
amounts of money from Manchester
United, both translating to league
victories. The likes of Arsenal and
Barcelona are more obsessed with
training youngsters through their
academies instead of spending
lumpsums like Real Madrid and
Chelsea. This does guarantee
good returns on investments
for players but as Arsenal has
experienced, its players are
poached by bigger clubs
turning it into a feeder club.
The profit and trophies trade-
off is a very difficult proposition
to deal with as observed by the
clubs.
The ability of top sides like Chelsea and
Manchester City to pay higher salaries
to players automatically make them
ideal destinations for players, apart
from their ability to win trophies. These
clubs have almost formed an oligopoly
and the other clubs have struggled to
compete with these sides.
U E FA , t h e E u r o p e a n
g o v e r n i n g b o d y i s
implementing Financial Fair
Play rule according to which
each club can only spend
what it earns. This would hurt
clubs like Chelsea and City and the real
challenge for them is how to
manipulate this rule and continue what
they have been doing so successfully.
On the flipside, clubs like Arsenal and
Manchester United are looking to
capitalise on this rule to progress. Who
will win the battle remains to be seen.
- By Vivek B. S., First Year MBA student, Batch 2012-14, DoMS, IIT Madras
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Treasury Market or the Government Securities market (GSM) constitutes the major portion of the debt market and it provides resources to the government for meeting its short term and long term needs and acts as a benchmark for pricing corporate papers of varying maturities. The Indian Bond market has been dominated by government securities and the daily trading volume is estimated to be $ 92 billion to $100 billion as on 2010 and it accounts for 50.5% of the GDP. In terms of volume, the bond market is regarded to be larger than the equity market. Most importantly, the market is next only to the Japanese and Korean market in Asia, in terms of performance. The investor’s preference for debt market, in India has been relatively a recent phenomenon, an outcome of the shift in the economic policy. In a developing economy such as India, the role of the public sector and its financial requirements need no emphasis. Growing fiscal deficits and the policy stance of “directed investment” through statutory pre emption (the statutory liquidity ratio
– SLR for banks), ensured a captive but passive market for the Government securities. Besides, participation of the Reserve Bank of India (RBI) as an investor in the Government borrowing programme (monetization of deficits) led to a regime of financial containment. Due to the administered interest rate regime, the asset liability mismatches and the banking system, which was the major holder of the Government securities portfolio in the past made the bond market inactive for a long.
Reforms and Emergence of Bond Market:
However, Bond Market has again gained pace owing to various reforms like gradual deregulation of interest rates and the Government’s decision to borrow through auction. In India, the monetary as well as government debt management functions are centralized by the Reserve Bank of India. Predominantly, the objective of the debt management policy is to reduce the cost of debt servicing in the long term for the investors, while the effectiveness of the monetary
Government Bond Market in India
“I used to think that if there was reincarnation, I wanted to come back as the president or the pope or as a .400 baseball hitter. But now I would like to come back as the bond market. You can intimidate everybody.”
— James Carville, political advisor to President Clinton
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policy depends upon how efficiently the transmission mechanism works. This in turn depends on the efficiently determined interest rates structure.
The transformation of the Indian fixed income market can be traced back to the reforms initiated in the government securities market in the late eighties and early part of the nineties. The year 1994 is considered as a turning point in Indian financial sector reforms when the Government of India took the decision to put an end to the monetization of its deficits through issuance of ad hoc treasury bills to the RBI. Through this landmark decision, the Government started to borrow from the market at market-related rates, thereby marking the beginning of an era, which allowed the markets to decide the price of money and thus the development of fixed income securities market.
Advent of Debt Market:
Traditionally, the developmental financial institutions, such as the Industrial Development Bank of India (IDBI), provided long term funding in India. Ever since these developments, f inancia l inst i tut ions changed themselves into banks and there has been a vacuum, which logically facilitated the development of a debt market. However, the growth in internal resources and equity financing averted this. For those resources which had to be mobilized through the debt market,
corporate preferred the private placement route. The absence of a well-developed derivatives market also hindered the development of the corporate market, since there were no way both the issuers and investors could hedge their risks. Meanwhile banks, whose resource base (liabilities) are short term in nature, were not able to undertake long-term financing. This situation made them vulnerable to interest rate risk. Eventually, the need to replace bank financing by bond financing was highlighted by the East Asian crisis, since the prevalence of bank financing was quoted as one of the reasons for the crisis. Bond financing is now considered as a relatively more stable source of debt financing, as bank loans are primarily illiquid, fixed-price assets.
