The Recent CSR Buzz

Let us know about CSR, rules pertaining to it and how it has been working as marketing tool for companies.

The Buzz :

The new Companies Act 2013, Section 135 that was formulated with wide public consultation declared specific guidelines for CSR activities and they get applied to companies as rule by April 2014.

In simple terms,  criteria declared is , ‘Companies having net worth of at least Rs 500 crore or having minimum turnover of Rs 1,000 crore or those with at least net profit of Rs 5 crore, have to make CSR spend with minimum amount being 2% of three year average PAT (Profit After Tax) every year on CSR activity’.

It is estimated that the 16,245 registered companies in India alone will spend Rs 20,000 crore on CSR activities in 2014 and 2015. This means that there will also be a need for whole lot of CSR professionals and consultants and other specialists. With more and more NGOs and other social institutions eligible to receive aid surfacing quickly to play in this relatively new area, CSR term is spreading in leaps and bounds.

The CSR Concept:

In earlier times social, environmental and legal aspects had very less importance. Earlier companies use to focus only on economic objective but this had very harsh impacts on interests of stakeholders, nation, environment as companies just ran behind profits. But now companies have become aware that profits will grow only if they focus on building a sustainable ecosystem, i.e. development of nation and society with which it interacts along with going Green … and this brought idea of CORPORTE SOCIAL RESPONSIBILITY

In very simple words, it means operating business in a way that it accounts for social as well as environmental impact created by business.

However it isn’t new, It was common for companies to take up welfare program in the region it operates or work in it’s core area. Take for instance, a coal company helping the people in rehabitalation or tobacco selling company setting up cancer hospitals. However, in recent times companies have started acting in fields away from core. Say for eg. A mobile operator company planting trees

Many people confuse CSR with philanthropy by a company. But CSR is a wide aspect including social initiatives, helping Academia in research,making products GREEN, decreasing carbon footprint or simply decreasing the use of resources. For example, CocaCola is using more of plant based matter instead of oil-based matter for it’s plastic requirement.

CSR as Marketing Tool :

Looking from the other perspective, CSR is all about reputation building, brand making among the people.  Simple this increases the sales, and hence CSR can be considered a marketing tool. You might have come across it as you flip your ‘Classmate’ copy and there’s ITC’s appeal that it contributes Re.1 for your purchase.

 When asked why corporates take up CSR as part of The Hindu Survey,

Ø  65 % of the respondents felt that the main motivation was to build their reputation.

Ø  22 % stated that CSR was undertaken to help corporates market their products better,

Ø  Only 13% believed that CSR was done because corporates believe in the cause .

" The finding that consumers consider it acceptable for brands to use social initiatives for marketing gives marketers the license to do CSR to promote their brands, thereby making it a win-win for business and society”  -  Mr. Kartikeya , VP, Lowes Lintas India Ltd.

Also a study by Reputation Institue, consultancy firm based in Newyork found that ‘42% of how people feel about company is based on their perception of the firm’s CSR activities’ based on study conducted across 15 countries.

Thus, if the corporate firms take up CSR activities in a targeted proper manner it is a win -win situation for both business and the society.

The Slide Of Rupee

The rupee has plunged to an all-time low against the dollar and its fall has become a subject for debate.The usual discussions on the fall of the rupee bring up macro-economic matters such as slow economic
growth, huge current account deficit, rising imports etc.

At the time of independence when India had no foreign borrowings the rupee was at par with the dollar.With the introduction of the 5 years plan and the subsequent requirements for foreign investments the
dollar slowly rose. In 1985, after the Bofors scam, which toppled Rajiv Gandhi’s government, the dollar was equal to 12.35 rupees and since the economic liberalization in 1991, there was a sharp devaluation of rupee and the rupee had dropped to Rs.24.5 against a Dollar. The dawn of the third millennium further worsened the condition of rupee against dollar. Indian economists are trying hard to chalk out a strategy to counterbalance the falling value of rupee but it seems the attempts are futile.

The major reasons for the plunging fate of the rupee are:
Current Account Deficit (CAD)
CAD is considered to be the key factor behind the steep volatility of rupee against dollar. CAD occurs
when the total import of goods and services of a country is greater than the total export of goods and
services, thus making India a debtor to the rest of the world. In the second quarter of 2013 the CAD of
India was 21.8 billion USD. This has hit hard on the rupee.

