A Times of India article on July 29, 2014, reporting on the launch of the Mi 3 smartphone by Xiaomi, the Chinese smartphone manufacturer, said that “Xiaomi has claimed that its Mi 3 smartphone went out of stock in just 5 seconds, … when it was put up on sale on Flipkart today. Last week, it had taken 39 minutes for the stock to finish when Mi 3 was first put on sale by the company…Xiaomi has, like last time, not revealed exactly how many units were up for sale in this round.”

Many companies deliberately engineer stock outs to create demand as a stock out can be interpreted as a stock out can be a signal of huge demand. However, there is a fine line in managing this and repeatedly using such an approach comes across as gimmicky, fake, and an annoyance for the consumer, creating a negative consumer sentiment.

Consider this, in the first round of sales on July 25th, 100,000 people registered on Flipkart, the Indian online retailer, for the Mi3 smartphone. With two rounds completed, not all of the 100,000 people who originally registered have yet been able to acquire an Mi3 handset and, according to the Times of India, Xiaomi has “allowed more people to register for the device.” This has made matters even more aggravating for those who are waiting in line.

To rub salt on the proverbial wound, Xiaomi has now announced: “Note that users who have previously registered will have to register again for a chance to purchase” for the next “flash sale” that is scheduled for August 5, 2014.

Not surprisingly, consumers in India are unhappy. Some consumers have tweeted, expressing dissatisfaction about the difficulty of registering in the first place! One irate consumer, a tech blogger with 11,800 followers (twitter handle @Rajupp) has uploaded a video of his negative experience on YouTube, tweeting the link! Others have tweeted their frustration!

Xiaomi appears very happy with the results: Manu Jain, India Operations Head, Xiaomi, said, “We are pleasantly surprised and delighted with the overwhelming response we have received from our India fans.”

I am, however, not so sure that Xiaomi will be happy in the long run. As I said earlier, there is a fine line between signaling you have a hot product, and annoying consumers through what blatantly appears to be a deliberate ploy. The negative reactions are mounting, and my take is that this is likely to damage the brand reputation of Xiaomi in the Indian marketplace. It is also likely to damage the reputation of Flipkart, since anger is likely to spillover on to the retail partner, and it has in this case!

Google’s Motorola is reported to be launching a build-your-own-phone project, according to the BBC. See some video examples on YouTube here, here, and here.

The goal is to be able to create a platform where one can put together different modules ranging from materials for the body to the battery, screen, processor, and the like to create a phone that has the features one wants at a price one is willing to pay.

The idea seems nifty and done right has promise. It will not only help consumers customize phones to meet their specific needs—for instance, I would like to see an Android phone that has the same power, storage and battery life as the HTC One or Galaxy S4 but with a smaller screen to make it better suited for one’s pocket, but currently no such option exists—at a price they are willing to pay, but potentially create more stickiness to the brand because research shows that investing time and energy in the co-creation process creates stronger ties.

So, Google is moving in the right direction and I am waiting for this project to come to fruition so I can build my very own customized phone!

Following the failure of the US Congress to reach an agreement on the debt ceiling and keep all government services open, many federal employees are on furlough, which essentially means that they are on unpaid leave. In a masterful show of empathy, Hyundai has offered all federal employees affected a deferment in their car payments. Because Hyundai acted promptly and in a relevant manner it will endear itself to many Americans, building its brand and cementing a loyal relationship with many millions of consumers. Bravo Hyundai!

Service levels on North American airlines have become appalling! And I am here referring to pretty much all the carriers I have tried in the recent past, be they United Airlines, American Airlines, or Air Canada.

