Marketing Mavericks Par Excellence

Kabir Mirchandani and Adduri Ramachandra Raju

Marketing as a profession is mostly a daily grind. It is as methodical, as systematic and as routine as any other profession in the world. But there are some salient and significant differences only a marketer enjoys.

First the contact with the customer, next enhancing of understanding of human behaviour and finally the corner stone allowing people to experiment. Mark Zuckerberg, Bill Gates and Steve Jobs are all shining examples of marketers who strived to enrich our lives.

There are some holy cows that no one challenges. But holy cows have to be challenged. One such holy cow is ‘never disturb status quo’. Status quo is the present structure and policies.

Every company establishes its own position in the market place and is happy to defend its market share. When all the companies do the same the industry as a whole starts to look boring and become stagnant.

It needs a maverick to shake the industry out of its self-imposed stupor and inject fresh energy and excitement. That is precisely what Kabir Mirchandani did for the nascent Indian Television industry first and to entertainment electronics later.

It is a fascinating study of a marketer who dared to be different. One who walked the talk; bold, innovative, exciting and yes RECKLESS. Oh yes he was loved but fell short of glory as he lacked the eye for detail.

Rather like the pundits say “Devil in Detail”. Not looking at the entire gamut of business and only focusing on the price and lowering it mercilessly (finally it sealed his own company’s fate) cost Kabir a hallowed place in Indian marketing history.

The story of the second Maverick is even more astonishing. A visionary and a dreamer Adduri Ramachandra Raju went where no one had dreamed of or even ventured. He took on the mega corporations like Coca Cola and Pepsi and came out a winner.

A fascinating story of guts and glory. ARTOS brand of cola that that still survives and chugs along struggling to maintain it foot hold in an industry that is dominated by MNCs with huge promotional budgets.

Kabir Mirchandani was the original poster boy of price cutting. One who redefined prices and margins in entertainment electronics especially Televisions.

Kabir Mirchandani, had captured popular imagination of customers experiencing the fruits of LPG ( Liberalisation, Globalisation and Privatisation) first hand in the in the mid-90s. Kabir wrote his own rules and got others to play by them.

Kabir’s company Baron entered the Indian CTV market in 1994, reviving the Akai brand and spectacularly crashed the prices.

At that time each Inch of colour television costed a 1,000 rupees that is a 21 inch TV costed Rs 21,000 and 29 inch TV was Rs 29,000. The existing TV makers were well entrenched and were happy with their respective market shares.

When Kabir entered the business, black and white TV sets were outselling colour sets three to one. At the heart of this imbalance was the price.

An average 21 inch colour set in 1993 cost nearly Rs 21000 roughly four times the national per capita consumption expenditure. Kabir "incentivised" the shift to colour.

Through gifts, financing schemes and exchange offers, he broke down the price barrier and brought colour television into the houses of lower middle class.

In this he was helped by the cable revolution which boomed in 1992-93. Kabir realised the potential of luring consumers if he could make Television sets affordable. And he did just that.

Armed with a sizeable advertising budget that crossed Rs 120 crore in 1997, Kabir used the media, cost effectively to spread this message of affordability His choice of the medium, mainly newspapers and large hoardings, was in itself unconventional at that time.

When Mumbai's hoardings went empty, Kabir offered to take them at less than 25 per cent of the rentals, gaining exposure at a fourth of the price. Similarly, his advertising in papers was normally on weekends.

The Rationale being that big shopping takes place with family in attendance on holidays. Kabir was selling around twice as many sets on Saturdays and Sundays as compared to weekdays.

In four years, Baron International had launched 13 different schemes to lure potential Akai TV buyers; the offers included free two-in-ones, gold coins, pagers, 14-inch TV sets, washing machines, mobile phones, mopeds, refrigerators, even club memberships.

The most effective was the exchange scheme that Kabir pioneered. Well aware of the national obsession of not discarding or wasting anything, Kabir decided to play on the national psyche.

For as little as Rs 9,999 he goaded owners of old TV sets to trade their old TV sets for brand new ones. Customer lapped up the idea. Other manufacturers were forced to follow suit.

Finally even the competition was forced to acknowledge that indeed, Kabir had made a difference. Kabir's exchange offers have certainly brought a fresh, new exciting element into consumer durables marketing.

Indeed, the exchange fever had gripped virtually every segment of the consumer market, even cars. In the process, Baron International's CTV sales grew from 2,500 sets in 1993-94 to 4.29 lakh sets in 1997-98, with every other TV company being forced to match the gifts and emulate the exchange offers.

