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Ankita \n Rai, Business World\n <\/i><\/p>\n
Ankita \n Rai, Business World
\n <\/i><\/p>\n
New \n Delhi, 13 July 2015 <\/i><\/p>\n
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To \n take advantage of the growing demand in the entry-level premium \n car segment, Maruti Suzuki India (MSIL) has just unveiled a new \n chain of dealership under the Nexa brand to showcase its premium \n offerings. MSIL’s desire to serve the premium end of the market \n is not new – over the years it has launched two products, the \n Grand Vitara SUV and premium sedan Kizashi, to woo this market \n segment. Unfortunately, these brands have not been able to make \n the kind of impact the country’s largest carmaker had hoped for. \n In a renewed push, MSIL has launched a new brand, S-Cross, and \n is now overhauling its distribution network.<\/p>\n
MSIL is not the first one to try this. Globally, carmakers Nissan, \n Toyota and Honda have similar distribution models, wherein they \n sell their luxury cars under Infiniti, Lexus and Acura brands \n respectively.<\/p>\n
And why single out automotive companies? Closer home, players \n like VIP Industries and Cafe Coffee Day (CCD) have treaded a similar \n path – matching the premium quotient of a product with the manner \n in which it is presented to the customer. VIP Industries has a \n separate chain for its premium brand Carlton, while CCD currently \n has three different formats for three different customer segments. \n Says Samit Sinha, managing partner, Alchemist Brand Consulting, \n "A big part of the experience is, who else is in the showroom. \n We don’t want to rub shoulders with people whom we don’t think \n are like us."<\/p>\n
Distribution, therefore, becomes crucial for a volume brand trying \n to climb the ladder to premiumness. So how can a brand gear its \n distribution to successfully climb the value chain?<\/p>\n
| Not \n everyone’s cup of tea: Devangshu Dutta <\/font><\/b> <\/font> \n For \n mass-segment businesses desiring to move up the price curve, \n it is important to create new channels that can stand apart \n from the previous offerings and, if feasible, to create \n entirely different brands as well.<\/font><\/p>\n From \n the consumer’s point of view, the expected purchase experience \n and service levels at the higher price point need to be \n better. So merely allocating a segment of the existing distribution \n network will not be enough. The store for the new premium \n product needs to feel complete in itself. Separate channels \n are also vital to achieve a service-cost balance and to \n have consistency within any specific outlet.<\/font><\/p>\n However, \n the biggest challenge to a premiumisation attempt by a mass \n brand is outside its control – whether consumers will accept \n that new offering as truly premium even though it is from \n the stable of a mass brand.<\/font><\/p>\n Having \n a critical mass is another significant challenge, as the \n investments in creating and maintaining a premium offering \n would be significant. <\/font>The \n third challenge is creating a culture and processes, at \n least for a premium-dedicated team that will be alien to \n the rest of the organisation. This requires willingness \n to invest, patience and sponsorship at the highest levels \n of the organisation’s leadership. Devangshu \n Dutta Premium is what premium does<\/b> "Maruti has been in the business of selling cars for almost \n 31 years. The market has evolved and consumer expectations are \n changing," says RS Kalsi, executive director, marketing and \n sales, MSIL. "Many of them are third-generation buyers – \n young achievers who are looking to upgrade to bigger cars."<\/p>\n To woo this customer, the country’s largest car maker will drop \n the ‘Maruti’ name from the bootlids of its premium products. So \n the Ciaz and the S-Cross and the forthcoming YBA compact SUV will \n only see the ‘Suzuki’ part of the badge. The ‘Maruti’ badge doesn’t \n command enough brand value in the premium (Rs 10 lakh-plus) segment, \n say experts, and that is where the "Suzuki" or "S" \n tag will bring in some "pulling" power.<\/p>\n The company also understands that having a handful of new brands \n will not serve the purpose. The way they are showcased and the \n manner in which consumer queries are handled will be make or break. \n It is looking two sort this issue with a two-pronged approach. \n First, as we have mentioned, the new products will be retailed \n through a chain distinct from its earlier one. Second, the company \n will train a new set of people to cater to the needs of the premium \n consumer.