Airtel’s Magic Mirror Parlay

Airtel’s Brand Identity Change seems to Indicate that The Company is Readying itself for Change.  

Every old-fashioned Indian amusement fair houses a “magic mirror” fun house, which reflects exaggerated features of any individual. While one mirror makes your neck and legs look longer than a giraffe’s, another can make even an elephant proud of its curves. And if you occupy the right spot on the floor, the infinite distortions will make your reflection unrecognisable. Today, the Indian telecom service industry, with ARPU (Average Revenue Per User; which has fallen y-o-y by 33.9% as on September 30, 2010) and MOU (Minutes of Usage; a fall of 11%) falling forever, is a lot that has become India Inc.’s fun-house. And no one is looking stranger than the very players who once boasted about well-charted out investment plans and endless earning possibilities in the wireless market.

As recently as two years back (September 2008), the country had 166 million mobile subscribers. Today (October 2010), it has 671 million! Prosperity it should have meant for the players. But the yoghurt turned sour. New licences, new players, and the once-dominant names grew weaker. The worst hit has been Bharti Airtel, which despite being the largest in the country still, has seen its grip loosen in the recent quarters gone by. While the #2 Reliance and the #3 Vodafone have witnessed a reduction in market shares of 1.9% and 1.7% respectively over the past 12 months, Airtel has lost 3.2%! The situation is thus – from a convenient command of over 25% of the domestic wireless market about two years back, the companying commands only 20.81% today. Worse, if you look at the mobile subscriber base addition in percentage terms during the past 12 months, Bharti has tasted least success, managing a growth of just 33.5%. The figures for others were: Vodafone – 42.66%, Reliance – 39.2%, BSNL – 33.72%, Tata Indicom – 95.4%, Idea – 46.29% and Aircel – 91.2%. [During this time, the total market size grew by 48.8% – implying an addition of 208.3 million.] So is Airtel, which has covered miles since it long began its services voyage a decade and a half back with a presence in just one circle (New Delhi), succumbing to competitive pressure? Actually, no! To retain the top spot for years, in this dog-eat-dog telecom services market, calls for pay-offs from well-chosen bets. And the CEOs & Marketing Heads in charge of brand Airtel, have never been indecisive about this.

Many took to Airtel’s global desires as a simple dream to stretch its wings. From what can be observed today, it actually had plans to fly. The first measure to revitalise itself was to brand itself a truly “global player”. This called for acquisitions in foreign lands. Soon, Bangladesh, Sri Lanka and South Africa happened (the $10.7 billion Zain buyout in June 2010, gave it access to 17 countries in the African continent making it the second-largest operator in Africa after MTN). Most would have stopped there. Airtel didn’t.

Becoming the fifth-largest telecom operator in the world requires hard work. It calls for brains too. And the latest gig from Airtel comes in the form of a revamp of its brand identity. The company has decided to give itself a fresh look, to keep in sync with developments that have occurred in the recent past. 3G is the next leap for Indian telecom, and who else but the market leader would desire to become the first one to stretch-out the welcome carpet. The metamorphosis happened through adoption of a new corporate identity – a new logo and a fresh signature tune, composed by the Oscar awardee A. R. Rehman. The company proclaims that the new identity showcases the willingness of the operator to offer new products and services. Red, the color of energy and dynamism, was retained by Bharti and the new additional curve, as the company claims, will ensure instant recognition of the brand across all markets. “This new brand identity reinforces our promise to deliver innovative services and a superior brand experience to our 200 million customers across Asia and Africa” says Sunil Bharti Mittal, CMD, Bharti Airtel. The man, who will hereon spearhead the rebranding effort, Mohit Beotra, Head – Brand & Media, Bharti Airtel, after a reality check, tells 4Ps B&M, “Our strategic decision of moving from primarily voice-based services to applications-based services, called for a need to communicate though a change in brand identity as well. The logo change therefore represents a strategic shift to project Airtel more as a youthful, dynamic and vibrant brand.”

But there are also many who say this might not have been required. Some more who believe that a change in corporate identity should be necessarily followed by a change in offerings or/and change in management. Ramanujam Sridhar, CEO, Brand-comm says, “Airtel’s investment in the new brand logo and the signature tune is unnecessary. Today, quality of service (QoS) is the key issue with any of the telecom operators. A customer will be happier if the QoS improves.”

