Selling @ Traffic Signals

Have you ever noticed the kids who are busy selling at Traffic Signals- from tissue paper to calculators, glossy magazines to Indian prints of best-sellers- they seem to have pedelled it all.

The overall logistics here works something like this:

Selling at traffic signalsMultiple traffic signals in an area are “managed” by a single “dealer” who issues the daily ration of goods to be sold in the area to each kid. The dealer would in turn get his assortment of goods from various company reps & bigger dealers. He would carry all the possible products you would see across signals in his “area”. The kids would then daily turn up at the dealer’s godown amp; based on their judgement, past experience amp; the pressure of the dealer- pick up the products to be shown & sold at the signals that day. They have to pay the dealer a minimum for each consumed item (like the cost price) amp; they can keep the margin (introduces flexible selling price). This means that the kids are given some room for price negotiations & they can swing profits by a mix of volume & price manipulations.

But have you ever stopped to wonder as to what products make it to this “channel” & why?

How do these traffic signal salesboys decide on their product mix- one of the most important of the 4 Ps in marketing.

Consider the following facts:

– One can target only the communters through this channel- amp; the primary way to communicate to them is the product display- most of the cars would have their windows up amp; music playing inside- so the kid has to get the customer interested – by just displaying the product as he walks past the vehicle.

– Not all products will sell through this channel. One obvious way to find those that will make the cut is to put them through the “time test”- can a person decide on buying it in 20 seconds? Ask yourself- how many things have u bought with that small a decision cycle.

– Since there is no service or product guarantee associated with this channel- the product has to have minimal involvement- which typically means a lower priced product. The typical ticket size here ranges from 30-50/- Rs.

– Inventory carrying capacity: These kids dont have a push-cart that they can carry to the market- so they can only sell as much as they can carry . Which means if they choose a product which is bulky, they cannot carry too many of those-cannot sell too many items-low revenues

– Most branded players would not want to leverage this channel due to fears of customer complaints & some serious dilution of the brand.

– The rising interest in Chinese goods has shifted the product mix to mostly electronics & other gadgets. Though a healthy # of them still sell books & car utility stuff.

My gut feel is that they tend to focus on either utility (water bottles , window screens amp; hats during summers, tissues or cleaning clothes) or obvious value difference (have seen people buying Da Vinci Code for Rs 40/- & a lighter for Rs 15/-)

But if you were to work on a serious project, wherein you are told to strongidentify items that can maximise revenue for these unique salesboys- what would you do?

Surjeet wants to go solo….

Surjeet Singh is your typical sardarji driving a taxi for yet another typical sardarji- Giani Singh. Gianiji has a fleet of around 40-45 cabs that are doing decent business (if fleet expansion rate is any indicator).This has been largely due to the fact that Giani enjoys access to a captive audience – he is the only “reliable” cab operator in my area.

Indian TaxiNow it so happened that Surjeet paaji came to drop me to the airport yday somewhere during the long ride we started talking about how much he is paid, on what basis etc etc.

So here’s the maths around the taxi business:

Giani pays a salary of Rs 4000/- to Surjeet and all other drivers with an additional incentive of Rs 40/- per round trip. Surjeet manages to do 3 trips daily on an average – making his total monthly income around=Rs7600/-.

Assuming each trip is for an average 20kms- it would give Giani a revenue of Rs 300/- with fuel costs of Rs 75/- , this gives a per trip margin of Rs 150/- (keeping scope for other expenses).So on an average Giani Singh takes home Rs 18000/- per day.

Surjeet wants to be independent start his own taxi operations. I hope Surjeet knows what he is aspiring to do:

– A new Indica or other vehicle will cost a minimum of Rs 350K on road. With little credit history, its tough for Surjeet to finance the vehicle acquisition at a competitive rate

– Giani gets some steady business because we can rely on him. People would not “trust”- a single cab service as the availability will definitely become a constraint. So even if Surjeet gets the car- how will he get customers? Will this mean less than 100% utilization or marketing overheads?

– Delhi doesn’t have a healthy number of Black Yellow cabs plying within the city- which means that most Delhiites are not used to hailing a cab on the road. The only places that you get into a BY cab is at the airport/station etc. So Surjeet can hope to do routes to/from such places. Had he been in Mumbai- he could have gone solo overnight after getting the vehicle.

– Airport pre-paid cabs have to wait for 2 hours typically before getting a customer- here the ticket size is Rs 250/- and they can rarely manage a round trip. They pay-up Rs 10/- per trip to the Pre-Paid manager. At this rate Surjeet will be able to do 2-3 trips in a day earning him revenues of Rs 650/-.His take home after fuel etc would be Rs 450/-. which transaltes to Rs 13.5K per month- almost double of what he currently makes.BUT with the EMI’s that he would have to pay- this could be eroded to less than Rs 7K levels. Also with this – he would earn only on days that he is making trips. If he has no back-up, he doesnt earn the days he is not well or on vacation.

So how does Surjeet let the entrepenur bug bite him in Delhi? How does he get finance at an affordable rate? Should he wait for the “Nano” That will surely change the dynamics in his favor.

