Maruti Udyog Ltd (MUL) has awarded the advertising account of its 'True Value' business to Capital Advertising, Delhi. According to MUL executives, True Value is the working name for the company's new business initiative, dubbed Project Vistaar. Vistaar is a set of four businesses: car insurance, auto finance, corporate lease and fleet management and pre-owned cars. MUL will be the first company in India to provide these services. In fact, it will be the first company in the world to provide these services in an integrated fashion. Although Ford, General Motors and Daimler Chrysler do it abroad, these services are provided by them in a fragmented way.
agencyfaqs! die-hards would remember the report Maruti's True Value is up for grabs, which came up on June 14. It was stated that two of the company's roster agencies Saatchi & Saatchi (which handles the WagonR account) and Capital Advertising (which handles MUL's corporate account) were vying for the business. The pitch was scheduled for the third week of June. In the same story it was stated that the budget for True Value is in the vicinity of Rs 2 crore, and that it was based on agency estimates.
However, while confirming the agency alignment, G C Dwivedi, general manager, new business 1, MUL, indicated that the advertising budget for the next one year has not been finalised yet. "We have to first decide what sort of activities we need to undertake. Only then can we fix a budget. Capital will present us a detailed plan by the 15th (of July)."
Dwivedi also said that formalisation of such plans and the communication budget is bound to be a protracted process given the nature of the target market. "Till now, we have been dealing with new cars and we have experience of consumer likes and dislikes in that market," he said. "But for a business like second-hand cars, we would be exploring completely new territory. The buyer of a first-hand car is not the same as the one who will go for a second-hand or pre-owned car. Here, we would be talking to a different set of people. They could be people who currently ride a motorcycle… or they may be scooter owners. So our approach and the media vehicle will be less mass media and more local. It will be based on the consumer spread and on our reach."
In a nutshell, MUL is looking at very local, event-based communication. It follows, the strategy will vary from market to market. "Capital is currently working on the events calendar and the budget for the next one year," added Dwivedi.
It is interesting to note the thinking behind MUL's entry into these value-added services. For starters, this is not a stand-alone diversification. As the company sees it, the new business initiatives will support MUL's core business of selling cars. Research results studied by MUL show that in developed markets, the purchase price of a car is only one third of the total consumer spend during the ownership cycle of the vehicle. A third is accounted for by fuel. The rest goes into support services like vehicle insurance, maintenance etc. MUL now wants to capture this component.
For the company, the existing customer base of over 3.3 million is a source of competitive advantage. No other car company has this kind of customer base or 'car parc'. Since entry barriers are high, imitation of this strategy may not be possible for a while. However, the company is clear it is not getting into the insurance business. It will be an intermediary in insurance on behalf of insurance companies. On auto finance, it has existing ventures like Maruti Countrywide and Maruti Citicorp. The new business initiatives will hopefully increase the scale and volumes of auto finance.
MUL executives feel that dealers are a key link in the entire exercise. Indeed, MUL has a fantastic network. It has 221 dealer (sales) outlets covering 135 cities (some cities have more than one outlet). These are the 'one-stop shops' that will sell MUL's new services during their interface with the car customer. The company has 1,683 workshops covering 695 cities. Of this, 302 workshops are attached to the dealer outlets. The rest (1,381) are Maruti Authorised Service Stations (people who do not sell Maruti cars but service and maintain them). These numbers are important because if the new businesses are to offer value-added services like extended warranty or accident management, then a large service network lends some credibility to the company's promise.
It's evident the success of MUL's new business initiatives hinges on its IT network. Currently, all MUL dealer outlets are connected through an extranet with its corporate headquarters. In fact, more than 130 dealers currently do all their business with MUL over the extranet. Its total online business in 2000-01 was about $1.7 billion, making it the number one B2B commerce operation in India.
Company executives are unwilling to talk about the expected gains and how these efforts will boost its bottomline. Given the stakes, it's easy to understand why.
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