Strengthening of Dollar
In the last six months the dollar has strengthened by 3.52 percent with the strengthening of the US
economy. The dollar has been rising on signs of growing economic momentum and talk of an early end
to the Fed’s stimulus effort. This is something which is beyond the control of the Indian Government and
it is hampering the recovery of the rupee.

Insufficient inflow of FDIs and outflow of the foreign investments
The downfall in the Indian economy has worsened the situation and the government is unable to
generate heavy capital inflows. Despite all the government effort to allow Foreign Direct Investment
(FDI), there hasn’t been significant FDI inflow. The US federation has withdrawn some of its bond buying
programmes, resulting in a sudden outflow of money that in return has left India far behind in the race.
Foreign investors has been pulling out of the Indian economy. The month of May has seen a record
outflow of foreign investments of Rs. 44162 crore. With the giants like Posco pulling out of its Rs. 30000
crore steel plant project in Karnataka followed by ArcelorMittal pulling out of its Rs. 50,000 crore project
in Odisha due to delays and land acquisition delays. This has shrunk the total inflow of capital in India.
Indian investors have been spending more abroad than foreign investors have been spending in India.
This has led to the further deficit of current account.

Rising Imports
The rising import bill is one of major concern and it has hindered the government’s effort to tackle the
falling rupee. Oil accounts for 35% of the total imports and gold 11% on India’s current bill. There has
been a heavy demand for the greenback from the exporters of oil, the most prolific buyers of dollar in
the world market, thus pushing rupee lower. In the gulf countries, the dealing of oil is done in dollars,
i.e, if India has to purchase oil, it has to pay in dollars, so for this India needs to purchase dollars from
USA in exchange of rupee. This has led to the further devaluation of the rupee.

Poor Economic Growth
The Gross Domestic Product (GDP) growth has hit its lowest patch in the last 10 years. With fall of the
GDP growth to 4.8%, it had significant effect on the stock markets and the falling rupee. The
manufacturing, mining and the agricultural sector has faltered and investors have become cautious of
investing in India.

The central government has unraveled a multipronged strategy to bring about an increment in the
inflow of dollars and limit the outflow to compensate for the sliding value of rupee. A planned increase
in import duty has been exercised to shore up the decrement in rupee.
Some of the other possible remedies that can be emphasized are:

• The customs duty on several red-hot imports like gold and silver is on the rise, it’s a strategic move by the central government to ease the gap between dollar and rupee.
• NRI bank deposits can be made more attractive and foreign loan norms eased.
• The government has also decided on three public sector institutions based on finances to raise funds in dollars through bonds.
• Electronic goods top the list when it comes to making big business. In order to stabilize rupee a significant increase in customs duty on Electronic goods needs to be exercised.

Economists believe that these measures will bridge the foreign exchange (Forex) gap significantly. Even
finance minister P. Chidambaram anticipates that the government will be able to prune annual imports
by $7 billion and thereby increasing inflows by $11 billion. This would in return help maintain the Current
Account Deficit (CAD) at $70 billion which roughly estimates to 3.7 % of the gross domestic product.
There have been a slew of measures that have been undertaken by the government. It clearly shows its
urgency to deflect a possible crisis on the economy of India.

Red Bull's Promotion Strategy

Red bull was launched in 1987 in the Austrian market and since then it has become synonymous with energy drinks. The red bull company founded by Dietrich Mateschitz since then has launched a variety of products. It now records annual sales of 4 billion cans in 160 countries employing 7700 employees. Red bull employs a progressive marketing strategy constantly trying to engage the consumers and evolve the brand.

Every organization uses a different marketing mix called 4Ps and red bull’s marketing strategy revolves around:

•    a distinctive product - the taste of the product is unlike any other, it also has a functional effect in comparison to other soft drinks
•    it is easy to obtain as it is sold in a variety of places – including retail outlets and food and drink establishments
•    it uses a premium pricing strategy. The product is priced above that of competitors’ products. Consumers will pay a premium for Red Bull due to the quality of the product and the product’s benefits. This is reflected in the fact that it is the world’s best-selling energy drink.

