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New sales strategy to ride out downturn: Premium products in stripped-down versions

Pranav Mukul, Anil Sasi

Unlike their durable goods counterparts, fast-moving consumer goods (FMCG) companies have depended on the tried and trusted strategy to reduce ticket size of their products to make them more affordable. (File)

FACED WITH the trend of consumers tightening their purse strings amid the downturn, manufacturers and sellers of goods from cars and two-wheelers to durable and fast-moving consumer goods are banking on a novel strategy to keep sales ticking: offer stripped-down, affordable versions of aspirational goods such as SUVs, high-powered motorcycles and air-conditioners, among others.

In the consumers goods section, Godrej Appliances, the consumer durables division of the Godrej group, has identified an opportunity in the cooling solutions segment that has opened up on account of an increase of Rs 5,000-Rs 6,000 in the prices of entry-level air conditioners.

The company has entered the desert cooler segment with a premium product particularly aimed at a consumer looking to spend less than what an entry-level air-conditioner costs, with added cost savings on electricity bills too.

Pune-based two-wheeler manufacturer Bajaj Auto launched a 125-cc variant under its sports motorcycle brand Pulsar in August. Bajaj Auto executives have said that the rationale behind launching a stripped-down version of its premium brand Pulsar — that typically has engine capacities of 150 cc and above — was to offer a product to people who were discouraged to spend on heavy bikes that cost over the Rs 80,000-mark.

India’s largest carmaker Maruti Suzuki (MSI) in September entered a new mid-market category — mini SUV — with compact car S-Presso that aims to cash on consumers that aspire to purchase a compact sport utility vehicle (SUV) but are only willing to spend enough for a small car.

According to MSI’s senior executive director (Engineering) CV Raman, the S-Presso’s design language was inspired from the company’s line-up of SUVs. The car also boasts of high-end features such as ventilated front seats, sunroof, 360-degree parking camera, dual-tone interiors, despite it being offered at an aggressive price starting Rs 3.69 lakh ex-showroom Delhi.

Additionally, looking to tap the second-hand car market at a time when new car sales showed sluggishness, MSI increased its used-car dealership network by a fifth over the last six months, primarily to tap into the surge in demand for second hand cars.

Its True Value network rose from 200 to 250 independent showrooms across 151 cities in India between March and August 2019. True Value has sold over 8 lakh units since its launch in 2017, with Alto, WagonR and Swift being the most popular models. True Value’s average buyers are in the 25-45 years age group.

Godrej’s launch of the air-cooler — priced at around Rs 19,900, claiming it is loaded with an AC’s inverter technology to provide better cooling with lesser energy consumption — is aimed at the AC buyer who might have deferred the buying decision.

“After the transition from the fixed-speed energy regime to the variable-speed energy regime in air conditioners, we have seen prices of entry-level air conditioners move up by Rs 5,000-Rs 6,000. Therefore, consumers who were looking for air conditioners in that price bracket found them to be unaffordable. Because of the price of entry-level ACs moving up, a large chunk of customers are actually looking at cooling solutions of lesser cost and lesser budget and therefore, cooler as a category is growing very fast,” said Kamal Nandi, business head & executive vice president, Godrej Appliances.

“We know that the energy regime for ACs is going to get tighter year after year and as it gets tightened, price of ACs will keep on moving up and entry-level consumer of ACs will fall back on a solution that is less expensive but can provide comfort level that is, if not equal, somewhat better than a fan,” he said.

Nandi, while optimistic about the home appliances market in India in the long term, told The Indian Express that the company was planning more such products targeted at a consumer deferring purchases due to reduced purchasing power.

Unlike their durable goods counterparts, fast-moving consumer goods (FMCG) companies have depended on the tried and trusted strategy to reduce ticket size of their products to make them more affordable.

For example, over the last year, Dabur India introduced a smaller packaging of its beverage under the Real Koolerz brand, a 30 mL packaging of Dabur Amla hair oil, and a smaller pack of its Babool-brand toothpaste, all priced at Rs 10.