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McRennetts – Baked in Chennai

Its origin is local. The owner, Maanikkam Pillai started out a small bakery in the early part of the 1900s and decided that a ‘foreign’ name would bring more patronage. It worked. Much like the Iyengar bakeries that made a virtue of being vegetarian by not using eggs, McRennetts grew by having the ‘non-vegetarian’ range as a significant part of their portfolio. The vegetarian puffs are triangular, the egg puffs have four little pointy corners, the mutton puffs are squares and the chicken puffs, rectangular. This simple differentiation ensured that the sensibilities of the customers would not be affected and a vegetarian customer would not mistakenly be served with a non-vegetarian filling.

The bakery has grown steadily over the decades with more than 60 outlets around the city and while it still remains a predominant ‘local’ brand, it fits into a clearly defined niche – that of the affordable bakery. The busiest time at the outlets is from around 4 o clock in the evening, going up to 8 pm. Office-goers in need of a quick snack, hungry students with very little to spend and passengers waiting at bus stops constitute their largest segment. They have the regular cakes, bread and buns, but not the fancy stuff. Fresh cream pastries are limited because they need refrigeration. There are just a couple of chairs and no tables at the outlets.They want their customers to enter and leave rapidly and there is no attempt to hide the obvious.

And they don’t need the internet or any advertising. A half-baked attempt has been made to try and bring the business into the digital age, but it ticks along merrily with no need for any fancy branding or customer focused attempts. The counter staff isn’t courteous or welcoming. They aren’t surly either. They are nondescript and a uniform is now mandatory. But almost a hundred years of baking has cultivated a certain atmosphere that comforts their regular customers.

So, in spite of a big revolution in the bakery business in Chennai with the entry of a brand called ‘Hot Breads’, Mc Rennett has continued to hold its own. Price is a major differentiator since even a puff is twice as expensive at Hot Breads. Mc Rennetts has another competitor in the same space. Adyar Bakery started off a few decades ago and now has the same range and the same profile of customers. But there is room for at least a couple more brands in the same segment. In a city with a population of close to 10 million, there is enough room to expand and grow. Adyar Bakery does not even have a website but it has put up a Facebook page – and then abandoned it after getting over a hundred likes. Maybe some enthusiastic digital marketer waxed eloquently about the wonders of social media and the brand decided that it was high time they got ‘current’ as well. But when 95% of their customers have no access to the internet, let alone a Facebook account, it does not make any sense to be there.

These are small businesses that have defined their boundaries very clearly. Branding isn’t difficult if you know who you are. Or who you want to be.

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When customers crack the whip

In the last one year, there have been several high-profile instances of the power that customers have come to command. The Arab Spring was not just the rising of the citizen against the state. It also signals the rise of the customer class and the ability to force companies to rethink their one-way relationship. When customers are angry, they do not fume in forums alone. They mobilise, launch strident campaigns and give companies a financial ‘black eye’

Netflix, the darling of the video rental business, believed they were helping their customers when they announced different price packages for streaming and actual delivery. Since profitability was taking a hit on physical deliveries, they forced their customers to choose between a lower ‘streaming only’ or ‘DVD only’ plan and a higher priced plan for customers who wanted both. Bad move. It set off a storm of protests and a loss of over 800,000 subscribers in a quarter. Their share price took a hit of over $11 billion. For business reasons, the company stayed with the plan. But the painful lessons will not be easily forgotten.

Bank of America notified its customers that a monthly $5 ‘service fee’ would be applicable on debit card transactions. A 22-year-old, Molly Katchpole set up an online petition as a response and it was signed by over 300,000 people in a matter of days. The bank backed down, though it maintains that the charge may be introduced sometime during the next year. Verizon is the latest casualty, after having announced a $2 convenience fee for payments made on the phone. It withdrew the notification in the face of strident customer protest.

What we are seeing here are not isolated instances. The very foundations of the customer- company relationship are being redefined. Advertising and PR used to be one-way streets, with companies able to control messages and contain dissent. But that is no longer possible. Customers are nailing companies to the wall and forcing them to act even when profitability takes a hit. Even small increases of $2- $5 are not forgiven when customers sense that the motive is profitability alone.

The entry of the customer into the pricing paradigm is likely to be very discomfiting. Companies cannot predict what the reaction to a price rise will be. There will be instances when a legitimate price increase will have to be deferred when companies want to retain market share. There was a time when companies could hope that their customers would stay as ‘silent partners’. They would leave individually when they were unhappy with the pricing or any other company policy. But the ability to influence a huge section of the customer base and create gaping holes in the cash flow is a sobering thought.

In India, where internet penetration is not anywhere as high as the US, customers have a different weapon – PIL ( Public Interest Litigation). A few months ago, telecom companies saw that the spike in text messages on festive days could be a huge money spinner. So, they simply doubled the cost for sending the messages for that day alone, netting a few hundred crores without any additional investment. Now, the High Court has stepped in and banned the practice. Either way, its the customers who are now having the last word.