Saturday, October 08, 2011

Let them choose what you want to sell them!

Recently a newspaper came to our campus and gave exclusive offer for the college students which were – 6 month subscription for Rs. 149, 9 months subscription for Rs. 199 and 12 month subscription for Rs. 299. It was no brainer to choose for the second option and more than 95% students opted for 9 month subscription. This was no coincidence or consumer’s choice but the company wanted them to take 9 month subscription even when 12 months subscription could have bring more revenues to them. With a slight manipulation in pricing and quantity of the product/service the marketers can make the consumers to choose what they want to sell.

This strategy to make one choice less lucrative and raise consumer’s preference for other product (with small quantity/offering difference) is known as Decoy strategy in marketing world. The concept of relativity and comparison used by the consumers for choice making process is subtly targeted by neuro-marketing discipline. Mostly the consumers find it difficult to choose from many choices and that’s where Decoy strategy plays its role by giving a small impetus for choosing the desired product of the company. Dan Ariely in ‘Predictably irrational’ has discussed and proved this concept well. Better understanding of potential and purview in which this strategy can be adopted in different industries may come by considering more examples.This simple marketing practice under stably comes under pricingof marketing mix. Though a word of caution at this point is that this strategy should not be used in highly competitive scenario where competitors may take advantage of such differential pricing. Also products like mobile phones, automobiles, electronic gadgets, etc. which have many specifications and features associated may be avoided for such pricing strategy. The strategy can be used to increase sales of a product by introducing another product but priced higher or lower than the focused product.

Consider Vodafone’s GPRS offers which gives 2GB data usage pack @ 95 Rs. If an additional option of 4GB is introduced @ 120 will certainly divert the users to go for the former choice even though they may not be able to exhaust 2GB in one month (those who use GPRS on phone know it well). If 1GB data pack at Rs.65 is introduced than it’s likely that users will find more value in 2GB pack at Rs. 95 instead of 1GB pack. This may not be true for all consumers but such a manipulation will certainly improve the results in desired direction for marketers.

Not just that one can mould a consumer’s preference but also this neurological insight can bring large scale industrial changes if strategized correctly. For instance, film industry is moving towards 3D experience and to fasten such transition Decoy strategy may help if major players intend to as the transition will help them not only to increase revenues but also piracy ,which is eating up their profits can be dealt to some extent. What they have to do is simply increase the rates for 2D picture screening such that it becomes ‘relatively’ economical to go for 3D screening as they will find more value in it. After the wheel start moving towards 3D, the rates may be adjusted as people get familiar with the new technology and will find it reasonable to pay extra for it.

Banking companies can also use strategies which may bring slight differentiation in package pricing and sell desired and most profitable services. For instance, online banking is one thing that banks want to promote besidethe credit card schemes but both are not accepted well by Indian consumers due to technology hesitance and lack of value proposition the consumers see in it. To deal with it, companies can provide schemes where internet banking is coupled with regular banking facilities and the minimum balance required is lower than that of regular banking. The point to be focused is the difference in the price needs to be significant to show higher value for the desired package. Also, credit cards which the bank wants to sell more need to be provided with similar cards which gives lower value proposition to the consumers at higher cost to them. The division should be subtle enough to engage the consumers in choice making process and give them feeling of winning a right deal at lower cost as compare to what they were previously going for.

This whole concept is applicable to product/services which do not cost extra to the company for offering and cost only if opted for. If applied to perishable products or goods which needs inventory than the overpriced or under priced products may cost heavy losses on sales and also due to increased inventory. Caution should be taken as competitors may take advantage of the gap/need cropped up for the product at a price in between the two prices if higher price is too high and sufficient demand is there. The whole idea rotates around to make the consumers think rationale and choose the desired offering due to clear&better value proposition in their choice.