Kabir mercilessly launched focused ‘buy, buy, buy campaigns’. He released full-page advertisements. He didn't allow the consumer time to lie back and think. Most purchases were instinctive and impulsive, which is what the campaigns achieved.

In the process, he changed the rules of the game in entertainment electronics. His strategy was to make people buy rather than sell his product. The strategy was built keeping in mind the price-sensitive and value-conscious Indian consumers. It paid rich dividends.

Kabir Mirchandani sold at wafer-thin margins of 2 per cent, good enough for him to make money through high volumes. In 1998, ties with Akai soured, and Kabir tied up with Aiwa, citing Aiwa's "superior product range".

Akai was the first split-up. But soon, it became a pattern. Baron seemed to have hit it off with Aiwa, but they soon fell out. In the meantime, Baron had declined to renew its contract with Hitachi and soon it snapped ties with TCL.

And with each of them, Kabir followed the same marketing strategy to ramp up sales. Aiwa's gleaming music systems, for instance, came with offers like Rs 7000 off on your old system and 50 CDs free!'

And with a trade-in, he sold 29-inch TCL televisions for Rs 12900. But again, these tie-ups soured and Kabir was left looking for yet another partner. Analysts say Kabir Mirchandani's business model didn't have long-term sustainability.

For one, it meant frequent switching of collaborators and the race once run couldn't be re-run.Baron didn't build any back-up strength in terms of after sales service or any credible infrastructure to maintain consumer confidence.

That finally meant the doom for the prince but he taught us all a lesson. Be aggressive in the market place, challenge the holy cows and believe in yourself and offer value to the customers.

The things that he missed out - not minding the basics, not building long term relationships based on trust and not focusing on less glamorous but important issues like customer service, quality and gaining customer confidence.

ARTOS slugs it out with Cola giants Coca-Cola and Pepsi

A small cola maker from Ramachandrapuram, in East Godavari, Andhra Pradesh, India has shown the way to battle the cola giants. The battle is not yet won but many of the initial skirmishes have been won by David (ARTOS).

ARTOS (Adduri Ramachandra Raju Tonics) is a 95 year old brand (started in 1920) dating back to the British raj in India. At a time when Coke and Pepsi retail their 300 ml bottle at 12 rupees, ARTOS sells at Rs 6, exactly half the price.

Adduri Ramachandra Raju the founder of ARTOS began his entrepreneurial journey with a small step in 1912 by filling soda water in soda bottles, and selling them in the local market.

No one was willing to consume the soda as they thought that there was a ghost hidden in the bottle. Raju through perseverance and an uncompromising will power traveled miles requesting people to taste the soda.

The First World War came as a boon to Raju. In 1914, a group of British soldiers camped at Ramachandrapuram tasted the soda and became its ardent fans.

The locals observed the soldiers consuming soda and followed suit. In 1919, Raju's younger brother, Jagannatha Raju, started assisting his brother. Jagannatha Raju started marketing the sodas with a dash of sugar, colour and flavour.

Later they established contacts with soda makers in London and imported glass bottles, sugar, CO2 gas and flavours for making aerated drinks. Thus was born AP's first soft drink in 1920 - Artos - with the tag line of “exhilarating, invigorating, aids digestion”.

The industry started flourishing and sales picked up gradually. The Second World War came as a severe jolt with imports coming to a virtual halt.

All the soft drink industries (Duke's from Bombay, Spencer's from Madras, Roger's from Delhi and Vincent from Madurai) had to close down due to non-availability of raw material.

But the Raju brothers did not lose confidence. They brought oranges growing in the forests, peeled them off and extracted fruit juice concentrate.

They purchased lemons from the market and made acids; jaggery was refined and liquid sugar was made. Though the whole process was costly and tedious, the indefatigable brothers went on making soft drinks until after the war.

Their sheer hard work paid dividends.In the late 50’s, many new soft drink companies came up all over the country. Coca Cola entered the Indian market in the sixties.

Among the Indian brands, Parle from Bombay started putting up franchisees in Andhra Pradesh from 1968.With the onslaught of multinationals, almost all the Indian soft drink manufacturers suffered and ARTOS was no different.

Despite losing tax reliefs and other related benefits from the state government and having to pay taxes on par with MNCs the company had not compromised on quality.

The company was forced to hike its MRP from Rs 5 to 5.50 on 1 April 2001. Presently selling at a rate of 6 rupees ARTOS is still doing well in the Godavari district but only time will tell whether it would be another Thums up an Indian soft drink brand that is doing well Inspite of the presence of Coca-Cola and Pepsi or if it will end up as victim of the relentless charge of the multinationals.

By:Dr M Anil Ramesh