When the going gets tough, the tough get…tactical.
That's the takeaway from consumer durables manufacturers as they struggle to reshape marketing plans turned topsy-turvy by the storm winds battering the economy.
“Normally, the first half of the year is all about strategic marketing, about brand positioning and innovation. The second half, when the festival buying season kicks in, it's all tactical,” says the marketing head of a major consumer durables multinational.
But this year, companies have been forced to go tactical from the word go, as sales flagged and margins came under increasing input cost pressure.
It has been a particularly tough year for players in the consumer durables space. The durables market is not just price-sensitive, but is directly linked to the discretionary incomes in the hands of the end-consumers.
Bad news on the growth front, therefore, translates into not-so-encouraging news on the jobs and pay hikes front. Add a plunging rupee, an excise duty hike in the Budget, repeated increases in raw material costs and surging marketing and advertising costs and you have the ingredients for a perfect storm in the durables space.
The relentless battering has already seen the toll mounting. The high double-digit growth of the previous few years is already a distant memory for most players. This year, growth has been at best in low single digits for some players, while others have seen de-growth.
In air conditioners, for instance, sales have shrunk by nearly a fifth in the ongoing peak season, as high prices and lack of affordable consumer finance drive away consumers.
Growth in flat panel TVs, which was rocketing along at over 25 per cent a year, has plunged to the low single digits. The big ramp-up in the under-penetrated washing machines segment is not happening in the immediate future. Appliances sales have shrunk.
This is where tactical marketing has paid off for some. “While the industry contracted by over 20 per cent, Voltas' performance was flat, with a negligible one per cent dip,” says Pradeep Bakshi, COO, Voltas Unitary Products Business Group (UPBG).
The company focused on the energy-efficient star-rated products in its range, pushing the low cost of ownership and laying out a host of easy finance options to reduce resistance to the buying decision.
According to Bakshi, almost 25 per cent of Voltas' business comes from its 5-star rated ACs, while the industry average sale of 5-star rated products is just 15 per cent.
“We have the highest market share in the 5-star category,” he claims. Extensive market mapping and dealer network expansion over the last five years, along with the introduction of a new advanced product range, are beginning to pay off for the brand, he says.
Home appliances company Haier India, a 100 per cent subsidiary of Haier Group of China, on the other hand, has been betting on a slew of product launches to rev up the market.
Says Eric Braganza, President, Haier India, “Haier India has adopted a strategy of introducing new products and innovations in its existing product lines across segments to deal with the current slowdown.”
Haier's list of launches this fiscal includes India's first six-door refrigerator, two new series of ‘smart TVs', seven new split and two window ACs, two new capacities in direct cool refrigerators, three new capacities and new variants in frost-free refrigerators.
Korean giant, LG, on the other hand, is tightening its advertising spends and focusing more on below-the-line (BTL) activations and better in-store experiences for consumers. Says L. K. Gupta, Vice-President, Marketing, LG India, “Investments will be geared to give consumers a better in-store experience via display, demonstration, BTL activations and branding visibility for flagship products.
Digital media, which plays a very important role in the consumer decision journey of searching and evaluating products, will be given more resources.”
The South Korean company, which follows a January-December accounting calendar, has only assigned Rs 600 crore to marketing and advertising in 2012, the same amount it spent in 2011. This is significant as marketing spends typically see a 10-12 per cent increase year on year.
Whirlpool India too has maintained the same level of marketing expenditure as last year. “The marketing budgets should not exceed Rs 71 crore, which was also the corpus for last year,” says Shantanu Das Gupta, Vice-President, Whirlpool India.
Voltas, too, is shifting focus to BTL and digital marketing. “Earlier we were lying low on below-the-line activities and social media. We are catching up now,” says Bakshi.
Haeir India is looking to expanding its retail networks to keep sales pumping. Haier expanded into 170 exclusive retail stores in the past two years. It too, is focusing on BTL spending. It has allocated Rs 30 crore for BTL activity for the current calendar year, fully half of its total marketing budget.
Pricing has become a dynamic variable in the equation. Says Whirlpool's Dasgupta, “Earlier, we were setting price caps for the quarter, now it is on a month-to-month basis. Also planning cycles have come down and we are taking decisions on supplier contracts dynamically.”
Some players are investing in products they see driving growth in better times. “We are pushing for high-end cooking appliances which will be a future growth driver for the company along with water purifiers,” says Dasgupta.
But the last word is innovation. Ashwani Arora, Research Head, Market Xcel Data Matrix, says innovation is key to success in tough times. “Companies are offering better products, with more advanced features at a low premium.
The exchange offers of late have been more lucrative, there is a push strategy whereby companies are offering products on easy EMIs. The phenomenon of bundled discounts is emerging, whereby anyone buying a few products of the same brand gets best prices. Extended warranty and better after sales service are other benefits being offered by the companies,” he points out.