afaqs!

Economic Slowdown: Consumer durable companies put up a brave front

By Dhaleta Surender Kumar , afaqs!, New Delhi | In Marketing | October 27, 2008
While the world is in despair at the economic slowdown and the US recession, consumer durable companies claim to be unaffected and remain buoyant this Diwali

Diwali & #BANNER1 & # is an important season for players in consumer durables and automobiles because this is when sales graphs swing upwards. This is also when these companies come up with a slew of discount offers and promotional schemes.

However, the economic slowdown and current instability in the market have caused a dip in consumer sentiment. Will the consumers' mood affect the business for consumer durables this festive season? afaqs! spoke to a few brand owners on how are they dealing with situation.

Most brand owners claim that the slowdown has not affected them. However, there have been changes in their communication and promotional plans.

For instance, unlike previous years, Samsung is offering no promotional offers on its products this festive season. However, Samsung executives attribute this change in communication plan to the learning from last year, rather than the effect of the economic slowdown.

R ZutshiSamsung is also trying to create consumer excitement through new product launches. The decision, according to R Zutshi, deputy managing director, Samsung India, has "no correlation" to the economic slowdown and cost cutting.

"We have recently signed on Abhinav Bindra as brand ambassador for our consumer electronics products and rolled out a new campaign, in print, outdoor and TVCs, featuring him (Bindra) for our LCD TVs," says Zutshi.

Zutshi is confident of registering "a growth of 35-40 per cent in terms of sales this Diwali over sales in the corresponding period last year".

Samsung's closest competitor and arch rival, LG Electronics, does agree that sales have been slower this year.

V Ramachandran"There has been some amount of downfall in terms of sales because of the financial crunch at the global level," says V Ramachandran, director, sales and marketing, LG India. The reasons he cites are "lack of consumer finance, extended monsoon and inflation". However, he is sure that "with proper plans and strategies, we'll cover our targets during the current festive season".

"LG as a brand introduced its premium brand imagery last year. That's the reason we decided not to give any discounts or freebies. Instead, we are wooing the consumer through innovative features, style and design of the products," explains Ramachandran.

Putting up a brave face, he says, "The slowdown in the economy has had no adverse effect on the consumer durables industry. Economic slowdown is a temporary phase. It doesn't really affect our strategy and brand communication in the long run."

Just like Samsung, Sony India also has adopted the strategy of new product launches to fight this slowdown. It launched several new models of Vaio notebooks, Bravia LCD televisions, Handycam camcorders, Cyber-Shot digital still cameras, Walkman MP3 players and in-car entertainment products.

Cyril ManiCyril Mani, head, marketing communication, Sony India, is confident that the economic slowdown will not affect the sales of premium products. "Our core consumer today is a changed person. He demands good-looking, trendy gadgets, which are extremely high on functionality and benefits. The communication approach in our latest campaigns is technology led and conveys the value enhancement that these brands will offer to our consumers. Our messaging will urge the consumer to rethink and redefine his expectations from the gadgets he uses in his day to day life."

Currently, Sony has five campaigns running across media: Vaio - Break the Code (urging the target audience to do something different from the rest and evolve); Bravia - Full HD 2 Million Bravia Pixels; Handycam - Make Memories for Life; Cyber-Shot - Clicks Automatically when You Smile; and the Sony Big Bond Offer.

Another strategy adopted by Sony and LG to combat to this slowdown is by increasing its ad budget. Sony India claims to have allocated a budget of Rs 60 crore for this festival season, which, according to Mani, "is a significant increase in comparison to the corresponding period last year".

LG, too, claims that it has earmarked a marketing budget of Rs 350 crore for this year, of which "25 per cent has been allotted for this festive season".

Unlike LG, Samsung or Sony, Videocon hasn't detoured from freebies and other promotional offers. According to a company spokesperson, "The proposition has only got better this year, with product offers like televisions, DVD players, air conditioners, Numero Uno/ Fast Track sunglasses, branded dinner sets and Reebok/ Adidas T-shirts."

Videocon claims to have received "a phenomenal response from consumers and the sales are expected to be on a high". The spokesperson says positively, "Towards Diwali, the company expects much more turnout, as bonuses will be released and people will be in celebration mode."

Many brand owners might have cut down on discounts and schemes, but what they are offering is other facilities, such as extended warranty and prompt after-sales service.

For instance, LG is focusing hard on its brand identity, offering extended warranties on its products and highlighting its after-sales service through its '211' campaign. The latter essentially means call back to the customer in two hours and appointment within one day in a promised one hour time slot.

"This has significantly improved our customer satisfaction and service reliability in the cities where we have launched this project. We are planning to expand the '211' project to 130 cities across the country," says Ramachandran.

LG is also offering two years' free service on desktops and PCs purchased between September 10 and December 31.

While, brand owners seemed to be in denial mode and trying to put up a brave front to this crisis, marketing consultants gave the opinion that market is going through a tough time and consumer durables brands are getting affected. There were also quite a few advices for the brand owners. As a senior marketing consultant offers, "cross-selling, could be an answer to the crisis."

Harish BijoorHarish Bijoor, a senior marketing consultant and chief executive officer, Harish Bijoor Consults offers a detailed view on the crisis. He categorises this in three phases - economic slowdown, recession and depression, and according to him, India is just about to enter the recessionary period.

He strongly feels that the players in consumer durables are experiencing a slowdown. "Footfalls have fallen in shops and people have postponed their purchases," Bijoor says.

He explains, "In an economic slowdown, first the automotive market gets affected, followed by consumer durables, and then cosmetics, garments and food. The automotive market has already been affected and the consumer durables category has started to get affected."

When asked about the products within consumer durables that would bear the brunt, Bijoor says both first time purchases and second replacements would be affected. First time purchases include products such as microwaves and personal computers in the urban market, and refrigerators and televisions in the rural ones. Second replacement products in the urban market include plasma or LCD televisions or high end refrigerators.

Jagdeep KapoorAnother senior marketing consultant, Jagdeep Kapoor, chairman and managing director, Samsika Marketing Consultants, says certain categories, such as microwave ovens and washing machines, will be affected because people will tend to postpone these purchases.

Kapoor says the consumer durables market in India can be extended to various other products, such as automobiles or ready to wear apparel.

In his opinion, the "absolute functional element" and the "absolute status element" are seldom affected by an economic slowdown. For example, luxury cars or the salwar-kameez have not got affected. People may not buy three sets of salwar-kameez, may restrict their buying to two sets, but they will buy nevertheless. "Even during these times, desire and aspiration rule," Kapoor says.

Kapoor says, "Brands have spoilt the market by pampering the consumer with discounts and freebies in good times. Now, in tough times, when many of them have stopped the discounts, consumers are postponing their decisions to buy and waiting for a more appropriate time."

In his conversation with afaqs!, Bijoor of Harish Bijoor Consults estimated that spends on traditional media have gone down by 18-20 per cent, as compared to the corresponding period last year. Similar was the view of a few other consultants or media observers.

On this, Kapoor of Samsika offers a piece of advice for the brand owners. He says, "Because of the fright, consumers want to take the 'flight to quality' route. So, brands should not change their positioning or cut down on their communication. It's important to not deviate from your communication or positioning and confuse the consumer."

"To stop communication or cut down on communication is like stopping breathing," Kapoor adds.