MSL303 Marketing Management Major
Anoushka Gupta 2018ME10590
Q1. Zomato is going into loss currently (in financial year 21 and projects of financial
year 22 based on the year 21) if we consider the total expenses including the fixed
expenses. The forecasted expense is taking growth into account and is calculated based
on percentage of revenue method from existing data.
Problem Statement: Growth is stopped for the number of restaurant partners, thus no
more “affluent restaurant partners” which were increased in the past year. Affluent
partners helped increase average order value of a unit order, which increased Zomato’s
revenue as commission on the order increased. This would significantly impact the
revenue, and it will be more of a stagnant revenue period for zomato in the upcoming
year 2022 considering market volatility due to the second wave of covid wave. Indians
also trust more in their home food, especially ones with families and in this time of
health crisis. But the revenue is not a problem, as in FY2021, Zomato with the similar
revenue, achieved positive unit economics for the first time.
Root cause: The issue of profitability for long term would be dependent on the costs,
because zomato has to have the maximum possible commission as revenue (i.e. reduce
the amount of costs deducted), the unit economics has reached profitability but main
goal of Zomato’s profitability is after the addition of the fixed expenses: advertising,
sales and promotional expenses.
Overview of the costs in 9M FY2020 period
(Advertisements includes marketing and sales promotion (through discount coupons))
Zomato cannot reduce spending on the advertisement discounts because of competitors
Swiggy and internationally Yelp (much bigger and older than Zomato) and the
upcoming Amazon FoodTech. And also because the Indian customers are the most loyal
to discounts, it has to invest money into discounts, thus not losing it's customers and
getting good average order value on it. In Covid, Zomato would need to spend more on
advertisement discount would mean more expense which is not sustainable.
Zomato’s purchase of stock in trade expenses will be reduced along with reduction on
restaurant partner refunds (the variable costs) as the restaurants will remain constant.
The reduction of variable costs will contribute to a greater contribution margin which
can increase sustainability of profit in the long term. Also, zomato will save up on
outsourced support costs if it stops growing its restaurant partners especially in
far-away areas where there is much more delivery costs involved. The marginal increase
in revenue from increasing restaurants would take up too much costs, and thus saving
on the costs following a light strategy is more beneficial. Also, keeping the restaurant
base constant will help in getting almost an equal number of orders to all restaurants,
which will avoid restaurant log outs in future.
Recommendations: The variable costs which cover delivery partner onboarding
insurance, restaurant partner refunds, SMS, processing & support costs can be reduced!
The outsourced support costs can be reduced with more and more acquisitions like
Uber Eats and Runnr. More motivation strategies other than monetary can be used to
incentivise Zomato delivery partners. For eg. Hand holding the delivery partners of the
delivery logistics (packaging). This will reduce the variable costs of spending on the
delivery partner onboarding costs.
Zomato can do auxiliary partnerships with the online payment firms, mobile telcos, and
several companies which can use the existing data of the customers and restaurant
owners for a credit score and mobile recharges, as it has done with MasterCard and RBL
Bank. Zomato anyway provides their consulting services to the restaurant owners to
competitively price their items, thus Zomato has the data of competitors in any segment
and geography. These data can be used to provide SME loans for restaurants through
such partnerships. This will make the restaurants get their own delivery guys and
subsequently zomato’s outsourced support cost can be reduced. The savings can be
directed towards advertising and sales promotion (discounts) towards which the users
are more loyal to, as shown below the percentages of outsourced cost reduced from 21%
to 19%, purchase of stock from 7% to 6% and variable costs from 22% to 21%.
Excel File Link with all calculations
Over the years, zomato has consistency reduced it’s costs (as proved by the fraction
reducing from 2.34 in FY2019 to 1.29 in Q1FY2021 and thus the projection is it’s expense
versus revenue could be decreased further in 2021 and later years it could be less than
one, i.e. it could be profitable even if zomato stops growing the number of restaurants.
Q2. Sputnik V is one of three vaccines (other two being Pfizer and Moderna) which
have efficacy of over 90% against the Covid-19 virus. As per the ‘[Link]’ on 11th May
2021, Sputnik V will be available in the market in India from the next week (if “all (tests)
goes well”. Sputnik V's next dispatch of 3 million from Russia would come by May end,
and 1,50,000 would arrive by the 17th May, as per the Hindustan Times with 1,50,000
already arrived on May 1. The need of the hour for such vaccines is huge, as the country
is going through a severe vaccine shortage in many states, so much that the vaccine
centres for the 18-44 age group are being closed. The population of the country is
1400,000,000 and only about 10% of the population has been vaccinated with at least
one dose.
If we consider the group with >18 age which comprises of 2/3rd of the population, then
2
approximately 3
× 0. 9 × 1, 400, 000, 000 = 0. 6 × 1, 400, 000, 000 = 840, 000, 000
population is remaining to be vaccinated. About 350 million people are yet to be
vaccinated in the above-45 age group. As per The Hindu Report, the government had
committed to provide vaccines to those above 45 for free, Sputnik being sold by Dr.
