V-Guard Big Idea Business Plan

V-Guard Business Idea - Executive Summary V-Guard Industries Business Plan and marketing concepts to ensure V-Guard emerges as a winner in the north segment. Innovative concepts to introduce V-Guard’s household appliance in the south segment.

2012

TEAM BG09

11/1/2012

V-Guard Business Idea - Executive Summary

TEAM BG09 Page ii

Table of Contents

Synopsis _______________________________________________________________ 1

Company Summary ______________________________________________________ 2

Mission _______________________________________________________________ 3

Keys to Success __________________________________________________________ 3

Market Analysis Summary _________________________________________________ 4

Impact of power crisis in the north ____________________________________________ 4

Urbanisation in the North ___________________________________________________ 4

Entry of International Brands in the Indian Market ______________________________ 4

Consumer knowledge _______________________________________________________ 5

Prevalence of gated communities _____________________________________________ 5

Brand loyalty in the South ___________________________________________________ 6

Shortage of Gas Cylinders____________________________________________________ 6

Competition ____________________________________________________________ 6

Strategy and Implementation Summary_______________________________________ 7

Product Portfolio __________________________________________________________ 9

Product Positioning and Core Strategy _________________________________________ 9

The Market ___________________________________________________________ 10

Market Description _____________________________________________________ 10

Marketing strategy – UPS inverters ________________________________________ 11

Market Research __________________________________________________________ 11

Product/Service Innovation ________________________________________________ 12 Voice over facility for changing modes __________________________________________________ 12 After purchase service strategy _______________________________________________________ 12

Sales Strategy _____________________________________________________________ 13 Living in communities demand more safety ______________________________________________ 14 Improving consumer knowledge in rural areas ____________________________________________ 14 Taking advantage of international industries ______________________________________________ 15 Urbanisation leading to development of office areas_________________________________________ 15 Establishing brand identity in retail outlets _______________________________________________ 15

Sales Forecast _____________________________________________________________ 16

Distribution Channels _____________________________________________________ 16

Advertisement and Promotion ______________________________________________ 17

Competition _____________________________________________________________ 17

Risk/Opportunity_________________________________________________________ 17

Marketing strategy – Stabilizers and LT cables ________________________________ 18

Market Research __________________________________________________________ 18


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Sales Strategy _____________________________________________________________ 19 Boosting morale in retailers__________________________________________________________ 19 Ensuring availability of products ______________________________________________________ 19 Tie up with other products to increase sales ______________________________________________ 20

Distribution Channels _____________________________________________________ 20

Sales Forecast _____________________________________________________________ 21

Advertising and Promotion _________________________________________________ 21

Competitors ______________________________________________________________ 21

Risks/Opportunities _______________________________________________________ 21

Marketing Strategy – Induction Stove _______________________________________ 22

Market Research __________________________________________________________ 22

Product/Service Innovation ________________________________________________ 23 Backup power during electricity outage _________________________________________________ 23 Saving energy for a greener environment ________________________________________________ 23 Interactive Tutorials for Easy Learning __________________________________________________ 23

Sales Strategy _____________________________________________________________ 24 Familiarising with the product ________________________________________________________ 24 Taking advantage of E-Marketing ______________________________________________________ 24 Offers for utensils and detergents _____________________________________________________ 24

Sales Forecast _____________________________________________________________ 25

Distribution channel ______________________________________________________ 25

Advertising and Promotion _________________________________________________ 25 Induction Chef Contest to promote Viral Marketing ________________________________________ 26

Competition _____________________________________________________________ 26

Risk/opportunity _________________________________________________________ 26

Financial Plan _________________________________________________________ 27

Conclusion ____________________________________________________________ 29

Exhibits ______________________________________________________________ 30

Current Financial Statements for the year 2008-2010 _____________________________ 30 Current Sales Revenue and Profit After of V-Guard Products for the year 2009-2010 _________________ 30 Current percentage of sales for the various products in 2010-2011 ______________________________ 31 Profit After Tax of V-Guard Industries 2010-2011 _________________________________________ 32

Survey Questionnaire for UPS inverters _______________________________________ 33

Survey Questionnaire for Induction Cook tops _________________________________ 33

Reference Materials _______________________________________________________ 33


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Synopsis V-Guard is a Rs. 3 million turnover company supplying electronic and electro-mechanical products for the past 30 years, and a recognized market leader in the south for stabilizers. V-Guard is aimed at extending its leadership to the North market and expanding their product portfolio through introduction of household appliances. The current scenarios which have a huge impact on consumers all over India are the electricity shortage and cap on gas cylinders. We believe the company can find a competitive advantage in this situation, by focusing on various sales strategy and promotional campaigns to gain a brand reputation among consumers and distributors alike. Our team conducted focused marketing surveys to analyse the consumer’s expectation on the main products of V-Guard: Stabilizers, Inverters, and LT cables. Surveys also focused on how consumers would respond to V-Guard’s extension of products to household appliances. These surveys have enabled us to create strategies for V-Guard’s product innovation, service; sales and diverse marketing campaigns which will empower V-Guard emerge as a market leader in the Non-South sectors. Our financial statement highlights the projected sales, and sales revenue that can be achieved if our marketing and sales strategies are implemented. Though the expenses incurred for gaining brand recognition are initially high, the forecasted sales turnover in the future years confirm that V-Guard will emerge as a market leader in the North and have maximum reach in the household appliances segment, thereby justifying the marketing investment.


