The paradigm shift in its marketing has made the airconditioning segment a hotly-contested domain. This is reflected in the pitch that companies are making to get the customer’s attention
In the beginning there was price. Anyone who bought an air-conditioner compared tags between the organised sector and the unorganised one (which paid no excise), checked out the compressor — and then usually chose the latter.
Excise changes and the entry of Korean competitors have changed all that. Air conditioners are no longer sold on price alone. Like TVs and fridges before them, brand and features count for everything. What does this mean for companies? How are they coping with the change? The Strategist presents a study of how an industry has reacted to shifts in the competitive paradigm.
“An air conditioner should not be an air conditioner should not be an air conditioner,” quips Salil Kapoor, product group head, sales and marketing, LG: “We positioned our product as an indoor environment controlling system.” So LG’s Plasma Gold campaign shows an expecting mother telling us that “the air I breathe is what my baby breathes”.
Voltas’ Rs 20 crore campaign informs us that its machines will make you “Feel the chill. Not the pinch”. Newcomer Daikin’s TV spots feature silence: an ant walks about, its footfalls resounding in the background.
The shift in the positions is reflected in the desire to feel luxurious, of “having arrived,” as Santosh Desai, executive vice president, McCann-Erickson, elucidates: “The sense of ‘Switzerland agle room mein’. So a lot of brands have, in design terms, moved to depicting the air conditioner as an object that softens the lives of people.”
As a product category, it’s time has come: prices have reduced and there’s a lot of choice. Designs reflect this shift: today’s offerings are soft, rounded and have light colours; many come with remote controls. Aesthetics count. An air conditioner is not the ungainly piece of industrial machinery that it used to be.
It was LG’s entry into the market that changed the turf. Although a greenhorn, it entered in 1998 but is now the leader in the retail segment of the Rs 800-crore, 6.6 lakh-plus unit air conditioning industry. It bested larger established rivals like Carrier and Voltas, entering just when the Indian market was opening up.
Here’s how. The positions that various players have taken is fundamental in comprehending the marketing paradigm shift in what was the institutionally-dominated area of the air conditioning industry.
As excise duties fell and as the price difference between the products from branded players and unbranded players decreased, the channels of distribution increasingly went retail. Why? With the dip in the market share of the unbranded sector — it stands at roughly 20 per cent today from about 75 per cent in 1991 — customers increasingly wanted to see air conditioners for themselves. So the branded segment of the industry grew — Voltas, Carrier, Videocon and Blue Star were joined by LG, Samsung, Amtrex Hitachi, and National, among others.
These players are practically falling over each other in an outspending spree to garner a greater share of the pie or, as Santosh Sood, senior associate director of Lowe puts it, “needscape”. And the industry is growing. In 2000, the air conditioning market grew at about 32 per cent. Burgeoning growth rates in the industry attracted more players into the market. This summer, growth is up. It’s showing: aggressive media campaigns are very much in the air.
If adspends are taken as a benchmark, it’s certainly witnessed exponential growth. Clearly, this is a fallout of air conditioners becoming a retail consumer durable. Daikin, the Japanese entrant, is committing around Rs 7 crore this year as it enters the public fray for the first time; Carrier has started out with Rs 10 crore, although president G. Raghavan claims that “we are not limited to this amount” — a hint that deep pockets may be tapped if need be — while Voltas has set aside Rs 50 crore over the next three years as part of its’ “big bang strategy” to revive its fortunes; in 1998-99 and 1999-2000, Voltas kept its adspend at an annual Rs 5 crore for both years, but has now upped the ante drastically.
Clearly, communicating to the consumer is now absolutely crucial. But as far as communication strategies go, the Koreans “changed the rules of the game,” as K J Jawa, vice president, sales and service, Voltas, admits.
LG’s meteoric rise in market is further accentuated by the fact that it was not well-known before. Desai attributes this to LG’s reading the market presciently:“A priori, Korean brands don’t have (brand) equity. But LG has become big because of their Indian (advertising) work — the quantum of it and the fact that they understood this faster than the other people have. They did it better and in much larger quantities than the others have, earlier on.”
LG’s Kapoor also attributes the success to its detecting the shift in customers wanting to see the product before purchasing it through retail channels rather than depending on specialised dealers: “Anyone who could have read the market so closely would have done it. Since we were the first to do it, we were the most successful.”
Industry giants agree. Jawa admits that Voltas, falling into the classic established player’s trap, was slow to detect the shift in the market. The new marketing mantra was: create a lot of noise in the market and push the product. As Jawa says, “Retail customers expectations’ were totally different. They were interested more in aesthetics than on reliability.”
By now, the lessons have been learnt and players have pegged their products on different platforms. LG took the lead. It was the first to take the “healthy air” tack from the very beginning. As LG’s Kapoor puts it, “The chunk of the market lies in cities where the air is polluted. So customers were highly concerned and educated about pollution levels”.
The thinking behind this was corroborated by the Francis Kanoi Marketing Research agency report. According to this, seven cities in India — the four metros as well as Hyderabad, Bangalore and Ahmedabad — generate about 63 per cent of the air conditioner sales in the country.
Subsequent advertising by LG, according to Kapoor, took “that positioning to an extreme: which individual needs the purest air? It is the foetus, who breathes through the blood of his mother. If we can give it to him, then we can give it to anybody”.
The emotive, if maudlin, nature of this campaign leaves some unimpressed. Sudhir Vohra, a professional architect and a consultant with air conditioning manufacturers, cites such campaigns as “singularly lacking in imagination”. Imaginative or not, LG claims that sales have grown by 100 per cent over the corresponding period last year.