-Birma Ram

Tuesday, September 27, 2011

PRODUCT DEVELOPMENT: DOES CULTURE MATTER

Culture can be broadly defined as the human capacity to represent his experiences with symbols and act creatively and imaginatively. Particularly it means how people living in different parts of the world relate their experiences with symbols. The experiences constitute the sum total of learned beliefs, values and customs of an individual. From a consumer behavior point of view, culture can be defined as traits signifying a society’s personality. With these definitions in mind we can study the impact that culture has on an individual’s taste and preferences. This article will be debating whether culture should play a role while shaping marketing strategies for a company.

Globalization: The process of globalization started very early in history with nation states acquiring colonies in different parts of the world and expanding their boundaries. Post twentieth century when industrial revolution had engulfed almost the entire world the process of globalization acquired a different meaning altogether. Thomas Friedman in his published works has classified globalization in three categories. The first stage of globalization i.e. globalization 1.0 was when the countries were expanding their boundaries and acquiring colonies. Globalization 2.0 was when the multinational companies were leading the way in driving global integration. The third leg as described by him is still in process and has been brought about by the advent of internet where the world as a whole is slowly shrinking to become a single entity devoid of boundaries.

This third phase of globalization raises serious questions in a marketers mind. The dichotomy of either going for a standardized product strategy or for a localized product strategy is making the companies strategists uneasy and is making them think beyond the obvious.

Resolving the Debate: Looking at both the sides

Localized Strategy Analysis

From the point of view of strategists propagating the localized product concept, the customer is not a purely rational being. There are various other variables in play when the customer is making her choice that drives her away from the most rational selection. These other variables are mostly constituted of the cultural differences.

In fact they question the fundamental assumption of the opposing side that the cultures across the globe are indeed converging. Mining the data from European countries and analyzing it has led to conclusions supporting their claim. The analysis done by Marieke de Mooij and Geert Hostede in their article ‘Convergence and divergence in consumer behavior: implications for international retailing’, shows that countries converge in the usage of relatively recent media but they diverge or remain stable with respect to relatively old media. It is logically expected that the new media will follow the same pattern. Again the analysis goes on to demonstrate that differences in national wealth did initially explain differences in the ownership and usage of products across countries. But later on in the time period, it did not do a good job in predicting the same. According to them, at this stage culture became a better explanatory variable.

Hofstede has identified five dimensions which can describe the personality of a nation. The five dimensions namely Power Distance, Individualism/Collectivism, Masculinity/Femininity, Uncertainty Avoidance and Long Term versus Short Term Orientation can broadly define the culture of a whole nation. Differences in the usage of various products and services can be explained by regressing step-wise the national wealth (GNP/capita) and Hofstede’s cultural dimensions as independent variables and variety of consumption and purchase behaviors as dependent variables. This proves that culture of a nation does play an important role in the product usage as well as the consumption behavior.

The major point that comes from these studies is that culture of a nation or society starts playing a greater role than the income as the wealth of the nation rises to a certain limit.

Globalized Strategy Analysis

The proponents of a globalized strategy believe that technology is the tool that will eventually drive the world to a converging commonality. The industrial revolution had made the world smaller in the sense that travel time was reduced substantially. Places hitherto unfathomed now came under the ambit of civilization. It played a precursor to the media explosion that took place with the invention of internet.

Rise of Mass Media: Its implications

With the popularizing of television in the latter half of the twentieth century and the explosion of internet in the early twenty-first century, media has started dominating the lives of the individuals. Now it takes only a few seconds for news to travel from one pole to another.

Markets have also taken up this advancement in stride and customers are increasingly becoming aware of the technological improvements and different types of products and services that are offered in different parts of the world. While on the one hand most countries ask for recognition of their culture but on the other hand they also look for products and services that would lead to the betterment of their lives and improvement in the living standard.

All this has led to stage where a standardized product across the globe would serve better purpose both for the customers as well as the firms. Some reasons that give strength to this point are:

1) Keeping the whole business strategy to be customer centric is naïve and a thing of the past. This is because customers many times themselves do not know what their behavior would be while actually buying the product. While answering for a market research survey, they might indicate their preferences but when it actually comes to buying the product factors like price and promotion dominate the buying decision.

