How TATA VOLTAS' brilliant business STRATEGY made it the KING of Indian AC market? : Case study thumbnail

How TATA VOLTAS’ brilliant business STRATEGY made it the KING of Indian AC market? : Case study

Hi everybody voldaz is one of the most amazing brands in the indian business ecosystem and if you look at the stock price of voltage you will see that it has shot up by fourteen thousand two hundred percent going from just over six point nine three rupees in two thousand to nine ninety five rupees in 2022. so a mere 10 000 rupees invested in voltage.

In 2000 would be worth 14 lakh rupees today but while most of us only know voltage is a tata bagged market leader in air conditioners market very few of us know that there was a time when voltas was almost in the words of being shut down they were in such a pathetic state that they went from being a market leader.

With a 40 market share in 1990 to just 6 market share in 2001 but suddenly something crazy happened and the same voltas brand went on to become a market leader in the next 10 years and even today stands as a market leader for 10 consecutive years so the question is how did this failing brand go on to become a market leader what.

Exactly was your business strategy and most importantly as future entrepreneurs and students of business what are the lessons that we need to learn from the iconic revival of voltas this video is brought to you by skillshare people recently we've been building our team and our main focus has been on building their creative confidence and one of the.

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One month of free trial for skillshare so all thanks to skillshare for supporting us for this video this is a story that dates back to 1990 india during this time voltas had been a market leader since 38 years and had a market share of 40 but in 1991 the indian economy opened up india is on the move again we shall make.

The future happen so july 1991 india kicked off a series of reforms to unleash its economy from the stifling rigidity of the socialist era we have to harness all our latent resources for a second industrial revolution we have to accept the need for restructuring and reform if we are to avoid an increasing marginalization of india in the evolving.

World economy this is when the announcement of liberalization happened and soon enough giant foreign players like lg samsung and whirlpool entered the market and suddenly volta's market share started dropping and the same voltage brand which was once a market leader had only six percent market share and it could.

Hardly stand strong against the foreign competitors this is when the tartars realized that something needs to be done about the voltas brand and they even gave out an ultimatum that the company might be shut down if they do not deliver but you know what guys suddenly in the next 10 years something crazy happened.

Because of which voltas went on to become a market leader by 2012 beating every single brand in its category and they call this strategy the big bang strategy the question is what is this big bank strategy well let's understand from the basics you see guys for a product to become legendary there are two pillars of value that needs to be.

Delivered to the customers tangible value and perceived value and for a product like air conditioner there's a third pillar also which is after sales support and the product of these three pillars is what defines the value of a product in the market and if any one of these pillars drop the value of your products will drop in simple.

Words if i make you sit in the best restaurant in the world the perceived value of the experience is going to be exemplary so the music the aroma the lighting all of it will enhance your experience of dining but after inviting you to this wonderful restaurant if i serve you rotten chicken would you love it no right so you see even though the.

Perceived value of the experience was great because the tangible value as in the food was not great the experience of dining turns out to be disgusting and at the same time if i serve you the best pizza in the world but if i place hundred boiled cockroaches near your table would you like it no right.

But guys what is the problem the cockroaches are not on your pizza they're just on the table but you still want to eat it right why because here although the tangible value is great the perception of the food has been ruined to such an extent that now the experience is disgusting so you see for a product to be great it needs to.

Have both perceived value and tangible value in case of air conditioners the factors that define tangible value are cost efficiency and utility the factors that define perceived value are design color and brag worthy features not features but brag worthy features and for support there is obviously pre-sale service after sale service and customer.

Support now let's have a look at each one of these factors and see how voltas identified and fixed each one of these issues properly the first problem that they encountered was the cost of manufacturing of voltas ac back then this cost was a lot and in spite of the high cost the design of volta's ac was.

So bad that voltas was not called as an ac but it was called as a dubba secondly the company had no model for catering to the lower end of the market as in people wanted to buy an ac at less than 15 000 rupees but since there was no ac in that range they settled in for coolers so three things cost design of the upper end product and lack of lower.

End products this is where voltas very cleverly partnered with the largest ac manufacturer in the world this company was feders international and this way they were able to get both tech and design for launching the best inline air conditioners in india for example if voltas orders 10 000 units of.

Each component it might cost them five dollars per unit but when fedors places the same order it will order one million units at two dollars per unit because it has got plants all across the world so voltas could get the component at two point five dollars per unit because of their partnership and as a result of this partnership voltas was able to.

Manufacture acs at the lowest cost in india this cost went from 10 400 rupees per unit to under 8 000 rupees per unit which is a drop of 20 percent this is also the reason why voltas was able to offer competitive features like purification filters ionizers to kill bacteria and the economic mode on top of that they also shifted their.

Manufacturing base from thane to dadra why because dadra was a sales tax exempt zone so voltas was able to pass on another 12.5 percent savings to its customers this is how voltas fix the two primary issues with their product which were cost and design then we move on to the second point.

Which is the untapped market below the 20 000 rupees range for this world task partnered with the manufacturing companies in china taiwan and malaysia and they launched a 0.6 to 0.8 ton air conditioner that costed just 9990 rupees this way they were able to tap into the huge market of coolers and transition these customers to buying acs.

And this brings me to the third aspect which is efficiency now people as we all know our fathers are extremely worried about electricity bills and we've all been scolded by them several times throughout our lifetime out now over here did you notice something although we know that all our fathers.

