Sunday, July 26, 2015

China: Striving towards world dominance

Published in International Journal of Management, 

Elixir Publications

IJM, Volume 2, Issue 2 (2015) e-ISSN: 1694-2299 | p-ISSN: 1694-240X


The relationship between military might and world dominance has been analyzed and deliberated upon for some time now. We have witnessed Superpowers fighting it out in the battlefield to prove their dominance. But it goes beyond the obvious. The real battles have been to corner the natural resources, which, in turn, help the owner of these resources dominate world trade. They would go to any extent to control the resources, whether through war or those strategic tie-ups. Through this piece, I present various possible scenarios from the perspective of world leader United States and emerging leader China that could unfold in future. This is the scenario of World Dominance. These are a set of scenarios on how China would compete with the rest, to dominate the world trade. To build the scenarios, I consider the GDP, the GDP at Purchasing Power Parity, the consumption in domestic markets, manufacturing wages, the challenges that China and United States face now and in the near future, and how China holds an advantage over others to dominate through trade.

Friday, May 10, 2013

Data interpretation and the art of Journalism-Sensationalization

The phrase ‘Ceteris Paribus’ has been protecting the economists for a long time. In plain English, it means “all other things being equal”, but that’s seldom the case. ‘All other things’ are ‘never’ equal. Take a case in point.

May 17, 2013 issue of Forbes India, one of the most respected business magazines in the world, carried a snippet on the sales of Small Cars in the last two financial years compared with the sales of SUVs in the same period and connecting the same with the Petrol prices. The conclusion drawn after comparing the two figures was as follows:

“With the increasing prices of Petrol, you would not be wrong to expect car buyers to prefer smaller, more fuel efficient cars. However, car sales data shows that instead of opting for more fuel efficient variants, buyers are going for diesel models that cost and pollute more, but lower running costs… The data shows more people are opting for diesel-guzzling (and therefore more polluting) SUVs, rather than petrol-efficient small or compact cars…)

If you read the above paragraph, you would conclude that we, as consumers, prefer to buy diesel vehicles, which have a running cost lesser than that of Petrol vehicles. There’s a merit in this argument. As a consumer, I would buy a product that has a lesser recurring cost. Now, let’s look at the data and try and understand where the journalist must have gone wrong.

% Change
Small Car Sales
SUV Sales

In 2011-12, the Auto Industry sold 1,881,179 vehicles. The figure was at 1,973,465 in 2012-13, an increase of 4.91%.It is safe to assume here that this increase of 92,286 vehicles went to the SUV segment. There has been a de-growth of 6.43% in Small Car Sales, a figure of 97,602, which, according to the journalist has moved to the SUV segment. The math looks somewhat like this:

% Change
Actual Change
Small Car Sales
SUV Sales

Let’s try and address the real questions.

  •       Is this the best way to interpret the data?

This is where ‘Ceteris Paribus’ comes in handy. Other things being equal, this is the best way to interpret the data. But this is the seldom the case. There are other factors which are conveniently being ignored by the interpreter of the data
  •       What was the reason of drop in sales of small cars?

Was the rising Petrol prices the only real reason for the drop in the sales of small cars or were there other reasons like the downturn in the world economy and the drop in investor and consumer confidence that affected general sentiments? The answer could lie in the next question.
  •       Who’s the target customer for SUVs and Small Cars?

The cheapest SUV in Indian roads is Premier Rio and Mahindra Bolero, which comes with a tag of 5.00 Lakhs – 6.50 Lakhs. They managed to sell only 1,500 vehicles since they launched in August 2012. Mahindra Bolero sold over 1 lakh vehicles in 2012-13. This is the range in which Suzuki Ritz, VW Polo, Skoda Fabia, Tata Vista, Hyundai i10 operate. Now, is it fare to compare these hatchbacks with the SUVs of the likes of Bolero and Rio? As a consumer, I would disagree and as a Marketer, I would, again, disagree. Rio and Bolero are predominantly targeted at the rural markets whereas the small cars listed above are targeted at the urban and semi-urban markets.
  •       How have the players in SUV segment performed in the same period?

The same issue of Forbes India carries another story on the performance of Tata Motors. Between 2011-12 and 2012-13, according to the article, the sales of Mahindra grew from 2,45,700 vehicles to 3,10,707 (an increase of 65,007 vehicles) whereas Tata Motors registered a de-growth of 56,367 vehicles (from 3,70,834 vehicles in 2011-12 to 3,14,467 in 2012-13). Is it safe to conclude here that one manufacturer’s loss is another manufacturer’s gain? The answer is ‘No’ because Tata Motors is very strong in small car segment with cars including Vista and Nano and we have seen a drop in the sale of small cars in this period. This could be one of the reasons why Tata Motors did not perform in the same period. This overlapping of data would help us conclude that the conclusion by the Journalist on the ‘Switch’ is not that simple.