2) Selling standardized goods provide the firms economies of scale. Thus a product having better features and at a lower price can be developed in case of a standardized product. This is in line with the competitive advantage theory of economics. A truly global firm would develop the product in such a way that the costs can be minimized.

3) Developing localized products is based on the assumption that preferences of customers are fixed. This is merely a belief of the multinational firms which is based out of their rigid thought process. History has proved that eventually the barriers against superior technologies, economies and products have always fallen down.

The finest examples that substantiate this strategy are the Japanese firms. Most of Japanese companies are devoid of any marketing department and come from a culture alien to the rest of the world, particularly the West. Despite this their tailored and standard products have flooded both the European as well as the American markets and have altered the customer preferences.

The gist of this discussion is that the world today has become flat in the sense that advancement in any nook and cranny of the world has the potential to alter the customer perceptions everywhere and that the customers are always on a lookout for a better product or service. Though initially they may face difficulty in accepting the product but eventually economic and rational sense would prevail and the better and less costly solution would be preferred.

Final Conclusion

Both the views have their merits, but in the long run the solution that is economically viable will prevail. The firms should have a long term strategy of standardizing the products. But while marketing and positioning them the four P’s of marketing namely product, price, place and promotion should be kept in mind. The first two P’s i.e. product and price support the standardized products strategy in the sense that the standardized product should be better as well as economical. The other two i.e. place and positioning should be done keeping in mind the cultural implications. Also their will always be a cooling period before a product gets accepted locally at different places.

To end the debate culture plays a very important role and firms should keep this in mind while positioning and branding the product but they should have the goal of making the product better and more economical thus strengthening the case of standardizing the product.


-Ravi Pandey

2010-12

Tuesday, September 06, 2011

THE Gold Standard

“Even the just may sin with an open chest of gold in front of them” truly emphasizes the importance this yellow metal has in the eyes of man. Mankind’s obsession for gold has lasted over five millennia. Earlier, gold, in its use as money, had to be weighed and checked for purity when settling trades. But, since 700 B.C. when gold was first minted into a coin its importance has increased manifold.

The discovery of America in the 15th century brought the first great gold rush. Spain's plunder of treasures from the New World raised Europe's supply of gold to almost five-fold. Subsequent gold rushes in the Americas, Australia and South Africa took place in the 19th century. Gold continued to dominate the market until the introduction of paper currency. Thus to stamp the importance of gold in the world market gold standard was introduced.

The gold standard is a monetary system in which a country's government allows its currency unit to be freely converted into fixed amounts of gold and vice versa. The exchange rate under the gold standard monetary system is determined by the economic difference for an ounce of gold between two currencies. The implementation of the gold standard was the first attempt known to history to formalize exchange rates. It was mainly used from 1875 to 1914 and also during the world war.

There were attempts earlier to introduce gold standards, especially in Europe.

Between the year 1696 and 1812, the initial attempts to develop and formalize gold standard began as the introduction of paper money had created problems. In the year 1797, the Restriction Bill in England suspended the conversion of notes into gold because of increase in credit on paper money. Also, the constant supply imbalances between gold and silver created tremendous stress to England's economy. The need of a gold standard was felt to instil a control over money.


By the year 1821, England became the first country to officially adopt a gold standard. The dramatic increase in global trade and production brought large discoveries of gold, which helped the gold standard remain intact well into the next century. As all trade imbalances between nations were settled with gold, governments had strong incentive to stockpile gold for more difficult times. Those stockpiles still exist today.


The international gold standard emerged in 1871 following the adoption of it by Germany. By 1900, the majority of the developed nations were linked to the gold standard. Ironically, the U.S. was one of the last countries to join. (A strong silver lobby prevented gold from being the sole monetary standard within the U.S. throughout the 19th century.)


From 1871 to 1914, the gold standard was at its pinnacle. During this period near-ideal political conditions existed in the world. Governments worked very well together to make the system work, but this all changed forever with the outbreak of the Great War in 1914

There were many advantages of the gold standard. Prominent among these were-

· The gold standard made sure that high levels of inflation a rarity, and hyperinflation was nearly impossible as the money supply can only grow at the rate that the gold supply increases.