Others criticise the very option of a new logo. Many claim that the new logo is not very different from that of the #2 in the Indian telecom space – Vodafone Essar. Text underlining both logos are in lower caps and have the same brand color (red). Therefore, differentiation lacks. Then there are some who question the very fact that the new logo is rather casual in appearance and appeal. “Airtel’s new logo does not give the look and feel of a serious player in the space. A more serious look would have been more appreciated,” says brand expert Harish Bijoor.

To this however, Abrain Miller, Chief Creative Officer, JWT, the man who masterminded the new creation, has an answer. He justifies logically to 4Ps B&M, “With the new brand identity, we are positioning Airtel as an enabler of technology, from being a purely tech-based company. People no longer care just about technology. They are interested in how it will help them. We are positioning the brand on similar lines, wherein Bharti Airtel can help its subscribers to connect to their loved ones while on the move, by being an enabler of technology.”

Arguments aside, Bharti Airtel has made promises in the past, and has lived up to its claims. Only this time, consumers across two continents expect a sea-change. Will Airtel continue to appear “strange” before the “magic mirrors”? Or will it strike gold investing all its winnings on the changed look? Too early to call, but you can bet on the #1; at least, it has deep pockets!

What’s In A Place?

Isn’t there Anything ITC is Losing Out on by being Headquartered at Kolkata? 

These days, company transformations are no more a breaking news. Almost everybody is doing something to stay ahead in the race. But it used to be the talk of the corporate town in the early 70s when the 1910 born Imperial Tobacco Company changed its name to Indian Tobacco Company in order to shed its British image and establish the much-needed Indian connect; and when it changed it again to ITC to venture into the non-tobacco businesses. But, despite all these transformations, one thing remained the same. ITC has tenaciously remained headquartered at Kolkata (which is insanely popular for its rich cultural heritage, but perhaps not so much for its corporate activity) for the last 100 years!

No doubt, there is a big list of companies that were initially based out of Kolkata. In fact, companies like Brooke Bond, ICI, Lipton, et al, are some cases in point. But then, they all soon decided to shift base to either Delhi or the financial capital, Mumbai, even Chennai or Bangalore. The equation was, if you wish to get counted amongst India’s best, you need to be centered around the fastest growing regions. That done, analysts have bene flummoxed – and more so recently – on what exactly makes ITC stick to the City of ‘Joy’? Clearly, it must be losing out on much on the strategic front. We did our bit to work out the foxy conundrum.

“There are three important elements to marketing – location, location and location! In this time starved, digitally activated world, this is even more relevant. People are not just demanding convenience they are expecting it,” says Crispin Reed, MD, Brand House, UK. If you were to analyse ‘bricks & mortar’ retailing, success sometimes comes down to a matter of metres. The difference between profit & loss can come down to which side of a street a store is located on. Retailers have been aware of this for a long time and whilst software has long been available to track traffic flow to identify optimal locations, the best individual retailers are those that know intuitively where to establish their presence.

But then, ITC doesn’t necessarily face this issue because they are more into manufacturing than retailing. And for a manufacturing concern, the ecosystem need not necessarily be that big because the integral processes like manufacturing and warehousing can be done wherever you want.

Y. C. Deveshwar, Chairman & CEO, ITC Group shares with 4Ps B&M, “There is no disadvantage in being in Kolkata because we are a national company.” He believes that it is more important to understand what the consumer wants or doesn’t want and then deliver accordingly rather than to focus on the location of the headquarter.

Underlying Deveshwar’s premise is another strong logic. Considering the inflating cost of setting up offices in Mumbai, Delhi or Bangalore, and with technology coming up the better day by day, there is inherent cost wisdom to stay put in Kolkata – one reason why companies like Parry’s and TVS are still based out of Chennai. Atul Tandon, Director, JL Morison adds more to the point of view with an additional logistics angle, “It’s difficult for ITC to move out because it has agricultural linkages to that place. It started tea plantation in that area and the entire genesis of the business has happened there. It’s more to do with the passion of a business model it had created.”

