The world’s lowest-cost refrigerator will be launched in March.
The bullock cart stops in one of the dusty alleys in Osnamabad, a small town in the Marathwada region of Maharashtra. And two village girls, dressed in traditional Marathi Kasta Saree, step out in style with the products they have helped co-create with engineers at Godrej & Boyce.
The quality of the sales pitch of the Class 10-pass girls would do an MBA proud. For, they know the products well, as the company involved them right from the conception stage to designing and marketing its ‘nano’ refrigerators, named Chotukool (Little Cool).
The refrigerators, which are being test marketed in a few towns in Maharashtra, are set for a nationwide commercial launch in March.
For Chotukool, the Godrej group has junked the traditional model of a proprietary channel with a sales force and a distributor-dealer chain and has joined hands with micro-finance institutions.
This new distribution ecosystem is just one of the unique experiments that Godrej is trying out to make a splash in the bottom of the pyramid refrigerator market. There are many more.
Chotukool does not have a compressor. It looks like a 43 litre cool box, which is loaded from the top, and can run on battery. The refrigerator weighs only 7.8 kg, runs on a cooling chip and a fan similar to those used to cool computers. Given the power shortage in the countryside, it also uses high-end insulation to stay cool for hours without power. The operational cost is low: the refrigerator consumes half the power consumed by regular refrigerators.
But the clear winner is its cost. At Rs 3,250, it costs almost 35 per cent less than the cheapest category of refrigerators available in the market today.
Apart from involving village girls in selling the products at a commission of Rs 150 per product sold (something that the company claims will reduce the distribution and marketing costs by 40 per cent), Godrej has gone in for several engineering innovations to keep the price low. The size is small and the number of parts in Chotukool has been reduced to just 20 instead of 200 that go into regular refrigerators.
“It’s a reverse engineering of sorts,” says G Sunderraman, vice president, corporate development, Godrej & Boyce.
Sunderraman says the idea to target the bottom of the pyramid customers was given shape at a workshop with Clayton M Christensen, Harvard University professor, best known for his ideas on disruptive innovation. The idea discussed in the workshop was to involve villagers right from the design to selling of the product.
The company did that in right earnest ever since it unveiled the first prototype of Chotukool in September last year. The product has gone in for several alterations after every little detail, including pricing and colour (red and blue were the clear winners) was discussed with a select group of villagers and micro-finance institutions.
The Godrej group is betting big on Chotukool. “It will certainly help us in overtaking competition,” says Sunderraman. The group lost its leadership position to Korean giants LG and Samsung and Whirlpool of the US a few years ago. Godrej & Boyce is currently the fourth largest player in the over three million units market.
But analysts say the cheapest segment is not the largest selling category in refrigerators. The largest selling category with over 50 per cent market share is the 160 to 170 litre size models priced at about Rs 6,500 to Rs 7,500. Hence, making Chotukool a success will be a long haul for the group, more so in a category which needs volumes to compensate for the ultra-thin margins.
But Sunderraman is unfazed. “We are trying to create a market segment which would evolve gradually. Eventually, it should have a significant share of the market,” he says.
In any case, Chotukool is bound to attract a huge new group of consumers in a country where fewer than one in five homes has a refrigerator. It is also in tune with what Management Guru C K Prahalad has been saying for some time now — serving the poorest of the world can and should be good for business.
Prahalad would be happy with the inventiveness of the people connected with Chotukool.