Consolidate Niche Services Sharekhazana.com should deploy some time-tested and proven business skills like cutting costs.

. That is a basic requirement. However, in an attempt to hasten the path to profitability, it is important to avoid a knee-jerk reaction. A quick-fix approach damages the brand, and dilutes the customer acquisition process. Among the immediate measures that I would suggest is a cut in the salaries of senior people. This should, of course, be done with their consent. In fact, the company should move towards a performanceoriented salary structure, where the variable component would be higher. Simultaneously, it should shun extravagance. Shifting from a big office to smaller premises may be a good idea.Clearly, sharekhazana.com has several things to its advantage. These must be strengthened. The profile of its target audience is its biggest marketable proposition. A youthful audience with impressive purchasing power that will only grow over time and whose ''investible'' surplus will only rise over the next 5-10 years gives sharekhazana.com a formidable edge. Also, the company's strong off-line presence is something competitors will find difficult to emulate. The fact that the portal enjoys considerable brand equity, and that it has a technological infrastructure in place will enable sharekhazana remain ahead of competition. It must leverage these strengths, both as part of survival in the interim, and for securing profitability in the long run. Whether the company is to remain a pure play trading site or become an integrated personal finance portal is a choice that Mukhi alone can make. A major issue here is the vision of the VCs and their ability and willingness to provide additional funds. True, integration provides an opportunity to build on existing skills. However, one cannot ignore the fact that there is a need to acquire new skills and competencies. There is a learning phase, which carries its own costs. You also need to fund the losses because the breakeven period extends further. The main risk in the transition towards an integrated portal is the difficulty in estimating, in precise terms, the resources required to be committed both at the beginning and as the project gets underway. It is also by no means easy to determine the time required to break-even. That is where the importance of a contingency plan lies. You need to make not only mid-course corrections but even change the direction. What is desirable, in my view, is a step by step approach-test the waters, gain experience, and move up. A phased entry is less risky in a personal finance portal business. It thus makes sense to go for an integrated personal finance portal only if the main promoter and the VCs are prepared to commit necessary funds. If they want to achieve break-even as soon as possible, then

it is good to focus on stock-broking, which is the firm's main area of strength. Globally, e-commerce has always started with a single key product where the provider has either a history of competence in that product or an innovative way of delivering it. Besides, most customers of financial products prefer standardised services. The cost of duplicating a standardised offering is low. It is, thus that a niche player who pioneers a set of activity is quickly stampeded by ''me toos''. Price becomes the only differentiator for the customer. Loyalties in the online world can shift with a mere click. The only way for a portal to drive profitability in a scenario of largely homogenous product offerings is to constantly review its internal cost structure in an effort to become the lowest-cost producer of online financial service. Assuming that no additional sources of funds are available, and that it has to work within the existing revenue and cost structure, sharekhazana.com should first review its online financial products. A focused survey among existing customers on their requirements will help it shortlist a portfolio of products. Some logical questions surface at this stage. What are the legal processes involved? With what level of current it architecture can the new products be supported? How much redeployment from the current team can be effected without going in for additional recruitment? It is based on these that a cost structure of each product will be evolved. The revenue prospects of each new product would be available both from market feedback and the customer survey. With the resultant costbenefit analysis, Mukhi and his team should quickly roll out products that ensure the retention of a larger share of the customer's investible income. Other products can be ramped up, based on the unfolding profitability scenario. Sharekhazana.com has built up expertise in niche areas. This should be strengthened further through alliances. There is no merit in spending capital on being everything for everyone. The alliances should be tightly integrated by way of Service Level Agreements (SLAs) with the partners to ensure smooth and consistent product delivery. It is important to ensure a common front-end on the website so that the customer feels that he is being duly serviced. The very nature of online services-where transactions are impersonal-carries some risks. There are the financial risks. Volatile market conditions make both the customer and the broker vulnerable to major exposures. The best way to mange this risk, particularly in secondary market equity related products, is by putting real time margin collection and markto-market mechanisms in place.