Further, with regional offices across the country, perhaps ‘headquarters’ as a concept doesn’t have that much of the significance left anymore, unless one is an IT company, because then the Bangalore/Silicon Valley persona adds to the brand perception.

Certainly, it’s factually less about the company’s location and far more about how effective are its channels of distribution. And no doubt, ITC has used this ‘P’ of marketing very effectively to its advantage. With initiatives like e-Choupal it has not only created a strong direct marketing & distribution channel for its products, but has also been able to eliminate unnecessary intermediation and multiple handling, hence bringing the transaction costs down to almost negligible.

Since its inception in 2000, ITC has had 6500 e-Choupal installations in 40,000 villages across nine different states of the country, empowering four million farmers in the process. By 2012, ITC aims at 20,000 e-Choupal installations in 100,000 villages across the nation, covering 15 states altogether and thus empowering 10 million farmers. In fact, ITC’s e-Choupal is a perfect example of how an innovative and inclusive distribution strategy can work wonders for a company. It’s such strategic choices made over the years that has transformed ITC from a company with a gross income of Rs.51.88 billion and a market capitalisation of Rs.55.71 billion (in 1996) to a conglomerate that boasts of revenues to the tune of Rs.260 billion and a market capitalisation that today exceeds Rs.1.3 trillion (2010).

All this has been possible because of ITC’s strong supply chain model that comprises of a large number of small scale partners and its distribution philosophy that makes it use different sales force to cater to different channels like convenience outlets, grocers and supermarkets. Adding to the bonanza are ITC’s e-Choupals and storage hubs that has strategically been placed in across states, functioning as centres through which ITC can directly market its products. In fact, the company has, for years, used ‘paanwallas’ to strengthen the local network for its products. This makes for an approximate network of 4-5 million local retailers and distributors. Certainly, the company shouldn’t be having any qualms about a head office in Kolkata when the distribution is this efficient. And it all shows in their turnovers. ITC has noted a 13.5% increase in its gross turnover in the last one year and a 27% hike in the exports turnover in the same period. All this couldn’t have been possible without a strong distribution network.

And as mentioned earlier, with audio-visual communication combined with technology advancements building a stronger and cheaper geographic grip in the corporate world, concepts like video conferences, live streaming, email on the move, have facilitated many a thing that wasn’t possible earlier – even annual general meetings. All in all, if one were to revisit the protagonist question, why Kolkata, the answer could well be, “Why not?”

What’s Next for PVR?

It started as a Dream Way Back in 1997 and Redefined the Entire Industry. With Competition Increasing, PVR is all set for a Strategic shift as it Moves Towards becoming an Integrated Retail Entertainment Co.

How many people would you know who can boast of coming up with a business idea during their honeymoon? Ajay Bijli, Chairman & Managing Director, PVR Ltd. is one man who can joke pretty easily how he was busier thinking about movies than romanticizing the moments during his honeymoon. The man, credited with revolutionising the modern cinema landscape in India, chanced upon the whole idea during his honeymoon trip to Orlando, Florida in 1990. Hailing from a country that consumes Bollywood with an unmatched frenzy and having grown up watching movies in single screen theatres with a trademarked damp, dirty and smelly environment, Bijli was more than surprised when he went to watch a movie in a US theatre. For the first time, he realised that watching movies can be such an inviting experience if packaged appropriately The rest as they say is multiplex history.

Cut to the present, the governing equations of the cinema exhibition business have completely changed and PVR Ltd has emerged as one of the leading players. But the habit of coming up with something fresh and interesting has not changed a bit. And perhaps, that has been a saviour for the company even during the worst of times. How can one forget the 381% year-on-year decline in PVR’s bottom-line during the first quarter of financial year 2009-10, when, owing to the gridlock between movie producers and multiplex owners, the group posted a quarterly net loss of Rs.109.2 million as compared to a profit of Rs.38.8 million in the year-ago period. But few actually know that in absence of Blu-O (PVR’s lifestyle entertainment venture), the losses could have been much bigger in that quarter. The venture, which started in collaboration with the Thailand-based Major Cineplex Group, achieved break even in its first operational quarter clocking revenues of Rs.39.6 million with a 32% profit margin for PVR.