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Company Summary

V-Guard Industries is a Kerala based company. Incorporated in February 1996, it was promoted by Mr Kochouseph Chittilappilly. The company operates in three segments -

Electronics (where it makes voltage stabilisers, UPS and digital home UPS),

Electrical/ electro-mechanical products (PVC insulated cables, pumps, water heaters, fans)

Others (solar water heaters, gas water heaters, water level controller, windmill energy etc).

V-Guard has been an established player in the stabiliser business since the last 30 years with a market share of ~50% in south India. The company has a network of 16 branches, 7,000 retailers, 177 distributors and 235 service centres spread across 12 states in the country. It has a diversified product mix; with electronics contributing 33% of total revenues in FY10, electrical/ electromechanical (63%) and others (5%). This product mix helps the company reduce its dependence on a particular product. V-Guard ventured into Maharashtra, Haryana, Madhya Pradesh, Orissa, Himachal Pradesh, Chhattisgarh, Uttar Pradesh and Gujarat in FY10, with an eye to develop a pan-India presence. Its northern markets contributed 15% to total revenues, while the southern region contributed 85%.

Figure 1 Highlights

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Sales

Gross Margin

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Mission V-Guard’s mission is to increase sales in the northern part of India and develop brand recognition in the north segment. The market share of V-Guard is very low in the north, compared to the market share in the south. V-Guard has emerged as a market leader for stabilizers and UPS in the south market, but is in strong competition with other industries in the north and is trying to establish its market with the target market in the northern parts of India.

Due to the success of the electronic components in the south, V-Guard has extended its product line by introducing small household appliances for consumers. V-Guard is aimed at achieving leadership in the household segment as well, in the south market.

Create a brand recognition in the North

Sell the electronics(voltage stabilizer, UPS and digital UPS, Solar water heaters) of V-Guard in the rural areas at a lower margin and higher sales turnover

Take advantage of the electricity crisis faced by the northern states and sell their electronics to the consumers and industries.

Establish the presence of household appliances in the south with V-Guard’s main positioning of providing safety for consumers through their product.

Take advantage of the shortage of gas cylinders in the south, and market V-Guard’s core household appliances - Induction Stove.

Keys to Success

The major success factors that can attribute to sales of V-Guard in the north are the following:

Expedient and convenient electrical services.

Growing and maintaining a referral network of customers.

Focus expertise in data, communication and electrical installation and maintenance.

Rapid order and delivery of electrical components.

Point of Purchase, Word of Mouth, Direct Sales to focus on specific groups of consumers.


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Market Analysis Summary

Impact of power crisis in the north

The main areas in the north, which are deeply affected by the power failures, are Delhi, Haryana, Punjab and Rajasthan. Other cities in the north also have had an impact in their daily lives due to the sudden shortage of electricity. It has become a growing concern for commuters, companies and industries looking forward to establish plants and manufacturing units in the northern states.

Though, the north is highly developed with proper amenities, the electricity shortage has posed a huge problem for office goers and industries. Another segment which is deeply affected by the power shortage is the rural areas, which comprises areas in the outskirts of the metro cities. Though the metro cities are affected, the electricity shortage had the most impact on the rural areas.

Figure 2 Electricity shortage - North India

Urbanisation in the North

The second analysis in the north market was the level of urbanisation in the economy. Companies were hugely dependent on office areas and buildings in order to accommodate maximum number of employees to enforce internal marketing. Employee satisfaction has become the “need of the hour” and all the company executives ensure employees are within reach and easily accessible. Though various modes of communication have become prominent, companies prefer all the employees to be in a single office area. For this purpose, metro cities in the north have developed tall storied buildings and the tallest buildings in India are situated in the northern parts such as Mumbai, Delhi, Jaipur, Madhya Pradesh etc. Sudden power cut for these buildings pose a huge threat as people in the highest floor will be unable to walk all the way to the ground floor.

Entry of International Brands in the Indian Market

The third analysis made in the northern parts is the entry of international brands into the Indian market. Industries from abroad are interested in setting up manufacturing units and plants in the north to enable sales in the developing economy. India is a growing economy, and many international industries are eager to set up their units in the country and mainly in the metro cities.

60%

Electricity Shortage

Urban areas

Rural Areas


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Consumer knowledge

The fourth analysis is the lack of knowledge consumers have about UPS, voltage stabilizers and solar water heaters. Implementation of the Go Green strategy in India has helped people think about saving electricity and consuming less electricity, but they do not know how to implement their ideas. For example, people are not aware that using stabilizers not only prevents from sudden short circuits and shocks, but also helps in regulating the electricity consumption to the specified watts/voltage. A survey was conducted in the northern areas and apart from industrial companies, surprisingly a moderate percentage of people were not aware of the electrical equipments

Figure 3 Consumer knowledge

Prevalence of gated communities

Another analysis made on the social factors in the north was the gated communities and societies in these areas. The north states mainly consists of gated communities with people living in apartment complexes that had around 400 flats and 8 to 9 blocks of apartments. Real estate industries focused on building huge apartments with a minimum of 10 to 12 flats, as the north had their own communities and large families. Nuclear families and joint families preferred gated communities for safety, comfort within their own societies, and support from neighbours, and companions for their children.

