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'You Can't Survive On Price-cuts'

Thomson Consumer Electronics, the $16-bil -lion turnover company that sells more colour televisions in the US than Sony, Panasonic, Goldstar, Sharp and Samsung put together, plans to work its magic in India now. In an interview with Neerja Pawha Jetl

'You Can't Survive On Price-cuts'
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To what do you attribute Thomson’s success in the European and US markets? Do you think the same strategy will work in India?

The basic ingredients of our success are the right product, right range and right distribution channels, with good backup service. Worldwide, Thomson has taken the acquisition route to growth. In 1986, General Electric acquired RCA, the largest-selling brand in the US, and sold it to us in 1987-88, sending our marketshare leap-frogging to the top. In Europe, a similar strategy gave us a portfolio of top brands like Telefunken, Nordmende, Ferguson, Saba and Brandt. Today, Thomson has a portfolio of nine brands which will be progressively launched in the Asian market. We couldn’t have taken the acquisition route in India as there’s nothing to buy here. No Indian brand has any infrastructure or technology of its own. Hence we have launched the Thomson brand. The basic strategy remains: give the consumer what he wants, at the price he wants and keep him happy much after the sales transaction is through. The formula is unbeatable.

Are you planning to do what Hindustan Lever did with the FMCG industry—a brand in every segment, every price category and product niche?

Precisely. The range of colour televisions (CTV) being offered by us is unmatched by any other brand: 14 models in sizes ranging from 14" to 80", with prices ranging from Rs 11,000 to Rs 5 lakh. Plus, we have modified our products to suit Indian conditions like power fluctuations. Our sets can work on voltage ranging from 100 watts to 300 watts. If the voltage dips in your house, chances are that the lights will switch off but a Thomson TV won’t. That’s my claim.

The market seems to be in the doldrums now with companies resorting to price-cutting, roll-backs, dealer incentives and freebies to consumers. What are your targets?

The market is in a slump. But the customer is willing to pay a price for quality. This is being vindicated in our sales. Last year we sold 50,000 sets. This year we’ll sell 1,00,000. We hope to capture a 10 per cent marketshare by 1998.

Isn’t this target too optimistic, given that the Indian consumer has so far not bought the ‘superior value’ for money offered by Sony and Panasonic? Indian brands have fared better on the basis of lower prices.

The share of Indian companies has already declined in the last one year. Even if foreign brands have only a 5 per cent marketshare, it has come from companies like BPL and Videocon. It will be difficult for them to survive on the basis of price-cutting, especially in a market that’s not growing. I’m not saying they will vanish. But the days of predominance of one brand in any market are over. International brands will score because we have a strong R&D backup. Thomson spends $500 million every year on maintaining its technology edge. We have factories throughout the world that give us economies of scale. Pricing is a function of scale and technology.

With a majority of CTV sales coming from conversion of B&W sets, this segment is more price-sensitive than technology-sensitive. What will be your pricing strategy?

Unlike in the US, consumers in India buy TVs once in a decade or more. Our TVs incorporate features that will be relevant even tomorrow. Our 21" fusion model has a reception facility to accommodate stereophonic transmission. Likewise for NTSC playback, laser disc compatibility, hyper band, etc. Here we have an edge over other foreign brands too, for they all have some products which has been made or patented by us. Ultimately it’s technology that cuts costs. You can also cut corners by importing cheap Chinese kits, assembling it under your brand, but that’s short-term. Our pricing is based on making the consumer perceive our products as value for money. We can compete with a low-end product with lower pricing, and with premium products by pricing accordingly. We have just sold our 80" TVs for Rs 5 lakh. There is a market.

How do you plan to tackle the recessionary trend in the industry?

We’re moving cautiously, putting up warehouses, dealer networks, training them and setting up after-service networks which are very crucial for our strategy. By January, we will cover the whole of India. We’re also building our brand. We’ve already done better than Sony, even though their brand awareness is higher. In the South we have a 10 per cent share, in the North, 5 per cent. Punjab is doing very well. This year the market hasn’t grown at all. So TV makers will have to create the market. Already freebies are being peddled by cash-strapped companies like Videocon and Akai. But these are desperate moves. A good strategy is to build consumer confi-dence. Our advertising budget for the year is Rs 10 crore. Next year, we may hike it to Rs 15 crore. We also plan to hike sales to Rs 200 crore from this year’s target of Rs 110 crore. If market predictions of sales of eight million sets by 2000 AD materi-alise, there’s a market waiting to be tapped. We won’t be missing any opportunity.

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