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Why pizza chains outshine mobile phone firms
Govindkrishna Seshan & Prasad Sangameshwaran |
August 23, 2005
Remember the children's joke? An old woman offers to sell her horse for just Re 1. When buyers queue up, she points to the fine print on the notice: conditions apply. Whoever gets her horse will also have to buy her cat -- for Rs 10,000.
Indian companies are ready to swear their special offers have no such catch, but what do customers really think about promotions? The Strategist decided to get under the skin of brand promotions to understand what separates a winning promotion from the ho-hums.
The basis of our comparisons was the Promo Survey 2005, a customers and retailers study by Kidstuff Promos & Events, a Delhi-based promotional marketing services agency.
To ensure interesting results, we picked two diverse businesses where special promotions are the norm -- cellphone service providers and pizza delivery chains -- and pitted them against each other.
Here's what we found.
Customers love offers. You didn't need to be told that, did you? After all, you've gone in for your fair share of offers, too. The Promo Survey found that more than 84 per cent of Indians have participated in promotional offers, while 80 per cent admit to trying a new brand if it rides on the back of an offer.
Not surprisingly, then, companies bank on promotions to create a buzz when all products and services in a category are defined by one word, parity. After all, there is only just so much tweaking of tariff plans that a cellular service provider like Airtel or Hutch can do.
And pizza chains like Domino's and Pizza Hut can't really expect to keep their new toppings secret for long -- it's just a matter of time before every pizzeria down the street offers the same sun-dried tomato-and-four-cheese specials.
Which means a good, innovative promotion is likely to be remembered. And the brand that associates with the promotion will also hog the limelight.
S P Shukla, president, wireless products and services, Reliance Infocomm, agrees. "Offers that are successful are always the path breaking ones, offers that have a high risk element, and a high quotient of uniqueness," he says.
But this was a test both cellular service providers and pizza delivery chains failed. The top promotions consumers remembered were from the soft drink giants Coca-Cola and Pepsi, and the consumer durable chaebols Samsung and LG. The reason? These companies' promotions had their names attached: Pepsi's Toss ka boss, Coke's Aish cash and Samsung's Phod ke dekho, for instance.
Remember Airtel's huge promotion earlier this year featuring Sachin Tendulkar and Shahrukh Khan? Can't recall the name? Nor can we -- the survey showed that it was way down the recall charts.
Round 1 -- Draw
Bang for the buck
"Promotions must be backed with adequate media spends," says Pankaj Wadhwa, managing director, Kidstuff.
According to him, FMCG brands spend close to Rs 6-10 crore (Rs 60-100 million) on every promotion, of which 75 per cent goes on media spends; the rest is accounted for by prizes, logistics and so on.
And he estimates that promotion-led spends for mobile companies would be around Rs 5 crore (Rs 20 million), compared to just Rs 200,000 for pizza chains. (Of course, that figure goes up when pizzerias like Domino's advertise on TV).
Going by the numbers, cellphone companies should beat the pizza chains hollow. They don't. The pizzerias may spend little, but they spend wisely. Their fliers and stickers are distributed to people who have already bought a pizza (thus hitting the target audience spot on).
Then, the offer at the point of sale (outlet or home) drives customers to consider redeeming the coupon at the earliest. After all, the offers are timebound, too. Says Wadhwa, "Pizza chains offer an instant gratification, something cellular services don't do often."
Cases in point are the free pizza offers from Domino's and Smokin' Joe's, which are delivered along with the customer's regular order. Remember that while customers don't minding waiting for a high-value gift, they're always looking for ways to hasten the redemption process.
If pizza companies practise instant redemption, cellular phone companies do just the opposite. In July 2005, Orange offered its new post-paid customers a pair of Reebok shoes worth Rs 2,490. But as the old saw goes, conditions applied.
Apart from paying an additional Rs 400 as deposit, customers also had to pay their first month's bill before they became eligible to get the free shoes. And the voucher was to be delivered only 15 days after the payment was encashed.
This offer has now been tweaked. While the extra deposit amount has been removed, customers need to wait two months before they get to wear their free Reeboks. "Customers prefer schemes where they can get instant prizes without making any effort," says the Kidstuff report.
Round 2 -- Pizza chains
Kiss it away
Companies planning promos would do well to stick to the KISS principle: keep it simple, stupid. Customers want easy to understand, uncomplicated offers. Smokin' Joe's anniversary offer simply offers a cheese pizza free with a larger pie -- customers pay for extra toppings.
And in 2003 Domino's' offered a free pizza to customers who ran up bills of over Rs 1,000 on their Visa Electron cards. It claims to have distributed more than 15,000 pizzas under this scheme -- and 30 per cent returned for more.
What about the mobile phone companies? Consider some ongoing/just-finished offers. Reliance offers a mobile phone connection for just Rs 999. But customers are being asked to pay Rs 1,999, of which Rs 1,000 will be adjusted against talktime (which has to be used within three months).
BPL Mobile will give you a Samsung C138 handset for Rs 1,999, throwing in free talktime of Rs 1,999. The free talktime is spread over a year, which works out to Rs 166.58 a month or just over Rs 5 a day. Similarly, Orange offers rental waiver against a commitment of a minimum bill. But the bill amount is valid only for local calls, not SMS or long-distance.
Most customers figure out the nuances of the offer only after the first bill and calls to the service provider's customer care executives. "Customers don't understand cellphone promotions," says Wadhwa."
Round 3 -- Pizza chains
Best fit practices
Here's a quick question: if you're buying a 5-kg pack of detergent, what freebie would you prefer? A bucket, a silver coin or the chance to win a holiday? If you opted for either of the first two options, you're in good company -- 67 per cent of the respondents for the Kidstuff survey preferred a small prize, with most choosing the bucket. "Promotions should be in sync with the product," points out Wadhwa.
How do our contestants fare? No surprises here. Offers of free ice cream or cola bottles with pizza offer a much better fit than shoes (Hutch) and jewellery (Airtel) with cellphones.
What's the reasoning behind mobile companies' out-of-sync offers? Naveen Chopra, vice president, corporate marketing, Orange, explains.
"Close to 80 per cent of Orange's target audience is male, which is why the company gives away radios, personal stereos and now shoes. Most marginal customers want to see value. So when they're asked to pay the deposit and other charges, and they get something free in return, it helps to bridge the gap," he points out.
Round 4 -- Pizza chains
Too much of a good thing
"Companies must not do promotions all the time. They should restrict brand promos to just one or two large events in a year," says Wadhwa, quoting the examples of Pepsi and Hindustan Lever. But pizza chains and cellular services are in no mood to listen.
At present, Domino's has four national offers apart from those run by individual locations. Smokin' Joe's has a new offer every month. That's the preference of BPL Mobile, too, while Tata Indicomm prefers to go with four and Reliance typically offers two schemes back to back.
There's another point of divergence between the report findings and ground reality. According to the survey, a promotion that attacks a broad target group is more likely to be popular, attracting higher involvement.
That's probably why a promotion for a detergent (Surf, dhoyega to jeetega) has a higher recall than a promotion for a snack targeted primarily at children (Lays, zoom machade).
Cellular service providers are hampered here, given that their schemes are perforce targeted at potential customers, which will be a niche market in any case. But do pizza chains believe in broadbasing their offers?
Surprisingly, no. "We have learnt that offers must focus on one target segment and must be custom made to suit the needs of that segment," says Russi Bilimoria, chairman, Smokin' Joe's.
Round 5 -- DrawThe verdict is clear. Pizza chains win by a distance.