The story of the day has been Freedom 251. A virtual unknown brand,
from a virtually unknown company has taken the digital world by storm by
launching a smart phone for Rs 251. Even a regular phone, forget a
smartphone, never came this cheap. Like many others, I also tried
booking the phone but the website had crashed and later on in the day
the website had posted an apology.
So a two day press blitz across publications in English and vernacular; ironical that a digital brand still needs press to sell its cause, had done its job. Or has it?
Let’s pedal back into three cases in the past and not so recent past where brands sensed a price opening, too good to be true, and failed.
The most recent example of course was the Aakash tablet. Launched amidst much fanfare and supported by the Government with subsidies and excise exemptions, the brand was supposed to be available for as little as Rs 1130 for college students. But the product fizzled out due to production issues. It could not deliver the promised product at the expected price, on time and the government walked out of it. The project was dropped in mid 2015 and now the product is being promoted and sold by the private vendor under a different brand name Ubislate, with prices from Rs 3500 upwards. The brand though lists in the top 5 selling tablets in India. A case of overpromise and under delivery.
The next example is the well known case of Nano. A car brand which took the world imagination by storm, failed for a simple reason. In India car is an aspirational status symbol which cues that one has achieved middle class status. So a car, whose only appeal lay in its low price, failed. The brand though soldiers on. Now being repositioned as an entry level, fun car for the young minded, the brand is virtually history.
The third example was of the early nineties. Colour TV in those days was a small, expensive category. 70% of TV sets sold in India were still B&W. Akai stormed the market with its audacious exchange offers. It was virtually selling you a colour TV at a price that was less than half of the established brands. An average 21”colour TV costing around Rs 12,000-Rs 15,000 was being sold at Rs 5900 in exchange for an old B&W set!
The strategy was well planned by Kabir Mulchandani a scion of the Mirchandani family who owned Baron Electronics. They tied up with Akai, a Japanese brand, owned by a Macau based merchant, with no production facilities. Baron imported TV sets from various suppliers in Taiwan at rock bottom prices with bulk orders. These were then branded Akai and backed by enticing offers and advertising, launched in the market place.
To give the devil his due, the market with low penetration of colur TVs was waiting for a disruption. Also it had a great insight. Indian families are not known to junk anything. So he found value for old sets. So the exchange offers hit the nail on the head. Within a year Akai had become the market leader in CTV’s, beating established players like Philips, BPL, Videocon etc and expanding the market. Soon all brands started their own offers. It spend heavily on advertising and had some interesting media innovations too. For example, Akai offered to take all outdoor sites which were not rented, and lying unpainted at no cost. It paid for the painting cost and just used the Akai logo in full red on the signages. When any other brand was willing to pay for those sites, Akai would pay for painting off its brand name. So for the cost of two paintings (flex skins were not prevalent those days), he would get dozens of hoardings in each town, virtually free.
But Mr. Mirchandani was playing with fire. He had exploited a loophole in the customs and excise act and was paying low duties thus managing to keep the price down. Given the way the Indian system works he was caught out after a few years and slapped with a heavy excise penalty notice. He skipped the country, went AWOL, reappeared in Dubai to dabble in real estate, got arrested after the global meltdown on fraud charges, spent more than a year in jail and was then released. As far as I know he still has a look out notice against his name in India.
Meanwhile the brand after having great success started faltering. It had done a great job in promotions but had forgotten that a key ingredient for success in durables is after sales service. Akai had virtually ignored this aspect. With wafer thin margins they could not afford to provide the same too. Plus, as it had tied up with various vendors at various times, it did not even have spare parts inventory. The initial flush of the promotion gave way to customer dissatisfaction and ire.
The Mulchandani family also had royalty issues with Akai. It broke up the franchise agreement and the brand has since struggled with various partners, the last being Videocon.
For those more interested in this case read http://www.business-standard.com/article/specials/akai-dissecting-a-discount-brand-198010301123_1.html
Each of the above three cases, in my mind had unique learnings. And all these should be a good lesson for a start up like Freedom251.
Akaash was simple. No groundwork was done, no logistics were worked out, overall points were hashed through but the finer points were missed. Freedom251 are you listening?
Nano, had a solid functional reason but failed on emotional ground. You don’t buy a car. You buy a status symbol. Of course the functional reason too started failing with quality issues like “stories of unexplained fires” spreading like wildfire. Freedom251 are you listening?
