Corporate Mar 18, 2013
IIPM (Indian Institute of Planning Management) spent 60 percent of its revenues on marketing and 6 percent on professors. That is the reason why it is not seen as a great success. And IIPM is just one of the many trying to cash in on a huge population without delivering much value whatsoever. The trend of trying to sell products to many and compromising on value is one of the reasons why India lags way behind on any form of innovation.
IIPM used many tricks to make students pay top-of-the-line fees for doubtful quality education. The first is the "Indian Institute" tag. Unfortunately for the best institutes in Indian education - the IITs, IISC and IIMs - the "Indian Institute" tag is misused widely.
The second is the marketing blitz that IIPM carried out, largely in print media. The print media hungrily devoured the advertisement fees but failed to carry out a meaningful report on the institution. A well-researched report would have saved many students and their parents time and fees.
The third is that students who did not get top-of-the-line jobs as promised did not take to social media to warn others who were being sucked in to the IIPM marketing blitz.
There are many IIPMs out there in businesses ranging from financial services to education. The focus of many Indian businesses is selling and marketing. Once sold everything takes care of itself is the mantra. In the education field, the importance given to professors who are supposed to be the backbone of a school or a college is very low. The student is given more importance because he has paid fees and there is no question of a student being incompetent. The first thing any hirer will tell you in India is the extremely poor quality of students being thrown out of the so-called private institutions and IIPM-clones in the country.
Financial services, where mis-selling is rampant, is another case of an industry where sales is given more importance than analysis. The sales force are usually taken in from these second-rung business schools and are told to push financial products but there is no incentive to train them on markets and investments. In fact even the mutual fund industry in India is focused on selling rather than investment management with more than 70 percent of revenues spent on sales and marketing rather than on fund management.
Health care is another industry where getting customers - i.e. patients - is more important than treating them properly. Doctors and nurses are given poor infrastructure to do their work properly while the hospitals charge enormous sums of money for treatment.
Hotels in India charge global five-star rates while many of them offer below par service. The Indian consumer puts up with the high rates and low service standards due to lack of options.
The list of high-cost, low-quality products is endless. Rail, air and other forms of transport stand tall in this regard. Housing and commercial real estate is expensive though basic infrastructure of assured water and power supply and easy accessibility is absent. The consumer is deemed to have no choice.
The question is will this change? Will the consumer come out on top ever in India? In some sectors such as telecom, competition has forced the players to offer more and more value at lower and lower costs. Media, whether electronic, digital or print, is hugely competitive and this benefits the consumer in terms of choices. The auto sector is highly competitive, benefiting the consumer. The retail e-commerce platform is seeing consumers benefit from competition.
Market forces should ideally change the way businesses operate in the country. Consumers will shun products where value is lower than cost and that should force businesses to focus on value. However if that does not happen, regulators should take up cudgels on behalf of the consumer. A country that is seen as offering low value at high cost will lose out on foreign capital to other countries that offer a more reasonable proposition.
India requires more foreign capital now to bridge its current account deficit. Is the government listening?
Arjun Parthasarathy is the Editor of www.investorsareidiots.com, a web site for investors
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