- By Prof. Thenmozhi M. & Karthika S. Nair, DoMS, IIT Madras
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CRASHING INTO A BIG FAT
GREEK WEDDING
When life experiences become limiting and we start looking for a change, for something that will help us break from our mundane routine and pace, something that gives us a larger than life picture, the obvious answer is movies. They not only helps us escape into a world of different ‘realities’; the celluloid world brings in lot of color, action, larger aspects of l i fe and of course, romance. Thanks to Hollywood, there are many who can move on with dull things and have a fantasy that they are a caped crusader! And, many of Hollywood’s hits and block buster’s bring in interesting insight to cultural exchange. But, it plays on our simplistic view of a typical cross-cultural exchange either b e s e t w i t h f u n n y stereotypes, social gaffs and harmless fun or on the o t h e r h a n d r a c i a l discrimination, offensive comments and violence. To illustrate this extreme portrayal, take two examples of Hollywood magic- one where cultures remain as a tightly held steadfast aspect of life and another where all differences are accepted and forgiven.
This sordid tale portrays the hard facts of racial struggle in America today. Tussle among White, Black, Arab and
Crash – A bouquet
Asians leading to misunderstanding, errors and violence. The movie tells the story that everyone discriminates. The victims perpetrate on to others what they suffer themselves. With a ‘we-they’ attitude, people of different culture remain separated. The movie maintains that cultural stereotyping is
a result of abundant misunderstanding and miscommunication. The members of different culture groups remain true to their ethnicity and struggle for survival.
This refreshing romantic comedy pushes all the right buttons of a love sick viewer. It takes an idiosyncratic attitude t o w a r d s c u l t u r a l d i f f e r e n c e . T h e protagonis t ’s Greek family is interfering, noisy
and most importantly huge (compared to her fiancé’s)! Disapproving parents are easy to win over; all differences are forgiven, accepted or treated as just mildly inconvenient. Participation in an intermixed culture is possible because this loving couple comes from the perspective of ‘us’.
Reality check:
Sorry to burst your little bubbles, but cultural exchange is neither a bouquet
My Big Fat Greek Wedding – A melting pot
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nor a melting pot, it is deeply imbedded in us, a part of us. Though people react differently in many situations, most of these would remain in the grey area. We rarely face such extreme situations. The most trouble one would have is to be lost in a foreign land. You will find people are helpful, interested, and polite. That doesn’t mean they will let you marry their children, nor does it mean they will try to shoot you. As self-righteous as we might want to be the bottom line remains everyone has their prejudices and e v e r y o n e discriminates, and we see this in our everyday life. It is an important aspect of the human nature to view and judge people. We categorize and classify, which helps us deal with the complex social behavior around us. But as people interact with different culture, they classify people at a more enriched and sophisticated level, beyond culture and ethnicity.Therefore cu l tura l exchange requires effort; efforts on both sides, to become cognizant of one’s own behavior and those of others. But is a melting pot of intermixed culture an ideal situation we must aim for? Though it sounds like a step towards utopia, it doesn’t happen this way. Cultures evolve, yet they remain distinguished from one another.
For cultures to co-exist harmoniously there needs to be a critical balance between both. This can be achieved through a conscious effort towards social pluralism, open communication and a sense of adventure!
-By Medha Satish Kumar, Doctoral student, DoMS IIT MadrasShe is specializing in cultural management, and would like to have her dissertation made into a Hollywood film.