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Voltage Stabilizers

UPS

Digital UPS


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Brand loyalty in the South

In relation to the south, V-Guard had established a brand loyalty among consumers, and all the consumers could relate to the brand as trustworthy and safe. People believed all V-Guard products were true to its tagline “name you can trust” and are regular users of the brand. They believe that V-Guard is not only trustworthy, but also safe to use and durable in the long run. Since it mainly manufactures electrical components, trust, safety from shocks, durability and quality play an important role. V-Guard has gained the consumer’s loyalty in these aspects in the south market.

Figure 4 V-Guard Market in the South

Shortage of Gas Cylinders

The growing concern in the south is the shortage of gas cylinders, where the government has restricted the use of gas cylinders to only six per year. This has led to consumers using less of gas stove and is becoming more open to other methods of cooking such as using induction stoves, microwave ovens, and electric cookers and so on. Though the consumers are not accustomed to this kind of cooking and have been practising cooking in gas stoves for centuries, the shortage of cylinders have let them come out of the shell and try new areas of cooking.

Competition The main competitors in the north for V-Guard are

Su-Kam

Havells

The main competitors in the south for the household appliances are:

Prestige

Butterfly

Other branded products (Philips,Panasonic etc)

3.6

3.8

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Retention Trust Satisifaction

V-Guard Consumers

V-Guard Consumers


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Strategy and Implementation Summary

The strategy that needs to be implemented in the north market is twofold:

Concentrate on rural areas through direct sales, WOM and Point of Purchase

Concentrate on urban areas through social media channels and contracts with building areas for office as well as the gated communities’ real estate.

Figure 5 Urban Vs Rural Market

Maharashtra and Gujarat are two northern states that are familiar with southern products and have a respect for them. Promoting V-Guard initially in these areas would be a good move and would be easier to establish a brand recognition of the product.

The following marketing strategies can be implemented in the rural areas of the north:

Direct sales where sales representatives can go to individual houses and explain about the product and the benefits of using UPS and stabilizers during times of power shortage crisis. The LIC model!

Word of Mouth in rural areas, as they are the most effective form of advertising. People in rural areas are closer to each other than people in urban areas.

Demonstration of the product to the potential consumers during direct sales.

Availability of the products in local supermarkets and wholesale distributors.

The pricing strategy in the rural areas can focus on wholesale profit and lesser margin in sales:

Provide a commission for sales representatives on sale to consumers.

Sell UPS and stabilizers for a lower margin to the consumers and retailers.

Offer UPS to the distributors stores for a low margin, making them brand loyal.

Tie ups with retailers to sell fridges, ac’s and other electronic goods along with voltage stabilizers.

Urban Market

Contracts with office areas

Launch of international manufacturers

Contracts with real estate

Social media

Electronic retail stores

Higher Margin

Rural Market

Direct sales

Word of Mouth

Live demonstration

Availability

Low margin


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The following marketing strategies can be implemented in the urban areas of the north:

Tie-ups with building contractors of office areas for digital UPS and UPS at a competitive price.

Initiate meetings with international companies that are going to set up base in India and educate them about the current electricity demand in India and the use of V-Guard UPS.

Tie up with gated communities offering UPS service for all the apartments through the apartment’s maintenance service.

Contracts with real estate companies such as DLF, Hiranandani, TVH etc. to include their UPS service along with the building contracts to ensure stable power supply during electricity shortage.

Provision of V-Guard products in electronic retail stores to establish status and brand recognition such as Reliance Chroma, E-Zone etc.

Direct sale of V-Guard products through Social Media channels such as Snapdeal, Shopclues, DesiDime and so on.

The pricing strategy in urban areas can focus on brand status and higher margin to compensate for the sales

in the rural areas.

Household appliances can be promoted through aggressive campaigns focusing on the trust and safety of the brand.

Figure 6 Promotion in the South Market

Safety and Trust

Live demonstration, trade shows

Competitive edge

Social media marketing

Live streaming and podcasts


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Advertisements should focus on the safety of the product and the fact that consumers can trust the products as it is a part of V- Guard.

Live demonstrations and trade shows can be held highlighting on the importance of using induction stoves and electric cookers with the shortage of gas cylinders in the city.

V-Guard has a competitive edge over other companies, as it is an established brand and it must focus on the emotional insight of the consumers by focusing on the quality, durability and safety of the product.

V-Guard can use the opportunity of social media marketing and promote their products through websites such as snapdeal.com, desidime.com, shopclues.com and so on offering coupons and introductory offers on the products.

V-Guard can also promote the product through live streaming on the use of induction stoves using YouTube and other streaming podcasts.

Product Portfolio

Given the Market Analysis in the North, V-Guard can focus on 3 main products in the North segment, to establish a brand identity and slowly increase their product portfolio to emerge as a market leader in the North.

UPS Inverters – for Household and Industries

Stabilizers – for different electrical appliances

LT cables

Similarly, based on our market analysis V-Guard can focus on obtaining a market for induction cook tops in the South as the shortage of gas cylinders, has emerged as the main problem for this target market.

Product Positioning and Core Strategy

We can position UPS inverters as unique from other competitors through the following strategies:

Additional features for easy interface

Sleek design to match the décor of the house

Unique after purchase service model to cater to customers and distributors

Following the LIC model to boost sales in rural market

Initiating a Go-Green strategy to conserve energy

We can position Induction Cook tops as unique from competitors using the following strategies:

Backup facility for 5,10, or 20 minutes during power outage

Utensils that suit faster cooking using induction stove

Green manual to help cook faster and save electricity

Stabilisers and LT cables can accommodate a unique way of distribution to increase sales through penetrative pricing in the north market.