· The gold standard limited inflation through excessive issuance of paper currency It provided fixed international exchange rates between those countries that had adopted it, and thus reduced uncertainty in international trade.

· The gold standard made chronic deficit spending by governments more difficult; as it prevented governments from inflating away the real value of their debts. A central bank could not create unlimited quantities of money at will, as there is a limited supply of gold.

There were major disadvantages of the gold standard too. Prominent among which are-

· Mainstream economists believe that economic recessions can be largely mitigated by increasing money supply during economic downturns. Following a gold standard would mean that the amount of money would be determined by the supply of gold, and hence monetary policy could no longer be used to stabilize the economy in times of economic recession.

· Monetary policy would essentially be determined by the rate of gold production. Fluctuations in the amount of gold that is mined could cause inflation if there is an increase or deflation if there is a decrease.

· Although the gold standard gives long-term price stability, it does in the short term bring high price volatility. If a country wanted to devalue its currency, a gold standard would generally produce sharper changes than the smooth declines seen in fiat currencies, depending on the method of devaluation.

The fall of gold standards around the globe was very rapid after the World War. The war changed political alliances, government finances deteriorated and international debt increased. While the gold standard was not suspended, it was kept in limbo during the war, demonstrating its inability to hold through both good and bad times.

This created a lack of confidence in the gold standard that only exacerbated economic difficulties. As the gold supply continued to fall behind the growth of the global economy, the British pound sterling and U.S. dollar became the global reserve currencies. Smaller countries began holding more of these currencies instead of gold. The result was an accentuated consolidation of gold into the hands of a few nations.
The death knell was the stock market crash of 1929. Many countries tried to protect their gold stock by raising interest rates to entice investors to keep their deposits intact rather than convert them into gold. These higher interest rates only made things worse for the global economy, and finally, in 1931, the gold standard in England was suspended, leaving only the U.S. and France with large gold reserves

In 1934, the U.S. government increased the value of gold from $20.67/oz to $35.00/oz, raising the amount of paper money it took to buy one ounce, to help improve its economy. As other nations could convert their existing gold holdings into more U.S dollars, a dramatic devaluation of the dollar instantly took place. This higher price for gold increased the conversion of gold into U.S. dollars effectively allowing the U.S. to corner the gold market. Gold production soared so that by 1939 there was enough in the world to replace all global currency in circulation.

At the end of WWII, the U.S. had 75% of the world's monetary gold, and the dollar was the only currency still backed directly by gold. But as the world rebuilt itself after WWII, the U.S. saw its gold reserves steadily drop as money flowed out to help war-torn nations as well as to pay for its own high demand for imports

After World War II, a modified version of the gold standard monetary system, the Bretton Woods monetary system, was created as its successor. This system was initially successful, but, the high inflationary environment of the late 1960s sucked out the last bit of air from it. Gold standard was abandoned in 1971 when U.S President Nixon "closed the gold window".

While a gold standard continued in a lesser form until 1971, the death of it had started centuries before with the introduction of paper money - a much more flexible instrument for our complex financial world.

- Vishal Shetty & Sunny Sumanshu

Sunday, August 21, 2011

Life at IIM Ranchi

Its been a year since this institute took wings and started its journey. As I look back and reminisce whatever has gone by, I’m amazed sometimes and wonder whether it has just been a year. When we got here, it looked so much needed to be done. And got down to doing it with a vengeance. Setting up the college from ground up, mess, website, IT infra, setting up clubs, studying sometimes in between, everything. All these activities shaped us and the culture around here. Quickly two terms passed and it was time for summer placements. Our PlaceCom team who had been working hard in the background lined up an impressive line of companies. The past 4 months had been a blur of corporate talks and campus interactions. One by one, we all got placed in the profiles we wanted.

Just as quickly as the first year had begun, it ended and it was time for internships. With everyone having a fully paid internship waiting for them, it was a quick week at home and off to our respective locations. It was time to put to test whatever we had learnt in the first year and leave our mark in the corporate world. And leave we did. Good feedback is still coming in about the performances of the batch from their respective companies.

