Why only Consumption is basis for HDI ? Why not Wastage?

When I saw the recent Human Development report, I realised that most of the developed nations stand tall at the top with Norway heading them all. This index is developed on the basis of life expectancy, knowledge Access and PPP of the consumers.  My argument is these reports are supported by the facts about consumption made by people of the country but surprisingly not the amount of wastage or the unused resources which are bought but never used.  With consumption I mean food, energy, resources etc. If we take example of Australia which is ranked second in the Human development Index it consumes approximately $ 35 Billion worth of food, however it throws away $ 5 billion worth of food. Same is the trend in UK which wastes 10.2 Billion worth of food every year. This accounts for 18% of the total food purchased in UK. Thus they have attained high living standard but have lost responsibility of towards the human society.

It is appreciable that these countries have a great capability of purchasing things but that does not give them a right to wastage. In the recent down turn these was an unrest created in the world about the shortage of food grains  and they blamed developing countries with large populations for such scarcity. This judgement is a totally void in the light of high amount of wastage in these countries.

It is not just about food but also the wastage of energy leading to high level of energy consumption. HDI counts the consumption and availability the consumers then why not the wastage Index should be a pillar while determining it. Equal weightage should be given to it, measuring how effective and efficiently are the resources being used by the society.

Thus the countries which are just boasting high living standards will get a message of making responsible expenditure of perishable resources.

Consumer Psychology and Recession

Recession psychology

Recession – this has always brought troubles for a marketer. It is not just the less disposable income but also the distrust and scepticism among the consumers, caused by failure of financial institutions, housing and scandals which has been the highlight of this recession the biggest after great depression. This has made marketing messages ineffective in front of the target market causing drop in sales which in turn leads to cut down in marketing expenditure.

Figure 1

One thing which companies forget is the customer – His needs, changes in expectations during recession, his desire for more value creation and above all the change in pocket size. Above figure explains vicious circle of recession which catalysed by wrong marketing strategy. So what become more important to understand is to understand above mentioned aspects. However strategies to cope up with them are designed for the conventional market segments which marketers usually design on basis of age, demography, needs etc. However what they really missed on is segmenting customer on the basis of change in psychology during recession. John A. Quelch segmented customer in four broad categories based on their emotional reaction towards the economic turmoil.

The one who eliminate spending heavily, called Slam On The Brakes by eliminating the needs, postponing purchase and waiting for recession to be over, decreasing consumption and substitution of branded goods with homebrands or cheaper products. They are hardest hit and affected by recession and are pessimistic about coming out of recession.

The other group called Pained but Patient are those who seem to be optimistic during the early days of recession but keep a check on the consumption and stock upon good deals in essential goods, however they are the one who are most likely to postpone purchase of durables and curtail lavish expenditure.

The third group of consumers who form a big chunk in western countries are the Live for Today consumer. They are singles who continue to live as normal until they lose their job. They continue purchase of luxuries like cars, jewellery, holidays and maintain brand loyalty.

Final group is of comfortably Well of consumers; they feel secured and confident and don’t alter their purchasing behaviour and habits.

Psychological segmentation and Maslow hierarchy of needs

We can notice that these consumers are placed in different levels of Maslows hierarchy of needs based on materialistic world. Slam on Brakes are the ones who struggle to complete their basic needs and safety needs. While the pained and patient are the ones who have attained third level of psychological needs, however longevity of recession pushes them down to first secure the basic and safety needs and they hence has to give up on psychological needs.

Based on the purchasing behaviour, which is independent of recession effect, Live for Today consumers remain at the same hierarchy before and after recession until they lose their source of money. The same behaviour can be expected from Well of consumers who tend not to spend extravagantly but will not be reluctant to buy if they get a deal.

Thus we can conclude that recession has a deep impact on the consumer psychology and this is the time when you can build brand loyalty and offering more value at the same price which applies to all the consumer durables, FMCG, cars and even governments.

“Social Identity” in social networks

How many times we might have thought “I wish I would have been with that group of my batchmates” or “our group cannot accommodate a person from some other social group”……………

I won’t be accredited as an astrologer if I say that the answer is more than one. It implies that our identity wants to match others. We try to attain certain level of self esteem by being with them. This is what Henri Tajfel talked about – Social Identity. When he expounded this theory, he explained how personalities associate or discriminate people and social groups without even establishing a personal contact.