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The Market1

An estimated 1.8 million inverters are sold in India per year with over half of them in the 1.5kVA range. Power outages (planned power cuts) are the main business driver for inverters. Sales of inverters pick up in the summer season when power shortages peak. Over the past few years, a trend of purchasing higher rating inverters-those that can support air conditioners apart from other low-wattage appliances-is being seen. The highest revenue earning segment is the 10-100kVA segment coming from industrial UPS like the online and line-interactive systems. The voltage stabiliser market in the country is estimated at Rs 1,250 crore, out of which V-Guard has garnered a revenue of Rs 200 crore in FY. This year, the company is hoping to achieve a 25 per cent growth. Cables demand forms a part of every industrial capex project. However, the requirements and orders for cables normally accrue only after 50% of the industrial capex project is complete. The wire industry in India touched approximately Rs.50-55 billion in FY 09. It was estimated that the 8-year CAGR for the wires & cables industry was 12%. Government’s decision on gas cylinders has become a boon for sale of induction cook tops as it has clocked Rs 1 billion in 2011, and this fiscal year is expected to earn Rs 1.5 billion. While the gas stove market in India is at Rs 13 billion, the induction stove market has already reached Rs 12 billion in just a few years and is growing at 30 to 40 per cent.

Market Description

Product Suitable

Segmentation Approach

Rationale

UPS Inverter

Benefit Geographic

Focus on benefits that the industries can achieve through purchase of the products. Eg: Energy saving, aesthetic appeal, additional features. Sales strategy in urban and rural areas to benefit both segments in terms of price and usage.

Stabilizers and LT Cables

Demographic Concentrate on tie ups and providing incentives for electrical companies and electricians.

Induction Cook tops

Demographic Benefit

Bachelors, newly married couples and old couples form the main target consumers for this category. Shortage of gas cylinders in the South makes this a necessary commodity in households. Knowledge enhancing strategies and cooking methods are the benefits that consumers can inculcate through the marketing strategies.

1 Reference from Economic Times


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Marketing strategy – UPS inverters

The main target for UPS inverters is:

Industries

Gated Communities

International industries with base in North

Rural areas – SEC classification

Market Research We performed a market survey on the problems that are faced by users of UPS inverters and analysed the following information:

28% of users are hassled by the beep sounds in the inverters, which do not give any information about the problem faced such as battery low, inverter on etc.

40% of users confine UPS Inverters to hidden areas like attics & basements due to their bulky size and minimalistic design (usually come in rectangular or box designs), and are too technical to be “mainstream enough” to be kept inside the home.

32% users believe service from UPS companies is usually not satisfactory, as they do not cater to the customers effectively after purchase of product. Since they are technical in nature, customers are in a helpless situation when they do not receive proper service.

Figure 7 Survey Results

28%

40%

32%

Market Research

Market Survey Results

Sound Design Service


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Product/Service Innovation

V-Guard can gain a competitive edge over other products, by implementing the following features in their UPS inverters in order to cater to the customer’s needs.

Sleek Design and Usability

According to the research, customers believed that the bulky design and interface of the inverter was very unpleasant and had to be hidden away in order to keep with the décor of the house. Implementing the design in Figure 7, would make the UPS inverter look visually appealing and also user friendly. This is critical need for most flat owners

The aesthetic appeal of the UPS inverter and the additional small accessories avoids a place in the attic/basement of the house and can be included as part of the furniture at home.

Voice over facility for changing modes

Customers complain of constantly checking the UPS inverter, whenever it activates the beep sound to alert the customer on the change in mode. For example, if the inverter has been overloaded, a system to alert the customer so that they can immediately make the change without looking at the inverter would be an add-on feature. For this purpose, a voice over with 5 main commands can be included in the inverter to enable the customer to know about the problem without having to physically view the inverter.

The 5 main commands can include the following:

Inverter On – specifies when the electricity is cut, and inverter is in working mode

Inverter Off – specifies when the electricity is back on and inverter is in dormant mode

Battery Low – specifies when battery is low and needs to be charged

Inverter Overload – specifies when the consumption of power is more than specified

Power Off – specifies when the inverter is switched off

After purchase service strategy

The main feedback of inverter users is the service rendered to them after 3 months of buying the product. Customers believe that the service provided by most of the inverter companies is not adequate and efficient, since they are dealing with products that are more technical in nature and require proper attention from customer service representatives.

To implement this idea, V-Guard can excel in their after sales service to achieve satisfaction among customers after post-purchase behaviour.

Mobile technology – Customers can send a message to the customer service helpline, which will trigger an alert in the customer service section and the representative can get back to the customer within 5 hours.

Tabletop to place mobile phones/magazines

Plug Sockets

Handle bar

Extendable loft for battery


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Customer Helpline 24/7

Using Social Media to address customer needs with a committed set of customer service representatives monitoring the activity in various media platforms

o Facebook page which is publicly accessible by all users to write comments and give feedback.

o Discussion Forums, addressing concerns of consumers regarding suitable products such as basic UPS, digital UPS and solving less technical problems, providing product knowledge and so on.

A user interface in the website, which provide options for the number of household appliances that need power during electricity shortage and number of hours required for backup. Based on the input provided, the website can display the best suited inverters with price and product description.