Akai had a solid promotional story, a great insight but lacked the full business model. Plus it had some dubious business practice. Freedom251 are you listening?
Will history repeat itself?
So a two day press blitz across publications in English and vernacular; ironical that a digital brand still needs press to sell its cause, had done its job. Or has it?
Let’s pedal back into three cases in the past and not so recent past where brands sensed a price opening, too good to be true, and failed.
The most recent example of course was the Aakash tablet. Launched amidst much fanfare and supported by the Government with subsidies and excise exemptions, the brand was supposed to be available for as little as Rs 1130 for college students. But the product fizzled out due to production issues. It could not deliver the promised product at the expected price, on time and the government walked out of it. The project was dropped in mid 2015 and now the product is being promoted and sold by the private vendor under a different brand name Ubislate, with prices from Rs 3500 upwards. The brand though lists in the top 5 selling tablets in India. A case of overpromise and under delivery.
The next example is the well known case of Nano. A car brand which took the world imagination by storm, failed for a simple reason. In India car is an aspirational status symbol which cues that one has achieved middle class status. So a car, whose only appeal lay in its low price, failed. The brand though soldiers on. Now being repositioned as an entry level, fun car for the young minded, the brand is virtually history.
The third example was of the early nineties. Colour TV in those days was a small, expensive category. 70% of TV sets sold in India were still B&W. Akai stormed the market with its audacious exchange offers. It was virtually selling you a colour TV at a price that was less than half of the established brands. An average 21”colour TV costing around Rs 12,000-Rs 15,000 was being sold at Rs 5900 in exchange for an old B&W set!
The strategy was well planned by Kabir Mulchandani a scion of the Mirchandani family who owned Baron Electronics. They tied up with Akai, a Japanese brand, owned by a Macau based merchant, with no production facilities. Baron imported TV sets from various suppliers in Taiwan at rock bottom prices with bulk orders. These were then branded Akai and backed by enticing offers and advertising, launched in the market place.
To give the devil his due, the market with low penetration of colur TVs was waiting for a disruption. Also it had a great insight. Indian families are not known to junk anything. So he found value for old sets. So the exchange offers hit the nail on the head. Within a year Akai had become the market leader in CTV’s, beating established players like Philips, BPL, Videocon etc and expanding the market. Soon all brands started their own offers. It spend heavily on advertising and had some interesting media innovations too. For example, Akai offered to take all outdoor sites which were not rented, and lying unpainted at no cost. It paid for the painting cost and just used the Akai logo in full red on the signages. When any other brand was willing to pay for those sites, Akai would pay for painting off its brand name. So for the cost of two paintings (flex skins were not prevalent those days), he would get dozens of hoardings in each town, virtually free.
But Mr. Mirchandani was playing with fire. He had exploited a loophole in the customs and excise act and was paying low duties thus managing to keep the price down. Given the way the Indian system works he was caught out after a few years and slapped with a heavy excise penalty notice. He skipped the country, went AWOL, reappeared in Dubai to dabble in real estate, got arrested after the global meltdown on fraud charges, spent more than a year in jail and was then released. As far as I know he still has a look out notice against his name in India.
Meanwhile the brand after having great success started faltering. It had done a great job in promotions but had forgotten that a key ingredient for success in durables is after sales service. Akai had virtually ignored this aspect. With wafer thin margins they could not afford to provide the same too. Plus, as it had tied up with various vendors at various times, it did not even have spare parts inventory. The initial flush of the promotion gave way to customer dissatisfaction and ire.
The Mulchandani family also had royalty issues with Akai. It broke up the franchise agreement and the brand has since struggled with various partners, the last being Videocon.
For those more interested in this case read http://www.business-standard.com/article/specials/akai-dissecting-a-discount-brand-198010301123_1.html
Each of the above three cases, in my mind had unique learnings. And all these should be a good lesson for a start up like Freedom251.
Akaash was simple. No groundwork was done, no logistics were worked out, overall points were hashed through but the finer points were missed. Freedom251 are you listening?
Nano, had a solid functional reason but failed on emotional ground. You don’t buy a car. You buy a status symbol. Of course the functional reason too started failing with quality issues like “stories of unexplained fires” spreading like wildfire. Freedom251 are you listening?
Akai had a solid promotional story, a great insight but lacked the full business model. Plus it had some dubious business practice. Freedom251 are you listening?
Will history repeat itself?
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