The target audience of these two segments differs and before we simplify the issue of one segment operator’s loss is another segment operator’s gain; we need to have a thorough understanding of the attitude of a small car owner and his/ her preferences, especially when we drive home a point that the consumer’s preference has changed.

So, before you conclude the interpretations from the data, you need to answer the following questions:

  •        Who’s the target segment for SUVs as compared to Small Cars?
  •        What is their attitude towards owning a vehicle including the daily running of the vehicle?
  •        What importance/ Weightage do they give to the running cost of vehicles?
  •        How many of these customers actually moved from owning a small car to an SUV?
  •        How many of the customers shifted from owning a Petrol vehicle to a Diesel vehicle and vice-versa?
  •        How many of these customers were new customers, i.e., they bought an SUV as their first car?
  •        How many of these customers bought an SUV as their second car?
  •        Did they increase their budget by a couple of lakhs to move from a small car to an SUV? What role has the new launches of SUVs played in the shift of such customers?

Understanding the customer is not easy and so is the case with interpretation of data.

Friday, July 27, 2012

Retailing at the Cusp of Growth

As published in International Journal of Retailing and Marketing
ISSN NO: 0976-318X
Reg. No. DELENG/2010/32112 
Retailing at the cusp of growth

Over the past decade, we witnessed a complete change in the landscape of retail sector in India with the entry of organized retail. Players including Bharti Enterprises, Reliance Retail, Aditya Birla Group and Future Group entered the segment and registered early breakthroughs in the mind-space of the consumers. Even as the opponent of organized retail critically evaluated the impact of the entry of large players in the retail segment, we did not register any decline in the numbers of the Mom-&-Pop (Kirana) stores. With the Government allowing FDI in single-brand retail and gears up to garner support for FDI in Multi-brand retail, this article looks at the future growth of Retail sector and argues why we should support FDI in Multi-brand retail ventures.

Author                         :           Sandeep Bhasin (Assistant Professor)
University                    :           Amity International Business School, Amity University, NOIDA,
Utter Pradesh
Contact                        : ,
                                                +91 99589 55151

Table of Contents

Indian Economy and the Retail Sector

India has shown an incredible economic growth over the last three decades by crossing USD 1.80 trillion. Even as the government opened up the economy in the early nineties, India’s golden class (defined by me as the great Indian middle class of real consumers in the age group of 20 years – 60 years) hold the key to this recorded growth. The world now looks at India as one of their premier markets, the other being China.

The Indian Retail Sector

India’s Gross Domestic Product (GDP) stood at INR 76,74,148 Crores (USD 1,535 Billion[1]) in 2010-11. We now expect the GDP to touch INR 89,12,178 Crores for 2011-12, a growth of 6.9% over the last year. A drop in the growth rate can be accounted to a major drop in the growth rate of Agriculture as a sector and Manufacturing. Agriculture as a sector recorded a Year-on-Year growth of 7% in 2010-11 but is expected to touch 2.5% growth in 2011-12. Industry as a sector is also expected to register a drop in the growth rate from 7.2% in 2010-11 to 3.9% in 2011-12. Services as a sector have managed to maintain its growth rate at 9.4%.
Approximately 52% of the country’s GDP accounts to Private Consumption (refer graph - 1). This translates into approximately USD 798 Billion. The Indian Retail Industry is valued at approximately INR 17,55,000 Crores (USD 351 Billion), or 44% of private consumption. For the starters, India’s retail sector employs over 35 million people, making it the second largest sectoral employer after agriculture[2]. The wholesale trade is estimated to employ additional 5.50 million people.

Graph 1: Indian Retail as compared to country’s GDP

Source: RBI, Mint Research, Deloitte Retail POV “Indian Retail Report, IBEF report
*: Calculated at 1USD = INR 50

The sector is expected to record a growth of over 12% and is poised to cross INR 32,50,000 Crores (USD 650 billion[3]) by 2015. The size of the market coupled with a high growth has made India an attractive destination for the global players. That’s what makes the Indian Retail sector an attractive proposition for the global players.

