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trousers, the twirl of their moustache and the shine on the metal and leather they wear. Arms, medals, epaulettes are all brought to the perfect shine before a parade. One key item of inspection is the glint on the ammunition boots. One enterprising regiment, the story goes, instead of using polish bought a box of Asian Paints paint and used it to good effect on the boots. Asian Paints managing director & CEO PM Murty doesn't know if it's a true story, though he joined the company way back in 1971. What he does know is that such small purchases can make the distinction between profit and loss, survival and extinction. Asian Paints has for long sold very small cans of paint which are used to colour the horns of bulls during the Pola festival in Maharashtra and the auspicious small red and yellow stripes at the bottom of the front door of Tamil Nadu homes. This might not always be remunerative, but it has given a tremendous boost to the company's brand recall. When the market is up, everybody makes money. But when the chips are down, only resilient brands stay afloat.
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ricewaterhouseCoopers leader (retail practice) N V Sivakumar says that Asian Paints has gained in the slowdown by
offering good brands at competitive prices and across price points. Agrees Murty: "There are smaller construction firms which tend to look for less expensive brands at times like this. So even if the cost of distribution increases as you move down the value chain, we offer the products, though maybe in a limited range."
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The Asian Paints range has always retailed at a premium to the competition -- even today it commands an average premium of 5 to 10 per cent. But it is careful to see that volumes don't suffer. Judicious price increases have been taken when it needed to pass on the higher cost of inputs. For instance, when costs went up last year in the wake of soaring crude oil prices, the company raised prices 16.7 per cent, but spread it over six takes! And when the government cut excise duty to stimulate the economy, it dropped prices by about 12 per cent in five cuts. The planned phase-out of lead by 2012-13 is expected to raise the industry's costs by 3 to 4 per cent. Its sheer size, rivals feel, will give Asian Paints an edge over them. "We have never been reluctant to pass on the benefits of lower input costs and we don't believe in special rebates or promotions; we feel that everyday low prices work best," says Murty. Asian Paints President (Decoratives) KBS Anand says it doesn't make sense to cut prices too much because the competition inevitably follows suit. Also, the success of Royale in the smaller markets and the fact that that emulsions now sell more than distempers indicate that more customers are upgrading. In this scenario, a price war is hardly advisable. Asian Paints wants to make the most of the upgrade. And for this it is important that the customer interface with the brand improves. "The idea is to bring in more customers into the shops; old-style cramped hardware stores are no longer acceptable," says Murty.
Direct to consumer
In a recent initiative, Asian Paints has opened a 6,000sq feet signature store in Bandra, an up-market Mumbai suburb, to show customers how a home can be done up. Incidentally, the place doesn't sell a single can of paint -- it is merely a meeting ground for customers and interior designers. Anand says the idea is to expose customers to new ideas and concepts that aren't always possible in a small store, most of which are packed with tins of paint and don't even have a wall free. That apart, a brand new chain of smaller premium retail stores called "Colour Ideas" has been rolled out. At least a dozen stores should be open by the end of the year; these are what Murty calls "a slice of our signature store." Again, the idea is to provide the consumer with the right ambience in which to check out all the options and get some advice, especially since not all dealers have the resources or time to educate customers. Of late, Asian Paints has made quite a splash of its samplers. "They cost just Rs 60 for 200 ml but help buyers visualise much better what the wall would really look like so that they're not disappointed later," explains Murty. With all this, the business has become far less seasonal in the metros. Then there are initiatives on the company's website from chatting with interior decorators to checking out options for colours and buying books. Asian Paints also connects with customers through the Home Solutions
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initiative -- a home-painting service which was started in 2000. The service is used by almost 20,000 homes every year. Emotional connect Asian Paints has several decorative paint brands. For exteriors, there are Apex, Ultima and Duracast. For interior distempers, there are Tractor and Utsav. In emulsions and enamels, its flagship is Royale. Given that consumers are moving up the value chain, Royale is Asian Paints' passport to success. In the early part of the decade, Asian Paints was not the leader in the premium space -- the spot belonged to ICI's Velvet Touch. The company felt it needed to create a campaign that positioned Royale as a lifestyle brand and if that meant spending more and using a star, it should be done. That is when it signed on film star Saif Ali Khan. "We felt a star would lend aspirational quality to the brand and it seems to have worked well because we are now the leader in the premium space," says Anand. In the process, Royale, which started out as a sub-brand, is now a full-fledged brand in itself. The benefits of aspirational positioning are paying off because spending power has increased; top-end products that fetch higher margins sell more than the products in the value-for-money range. Emulsions, for instance, are outselling distempers.
Today, more than half the dealer network of Asian Paints comprises Colour Worlds, as the shops with tinting machines
are known. The company's plan is to convert the other half also over the next five years. PwCs Sivakumar says where Asian Paints scores over others is its ability to partner and hand-hold dealers: "It's not enough just to have dealers in place, it's as important to train them about new technologies and get them more involved." Anand says so much time is spent these days teaching dealers that when a new product is launched, there can be a sixmonth gap between the time it hits the market in Madurai and Jalandhar. Dealers are a key stakeholder in the company's business model. It, therefore, tries to ensure that dealers always make
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enough money they are eligible for price discounts, especially on cash purchases and during some seasons. The strategy is obviously working because otherwise the volumes wouldn't have come through. IDFC SSKI managing director Nikhil Vora says: "Asian Paints is not a lethargic leader. It has grown the market, innovated with delivery mechanisms and products, and virtually managed to insulate the business from downturns." This company clearly won't allow itself to be painted into a corner.
Source:
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