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Independent Directors: Torchbearers of corporate Governance
Investors and regulators are compelling
corporates for increased transparency and
accountability in governance. Corporate
governance abuses that have come to light
in the recent past (such as Satyam
Computers, Enron, Siemens etc.) have
raised questions about the ways in which
corporate boards function. Public scrutiny
has grown enormously on how the
promoters govern their businesses, be it -
structuring of businesses and transfer of
assets between group companies,
preferential allotments of shares to the
dominant shareholder, payments for
“services” to closely held group companies
and so on. Inclusion of experienced
professionals as independent directors on
the board has therefore gained importance
not only for the stakeholders or minority
shareholders but also for the promoters.
Though having independent directors on a
company's board has always been
considered a best practice and is now even
made mandatory, it has not had the desired
effect in real terms. Independent directors
have largely been passive and at times
even riddled with conflicts of interest. It is
essential for businesses to induct 'truly'
independent directors on their boards to
allow objective evaluation of the
management's performance and well-
being of the company without any conflict
of interest or undue influence of interested
parties. This becomes even more important
in cases of family businesses as they are
more vulnerable to abuse of power. Family
members on the board need to allow their
executive actions to be open to scrutiny.
Why bring Independent Directors on-board?Companies have many good reasons to
bring on board independent directors
other than to fulfill the regulatory
requirements. If inducted in the right
spirit, independent directors add a lot
of value to the company.
?Independent directors bring in
expertise and diverse knowledge
pool to the business thereby
improving quality of boardroom
decisions.
?They can coach and counsel the
management/family members
on legal, technical, financial or
leadership issues.
?They raise a 'voice of reason'
that counterweighs bias in
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d e c i s i o n - m a k i n g , f a m i l y
factionalism and vested interests.
They serve as spokespersons of
minority interests and ensure
objectivity in decisions.
Independent directors bring an
outside perspective on strategy
and control. They can help others
view new strategic dimensions,
opportunities and risks for a business.
This challenges the 'status quo' in the
way business is conducted by the
incumbents.
They keep a vigil on the
m a n a g e m e n t a n d f i n a n c i a l
performance of the company.
Without direct family ties to any
one group or individual, independent
directors can bring balance and
clarity to resolve boardroom conflicts.
They can also help improve succession
planning by being a neutral and
objective voice.
Family businesses can benefit by
inducting distinguished qualified
professionals in the capacity of
independent directors on their boards
as this would help their businesses to –
Demonstrate to shareholders,
c u s t o m e r s a n d o t h e r
s t akeho l de r s t ha t t he i r
organisation is professional and
successful.
Operate at a strategic and
tactical level to create and
sustain growth.
Appreciate all facets of effective
business leadership and good
corporate governance.
I m p r o v e t h e b o a r d ' s
effectiveness.
?
?
?
?
?
?
?
Q u a l i t i e s D e s i r e d i n
Independent Directors
In order to discharge their duties
effectively, independent directors must
be -
?Knowledgeable (Possess
expertise)
?Sensitive (Empathetic to the
needs of both the family and the
business)
?Objective (Impartially analyse
business situations/decisions on
merit)
?Inquisitive (Vigilant and
curious to know 'what' and 'why' about
decisions taken)
?Forthright (Candidly voice a
concern or disagreement)
?Available (Devote quality time
to oversee company affairs)
?Prepared (Prepare for and
attend board/committee meetings)
?Good Team-workers (Work
well with others and bring people with
divergent interests to work together
towards a common business goal)
Family businesses often need a more
nuanced set of behaviour and people
skills in independent directors. On one
hand, they need empathy and patience
in dealing with family members but on
the other they need to have an ability to
be “super”-independent and offer
candid opinions about board and
management decisions.
Family businesses must aim to bring
independent voices on board, be open
to debate and welcome alternative
suggestions. They must establish
individual accountability and a climate
of transparency, trust and candidness
in the board. Managements of family
businesses need to genuinely believe
that institutional sustainability is
paramount. The keys to that are
boardroom relationships based on
- By Navneet Bhatnagar, Research Scholar, DoMS, IIT Madras
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ou wake up, get ready, have
breakfast and are about to leave
for work when you suddenly Yrealise that you are forgetting
something important. Facebook! You
quickly log in and check anything new
that may have happened between the
time you went to sleep a few hours ago
and now.