Let’s start with check in! They close flights one hour before departure time! Not a minute’s grace. I arrived one hour before according to my watch but 58 minutes according to United and was bumped from the flight to Chicago earlier this morning! To boot, a lot of the staff are rude. I was told by the woman at the check-in counter that I had to go stand by as all flights to Chicago were full. I asked if I could be rerouted and the woman at the counter snapped, “No point asking me in different ways, the flights are full!” The odd thing is that she was wrong as two hours later I had been rerouted by a kindly gate agent! United should reward Laura Sharpe, the very helpful lady who is going to get me to Chicago today. Sadly, I cannot remember the name of the rude, incompetent, and unhelpful woman who checked me in this morning at 7:18 am in Vancouver. I guess she just wasn’t a lady. Perhaps if United will see this blog and can put two and two together and kick this woman’s sorry butt out of the company, since all she is doing is getting United a bad name.

Since I knew the next United flight to Chicago was also full, and at the time, I did not have the re-routed flight, I approached Air Canada. The woman at Air Canada didn’t seem to understand that I was willing to buy a fresh ticket, paying hard cold cash to Air Canada! She kept saying that my ticket was on United so she couldn’t help! Incredible, I understand that I speak English with a foreign accent but my students seem to understand my English perfectly well, but the Air Canada employee clearly couldn’t. Perhaps she needs some training in listening or perhaps education in English! More likely, she just couldn’t be bothered to look in her computer if indeed she could take my money and get me to Chicago today.

I am now sitting in the Air Canada lounge and I cannot but help overhear the lady on the next seat having a conversation on the phone with some North American airline representative over the phone. She has moved along in her frustrated conversation to ask for a “manager”. The manager’s comments to her elicited the reaction “you can’t be serious that, that is a rule”. I guess I am not the only person who is frustrated.

I travel a lot on Singapore Airlines. They close the check-in counter only 40 minutes before the flight and the gate just 10 minutes before. Perhaps United, Air Canada, American Airlines and more generally all North American airlines should take courses from SQ and learn how they manage to get their passengers on board without requiring them to come so much earlier!

The moral of the story is don’t fly North American carriers if you can help it. Within North America, sadly there is no option. This is what keeps these hideous carriers afloat. A free market would see them go under.

China Huishan Dairy Holdings Company is planning an IPO and The Wall Street Journal anticipates the IPO to raise US$1.3 billion. What is interesting about the company is its strategy to diffuse the concerns in Chinese consumers’ mind about food safety which is particularly significant and also particularly strongly so for the dairy industry following melamine tainted milk tragically sickened thousands of Chinese babies and caused the death of many!

China Huishan imports heifers from Australia and grass from the US to feed them with the intent to allay the safety concerns in consumers’ minds. It is an interesting strategy and it would undoubtedly be interesting to see if it works. Logically, clearly, it should not, since imported cows and visibly imported feed is no guarantee that melamine or other substances cannot be added to the milk before it reaches consumers.

The recent recall of dairy products by New Zealand’s Fonterra Cooperative Group Limited and the seizure by Chinese authorities of dairy products from Westland Milk Products also of New Zealand, for abnormal levels of nitrates, might be a bigger cause to undermine the potential value of using imported heifers and feed. True, the heifers are from Australia and the safety issues are for products from New Zealand, but just as consumers from the West don’t discriminate among emerging markets, as we saw in the past when stock markets across emerging markets were hammered through contagion due to weakness in one subset of emerging markets, Chinese consumers’ sentiments towards milk from heifers from “down under,” irrespective of origin, might be tainted by the concerns regarding safety with dairy products from New Zealand.

Alibaba has decided to not list on Hong Kong Exchanges and Clearing Limited because the latter was not willing to bend its rules to pander to the demands of Alibaba, even though it would have been an iconic and valuable client to acquire. I congratulate Hong Kong Exchanges and Clearing Limited for its ethical and honorable stand.

There is now speculation that Alibaba will try to list on the Nasdaq or the NYSE. With a listing that could see a valuation of US$70 bn, it is a hugely attractive potential catch for any stock exchange. The media is rife with speculation about the potential competition between the two New York exchanges, should Alibaba decide to list in New York. I hope that the New York exchanges stand for ethics as strongly as Hong Kong Exchanges and Clearing Limited. In a world where money has become god there is a strong need to a return to basic values.

