Transcriber: Sue McGregor
Reviewer: Helena Bedalli I'm going to talk about something
that has really fascinated me over the past three years, which is, how you can build a brand
without really advertising. Historically, people are taught
that marketing is equal to advertising. The most convenient way
of building a brand or selling our business is to basically launch a product, do a lot of traditional ads – TV ads, and then assume that people
will come and buy it. "But is that the only way
to build a brand?" is what I'm trying to caution today. Let's start from the beginning. In the '80s, when I was a kid –
probably many of you were not even born – this was the only way
for us to come to media. This was Doordarshan. Then around the late '80s or early '90s, all of a sudden my role changed,
because I had a choice. I had two channels: Delhi and Delhi Metro. So I could switch. And with this Delhi Metro coming in,
a lot of new soaps came on, like Zabaan Sambhalke,
Dekh Bhai Dekh, etc. And a lot of new brands
started showing their TV ads.
In fact, all the brands that I consumed
during the 1990s when I was growing up were the brands that were introduced
to me by these TV ads. Then I went to IoT. The big revolution for me in IoT
was a new medium, called Internet. All of a sudden, I could go
and access Internet on something called "desktop." I used to go to my conference lab,
I used to go to Yahoo!. I had an image of Yahoo! there. All of a sudden, you could type something
and results would come up.
It was so fascinating! A new way of communication. About six or seven years back, I thought that was the only way
for me to access Internet. Today, I'm responsible
for Xiaomi's business in India, and we call ourselves
a mobile internet company, but can you imagine that in 2010, I didn't know you could access Internet
on a mobile phone? In 2010, my wife gave me
this phone, an N72, and that's when she taught me, my wife, that you could access Internet
on a smartphone. I said, "Wow! This is phenomenal!" "Whoever thought of something like this?" Anywhere you're traveling,
you no longer have to hold onto a laptop or your desktop. And you can access Internet on the go. And that was one moment
which basically defined my life. At that time of my life,
I was working for McKinsey, and I started thinking, "What am I doing? The world is changing,
and I need to do something much more exciting in my life." And that's when we started Jabong.
Jabong was basically a new way
of selling products. As many of you would know,
people are selling shoes, clothes and other fashion products online. So we were trying to redefine
the distribution network. We were saying, "We will sell these products,
available offline, now online. We actually thought we would fail. Who would ever buy shoes online,
or clothes online? But eventually, we were wrong;
a lot of people were coming and buying. We came up with a new type
of distribution, but our marketing
was still very traditional. At Jabong, we started
with a lot of TV ads, print ads, outdoor hoardings, and it was spending
just like any other traditional companies in the '90s would spend.
That's how we were building a brand. And I used to think, "Something is wrong." Because when I used to compare Jabong
to other Internet companies from the West, that I knew about and was proud of,
like Google, Facebook, etc., I thought, "These are companies
which have built Internet businesses without any kind of TV ads. So what were we doing wrong? At that point, I didn't have an answer. About two and a half, three years back, I left Jabong and I started
Xiaomi's business in India. When I started Xiaomi's business, most of the people said,
"You're going to fail." "You're going to be a disaster."
"You'll die in three months." The reason was that we were
selling phones online. And only online. And we were not doing any TV ads. In fact, if you look
at all the smartphone brands before that, they had built their business
on only the usual things, building a huge distribution network
across 100,000 shops, doing a lot of traditional
TV ads or print ads. People said we weren't doing
any of the usual things, so we would will definitely die.
Today, we have become the number one brand
in the online segment. We have become the number three brand
online plus offline in all of India. And we have had a great success
over the last two years. A lot of people don't know us,
because we don't do any TV ads, but we have basically built a pretty
solid business foundation over here. And that started me thinking,
"What have we done differently? And can you basically
share it with others? And what have other similar companies
across the world done, which is how to build brands
without any advertising?" I looked at the top 50 smartest
companies in the world. This is MIT's list of last year. We are one of them, by the way. I short-listed some of these companies, which I thought would be
some of the companies we could relate to, companies that we use or we have heard of.
