‘Social media more relevant to consumer marketing'

It's mid-morning and Prof Nirmalya Kumar is tucking into a leisurely breakfast on the porch of the revered Madras Club, overlooking a verdant expanse of lawn with the murky green of the Adyar river visible beyond. Prof Kumar, Director, Centre for Marketing at the London Business School, is among the world's leading thinkers on strategy and marketing, and has taught earlier at Harvard Business School, IMD (Switzerland) and Northwestern University's Kellogg School of Management. Prof Kumar is in Chennai on a brief visit after 15 years. Breakfast done, Prof Kumar, tucks into the questions BrandLine puts him on a variety of issues confronting the marketing world. Some bites:

What is the next big thing in marketing? What's the big trend that you are seeing today?

In the developed world, the hottest thing is social networking and how to exploit its reach for marketing. But, even Facebook is unsure how to best use its platform as a marketing tool. For example, in Google, if you search for a digital camera, then you are in a frame of mind where you are open to advertising and suggestions for digital cameras and places to buy them.

But, on Facebook, I am interacting with my friends, and as such, it is considered a private space. Any marketing is considered mostly an interruption. Marketers are struggling with how to get the balance right between exploiting the power of social networks and not having the customer view marketing as an irritation. Sophisticated exploitation of Facebook for marketing is still open to innovation.

Google is perhaps the hottest concept in the past ten years. An incredible company! If you are a mathematician, or a computer scientist, or an engineer, you aspire to work for Google as they hire only the best. But it's a company run by nerds who pride themselves on having developed the best algorithms.

On the other hand, social networks are not about engineering but human relationships. Google struggles when it comes to social networks and human interactions as that requires a different mindset, different capabilities, and different metrics. In Google, when you type “digital camera” and search, you get 20 million hits; you will find everything there is to know about digital cameras.

For Google, this demonstrates the power of their algorithm. But as a customer, I am left confused because of information overload.

Now, suppose Facebook develops a search function and when I type “digital camera” I get only 25 hits. But these are the cameras that my network of friends own or recommend. Which is more powerful? Both the marketer and the user are more interested in these 25 results than the 20 million hits that Google served up.

Smart money has realised that if Facebook turns on these functionalities one by one, knowing who you are, who your friends are, the potential would be mind-boggling. This is why the marketing world is so excited about Facebook and Google employees are jumping ship to Facebook. They believe it is the future. But for the moment, social networks seem more for consumer marketing and less relevant for business marketing.

What's the transformation in business marketing today, then?

If you go to business markets, the big story is that all the top management are located in the cities of the developed world – New York, Frankfurt, Milan. But, the business is rapidly moving to China and other emerging markets, whether it's financial services, railways or steel. This is also relevant for consumer products and luxury goods.

If the biggest market is China and the top “brains” of the firm are in the US or Europe, then how does the company gain deep insights into that market? It is not easy - they don't know the language or the culture.

Take, for example, BMW, which calls itself the ultimate driving machine. China is probably the most profitable market for BMW and on its way to overtaking Germany as its largest market. However, buyers in China are not driving BMWs; it's driven by chauffeurs. In Germany, the family is small, so the front seat and panels are optimised for the driver and companion; but in China, they had to elongate the BMW, to re-design it for the owner sitting in the rear seat.

This is the kind of consumer insight we need into faraway markets that have suddenly emerged in the last ten years, and the question for firms is how to do it. Do we move people from these emerging markets to critical roles at HQ in the West, or do we move HQ or R&D to China because localisation cannot take place out of Western markets? Brands are racing to ensure that their markets don't move faster than their marketing to China.

Japan used to be the biggest market for luxury goods but now China has overtaken it for many premium brands. And, there is a major difference between the two countries. Japan, like the Western markets, is about understated luxury. Luxury, if you know, you can see it and feel it.

But, in China and India, people want everyone to know - the LVMH brand has to be big and visible, man! If it's hidden, consumers between Beijing and Dubai don't want it. From understated luxury to bling, how do you bridge it; that is the job of marketing. The challenge for marketers in developed markets is to obtain these cultural nuances and build it into the sinews of the brand and the company.

Where does India figure in this? How important is India for marketers from the West?

India is very important. The good MNCs are making plans for the next 10 years. In every 10-year plan, both India and China figure very prominently. MNCs don't care as much about the size of the market today; they care more about growth.

They don't want to miss the growth opportunity or a large potential market that will be the future of the firm. I remember a senior manager from P&G telling me he headed a company that was 165 years old and he had to make sure that any decision he made ensured the company was around for another 165 years!

Most senior managers today have grown up in the '80s when social media didn't exist. Are they able to understand this new animal?

Without naming any names … a few of the top consumer goods companies I work with have forced all senior managers to open Facebook accounts. Even if they don't understand it, they were told to get on. Of course, it doesn't mean they are excited about it or interact on it.

On FB, older people want to be careful about what information they share, but young people are not like that, they put their entire life on it. So, there is a big disconnect between the people who are running the marketing function in companies and the consumers they are targeting. So, the challenges we have been talking about are similar.

In the developed world, senior marketers are struggling to overcome the disconnect with their future consumers – the youth in the developed world and the consumers in the emerging markets.

So, how are Western corporates looking to handle these challenges?

One approach is getting people from these markets and incorporating them into their global top management teams. The challenge is if I am a German company, meetings are held in German. Now, it would have to be in English and it's not a comfortable change for them.

Second, it's easier to have an Indian in the top management, but it's difficult to have a Chinese because of the language and cultural issues. The other way is to move some of their key people to these markets; have a certain percentage of their top executives out of Asia. HSBC has done it and so has Standard Chartered out of Hong Kong.

Third, is to get the CEOs from China and India to report directly to the global CEO; reducing the chain of command and giving them the same importance and access as heads of entire regions such as Latin America or EMEA. But, the biggest challenge is: What will an MNC look like ten years from today? As markets far away from home rise, what does it mean to be a lead market, which earlier was usually the home market?

For automobiles, trains, highways, and so on, the lead market today is often China. Is that where one introduces new products even if you are an American or European company? Some firms are even moving their global CEOs there. This is what companies are struggling with: how to change the MNC so that it can take advantage of these new markets of the future.

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