LG’s challenges, however, could begin now. For, other players have started plugging novel features with great energy as well. Samsung plugs its’ “Chilling power of Five” — faster cooling, a rotary compressor, “diamond shaped fins”, biofilters and memory restart. When Daikin-Shriram made its presence in the market this summer for the first time, the peg was silence.
As Rajneesh Ohri, general manager, marketing, Daikin Shriram, puts it, “When we say complete silence, it looks very simple but it’s not. That’s because it involves the entire gamut of the air conditioner — the air flow, noise, the compressor, the way the blower is working, the whole thing.”
Raghavan differs: “You don’t buy an air conditioner only to cool instantly, to have a healthy filtration system or for just silence. You don’t want to compromise on one by going for the other. So we thought — why not tell the customer that when he buys a Carrier, he is not compromising on one of these.”
Carrier had successfully helped introduce and build the branding paradigm from 1988 when it entered the market.In 1993-94, Carrier had 12.89 per cent of total market share, which peaked to 25 per cent in 1997-98 while today it has 9.8 per cent of the total pie. “It’s always the leader who is attacked,” concedes Sameer Kapoor, product development manager, Carrier.
However, its communication platform lacked consistency. In 1994, Carrier’s advertisements showed the familiar Marilyn Monroe visual with a dramatic billowing skirt, albeit with her leggings on, to indicate how comfortable she was.
The “comfort” plank subsequently gave way to the “future is in the air” line to highlight Carrier’s position as the progenitor of the air conditioning industry; after all, in July 1902, Dr Willis Carrier had invented the air conditioner. But today, Carrier’s USP is “Zero compromise”. Why these shifts over the years?
Raghavan says that the “comfort” campaign was generic, intended to “popularise the concept of air conditioning”, while later campaigns highlighted Carrier’s international lineage. That, and comfort, helped “reinforce our brand.”
The zero compromise theme is a response to the increasingly feature-laden campaigns of other players. But as reflected in the changed positionings Carrier has taken, Sood says, “the brand is somehow trying to find the right tags. I think Carrier is more in search of a strategy than communicating a strategy.”
Voltas, on the other hand, was rather late in reacting to the dramatic changes in the marketplace, both in terms of marketing as well as positioning itself. The Koreans continued making steep inroads.
CMIE figures indicate that between 1998 and 2000, LG’s sales grew from 10,528 units to 44,721 units, while that of Voltas and Carrier for the same period, in fact dipped, respectively, from 79,502 to 74,309 and 50,977 to 41,067 units.
LG and Samsung took up the slack. From 1994 to 1997, when excise duties started dropping, the market shifted to the retail mode and left Voltas out of the reckoning.
Yet Voltas is looking to get into the rough-and-tumble. “We want to become a more aggressive brand,” Jawa says. And industry experts are wont to give Voltas the benefit of the doubt. Having been in the Indian air conditioning industry for the last few decades, its pull is strong.
Although Voltas was slow to react to the shift to the retail route, Samsung saw an opening. Its understanding was that retailing was the route through which it could make deep inroads into a growing Indian market.
As Pawan Bhargawa, general manager, sales, home appliances, Samsung, says, “The channel was ready, it was only a question of convincing retailers that the product was ready and that it had a future.”
Voltas knew that something had to be done — fast. So in late 1999, Tata’s management went into a strategic huddle and over the next two years, put in the “Big-bang strategy”.
Talks for a joint venture with Fedders, the largest air conditioning manufacturer in the world, were cemented by 2001. Call centres opened up, to the extent that Voltas is looking at having a complaint answered within six hours of it being lodged.
Other players took a different tack. Blue Star, a giant in air conditioning plants, is targetting showrooms and the small office/home office segment. After the advent of foreign companies, the 0.75 tonne segment was created by Shriram.
Earlier, all air conditioners began with the one tonne-range, but when small, one room offices started gaining currency, the requirement for sub-one tonne units became a reality. This was an attempt to expand the use of air conditioners, being based on a study of smaller outlets.
Professionals such as doctors and lawyers had offices with small carpet areas, so they did not require air conditioning with high tonnage. Since these products had to be price- and cost-effective, they made eminent sense.
Today, Amtrex, Videocon, Kenstar and Voltas have offerings in that segment in the range of Rs 14,990 upwards, according TV Veopar Journal figures.
What of the “big bang strategy”? “We brought in American technology at Chinese prices, we brought in a range, rejuvenated the service, and went outdoors very aggressively,” Jawa says.
Deep pockets helped: part of the Rs 45,000-crore Tata Group, Voltas went in for a Rs 50-crore, three-year outlay. It’s showing in the media blitz. Bus shelters, stickers and signages are on besides the TV spots.
Voltas has positioned its products as being technologically above the rest. Sales figures indicate that its patience is paying dividends. To date, Voltas claims to have sold in three months what it did in an year back.
McCann’s Desai, however, dismisses the positions that companies have taken on their products: “I don’t think consumers really have a clue about features. I don’t think consumers have very strong opinions about air conditioners”.
As part of an overall study of consumer durables, McCann-Erickson tracked air conditioners and found that “in air conditioning, the images of brands are weak,” Desai says.
Whatever the experts think, prices are dropping and sales are up. With the behemoths slugging it out, this summer may well witness one cool cat: the bemused Indian customer, wondering which pitch he should shell out his hard-earned cash for.
Source: The Financial Express, Wednesday 26th June 2002
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