Figure 8 User Interface

Sales Strategy

V-Guard can adopt a sales strategy based on the marketing initiatives taken to promote the uniqueness of Inverters and the brand positioning. UPS inverters are priced at a range of Rs.5000 (basic category) to Rs.8900.


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Figure 9 Sales Initiatives

Living in communities demand more safety

Gated communities are a growing trend among real estates in the coming year, as families enjoy special privileges and monitored safety for their children. Around 40% of North India consists of gated communities, as the culture followed in the north mainly contribute joint families and closely knit relations. Due to this, the demand for safety and commitment to provide comfort from the prevailing electricity shortage in the cities has been a growing concern for real estate industries.

V-Guard can promote advertising among real estate industries and offer UPS inverters for their gated communities.

Contracts with construction companies for long term relationship

A good margin of sales can be obtained in gated communities as it consists of mainly upper middle class people and real estate industries that are willing to shell out money for a high quality product.

Improving consumer knowledge in rural areas

As per the market analysis, it was noticed that a large percentage of consumers did not have proper knowledge about the use of UPS inverters and the various types of UPS products that are offered based on the number of appliances available at home to the number of hours of backup power required. The untapped potential of rural market was unknown due to this lack of consumer knowledge.

V-Guard can initiate promotion of products in rural haats, by explaining the usefulness of an inverter in the impending power crisis, and the normalisation of price depending on the VA output.

Basic UPS inverters can be sold in these areas (backup power for maximum of 2 fans and one TV) at a lower price.

Consumers can be offered incentives or commission for reference of potential consumers, if they purchase the product. Similar to LIC model, to promote and create sales team within every household.

Inverters

Gated Communities

Rural Haats/House

holds

International Industries

Industrial Buildings

Retail outlets


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Figure 10 Indirect sales

Lower margin with wholesale price can be the sales strategy that can be implemented in rural areas as the target market consists of lower middle class, who concentrate only on their basic needs being met. V-Guard can concentrate their sales strategy in rural areas initially in parts of Gujarat and Maharashtra as they have a certain amount of knowledge on South Indian products. After establishing a brand in these areas, the company can concentrate on the metropolitan cities.

Taking advantage of international industries

As India is slowly transforming into a developed country, many international brands are interested in opening up a manufacturing unit or a product base in India. Especially northern metropolitan cities are the main targets for international industries due to technological advancements, availability of land and labour.

V-Guard can focus on establishing contracts with these industries by explaining to them the threat of power shortage in India and the hourly power cuts imposed by the government in order to conserve electricity.

Opportunity for a New Product:

Industries are now concentrating on “making the world a greener place”, and are trying to include initiatives to conserve electricity and save energy. Keeping this in mind, V-Guard can introduce the Solar UPS product, which converts solar energy to recharge batteries and provide electricity.

V-Guard can focus on selling inverters at a competitive price amongst other companies, in order to gain brand recognition among all the industries. Sales to industries mainly rely on how soon we reach the industry and the value for money that they will incur.

Urbanisation leading to development of office areas

Many companies have office areas in high-raised buildings in order to contain all the employees within one geographic location. Therefore, tall –storied buildings have been constructed and are one of the main business drivers for construction companies such as DLF, TVH and so on. The electricity outage problem has created a major impact in these buildings.

V-Guard can exchange contracts with corporate buildings for a lower margin in order to develop a long term relationship with the construction companies.

Establishing brand identity in retail outlets

Product knowledge in rural haats and demonstration

Sale of inverters to

consumers at nominal price

Referring potential

consumers for commission of

sales


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V-Guard can distribute their inverters in electronic retail outlets such as Reliance Chroma, E-Zone, Big Bazaar etc. This will focus on the urban sector and also establish a brand recognition among consumers.

Another way of creating sales is through local retail stores that are situated near the rural areas as research shows that rural consumers purchase electronics that are closest to their areas, as they look for basic needs and not branded items.

Sales Forecast

Figure 11 Projected sales of inverters

Distribution Channels V-Guard can initially focus on enhancing consumer knowledge about inverters in the rural market and target Maharashtra, Gujarat, Bengal and so on. After establishing a brand identity and initial sales, they can slowly increase their market to the metropolitan cities such as Mumbai, Calcutta, Delhi through retail outlets and tie up with building contracts.

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Retail Outlets

Contracts

Personal Selling

Retail Outlets

Contract with builders

Wholesalers


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Advertisement and Promotion

Competition2 Leading players catering to the Indian UPS market are APC (a unit of Schneider), Emerson, Numeric Power Systems, DB Power, Eaton, etc. These five players account for half of the market size, in terms of

revenue.

Risk/Opportunity3

One trend that experts feel would emerge in the coming years are efficient and greener equipment. A solar powered inverter is a case in point. Currently, these inverters are expensive but as technology evolves, they might become more affordable. While one can be assured of a steadily growing demand for power conditioning equipment in India, there are concerns about the maturity of the industry. There is very little production of power electronics components in India. As such, India is heavily dependent on imports. There is need for the component industry to evolve, which can make the industry survive the onslaught of imported equipment from China and Taiwan where the industry is fully integrated.