In an opinion piece in The Wall Street Journal today (September 26, 2013), entitled “India’s Attack on Innovation,” Mr. Rod Hunter, a Senior Vice President at the Pharmaceutical Manufacturers of America, made claims that are incredibly specious and self-serving arguments to bolster his thesis that the Indian government was attacking innovation.

First of all, the title is a gross generalization of the topic of his article which is about pharmaceutical patents. I agree that one should debate the Indian Government’s decisions regarding accepting pharmaceutical patents. However, the debate needs to be based on reasonable arguments and examined from all sides.

The Wall Street Journal should be embarrassed to publish an opinion peace that is vacuous in its arguments and pander to the public with gross over generalizations, even if this would serve Mr. Hunter’s goals.

Let’s examine Mr. Hunter’s arguments for why India should not be allowed to reject pharmaceutical patents granted elsewhere in the world, to get needed medicines at an affordable price to its citizens. The first argument made by Mr. Hunter has merit. He argues that the motives of the government are not altruistic but play to the demands of India’s domestic pharmaceutical players. However, his remaining arguments are about as ridiculous as any that I have heard. Mr. Hunter’s claim that India is not poor is ridiculous. India’s per capita income is less than US$3000/annum on even a PPP basis! That is less than 10% that of the US or for that matter the G7 average per capita income! Arguing that India has 150 million middle class consumers and should thus not worry about the cost of medication is equally ridiculous. It conveniently ignores the fact that India has a population of 1.2 billion and thus government policies cannot be directed at just 12.5% of the population. Government policy needs to encompass the majority. Finally, claiming that India is rich because Mumbai has a GDP greater than Hungary is an embarrassingly foolish argument! The per capita income in Mumbai remains less than In Hungary and the wealthy city of Mumbai comprises less than 2% of India’s population.

The Wall Street Journal should take a little care to ensure that they don’t publish opinion pieces that are inflammatory but don’t stand up to any intelligent scrutiny at all. This of course assumes that it aspires to journalistic standards higher than the National Enquirer!

I have long suspected the veracity of online reviews.  Only the other day we had a terrible experience with a cleaning service that was rated as 5-star on Yelp.  They were unreliable, pushy, and downright rude.  Indeed, what was interesting was that Yelp did not publish the review I wrote giving the business a 1-star. 

As such, I was most heartened to read in today’s (September 24, 2013) Herald Tribune that, at least in the US, and in New York State in particular, a crackdown is in progress on fake reviews, with entities that have arranged to have fake reviews posted through demanding it of employees or worse still paying for them directly or through PR firms, as well as the PR firms that have helped in procuring such fake reviews, being taken to task.  Hopefully, there will be a ripple effect through the other states and perhaps other countries too, to eliminate this heinous practice.

The practice is heinous on many counts.  First, it is simply unethical.  People believe that reviews are objective as they are written by people who have an arms-length relationship with whatever it is that is being reviewed.  Thus, reviews have a much bigger influence than what consumers perceive to be company paid for messages. Second, such reviews can have consequences for consumers that go well beyond just a sub-optimal choice. It can expose consumers to potential harm, and deadly harm at that, in categories where poor products or poor service performance can have a profound effect, e.g., in the medical field. Third, a competitor using this underhand practice can quickly and cheaply acquire a reputation that may have taken the incumbent years and many millions to build up, unfairly negating their competitive advantage. Fourth, fake reviews totally undermine the principles of competition.  Indeed, the whole point of reviews was to facilitate the transmission of competitive information to consumers, which is the bedrock assumption of free market economics.  Fake reviews eat away at this fundamental assumption, distorting the whole notion of a free market.

I am delighted to see that New York State has taken a lead on this. I sincerely hope that other states and countries follow suit!