Companies like Facebook, Snapchat, Uber,
Apple, Google, Amazon, Tesla Motors. I said,"What are these companies doing? Aren't they really spending money
on advertising?" And the answer was, "No, none of them." Take the example of Facebook. Facebook has 1,7 billion people
coming on Facebook monthly. One fourth of the people in the world
come and use Facebook every single month. Has Facebook ever done any kind of TV ads? No. Take another example from the East: Alibaba, which is the biggest
e-commerce company in China, and the biggest e-commerce company
in the world. They have a "Singles Day," every 11th November,
they celebrate a Singles Day. Last Singles Day, they did a revenue
of ten billion dollars in less than a day. Ten billion dollars. And without any TV ads. So what are these companies
doing differently? What are all these great companies
across the world doing differently? And that's what I'm trying to answer. If you were to ask me, the number one
thing that they are doing differently is that they have
a fundamentally great product.
A great, great, great product. In fact, if you look
at most of the founders, they're paranoid about one thing,
which is product. They're bothered by one thing,
which is product. Most of the CEOs or founders
of these companies are the biggest product managers
who are very consciously, every single day, just working on product. If I divide these companies
on two different axes, with marketing spend on one end,
and product innovation – So companies like Google, Facebook,
WeChat, Tesla, etc.
Are companies who rank very high
on product innovation. and spend zero money on marketing, They're companies like Apple,
who are great on innovation, who also spend money on marketing. They're companies like
our biggest Indian success, Flipkart, which has done innovation, also spends
a lot more money on marketing, and a bunch of traditional companies
which spend a lot of money on marketing, and may or may not be doing
a lot of product innovation.
These are the companies
that I've shown in blue. Now, the point that I was making
that most of these CEOs and founders are so paranoid. Take the example of Facebook. Mark Zuckerberg
is only involved in product. That's what he does every single day. But he's hired a separate person
to take care of the company who shadows in the back. And he says, "Let me focus on product. All the other stuff, like revenue,
marketing, profitability, etc. is something that you should focus on so that I can focus
on one single thing which matters, which is product." Take an example of Tesla. [Model 3] Not many of know about Tesla here
because it hasn't been launched but Tesla is basically redefining
the way the world will travel. They've launched not only electric cars, but they've launched cars
which have an auto-drive capability, which means you can sit in the car,
tell it the address, and it will drive on its own.
You don't even need to park the car.
It will go and park on its own. This is something only thought
possible in sci-fi movies, which we thought
would be 100 years from now, but it's beginning to happen now. And the person who is driving this,
who is in war on this on a daily basis is the CEO and founder of the company,
Elon Musk, himself. He just worries about one thing,
which is product. At the beginning of 2016,
they announced that this Model 3 and they said this product would be sold
and made available next year, 2017. And still, within two days,
they did a sale of ten billion dollars. And with zero advertising. [Innovation] How do these companies build product? Obviously, most of these are innovators.
They try to do something different. Take an example of Flipkart,
the biggest startup in India.
It came up with a very innovative product,
which was cash on delivery. I would give a huge amount
of credit to Flipkart for starting the e-commerce
revolution in India. They were not the first
e-commerce company. There were companies like
Indiatimes Shopping, Rediff, and many others, like Indiaplaza, which existed five years
before Flipkart started. But none of these companies
was a success story. When Flipkart started,
they basically realized that most of the consumers in India don't have credit cards
or internet banking. India is a cash economy. Most of the people still do their business
on a daily basis in cash. So why force consumers to come online
and basically shop using a credit card or internet banking, when they don't
even have this facility? So they came up with the concept
of cash on delivery. And today, about two thirds,
depending upon the number you look at, but approximately two-thirds
of Indian e-commerce is driven by one single concept,
cash on delivery.
The e-commerce market exploded
when Flipkart started with this one single concept,
cash on delivery. Look at Snapchat from the West. Snapchat was not
the first social media platform, nor the first image-sharing platform. Before Snapchat, there were
a lot of other social media platforms or image sharing platforms. But there was an inherent need. If I were to send a picture to you,
it would be stored on your phone, or on your desktop, or your laptop,
and you could have a permanent access to the that image. What if I wanted to send you a picture
but I just wanted you to see it but it should not be stored
on your phone or any device. It could be some naughty picture
that I'm sharing with my friends or it could be something else, right? They realized there was a need for this
and they innovated on this, saying, "We will come up with a product
which allows you to share pictures without anyone else sharing this picture." And then four to five years –
Snapchat was pretty early, I think 2011 or something
when they started.
