Pairing Products, Spiralling Synergies
Fast Moving Consumer Goods (FMCG) companies, selling consumer goods, are well aware of the need for multiple brands of the same basic product. While these may seem to compete with each other, actually they are complementary, filling price or perception gaps in the product space. One example is a multinational selling multiple brands of soap, each at a different price point and with brand positioning aimed at a different audience. One can also think of large conglomerates operating hotels under various brand names, each with different facilities and room tariff.
The result may be a degree of cannibalisation, with one brand eating into the share of another, but this strategy expands the market for the product while also creating an entry barrier for competition. Beyond brands that fully encompass the market, companies would love to have product pairs or sets that create demand for each other, in a mutually reinforcing upward spiral. Some examples are known, others need to be found or innovated. Amongst the obvious ones are telecom networks and mobile handsets; more extensive the network, greater the demand for mobiles – and vice versa. Similarly, roads and cars: more roads or expressways stimulate the demand for cars, and more cars increase the demands for roads.
Other virtuous pairs exist but many more need to be found or created. This has special significance at a time when private investment needs to be stimulated. Government expenditure on one set of products could trigger private investment in the “paired” set. Government investment in roads and the consequent growth of private investment in the automobile sector is a case in point. Ideally, a policy tweak could lead to private capital expenditure in both sets. This has happened in the case of telecom – in which investments in both, the network and handset production, are from the private sector.
In looking at this, though, one needs to be wary of unintended negative effects. Health insurance can, for example, lead to a rise in medical costs, resulting in a rise in insurance premiums. Ultimately, the two chase each other to ever higher levels in a negative spiral of synergy. The US has long been a showcase of this danger.
Another example of such negative synergies is in the geo-political arena – the link between inter-country rivalry (even war) and sale of weapons. More conflict means greater arms sales, while more of the latter enhances the possibility of conflict: a spiral that is sad for people, but not really negative for arms manufacturers. An extreme extension of this – reminiscent of Kafka in its level of absurdity – is the US dropping food supplies in Gaza to bring relief to the starving population, a situation brought about by the US itself continuing to supply arms to Israel for its ongoing assault on the hapless people of Gaza! Strange synergy indeed – food to help people survive and bombs to kill: destruction leads to relief supplies for survival, but survival of Palestinians (including of Hamas cadres) “requires” Israel to continue its devastating attacks. Of course, the US is not the only country indulging in such hypocritical “synergistic” actions.
The challenge, then, for innovators, corporates, and countries is to come up with sets of products which create mutual reinforcement, but to avoid those with negative effects and certainly those that cause grief.
The author loves to think in tongue-in-cheek ways, with no maliciousness or offence intended. At other times, he is a public policy analyst and author. Among his books is Decisive Decade: India 2030 Gazelle or Hippo (Rupa, 2021).