My suggestion to Surjeet was to go to Mumbai- but with Raj Thackeray picking up morcha against Northern outsiders, Surjeet declined that option rightaway. He wants to be in the city of Dilwalas i guess 🙂

Growth Boosters- Can i find em in Tea?

Ever since we moved office to this part of town – the whole of the team has become almost completely addicted to the corner tea-stall. The shop is your regular road-side tea kiosk managed by this ol man- who is the brewer, accountant, salesman and the delivery boy- all packed in one.

Growth Boosters in teaIt may come as a surprise but our “baba” (as he is fondly called) is an astute business man. His concepts of tracking demand , recovering Variable/Fixed cost are so well engrained, that he doesn’t deliver at our office if there are fewer than “X” people- coz he wont be able to recover the cost of the rickshaw he hires to reach the office. He also calls us on Friday nights to check and confirm if we are open on Saturdays and how many cups are required.

Baba also makes one of the best teas that I have ever had- He knows that this is the trade secret that keeps him in business inspite of his irregularity of delivery.He told us that he once had an assistant who “stole” his recipe and started his own shop- right across the road from Baba’s previous establishment. That explains why Baba is so scared to expand his “team”.

Baba charges Rs 5/- per cup of tea has a regular demand of atleast 200 cups of tea twice a day for atleast 5 days a week- which translates to a weekly sales of Rs 10000/-. Not bad for a road-side vendor you might be thinking ! Baba has been able to achieve this scale coz he selected a neighborhood that had “few” offices in a largely residential locality.

This had the twin advantage of:

a. Ensuring that there were few large customers (like us) with sufficiently high demand

b. There will be little or competition coz its a primarily residential area. Other tea vendors are close to business or corporate hubs.

Assuming his profit margin to be 40% Baba is currently at Rs 16000/- per month take home. Much better than a lot of call center execs huh? But Baba’s business is stuck at this level of scale for quite some time now.

Here are the reason(s):

1. Most corporates want the tea delivery once each in the 1st and 2nd halves of the day. Given that they are wide spread- Baba cannot deliver to too many offices, by staggering the time of delivery. He has already experimented with just sending his kettle with the rickshaw chap- but there were some trust and logistics issue involved.

2. Corporates that grow mostly start investing in a vending machine or eventually move to a more “corporatish” locality.

3. Baba is adamant to not hire a “chottu” to scale up his operations coz of the bitter experience in the past. And am sure there are no IPRs in their business yet.

So what if anything can this brilliant brewer do to grow even further in his quest to get more nicotine down more throats ?

Delhi-Gurgaon Toll Plaza: Is adding more Marshals the solution ?

There has been much hue cry about the mis-management of the newly openend Toll Plaza at the Delhi-Gurgaon Expressway. There have been reports of consistent traffic jams during peak hours where commuters have alleged that they were stranded for almost 2 hrs only at the plaza.

Source: http://adatewithdelhi.wordpress.com
Source: http://adatewithdelhi.wordpress.com

While I symapthise with all those who have to undergo such drastic methods of increasing their patience levels – the management of the plaza has some serious genuine problem at their hands. Consider this:

– Most of the “regular” commuters have still not shown any early indication of shifting towards the monthly token, which would ensure a smooth pass from the plaza.

– The other option the plaza mgmt has is to manually charge issue receipt for each vehicle passing the plaza. Assuming it takes 20 seconds per vehicle- the bottleneck is pretty obvious.

– The peak demand for toll-marshals exists for only about 2 hrs each in morning evening and this is where the tricky nature of the problem is

– One can invest in multiple marshals per lane (as has been done currently)- which leads to parallel processing hence increase in the “capacity” of the plaza. But what do these “extra” hands do during the off-peak hours?

– The increased labour could be used to actively promote or even hard-sell the monthly tokens (during the off-peak hours) but I doubt the efficiency of such a step.

So is there an innovative solution to such problems where one needs extra “labour” to service intermittent peaks in demand? How does one ensure a good return on such investments? Should there be some “incentives” to drive more rapid migration to the token process. Plz do keep in mind that most of the tolled projects in India have had a history of not breaking even. Though my guess is that the Delhi-Ggn plaza will be an exception.

Business Case Study # 1: What should the Indian Farmer do?

Indian FarmerWas on a road-trip when I came across a possible biz dilema that is faced by most mid-sized Indian farmers.

– Our man-HariRam has been able to save enough to either buy some more land or a tractor

– Hari like most other farmers is not sure about credit- either the rates are too high or the micro-credit firms have not really reached his village yet- This means that he cannot really buy both the tractor amp; the plot at the same time

– HariRam’s current plot size doesnt really need him to buy a tractor

– If he decides to buy land- he will have to stretch himself really hard for 2-3 years before he can afford a tractor.

– if Hari buys the tractor-he sees a high rate of depreciation on his asset which will not see full scale utilization

What do u think the Indian Farmer should do?

I suggested Hari to find a few other such farmers in his community & then

– Either pool the money amp; buy a common tractor

– Or buy a tractor & start lending/leasing to these other needy guys also. He rejected my 2nd idea rightaway- saying “If i start making money by lending tractors to others- these other guys will also buy it &  I would not see the ROI on my investment”.

So put on your strategic mgmt caps & tell Hari what he should be doing.