Should Bajaj be dropped? Implementation issues

In my previous post, I had discussed the new branding strategy of Rajiv Bajaj from the point of view of management theory. Well, management theory suggests that Rajiv Bajaj is on the right track. Now let us discuss some of the implementation issues that Rajiv Bajaj will have to grapple with to make his new branding strategy a success. In addition, we will also try to comment on some of the issued and concerns raised by others while debating on this issue.

How will the dealer network be branded?

One of the major implementation issue that Rajiv Bajaj will face is in terms of how he will implement the strategy at the dealers end. There are a number of issues that will need to be addressed as far as the dealer network is concerned.

First, what will be the branding of the dealers? Will the dealers continue to be called Bajaj dealers? If yes, then the new branding strategy of Bajaj will be diluted as from the customer’s perspective there would be no change in terms of branding. For the new branding strategy of Bajaj to work, the customer has to perceive the new branding strategy in his mind and it does not matter what Bajaj Auto is thinking internally. Continuing with the current status of the dealership network will be counter productive. It will also be expensive and confusing. The dealer will have 4 different representatives, one for each brand, visiting them with each asking the dealer to take certain actions to promote their brand. Some of these actions may not be in sync with the strategies of the other brands. Also, each brand representative may ask the dealer to allocate more resource ti his brand or allocate more space in the showroom. This would not only be confusing to the dealer but would turnout to be expensive for both the dealer and Bajaj Auto. What more. It could end up creating conflict between the company executives of different brands as well as the dealers.

In case, Bajaj is thinking of developing separate dealerships for each brand, then there are multiple issues to be addressed. How will Bajaj Auto decide which dealer will handle which particular brand? Will the division of brands bring about discontent among the dealers? Will their morale come down? Also, what about the viability of dealers? When dealers start dealing with one brand instead of 4, their viability will be definitely adversely affected. What about small towns where a standalone dealership for one brand will probably not be viable.

My experience in the tractor industry suggests that by appointing separate dealerships, the overall sales of the company will increase in the medium term but in the short term some dealerships will suffer because of viability issues. I believe that in the long term, the profitability of the dealerships will also improve as they will be focused on selling one brand. For instance, they will carry less models and spare parts in stock. As the number of models/brands they sell reduce, they will also become more effective in selling. It is the short term that I would worry about more.

This issue has been faced by many companies before. A large number of Escorts dealers were selling tractors (Escorts & Ford tractors) as well as Rajdoot motorcycles. Rajdoot motorcycles division felt that dealers who were selling both tractors and motorcycles didn’t put enough effort in selling Rajdoot motorcycles. As such, the Rajdoot motocycles division wanted to establish separate dealerships. Later I think the issue of separating Escorts and Ford tractor dealerships was also raised.

When the customer wants to buy Discover, will he walk into a Discover showroom or a Bajaj showroom? This is an important question that Rajiv Bajaj has to answer. If you ask me, my answer would be that he should walk into a Discover showroom.

What will be the positioning of each brand?

One of the most important issue which has not been clarified by Bajaj Auto is that what will each brand stand for. What will be the positioning of each brand? Will it be based on the horsepower, quality, target market, pricing, brand personality or some other factor? When new models are introduced, what will be the basis on which Bajaj Auto will decide which brand it will carry. The success of Rajiv Bajaj’s strategy will depend upon how distinctly he positions each brand otherwise the probability of cannibalization of sales will increase and each brand could end up competing with each other.

Will investment on branding increase?

Some people argue that instead on one brand, now Bajaj will have to promote 5 brands which will result in a tremendous increase in branding expense. I believe that initially there might be a slight increase but over the long term it will not be an issue. Even today, Bajaj is spending money to promote all its brands. If it introduces a new model, it spends money on promoting that particular model. Such promotional expense will be incurred whether it continues with its present strategy or shifts to the new strategy.

In fact, I believe that the branding expense may actually come down because each brand will now have a distinct focused positioning. Today, not only is the Bajaj brand diffused as it is spread over a broad range of products but also that every motorcycle under the brand also has a different positioning. Logically, it would seem that one may have to spend more on promotion when the brand is diffused in order to clarify the positioning of the brand under the diffused umbrella brand. On the other hand, less expenditure on brand promotion is required when the brand has a focused positioning.

Will Bajaj be competing with itself?

This is an interesting question. If the positioning of the different brands is distinct, cannibalization of sales will not be an issue. In fact, distinct positioning without the umbrella brand will most probably lead to increase in sales. Why? Simple. Each brand will be focused on enhancing its own position in the marketplace and competing with other brands in its market segment to increase its market share. Also, the customer will not be confused when he visits a particular brand dealership. The products that he sees in the showroom will clearly identify with the stated or perceived positioning.

Will dropping Bajaj brand have an adverse impact?

One of the major objections that some people have is that the new strategy will lose the benefits of the name recognition and reputation of parent brand Bajaj. Some have even cited the example of HLL which today is letting customers know, even though in a subtle manner, that the product being advertised is an Unilever product.

Others have argued that practically all the auto companies in the world are using the parent brand strategy so why not Bajaj? For instance, when you buy a Corolla, Camry or an Innova, you are buying a Toyota as much as you are buying the individual brands.

My response to this argument is as follows:

(a) As stated by Rajiv Bajaj, the Bajaj brand is very diffused. It covers everything from heaters, hair oil, insurance, finance and home appliances. So, one does not know if there is any significant advantage that is being lost.

(b) None of the global auto brands are so diverse in nature and practically none of them (as far as I know) is associated with consumer goods. If any global auto brand is associated with any other products or services, they are basically technical and engineering in nature and as such their association with these products and services is not that well known as in the case of Bajaj.

(c) In a way, Rajiv Bajaj is also trying to create 4 different umbrella brands with distinct and focused positioning under which he will sell different models. In this case, the umbrella brands will not be as diffused as the Bajaj brand is but rather each will have a unique distinctive positioning.

(d) Bajaj has also not been able to discard its association with scooters.

Should Rajiv Bajaj adopt a stepwise approach

Some have suggested that Rajiv Bajaj should adopt a stepwise approach while implementing the new branding strategy. Taking the problem of separating the dealer network into consideration, this suggestion does have some merit. The strategy could be implemented stepwise as follows:

(a) Bajaj Auto should first launch a separate brand for high end bikes like KTM. Maybe, they should even have a separate company just like what Toyota did when it launched Lexus. Even the dealerships could be separate.

(b) In the larger cities like 4 metros they can appoint separate dealers for each of the brands. Slowly and steadily they can implement the same in other cities also.

(c) Another option is to separate out the largest selling brand. The higher volumes of this brand will make the new dealer network viable. However, there could be resistance from existing dealers because they would lose big chunk of their revenues.

(d) Yet another option is that you separate out the lowest selling brand. Dealers may accept this easily. Also, separating the low selling brand will give it the focus it needs to generate higher volumes.

(e) Internally, Bajaj can organize as they have planned. They can organize themselves on the basis of the proposed strategy.

Recently, Al Ries, the guy who gave us the concept of positioning was in India and he indirectly endorsed Rajiv Bajaj’s strategy. According to Al Ries, Reliance and Tata brands have a long term problem since they are not focused. According to him, the key to success of brands is focus, focus and focus. Just like Reliance and Tata, even Bajaj brand is not focused.

It is obvious that the new brand strategy of Bajaj makes sense but there are serious issues that need to be addressed on the marketing side. We all know that branding and positioning is not established in the factory but in the mind of the customer.

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