This is nothing new that we have experienced in our lives, I mean we stereotype (categorise) people, identify ourselves as the potential member of a group, compare people or try to set a distinct personality of ourselves.

Don’t you think this behaviour is also reflected from profiles of our social networks – facebook, orkut, twitter and many more? You may wonder, but it’s true the first things we try to do is either search for a community or group of profiles from our hometown, work place, school or college etc. or create it if it is not there. Next thing we do is look for our wannabe identity in the form of communities and join it and we also moderate the community we created. It is a human tendency but we should realize that one thing this practise restricts is the flow of information between different social groups in virtual world which also persist in actual world and eventually this burgeons with lack of communication between the groups and restricts us to a limited knowledge about cultures and people. Still western society’s knowledge about the Asian culture is limited, people deal on the basis of stereotyping done generations back.

This can be stopped when individuals overcome the societal identity and instead of just limiting themselves to boundaries of closed groups, open groups should be set up which will uncover hundreds of myths we are carrying about cultures, people and countries.

This was the societal advantage of overcoming the Social Identity however this phenomena can be used by marketing manager with restricted funds but desperate to vend his company’s product across the border to spread the awareness of its product across different societal and ethnic groups. If a strategy can be chalked out to overcome such behaviour, it can revolutionize the trade prospects of a small trader willing to sell his products across the world boosted by a marketing model based on shear exchange of information between the social groups and the social networks like Facebook are an ideal platform to launch such a campaign. Such a promotional model can be applied to get fame and spread awareness about so many dying arts in different parts of the world. One such example is ChickenKari work from Lucknow everybody know that market for such a fascinating art exist however all we need to do is make them aware. Thus our first strategy should be to find a common denominator which can bridge the communication gap between these cultures or societal groups.

“Living Wills” of US financial Institutions

This morning I was reading an article on Reuters mentioning the concerns of US Federal Reserve chairman Ben Bernanke. It talked about the big financial institutions being crucial to drive the world economy, although his concerns were them being too big to fail as heavy debt and fear of another global meltdown leaves them vulnerable to failure.

In order to cope up with such situation US senate is poised to pass Dodd Bill, proposed by Senate Banking Committee Chairman Christopher Dodd which proposes to give Fed power to supervise bank holding companies with more than $50 Billion in assets as against the previous regulation of $100 Billion in assets and etc.

This is not the reason that I am writing this post, the motive is to highlight the notion of “LIVING WILLS”. Fed now expects important firms to develop their living wills describing how they could be wound down in case of shut down of their operations. Since the process of bankruptcy not only ties up the assets of clients, it also put downward pressure on the markets. This process won’t rip the shareholders of their money and most important, that market will be spared of hiccups since this will breakdown the process of reviving or dismantling the institution. There would not be another Lehman Brothers which could have escaped bankruptcy if it had time and a such a life saviour will , of course it would have lost its identity under Barclays capital but it’s better than being out of business.

Dodd’s Bill is a 1,336 page attempt to restore responsibility and accountability in US financial system

Link to Dodd’s Bill:

http://banking.senate.gov/public/_files/FinancialReformSummary231510FINAL.pdf

Emotional Labour on The Other Side Of Service Desk

What is Emotional Labour?

Many readers might not have come across this term but believe me this phenomena has been experienced by each and every consumer of services in this world and the studies say that it’s present in approximately two thirds of workplace communications.

This term was coined by Arlie Hochschild in 1983 in her book “The Managed Heart” when she said that “Jobs involving extensive interpersonal contact with customers or clients necessarily involve Emotional Labour”.

Let me explain it to you with a simple example, Service at a Coffee Shop,

You wake up in the morning in a good mood with a smile on your face and get ready for work. On your way to office you thought of grabbing your favorite coffee. You enter the cafe and greet the lady over the service counter with a smile but what you get in exchange is a stale and fake smile which would be there all the time until you leave the cafe. This fake smile pretending to be warm and friendly is a sign of Emotional Labour.  That smile was an organisationally desired emotion from a service personal which at times may delight or disgust you and that is emotional labour.

What made Emotion labour so important in service sector?

Service sector especially when it comes to high contact service experience like Flights or Dentists, emotions play big role in making the service interaction successful and maintaining customer loyalty which eventually bring repeated business to the service provider.