The Business of Retail

The retail players have started to realize that the projected growth may not come easily. The dynamism of the Indian markets is quite unique where the unorganized sector, better known as ‘Kirana’ or Mom-&-Pop stores virtually dominating the retail sector. According to an estimate, over 14 million outlets operate in the country. Of these, only 4% of being larger than 500 sq ft (46 m2) in size. India has about 11 shop outlets for every 1000 people.

In 2005, these stores controlled over 96% of the retail market. In 2010, their share was marginally reduced to just below 94.5%. It is expected to change further with the spread of organized retail across tier two and three towns (refer graph 2).

Graph 2 – Organized Vs. Unorganized Sector

Sources: Deloitte’s India Retail Market Report, Booz and Company Analysis and Forbes
When compared to China and the United States, the Indian Retail sector looks better poised to gain all the attention. According to the data published in The Economist, even though the sector is not as organized as in the United States, the Indian Retail sector has only a marginally lesser number of shops as in US. What’s interesting is the fact that the Indian retail industry is, on an average, has maintained a 32% of GDP as compared to 20% in the USA. With this established relationship with the GDP of the country, the retail industry does promise a lot of action in the years to come.

What’s working for the Indian Retail Sector

  • The Indian middle class in the age group of 15 years and 65 years has created a market for products that were considered a luxury earlier. This wide age bracket ensures a growth for the sector till 2035.
  • The per capita income in India has doubled between 2000-01 and 2009-10, resulting in improved purchasing power. A high disposable income of the population has helped the industry expand its base even in tier two and three cities.
  • Over the last decade, there has been a clear shift in the mindset of the Indian consumer. Today, the consumer is ready to pay a premium for a better quality product. This change in attitude, coupled with an increase in disposable income has worked well to establish the retail industry.
  • The emergence of organized retail has added a glitter to the industry. It has also helped in employment generation in semi-urban areas.
  • The organized retail brands have created their own unique loyalty by passing on saving to the consumers. The retails plays on economies of scale and the consumer get the benefit in terms of savings on purchases.
  • FDI in single brand retail coupled with high disposable income of the Indian middle class has given a boost to the semi-luxury market.
  • The government is working overtime to create a lasting attraction for the sector at policy level. The expected growth of the retail industry

FDI in Retail

The liberalization of the economy that started in early 1990s created a new landscape for the service sector. This, coupled with an attractive FDI policy has transformed India from a ‘closed’ economy into one of the favored destinations for foreign investments. It was only logical that many foreign brands now started looking at India as a promising land to boost their profits.

Table 1: FDI Policy in Retail

Entry Route
Wholesale cash and carry
Single brand product retailing
Through Foreign Investment Promotion Board
Multi Brand retailing
Not Allowed

Retailing is a number game. Understanding the local psyche is also extremely important for the multinationals to achieve desired success. This brings us to addressing the core issue of how to new enter the market by better management of business risks. Following table presents a synopsis on preferred routes taken by major players to enter the Indian retail market:

Table 2: How to enter Indian Retail market

Wholesale trading (Cash & Carry)
100% FDI allowed by the government. The entrant needs to develop a bigger infrastructure to ensure better relationships with the local manufacturers. Also gives an opportunity to the entrant to source the product locally for its international operations.
Franchisee arrangement
Most preferred route for an international player. Franchisees help the multinational players to get a better understanding of the local market before they set up their own shops. To ensure the trademark international experience for the buyers, these players do get involved in training and presentation.
Strategic Licensing arrangements
The entrant has an option to opt for a strategic licensing arrangement with a local player. This helps the entrant have a much better control over the set-up. It also helps the entrant understand the nuances of the market first hand through direct involvement.
Manufacturing and wholly owned subsidiaries
Owners and manufacturers of leading brands have an option to setup their own manufacturing units in India. Brands like Nike and Reebok have set up their plants in india. Nike, for instance, has set up a wholly owned subsidiary Nike India (P) Ltd to manage its Indian operations.

Retail Policy: Advantage India

The Indian government’s policy to let the MNCs enter retail has been a well-thought out plan to ensure a boost to the local manufacturers and service providers. The policy ensures involvement of state governments in allowing the chains to set up their shops, thus helping the development of local industries at the grass route level as well. For instance, the rule that the retail chain has to source minimum of 30% from the SMEs ensure development of the SME sector in particular. This also helps the SMEs to match the quality standards as set by the buyer thus giving an opportunity to upgrade the manufacturing process. With an expected high growth in retail industry in the next decade (refer graph 2), the SME sector would also ensure a promising growth.
The government has also put a minimum stipulated investment at INR 500 Crores (USD 100 million) with a maximum of 51% stake. This condition has ensured to restricts the entry only to serious players and also have helped the Indian entrepreneurs to be a part of this growth story. This restriction may also work as a blessing in disguise for the multinational player as Indian buyers have their own peculiar characteristics that can be understood better by a local player with a proven track record.
The condition that half of the total investment must be made in backend infrastructure ensures a holistic development of retail infrastructure through introduction of latest technologies and techniques.