2 Business Line India 3 Economictimes.com

Print ads

•Hoardings in dhabas

•Newspaper ads

Indirect Advertising

•Word of mouth

•Direct sales

Promotion •Rural haats

•Retail outlets

Advertising and

promotion


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Marketing strategy – Stabilizers and LT cables

V-Guard is a market leader in sales of stabilizers as around 70% of their revenue accounts for stabilizers. LT cables are a new market that V-Guard has extended along with its other products, and is in competition with local and branded companies selling LT cables.

Market Research On refrigerator, A/C and motor driven machines a drop in voltage below a certain limit would cause those appliances to draw large currents that may lead to overheating and consequent failure. Stabilizers are used when the supply is unreliable.

The main target market for stabilizers is the electrical companies and retail outlets.

According to our market survey, around 80% of consumers who buy household appliances do not have enough knowledge about the use of stabilizer apart from the fact that it regulates voltage in AC, Fridge, TV and so on. Therefore they rely on the experts at retail showrooms and electricians to suggest the best stabilizers and LT cables that can be used for their appliances. Keeping this in mind, V-Guard can adopt a sales strategy to satisfy the retail distributors and wholesalers in order to give first preference for their stabilizers and LT cables.

Figure 12 Market Survey results

Product Knowledge

Retailers

Customers


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Sales Strategy

Usually any marketing strategy considers that “Customer is King”, but in order to boost sales and revenue of stabilizers and LT cables, V-Guard must consider as “Retailers and Distributors are Kings”. Stabilizers are sold at a price range from Rs.810 for basic models to Rs.8000 for advanced versions.

Boosting morale in retailers

It is important to maintain a strong relationship with retailers and distributors, while selling technical products such as stabilizers and LT cables as they are the main source of sales for the company.

We can boost the competition and confidence of retailers and wholesalers by initiating the following sales strategies:

Provide commission to retailers on the number of stabilizers and LT cables they can sell to customers

Provide incentives or bonus prizes such as a paid vacation, if they achieve or exceed expectations on the sales target that is provided to them.

Ensuring availability of products

Since most of the retailers deal with various products, it is important to ensure constant availability of products and immediate replenishment whenever required.

For enabling a seamless process of replacing products or stocking new ones, we can include the following strategies:

SMS facility for retailers to inform us for replacement of damaged goods or replenishing the products. Retailers can send an SMS mentioning “Stock Over” or “Damaged” in their regional languages to a specified number for immediate assistance.

An helpline facility for retailers and distributors, with an automatic IRS System that enables the retailers to log in details of the number of stock required, number of damaged goods to be replaced, assistance by an executive, or addition of a new retailer or distributor.

Quarterly or half yearly meetings in every region can be arranged among all retailers and wholesalers, to interact with them on the sales achieved by the company, contribution of retailers in the success of sales and any other new initiatives taken with relation to the product and sales.

The helpline facility will store the retailer information when entered for the first time, and contact the retailers based on the information provided in the helpline system. Similar to the IRS system for gas cylinders in India!

Sales target

Availability

Tie up

• Commission

• Incentives

• Mobile SMS

• Helpline IRS

• Interaction • Inverters

• Household appliances


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Tie up with other products to increase sales

LT cables are the most competitive products of V-Guard as there are many branded and unbranded companies manufacturing LT cables and selling at competitive prices. Therefore, apart from providing commission to dealers, it is also important to take advantage of the other products in V-Guard to increase sales of the cables.

As mentioned in the marketing strategy for UPS inverters, V-Guard can establish contracts with Real Estate builders and construction companies for industries. Along with this, V-Guard can offer LT cables for the purpose of wiring in gated communities and industrial buildings at the wholesale price.

A specified amount (in metres) of LT cables can be offered to the clients for a lower margin and wholesale rate for a best bargain along with the inverters. Since the companies are already convinced to purchase inverters from the company, there is high probability that they will save time in search of LT cables and buy them at a competitive price.

This ensures a wider reach for LT cables and if the clients require more cable, they can purchase it at the regular price that is offered for other industries. Since a brand identity has already been established during initial purchase, V-Guard can focus on excellent service and quality product ion instead of reducing the price again.

V-Guard can also establish tie ups with manufacturers of household appliances such as Fridge, TVs and ACs by selling their stabilizers at a lower margin along with the household appliances to customers.

Distribution Channels

The following channels are used for distribution of stabilizers and LT cables:

Retailers

Wholesalers

Direct sales to construction companies


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Sales Forecast

Figure 13 Projected sales for stabilizers and LT cables

Advertising and Promotion

Apart from the above mentioned sales strategy, V-Guard can promote their stabilizers in focused retail showrooms such as Reliance Chroma, E-Zone, Big Baazar and other outlets dealing with electrical and household appliances in order to address the 20% of consumers who have substantial knowledge about the use of stabilizers.

Competitors

Havells

Servo

Local manufacturers of LT cables and stabilizers

Risks/Opportunities4 The main threat faced in the product line is the seasonal nature of many of the white goods and the

aggressive campaign by the manufacturers of the white goods stating that the appliance contains in-built

stabilizers. Besides these, the increasing inflation rate, competition from the unbranded segment,

improved power distribution etc., may hamper the future growth of the product.

