Calcutta, Aug 9: Big brands, smart designs, international models and a wide range-over the last few years, car buyers have been riding on easy street. It's the manufacturers who have been cruisin' for a bruisin'. According to Professor Avinandan Mukherjee, assistant faculty member of marketing at the Indian Institute of Management Calcutta (IIM-C), the winners in this crowded market will be those who ``strategise'' distribution.Mukherjee, an expert on the international automobile industry, points out that 15 car makers have either begun operations in India or plan to start soon-the large numbers and high investment within a short span of two to three years is unprecedented and seems to be unique to India.
The players include General Motors and Ford of the US; Honda, Toyota and Mitsubishi of Japan; Fiat, Peugeot, Volkswagen and Mercedes-Benz from Europe and Daewoo and Hyundai of South Korea. Then there is market leader Maruti, Telco, Hindustan Motors and Premier Automobiles.
But while the industry hasseen new entrants, the selling business has not seen any innovation. The Indian car-dealer has operated for years in a supply-constrained industry, where his main function was to collect payments. The market, Mukherjee says, is also characterised by one-tier dealer networks, small dealers with a single franchise, low dealer margins and the absence of manufacturer-owned dealers. In short, car distribution has been treated more as a logistic problem.
Mukherjee says competition will soon change this. Now, car makers should consider strategising distribution by retail segmentation and unbundling of distribution activities. According to Mukherjee, Telco and Hyundai have partly implemented the concept of strategic distribution for the Indica and Santro respectively. Hindustan Motors has introduced three ``colour-coded'' channels, with one reserved exclusively for the Mitsubishi Lancer. HM is also undertaking direct selling for the Lancer.
Retail segmentation, a central concept in marketing -- but still a farcry In India's auto market -- enables the car maker to serve different customer groups through channels best suited to their different needs. Unbundling relies on specialised distribution channels for customer service as against the all-purpose franchiser.
As increasing vehicle complexity compels all-purpose franchises to increase investments in personnel and equipment, the only way to lower breakeven point and gain economies of scale will be to concentrate these investment on particular sales outlets. Recommends Mukherjee:
At the first stage, or retail segmentation, buyers can be classified as sophisticated, technology minded, traditional and those who look for convenience of the product or service. At present, no car maker has introduced true segmentation, and different customer segments are served through the same distribution channel for a given make. After identifying the different buyer groups, the next step is unbundling of activities such as prospecting, information, advisory, trial,sales and delivery. For example, internationally, Toyota has showrooms in which all sales staff are women and which target only women.In the Indian context, manufacturers and dealers have to re-orient their organisation, processes, systems and culture. The specialised outlets can also multi-franchise different brands which will help offtake of vehicles as the Indian market is saddled by depressed volumes.
As for unbundling of services within the industry, the concept is based on the notion that different and specialised distribution channels could separately perform discrete sales or customer service activities more efficiently and cost-effectively than the all-purpose franchiser.In the Indian market the traditional all-purpose car franchises are losing market share and volumes to manufacturers-authorised service centres and even roadside mechanics. By focussing the expertise of each sales outlets on its particular capabilities and the need of its local market, unbundling could increase the levelof quality and marketing efficiency.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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