Dhithi

operationsimprovment

innovation

finance Department of Management StudiesIIT Madras

The DoMS Magazine

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

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

“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

DHITHI - The DoMS Magazine August - September 2012

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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

[email protected]

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.

http://www.c-tides.org


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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

DHITHI- The DoMS Magazine August- September 2012

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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


DoMS

16

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


DoMS

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

`www.samanvay.iitm.ac.in

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