However, perhaps the most interesting element of Red Bull’s marketing mix is its approach to promotion. Its campaigns are quite innovative and uses the tagline ‘it gives you wings!’ symbolizing pushing of boundaries of what is possible and helping people realize their goals and dreams.

Red bull follows a promotion strategy known as below the line promotions. But unlike other companies instead of using the traditional sponsorship it organizes its own events. The annual red bull air race and red bull x-fighters invites top pilots and FMX riders to showcase spectacular stunts among thousands of spectators.  These events build brand value and creates awareness and interests among consumers.

A key aspect of red bull’s promotion strategy is to create genuine relations with athletes, supporting them to challenge themselves and reach new heights of excellence. Red bull helped Robbie Maddison to achieve his lifelong ambition of doing a motorcycle backflip over the tower bridge of London. Through such events red bull is able to engage more with customers. Red bull’s events provide a platform that excites, surprises and challenges participants as well as spectators.

Big expenditures such as the formula one team is not the cornerstone of red bull’s promotional activities but smaller activities as local events are given more importance. It is based on the belief that local activities create a big impact and interesting media coverage. Added advantage of this is that they can easily change anything that isn’t working. The programme is managed through an annual activity plan which is based on a three year overview of promotional work

Red bull engages consumers with word of mouth marketing. It is based on the principle of pull marketing. It relies on the transmission of a positive image from person to person through personal communication that is consumers bring the product to other consumers. It is in contrast to putting the product in front of the customer, here the customer is brought to the product through excitement created among consumers. The founder of red bull hired a wings team in the 1980s to go and talk to people one to one about the product. It started creating interest about the product and as customers started appreciating the qualities of the product they became advocates of the brand sharing opinions with family and friends creating a ripple effect.

It continues to use this strategy to promotion through innovative initiatives as:-

1.      .Red Bull Wings Team

2.      .Student Brand Manager Programme

3.      .Red Bull Bedroom Jam

4.      .Red Bull Reporter

Social media remains the core element of red bulls marketing campaign as these provide a direct and relevant line of communication to red bulls target audience the youth. Facebook twitter and microblogging sites provide a platform making it easy to share information and opinions. Red bull uses a variety of smart phone apps to reach is audience and it is far more effective as it filters out the noise. This also has the advantage of flexibility and can be changed in real time unlike advertisements that need to be planned months in advance.

For promotions to remain effective they need to be revised .Word of mouth marketing can be difficult to measure unlike other methods and although sales is an important figure it uses other measures to evaluate effectiveness as:-

1. Setting targets for sales returns from the smaller promotional activities.
2. Evaluating the amount of editorial coverage its activities receive in the media.
3. Measuring the number of blogs related to Red Bull’s products and the frequency of comment on these blogs.
4. Evaluating the online influence of Red Bull activities in the social media. For example, on Twitter there are around 260,000 followers of Red Bull activities. On Facebook, more than 21,000,000 consumers ‘like’ Red Bull.
5. Conducting an annual brand health-check with consumers to ensure that they like the brand.

Measuring red bull’s returns in investments in promotions is not just through sales figures as this misses the big picture. Long term brand loyalty is as important as sales.

Red bulls marketing strategy allows it to continuously evolve to changing market environment and adapt to technology. This maintains its connection with the youth and keeps its relevance. Consumer expectations are higher than ever and red bull continuously keeps on evolving and innovating.

Skoda's Promotion Strategy

Skoda, a company that had a humble beginning as a bicycle manufacturer in 1895 and which for most of its
existence thrived in the then communist Czechoslovakia, mostly deprived of the new technological innovations that were taking place in the western world and often faced with economic or political turmoil, has today emerged as one of the leading car makers in the world with total global sales for the year 2012 being 939,200.

Some major components of Skoda’s marketing strategy are:

•              Marketing strategy involved focus on happy and content customers instead of the car itself (which most car makers were doing at that time).

Skoda focussed on making cars that customers would enjoy, rather than just increasing sales. As a result Skoda enjoys the highest loyalty rate (buying again) of 84% against 48% of industry average.

Ø  Skoda knows that 98% of its drivers would recommend Skoda to a friend.