Undoubtedly, the diversification now stands for a better and sustained profitability for PVR and the brains out there are all set to make it large by opening up the country’s first entertainment city spread across a total area of 150,000 square feet. Discloses Pramod Arora, Group President, PVR, “Through this retail entertainment city, we plan to leverage the synergies of our various brands in order to expand into the space of retail entertainment. The success of PVR Blu-O has acted as a catalyst for us to doggedly pursue this format.” The company has some real big plans like 15-screen state of the art multiplex, a 24 to 28-lane bowling alley, Olympic size ice skating rink and microbrewery based Beer Island and food kiosks. PVR, we’re told by the top management, wants to fulfill its dream of becoming an integrated entertainment company. As Ajay Bijli, CMD, PVR, puts it, “The Entertainment City will be a mecca of entertainment in the NCR region as we will house all our formats under one roof. This is a huge step forward for us to realise our dream.”

However, apart from diversification, PVR’s rapid and aggressive expansion has been very instrumental in making its business model fundamentally strong. The group, which only had 51 screens at the end of FY2005-06, now has 142 screens in 31 multiplexes across the country drawing 5.5 million footfalls every quarter (Q2 FY2011) and generating a revenue of Rs.1.05 billion. But then, considering what Bijli has in mind this might just be the beginning. This is because the officials of PVR were quoted in media earlier this year that the group wants to increase its screen count to 500 by 2016. If achieved, PVR then would command a huge share in the Indian film exhibition industry.

However, increasing the number of screens alone will not serve the purpose for PVR. And the group knows it very well. Competitors have spruced up their packaging to world class standards too. To that extent, PVR is continuously putting in effort to be reckoned for the quality of service it provides. Moreover, to attract higher footfall, it has been introducing innovative concepts like the exclusive prepaid gift cards (which can be redeemed against purchase of tickets, food & beverages at the PVR cinemas across the country) that they came up with during this festive season.

With the commitment to build PVR Pictures as a full scale distribution and production company, PVR now intends to gear up its movie production to at least 4 to 5 a year, and also aims to get hold of as many rights as possible for distribution of international movies in India. Besides, it also has plans to get into the distribution of regional movies clearly indicating that now it has made up its mind to diversify and grow in order to become the country’s largest entertainment conglomerate. For that matter, the game plan is ready and it is much bigger than what Bijli thought of during his honeymoon trip. And... action!

Will an Expensive Car Work to Maruti’s Advantage?

Maruti Suzuki is Embarking on a New Strategy. This time, it’s a Rare Ritual. The Company calls it the “Kizashi”. We call it “The Newest Shot at Growth”

When all competitors around Maruti Suzuki have seemingly started taking its dominance in the compact car segment to heart (the A2 segment, where the Indo-Jap carmaker enjoys a market share of 55.03%, having sold 369,466 units during Q1 & Q2, FY2010-11), the Indo-Jap has begun doing the right thing – take a peep into their world too! Call it a sign of great things to come or simply a fanatic anti-competitive rhetoric, but this fierce advocate of Indian consumerism has decided to take the plunge to ensure that its 50% market share doesn’t go anywhere. Many even view this decision by Maruti as a visceral fear of change, but left it was with little choice. Despite flooding the domestic market with offerings at the lower to mid-price points in the A2 & A3 segments (with brands like Alto, Wagon R, Estillo, Swift, A-Star in the A2 and SX4 and Dzire in the A3 segment), its passenger car market share fell below the 50% mark (touching a low of 45.7% during Q1 & Q2, 2010) for the first time since it started dominating the market with its 800 magic more than two-and-a-half decades back. Reason – competitive pressures, with everyone from the mighty truck-making General Motors and Fords to the premium sedan-rich Nissans and Skodas taking an elephant ride on Maruti’s hunting ground. Even the number of offerings in the A2 and A3 segments have increased by 24 in just the past two years, to 46 (as of date)! Given the circumstance, trying its hand at the A4 segment remains the hope that can help Maruti salvage lost pride. Kizashi is at that hope’s vanguard.