Reddy’s would not be used to inoculate this segment. Hence, the remaining target of
population for Sputnik V vaccination would be approximately 490,000,000 Indian
citizens (assuming by the next week’s launch or by the May end, a very negligible
number under this segment would get vaccinated). Hence the total market size for
Sputnik V may be approximated for 490,000,000 Indian citizens.
Because of two doses required per person, the total potential doses of Sputnik V
requirement would be 980,000,000. Sputnik V price has been set to be less than $ 10 (Rs.
750) currently. But the Indian Government is negotiating to get the Sputnik V at an
affordable price, say Rs. 600 per dose. The potential market of Sputnik V therefore may
be calculated as about Rs. 58, 800 crores for 980 Million doses. ( Note: The market share
for Sputnik V would be the market re divided in three companies presently serving in
Indian market for the target segment of 18-44 year age group population)
Q3. Social marketing is more sensitive to the target consumer’s needs as it deals with
the behavior, it has to be done with a lot of care because even with the right aim of
impacting public’s welfare and making a change in people’s lives for good, there can be
some unintended consequences primarily due to (i) the product/business having an
inherent fault. (ii) misinterpretations of marketing or influence of environmental or
secondary factors, (iii) an element of marketing evokes ‘backlash’ by the public.
(i) Reasons of inherent fault include design failures, lack of research, conflicting
interests, generic designs (without keeping in mind the cultural idiosyncrasies) and
promoting offsetting behaviors - People assume that they are completely safe, and thus
reduce their cautiousness levels. For eg, vaccines can create an offset completely of not
caring about viruses anymore. Wearing seatbelts offsets the behavior of driving
cautiously at a low speed as the drivers become (over)confident of their safety with a
seatbelt.
1. Launching the Condom Vending Machine in 2008 faced unintended consequences
occurring due to lack of familiarity of Indians with machines, they mistook it as coin
telephones and letter boxes, and many machines were vandalized or stolen.
(Hindustan Latex Family Planning Promotion Trust’s Machine)
[Link], a general purpose payment platform to be used across all demographic
spectrum was a failure when launched in Africa because African rural women didn't
have a boot income to place starting money which was needed for a sustainable cycle.
3. Sometimes we see that government expenditure for infrastructure projects like public
toilets, buildings, telecom and IT infrastructure, roads etc in the rural areas specially are
not put to use when the Government spends 100% required money in such projects.
Such infrastructure is soon spoiled with no interest for its maintenance or utilisation.
The agency completes the basic work but aren’t interested in pursuing it further (and
completing their contractual terms and conditions). This is known as a conflict of
interest in the partnerships. Thus the model of “Public Private Partnerships” has arisen
where both the stakeholders-private service providers agree for its contribution and the
government subsidizes to some extent only known as Viability Gap Funding. The
private service partner which creates such infrastructure then maintains the assets and
tries for its optimum utilisation to recover the share of funds arranged by it thus
achieving the very objective of spending the money by the government in creating such
infrastructure.
4. The Green Revolution: There was a focus to grow more wheat and rice which
require lots of water, fertilisers and pesticides. The farmers stopped growing millets like
Bajra, Ragi etc which need less water and fertilisers etc for want of more money.
Unintended consequence on health: Diabetes, Malnutrition, Blood pressure etc due to
high gluten contents in wheat and dependency on a single grain intake instead of
multi-nutrient diet which could be possible with balanced focus on mixed crops.
(ii) Unintended consequences can also be due to many other factors like social factors
also can result in actual outcomes being opposite to the desired behavior (counter
effect). This type of consequence can be through misinterpretation of marketing and the
consumer needs to be understood completely to avoid it. People may feel socially
prejudiced due to which marketing can become offensive rather than empowering. E.g.:
1. Arousing fear due to misinterpreting advertisements can have long term effects of
creating some sort of depression in the people, although the advertisements on dangers
of smoking, were meant for information/cautionary purposes to motivate behavior
change. Depression often creates more pressure to do the things which they don’t want
to do like smoking. Thus fear arousing advertisements or regulations are counter
effective. Also fear arousal can work for some time but not permanently. Fear causes a
sense of helplessness and anxiety with some denial towards the advertisements. It
produces stigmas (obesity, smoking etc.) in the people which can create less self-esteem,
as it acts as a punishment (creating fear) instead of a reinforcer of motivation.
2. Marketing aimed towards women taking control and power can be misinterpreted by
men and they can become more anxious and thus can strengthen their violent acts. And
increasing the marital age eligibility of girls, may be misinterpreted as a “burden for
longer time” increasing the prevalence of female infanticide and sex-selective abortion.
3. Activity based learning, designed for experiential learning involving the children,
increased the workload on teachers and they weren’t able to focus on slow learners,
which resulted in counter effective even poorer performance by the slow learners
(iii) Examples of unintended consequences due to the ‘Backlash’ by the people. This
involves upsetting or hurting sentiments of a group and could be common with
‘upstream’ marketing where there is a goal of a ‘new regulation or new social policy’ to
be implemented by the government. These interventions need to be accessed and tested
whether they are perceived as appropriate or not, to avoid such backlashes.
