Push back please

Traveling has never seemed more costly. An usual Volvo customer I found a big difference last week. Most of the seats in Volvo were empty!

The sales at private travels in AP has registered a 10% decrease in demand for Volvo ticket sales. Most of the times the A/C Volvo travels costs 80 to 100% more than a regular push back bus. So where does this population go? Most of them have shifted to trains which provide a more convenient comfortable option at a cheaper price. Call it cost cutting, recession, job losses or just a change in trend.. it is visible. With in the bus all items have become costlier, DVD choices wider, staff friendlier... The last ten seats are what get converted to profit in a Volvo and if they aren't filled its a loss trip. Hence travel service owners are considering a reduction in prices to keep the charm and traffic consistent. The pain is reduced as the fuel prices have come down a bit. Or else I need to book a train ticket or push back.

"Bangalore busses are never vacant," I hear, "as they are full of IT personnel." The staff are hoping it would pick up faster... may be by Deewali. Amen.

Move towards Internet banking

Banking has been revolutionized by the use of technology. The service is swifter, better and cheaper. But how cheaper? Well here are the details...

Cost Per Transaction In The US: Money Transfer (units in US $)
Type	Branch	Cheque	Phone	ATM	PC	Internet
Cost Per Transaction	1.07	0.95	0.45	0.27	0/015	0.01

The reduced cost makes it feasible for the bank to concentrate on the user experience and making it pleasant for the consumer. The difference between services of various banking firms being negligible the focus has shifted to the experience. Consumers are becoming more critical and demanding about the services from the bank as the switching costs are less and there are many players in the market. So any reduction in the cost is welcomed eagerly. Banks aim and strive to move the customer from the branch-banking to Internet-banking which is about 100 times cheaper and gain competitive advantage.

Focussed strategy

Cost leadership strategy works excellently at all times as there is a segment of population who are price conscious. Once this segment moves up the income ladder they shift to better services and products. But now in times of recession most luxury and high priced brands are in a dilema on what to do: 

• Cut prices and erode in times of brand value or
• Take a hit in terms of profits and retain the value as the sales, profits and shareholder value plumment
  

In this case McDonalds is seeing a surge in the usage and repetitive purchases. The nation's No. 1 hamburger chain has been posting strong sales as the economic downturn in the U.S. spreads overseas and people turn away from pricier restaurants to grocery stores and fast-food outlets. "McDonald's continues to appeal to customers as we offer high-quality, affordable meal options and unparalleled convenience," Chief Executive Jim Skinner said in a statement.Shares rose 56 cents to end at $59.02. 

The clown is actually making the customers smile. The smile has a ripple effect on the employees and the shareholders too.

Cost cutting @ ICICI Bank

I was at ICICI Bank today and had to write a letter for the cancellation of a DD taken long ago. What happened would surprise you. I asked for a white sheet to write the letter on and was given a half sheet, an A4 sheet was cut into 2 pieces. They were giving all the customers the same sheet. The reason was that they were cutting costs! 

The pens were use and throw pens, the AC was off and so on. It is shocking but true. I think every firm is in scared mode? But the brand must also understand that it is not just enough to tell me that they are scared but that they do have back up systems in place which will ensure its longevity. Brand communications in slump periods like this one should be more careful, calculated and clear. Customers should be assured that the brand knows where to cut the flab and reduce its costs, how to improve its processes, innovate and cut costs on its functioning and then translate them as a cost benefit to the final consumer. 

Obviously this needs much more than saving half a paper. If this piece of paper is a part of the communication that the brand wants to give its customer then there is a problem. The performance and the imagery should be consistent with the brand's personality which would result in better brand equity and trust.