Sep 17, 2012, Business Standard – Price upgrades can be hard to get right and brand renovations take a lot of time and money. Above all, it can be difficult to transform customers’ perceptions. However, mass market brand Videocon believes it can climb up the price ladder, given its long association with the Indian consumer. Experts discuss Videocon’s prospects.
Pranesh Misra : Chairman & Managing Director, Brandscapes Worldwide – Videocon has been successful as a mass market player offering value for money products. Trying to enter the premium, high technology segment of the consumer electronics market is a strategy fraught with danger. Mass market and premium are two ends of the totem pole. The rules of the game are distinctly different — and moving from one end to the other is not as simple as offering a premium product mix or communication mix. Opting to be a premium player means re-engineering the business systems over a broad spectrum, in areas such as R&D, customer service infrastructure and mindset, distribution coverage, pricing strategy, knowledge and attitude of front-line staff and long-term top management commitment. It means organisational un-learning of the mass-market rules, and replacing these with premium market principles. (Pic courtesy – Business Today)
Videocon should consider the risks involved in making this transformation. First, their current consumers and dealers are likely to resist change. The millions of consumers and dealers who have respected Videocon for its value offering are likely to feel abandoned. This would be an opportune time for a competitor to enter and offer them an alternative in the value for money market.
Second, the premium markets are highly risky and volatile. The premium players need to be committed to forecasting what consumers will want in the future and offer futuristic solutions. This needs very high upfront investment in innovation and technology. With high international competition, technology obsolescence is a reality. Life-cycles of high tech products are getting shorter — and the company has to recover its investment in a few months or at best a year or two. If you get your foot off the pedal, you fall behind very fast. One can never afford to be complacent as a technology player, as Nokia discovered to its horror, in recent times.
Third, as a premium player, Videocon has to compete with global leaders like Samsung and Sony, who have deep pockets. They also have history and heritage to their advantage. Their countries of origin — Korea and Japan — have far positive technology imagery than India. Fighting them is like taking on the titans. A lot of blood, in terms of investment in technology and brand building, has to flow; and success is only a small possibility. Does Videocon have the reserves to enter this battle field and keep fighting for at least five years? To my mind, five years is the minimum time frame they should plan for making this transformation.
Fourth, history has shown that it is nearly impossible for mass market players to make credible forays into premium segments. Toyota, for example, struggled for years to credibly enter the premium car segment and compete with premium European brands like Mercedes and BMW. It had the capability of building products that were competitive. But given their mass market equity, consumers were just not willing to buy-in to the proposition of a high status premium brand from Toyota. This is what led the company to launch Lexus with a dramatically different business model and imagery from the mother company, while Toyota continued to perform in its mass segment.
An alternative, perhaps more prudent, strategy could be to consider entering the premium range with a completely new brand name and business structure. Rather than go broad spectrum in terms of category offerings, the company should concentrate on one or two high potential, high growth categories and bring about real technology innovations in these categories. This is what Bose did in the audio system business to claim global technology leadership through sheer step-ahead innovation.
Anirudh Dhoot, perhaps could take the leadership of this new business. From press reports, entering the premium end seems to be his brainchild. His best chance of success is to keep everything about Videocon out of his business. He should find a new, young, enthusiastic team and give the business a new name. He could think of relocating the headquarters to some other country, where the country of origin has a positive value addition — because India’s image in this regard is not going to change for a long while.