FDI in Multi-brand Retail: Why do we need it

… but first what is a multi-brand store? The government has not defined what it means by multi brand in the policy document but it implies that the retailer selling multiple brands in its outlet will qualify as a multi brand retailer. If the government allows multi brand retailers into India, we would have brands like Walmart, Carrefour and Tesco competing with Reliance Retail, Big Bazaar and Spenser’s. Economies of scale would play a major role in the success of these chains and that’s what is playing in the minds of a section of our society when they oppose the entry of multi-brand retailers. The foreign players have the money power to help them compete and probably outplay the local players but when we consider the holistic view, things start to get clearer.
Size of the outlet: The average size of Walmart outlet across the globe is over 100,000 square feet. Now, compare this to a typical Big Bazaar outlet in India which is spread over an average area of 30,000 square feet. The real estate scarcity in the city-center will force the large format players to move to outskirts of the city ensuring development of the underdeveloped regions.
Employment: Retail sector is the largest employment generator in India after agriculture. With the entry of new format stores and higher penetration of retail stores in tier 2 and 3 towns will ensure higher employment generation.
Supply Chain Management:  Though India’s the second largest producer of fruits and vegetables (About 200 Million MT), it has a very limited integrated cold-chain infrastructure, with just over 5,000 stand-alone cold storages, having a total capacity of 23.6Million MT, 80% of this is used only for potatoes[4]. To ensure the success of a large format stores, the entrant will have to systematically invest in the retail infrastructure, thus helping the agriculture industry in reducing wastage of food.
Advantage Agriculturists: The agriculturists in Punjab belt have already started gaining better price (almost 8% more than what they were paid earlier) for their produce. With more competition coming in, this market would get even more competitive and the benefit of this competition will get passed on to the agriculturists. It’s worthwhile to note that agriculturists get just about 12% to 15%[5] of what the retailer is paid for by the consumers.
Lesser Wastage: According to the data released by Ministry of Commerce and Industry, Government of India, the country loses agricultural products worth over INR 1 trillion. It is estimated that over INR 570 billion of the agricultural produce can be saved by better management of supply chain. It is only evident that with the entry of large retail formats, we will have a better chance of saving on these wastages.
Inflation Control through Multi-brand Retail: The impact of the presence of multi-brand retailers in India will help the industry work on upgrading the supply chain to global standards thus reducing the wastage of agricultural products which may have a minor but positive impact on reduction of inflation.
Advantage SMEs: The policy suggests that every player will have to source a minimum of 30% of manufactured products locally from the small and medium sized enterprises. Needless to mention here that the players will look at global sourcing from these SMEs, if the costs are reduced and quality is maintained. In the medium to long run, we can expect introduction of technologies in manufacturing. The condition laid by the policy makers will also ensure a guaranteed growth for SMEs, a growth that would link with the growth of the retail sector.
Level playing field for local players: Walmart entered China and did not succeed. They entered Germany but failed to make any impact. The local competition was well placed to compete with the biggest of the players. India may not be different. After all, a fear in the mind of a section of Indian politicos about the ill-effect of FDI in Multi-brand retail may not be called for. We have already witnessed large Indian corporate houses entering the retail space and most of them helping in reducing the monthly spend of consumers by passing on the saving. It is a fact that these corporates have a perfect knowledge of Indian psyche and our ways. They have already registered early advantage by creating a brand in the minds of the customers.

Will the Kirana Stores survive?

Kirana stores have a peculiar positioning in the minds of its customers: they exist to meet the daily needs of the customers. The large format stores may have created a dent in Metros to a certain extent but as we move to semi metros and towns, the impact of their presence has been negligible.  To ensure minimum impact on the small kirana shops, the government has taken due care to restrict their entry to towns below the population of 10 lakh. This translates to just about 53 cities/ towns that qualify for FDI in retail as compared to over 8,000 cities/ towns.

Graph 3: Retail formats and growth over the years

Sources: Booz and Company Analysis and Forbes India
In China, for instance, Walmart is present in 101 cities with 189 stores in varied formats[6]. That’s less than 2 stores in every city. Even with wildest stretch of imagination, it will not be possible for a player such as Walmart to capture the market that exists in the city with just two stores. One’s daily needs will be met by the local mom-&-pop store.
Even with the entry of multi-brand retailers, we expect a growth in the presence and penetration of kirana stores across India. These stores will not only survive but also grow even as an increase in per capita income and consumption is registered.