<\/p>\n To begin with, MSIL has hired people from service sectors like \n hospitality, aviation and financial services and has roped in \n Dale Carnegie to coach relationship managers on soft skills. These \n managers are being given product and experiential training, which \n includes travel by air and luxury hotel stays, so as to acclimatise \n them with the way the new consumer thinks and acts. So far, MSIL \n has trained 700 people and plans to train 2,000 more. This financial \n year, MSIL will roll out 100 showrooms. "Around 70 to 75 \n per cent of the sales come from top 30 cities and we are targeting \n them with our new offerings," says Kalsi.<\/p>\n The Nexa showrooms boast of separate lounge areas for customers, \n a personal relationship manager for the entire lifecycle of the \n product, paperless interaction and so on. "We want to make \n the customer feel pampered," says Kalsi.<\/p>\n A sound strategy, going by auto experts. "The maximum growth \n is at the entry level premium segment, which MSIL has targeted. \n In this segment, one must note that the ‘brand’ makes more difference \n than the ‘product’," says Abdul Majeed, partner, PriceWaterhouseCoopers. \n In a way, MSIL will take the route VIP Industries has taken earlier \n with its Carlton range, targeted at the premium segment of business \n travelers. Indeed, VIP doesn’t offer all its products across all \n channels. It has five luggage brands in its portfolio: Caprese, \n Carlton, Skybags, Alfa, Aristocrat and Footloose. The premium \n brand Carlton is available at only at 350 touchpoints, while VIP \n brands are available at 4,500 touch points. The reason is the \n same: premium brands demand a premium atmosphere. "We offer \n Carlton only at our VIP premium lounges. Even at these lounges, \n there is a separate section for Carlton. We are also opening exclusive \n stores for Carlton," says Sudip Ghose, vice-president, marketing, \n VIP Industries. Currently, there is one exclusive Carlton store \n at the Mumbai Airport and the company will launch another one \n at the Delhi Airport soon. Carlton contributes 5 to 6 per cent \n of VIP’s sales and is growing at 40 per cent annually.<\/p>\n VIP also realises that training the sales staff at showrooms \n is important. "You have to have SEC A, serving SEC A," \n says Ghose. "The sales managers at premium stores need to \n be groomed for retail so that he\/she asks the right questions \n when interacting with consumers." For instance, when selling \n a premium brand, you don’t ask the customer her budget.<\/p>\n Ghose admits it is difficult to ‘turn’ a volume brand into a \n premium one. "It is better to start afresh without any baggage," \n adds Ghose, no pun intended.<\/p>\n Coffee chain Cafe Coffee Day (CCD), which has developed multiple \n formats to differentiate customer segments (such as CCD targeting \n the value-conscious youth, The Lounge targeting affluent customers \n and The Square catering to coffee connoisseurs), believes focusing \n on the uniqueness of the offering and experience are the pillars \n on which one ought to position a premium brand. "The most \n important consideration before a brand gets into a premium slot \n is to evaluate the brand stretch-ability," says Bidisha Nagaraj, \n group president, marketing, CCD.<\/p>\n CCD’s The Square sets itself apart on service and ambience. The \n outlet design is minimalist and the furniture contemporary. There \n are seven Square outlets currently.<\/p>\n Two sides to the coin<\/b> Given the high stakes, some experts warn brands from being dazzled \n by the lure of premiumness. "Most Indian brands fail to recognise \n that you don’t necessarily have to serve the whole spectrum of \n the market because it looks attractive," says Saurabh Uboweja, \n brand strategist and CEO, Brands of Desire.<\/p>\n "If you are true to your definition and keep upgrading brand \n experiences around your core, you will succeed in the long-term."<\/p>\n In any case, changing consumer perception about a brand is a \n tough call. "In case of MSIL, the biggest challenge would \n be how successfully it is able to change the perception of being \n a budget, family car manufacturer," says Amit Kaushik, principal \n analyst, IHS Automotive.<\/p>\n Yes, there is a way to do it like VIP has done – by having a \n different brand altogether. Samsonite, on its part, acquired luxury \n US brand Hartmann after it failed to create its own luxury brand \n Black Label. "If Tata Motors created a luxury buying experience \n in a new dealer format and put the Jaguars to sell underneath, \n you can imagine the kind of brand dilution it would cause to Jaguar," \n muses Uboweja. "The secret to long-term sustainable equity \n creation is "let your brands be, make them strong, make them \n relevant but don’t change them."<\/p>\n That perhaps is the reason for calling the S-Cross just that \n and reserving the Maruti-Suzuki tag for the range spanning Alto \n 800 to the Swift DZire. |