Tue, 10 Jun 2003

Product innovation complemented with innovative marketing

Yadi Budhisetiawan, Contributor, Jakarta

Indonesian consumers may be considered as some of the most progressive and consumptive despite their limited purchasing power. Indonesia is one of the few countries in the world where leading multinational companies have to modify the features of their brands and long-standing "traditions" to accommodate the unique buying and consumption habits of Indonesians.

Indonesia is also probably the only country in the world where McChicken sales units are almost three times larger than Big Macs.

Coca-Cola, which has been operating in the country since 1932, succumbed to locally produced bottled tea to the point where it recently had to relaunch its "me-too" bottled tea, called Fresh Tea, with a hard-sell campaign similar to the "Pepsi challenge" advertising theme that became famous in the United States back in the mid-1980s.

Toyota Kijang, a locally inspired family car, has now turned into a national symbol as "the Indonesian Volkswagen", which is a unique strategic marketing initiative rarely found in over 120 countries where Toyota cars are sold.

In short, it is not easy to market any product to Indonesian consumers.

Telecommunications, meanwhile, is another major market in this country of over 220 million people. Ironically, however, cell phone ownership now stands at 11 million, still a higher figure compared to the eight million ownership of fixed-line telephones.

During their initial launch here in 1985, cell phones were priced at a hefty Rp 14 million, while today for a tenth of this amount you can get a sleek and sophisticated mobile available in numerous brands. The market leader then was Ericsson with its NMT Technology. In 1989 Motorola with AMPS Technology took the reign, but by 1994 Nokia dominated the market with its comprehensive GSM telecommunications technology.

Welcome to the world of hypercompetition! Nokia and its GSM technology has so far maintained its market leadership for the past seven years. Nokia's success lies in its strategy of dividing the market into more than 36 market segments. It launches at least 12 new products every year, or one a month.

However, GSM is now facing serious challenges from CDMA technology, which has been recently introduced by state telecommunications company, Telkom, under its Flexi brand for the new fixed wireless telephone services. This will indeed revolutionize the way consumers make telephone calls. CDMA technology has also attracted major telecommunications corporations like Sony Ericsson, Samsung and Sanex to bank on the opportunities available in the fixed telephone segment and to grab a bigger slice of this huge market.

Similarly, the marketing of televisions is another competitive sector. Back in the 1970s European brands such as Telefunken, Blaupunk, Phillips and Grundig held a handsome portion of market share, but soon they were overtaken by Japanese brands like Sony, Toshiba, Hitachi, Sanyo and so forth. Since 2000, however, Korean brands such as LG, Daewoo and Samsung have managed to steal some of the market share from their competitors.

Samsung is particularly aggressive. It gained a significant market share due to a combination of three factors. First, its marketing efforts are mainly concentrated in the largest television set segments, the 12-inch and 21-inch.

Secondly, it generously provides unique product features at affordable prices, while maintaining high quality standards.

The third factor behind the company's success is innovative tie-ins and promotional programs, such as setting up the Samsung DVD Club. During a special promotional period a month ago, anyone purchasing a Samsung DVD player (E-235 series) priced at Rp 788,000 received a bonus gift of 180 free DVD rentals. The cost of renting these DVDs would almost equal the price of the player itself.

Audio electronic appliances such as cassette players and tuners form another huge market. There are over 460 private radio stations throughout the country, and the recording industry is another big business with over 21 million cassettes and CDs sold annually. Both private radio stations and recording companies contribute to the current shape of the audio electronic appliances market.

The success of most audio products is based on three basic elements: design, quality or durability and features that meet consumer demands. The Phillips Boombox, for example, with its unique "unsquare" shape, was a breakthrough in audio design concept about five years ago. Sharp's Simba, meanwhile, is responding to the demands of the young with extra-strong bass and treble output in its players and tuners.

Another smart marketer is Polytron. Its success has often made for unique marketing case study. Polytron, through its aggressive and big-budget advertising, is famous for creating high brand- awareness about the company's innovativeness, even when the enhancements, in technical terms, are only small refinements.

Electrolux, famous as the brand for vacuum cleaners several years ago, has now repositioned itself as an umbrella brand for other appliances, including washing machines. The company's astuteness lies in product differentiation; consistently offering innovative product features for the benefit of consumers.

Its circular jet spray system in washing machines is one of its breakthroughs in ensuring cleaner laundry and efficiency of water use during washing. Recently it teamed up with Unilever's Rinso for the Rinsomatic advertising campaign. Product demos, called "Cleaning Day", are also held at malls and other places where prospective consumers gather during the weekend.

While years ago product innovation was sufficient for securing market leadership, in today's highly competitive market, product innovation must be cleverly combined with innovative marketing strategies to win the hearts of fickle consumers.(The writer is managing director at Force One -- Selling and Distribution Consultant)