With an uncertainty over the global economy looms large, we as a nation have to decide on factors that have the potential to shape the future growth prospects of our economy. The Agricultural sector has always been the biggest employment generator for India. With the unemployment rate of close to 10% looming large on the Indian economy, it is only logical for the policy makers to develop the sector that has a potential to generate jobs for the unemployed, the retail sector, which is the second biggest employment generator for the country. By allowing FDI in single brand retail, the nation has witnessed a sharp increase in employment generation. We have also witnessed a limited but important development of retail infrastructure in the past five years. Even as we work towards limiting our losses due to wastage in agricultural produce, which is to the tune of a trillion rupees per annum as per Government estimates, we are left with no option but to take a calculated, well-thought out call on what will drive the next wave of economic growth for our country. It may be noted that most of the leading economists and large industrialists have concluded that retail will add that much-needed boost to our economy. This is evident even as they invest in the retail infrastructure to maximize their profits and simultaneously offering around higher price for the agriculturists. With their entry, we have seen limited but important development of infrastructure. This can be given a boost, if we allow major Multi-brand retailers to set shop in India.
FDI in retail will help not only in creation of new employment opportunities but will also help a new breed of entrepreneurs to take control of the peripheral demand that is expected to get generated by the presence of world’s largest retailers. The presence of world’s biggest brands will also create a healthy competition for the local players to excel.
The Government of India has taken all the steps necessary to insulate the unorganized retail sector. They have also put some conditions that will benefit the SME sector to a great extent. More so, to understand the Indian market, these multinational players will need local help and this would create a new set of opportunities for the local entrepreneurs.
We need to look beyond the obvious to take this call and help India seize economic growth through development of the sector that attracts foreign interest.


  1. FDI in India’s Retail Sector - Centre for Policy Alternatives
  2. Deloitte’s Indian Retail Market
  3. Retail Report by Booz and Company and Forbes
  4. Indian Retail Sector report by Resurgent India
  5. FDI in Retail – Background and Policy, Ministry of Commerce and Industry, Government of India
  7. India Brand Equity Foundation’s report of retail sector
  8. 100% FDI in retail in India, good or bad... by Veeresh Malik
  10. Organized Retail in India by Stanford Technology Venture Program
  11. Retail Evolution, Trends & Business Opportunities in India by Rajan Bharti Mittal, Vice Chairman and Managing Director Bharti Enterprises Limited
  12. Cash & Carry retail in India,
  13. Modern retail fuels new growth categories, by Samidha Sharma
  14. FDI in Multi-brand Retail, Wharton
  15. Future of Retail in India, by Ashis Mishra and Roger Moser, IIM – Bangalore
  16. Selling and Distribution in India, Boston Analytics
  17. Food Retail Chain and Supermarket Evolution, P.G.Chengappa, Vice Chancellor, UAS, Bangalore
  18. Winning in India’s retail sector – PwC

[1]  Calculated on a conversion rate of 1 USD = INR 50
[2] Source: Deloitte’s Indian Retail Market Report
[3] Source: Booz & Company Analysis
[4] Ministry of Commerce and Industry, Government of India
[5] World Bank Study of Retail sector
[6] Source: Walmart China website

Monday, July 2, 2012

Neuro-Marketing: The Individual, The Brain and The Brand

Published in South Asian Academic Research Journal, Volume 2, Issue 7 (July 2012)

Listed at Ulrich's Periodicals Directory, ProQuest, USA and Cabell's Directory of Publishing Opportunities, USA

Author             :           Sandeep Bhasin
                                    Assistant Professor
Institute           :           Amity International Business School, NOIDA, Uttar Pradesh
Email id           : ,


"I know I waste half the money I spend on advertising," the turn-of-the-century department store magnate John Wanamaker is reported to have said. "The problem is, I don't know which half."

This was then. The new technology now promises to address this issue with better targeted conversations. It took relatively a long time for the marketers, especially after industrialization, to understand the power of marketing and related activities. Even as the manufacturers of goods and services established their marketing departments, the activities were restricted to communication, viz., designing of internal & external communication, Above-the-line and Below-the-line advertising and organizing events during the launch of the products.
When the marketers were busy working on defining marketing strategies, taking their vague market research findings and gut-feelings, a group of Neuroscientists were researching on understanding the working of the human brain. These studies, related to better understanding of our brain’s decision making processes, promises to have a direct impact on the ‘why’ of the product positioning and the ‘how’ of communication. 

