Should Bajaj be dropped?

We all know by now that Rajiv Bajaj takes radical decisions. After deciding to exit the scooter market, he is taking another radical decision to restructure the company’s branding strategy. Unfortunately, Rahul Bajaj did not agree with Rajiv on his strategy to exit the scooter market and now he does not agree with Rajiv on the new branding strategy.

Rajiv Bajaj, managing director of Bajaj Auto, recently unveiled his new branding strategy, that is, the company will focus on the five motorcycle brands and slowly and steadily phase out the rest of the brands even brand Bajaj, our Hamara Bajaj. According to Rajiv’s plan, Bajaj Auto will become a store or a garage of independent brands like Hindustan Unilever wherein marketing and branding focus will be limited to four motorcycles brands (Boxer, Discover, Pulsar and KTM) and the auto rickshaw brand. The parent or the umbrella brand “Bajaj” will take a back seat.

The entire organization will also be realigned with the new branding strategy, that is, the 5-brand focus strategy. Each brand will have its own organization to manage its brand as a profit centre. Every brand will have its own marketing and sales, R&D, accounts, finance, advertising, HR, production and distribution departments. According to Rajiv Bajaj, “In a brand-centred company, the brand strategy must manage all decisions, including styling, performance, sourcing, positioning, and pricing.”

Eventually, the Bajaj brand could be completely dropped. Explaining the reasons behind the new strategy, Rajiv Bajaj said, “We said to ourselves, we must have a strong differentiator in the marketplace so the consumer will buy from us even when he has a choice of buying a rival (Japanese) brand. It can’t be cost, quality or production levers, so it has to be a brand lever as that would be the most potent level at which to differentiate oneself—at the level of the business model itself.”

Bajaj has already stopped making bikes such as the XCD 125 and 135, Wind and Caliber. Others like the CT100 will be made for some export markets, but according to Rajiv Bajaj even these models will be migrated to the Boxer brand in a year.
What are the reasons behind this radical and drastic move? Rajiv Bajaj told ET NOW, “The Bajaj brand is very diffused, covering everything from heaters, hair oil to insurance and financial services. Correcting that problem is the biggest opportunity for the company.” He further added, “We have to be clear about what our brand stands for. A sporty Pulsar and the humble auto rickshaw are as different as chalk and cheese.”

The same reasoning was behind Rajiv Bajaj’s decision to not to use the Bajaj name on the ultra-low-cost car that is being jointly developed with Nissan and Renault. Rajiv’s explanation was simple and clear when he said, “Extending our existing brand name to that product would have been contra to our strategy. The ultra-low-cost car doesn’t fit into any of the five brands.” However, it is suggested that a new car brand may be created which may be jointly owned.

What does Bajaj Auto patriarch, Rahul Bajaj think of this new strategy? Well, he is dead against this idea and has publicly apposed his son’s move. It may be recalled that Rahul Bajaj also had a difference of opinion with his son on the issue of the branding of the small car that they were planning to develop with Nissan as well as on the strategy to exit the scooter market. As we all know, Rahul Bajaj is not shy of expressing his opinion known publicly. On Rajiv’s strategy to exit the scooter market, Rahul Bajaj had stated, “There is still lot of demand for scooters with annual volumes at around 1.8 million units. I don’t understand why Bajaj Auto can’t develop a scooter that sells in good numbers.”

The media has turned this issue of the new brand strategy into another fight between father and son and are blaming their different management styles for their difference in opinion on the issue. This is not true. This time the difference between father and son is actually over the understanding of the concepts of branding and positioning. It has nothing to do with management styles. In fact, argument over the issue of using brand extensions and umbrella brand versus using single-brand-single-positioning (SBSP) is quite common. It is actually a fight between those who understand the concept of branding and positioning and those who do not. I believe that majority of the people do not understand the concept of positioning and thus end up making serious mistakes by pursuing brand extension and umbrella brand as their branding strategy. It is fight between financial logic versus the logic of the mind of the customer where all the marketing battles are fought.

It seems that Bajaj Auto is all set to implement its new strategy. One of Rajiv Bajaj’s associates has stated, “Some people may find false comfort in stretching the brand beyond what’s logical. However, we believe in our strategy and proof is that execution is already underway, as seen on our products in the showroom.”

There is a great deal to be learned from what Rajiv Bajaj is trying to do. I will try to analyze this strategy of Bajaj from two perspectives. One, what does the theory of branding and positioning suggests? Two, what are some of the issues and concerns that need to be addressed while implementing this strategy?

Of course, before I put across my point of view, I would like you to suggest if Rajiv Bajaj is attempting to pursue the right strategy or not and your reasoning for the same.

Avinash Narula

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