5. March 2009 by amal.

Linda is the proprietor of a bar in Cork. In order to increase sales, she decides to allow her loyal customers - most of whom are unemployed alcoholics - to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans). Word gets around and as a result increasing numbers of customers flood into Linda’s bar.

Taking advantage of her customers’ freedom from immediate payment constraints, Linda increases her prices for wine and beer, the most-consumed beverages. Her sales volume increases massively.

A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Linda’s borrowing limit. He sees no reason for undue concern since he has the debts of the alcoholics as collateral. At the bank’s corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These securities are then traded on markets worldwide. No one really understands what these abbreviations mean and how the securities are guaranteed.

Nevertheless, as their prices continuously climb, the  securities become top-selling items. One day, although the prices are still climbing, a risk manager (subsequently of course fired due to his negativity) of the bank decides that slowly the time has come to demand payment of the debts incurred by the drinkers at Linda’s bar. However they cannot pay back the debts. Linda cannot fulfil her loan obligations and claims bankruptcy.

DRINKBOND and ALKBOND drop in price by 95 %. PUKEBOND performs better, stabilizing in price after dropping by 80 %. The suppliers of Linda’s bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation. Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor. The bank is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties (and vested interests). The funds required for this purpose are obtained by a tax levied on the non-drinkers.

Posted in Economy | Print | 1 Comment »

25. February 2009 by amal.

Wipro Infotech launched 20k laptop range. HP is offering Home theatre with its laptop. Time for price-war. Check this news  article. Not bad, if this impacts sale positively.

Posted in IT, Economy, Management | Print | No Comments »

4. February 2009 by amal.

Innovation is consistent in various disciplines viz. business, technology, sports. Coming to two innovative business models, which I come across recently are:(a) DNA newspaper distribution model

DNA started newspaper circulation in Bangalore only in past few months. There major competition is ‘Times of India’.

One of the major issues for any news-paper to make in-roads is to overcome brand loyalty. Consumers are very much loyal to the brand w.r.t. content and articles published in the newspaper. DNA USP is the complete package one-stop newspaper solution to the office-going mid-age & young segment. Segment which is looking for entire set of contents - regular news affair (local, domestic, national, international) along with sport updates, movie-entertainment with business and economic affairs. Being an English newspaper with lot of photo based content, daily economic updates supplement, they target most of the office-going segment that don’t have to subscribe to multiple news paper (regular and economic supplement).

Issue always was to make in-roads to brand conscious & loyal segment. That is where DNA came-up with unique distribution & pricing model. First of all they started canvassing at various avenues where target consumer segment visits regularly - supermarkets like Big Bazaar, malls etc. There pricing proposition of Rs. 300/- per annum which is appx. 82 paisa per day is very much cost-sensititive and quite attractive proposition. More-over with one year confirmed upfront paid subscription with assurance for home-delivery; all doubts regarding the delivery/modalities were resolved. Many of the targeted segment started DNA either as an alternate to there regular news paper or 2nd news-paper choice. With cost-affective pricing scheme, it was easy decision for most of the consumers to go-ahead with it rather than not-to-go. Essentially both price-sensitivity backed with packaged complete content solution and assured delivery with regular newspaper vendor culminated in winning 1st part of the battle.

How far DNA goes, it’s now dependent on consumer bandwagon effect, marketing effort and creating brand loyalty.

(b) ‘Pay-what-you-want’ No strings attached

One of the London based restraunt ‘Little Bay’ started this unique concept of ‘Pay-what-you-want’. In the sense, restraunt customer can choose what amount they wish to pay for the menu options. There isn’t any compulsion of any particular price for one serving or another. Menu-card will list the various options under appetizers, starters, main-course etc and customer can choose amount to pay anywhere from 0.50 to 50 GBP. ‘Little-Bay’ is bistro-style Mediterranean cuisine recognized as arty restaurant. This model was introduced to reduce the economic impact of credit crisis and recession impacts.

More-over this concept is well-received by the customers and they are paying normally 20% more than the regular price. Essentially customers are polite and sensitive enough to pay in fair and appropriate manner. BTW, only menu-item priced are liquor and wine. For remaining options, there isn’t any price and strings attached. Tap-water is of-course free.

Finishing on the note, Innovation is consistent. Do share if any of you experience any other unique model.

Posted in Economy, Management | Print | No Comments »