 The negative positions of one customer should not be compromised by dipping into other customer's accounts. Due audit of Chinese walls is necessary. Sharekhazana.com typifies the state of a number of early birds (dotcoms launched pre-1999) who fed handsomely on a number of early worms (glassy-eyed venture capitalists), and squandered the early mover advantage by embarking on initiatives first and thinking next. While sharekhazana's management has realised that something must be done, it continues to be flawed in its thought process-confusing packaging with product and add-on with core value proposition. Customer and commerce have been kept as 'pariahs'. There are some major lessons, learnt the hard way, on the status of the internet in retail business in India. Indians (unlike, say, Americans) have never been active users of technology in personal life. Therefore, there is an intrinsic 'fear of technology'. Internet penetration is limited and the access is expensive. The service quality, in terms of speed and reliability, is still patchy. And the demographic profile of people in the 25-35 years age group is as misleading as the famous epithet of early 90s-'a 200 million middle class'. Mukhi and his team see two alternatives-niche portal and integrated portal. I do not recommend the latter option for sharekhazana, for three reasons. First, banks and financial institutions enjoy a huge franchise with their existing customers. They can leverage their clout with customers by broadening product offerings, including third-party distribution. Secondly, the acquisition and retention of retail customers expensive. The process requires resources, which are scarce at sharekhazana. And, finally, the personal finance business is complex. An equity broking firm does not naturally evoke the confidence of customers.

I recommend that Mukhi and his team:

Explore opportunities to generate commerce and revenue in equity broking through the off-line source, by leveraging a 130-year lineage and franchisee operations in 60 cities. Set targets on either a weekly or fortnightly basis, and monitor actual achievements.

Use the internet to provide 'after-trade services' to customers such as trade confirmation, weekly/monthly reports, and gain/loss calculator/simulator. This will help build comfort level for the customer with the internet. Ensure that the franchisees use internet-based information to service customers, thereby creating confidence in the medium among customers and franchisees. Prune revenue expenses ruthlessly on a 'need to have' basis as against 'a nice to have one'. Defer capital expense, in site building and technology, till revenues are stable. If all this does not help the company show a positive cash flow within the next 6-12 months, it is time to pick the next option: close shop.

Pomotion -

The apportionment of funds between mass media advertising and sales promotions has always been a function of marketing strategy. The details vary each year with market conditions, the status of the company's brand, sales targets, and brand share objectives in comparison to the previous year. Brand advertising is the 'pull' factor of marketing. It encourages customers to go into showrooms in a single-minded pursuit of that particular brand. Sales promotion is the 'push' factor. It catches the attention of the customer at the point of sale and helps clinch the deal. Being a major player in the industry, it is easier for VK Appliances to achieve volumes, once it develops a strategy to support its brands and products in the 'push' area, and ensures that the customer's mind is attracted towards the bargain of the day. It is with tactics like these that the bigger brands get better responses, because the offers are made under an umbrella of a major player, and that provides its own comfort zone for the customer.

That explains why VK has been securing continuous improvements in growth as compared to its competitors. Such improvements, even if incremental, are valuable from the viewpoint of keeping the motivation levels high among dealers, sales executives, and even consumers. It is true that, over time, customers get used to promotions. D'Costa's concerns in this regard are well-founded. It is also true that the marketing department of the company and its executives have their own take on sales promotions. They see them as continuous selling aids. The self-perpetuation factor operates at many levels. But, clearly, for each year that passes with such promotions, the value of the overall brand erodes. The dealers begin to question the strength of the brand. And the comfort zone of the customer diminishes. This is where reinforcements become vital. Like any other intangible resource, corporate identity and brand values need constant nourishment. A single bite does not affect marketshare, but put together, year after year, the bites add up to hefty morsels, which erode the equity built on decades of hard work. The most critical parameter in my view is how the profit share of the brand has moved. Has it gone up, come down, or remained the same? After all, the new mantra of recession is, ''Forget volumes, value, even marketshare. Expand the share of the total profit in the market and you will be there tomorrow, fighting fit.'' Becoming lean is fine. Retrenching and cost-cutting are fine too. But you will reign supreme only if you enhance your share of industry-profits year after year. That is something that D'Costa and his team should ponder over. D'Costa is faced with a 'positive' problem-of a sales promotion that is working well. The dilemma before him is clear. Are the company's marketing resources being deployed to build long-term brand equity? Are its promotion schemes, aimed at driving short-term sales, weaning away funds from the more enduring activity of image-building advertising? These are valid concerns. The purchase of a consumer durable in developing countries like India is still a high-involvement activity. D'Costa has personally witnessed this during his brief stay at the showroom. But it is erroneous to conclude that the purchase is purely rational. It is more dangerous to conclude that all purchases of durables are driven by salesmen's recommendations. While it is true that consumers look for a number of critical variables like quality, after-sales service, power consumption, it is equally true that they are influenced by non-critical variables like free gifts.

