DESIGN is the new TECHNOLOGY

A presentation I recently gave at the MIT Institute of Design, Pune to the students of their PG course in Design Management.

Who are they to JUDGE?

Can the price of a branded product like mineral water be regulated by consumer courts? And if so, can the price cap be based on the cost of manufacturing? Is differentiation only at the level of manufacturing process? What about brand value, packaging, customer experience, positioning?

A judge of the Delhi Consumer Court recently issued a diktat to mineral water manufacturers to cap the price of their products at Rs.12. The reason in his own words:

Stating that the differential pricing above Rs 12 was “unfair trade practice”, Justice JD Kapoor, head, Delhi State Consumer Disputes Redressal Commission, said: “The process of converting ordinary water into mineral water is the same (for all bottlers) and the quality or purity is also the same.”

First, it goes against the basic principles of a ‘market’ economy to cap the price of a product. A manufacturer is free to price his products as he likes (actually, at a level where he thinks there will be enough demand). Consumers are free to buy the product if they see enough value in it at the price the manufaturer has set. If not, they won’t buy it and the manufacturer will be forced to reduce the price or will go out of business. 

But for a moment, lets consider the judge’s argument, assuming that it is ok to regulate the price of mineral water. He suggests that if the process of making mineral water is the same and if the quality of the product is the same, then the price too should be the same. What about other economic factors? I might be running an ineffiecient operation, my old plant might cost more to run, I might be paying my employees more than the bare minimum wage…

More importantly, what if a product is positioned as premium or niche (as TATA Tea has tried to with Himalaya*) through packaging and branding? Doesn’t the packaging add to the experience of the product? Doesn’t the brand have any value? (incidentally, the TATA brand is valued at about $5.5 billion)

If this judgement is upheld by higher courts, it will open a can of worms. There are hundrerds of products and services (where the actuall process of production is identical) that are differentiated based on intangible attributes like packaging, brand, ambience, experience… Will coffee cost the same at Barista and Coffee Day? Will airlines be forced to cap their prices? (may be at Rs.12!)

Unfortunately, TATA Tea, the defendant in this case has chosen to take an equally narrow ground of appeal, claiming that because their water is sourced from the Himalyas, it should be allowed to charge a premium. They should be defending their fundamental right to set price.

Tata Tea had appealed for keeping the Himalaya brand mineral water’s price at Rs 20 a litre, as it was sourced from the Himalayan springs, while other mineral water brands used water taken from borewells. “It is immaterial whether mineral water is obtained directly from springs or through any other source,” said Justice Kapoor, while suggesting that the company should brand its packaged water as ‘spring water’ and not ‘mineral water’, as it otherwise could mislead the consumer.

It would help many a consumers if the consumer courts actually did something about the implementation of their earlier order that forbids stores (on the railway station, at multiplexes…) from selling products over their MRP. While the court passed this order more than 2 years back, it is yet to be enforced and we are sold Rs.12 mineral water for Rs.15 anyway!

Read the whole newsreport here: 
http://www.business-standard.com/india/news/packaged-water-firms-ignore-rs-12-price-diktat/353342/

*I do not particularly like the packaging of Himalaya or their attempt at building a brand story. Its very mediocre considering the amount of money they would have spent.

Branding can only do so much

“We can go for a name change. But if you want to tell your customers that you have a new and improved offering, then the services have to be new and better”

Romesh Sobti, CEO, IndusInd Bank
answering a journalist on whether the company will go in for a rebranding exercise as a part of his 3-year strategy to revitalize the bank and make it competitive.

Wisdom or common sense?