The slowdown is a time for companies to rediscover their core strengths to win customers over from others
With the first sign of a slowdown in sales growth, the auto industry has reportedly petitioned the government for relief in the form of some excise duty concessions. They are not alone in this kind of thinking. Business targets have for quite some time now been moved up or down, based on what the economy will or will not grow at and what the sector is projected to grow at, almost suggesting that the job of chief of sales and marketing is with the government of India, and the job of fulfilment or delivery is with the individual companies. The government, it is felt, is responsible for doing things that will make the tide rise, and it will lift everyone, in proportion to the type of ship they have built.
When market leaders that have 60% of the market cite their industry growth slowdown as a reason for their slower growth, it is puzzling, because their efforts determine the growth rate of the industry more than anything else.
Market share has, therefore, implicitly been treated as equal to fulfilment share, based entirely on the efficiency and effectiveness of the delivery engine. The real market or wallet share-gaining competence seems to have gone missing. The market share gene is one that says we will do better than others because we will persuade consumers and customers to part with their money, better than anyone else.
When IT companies declare guidance as gospel by saying that they have surveyed their customers and this is what the customers say they will give in business, the precision and predictability is impressive. But it begs the question: what more can be done to yank market share away from competitors or to persuade customers to spend more?
Most consumers and customers are rarely so broke that they are on their last spending legs. It is often just that a harder working value proposition is needed to get them to part with their money. Paying serious attention to crafting the meaner, sharper value propositions to win over competition is something that India Inc has not needed to do for a long, long time - in fact, perhaps those who joined the workplace in mid-1990s, now in senior management positions, may never have learnt to do it at all. A recent quote from a financial services manager said something to the effect that, eventually, who can buck a customer trend. But often, it is suppliers who determine consumer trends, and managers are paid to make customers change course and choose to part with their money. The name of the game, the mission of business, is to value-add to customers and value-extract from them - more than the next company and the next product standing in line can.
In the last 15 years, businesses have grown mostly from geographic and product line expansion. Market leaders grew from this adventurous 'star trek'-type strategy of 'going where no one had gone before', and the smaller ones grew from being 'fast followers'.
It must be noted that, in many sectors, the faster-growing No. 2 and No. 3 are not necessarily more agile or superior than the market leader, they are just lucky that someone had created the market before them and are not able to cater to all the resultant demand. Growth has not come from changing the game as much as from expanding the frontiers for the same game. When the frontiers have been maxed out, the early-bird market leader stagnates but the late starters hit the sweet spot, and grow faster by playing 'catch up'.
The idea of 'differentiation' or playing a differentiated market game has not been taken seriously in India Inc for a while now - there has not been a need to. The top few telecom companies, banks, durables companies, hotel chains, big-box retail chains and consumer durables companies look and feel the same. Individual products can be hits or misses, differences at the margin, but the overall impression is the same. Switch labels on their products and services, even advertising, and most customers might not notice. Or, since the companies have had no need to think of differentiation, customers have decided their preferences and loyalties based on hazy and very impressionistic perceptions, which will be very hard to decipher and, hence, hard to break later on.
But the future will require companies to regain the lost art of going after market share strategically - which means that when the pressure or effort to gain sales is withdrawn, the sales graph does not follow suit, and that over time, more customers have strong preferences for the right reasons. Disposable incomes will shrink as subsidies get withdrawn, distribution expansion will fetch diminishing returns, No. 2 and No. 3 following the geographic and product expansion trail blazed by No. 1 will eventually reach the end of the same road, and consumer incomes will grow a lot slower than the number of things to buy.
Hopefully, the stock market will value quality of market share and whether there is improvement in market position (which means that more and more customers gravitate towards you rather than your hunting them down).