Get pissed at costly electricity bills nobody really knows which number in that electricity bill will make them happy is it 2 000 rupees 1 000 rupees 500 rupees or even 250 rupees which number is good enough to actually pay an electricity bill happily but guess what the voltage team actually got to the ground to analyze how much.

Bill is acceptable for an ac in an indian family and they got to know that if you design acs which contribute less than one thousand rupees then suddenly the overall market for air conditioners will triple to 30 lakh units so now they went back to the drawing board did some engineering to try and understand how can they actually bring.

Down the electricity bill as close as possible to this golden number of 1000 rupees and even the sales staff was educated enough to tell the customers how much bill a particular product would generate considering the usage of the customers this way the customers actually felt safer while making the purchase of the ac in fact voltas even.

Launched a special ad to address the huge market of retired couples who are often skeptical to buy an ac and it reassured them that the bill won't burn a hole in their pockets this is how the factors of tangible value were first fixed in volta's air conditioners and then we moved the most difficult part of the volta strategy and.

That is brand building to fix the perceived value of voltas now people listen to this very very carefully after conducting a thorough market research they found out that voltas was perceived as an outdated white duba and an old man's product so here's where voltas came up with a buzzword that did not just change the fate of voltas but the.

Entire air conditioners market itself this buzzword was intelligent cooling now just to give you a modern example of this power of buzzword today you will see in the market that there is this buzzword called smart and anything with the word smart somehow ends up being perceived as better and more feature loaded so we've got smart fridge smart.

Ac smart bulb smart tube light smart homes and even smart switchboards but you know what guys the catch over here is that there is no standard definition to what exactly smart means sometimes it could be alexa sometimes it could be digitalization sometimes it's motion sensing and sometimes it's just the feature of controlling a freaking.

Bulb through a smartphone so you see the term smart is just a blanket term and there is no consensus on what exactly is the definition of a smart product but the one thing that you will observe in the market is that the moment you call a product smart people be like smart bula so a smart product is by default.

Perceived as a better and a more feature loaded product now in case of voltas this buzzword was intelligent cooling which essentially meant conventional features like uniform cooling energy saving timers and air filters but in reality after being repeated a million times intelligent cooling just.

Became a blanket term for being feature loaded and this was a crucial stepping stone for voltas because now the perception of voltas was changing from a white dabba to a feature loaded intelligent air conditioner and then voltas hit its master stroke with its all-weather ac in 2012. you see.

Guys india is much much bigger than we can imagine we are such a huge country with a vast diversity in climate that when it comes to ac if i ask you what is the purpose of ac in your life most of you would say that you would use an ac to drive away the heat but you know what guys voltas understood that their acs could actually be used beyond.

That to solve different problems in different parts of the country for different climatic conditions their acs could be used in a dusty climate to keep the house clean in a humid climate to stay dry during the rainy season to stay sweat free and even during winters to stay dry and after identifying these pain points they.

Launched the voltas all-weather ac which could literally be distributed all across the country and at the same time they designed custom advertisements for each of these scenarios in different parts of india this is where we saw one of the most memorable marketing campaigns in tv history which portrays the story of mr murti who often gets.

Transferred from delhi to kota to chennai to even chirapunji fun fact over here is that each place that he gets transferred to has a different weather but somehow murti is happy everywhere why because he has got his voltas all-weather ac this is how voltas distributed different ass to resonate with different parts of.

India and at the same time they told a memorable story to signify the problem that their product was solving and quite evidently it turned out to be one of the most successful campaigns of voltas that went on for six years until 2018 and lastly both marketing and product was backed by a lifelong service support throughout india by the voltage team.

Therefore as a result of this relentless pursuit to build a great tangible and pursued value if you look at the growth of voltas you will see that in the next 12 years that is from 2001 to 2012 voltas went from having just six percent market share to becoming a market leader with 18.3 share beating lg which stood at 17.7.

And more importantly it has been a market leader for 10 years now with a market share of 25.4 as of january 2022 this is the story of the iconic rise of voltas from the ashes and this brings me to the most important part of the episode and that are the business lessons that we need to learn from the rise of voltas lesson number one every.

Product has two elements perceived value and tangible value and even if one of them gets messed up it will nullify the effect of the other and for products like ac we have the third pillar which is customer support lesson number two whenever you do your market research especially for a generic market please make three columns.

Tangible value problems perception problems and miscellaneous otherwise usually what happens is when you try to solve a problem for your product if you do not categorize your problems you will end up swallowing for a problem that doesn't even exist for example if you go to our fathers and you tell them that this phone has 5100 milliampere battery.

They will understand it but if you tell them that this lasts for 36 hours then they'll be able to understand the gravity of the specification so when you divide your problems into tangible perception and miscellaneous you will be able to categorize the problems properly eventually you will be able to solve them and lastly if you.

Want to build a d2c brand the more the example although a decade old it is very very relevant in the social media world that we live in because back then you had to play the same ad everywhere but today you could literally choose to play a custom ad for a different set of audience in every single city and that will give you an insane amount of.

Conversion so do look into it that's all from myself today guys if you learned something valuable please make sure to hit the like button in order to make youtuber happy and for more such insightful business and political case studies please subscribe to our channel thank you so much for watching i will see you in the next one bye bye.

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