The second year started with a bang. The soon-to-be seniors assembled in the campus after their internships and got busy planning for the arrival of our very first Junior batch. We were in for a surprise. As if it was it was not already impossible to top the infrastructure of last year, we had waiting for us , on a much grander scale, three huge spanking new theatre classrooms which cannot be called anything less than state of the art: projector systems, audio systems, sliding blackboards, fully air-conditioned and Wi-Fi, a state of the art auditorium, the works. Our director sure did decide to treat us in a big way.

The seniors put together our very first Fresher’s week, FROWN. To give the juniors a taste of what lay ahead of them, FROWN involved one whole week of grueling assignments, presentations and case studies on a whole gamut of subjects of finance, marketing, operations, economics etc etc. The week ended with an amazing Freshers’ Party with everybody letting their hair down and enjoying themselves to the hilt.

The beginning of the second year also saw five luminaries of the world of academia joining IIM Ranchi as its core faculty. Prof Subeer Verma, Prof Amarendu Nandy, Prof Hemalatha Chandrashekhar, Prof G R Chandrashekhar and Prof Amit Sachan. All of them have assumed important responsibilities in the campus, making important contributions in building this campus.

The campus has got another shot in the arm with the joining of the juniors and faculty and Team IIM Ranchi has gotten bigger and better.

-Akash Gaurav

Tuesday, August 09, 2011

COLLOQUIUM 2011


Colloquium 2011, is a series of guest lectures to empower the students. The program aims at introducing the students to different business functions and giving them a flavour of the organizational culture. As part of the program, senior executives from different domains are invited to share their personal and professional experiences. These executives speak on a variety of topics covering the areas such as Finance, Marketing, Consultancy, Operations and HR. This will not only enable the students to develop business competencies but would also help them improve on their soft skills. This event would help understand the Do’s ankd Don’t’s of corporate life. Scheduled at the very beginning of the MBA curriculum, this program would also empower the students to assess their areas of strength and, then, make well-informed career choices.

Above all, the program gives the students an opportunity to interact with the business leaders. Herein, they would be able to learn from these esteemed guests and understand what separates the leaders from the rest of the pack. Through the interactive sessions, students can see the ups and downs that these leaders faced and how they handled each situation.


