From THE HINDU group of publications
Thursday, November 08, 2001


Philips will be a lot more aggressive

Neha Kapoor

In February this year Philips India Ltd had announced a huge loss of Rs 34.2 crore for 2000-2001 which it attributed primarily to poor sales in its Consumer Electronics (CE) and Domestic Appliances divisions. The CE division, in particular, had experienced a bad year with a 36 per cent decrease in topline growth. With the recently-announced quarterly results, however, Philips seems to have bounced back with its CE division registering a 20 per cent topline growth for the nine month period of January-September.

And Rajeev Karwal, Senior Vice-President, CE, Philips and President, Consumer Electronics and TV Manufacturers Association (CETMA) is a happy man today. Our strategy of repositioning products across categories and talking technology is beginning to work. And given the tough market conditions this year, I think our performance has been commendable, he claimed in an interview with Catalyst. Excerpts:

When the annual results were announced in February this year, there was talk about restructuring the CE division. What measures were taken and how did they help the division in increasing sales?

If you look at the CE divisions topline, it has grown by around 20 per cent in all product categories for the first nine months of the year. This has been possible because of restructuring on the product front where our strategy of repositioning the brand has started working.

Throughout the year weve undertaken initiatives such as revamping most of our product range - be it colour televisions (CTV) or introducing monitors with new technologies.

The one thing common to all our product categories now is that most of the products are well researched from the Indian consumers point of view. Also, they are the very latest, at the top end of the global Philips product line.

Clearly Philips strategy of moving upmarket, talking technology and launching new technologies at appropriate prices has helped us regain our overall market share.

Take the CTV market, for example. This year the industry has declined by 15 per cent from January to June. In July it grew at 18 per cent, in August at 21 per cent, though September saw it fall to four per cent in volume terms. Growth is slowing down in the industry. Also, there has been massive price erosion in CTV prices. Starting from January, its close now to 10 to 12 per cent. Even in these conditions we have gained a one per cent market share from 3.8 to 4.8 in nine months.

In the audio market too weve grown by 19.7 per cent to become the number one brand with a share of 34.4 per cent while the market declined by 8.8 per cent.

Apart from the product line, what other areas were revamped?

I think our advertising and marketing was far more aggressive this year. We launched campaigns such as Dare to Compare where we went to showrooms and asked consumers to take blind tests comparing our technology with other brands. Once the consumers voted, Philips came out tops in terms of technology. For the audio segment, we had the MP3 Mania aimed particularly at the youth. Basically, our strategy of reaching out the consumer has started paying good dividends.

We've also restructured our supply chain as we decided to operate from small outfits in each State in order to solve issues related to trade and consumers much faster.

Hence, starting last year, weve added 12 new branches to the existing seven thus reaching out to dealers and trade. Regional offices were done away with curtailing bureaucracy to some extent.

Depots have been reduced from 38 to 28. The number of grouping centres have been reduced from 14 to one all India grouping centre. This has brought down our costs and weve been able to control inventory quite aggressively.

Our services have become better. One of the initiatives we undertook was the appointment of an ombudsman or a guardian of customer interest in August last year.

It was the only initiative of its kind in the industry and people said it wouldnt work because Philips has the largest accumulated stock in the market place.

However, since the appointment weve had only 179 to 180 complaints and they have all been solved to the consumers satisfaction. Also, we havent had a single legal case or consumer forum case filed against us since last August so this initiative has really worked.

Currently, we are in the process of automating our service centres. Weve installed the latest consumer satisfaction measures in computers at reception areas in all Philips centres so consumers can actually log on there and see how many consumers are satisfied with Philips products. This helps consumers make informed decisions and also puts pressure on our people to provide good service.

Moving on to the festive season, how has business been so far?

October sales have been good, especially in the Eastern market, due to Durga Pooja. So, West Bengal, Orissa, North East and South Bihar have done quite well.

The Southern market too has shown a good performance. North is slow but will pick up as we approach Diwali while the Western market is expected to gain momentum post-Diwali.

Overall, during October-November-December, we should be able to record good growth figures maintaining the performance of the past few months. In fact, we hope to achieve 40 per cent of our total sales during the last three months.

Could you give a market-wise break-up of sales expected for the year?

This year, the Southern market will contribute around 32 or 33 per cent of our total sales, up from last years 28 per cent. The South, in fact, has emerged as the top market for Philips and the reason lies in the fact that retailing is taking better roots there than anywhere else in India. You have numerous retail chains such as Viveks, Vasanth & Co and TMC down South that are doping quite well.

East, of course, has been a traditionally strong market for us contributing 17 to 18 per cent of total sales. Together, South and East, add up to almost 50 per cent of our total sales while West and North will bring in the balance with around 25 per cent each.

Do you have any product launches lined up specifically for the festive season?

In the run-up to Diwali itself, we launched about six hi-fi systems, three to four CD cassette recorders, six new CTV models, three monitor models, four new stereos and mono cassette recorders.

These launches will continue through the festive season with focus on introducing new technologies such as the plasma and PC TV as well as LightFrame technology for monitors.

What is the advertisement budget allocated for the CE division for this quarter as well as for the whole year?

Our advertisement budget for this quarter is around Rs 10 crore. Overall, the annual budget is about 4.5 per cent of our turnover of which 30 per cent is spent in October-November-December itself.

Almost every company, including Philips, is offering various freebies with its products during the festive season. How far does this help sales and is it done because the consumer has become smarter and demands more ?

Companies offer freebies during the festive season because the consumer expects all brands to do something for him. Consumers should not feel that this company does not respect his emotions. However, he definitely will not fall for gimmicks...offers have to be genuine and once the offer closes there has to be a sustained effort to keep the consumer happy by maintaining the quality of products and services. A Philips customer will buy our products out of loyalty to the brand and not just for the freebies.

But yes, we need to do something special during the festive seasons so as to equalise the advantage that other companies may have because of their promotional activities.

And its not that the consumer has become more demanding; its just that the companies pamper the consumer and in a tough market situation the consumer is always the winner!

What is the outlook for the consumer electronics industry for this quarter ?

The consumer electronics industry is expected to grow at 10 per cent during October-November-December. CTVs should have neutral growth value-wise while audio market will move from -8 per cent last year to -2 per cent during this period. The monitors segment should grow at 20 per cent overall compared to last year.

In July this year, CETMA had announced a five-point programme to revive sales across the industry - create new interest in the industry, create better customer value proposition, manage trade relationships, manage supply chain and management of costs. How much of this has been achieved?

A lot has been done and the results of the five-point programme are visible even now with companies coming out with new products supported by good advertisements and promotional campaigns.

Finally, what is the outlook for the CE division this year? Will it achieve the 30 per cent growth over last year that you spoke about in July?

You'll find Philips a lot more aggressive than before this year in terms of advertising, promotional activities and launches. We have to be a company that demonstrates its superiority as a consumer goods company. Times have changed and we too have changed quite a bit, and will continue to do so. As for the growth rate, we will try and maintain the trend of the past nine months.

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