In a service interaction a customer expects many things. Right from interior and exterior facilities, equipments, people to service support. Everything matters from top to bottom and among them the most important is the encounter of service staff with customer as this is the time when organisation can build personalized relationship with a customer.  The success of this interaction is heavily reliant on the frontline employees’ ability to regulate their emotions.

How Emotional labour regulates emotions in the service personals?

There are quite a few theories defining this phenomena and one of the most widely discussed is the one which explains it on the basis of Deep Acting – where one tries to modify his or her emotions to give a genuine look and Surface Acting – where one tries to fake emotions not actually felt and that causes displeasure in a customer.

I made a small comparison between Deep Acting and Surface Acting, for better understanding;

Deep Acting	Surface Acting
Employees endeavour to express authentic emotions which are in sync with the organisationally desired emotional display.	Employees only change their outward emotional display (faking)
Greater Authenticity of emotions increases Service quality perception of customer.	Detection of fake emotions leads to confusion and decreases Service quality perception of customer.
High contact services involve high level of customization and personal interaction thus a slight disparity in emotions may result in loss of business. Hence Deep acting is essential in such encounters.	In medium to low contact services the emotions may remain unnoticed as this may be the case where customers do not place importance on genuine display or congruity between different modalities. Eg:  A retail Store

I conclude this post with small comment over strain and psychological distress emotional labour has caused, as at one or other point of time in our lives we all have experienced this emotional conflict inside us.

Social media – Adding a new dimention to market segmentation

“Facebook, a place where people care more about their friends than anything else.” this is what everybody always thought. Now think of it as a pool of consumers who have predefined their preferences, likes, dislikes and expectations.

Is social media redefining the segments of market?

Traditionally, a market segment can be defined as the group of buyers who share common characteristics, needs and expectations and now in this age of retweets and  facebook wall, segments has been rejuvenated into communities. Now the members of a group are seen as potential buyers.

Segments in conventional marketing sense are profiled on the basis of demography, psychographic characteristics, geography and some of the behavioural variables like preferences, expectations, socio-cultural differences and many others.

Social media has added a new dimension “ONLINE” to the segmentation criteria and has started playing a greater role these days in determining who to target.  High penetration of internet and prominence of social media networks has resulted in high growth of online segment of consumers.

This segment has gained important because the people in this segment spread the word of mouth which has increased consumer acceptance of the referred product or service.

The “Online” segment

Like the traditional model of segmentation Demography of the online users defines the market groups based on age, nationality, religion, gender etc. It might seem that there is not much of a difference between the offline and online model but the difference is made by the number of people who can be reached, directly without incurring the cost of advertisements and media ads. Everybody there is online and notion that social networking sites are just for the young generation has become a myth now.

People can be segmented on social networks on the basis of themes, activities, interests, taste etc. and this provides an opportunity to target buyers in a small town of Haridwar (India) to a big market of New Delhi. These budding sub segments have given the marketing managers a great chance to focus on a highly differentiated group of consumer, with a highly specific and customised product or service for that particular community of consumers. Think of Ning a platform where one can define his own community. Imagine a social network of surfers on Ning in Australia being targeted by billabong or Nike. So instead of just running stores these brands can effectively use the online model of distribution as direct marketing.

Target e-commerce users

A high percentage of the users from the developed world are using e-commerce and there is still a large potential for growth in e- commerce in the developing worlds of BRICM (Brazil, Russia, India, China and Mexico) but we should not forget that till now e-commerce was driven by pull marketing strategy involving heavy expenditure on ads and consumer promotion. The fact that these e-commerce users form a large chunk of social networking sites and with the advent of effective online advertisement structure using Facebook, youtube, Blogs, Twitter etc. more and more potential buyers can be reached.

Not only consumer products but social media has effected refurbishment of segments in the services industry which shows a shift from offline to online model, atleast in services which involves less consumer involvement. In service industry a consumer generally depends on the important attributes and determinant attributes of the service to choose between the service providers. Now with blogs and forums the line between important and determinant attributes has become hazy, because buyers are now aware of every attribute of a service and this has increased their preconceived perceptions and expectations about it and has reduced the intangibility of services. This provides a great opportunity to the organisations running an online service model to be the first mover and reach these sub segments of consumers.