4 Indianinfoline.com

10

15 12

17 18 19

14

6

17

13

17 20 20

9

19 19

7

30

22

15 14 16

10 9

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Sales Forecast

retail outlets electric compainies


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Marketing Strategy – Induction Stove

The main target market for Induction Cook tops are the following:

Bachelors and working women

Newly married couples

Joint families

Market Research

We conducted market surveys in the South on how the cap on the number of gas cylinders has affected the sales of induction stoves in retail outlets and the problems faced by consumers of induction stove. Though the sale of Induction cook tops has increased rapidly, consumers face the following problems:

56% of consumers do not have adequate knowledge on the technology to use induction stoves and often burn or undercook the food.

30% of consumers feel that induction cook tops consume more electricity and can pose a problem during the frequent electricity power cuts, while they are cooking.

14% of consumers are apprehensive about moving away from the traditional method of cooking with gas stoves.

Figure 14 Market Survey Results

56%

30%

14%

Market Research

Market Survey Results

Consumer Knowledge Electricity Outage Traditional Method


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Product/Service Innovation Keeping in mind the problems faced by the consumers, V-Guard can include a few additional features for their induction stoves to meet the needs of the consumers.

Backup power during electricity outage

The current power crisis scenario in India, has led to consumers using the best possible ways to reduce electricity usage in their daily activities in order to be prepared for sudden power cuts. Especially while cooking in induction stove, consumers are worried if a sudden power cut would temporarily halt their cooking and in turn spoil the food.

To cater to this immediate need, V-Guard can develop an additional feature in the Induction Stove which has a battery backup facility for 5, 10, 20, to 30 minutes that can be switched on when the consumer is cooking during a power cut. This ensures that the consumer can rely on 20 to 30 minutes to finish cooking food and not be worried about completing cooking without electricity. This new facility makes Induction Cook tops a premium product and can be catered for niche marketing.

Saving energy for a greener environment

According to research on consumption of energy in gas cylinders and induction stoves, it was concluded that induction stoves, if used the right way consumes less energy than gas cylinders and plays a vital role in contributing towards a greener environment.

An environment friendly world is the need of the hour today, and everybody wants to play a role in saving energy for a greener world. Keeping this in mind, V-Guard can provide a Go Green user manual apart from the regular user manual, to give tips and instructions on how to use induction cook tops to conserve less energy along with healthy recipes such as:

The type of utensils to use in order to transfer heat faster from the stove to the utensil

Switching off the cook top 10 minutes before you finish cooking as the heat from the stove cools down slowly

Amount of time it takes to cook different vegetables and other items

This strategy will improve the consumer’s knowledge on how to use an induction stove and also help them contribute towards a better environment.

Interactive Tutorials for Easy Learning

As per the survey, the maximum percentage of potential customers does not have knowledge on the features and usage of induction cook tops. Since the main target market is confined to the urban areas, we can assume that the consumers are educated and come from a middle class society.

In order to improve knowledge on induction cook tops, e-learning tutorials with visual scenarios and interactive sessions can be created for the purpose of educating the consumers on how to use the product.


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The tutorials can be included in CD-Roms along with the purchase of the product, or it can be uploaded on You Tube and on the company website. The link can be printed along with the user manual and the packaging of the product.

Sales Strategy The price range of Induction Cook tops are between Rs.2000 to Rs.8000.

Familiarising with the product

V-Guard can promote induction cook tops by having live demonstrations in IT offices, Shopping Malls, trade shows and exhibitions conducted in various parts of the city to enable familiarity of the product among consumers and a direct touch and feel of the product and its uses. A proper demonstration on how to use the induction cook top will gain the consumer’s trust on the product and will be more appealing to purchase them. V-Guard can also promote its product to restaurants and marriage caterers as a complement to gas stoves to increase the production rate during high demand.

Taking advantage of E-Marketing

Urban society has already adjusted to the growing popularity of social media such as Facebook, Twitter which has gained attention of e-marketing through websites such as flipkart.com, snapdeal.com etc. V-Guard can provide introductory offers in popular websites such as snapdeal.com, pepperfry.com and shpoclues.com for a discount on purchase of induction cook tops to increase brand recognition and sales. Apart from offers, coupons can also be provided for discount on utensils and cleaning detergents on purchase of induction cook tops.

Offers for utensils and detergents

There are specific type and shape of utensils that are best suited for cooking in induction cook tops in order to gain durability and faster cooking. Instead of educating the consumers on the type of utensils to purchase, we can sell the utensils along with the induction cook tops for a premium price garnering attention of the bachelors and newly married couples.

Since induction cook tops are a new technology dealing with cooking on a magnetic surface, consumers will be unsure on the type of detergent or cleaning soap to use in order to clean the surface of the cook top. For this purpose, V-Guard can provide a free scrub along with the detergent that can be used to clean the induction cook top with ease and in turn generate sales for the detergent company. This will mainly attract the joint families and older couples as it is essential for them to keep their kitchen clean.

Specialized Market

•Trade shows

•Exhibition

• IT Offices

• Shopping Malls

Social Media

•Shopclues.com

•Snapdeal.com

•Pepperfry.com

Offers

•Complementing utensils

•Free detergent and scrubs


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Sales Forecast

Figure 15 Projected Sales for Induction Cook tops

Distribution channel The following channels are used for distribution of induction cook tops:

Advertising and Promotion

Since V-Guard is introducing a product in a completely new segment, it is important to have an aggressive advertising campaign and promote the product to gain the trust of consumers. V-Guard has a competitive edge over other companies as the consumers in the south are already familiar and are loyal to V-Guard products Majority of population spend at least 40% to 70% of their time in the kitchen, and therefore it is important for the appliances to be safe, durable and good in quality. Emerging as a market leader in the south, V-Guard can use their brand loyalty to its advantage and advertise their induction cook tops as safe, durable and of high quality as similar to their existing products.

