Ceteris Paribus

First, it should be a selling proposition. Next, it should be unique. Last, it should have the power to move mass millions from the brand of their choice to the new one on offer. Three rules made by Rosser Reeves, in the 40s became a mantra. Called the USP.

 

USP, was in its initial days, an after-thought. The product was all but ready (engineered, produced and packed) when marketers starting working on the selling of it. But it helped if the product had an advantage. An advantage that was built into its DNA. An advantage that would be relevant to some if not all users and buyers.

 

USP, as a single strategy, is arguably the progenitor of consumerism. It started a race amongst competing manufacturers. It empowered consumers with choice. To be relevant meant that manufacturers spent time and effort on research. Identifying unfulfilled needs and wants was the necessary first step. This allowed consumers to become demanding. Demanding consumers encouraged those who engineered innovations, and thus the cycle grew into a movement and the movement into consumerism.

 

With time, being one-up became difficult. Why? Because all products used more products in the making. Called components. And components became available equally. As a result, USP started living for a shorter period in time. And intense competition on the shelf ensured that one-up progressed to two-up and so on. Not only did being ‘one-up’ suffer, so did the bigness of the differentiator. Product development naturally, moved on to many small innovations as against a single path-breaking one. And with smaller innovations, came into being – parity. Parity, because while one or two differences did persist, on the whole products, made of similar components, became quite alike each other and usually addressed the same consumer problem(s) to deliver more or less similar results. Ceteris paribus.

 

Another very natural fallout of the shift to many small USPs lay in the market. Not all innovations appealed equally to all people connected with the product. So distinct groups with clear preferences started emerging for the same product (a brand and its competition). This led to ‘segmentation’. As segments started to cut into each other, those left out started grouping up as niches. And slowly, the mass millions transformed into a loose confederation of segments and niches, each willing to explore into a new product as long as there were some small innovations.

 

Such a market, in some sense, leads to ceteris paribus. Following the tenets of classical economics, parity, segments and niches are inching towards a perfect market. A market where the strength of the innovations is ideally reflected in the size and value of the market it caters to. And worse, it eventually will boil down to a commoditized state where sustenance will be key; and new brands will have equal opportunity with existing leaders.

 

Concluding, USP, through its own hand, has grown to its period of insignificance. Differentiation remains the key challenge, but the answers are no longer to be found in a simple ‘one-up’. They have become more complex.

 

We are now living in times of ‘all things being equal’ (ceteris paribus). And the USP is practically dead, possibly beyond resurrection.

 

As a small business, what is it that you need to do? Your immediate need is to find space for your product on the shelf in a market with a given leader, its immediate competitors and several parity brands. The answer is to be found in mathematics. Yes mathematics.

 

In an ideal situation, such a market can be represented by normal distribution. The leader and its immediate competition will offer minor variations and will occupy the 1-sigma (standard deviation) distance across both sides of the mean. Meaning, they will cover about 68% of the market. Several challengers are likely to offer marginally stronger innovations and are likely to occupy the fringes around 2-sigma on either sides. This will be about 95% of the market.

 

Coming back, if you are a small business marketer, then you need to build several small innovations (preferably mined from consumer research) to occupy the niches that emerge between 2-sigma and 3-sigma of the mean on either side. If the mean be constructed on price, then this would mean a compromise to deliver to a lower rung in the pyramid on one side and a significant premium to deliver to a higher rung in the other side of the pyramid. Put together, these are likely to constitute about 4% of the market. While the 2% bottom of the pyramid may not be too lucrative, it remains a qualified opportunity. One product going in this direction is the ‘chotukool’ refrigerator from Godrej. It is small, is priced at Rs. 3,500/- (a real entry level price point), contains special insulation to keep cool even without power for hours together. While the success of this product is yet awaited, it surely embodies all the needs of the target group below the majority being catered to by brands like LG, Samsung, Electrolux-Kelvinator, Videocon and Godrej itself. The top 2% requires deep pockets and marketing investments. Building aspirations is an expensive exercise. But the payoff over time is better, when you can, through variants come down the pyramid to compete with the leaders. Several brands use this strategy to offer products, one good one being Koenigsegg, the Swedish super-sports car. Nothing else but speed, and at a price that only the chosen few will be able to afford is the mantra this company and brand is following to great success. Even in an emerging luxury market like India, their product has not been downgraded (both in features and in price)!

 

Consumer behaviour shows clearly that people on the fringes will always be dissatisfied by the brands and products that occupy space and cater to the majority. This dissatisfaction or dissonance will ensure that there is space for the n+1 product and brand even in a circumstance called ‘ceteris paribus’.