Will understanding the human mind turn out to be a game changer for marketers? This paper explores how our marketing strategies will get sharper in their approach and reduce wastage with a deeper understanding of the working of the brain.

Key Words:

Neuromarketing, Marketing, Brain, Behavior, Decisions, Real-Time-Bidding, Nervous System

The Web of small things…

In a country with a population of over 1.22 billion, we have just over 75 million[1] internet users and growing. India registered a growth of 13% in internet usage, as compared to 11% growth in internet usage worldwide in 2011, second only to China. The ‘web’ is expected to rule the infotainment industry in the times to come. At present an average Indian uses the net for just over twelve hours in a year, which is one of the lowest in the world. This is expected to change in the next five years even as large and small corporates work to increase the Internet penetration with the expected launch of 4G services and next generation Broadband by end of 2012.

Even as entrepreneurs in India work towards increasing internet penetration, a bunch of techies in the Global village work overtime to improve the effectiveness of the targeted advertising. They call it Real Time Bidding or RTB. This software helps the advertisers target the right message to the right audience thus minimizing wastages. I expect the RTB to reshape the advertising space, just like Google did a couple of years ago with the launch of Google Ads, a search advertising platform. While the search advertising selected the advertisements taking a clue from the key words entered by the surfer on its search engine platform, RTB takes the targeted advertising a step ahead by analyzing the profile of the surfer and displaying the advertisement customized to her needs. Unlike any other banner advertisement, this advertisement is customized to the user of the internet. The RTB platform hunts for the right advertisement to be displayed, contacts the select advertisers, registers the bid from all the advertisers and displays the advertisement of the highest bidder. And all this happens in less than 500 milliseconds, thus avoiding any delay in loading of the webpage. Companies including PubMatic and Vizury are working overtime to make this technology faster, better and more adaptable. This is a stride from Amizon’s ‘Recommendations for You’, a search engine based platform that uses your surfing and order history to recommend products for you.

The web now captures the ‘i’ in the Brand.

Understanding the working of the brain

Our brain is the most complex of our body parts. It has over 100 billion nerve cells... Each cell plays its own unique part. Our brain is so important for our survival that almost 20% of the blood pumped by our heart every minute is used by it.  At a macro level, our brain is divided in six sections but what runs (well almost) this world is the Frontal lobe, which is positioned at the front-most region of the cerebral cortex. It controls our movements, complete decision-making process, problem solving, and planning. It controls our impulse as well. This part of the brain is the latest edition of evolution and is unique to us humans.

Our Nervous system has two parts: the Central Nervous System and the Peripheral Nervous System. The central nervous system is made of the brain and the spinal cord. The peripheral nervous system is an autonomous system which is performed without a conscious control. This would include Heartbeat, digestion, salivation and perspiration. Through the receptors or senses, our nervous system keeps us in touch with the environment and together with hormone-secreting system, the nervous system regulates and maintains the body in equilibrium.

The challenge for any marketer is to understand the human nervous system and create a communication that connects with the brain, conditions it in favor of the communication and forces the brain to act in brand’s favor.

The ‘i’ in the Brain

Neuroscience now helps us in better understanding the human decision making process, popularized by Malcolm Gladwell in his book Blink. He argues that most of the decisions are taken in the first two seconds; the rest of the time is spent on justifying the decision. With the release of this book, he managed to generate a serious interest in Neuroscience and its implication in marketing. Many marketers have, since then, researched the decision making process.

Harvard Professor Jerry Zaltman created and patented ZMET (Zaltman Metaphor Elicitation Technique), a technique that “elicits both conscious and especially unconscious thoughts by exploring people's non-literal or metaphoric expressions”. According to a research conducted by Professor Zaltman, 95% of our thoughts, emotions, and learning occur without our conscious awareness. Market leaders including Coca-Cola, Nestle, Procter & Gamble and General Motors were among the first to adopt this technique. They all had a single point agenda: to understand how we take buying decisions. As it gained popularity amongst the advertisers, it also attracted the researchers. Today, we call it Neuromarketing, the Science of Marketing, a logical extension of Neuroscience and Neuroeconomics. The concept of Neuromarketing includes behavioral research and behavior-based strategies. It’s all about understanding how our brain works and employing of that understanding to improve both our marketing and our products. With more and more researchers making the findings public, the marketers were flabbergasted with the shared knowledge.

