Sunday, September 7, 2008

The 3C’s of Investing

When I went passed out of my B School and stepped into the corporate world, I left behind the golden rule of marketing that Mr Kotler’s blue coloured marketing management book listed down. The 4P’s of marketing. By the time I was passing out the 5th P was getting added to it called Packaging.

I moved to the 3C’s of marketing in the real world.

1) Convince
2) Confuse
3) Corrupt

It was simple and effective.

Convince - You start with a product and try convincing the customer on how great the product is and better than the competition. Like how u r shampoo will make hair more silkier and beautiful. If this doesn’t work then move to the next stage …

Confuse – If refuses to be convinced, confuse him. He needs to buy your product bcos it has ZPTO, AFGO, Booster technology, Oxidation technology, Salt crystals etc. Most customers will get adequately confused to buy the product. If this doesn’t works move to Step 3.

Corrupt – Buy 1 get 1 free, get 30% more, buy shampoo get toothpaste free, Rs 10 off etc. Economists will call it incentives. Problem is when everybody is working on corrupting the customer.

Well the 3C’s works as well in the investing domain. Companies / Management go thru the same cycle marketing their stock.

Convince - Managements will make some nice presentations and give the relevant sound bites to convince investors on the great future of the business and the company. If this doesn’t convince investors to chase the stock, move to step 2.

Confuse - Announce increase in FII limits and a few takeovers across the world. ( It doesn’t matter some of these are shell companies owned by the promoters sister in law). Float about 15 subsidiaries so it is really tough to figure out whether any of those takeovers are covering for the cost of capital.

Announce a few large scale diversification into current hot sectors or flavour of the month - Telecom licenses, real estate, infrastructure. If this doesn’t work move to Step 3

Corrupt - Announce a stock split. Thrown in a bonus issue as a bonus. And if all this doesn’t work announce a share buyback DLF, Sasken, Mastek, Reliance Infrastructure …….. This one works for sure.

2 comments:

Ninad said...

"defining the investing value system" - Always thought MBAs were too full of themselves

And it is really easy to just paint everything with one color, the 3 Cs idea is extremely context dependent

And passing judgments on companies based on one or two variables that stand out is also really easy, but not necessarily always right from the more holistic viewpoint of a businessman running his business, but I forgot you're an MBA

Now, experience is not necessarily the most important thing in Investing but from the point of view of humility, it is really critical, and you need it

Ninad Kunder said...

Hi

I dont see how charting out a path towards defining a investing value system for myself could be so MBA'ish or being full of myself. The objective of the blog is to refine my thinking process by putting things down and getting inputs from readers like u.

I would appreciate if you could view my post with a element of satire and humour and not take it literally to the point of generalising it to all scenaiors. There is a lot that goes into marketing and the 4P's of Kotler still form the core foundation of it.

Let me also state I run a business myself and understand and empathise on the challenges that a businessman faces. I dont pass judgements on a company, I have a viewpoint on one aspect of a company. You might chose to ignore it or correct me and i am most happy to stand corrected.

I agree humililty ( will take u r feedback on it) is absolutely critical coupled with temperament, hard work and paitence.


Cheers

Ninad