That's the power of the online
media, and corporates and media
houses, all over the world want to cash
in on it. Online marketing has been
around for the last decade and a half but
has gained more significance in the last
five years or so mainly due to the
advent of social networks.
What we just saw was online
marketing but there's another channel
called offline marketing. The offline
channel consists of public connect
which in simple terms means, getting
contacts of people and organizations
and increasing the awareness of online
buying among them which ultimately
results in sales. India is still a traditional
market and most of the people are still
comfortable buying from physical
stores rather than online. One of the
reasons for this could be lack of trust in
the process as people fear losing their
hard earned money. Another reason is
that a lot of people like to buy products
after examining them physically. This is
one comfort that the online store can
never provide.
But then the online purchase has
other advantages like time saving,
providing all sorts of information on the
products, providing a wide variety of
choice and so on. Nowadays most
onl ine companies provide the
customers with the option to pay after
getting their products delivered known
as Cash on Delivery (COD) facility.
..
A technique called Search Engine
Optimization (SEO) boosts the search
engine listings by optimizing a website
through keywords. The SEO team does
the work of modifying the home page of
the website with common keywords
that customers search for in the
internet among many others. This helps
in improving the search rank and
thereby increasing the traffic. Another
technique called Search Engine
Marketing (SEM) deals with the paid ads
that appear at the top after each
search.
For example, Google Analytics
(GA) helps in tracking the progress of a
campaign or an ad. It also lets us know
how the ads of the company are
showcased to the target customers
when they are online.
How It Works.
Online Channel Marketing
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This involves a lot of factors and cannot
be explained easily. In simple terms, it
involves understanding the customer
behaviour and
displaying the
ads only to the
r e l e v a n t
customers. In
fact Google ads
are very crucial
as the company
earns most of its
revenue from
shoppers who
r e a c h t h e
website by clicking on some ad through
Google.
Facebook is increas ing ly
becoming a sought after channel for
advertising. Once you log in to
Facebook you can notice six ads on the
right side end displayed one below the
other. The first three have the
advantage of initial visibility and the
remaining three have visibility
throughout the rest of the page. That is,
once the user starts scrolling, the
second set of three ads is seen
constantly. ̀ The use of proper key
words and 'call for action' phrases like
'shop now', 'buy now!' are some things
which a person should keep in mind
while creating ads. Now the hard part of
the job follows. This is to monitor the
performance of the ad based on several
parameters like Click through rate
(CTR), number of impressions (number
of times an ad is shown to the target
segment), and number of conversions
(buying) etc. Based on the values
obtained the higher performing ads are
retained whereas the lower performing
ones are scrapped. The monitoring of
ads is to be done on a real time basis.
This can be related to how share
brokers monitor the changing stock
prices continuously.
Once the ads are created in
Facebook the next
quest ion is to
whom they need to
be shown. There is
n o p o i n t i n
displaying a baby
p r o d u c t t o a
teenager or a
kitchen utensil ad
to a school boy.
There is a detailed
procedure to be
fo l lowed which
decides the target segments including
the age, gender, income, place of stay
and many other factors. So just see how
many factors are to be considered just
to publish an ad in a website. Creation
of ads in Google is still more hectic as
Google can be compared to an ocean if
Facebook is a river.
Nowadays people buy more of
bundled products than individual ones.
Bundled products are an attractive offer
for the company as bundles help to
introduce variety in sales and also it
helps the company in reaping profits.
Customers go for bundled products so
as to avail the benefits of lesser price
(discounts on products) when
purchased in bulk and also to save time
by reducing the frequency of purchase.
There are different types of bundling;
bundling of multiple number of similar
products, bundling of different products
(complementary items), pure bundling
(where people can only buy the entire
bundle or nothing), mixed bundling
(where consumers have a choice
between buying the entire bundle or
individual products) etc.
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Algorithms are designed to
decide the optimum bundle size for
different products in the case of
bundling of similar products. This
requires surveying a sample of
customers to know their preferences on
bundling and how many products they
prefer to buy and so on.
