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The Case Of Market Consolidation


B.M. GhodeswarB.M. GHODESWAR
Associate Professor, NITIE

Market research has thrown up a certain profile of the customer base of Total: little knowledge of the product and its technical parameters; indecisiveness about the brand that suits one's needs; and a high reliance on the advice of the dealer. These attributes are normally associated with a low-income target segment.

That only 15 per cent of the respondent customers have stated they were satisfied with Total's performance is interesting. The survey probably did not focus on specific parameters while measuring customer satisfaction. It should have included product parameters such as features, performance (clarity, colour quality), reliability, durability, style, and design.

It also should have included parameters such as service delivery, customer education and training, availability of service, responsiveness of the staff, and customer relationship.

As part of gaining long-term competitive advantage, Total should define specific customer segments, foresee likely changes in consumption characteristics, and anticipate changes in expected benefits. Total should use the 'Focus Group' technique to elicit information and identify parameters that may help it to know what customers value as important criteria in buying and using products.

To build a superior image, Total has to focus on some differentiating idea. Every aspect of the communication should reflect the difference, which could be in the form of product, service, or image.

Price differentiation is not a sustainable advantage in the consumer durables industry. The focus must be on superior benefits as compared to competitor offerings. Total could also re-position its products with higher benefits to help retain customers who want feature-rich offerings.

I feel that Total's move to enter international markets is good, but it comes with a rider. Competitors may also follow the same route and try to exploit the 'free- riding' potential created by Total, unless the latter is faster than the competition in meeting customer-requirements.

The only way to create sustainable competitive advantage is to ensure that Total develops excellence in four specific areas: speed of response to market needs; innovation, knowledge base (customer insight); and an internal learning culture. These are more difficult for competitors to copy than tangible attributes like product quality, costs, and after-sales service.

A. SrinivasaA. SRINIVASA
Associate Consultant, TSMG

There is a glaring dichotomy between the global business aspirations of Total Industries and the 15 per cent satisfaction rate among its customers. If product quality is indeed as superior as Suresh makes it out to be, it is imperative to understand why customers do not seem to be satisfied and how this ties up with the marketing strategy that is being pursued by Total. Besides, the market research sample is skewed to the lower end of the market. One needs to validate if this segment is the focus of Total's marketing efforts.

Recommendations by dealers, friends, and relatives seem to be the primary influence of brand choice. This dealer push has an interesting effect on post-purchase customer perceptions. Consider a case where the dealer has influenced the customer into buying a Total CTV. She had no preference for the brand, but has very high performance expectations. Even if the actual performance meets her base-level requirements, she would feel that she made the wrong decision-another brand might have been better.

What has Total done wrong? There is a clear mismatch among the choice of target segment, brand positioning, communication, and channel strategy. Advertising punchlines like ''life-like images'' and ''freshness forever'' create images that are not consistent with a value-for-money product for the lower middle class segment. And, subsequently, these ads fail to reduce post-purchase dissonance by not enhancing the customer's satisfaction or pride in the ownership of a Total product.

Total has to depend on dealer-push to increase sales in the competitive lower end of the market. But this has to be necessarily followed up by service, communication (advertising, customer feedback), and schemes (discounts on subsequent Total purchase) that result in a positive reinforcement of ownership.

Improved satisfaction levels among customers would lead to better word-of-mouth referrals and, thus, develop brand strength, which should act as a source of differentiation. This virtuous purchase-satisfaction-referral-purchase cycle would let Total increase its marketshare without having to offer greater discounts to its dealers and customers.

The problem of diminishing returns could also be tackled by Total's multi-branding strategy. Total should develop sub-brands for different segments and benchmark its marketshare and returns at segment level. Such a strategy, while ensuring a balance between high volume-low margin sales and low volume-high margin sales, would also enable Total to upgrade its customers to higher value products on subsequent purchases. Total's engineering skills would allow it to develop a high-quality product to compete with global brands at the upper end of the market.

Distinct and targeted marketing strategies aimed at both ends of the market should enable Total to consolidate its position in the Indian scene before it aspires to take on global markets.

Senior GM, Godrej-GE

Total's new marketing strategy in light of the available findings, should be based on four ingredients: product innovation, superior product quality, customer relationship management, and world-class service. The success of the durables division, which is evidently in a high-cost, low-margin mode, depends on how effectively Total Industries integrates these ingredients into an effective action plan.

Clearly, customer perceptions of Total's brands need to be improved. The company should take steps to influence the perceptions of not only the end-users, but more importantly, the dealers. The dealer is a major influencing factor at the point of purchase.

One of the sure-fire ways in which Total can make perceptions swing in its favour is through rapid-fire introduction of new products. This would help send out positive signals about the company's commitment to the customer needs.

It is also important for the product launches to be fully backed by performance in terms of quality, durability, and reliability. Total should be able to match the promise made to the customer. In fact, it is here that the role of differentiation comes into play. It is true that product differentiation is not always possible at the functional level. But there is certainly room for differentiation through the features and aesthetics route. The fit and finish, the quality of components, and the brand image, can all serve as sources of differentiation. Total should ideally focus on these three areas.

Volume growth need not necessarily be accompanied by diminishing returns, although the risk is quite real. There are several ways in which Total can buck the trend. New product innovation is, again, the best safeguard. Multiple branding and sub-branding are options that Suresh should explore. A diverse portfolio ensures that overall margins remain stable.

Second, Total should charge a premium in some chosen segments. This will lead to a higher price realisation. It could also be a precursor to moving gradually into the high-end where margins, and not volumes, drive business growth. This, of course, is a strategic issue that needs a closer look at how the market as a whole is evolving and whether Total has the resources to influence it.

Finally, cost-competitiveness is a major deterrent to diminishing margins. Total Industries should work more closely with its vendors to secure economies.

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