Ø  Skoda UK has responded with a new marketing strategy based on the confident slogan, 'the manufacturer of happy drivers' The key messages for the campaign focus on the 'happy' customer experience and appeal at an emotional rather than a practical level.

Ø  Customers are able to book test drives and order brochures online. The result is that potential customers will feel a Skoda is not only a reliable and sensible car to own, it is also 'lovely' to own.

Ø  Analysing the external opportunities and threats allows Skoda UK to pinpoint precisely how it should target its marketing messages.

Ø  No other market player has 'driver happiness' as its USP.

•       Changing popular negative perception of the brand-

                                Although Skoda enjoyed a premium brand image in central Europe (where the company originated), the situation in the UK has been very different. This weakness was partly due to out-dated perceptions of the brand. These related to Skoda's eastern European origins. In the past the cars had an image of poor vehicle quality, design, assembly and materials. Crucially, this poor perception also affected Skoda owners. For many people, car ownership is all about image. If you are a Skoda driver, what do other people think?

•        Building the brand through aggressive public relations strategy-

                               Branding helps consumers to identify closely with products which satisfy their needs and provides them with a deeper understanding of the qualities associated with the product. Skoda is an example of a brand whose popularity has gone up and down like a roller-coaster in its 100 year history. From the heady days of the 1920s, when it produced the Hispano-Suiza - the Rolls-Royce of cars in those days - to its lowest point of communist domination, and in the UK where the brand suffered the darker side of British humour. Today, however, this is no longer the case; the brand is enjoying a renaissance.

§  Moving from negative perception to neutral perception.

               This involved showing the public that the 'new Skoda' had replaced the 'old Skoda'. An integrated press and public relations programme was planned and implemented to communicate the new face of Skoda. This involved on-going media communications which incorporated:

Ø  Factory visits to see the new state-of-the-art manufacturing plant in the Czech Republic

Ø  One-to-one interviews with designers, engineers and R&D personnel.

Ø  Press product launches, motor shows, sponsorship opportunities and exposure marketing.

§  Moving from neutral to positive perception-

                Creating positive perceptions and encouraging people to buy cars cannot simply be achieved by                  product marketing. The process is far more complicated and involves communicating to the public the values                      represented by the brand.  Skoda’s brand values are reflected in:

Ø  Skoda’s commitment to producing cars that provides potential customers with practicality, functionality, robustness and reliability.

Ø  Skoda’s commitment to quality and giving customers what they want at reasonable prices.

Ø  The Skoda Network of dealers, most of whom are small, family-owned businesses, have good relationships with their customers and provide high levels of personal attention.

§  For example , when marketing the Octavia Skoda had many communication objectives:

Ø  The Octavia is a completely new and modern car to appeal to different car segment customers

Ø  Skoda customers get much more for their money compared to competitor models

Ø  The Octavia is designed with the same quality standards as any Volkswagen Group product
Ø  The Octavia experience is a Skoda experience.

•  Collaboration with Volkswagen-

                  By 1990 the Czech management of Skoda was looking for a strong foreign partner. Volkswagen AG (VAG) was chosen because of its reputation for strength, quality and reliability. It is the largest car manufacturer in Europe providing an average of more than five million cars a year giving it a 12% share of the world car market.

From the late 1940s through to 1989, Skoda manufactured in a communist-dominated market. This climate allowed little outside intervention in terms of modern technology and new ideas, and suppressed innovative and creative methods of working. In those days, its cars were cheap to buy but Skoda could not hope to compete on an equal footing with cars manufactured in the West and in such a competitive market-place.

 Volkswagen AG, Germany, bought Skoda Automobile, the state-owned Czech car manufacturer, in 1991. Volkswagen investment enabled Skoda to develop new products on a par with western competition and since then, increased its strength as a brand all over the world.

•        Using reliable independent surveys that test customers' feelings-

 For example, the annual JD Power customer satisfaction survey asks owners what they feel about cars they have owned for at least six months. JD Power surveys almost 20,000 car owners using detailed questionnaires. Skoda has been in the top five manufacturers in this survey for the past 13 years.

In Top Gear's 2007 customer satisfaction survey, 56,000 viewers gave their opinions on 152 models and voted Skoda the 'number 1 car maker'.  Skoda's Octavia model has also won the 2008 Auto ExpressDriver Power 'Best Car'.