It is a well known fact that Google
earns revenues mainly through its
online sponsored ads but there are
countless other examples where online
marketing succeeded especially in the
social media domain.
A Facebook ad campaign that worked
wonders for Burger King was the
“Whopper Sacrifice” phenomenon
where every participant would get a
free burger coupon upon deleting 10
friends from his/her friend list. Nearly
20,000 coupons were sent and 2,
00,000 friends were deleted!
In 2011, another successful Facebook
ad campaign saw Ford become the first
car manufacturing company to reveal
their new model(Ford Explorer) using a
social networking website instead of an
auto show.
An innovative case of online
What worked...
marketing is pixel marketing which was
conceived by an English student to raise
money for his education, called Million
D o l l a r H o m e p a g e
(www.milliondollarhomepage.com). As
the name suggests, the website has 1
million pixels for placing ads at the rate
of 1 dollar per pixel, thus generating
revenue of 1 million dollars.
Facebook users spend 175 million
hours per day (as of January 2012) and
that excludes mobile usage. Google on
the other hand gets more than 1.5
billion visits per day. Such staggering
numbers indicate the potential of online
media especially social media. With
Facebook recently crossing the 1
billionth user mark, advertisers globally
would want to capitalise on such a
g row ing med ium tha t spans
geographical boundaries and provides a
much cheaper and bigger reach than TV
or radio.
The Bottom Line
- By Vijay Menon, Second year MBA student, Batch 2011-13, DoMS, IIT Madras
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CONSIDER THIS, IN
ouldn't it be nice if you could
simply turn in old clothes Wthat you didn't use any more
for new ones, the next time you were
eyeing a new pair of jeans? It could
save you space in your wardrobe, you
could pay a lot lesser for the new buy
and you could simply do this more
often!
‘Showpping' is a recent
promotion run by Marks & Spencer's in
the United Kingdom to encourage
customers to bring back old clothes
while buying new ones. If you thought
the motive at M&S was to just get you
to shop more, think again! M&S has a
Shwop Lab, that studies the future of
fashion using the types of fabric that
are turned in. The lab then uses that as
an input to design more sustainable
fabrics for the future.
But then, exchanging your
old for the new is not a new
phenomenon. At least, not in India.
Some of us may be aware of the
'bhandiwala' who took back old clothes
and gave us sparkling stainless steel
kitchenware in exchange. Some of the
other categories that have joined the
exchange fever (off late) are car tyres,
travel bags, furniture, bed linen and hi-
tech products. Of course we already
know about some age-old-exchange-
favourites – like gold jewelry and white
goods.
Re s e a r c h r e v e a l s t h a t
consumers consistently prefer an
'Exchange offer' over a 'Discount Sale'
and the theory beh ind th i s
phenomenon is called 'Prospect
Theory'. Consumers consider retiring a
used product that is still functional as a
'loss'. Compensating this loss is
weighted as far more value-adding
than getting the same
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DHITHI - The DoMS Magazine August - September 2012
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17
amount as discount, while buying a
new product. This is especially true
because consumers are retiring their
durables sooner and sooner than their
actual lifetime.
But do we all think so? Is it true
in all cases and circumstances? May be
not. Consider a situation where the new
purchase is more important than
selling the old. For example, let us say
you have set your eyes on the new iPad.
Would you mind if you got a couple of
100's less on your old laptop/tablet, as
long as you got a good deal (read –
lesser than market price) on your
new iPad?
But this way or that, an
'exchange offer' (EO) is a
very effect ive sales
promotion tool, in the
hand of a marketer. The challenge lies not in choosing an
EO, but in spotting what it means to the
consumer, be it reduction in pain
associated with retiring a still
functional product indulgence in
hedonic behaviour while buying that
aspirational brand, which may not have
been possible without the EO just
plain clearing of space at home as they
buy new products to replace the old.
For, as long as we (the marketer) know
why the customer wants the EO, it
becomes easier to put that value-
adding reason in our communication to
the customer – connecting instantly
and succeeding gloriously!
or
or
Exchan
ge
Offer
- By Preetha Menon, Doctoral Candidate, DoMS , IIT Madras
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