Wednesday, May 18, 2011

ZIMBABWE - THE PLUMMETING ECONOMY


India’s 2009-10 Economic Survey Report reported a high double-digit increase in food inflation, with signs of inflation spreading to various other sectors as well. For 2009, Indian inflation stood at 11.49% Y-o-Y. This rate reflects the general increase in prices, taking into account the purchasing power of the common man. And this has become a worry for our nation. Now think of a situation when the inflation rate is so high that a calculator refuses to acknowledge the figure. This is what is happening with Zimbabwe.
With an inflation rate estimated at 6.5 quindecillion novemdecillion percent (65 followed by 107 zeros) by December 2008,(after that they stopped calculating the inflation rate as it was impossible to), the conditions do not look like they will be improving in the near future. There is a severe cash shortage in the country owing to the government’s inability to print bank notes to keep pace with inflation. The government scrapped Z$100bn note because it was worthless on the street.
But this wasn’t true only some decades back. Zimbabwean dollar was considered to be amongst the highest valued currency unit with ZWD 1 = USD 1.47 in 1980. Whenever one thought of Zimbabwe, the first thing that came to mind was a country of scenic beauty with easy going, content people. But this image no longer remains as Zimbabwe has drastically spiralled downwards into an economic chaos. It is now one of the poorest countries in the world with more than 94% of the country's population unemployed and nearly half are chronically malnourished. More than one fourth of the population has already fled to neighbouring countries and the ones who could not, was because they cannot afford to do so.
Today, more than 80% population require food assistance. One out of every four people is infected with HIV/AIDS. Adding to the already grim situation of the country, the outbreak of cholera and malaria only seems to worsen the situation even more. The country’s dilemma can be viewed perfectly by considering the present life expectancy, 32 or 33 years, one of the lowest in the world,as compared to an expectancy of around 60, some 16 years ago.
On January 16, 2009, Zimbabwe announced plans for imminent issue of banknotes of $10 trillion, $20 trillion, $50 trillion, and $100 trillion. In February 2009, the government of Zimbabwe again revalued its currency, for the fourth time. One of these new Zimbabwean dollars is worth one trillion of the previous. This move took the number of decimal places removed during the period of hyperinflation to 25 (1025 = 10 septillion short scale; thus, if no revaluations had taken place, Zimbabwe would now be issuing 10 septillion dollar notes).
It all started with President Robert Mugabe, now 85, taking over the reins in 1980. It’s been 30 years and in this timeframe he has changed the face of Zimbabwe. The president, who promised to step down from his position several times, has only broken his promise by not only holding his position but also projecting himself as a dictator. With Zimbabwe’s struggling trade relationship now coming to an almost complete halt, it may look only to South Africa as a trade partner and that too, a reluctant one. It depends completely on agencies and programs like the World Food Program which feeds more than half of its population. The country’s in-house production has been decreasing and there is mounting pressure on the agencies helping to support it as their own funds are being exhausted.
The government of Zimbabwe faces a variety of economic problems after having abandoned earlier efforts to develop a market-oriented economy. Zimbabwe's involvement from 1998 to 2002 in the war in the Democratic Republic of the Congo drained hundreds of millions of dollars from the economy. Mineral exports, agriculture, and tourism were the main foreign currency earners of Zimbabwe which are on a downturn and cannot support the economy anymore.
The downward spiral of the economy has been attributed mainly to mismanagement and corruption of the Mugabe regime and the eviction of more than 4,000 white farmers in the controversial land redistribution of 2000. Land issues, which the liberation movement had promised to solve, re-emerged as the main issue for the ruling party beginning in 1999. Despite majority rule and the existence of a "willing-buyer-willing-seller" land reform programme since the 1980s, ZANU (PF), the ruling party, claimed that whites made up less than 1% of the population but held 70% of the country's commercially viable arable land (though these figures are disputed by many outside the Government of Zimbabwe). Mugabe began to redistribute land to blacks in 2000 with compulsory land redistribution. But now it is widely accepted that the whole program was designed to reward loyal Mugabe deputies who have persisted in Zimbabwe since the beginning of the process.
Since this land redistribution began, agricultural exports, especially tobacco, have declined sharply. The legality and constitutionality of the process has regularly been challenged in the Zimbabwean High and Supreme Courts; however, the policing agencies have rarely acted in accordance with court rulings on these matters. The chaotic implementation of the land reform led to a sharp decline in agricultural exports, traditionally the country's leading export producing sector. Mining and tourism have surpassed agriculture. As a result, Zimbabwe is experiencing a severe hard-currency shortage, which has led to hyperinflation and chronic shortages in imported fuel and consumer goods. In 2002, Zimbabwe was suspended from the Commonwealth of Nations on charges of human rights abuses during the land redistribution and of election tampering.
The Zimbabwe Conservation Task Force released a report in June 2007, estimating 60% of Zimbabwe's wildlife has died since 2000. The report warns that the loss of life combined with widespread deforestation is potentially disastrous for the tourist industry.
Watching Zimbabwe’s decline and fall has been one of the most dispiriting experiences of modern times. There are no easy ways out of the abyss in which the country now finds itself. But there is still hope as the country’s vast, unexploited natural wealth and resources, if properly utilised, can bring about miracles. I personally believe that the country needs a massive economic overhaul with major programs to stimulate and galvanize economic activities mainly in the agricultural sector. This can only happen if Zimbabwe manages to find leaders who are committed to ensuring a better future for its people. Sustained, carefully modulated commitment by the international community along with radical changes in the administrative policies of the country can and will make a difference. One solution that comes to my mind (though a far fetched one) is by changing the entire political structure and bringing in a new leader with vision and pegging the entire monetary system to a more stable currency like the dollar or euro and than changing the socioeconomic system to a socialist economy till some stability and development can be achieved.