Yet, one hesitates to read too much into this Maruti dream, which is fuelled by the Indian consumers’ desires to grow fast on the social scale. Yes, the 350 million middle-class (that is, if you were to define the typically quasi-rich classes as the middle class; as India in reality has no true middle class) still believe that Maruti as a brand stands for the power of delivering a value-for-money Jap engine, a well-in-place architecture and an extremely affordable and readily available service (centres). But is the Kizashi what this Indian consumer class is waiting for? Mayank Pareek, the Marketing Chief at Maruti Suzuki believes the answer is yes, and tells 4Ps B&M, “The new age Indian consumer has evolved. Today, they demand more, and we are starting to deliver what they are demanding...” Says Alex Mathews, Research Head, Geojit BNP Paribas to 4Ps B&M, “The market for premium sedans is growing at a slow pace in India, but the (future) opportunities in this segment are strong. This is because Indian households with annual disposable incomes of $5000 -$15,000 as a percentage of total households, is expected to reach 41.1% in our country by 2020 as compared to 14.6% in 2010.”

For the compact-car loving Indian (who stands impressed by the Bolly star Ranbir Kapoor’s Nissan Micra claims or by Yuvraj Singh’s off-the-pitch Fiat Punto promise), Rs.12 lakh+ (on-road) A4 segment offerings have not fit the bill historically. But truly, history need not repeat itself in the current times, as consumer perception could well be changing. Yet, the Kizashi has respectable and much dreaded competition in its category. Especially the lower-priced Honda Civic or a GM Cruze or even a Skoda Laura. Add to all this another factor – the danger that the Maruti tag remains associated with the premise of being “affordable” – and you have the making of a very interesting marketing conundrum.

Maruti Suzuki has been here and done that. In the sense, they have some valuable experience in this segment. The Grand Vitara had made for a case for Maruti Suzuki’s premium dreams in the past. But currently, after five years of the SUV’s existence in the Indian market, it commands a share of 0.06% in its (the SUV) segment (Q1 & Q2, FY2010-11). The Indian consumers bought 307 units of the “all-petrol” Honda CR-V during the two quarters ending September 2010 (a y-o-y rise of 184.26%), while the Suzuki Vitara, which is also available in the diesel version, sold 49 units during the same period (a y-o-y decline of 20.5%!). The underlying perception complication could also be that while Suzuki and Maruti Suzuki are two different companies in reality (with common holding), for the masses, Suzuki is­ Maruti, and any product, by either name, would be seen against the checklist of value-for-money (read, ‘is it cheap?’). And Grand Vitara particularly so, did not qualify on that basis. Says auto expert Murad Ali Baig, “When it comes to luxury cars, somehow, Maruti Suzuki is considered low-priced. It is the same reason why Volkswagen & Fiat sell the Audi and Ferrari respectively as premium brands – rather than the Volkswagen Audi and Fiat Ferrari. For that matter, not many call the Lexus a Toyota Lexus!”

Irrespective of this, if the Kizashi were expectably successful, would it be able to change the overall auto market share percentages of Maruti Suzuki? The answer is a no because of the sheer low volume of sales in the A4 segment. Even if Maruti’s new launch were to capture 100% of the existing volumes in the A4 category – which is a highly unlikely situation when you are talking about one of the world’s largest selling sedans ever (Toyota Corolla) and the most attractive launches in the past four years (Honda Civic and Chevrolet Cruze) as category competitors – it would only be able to increase its overall passenger market share by 2.84% (estiamtion based on sales figures for Q1 & Q2, FY2010-11).

For the sake of ensuring a diverse range of offerings, Maruti does need to exist in every possible segment. Considering that argument, the Rs.12 lakh+ priced and 2.4 litre petrol-driven Kizashi does carry some weight. But it will need quite some marketing gumption to make its presence felt. In 1999, when Maruti Suzuki’s Baleno tried to make some space in the A3 segment, it failed the test. Seven years later, the product had to be replaced with the now-successful SX4. Today, along with the Dzire, the A3 market share of Maruti stands at 36.14%, while the closest followers (Tata Motors and Honda) with 26.23% and 14.04% market shares respectively, are still some yards behind Maruti’s tyre marks. If history repeats itself, and even if Kizashi gets moderate success, it will read well for Maruti, most importantly because the Kizashi – which looks fantastic and has post-modern designs one would kill to own – can influence a multiplier effect on the other segments’ sales of Maruti’s cars and also on the overall image positioning of the firm. As for us, we’ll keep watching!