In four to five years, they have become
bigger than Twitter, and the amazing statistic
is that 60 % of young users in the US in the age group of 15 to 35
actually use Snapchat very actively. So the point I'm trying to make
is that all these companies had great products, great innovation,
they understood what consumers wanted, and they accordingly
came up with something to satisfy the needs of the consumers.
[Product, Price, Promotion, Place] A lot of you who are studying here
will know the four Ps. The reason I brought it up was
that I don't think they are all relevant. And even if they are,
if you were to ask me, there is one "P" which stands out,
which is probably five times, ten times, 100 times bigger
than the other three, and that is "Product." If your product is fundamentally great, even if you don't do the other three Ps, you can live with it. But if your product is shitty, even if you do great things
with the other three Ps, you cannot succeed. So product is important. What do many of these companies,
also do apart from product to successfully build brands
without advertising? They build BG. They build a small group of users
who are social influences.
A traditional way of working that a company would have
a brand campaign, they would have TV ads, and they'd hire a brand ambassador,
say Shah Rukh Khan, or Salman Khan or any big star, and they would do a TV ad
which would reach millions of people. But in some of these new-age companies,
the way that they work is, they don't have any TV campaign,
they don't have a brand ambassador, but they have something
called "brand influences." They will go and work
with a small number of people, who genuinely believe in their product,
who love these products, and become brand evangelists. These are the guys who will go
to their social circle, friends, family, or colleagues,
and will talk about this brand. Think about this: Today, most of the shopping,
or any other thing, is a social need. If you decide to buy a phone, you will typically go to a friend
or family member, and ask, "Hey, which phone should I buy?"
My budget is 10,000 bucks." "I want to buy a car.
My budget is ten lac rupees.
I want to buy a watch.
My budget is 10,000 bucks. Which one should I buy?" And these friends, colleagues
and family will recommend this. And this is much truer in smaller towns. A 50-year-old man living in [a small town]
would call up a son or daughter or a nephew or a niece
living in Delhi or Bangalore, and ask, "Hey, which one should I buy?" And these are the brand influencers
who can recommend the phone or the car or whatever the product is, and say "This is what I use.
I believe this is a great product, and you should buy this." When a brand influencer
recommends something, it is far more trustworthy
than a big film star saying this.
Because more often or not you know
that when a film star is saying that he uses this phone
or drinks this cola, he is not even using it. When your social circle says this,
the amount of trust is much higher. We do this a lot. We have fan clubs in every single city. And these fans – like when people ask me
how we have built a great brand – a huge amount of credit goes to our fans,
who are living in every single city and who help us spread this message
without any kind of TV ad, without any type of print ad.
Great product, great network. Again, I want to repeat: Advertising does not lead to success. I just want to give two last examples
from Indian companies, which I hope will help
establish this point that if your product is shitty, you cannot build a brand
only on the basis of advertising. Look at this e-commerce company. It was in use about a few weeks
back, Askmebazaar. They had a website; there was
nothing special about the website, nothing special about the assortment, nothing special about the price
or about their service, but they spent hundreds of crores –
or whatever the amount was, I don't know – on TV ads. With some of the biggest
brand ambassadors, Kangana Ranaut, Ranbir Kapoor,
and a few other big stars doing TV ads every single day
for Askmebazaar. And yet, this company was shut down.
No great product, amazing
advertising; it doesn't work. Another very radical example
from our brick-and-mortar industry, and I'm sure many of you
will know this, is Patanjali. Look at Patanjali versus Dabur. Dabur was started almost 150 years back, Patanjali was started ten years back. Today their revenue is similar, and Dabur spends 25 percent
of their revenue on marketing. 25 percent. Patanjali also does, a little bit,
but nowhere close, almost negligible. And in ten years, they have done
what Dabur did in 150 years with zero advertising. So coming back, if I were
to summarize, I would say, "The traditional form of marketing?
Yes, it has some merits, but that's what I call lazy marketing. Lazy: we build a brand, just do TV ads, and then hope the consumers
will come and buy. The smarter and harder we're working
means that we're building great products. Brands and companies
will eventually realize that consumers will understand
that when I'm watching a TV ad and I'm buying a product,
I'm not only paying for my TV ad, the TV ad that I'm watching, I'm also paying for thousands
of other people who are watching this TV ad,
but are not buying.
It is not a good proposition for a brand;
it is not a good proposition for the user. It's a lazy way of working. And I hope in future, a lot more new B2C tech companies
will not use this. Thank you. (Applause).