Financial Daily from THE HINDU group of publications
Wednesday, Aug 28, 2002
Columns - Inside Business
What put TVS Motor on the fast track again
A LIFE-SIZE cut-out of champion bat Sachin Tendulkar greets you with a toothy grin when as you enter Ramkay Agencies in Chennai, among the largest dealers for TVS Motor Company Ltd. There's a bustle about as a constant stream of customers throngs the showroom. A bunch of buyers discuss finance options with Ramkay staff on tables strewn around the spacious premises. Many have come just to gawk. The focus, of course, is on the Victor, TVS' hot-selling bike. "Three weeks waiting time only, Sir," informs a polite member of the sales staff. Requests for test rides on the Victor are met with alacrity and eager beaver salesmen whisk you off on a ride and patiently talk you through the Victor, bristling as it does with unique features.
Ride over, a quick picture of the customer astride a Victor. "A rider astride a Victor looks like a man riding a horse," avers Mr Venu Srinivasan, Chairman and Managing Director, TVS Motor. Other bikes, he insists, don't make a biker look so flashy. Maybe it has to do with the TVS logo of a galloping horse. But at least 1.6 lakh two-wheeler riders have voted with their wallets to own the Victor. And, more are trooping in. At Ramkay, on an average, over a dozen visitors drop in daily to test-drive the bike. Post ride, sales staff settle customers down on comfy chairs to jot down their comments on the Victor. The Victor rub-off on its other brands such as the two-stroke Max 100R, is palpable, says the company. It hasn't always been like this, says Mr R. R. Manohar, Managing Partner, Ramkay Agencies, spouting marketingspeak like SOWs (sales on wheels) and F&C (follow and convert). The past few years, he says, has seen TVS dealers getting their act together.
Showrooms across the country are now draped in similar colours and designed to look alike as part of a corporate identity programme. Dealer staff have been trained in SOWs and F&Cs, standards and procedures have been set on how to deal with customers, convert them to buyers and, more important, keep them happy.
In short, the entire operations of a dealer have been codified. Every dealer was asked to ride a TVS bike and compare it with competing models. The point is that till then the customer who walked into the showroom had ridden different models and knew exactly the pluses and minuses of each, while the dealer himself had no such knowledge.
As Mr Manohar points out, all the hardware is in place at the dealer end, and the focus now is on customer satisfaction. The change, he says, has been dramatic and unrecognisable from the way things were. `Quality leadership through quality dealership' is not just blithe jargon.
The transformation of the dealer end, where the company's moment of truth happens, has played no small role in the immense success that the Victor has enjoyed since its launch in October 2001.
No doubt, the Victor success has been extremely satisfying for the company, especially when there were enough Cassandras writing off the company when Suzuki sold its stake in the company to TVS for a song.
However, Mr Venu Srinivasan, TVS Motor's voluble CMD, says that the Victor was bound to succeed because of the process that TVS had kicked in a few years ago which has transformed the company into a savvier marketing company.
Elaborates Mr Srinivasan, "Everybody says that today's success is the Victor; but the story is that we have transformed into a fairly successful marketing company. It is not merely the Victor; we are selling 25,000 vehicles per month, on an average, of two-stroke vehicles when everyone is saying that two-stroke vehicles are gone. We are the only company selling two-stroke vehicles. We are today a far more savvy marketing company. We've developed a marketing team over the last five years and got our act together."
The change did not come overnight. While company officials may not admit it, internally they were getting ready for life after Suzuki.
The Victor's success is the result of the integrated marketing approach that TVS adopted in selling the Scooty as well as the product-to-market linkages that it established along the way.
The process of launching the Victor was actually kicked off 18 months before its launch.
Says Mr R. Chandramouli, Vice-President, Marketing, "We were entering the four-stroke motorbike market fairly late and we needed to make a difference."
In a first instance of a cross-functional team approach, a nine-member team of senior TVS officials from R&D, projects and marketing fanned out and met with over 500 two-wheeler users picked from different market segments and from urban and rural areas.
The team talked at length to people on usage patterns of two-wheelers, needs and desires. "It was all very fundamental stuff that we were doing," recalls Mr Chandramouli. From then on, at every stage of the bike's development, actual users were given the bike to validate performance claims. The method worked overwhelmingly. As he says, the company could shout from the rooftops about the product's quality, but the proof of quality was getting a customer testimonial on the bike.
Mr Chandramouli recalls an instance where a test-bike was given to a person who rode a competitor's bike. The feedback he got was the person's wife saying the bike was very comfortable to sit on. "That's the language our engineering and R&D people are speaking today, which consumers can relate to, rather than technical specs," he adds.
The Victor's unique feature of the economy-power mode indicator, developed by TVS' R&D head, Mr Vinay Harney, for which it has a world patent, was another such feature that proved to be a powerful psychological device. Mr Chandramouli cites these examples to reinforce the product-market linkages that the company has been able to establish.
Mr Venu Srinivasan points to the company's growth in the first quarter, an outcome, he says, of its deeper understanding of positioning and marketing. Total two-wheeler growth for TVS in the first quarter was 44 per cent more than last year.
The company has grown in every segment that it has a presence, even managing to do reasonably well in a declining moped market. The Scooty, after a tepid first quarter, delivered big volumes in July. "All this growth is because we today understand marketing very well today," claims Mr Srinivasan.
Essentially, the learnings from the marketing of the Scooty have been applied on the Victor, to good effect. What TVS did in the marketing of the Scooty was nuts and bolts stuff. Painstaking, as for at least two years there was no immediate payback.