First GSK and now Danone, the Chinese government has leveled bribery charges against both these organizations.  Indeed, according to Reuters the Chinese Security Ministry has stated that “Executives of British drug maker GlaxoSmithKline PLC in China have confessed to charges of bribery and tax law violations after initial questioning by Chinese police” while CCTV has claimed that “an unidentified former Dumex sales manager as saying the company had paid medical staff at a city hospital in Tianjin to promote its products.” 

Conversations with senior managers familiar with China and the spate of corruption charges suggests that, in many cases, the companies accused of corruption are equally the victims of corruption.  One example of how some of this was happening is quite informative.  Consider for example the following typical example: A sales representative claims s/he wants to host a sales event in a relatively remote part of the country to boost sales there, for say hospital nurses. The event is claimed to be held and the sponsoring company receives a bill for the venue, the expenses for getting all the nurses to the venue, for the food and beverages, the fee and expenses for the expert who has been brought in to speak, etc., etc. In other words, all the typical expenses that one might expect for such an event.  The company accepts and pays the bills in good faith as it is difficult to monitor each event, particularly those in more remote locales.

 In reality, no event is held!  Receipts are issued by the travel agents for air tickets, by the caterer for the food and beverages, by the expert for their fee, and so on.  All the hypothetical participants gain because the money is shared. The event sponsoring company does gain in as much as the product does get promoted in the hospital from where the nurses supposedly came, but it loses because it is oblivious to the fact that no event ever took place, and no brand gets built up. The next fake event by a competitor will eliminate whatever sales are achieved. 

Given that moneys changed hands, bribes have technically been given, and the involved companies are liable for the charges that are now being leveled against them! The sales representatives, travel agents, hotels, caterers, etc. however, are laughing all the way to the bank! Well, perhaps not all as some will pay for their behavior as a result of the current investigations, but the vast many are.

So, is there a solution?  One interesting cause of the problem is the ubiquitously accepted sales compensation model.  That is the sales person receives some 50% of their compensation as salary and the balance 50% for meeting targets.  Importantly, the targets are revenue sales targets. This sows the seeds for tempting sales people to undertake the illegal practices that the companies are now accused of.  Given that most companies, including the likes of GSK and Danone that we reference above, require their sales representatives to invest a significant amount in educating the channel partners, one solution could be to, on the one hand, reduce the level of bonuses compared to fixed salary and, on the other, offer the bonuses more on the education and other services that they are to provide.  In effect, I am suggesting a process based bonus rather than an outcome based bonus, along with a significant reduction in the proportion that is variable. 

A second possibility which could go hand in hand with the first suggestion is that the companies could start looking at a new breed of salespeople.  Instead of the typical young person they could perhaps look at an older group of individuals that may have fewer job prospects and thus will have less of an incentive to jeopardize their current jobs particularly given a stable job that provides a long term and stable income potential.

These are some thoughts and I am sure there are many other ways for dealing with the problem.  However, what is clear is that companies in China, and indeed elsewhere in the world, need to think about compensation models that are less vulnerable to being gamed by less scrupulous employees which may cause companies with impeccable reputations and the best of intentions to have their names dragged through the mud and sullied.

Contrary to popular opinion, those bikini-clad young models draped over the show-room Ferrari might be doing your sales more harm than good these days.

Marketing executives have long relied on the idealised female image, usually in the form of a celebrity or model embracing a product or draping themselves across it, in the belief that the placement of these images positively influences purchase decisions.

That may have worked when it was men making list of the purchasing decisions, but today women customers are a force to be reckoned with, and they are not amused. New research by INSEAD reveals a fine line between creating a positive, aspirational image – which makes people open their wallets – and a threatening one that turns away a potential purchaser.

In Defensive reactions to slim female images in advertising: The moderating role of exposure, Amitava Chattopadhyay, INSEAD Professor of Marketing and the INSEAD Chaired Professor of Marketing and Innovation, examined the blatant versus the subtle positioning of models in advertising which showed two very different results.