1. Displacing livelihood and environmental regulations: Dams destruct forests & move
millions of people, many machines/automations take up the people’s jobs, which isn’t
taken up well by many citizens. Even the e-vehicle, and solar panels generate a lot of
e-waste as well, which can be opposed by the waste authorities about where that
e-waste is dumped.
2. Tax regulations which are perceived as unfair cause a lot of protests and civil unrest.
3. Regulations on smoking have led to the illegal cross-border smuggling which is even
more toxic and the tobacco manufacturers have thought of more creative ways about
disseminating their advertising.
Q4. Social Distancing Impact
(i) Consumer Behaviour
In the pandemic, chinese products and non vegetarian food weren't purchased as they
were conditioned with the chinese virus origins of eating something non-vegetarian, a
typical case of classical conditioning’s influence on the behavior. These cues formed
from conditioning, are a part of the peripheral route! Overall, Indians understood the
importance of the necessary fact-check and correct sources, specially the focus was more
involved: if it was from a doctor or verified links for the oxygen cylinders whose
relevance was highly increased in the pandemic, and thus these decisions went through
the central route.
Before the pandemic, Indians not only were comfortable with crowds, but also liked
narrow aisles and lots of people because that gave the place authenticity. In the
pandemic, people would like the least crowded places and which are sanitised being
safe.
Fig. 1 A grocery store which got popular
because of authenticity generated by
crowding, now has an anti-crowding
behavior of consumers.
Impact on mental health: The people of all age groups have greater sense of anxiety
now a days and more number of cases of depression/sadness frustration are being
reported. Because of pandemic, people are living in isolation and reduced social mixing
has impacted relations. The divorce rates, suicides, domestic abuse cases are increasing.
Due to reduced income and loss of jobs , people have reduced purchasing avoidable
goods and services. People have stopped going out in the markets and shopping mall as
for fear of catching virus. Before the pandemic, consumers went out of their homes
quite regularly for entertainment and window shopping. Now, almost all businesses
have gone online and facilitating consumers with virtual tele-shopping experiences.
Wearing masks and PPE kits have negatively impacted interpersonal communication
due to absence of subtle non-verbal cues, this has resulted in reducing the power of
salespersons to convert more sales in offline modes.
Digital inclusion: The elders are also resorting to online transactions and completing
their needs online. More people have purchased the laptops and tablets for on line
education. Similarly the consumers are putting more trust on the cashless payments in
the pandemic.
When the pandemic situation improved in the months of January-February this year,
consumers were also reported gunny-sacking of new plans of traveling (eg. "Revenge
tourism"), going out to eat, etc.
With the social distancing and isolation, there is rampant use of social media (facebook,
twitter, Tik tok etc), live streaming of games, remote multi-player games and
telemedicine increased with a boom of interest in online yoga, health wellness
(including meditations and awareness of mental health therapy), online education of
art, dance and everything which happened in-person became online. Screen time
increased and thus most advertisements, and all services including entertainment are
now consumed through the screen.
We have now started appreciating small things like immediate friends, family,
classmates. People have started liking small towns instead of the earlier mindset of
considering the glamorous life of cities of malls etc. The sale of flats in metros have
started reducing as we don’t find cities glamorous now and small towns are considered
better because of less population. Consumers also want that the established brands in
market must contribute to solve problems faced in pandemic.
(ii) Business Practices
Businesses had to find alternatives to social distancing, by doing everything online or
keeping touchless interactions with safety displayed in their actions.
● Pivot of offline business to online mode, specially coaching classes
● Wholesale, retailers started on e-commerce and social media, telephone
● Theaters planned their recovery by changing capacity & empty seats in between
● Salons and spa centres starting winding up their operations
● Airplanes/train coaches re-engineered the air conditioning for more ventilation.
● Restaurants, cafes closed or re-designed for distancing & decreased capacity.
● Brands pivoted into making PPEkits, masks, sanitisers, oxygen concentrators
because these products had more use, specially the fashion retailers made new
products which were needed.
● Introduction of "self-driving cars and taxis instead of drivers
● Parties, weddings, movie shoots, sports tournaments have been disallowed or
held without spectators. This has affected business of event planners, travel
agencies etc
● SaaS growth (eg. Zoom) as more softwares to replace the services
● Retail Businesses increase the safety precautions like stopping the use of trial
rooms and no return policy etc.
● Travel and hospitality industries were badly affected due to reduced tourism.
There is a significant effect on workspace culture also. The: people were always weary
of work time entering the family time and work moving into homes but after the
pandemic, the mingling of work time and family time is becoming normal, it is harder
to keep track of time and avoid burnout while working. Collaboration/Meetings are
done virtually with difficulties in keeping track of time and people’s daily routine are
badly affected. All the businesses, especially the new startups are facing lack of
confidence in doing big deals remotely as there is a lack of trust in partnering with
online strangers sometimes and proper verification is not also possible remotely.
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