Pivot or Perish… Using your business moat to survive in the pandemic

11 Aug,2020

 

By Bhuvi Gupta

 

Bhuvi GuptaAs a marketer for the last decade if there is one thing that I can attest to be true is that marketing jargon comes and goes with an average lifespan of a year or two. The jargon du jour is backed by stellar logic, often introduced by a book, or a widely respected businessperson, and has wide applications in the entire gamut of business strategy.

 

The latest buzzword is the concept of the ‘moat’ as espoused by Warren Buffett. While he first shared this concept during a Berkshire Hathaway shareholder meet in 1995, it has seemed to catch on in pandemic. (Maybe, because being stuck at home is like a having a moat around you?). Mark my words, we are just at the beginning of the lifecycle of this jargon and you’ll see multiple applications in interviews, podcasts, CEO roundtables et al in the coming times. 

 

What are economic moats?

 

The usage comes from ancient times, when a moat was a water body built around a castle so as to give the king some time to plan his defense when attacked by an invader.  The concept itself is golden, as most espoused by Buffett are – An economic moat is a distinct competitive advantage a company has over its competitors, which allows it to protect its market share and profitability over the long term. Companies can build moats by strengthening their brands like Apple and Coca-Cola, achieving economies of scale like Amazon, or even lobbying for special status from the government like Patanjali.

 

Economic moats have existed since commerce has, but in the digital age, using data, network effects, online marketplaces, search, and social networks can help create wider and longer-lasting moats.

 

According to a report from CBInsights, moats can be classified into four types –

 

Network Effect– those products whose value increases the more people who use it. All social media networks have network moats, which explains why a Telegram has not replaced WhatsApp despite offering some advantages

Cost Moats– when users have a high sunk cost in the product or service (high one-time or recurring membership fee) which make them reluctant to switch

Cultural Moats– when consumers buy into the product for the brand promise and the values it represents. For e.g. people consume Dove because it promotes ‘real beauty’, Coca-Cola due to its great emotional marketing which talks about happiness

Resource Moats– due to patents or preferential treatment on account of a governing body. Typically why pharmaceutical companies have huge lobbying budgets

 

How companies have used their moats in India to remain relevant in the pandemic

 

The pandemic has been a death knell to the global economy – USA’s economy has contracted by a third, in its largest quarterly contraction since 1921. India is not expected to fare any better, when numbers release later this month.

 

Companies are being forced to be agile and leverage their business moats, and pivot to newer consumer behaviors to remain afloat. Many companies have successfully pivoted their products, launched line and brand extensions to have new health and immunity claims, which is why we even have Chyawanprakash and Haldi ice-cream now (from Amul and Dairy Day Plus). This has come easier to the behemoths like ITC and Dabur, which have both Innovation teams sitting on years of research, and vacant factories to put into use.  As a result, in the last three months, ITC has launched six, and Dabur 15 new products. Such companies also have the business advantage of well-established supply chain and distribution channels.

 

How companies which don’t have a moat can remain relevant in the pandemic

 

A July 2020 McKinsey survey found that an overwhelming 91% of consumers reported trying a new shopping behavior in India due to the pandemic. Two key trends that stand out from the survey are an acceleration in the rate of digital adoption which has seen a 10+ percent growth in online customer base during the pandemic & a new DIY culture in the middle class which was reliant on household help or access to almost everything via a few taps on their mobile screens. New product categories for fruit & veggie wash, contactless dispensers, dishwashers which would have years of promotion and audience interactions have seen demand rise exponentially.

 

These two are the life jackets for Indian companies that can help save them in the coming months.

 

The pandemic has facilitated trials (often via e-commerce) as well as repeat buys in the 5+ months of its duration. This is one of the silver linings of the pandemic because categories and products, which would have taken companies years to launch and for consumers to adopt, especially in a value-conscious market like India, have launched overnight.

 

Restaurants, which are arguably the worst hit, have started retailing recipe and ingredient kits and sauces. Pictured above are the ready-to-cook sauces, and gravies launched by Jubilant FoodWorks (which runs Domino’s Pizza and Dunkin’ Donuts in India)

 

Indian companies, especially the beleaguered ones, must leverage this time to pivot, because even if some of these consumption shifts are pandemic specific, many new behaviours will stick because, getting consumer trials is one of the most difficult parts in a product’s lifecycle.

 

Talking from personal experience, now that I have been forced to realise that I am not a half-bad cook, I have often wondered why was I so reluctant to cook earlier and why was I so dependent on my cook or ordering food in. If the rough survey of my social circle is to be believed, I know I am speaking for scores of us in the middle class. These cooking sauces and cheaper dishwashers are only helping to cement this new-found realisation into a resolve to be more independent.

 

Bhuvi Gupta is a marketer with over 10 years across industries, of which the last six have been in Media & Entertainment. She has been a part of many launch marketing campaigns – specifically at the Times of India group, Republic TV and the latest in marketing a Bollywood film. She will write on A&M (mostly marketing, but often on advertising too) every other Tuesday. Her views here are personal. She tweets at @bhuvigupta3

 

Post a Comment 

Comments are closed.

Videos