Monday, March 18, 2013

“The Consumer is A dictator...”

Maruti did Well to Capture Rural Attention. But it would have Done Better by Increasing Supply and not Missing out on Demand in the Cities!

Whether it is the announcement of the launch of CNG versions of its cars, or the fact that the company has finally come to take the Indian rural consumer seriously, it has all worked in favour of Maruti Suzuki. B&E talks to Mayank Pareek, Managing Executive Officer of Maruti Suzuki, who has been one of the strongest pillars of Maruti’s citadels over the past two decades, on the rural-consumer focus that really worked for Maruti during FY2009-10, supply-demand mismatch and the changing consumer psyche...

B&E: It is believed that Maruti Suzuki really began to focus on penetrating the smaller towns and rural parts of the country under your leadership. How has the strategy paid off when it comes to helping the company’s topline grow?
Mayank Pareek (MP): From contributing about 1-2% to our revenues, today, rural and tier III markets account for about 18% of our annual revenues. We mostly sell our smaller cars there. Even during the past financial year, the response we got from the smaller locations was tremendous. The rural fairs that we conducted helped to attract many consumers towards our brand. There were many buyers in such fairs who came with bags full of money. They are the lot which prefers a 100% down-payment mode of transaction than visit dealerships, where they are not very comfortable with English-speaking salespeople.

B&E: So do we primarily say that rural India helped revive your sales? And how about the bad news that most of your products are short in supply?
MP: The main reason for the revival in sales in FY2009-10 was the potential of the Indian market. It is such a huge market that there is space for everyone. You just need to set the right agenda and innovate continuously to make sure that the products stay relevant to the target consumer. For instance, when the world was being troubled by the recessionary winds, we at Maruti had established a strong base in the rural parts of the country. The basic reasoning was simple – if a Lehman Brothers is crashing in the US, it hardly bothers the consumer in the rural parts of India. Also, along the way, we have broken many myths. One of it is rural means poverty, which is not true at all. Today, close to 2% of our total sales comes from villages that have less than 200 habitants. Therefore, today we are in a situation where the consumer is demanding, but we don’t have enough production capacity to meet that demand. Hence, almost all our products are running on waiting period. But that too is a healthy sign, isn’t it?

B&E: How about producing more cars...?
MP: We are investing close to Rs.25 billion to set up a new plant in Manesar (Haryana) which will give the company an additional capacity of 250,000 vehicles annually by 2011. But till then, we will have to manage with our existing capacity.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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