Vodafone's Promotion Strategy

Vodafone opened the UK's first cellular network on 1 January 1985 and has been the market leader since 1986; its UK networks carry over 100 million calls each week. Vodafone currently has the largest share of the UK cellular market and now it is one of the world’s largest telecommunication companies, hence its promotional strategies are also at a grand scale .

Vodafone's current business strategy is to

Ø  grow through geographic expansion

Ø   acquisition of new customers

Ø   retention of existing customers

Ø  increasing usage through innovations in technology.

Sponsorship, the most effective way of increasing brand awareness, helps to generate consumer preference and to foster brand loyalty. A company can reinforce awareness among its target market by sponsoring an event or organization that attracts a similar target market. Vodafone sponsors several leading sports brands that have similar ideologies as Vodafone. In particular it sponsors – Ferrari and Manchester united .

Consider the case of Ferrari . Vodafone has over 100 million customers worldwide, spanning 5 continents and 28 countries . Formula 1 offers Vodafone high profile exposure a sport that commands a worldwide television audience of 360 million people thus giving Vodafone the immensely valuable media coverage it needs to be recognized as one of the world's leading brands .

Vodafone has established tangible links between the products and services it offers and the organizations that it sponsors. For example:

·         Ferrari fans can subscribe to Multimedia Messaging Services (MMS), news services and chat forums

·         Download games, ringtones, wicked welcomes, wallpaper and other images and play in quiz competitions

·         Similarly, the Vodafone Race Track racing simulator allows customers to compete in a racing simulator

Vodafone is thus committed to developing a range of value added connections to the sponsorship package . Vodafone's link with Ferrari gives them a USP in terms of up-to-the-minute involvement with the world's leading racing team . Providing up-to-the-minute sports services is a winning formula as it provides Vodafone with plenty of positive press coverage, word-of-mouth and public relations . Vodafone has provided a range of value added services that form part of its sponsorship package of Ferrari and Formula 1. 
Examples include:·         

'Grand Prix on the Fone' Generic Alerts

Customers can obtain wide-ranging updates texted to their Vodafone mobiles for every race of the Formula 1 season. They can even follow their favourite team, with lap speeds and times, positions of drivers and constructors as well as the drivers points table after the race

·      Ferrari news

Exclusive news from Ferrari texted to phones includes comments from Michael Schumacher, Rubens Barrichello and team manager Jean Todt , as well as key announcements from Ferrari (e.g. new driver signings) all through the year.

·      Grand Prix Quiz Trivia Game

·      Ferrari Ringtones and Icons

·      Ferrari content on Vodafone live!

Considering the case of Manchester united , we find how two businesses that have global appeal are co-operating to achieve their shared visions for their companies and brands

Vodafone: To become a global mobile leader in terms of profit, customers and value, making mobile networks the "nervous system" of the networked economy spanning three major developed markets (Europe, US and Japan) . Its brand vision is a ‘ Can Do ‘ approach that makes life easier for customers .

Manchester United: To remain the most pioneering, best supported and most successful football club in the world . Its brand ideology is ‘Relentless pursuit of excellence ‘ .

In February 2000 Manchester United and Vodafone UK announced a commercial alliance. Through this, Vodafone became the principal sponsor as well as the telecommunications and equipment service partner of the club. Due to Manchester United's global appeal, the dual branding process that Vodafone is currently progressing means that sponsoring such a renowned sporting team, exposes the Vodafone name in countries where it may not have been previously known

Both Vodafone and Manchester United are seeking to be the best in what they do and in pioneering new ideas. Both brands have a global appeal. Manchester United has a massive supporter base, including areas such as the Far East. These supporters represent potential customers for Vodafone. Clearly, the deal fits with Vodafone's marketing objectives of obtaining new customers, keeping its present ones and continuing to develop the brand. In addition, Vodafone is able to develop new value added services specifically for Manchester United fans.

The marketing benefits for Vodafone from these 2 alliances cover three main areas.