5 6

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17

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4 6

8

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1 2 3 4 5 6 7 8 9 10 11 12

Sales Forecast

Retail Outlets Social Media

Retailers

Direct Sales

E-Marketing


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Induction Chef Contest to promote Viral Marketing

V-Guard can promote their product and increase sales and brand value through viral marketing by introducing an all round South India contest for the best chef using induction cook tops.

1. Participants need to register, create a recipe using V-Guard’s induction cook tops and post the video on You Tube.

2. This will result in many You Tube posts of V-Guard’s induction stove, which indirectly promotes the product through social media.

3. As the number of videos increase, V-Guard becomes one of the key videos displayed in You Tube’s website, which in turn promotes viral marketing.

4. Apart from creating a brand value for the product, it will also increase the awareness of the product among potential consumers, which in turn increases sales.

5. The winner can avail a cash prize or an exclusive dealership of V-Guard products.

This is a tried and tested strategy which promotes one of the current trends of marketing and promotion.

V-Guard can advertise the contest details during TV shows with highest TRP ratings such as famous TV serials and in Newspapers.

Competition

The main competitors for V-Guard are:

Prestige

Preethi

Risk/opportunity5

The overall inflationary trend and steady increase in key metal prices are matters of concern. However V-Guard can continuously improve its efficiencies and is hopeful of maintaining healthy margins and return on capital employed.

5 Crisil report

Advertising and

Promotion

Viral marketing

Tv and print advertisements

Online Media


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Financial Plan

Implementing our marketing and sales strategies, we believe that the sales growth will considerably be affected as shown below:

Based on the following assumptions, we present the financial statement analysis for the year 2012-14:

Particulars

2011 (Rs in millions)

2012 ( Rs in millions)



Sales 7266.22 10172.71 13224.52 16530.65

Exp 6535.87 9664.073 12166.56 14877.59

EBITDA 730.35 508.6354 1057.962 1653.065

Other Inc 17.08 25.43177 33.0613 41.32663

Dep & Am 79.37 79.37 79.37 79.37

EBIT 668.06 454.6972 1011.653 1615.022

interest 113.34 152.5906 198.3678 247.9598

PBT 554.72 302.1066 813.2851 1367.062

Tax 164.73 90.63197 243.9855 410.1186

0

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stabilizer wires pumps water heater

ups fan ltcables others

2011

2012


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Pat 389.99 211.4746 569.2996 956.9433

Growth of sales in the consecutive year 2012 ,2013,2014 is 40%,30%,25% respectively

Individual contributions for the year 2012 Stabilizer-31% LT cables-7% Ups and digital ups-13.5% Induction stoves-1.5%

Expenses include advertisements, selling and distribution expense, administration expenses.

Since new product is being introduced in 2012 and as we adopting follow an aggressive advertisement and service strategy , the expenses are high which is 95%

For the consecutive 2013 and 2014 the operating expenditure is 92% and 90% of sales respectively

It is assumed that straight line method of depreciation is followed

Tax is assumed at a flat rate of 30%.

Due to the new product innovation and advertising strategies, we incur high amount of expenditure, so profit after tax for the current year is lower when compared to the successive year.

0

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fy 10 fy11 fy12 fy13 fy14

projected revenue of vguard (financial year 2010-14)

projected revenue of vguard (financial year 2010-14)


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Conclusion

Based on our market survey, implementation strategies and financial statement analysis, V-Guard can establish a huge presence in the north market and take advantage of the current situations in the states.

0

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fy11 fy12 fy13 fy14

projected pat of vguard (financial year 2011-14)

projected pat of vguard (financial year 2011-14)


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Exhibits

Current Financial Statements for the year 2008-2010 Our projected sales revenue and sales growth where calculated based on the following data:

Current Sales Revenue and Profit After of V-Guard Products for the year

2009-2010

0

1000

2000

3000

4000

5000

6000

2008 2009 2010

Revenue

PAT


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Current percentage of sales for the various products in 2010 -2011

Sales

stabilizer

pumps

water heater

digital ups

fan

lt cable

ups

solar water heater

wires

others


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Profit After Tax of V-Guard Industries 2010-2011

0

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fy10 fy11 fy12 fy13 fy14

PAT

PAT


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Survey Questionnaire for UPS inverters

1. Where do you normally keep your UPS inverters? And why?

2. Would you prefer buying Inverters which are visually appealing, even if offered at a premium

price?

3. Which brand strikes your mind when it comes to electrical safety?

4. What is the feature in the UPS Inverter, which you would like to change?

5. How would you rate the service provided by companies after purchase of inverters?

6. On a scale of 1-5, where does V-Guard stand?

Survey Questionnaire for Induction Cook tops

1. What would you look out in an induction cook top?( choose any one of 3)

a. Variety

b. Functions

c. Quality

d. Appearance

e. Power back up

2. What do you think about induction stove? Do you prefer it compared to traditional gas stove?

3. Do u own an induction stove? If yes, what brand and its cost?

4. Will you be interested to own an induction stove with battery back up? If yes, how much are you

willing to pay?

Reference Materials

www.moneycontrol.com

www.indiainfoline.com

www.economictimes.com

Business Line

Crisil Report