The television ad for a popular brand of deodorant opens with a player running in to bowl and the batsman ready. The TV commentator intones approvingly on the bowler's nice, smooth run-up to the wicket. But the bowler, instead of hurling the ball, keeps running beyond the pitch, leaving the commentator exclaiming in a perplexed voice: “What is going on?”.
The TV commercial then features a bevy of girls running after the bowler, catching him on the run and knocking him over, seemingly bowled over by his air of irresistibility. The voiceover proclaims, in all seriousness, that it “must be the Axe effect”.
The commercial holds lessons for regulators overseeing the marketing of financial products that offer features of risk cover and investment management.
It is a no-brainer, as the Americans would put it, that the public do not for a moment seriously believe that a deodorant can be rigged up to exert for the user such an potent attraction on the members of the opposite sex. Least of all the cricketers themselves who, one suspects, believe that their accomplishments on the field would be more than sufficient.
Is the effort involved in communicating a combination of virtues in a particular brand of deodorant then wasted? Far from it.
Traditionally, marketers of consumer products have packaged their offerings with more than one attribute or more than one functionality in it. In the instant case, the deodorant not only neutralises the body odour but also induces a feeling of goodness about oneself.
One may quibble about the efficacy of a communication that is wrapped up with suggestions of the consumer possessing nothing less than a Pied Piper of Hamlin-like quality in attracting women.
The notion of the consumption of a product satisfying a variety of consumer aspirations or needs, however, is not something that can be dismissed as frivolous. It is not just deodorants. A shampoo commercial featured the other day promises the user clean, dandruff-free, bouncy and glossy hair from a single application.
There are a number of reasons why producers would want to bundle features. One, of course, is that it is a matter of convenience in a situation when the consumer has more than one need. Two, promise of fulfilling one (washing one's hair clean) creates an unnecessary side-effect (loss of sebaceous oil present at the root and, hence, the loss of sheen) warranting the inclusion of other ingredients and, therefore, the bundling of a multiplicity of functionalities in one product.
Last but not the least are the innate compulsions of a fiercely competitive market, forcing producers to differentiate their product with some attribute, which too gives rise to a phenomenon of bundling of uses/attributes in a consumer product.
Two points can be made. One, consumers are quite comfortable with this. Two, there is no serious fear of mis-selling merely because a combination of features are bundled into one.
One could, therefore, argue that if bundling is such a common feature of most consumer products there is no reason why similar investment products should be looked at with suspicion. Once this is recognised it becomes easier for regulators tasked with protecting investor interests to change their mindset.
The controversy on the jurisdiction over unit-linked insurance plans (ULIPs) arose, in part, because SEBI, as a custodian of investor interests, is not comfortable with the idea of a product offering a combination of features.
The insurance companies too did not help their cause by branding what they were selling as a unit (investment) linked insurance policy when they were selling an insurance-linked investment product.
In other words, they were selling not ULIPs as much as ILIPs (Insurance Linked Investment Policy), if one may coin such a term.
The former suggests that investment is an incidental feature (as in the deodorant that incidentally promises a feel-good fragrance apart from the primary function of neutralising body odour) to the protection against risks of mortality.
Once you change the label as ILIP, it is reasonable to assume that investors perceive that risk cover is the incidental feature while investment management is the primary functionality.
The labelling is important because it addresses the core concern of miscommunication and a consequent injury to investor interest.
Whether SEBI should regulate such a product or the IRDA should is a matter of detail.
From Business Line published on June 27, 2010
