“I asked the lady working there, ‘Which milk would you buy?’ She says, ‘Oh, I would buy the milk which is from Denmark.’ I said, ‘Why not local?’ She said, ‘Well, because they treat their cows better.'”
Could your brand thrive in an African village? I try to imagine Sam Walton considering that question back in the 1960s as he launched the first Wal-Mart in Rogers, Arkansas. Whether or not he saw that far down the road, the giant chain now has stores in South America and China, with reports of activity in South Africa. (If anyone out there has more details please let me know.) In any event, there is already competition waiting there from retailers such as Kenya’s Nakumatt supermarkets.
Perhaps no one follows these trends closer than Vijay Mahajan, a well-traveled marketing professor at The University of Texas at Austin. Mahajan is obsessed with curiosity about brands and markets worldwide. I first got to know him shortly after he published The 86% Solution, which made the case that businesses can no longer focus solely on 14% of the world’s wealthiest populations, and must begin to address emerging markets in Asia and elsewhere. He recently followed up with Africa Rising, a highly readable book that details the growing market opportunities in Africa.
Mahajan is a warm, unassuming guy, and you might never guess he is something of a marketing celebrity. The American Marketing Association Foundation gives the Vijay Mahajan Award to educators who have made sustained contributions to marketing strategy literature. He is also a former dean of the Indian School of Business.
My interview with Vijay Mahajan.mp3.
Recent article in IndianExpress.com entitled Where tigers and dragons can get along.
Edited Version of Our Conversation
David Wenger: One of the stereotypical views of American brand building is that consumers are tested, focus grouped, prodded, probed and then an advertising and marketing team carefully crafts a brand message to match what has been discovered. Is that different or the same in markets such as Africa?
Vijay Mahajan: I would say it’s more or less the same, because a brand is the association that a consumer has with a product, a positive association. All the way from the trust to the positive feelings to the value and you name it. So the process in the developing country is not any different. As a matter of fact in some of the countries it’s even more important. For example, in Africa there’s a huge market for used products, whether mobile phones, clothes, or cars. Most companies don’t realize how brand conscious Africans are. BMW probably has more fans in Africa than they have in the rest of the world. And even when business people are buying the used clothes they’re very conscious about the brand. They buy the brand name clothes, and so it’s not unusual to see a young guy there wearing a branded shirt there and being very proud of that. So I think the brand is a universal phenomenon.
DW: Are the brands they are attracted to the same brands we would have heard of?
VM: In some countries when it’s a foreign brand they actually consider that as something very special. To give you an example I was in Nigeria in Lagos, visiting one of the supermarkets on my market visit and I saw this packaged milk. I asked the lady working there, “Which milk would you buy?” She says, “Oh, I would buy the milk which is from Denmark.” I said, “Why not local?” She said, “Well, because they treat their cows better.” So here she has an association that the foreigners actually treat their cows better than they do locally, and therefore she would buy their products. So sometimes the foreign brands are very well known, the same brand that you and I would know here in Austin, Texas they may also be aware of the same brands there.
And at the same time sometimes the foreignness is not very good. They might consider buying the foreign brand as compromising their own economy. The companies have to play a very delicate role when they take their brands through these developing countries. But to answer your question, yes, they would be aware of that same kind of a brand that we would be. In fact, this issue of Business Week has given the top 100 global brands, and you can see on that list there are several of those brands that are non-U.S. brands, be that Canadian, be that European, or be that the Asians. So I think that because of the media people are very much aware of the quality.
DW: So there might be some sentiment from the African consumer, much like the American consumer, to in some instances buy local in order to support local industry?
VM: Absolutely, and as a matter of fact when it comes to cosmetics it was very interesting for me to actually interview some of these consumers. Cosmetics, for example, they prefer to buy their local brands because local manufacturers understand their complexion, they understand their need, they understand their climate. So rather than buying our brands they’re happy to buy the local brand. That’s a very interesting delicate thing that I mentioned that the companies have to really work around. And that also, by the way, tells you that one of the very key strategies of the multi-nationals when they enter some of the developing countries is to actually buy some local brands. So Coca Cola, for example, when they re-entered the Indian market they actually bought one of the local manufacturers who actually had some very well-established, very well-known brands, and they used that, they leveraged that to introduce Coke in that country. And now many of the companies are doing the same thing in China, beer companies are doing the same thing. There are certain very well-established local brands there.