One of the first studies released was the (great) Pepsi Challenge in 1975.  A large majority of the audience preferred Pepsi to Coke in the challenge. It also made a great advertising campaign. It had to. The findings were so off-the-beat. This prompted me to do my own informal study of Pepsi Vs. Coke in 2005. The subjects were 75 of my colleagues of the financial organization I worked for. The results were starkling.  Over 20% of the respondents could find no difference between the tastes of two brands. Of the rest, 33% liked and preferred Coke whereas just 19% linked and preferred Pepsi.

The Pepsi Challenge - in Numbers
Preferred Coke
Preferred Pepsi
Liked Coke
Liked Pepsi
Could not differ

The Pepsi Challenge - in Percentages
Preferred Coke
Preferred Pepsi
Liked Coke
Liked Pepsi
Could not differ

52% of the respondents were clear to choose what they liked but 48% of the respondents were influenced by the communication and brand power that both Pepsi and Coke created. Our brain was being played with.

Criticism of the Pepsi Challenge

 Even as I made public my findings on the localized Pepsi Challenge, Malcolm Gladwell, in his book Blink, argues against the research methodology that resulted in Pepsi's success over Coca-Cola in the "Pepsi Challenge". According to Gladwell, result of the research can’t be taken seriously because of flawed nature of the "sip test" method. His research shows that tasters will generally prefer the sweeter of two beverages based on a single sip, even if they prefer a less sweet beverage over the course of an entire can. Just because a taster prefers a single sip of a sweeter beverage, doesn't mean he or she would prefer to have an entire case of it at home. The Pepsi campaign may have failed to dent the cult status of Coca Cola but it did manage to create a dissonance in our minds. The campaign also gave the researchers a new ground to explore.

The synergy between the Brain, the ‘i’ and the Brand

The ‘i’ is the individual. He is unique and so are his needs. The challenge for any marketer is to create a system that would target him as an individual with a customized communication to address her preferences in her style. The new technologies [2] will now assist the marketer to customize the communication. Researchers across the developed markets are now extensively using EEG or Electroencephalography, which measures the electronic activity of the brain through the placement of electrodes on the scalp of the subject. EEG captures the visible as well as invisible reactions that the human brain creates to a given stimulus. The other technology being used by Neurobiologists is fMRI or functional Magnetic Resonance Imaging. It records the blood flow to different parts of the brain to capture the effects of a stimulus. An example that has been widely quoted in the marketer circle is of researcher Samuel M. McClure who used fMRI to show the prefrontal cortex, hippocampus and midbrain were more active when people knowingly drank Coca Cola as opposed to when they drank unlabeled Coke.

Researchers are also adapting the use of Biosensors to measure the heart rate (ECG) the response generated by human body upon presence of a stimulus. Eye tracking devices are being developed to help the researchers understand the typical eye movement to help marketers place the right message at the right place at the right time.

Studies like these now help the marketer to create specialized communication for the target audience. It also helps the marketer to experiment and measure the response in a conditional state before rolling out the strategy in the market place.

The findings that will surprise you

Human brain is considered as one of the most complex objects around. Even as a lot of research has been conducted in the last century to better understand the real power of brain, it just happens to be a tip of the iceberg. Resent researches have proved the real power of human brain. Check out the sample of some of the research findings [3]that will steer your mind:

  • _      The researchers have found that the guests who got the simple numeral price list (without a dollar sign) in a restaurant, spent more than those who got the menu with a dollar sign
  • _      Researchers at Stanford University proved that subject’s brain experiences more pleasure when he think he is drinking a $45 wine instead of a $5 bottle, even when in reality it it’s the same cheap stuff
  • _      One experiment showed that nightclub patrons danced longer when the venue was scented with orange, peppermint, and seawater
  • _      A test in a casino found that people gambled 45% more money in a slot machine when a pleasant scent was introduced into the area
  • _      Another experiment showed that just by changing the scent of the shampoo made the users believe that it foamed better, rinsed out more easily, and left their hair glossier

Playing with the Brain – The Marketing Way

Have you ever wondered why you are ready to pay more for a cup of coffee at CafĂ© Coffee Day or Barista as compared to your canteen? Because there’s no concept of a ‘fair’ price in our mind[4]. The ‘fair’ price is the price we decide after considering all the factors surrounding the decision. This would include the perception that we carry of the brand, the value our brain perceives to derive from the ownership of the product, the pleasure we derive from the consumption of the product and the snob value of the product we consume.