• Enhancing brand awareness and image
• Extending the range of products and services
• Adding value to services

The organisation receiving the sponsorship (sponsee) stands to benefit enormously from both financial support and other forms of backing from an established partner .For Manchester United, the deal not only generates extra income, but also provides valuable new services to its fans. This makes being a Manchester United fan even more attractive and for the club new fans mean new customers to sell to. Ferrari will benefit from joint ventures and shared revenue streams arising from the creation of a range of products and services, as well as the sale of merchandising within the telecom sector

Like all the best deals, there really is something in it for everyone.

Nestle's Promotion Strategy

Nestlé’s theme in promotions field is-“Think Globally, Act Locally”. It is a global brand, although

advertising messages and product formulation vary to suit local differences.

Nestle has its own website (www.nestle.com) and there are more than 100 countries registered under it with almost each one of them having its own website. Uniquely, Nestle has its own website for each product it sells like www.milo.com.au, www.nescafe.com etc. These have been set up to provide information to the customer related to a particular product.

Nestle has a history of striking partnerships. It has always partnered with the right brands.

• It partnered with Coca-Cola in ready to drink teas and coffees. Coca-Cola entered into a licensed agreement with Nestle for the Nestea brand. The partnership helped Nestle enjoy the benefits of Coca-Cola’s world-wide bottling system and expertise in prepared beverages. Their joint venture was named Beverage Partners Worldwide (BPW).
•          Nestlé’s partnership with Google is a famous one. Android version named Kit Kat was released by google in 2013 and one can imagine the level of publicity the company would have fetched out of this partnership. In the press release, Nestle mentioned that Google chose Kit Kat as the name of the android version 4.4 because its engineers love the chocolate and it is their snack for late night coding. 

         Nestlé’s combative advertising campaign against its rival Cadbury is one of the bests of its type. It launched an advertising campaign with tagline-“sirf pehli tarikh ko nahi, kabhi bhi kha sakte hai” and this directly mocked Cadbury’s brand proposition as it had initiated a campaign titled-“kuch meetha ho jae, aaj pehli tarikh hai”. This ultimately helped Nestle dilute the impact of its competitor on the customers.

       Nestlé’s major target segment is the younger generation. Maggi, kit Kat, milo and several other nestle products are consumed mostly by children. Hence, promoting the brand at school level has been the strategy of Nestle since the very beginning. It organises events like Maggi quiz, milo marathons etc. in schools where the prize is generally a mixed bag of nestle products. Maggi stations are fast replacing the traditional school canteens. It sponsors International Polo Tournament and SAF Games and these have helped it make a global impact. Recently, in Januray 2012, Nestle enetered into a 5-year sponsorship with IAAF and has become the main sponsor of IAAF Kids’ Athletics Programme.

           Effective tagline communication is a strong point of Nestle in the field of promotions. The taglines have            always justified its products. For eg.-

                        ·  Maggi-“Fast to Cook, Good to Eat”. Maggi is advertised by Nestle as ‘2 minutes noodles’ and is                                  projected as a convenience product for moms and as a fun or taste-based product for children. So, the                            tagline speaks everything.

                        ·  Kit Kat-“Have a Break, Have a Kit Kat”. This is one of the most often heard lines on television whenever                    a break is to be called.

        

           Nestle is a nutrition, health and wellness company and this is highlighted in its public relation activities             and CSR. These are one of the most effective promotion means as they help you connect directly with the                people.For eg.

                       ·     Provides assistance to hospitals and other organisations that serve the poor.

                       ·     Responds to distress calls by government and NGOs for providing assistance to earthquake, flood,                                 drought victims.

                       ·     Helps undernourished children through several NGOs and charitable organisations.

                       ·     Recently it spent considerable sums of money on a consumer communication campaign to make                              consumers aware of the new labelling system that would help them in buying and products. A market                            research company was hired to understand how and to what extent communicating with the consumers                              worked in favour of the company. And the research outcome showed an unusual rise in the sales.

      

      With its innovative promotion strategy, Nestle has been able to overshadow its competitors in several product segments. World’s largest food company (by revenue) has surely impressed the customers through its ground-breaking marketing ideas. “Nestlé’s sales growth excluding acquisitions, divestments and currency swings may reach its goal for an average level of 5 percent to 6 percent in 2014”, Chief Executive Officer Paul Bulcke said.