DW: That makes me think of a conference last week here at McCombs, and John Berra, who’s the CEO of Emerson Process Management, talked about the investments that his company had made in infrastructure and China, basically following their customers into China. And his point was they had to look and operate as a Chinese company not as an American company shipping products over there. And it sounds like that’s very much true in Africa as well.
VM: Oh that’s absolutely right, because you’re not going there to exploit the consumers. You’re not going there as an importer or an exporter you’re really going there as a member of their community. So this is something in the book also I call Ubuntu, which is a Zulu word meaning “I am because you are.” And that is one of the reasons that I have criticized, not criticized but at least brought to their attention, some of the companies who are actually trying to market their products in Africa but they have their headquarters in Europe. So this will be, you know, somebody trying to market their products in India but having their headquarters in Singapore because Singapore is a lot cleaner and the families want to stay there. Unless you become part of the community why would the community care about your products? You’re always going to have that image that you really don’t belong here, you’re here for the wrong reasons, and that’s what I like about some of the companies.
For example, if you take Nestle they have made a very dedicated effort. They’re able to be identified as a local brand. The moment you mention Nestle people will think that it is their own brand. The same is the case with the shoe supermarket Bata, it is Hungarian I think, and they have some now in Canada, but wherever you go in the developing countries and you see Bata people will think that it’s a local brand. The fact of the matter is that Bata is not a local brand.
Gone are the days where you could just ship the products there. And in this Internet age the word gets out very quickly. So you have to really have a presence there and be part of the community to build your brand.
DW: I know you’ve studied a lot of the brands that are being successful in Africa and I’m sure you’ve also seen some missteps along the way. What are the lessons learned from some of the mistakes that have been made as American companies have tried to break into that market?
VM: When you look at developing countries including Africa some of our companies have done a remarkable job. For example, Coke has been in Africa for 90 plus years. They are probably the largest employer in the private sector. They have a phenomenal distribution system. They participate in the local initiative. So by default they have also created a fantastic distribution channel asset, because they wanted to go everywhere. And then what happened is by default they have also become one of the largest distributors of condoms in Africa. So Coke has been there for 90 years and they are going to stay there, so they have done a remarkable job.
The biggest issue in the developing country is really the piracy when it comes to the brands. Somebody could actually make a product and use exactly your colors and logos and packaging and if not your name at least some name that looks very much like your name. Case in point would be in the context of shoe polish. Per capita consumption of shoe polish is actually higher in Africa. People like to look good. When they go out they want to be clean and sometimes they want to expand the life of their shoes so they will use the shoe polish. So the shoe polish Kiwi, for example, has this major issue that there are a lot of imitations which are available. I won’t say imitation they’re really pirated copies because they look exactly like them. So how do you accurately build a brand and protect yourself at the same time, and don’t look like somebody who’s going to kill the local entrepreneurs? So the biggest issue is how do you actually protect yourself? Several companies have that issue.
DW: So it’s a bit of a wild frontier in terms of brand protection.
VM: It is actually, and unfortunately it is the major issue for our companies when they go to those developing countries. And also keep in mind that even in this country we have that, I have seen it myself if you go to Laredo, I have seen that on the border right there, people are trying to sell you Rolex watches or you name any product. It looks the same and for a layman it looks the same and is much cheaper. I mean if you are wearing that Rolex watch I won’t be able to tell that you are wearing the real one or the fake one. And so it is a global problem but it’s probably a little bit more in the developing countries including Africa.
DW: Professor John Doggett claims China is doing a better job moving into the African market. Is that something you have seen?