Understanding the decision making process of typical brain opens a new perspective of pricing decisions that a marketer implements. The classic ‘Bata Pricing’ changed the way marketers priced their products. Bata was one of the first marketer to price the product breaking the psychological barrier or the “art of sneaking in a tag just short of the 'oops' barrier”[5] by effectively using the power of one rupee. Many marketers have, since, followed the pricing strategy, to name a few, SpiceJet pricing a ticket at INR 4,999, Acer with a Celeron-based laptop priced at INR 49,999 and Unilever pricing its Lifebuoy Hand-wash at INR 39. The effectiveness of this pricing strategy is visible on the travel sites which list the ticket rates in ascending order. The difference in the quoted rates, if you observe, will most probably be in single digits.


The complex working of the brain has made it extremely difficult for us to gauge its full potential. Over the last century, many researchers have spent thousands of hours in defining the working of the brain and its impact on our personality. For instance, the Left Brain – Right Brain theory was recently challenged by a leading psychiatrist and author Iain McGilchrist[6] by directly comparing human brain’s shape and structure with the shape and structure of other animals and birds and proved that the traditional understanding of "left-brained" being more logical, analytical and objective, while "right-brained" being more intuitive, thoughtful and subjective[7] may as well be wrong.  The new wave of thinking among the researchers and the development of technologies including ZMET, EEG and fMRI with specific use in better understanding of the ways of our thinking have already started yielding results, predominantly in targeting communication with minimal wastage. All this is done by High-density arrays of high-resolution EEG sensors acquire actual brainwave activity across up to 64 separate sectors of the brain, at 2,000 times a second, Pixel-level eye-tracking equipment determines the precise location of visual focus and GSR (galvanic skin response) sensors measure variations in the skin’s electrical conductance, serving to affirm degrees of emotional engagement[8]. These technologies are now being used extensively in product conceptualization & designing, product packaging, advertising and media planning.

Over the last 5 years, we have witnessed a change of preference of the advertising vehicles by advertisers. It’s only logical for the advertisers to reduce the proportion of spends in magazines and increase the same on the new media such as internet. Our daily newspapers have also seen a drop in advertisements whereas we have seen an increase of BTL advertising and paid news in this period. The advertisers have now started critical evaluation the communication vehicles. New tools have now made it possible for the advertisers to get a better understanding of which portion of advertising investment can be termed as a waste and realign it to get the best possible value. This is just the beginning of better understanding of our brain power. A lot more is expected in the times to come.

Terms used

Neuromarketing          :           A new field of marketing that studies consumers'
sensorimotorcognitive and affective response to marketing stimuli
ATL                             :           Above The Line Marketing Techniques
BTL                             :           Below The Line Marketing Techniques
fMRI                            :           Functional Magnetic Resonance Imaging
RTB                             :           Real Time Bidding
ZMET                         :           Zaltman Metaphor Elicitation Technique
EEG                            :           Electroencephalography
ECG                            :           Electrocardiography



        Neuromarketing by Leon Zurawicki, Springer-Verlag Berlin Heidelberg 2010
        The Tipping Point: How Little Things Can Make a Big Difference, Malcolm Gladwell, Back Bay    
        Books, 2002
        Neurofocus Case study, 2011
        Neuroeconomics, Edited by Paul W Glimcher, Colin F Camerer, Ernst Fehr, Russell Poldrack, 
        Academic Press
        Behavioral Sciences, Kaplan Medical, Steven Daugherty, Editor
        Research Methods for the Behavioral Sciences, Fredrick J. Gravetter, Lori-Ann B. Forzano,
        4th edition
        Brainfluence: 100 Ways to Persuade and Convince Consumers with Neuromarketing, Roger 
        Dooley, Wiley; 1st edition, 2011
        Evaluating Research Methods in Psychology, George Dunbar, BPS Blackwell publishing,
        Iain McGilchrist (
      Buyology: Truth and Lies About Why We Buy, Martin Lindstrom, Crown Business, 2010
      Blink: The Power of Thinking Without Thinking, Malcolm Gladwell, Back Bay Books, 2007
      Neuromarketing at Work,
      The Branded Mind: What Neuroscience Really Tells Us about the Puzzle of the Brain and the Brand, Erik Plessis, Kogen Page, 2011

[1] Source: Comscore’s State of Internet report
[2] Source:
[3] Source: Brainfluence by Roger Dooley

[4] Source: Brainfluence by Roger Dooley
[5] Source: The Economic Times
[6] For more on Iain McGilchrist, please visit
[7] Left Brain vs. Right Brain, Kendra Cherry, Guide,

[8] Proprietary technology of Neurofocus, a Neilsen Company