For example, one of its programmes focussed on safe riding classes for schooland college girls. Safe riding classes were conducted across the top 100 colleges. Female instructors were roped in as parents felt more comfortable about it. It was a sub-conscious way of putting the TVS Scooty message across as a brand that cared.
As Mr Manohar says, the dealership organised safe riding classes across 16 ladies colleges in Chennai city. "In three years we have developed a large database," he says. It keeps in touch with students who later could become potential customers as well.
There were other marketing programmes such as the `Guess your marks' contests for school students where the winner who guesses his/her marks right to the last digit gets a free Scooty. "It's amazing, there are about three-five kids in every town who guess their marks right to the last digit!" exclaims Mr Srinivasan.
For that personal touch, TVS would also send pre-examination messages to homes saying TVS Scooty wishes the student all the best for the exams. "So much so that parents started saying that this is a company that does not merely want to sell its product but also wants to marry that with good values," he adds.
Integrated marketing is something TVS learnt with the Scooty, when it realised that the Scooty segment was not going to grow unless it did something about converting the latent desire into a positive decision to buy.
The focus on the Scooty as a student's product paid off. Scooty did not lose as much as the others of its ilk. "We have maintained our volumes while the growth has been cornered by the Activa," elaborates Mr Srinivasan.
The second major marketing coup for TVS was roping in Sachin Tendulkar as a brand ambssador, the first time ever it went in for a celebrity endorser. TVS had several compulsions.
In the North and West it was not seen as a national two-wheeler company, rather as a `Madrasi' moped company. And with Suzuki not being there, it had to announce that it was a national player.
The only way it could demonstrate that was by having a national symbol and a symbol that represented the values of the TVS brand which is confidence, trust, sincerity and humility, explains Mr Srinivasan. "To me, Sachin really represents the brand. Despite being one of the great cricketers of this century he's very humble. Similarly, we are a very high quality brand, we are confident but we don't need to strut around to tell the world about it. We are proud of ourselves but we don't need to flaunt our pride," adds Mr Srinivasan.
Sachin, he says, has lent value and credibility to the brand. And helped, too, in creating a significant awareness of the TVS brand. "Everybody told us at that time that TVS will not be successful as a brand without Suzuki but all our research told us TVS had no negatives," Sachin helped create that positive outlook about TVS. The company, he says, has transformed and learnt a lot more about positioning and branding products and advertising. "We now know exactly what we need to advertise, what product, which segment, what benefits is it delivering and how to make sure those benefits run through your advertising. What is being seen today is a result of huge amounts of learning in marketing, in product development, in sales thinking, dealer development and you'll definitely see in the next two years a significantly better quality of dealership and customer service from TVS."
These exercises have paid off over the years. A look at the 10-year compounded annual growth rate (CAGR) of TVS between '92-93 and '01-02 shows that the company has grown 18.53 per cent, bettering the overall two-wheeler industry growth in this period of 11.14 per cent. Hero Honda has bettered that with a 27.27 per cent growth rate while Bajaj has underperformed with a growth rate of 6.46 per cent.
However, others are not sanguine about TVS continuing to blaze a trail as it has the past year. Says Mr P. Krishnan, Country Manager, DNB Asset Management Asia Ltd, "Sure, TVS has become more marketing savvy, but Hero Honda has always been so and Bajaj is getting better too. The next year will see competitive pressures increasing, and the motorbike market will not expand just as fast." He says TVS' success with the Victor was fuelled by several factors market expansion (the motorcycle market grew by 38 per cent last year) and TVS was able to effect cost savings, helped also by the fact that it now does not have to pay royalties to Suzuki.
Input costs are spiralling upward and Mr Krishnan says there is a price war in two-wheelers around the corner which could be bruising. Bajaj and Hero Honda are two cash-rich competitors who aren't exactly idling their engines.
Mr R. L. Ravichandran, Vice-President, Business Development and Marketing, Bajaj Auto, feels right now the company is in a vulnerable position because of its over-dependence on the moped segment. "They may be selling large numbers of mopeds but a bulk of this is in Tamil Nadu itself and while the demand for the product will continue here for some years to come, they should also realise that the moped segment only accounted for eight per cent of total two wheeler sales last year and the market is expected to shrink still further this year. Any company which depends on just one product for its survival is asking for trouble, like we did when we were dependent on our geared scooters,'' he says.
Mr Ravichandran, a former TVS hand himself, says the key to the company's performance is its strong R&D base, excellent manufacturing set-up and its vendor capability. "What they need is the right product mix and once that is done it will be great going for them,'' he says. It got it right with the Victor.
Elaborates Mr Ravichandran, "The company languished during the time when Suzuki gave it only two-stroke technology which could neither match Honda's superior performance on mileage nor Yamaha's supremacy in two-stroke technology."
He points out that when Suzuki did give it the 150 cc four-stroke Fiero, it was not what the market wanted at that point of time. "The market was at that point looking for a commuting bike and the Victor fits the bill perfectly since it's a basic commuting bike which is robust and reliable," he adds.
A long-time observer of TVS, and who has worked closely with the company, says that TVS' strength is the fact that it is a learning organisation and a very strong TQC-led organisation.
But, in the long run, being a number three in the market space could make it difficult. "The next step, which one would have to see, is how it is going to bring in new concepts and upgrades. What will replace the moped, its bread and butter so far, but is declining fast?
That's going to be a real challenge for TVS." Mr Venu Srinivasan has seen greater challenges in the history of the company. Industry watchers are betting that he will be equal to the task.
(With reports from Sudha Menon in Pune)
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