Given the fact that durables are bought at very long intervals-usually only three or four times in an entire lifespan of the consumer-the role of advertising becomes crucial. Advertising should not only generate sales, but also build brand salience, originate enquiries, and drive traffic into dealer showrooms. Advertising for durables often falls into two broad categories: 'feel good' image advertising and 'news' advertising. D'Costa believes that image advertising is all that is needed to drive consumer enquiry. That, in my view, is incorrect. In a fast-changing marketplace with over six active competitors, he needs to also look at advertising that is news-oriented: a new feature, a new benefit, or a new model. Sales promotion schemes cannot sell high-value durables in the absence of quality, value, and image perceptions. But VK seems to have devised a scheme that works. The free offer of a product with high perceived value has helped grow sales of its washing machines. Having secured results, the questions facing VK are two-fold. Both are tricky. The steroids, as D'Costa says, will have to be slowly withdrawn. No brand can be sustained on the long haul on promotions alone. The issue here is how to divide a limited advertising budget across various inputs. VK should split the budget across image-building advertising and promotion schemes. A judicious mix will ensure that the company achieves the desired impact. The more difficult question concerns keeping the brand vibrant and attractive to customers. This calls for a closer examination of the product range, identification of unique features and benefits offered by each product, and using them as a powerful weapon against competitors who seem to be busy flogging the singular avenue of sales promotion. Brand salience is a critical success factor in the consumer durables business. In fact, it is the most important attribute to be driven by the management. Brand salience becomes particularly relevant in a competitive market like India, where the number of brands is high, and several of them are easily-recognisable, international names supported by heavy advertising. Every study conducted among consumers in this country bears out that top-of-mind recall is a major influencing factor when it comes to the purchase decision. Clearly advertising per se has to take pride of place over other forms of attracting attention in the marketplace. And advertising must be a continuing and ongoing exercise. The elements that drive brand salience can best be consolidated only

through a good advertising campaign. In fact, it is actually from these elements that good promotions will draw their strength. One must also remember that consumer durables marketing must take into account the fact that not all consumers are in the market to buy at all points in time. This is unlike FMCG products and soft drinks, for example, where impulse purchases are common. Brand advertising itself is, therefore, conducted in a selective manner, involving specially selected media vehicles aimed at achieving top-of-mind recall. Pandey's light-hearted remark about the usual debate relating to advertising versus promotional expenditure is correct in the sense that such discussions are common at certain times of the year. Consumer durables like refrigerators and airconditioners have highly pronounced seasonal sales cycles, with July-September being a traditional 'low' period (and, therefore, a period when sales promotions should usually be employed). Paradoxically, though, the 'festival' time in October-November is when manufacturers and dealers try and drive a feel-good factor by offering gifts and other allures. The accepted norm is a 60:40 or 70:30 split in the budget between advertising and promotions. Very often, it goes up to 80:20. But it is always the advertising that gets the larger share. VK Appliances seems to be doing things a little differently, with a much larger spend on promotions for the washing machines than would normally be thought safe. Why would it draw away resources from advertising to sales promotion? Perhaps, this is why D'Costa has felt it necessary to put on a false beard and wander around the city's largest home appliances showroom incognito. But the undercurrents it portrays do not seem to augur well for the company. Does D'Costa mistrust the advice and instincts of his advertising agency and his marketing VP? And why would he want to escape the attention of the owner of the showroom?