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