Coming up Ace(r)s
Long dismissed as a price warrior, Acer is repositioning itself as a brand for the youth.
Rivals have for long dismissed it as a price warrior. Acer’s sole strength, they say, is its large factories in Taiwan which churn out personal computers at low costs. Recent events should make them sit up and take notice. Acer has overtaken Dell to become the second-largest maker of personal computers in the world after Hewlett Packard. Its acquisition of Gateway and Packard Bell, say investment analysts, has equipped Acer to put in place a multi-brand strategy — something for all segments of the market.
The picture in India is only slightly different. It is ranked third after Hewlett-Packard (which also owns Compaq) and Dell. It has overtaken homespun HCL in the last one year. (See chart.) Though Dell has improved its lead, Acer has reason to cheer. It is now ahead of others in the market like HCL, Toshiba, LG, Sony and Samsung. And its ambitions are big. “I strongly believe that we are poised for our next big phase of growth in India. We hope to become number two in India over the next one year,” says Acer India Managing Director WS Mukund.
To be sure, a price-led strategy may not be totally out of place in a price-sensitive market like India. The price tag is critical in every segment of the personal computer market. At the retail level, consumers in India pay cash down — banks have stayed away from financing personal computer purchases. So, the bill is not spread across several monthly installments. Given that features can be ordered off the shelf, consumers therefore go for the lowest price. In all institutional purchases (government offices, educational institutes and so on), the order is always given to the lowest bidder. Companies too give weight to price when they decide on buying personal computers.
Keeping prices low
How does Acer keep its prices low? There are several tricks. Hewlett-Packard and Acer, for instance, are the only large players that use AMD microprocessors in their personal computers. All others use Intel chips. While functionally both are more or less similar, an AMD machine can be up to $90 (around Rs 4,400) cheaper than an Intel machine of a similar configuration. Not a small difference. “Acer’s low production cost allows it to write competitive prices. Acer has its own manufacturing units in Taiwan, which ensures low-production cost,” says Ascendia Consulting Principal Analyst Alok Shende.
Acer was also, adds Rajendran, the earliest to launch netbooks with 10.1-inch and 11.6-inch screens in the country, when all others were selling 8.9-inch screens. When others moved to 10.1-inch screens, Acer launched netbooks with 11.6-inch screens. “It led us to occupy the top slot globally with over 40 per cent share in netbooks,” says Rajendran. In India, Acer sells more netbooks than others. Acer has also simplified its products and added innovations with form factors. Its ultra-small form factor desktop, for instance, is smaller in size as compared to the boxes of its competitors.
Gartner Research Services Principal Analyst Diptarup Chakraborti concurs that Acer’s success is not only because of low-cost products. “The market offers products at lower prices than Acer but many others do not sell as many computers as Acer. It has attained this position by closely working with its partners to create an exciting product range and attracting customers by high-decibel marketing,” he says.
Acer, says Rajendran, has focused not only on technology but also on looks and design. “Technology is not the only driver anymore,” he says. Its Ferrari, Gemstone, Timeline ranges are design-centric.
Design has found a place in Dell’s strategy also. Over a period, it has worked to improve the look and feel of its machines. It also introduced laptops in a range of colours. HCL too has taken note of it. Recently, it rebranded its retail stores as ME and launched a new range of netbooks and laptops under the same brand. “Almost 60 per cent of India is in the age group of 25 years and above. They want not only great technology but great looks too. ME has been launched keeping looks and design in focus,” says HCL Infosystems Executive Vice-president (marketing) George Paul.
Multi-branding
Rajendran perhaps also realises that brand Acer has come to be associated with value for money. He therefore believes that a single brand cannot cover all the market segments. “With different brands, a firm can introduce reduced prices, or the same price segment can be addressed by more brands which target different consumer profiles who value the technology and brand image differently and attach different values to these during purchase,” says he. Acer’s portfolio thus comprises Acer, Gateway, Packard Bell and eMachines. The brands cater to different price segments. eMachines are priced between Rs 9,999 and Rs 28,999, Acer between Rs 15,999 and Rs 42,999, and Gateway between Rs 21,999 and Rs 54,999. Packard Bell has not yet been launched in India.
Globally, the acquisitions of Gateway and Packard Bell have “helped us significantly since Gateway in the US and Packard Bell in Europe are very strong brands which have added significantly to our numbers,” says Rajendran. “In India, eMachines, our core value brand, has been a runaway success and is selling around 5,000 units per month.”
Gateway has been launched in India through Croma, the Tata-owned consumer electronics retail chain. In the current quarter, October to December 2009, Rajendran wants to move into another 10 cities and 50 stores across modern retail and multi-brand stores. “We expect Gateway to move up to 3,000 units per month starting January 2010,” says Rajendran. Gateway and eMachines, he is confident, will become significant players in the Indian market place in the next one or two years.
Shende points out that Acer’s distribution model is similar to that of market leader Hewlett-Packard. It has 110 exclusive stores, is present in 275 personal computer retail stores and retails through another 200 large format stores like Croma, Ezone, Staples and Vijay Sales. All told, it reaches 140 cities and towns in the country. Sector experts say that the top 100 cities and towns cover more or less the entire market for personal computers in the country.
For institutional sales (which comprise mostly desktops) Acer has tie-ups with all the big system integrators like TCS, Omega, Educomp, Netlink, NIIT and so on. Acer focuses on education, banking and financial sector and e-governance. Desktops comprise 55 to 60 per cent of its total unit sales. It has stretched the multi-brand strategy to enterprise segment also and sells under brands like Acer, Gateway and e-Machines.
Acer’s customer support network too is one of the largest in the country with over 450 consumer touch points. Acer has ramped up its customer service network with a toll-free call centre, SMS and chat services, and is the only brand available 24x7 across the country in select cities. The turnaround time could be anywhere between three and five business days from the day of the call. But it still has some distance to cover. Market leader Hewlett-Packard has over 700 service centres. Dell has 5,000 stores and partners in India.
Targeting the youth
Ad campaigns with Bollywood superstar Hrithik Roshan have contributed to Acer’s brand positioning as a young, aggressive, energetic and youthful brand. When most players were still marketing with the business segment at the core of their strategy, Acer kept youth at the centre, who are known for its faster adoption of technology. More than 50 per cent of the population in India is below the age of 30 and that’s what Acer has had on its mind while cutting out its marketing strategy. Its associations with brands like Ferrari, Yamaha Racing, FC Barcelona and Roshan in India reflect a brand personality to which the youth aspire.
But this is a game others also can play. Compaq (Shah Rukh Khan), Toshiba (Vidya Balan) and Lenovo (Saif Ali Khan) also have brand ambassadors. Sony recently brought in Kareena Kapoor for its ultra-slim Vaio line.
Rajendran attributes his company’s success to a “lean and thin organisational structure which helps it to take faster decisions which are greatly needed in a market as volatile as personal computers.” It has only three layers of management: The managing director, department heads and second-level management. Will it help overtake Dell in the days to come?