VM: China has a lot of projects going through their government. I was reading the Financial Times and right on the front page the headline data is how the Chinese have actually gone to Nigeria to buy oil, they’re going to invest in their oil company. My interest is predominately in the consumer market, and in the consumer markets you do see the Chinese and the Indian companies playing a major role. For them, the consumers look very much like the consumers back home. They’re very value conscious, they’re very price conscious, products need to be developed which are more durable, the demographics are not any different in terms of per capita income and so on and so forth.
So it didn’t come as a surprise to me to find a lot of the Chinese and Indian products throughout the continent. For example, let’s say flip flops are $1.00 or $1.50, a television, $70 to $80. For the Chinese and the Indians they know that whatever products they’re manufacturing for their own consumers those products will also appeal to the Africans. That’s why you will see a lot of these products actually throughout the continent and 900 million is a lot of consumers.
Some of the companies are making those products in Africa itself but some of them are importing it. And there may be some entrepreneurs. I have seen some of these small entrepreneurs they will bring one carton of toys and other kinds of things, electronics, gadgets and so forth. They import one carton, they sell that, and after they have sold that they go back and buy one more.
All you have to do is look at the traffic between Africa and Asia. If you look at Kenya Airways, for example, or you look at Ethiopian Airlines, in the in-flight magazine they always give you a map of where they go, and it’s amazing to see how many of them actually have direct flights now from Africa to both places in India and in China. And some of them actually go through Dubai and then some of these airlines especially Kenya Airways even have charter flights where they take these businessmen and they go to China and buy the products and bring them back.
It has also convinced the local entrepreneurs that if India and China can produce those products and come all the way here and sell those products to us, we can also do it. When they look at a toy, for example, they say why bring it from there? Can’t we also do it here? So it is also creating that very positive entrepreneurial spirit among the local entrepreneurs also.
DW: Obviously, a company can’t just brand from a U.S. perspective. And that makes me wonder what does an American-born brand professional do to stay relevant in a global corporation?
VM: Well that’s a very good question. Some of these companies are hiring ad agencies based in the developing countries. For example, the Chinese PC company, Lenovo, has their office in Bengaluru, their ad agency office in Bengaluru, and they’re responsible for creating the copy for the developing countries.
Keep in mind we’re very blessed in this country. I mean our income per capita is something like $43,000 U.S. dollars, India is only $1,000 and China is $2,000 or so. Ask yourself how do we create a brand which has the same association, trust and what not — durability, price, and quality that consumers here like — but the consumers there would also associate with the same attributes? You have to explain them in their own way.
The sense of humor is very different. Some of the things that we can say here, they may not be acceptable there. Sometimes there is only one TV in a small home, a 900 square foot home, the whole family sitting together to watch that TV. You cannot show certain types of material on the TV which will be offensive to the entire family. The same applies to advertising also.
So that’s why you see Saatchi and Saatchi, they bought a local ad agency and then they brought the technology to update them, and show them “This is how it should be done.” They improve the quality, but they bought the local ad agencies because the local ad agencies really understood the local culture, the local market. Many of the multi-national companies who are going to these developing countries are directly asking their ad agencies to facilitate that. So, for example, Proctor and Gamble would go through Saatchi and Saatchi, and they work with the various offices.
DW: You’ve written Africa Rising. What’s the next book? What’s your next focus?
VM: [Laughing] David you’re putting too much pressure on me now. Actually I’m putting my thoughts together to do something for the Middle East and especially the Arab countries. As you know the Islamic community in Austin just finished their Ramadan. It’s a very big thing there and when I was in North Africa I saw some very interesting things going on during Ramadan time, people buying televisions and new programs were being created and promotions were done during that time. It’s a very happy time, a celebration time, and also time to reflect.
I’m also interested in how the markets are being organized. Sharia banking, for example. At this stage I’m trying to put my thoughts together to see if I can capture the positive spirit of some of these countries. They’re also consumers just like your and my children here. Children there are not any different, they also know what BMW is, they also know what Nokia is, they also want to talk to their friends on the telephone, but in their own context. So that’s the context that I’m trying to understand, their religion and the culture and the politics so in three years I may have another, hopefully interesting book to offer and talk about.