- Ankit Singhania (PGP 2010-2012)



The effects of Colours in branding

The effects of Colours in branding

Yellow, red, blue, etc – we see these colours play a vital role in the advertisement industry. Many corporations have made emphasise of colours in creating the positive image of their brands to the public. Let us look at how colors play an important role in brand recognition.

Colours are good means to convey emotions. They can be used to create contrast and attention to designs. They also play a huge role in memory recall and stimulation of senses. This helps in conveying our messages to the people instantly better than any other medium of communication. A study from university of Loyola suggests that, colours can increase brand recognition by up to 80%. When used with proper strategy, colours are a powerful tool in branding.

Choice of colours:

The first and most crucial step in any branding is to choose the colour that defines the brand image. While choosing a colour for the brand, we must consider the psychology of the target. Many companies use market research to find the colour that is likely to make an impact on the people. There is no set of rules or guidelines for this but we can see some patterns across certain industries.

For instance, fast food chains predominantly use red colour in their brand. This is because, according to studies, red colour encourages people to eat quickly and leave – the prime purpose of fast food chains.

We can even notice that the products targeting kids use big letters with bright but basic colours like red, yellow, green and blue. This is based on the fact that young children prefer basic colours and respond more positively to these, compared to more advanced colours.

The following table shows the psychology associated with the colours and the nature of their association. It also recommends the type of business that can use the colors.



GROUP

COLOR

ASSOCIATIONS

NATURE OF ASSOCIATIONS

RECOMMENDED FOR

cool (calming)

Blue

secure and trustworthy

sky (therefore universally liked)

business related (e.g. banks)

Green

wealth (deep green)

money (“the colour of success”)

finance related (e.g. Forex related)

calming (light green)

trees, spring

entertainment and leisure related

warm (exciting)

Red

grabs attention and makes you energetic
(by activating your pituitary gland)

power (e.g. red carpet)

eye-catching logos, calls to action

Yellow

optimism

sun

attention grabbing (esp. using it in contrast
with other colour)

Pink

energy (hot pink)

feminine colour

products for young women

romantic (lighter pink)

products for girls

Orange

cheerful

citrus fruit

Kids websites

neutral

Black

Powerful

“absence of colour”

expensive products

White

simplicity and purity (catches the eye)

numerous (from brides to hospitals)

health related products

Usage of colours:

Once we are done with the choice of colours, we have to start using them to claim association in the peoples’ mind. In order to do this, we need to use them on our logo, products, advertisements, brochures etc. and even packaging. Over time a consistent use of colour allows a business to claim rights to that colour as an integral part of its brand.

In order to differentiate itself from its competitors, Pepsi changed its colour of packaging from red to blue in 1998. A decade later, most of us have even forgotten that Pepsi’s packaging used to be in red. Such strong is their usage of blue.

In recent days, Cadbury has been making attempts to trademark their purple colour internationally. Though they have failed, we can see their attempts to associate a colour with their brand.

Word of caution:

Effect of colours is not the same across the globe. It varies across countries and cultures. We have to be very cautious in choosing the colour combination. We need to know our target’s perception before choosing them.

For example, white is the colour of death in Chinese culture, but purple represents death in Brazil. Yellow is sacred to the Chinese, but signifies sadness in Greece and jealousy in France. In North America, green is typically associated with jealousy. People from tropical countries respond more favourably to warm colours; people from northern climates prefer the cooler colours.

The role colour plays in branding is a key consideration. As colour choice can be subjective it is important to take a rational approach and then ensure a consistent application of colour across corporate communications or product ranges.

To conclude, we see that the phychology effect created by colors plays a major role in the way a product is percieved. A color should be chosen in such a way that it fulfills the purpose of the brand and at the same time conveys a strong message to the target audience.


-Avinash Rajasekaran

avinash.r10@email.iimranchi.ac.in

PGP 2011-13