Vivek Basrur Is Director, Direm Marketing Services.

It is difficult to be prescriptive and precise, given the lack of details, but I will attempt to outline a broad approach.Let's start at the beginning. Hertig pens needs to be clear as to what it wants to do by entering the Indian market:

build and retain its premium image (which will require patience and investment in the short-to-medium term);

generate volumes in the short term (which may produce revenues, but at the cost of eroding its exclusivity);

do both (which will require a lot of balancing).

Thus, the key issues are:

Why is Hertig entering the Indian market?

Can Hertig afford to take a short-term view of the market and look for viability in the first year of operations?

 

Is the premium market large enough for Hertig fountain pens to survive with more well-known brands? Can Hertig survive without generating the volumes that will come from the lower priced segments and ball-point variants?

Will lower price offering dilute the brand image?

What retailing strategy is appropriate? Will selective retailing enhance the brand image?

The answers lie in a good understanding of Hertig's value proposition, the needs of the Indian consumer and the dynamics of the Indian market.

Let's look at each of the issues. Overall corporate objective: The fundamental issue is why is Hertig entering the India and market and what are its objectives. Does it want to be a niche player or a broad-based player? Does it want to be a Rs 1-crore or a Rs 10- crore player? The recommendations outlined below reflect the lack of clarity on this issue and need to be fine-tuned based on wh-at management wants to achieve.

Time horizon and size of the market: Any international company entering the Indian market with a consumer product needs to look at a minimum of three years, even before expecting to break-even. If Hertig is looking for viability in year one, then it can not survive on the premium market alone. A revenue target of Rs 45 lakh in a market of Rs 5 crore amounts to a market share of about 9-10 per cent unachievable in the short-to-medium term given the lack of brand recognition. This is especially true because brand image is everything in life-style products like premium fountain pens. Who wants a writing instrument for Rs 6,000?

Competitive entry: An issue closely linked to market size is that of the competition and their strategies. If Mont Blanc et al, decide to come to India in the investment mode and spend heavily on media and promotion, there is really little that Hertig could do, given its size. Thus, the company's decisions should not be driven primarily by responding to such competitors, as the premium market is too small to sustain more than two or three players. To be viable, the company should focus on the larger size segments.

Brand image: Hertig pens are primarily life-style products rarely are they bought as writing instruments. When people buy such products, either for personal usage or to gift, price is rarely the consideration. They are supposed to reflect good taste and personal status. Thus, offering the same brand at a much lower price and also in bulk volumes for the corporate gift market (to generate volumes) will do untold damage to the brand's image. No one wants to buy an exclusive product that is no longer exclusive.

A related issue pertains to ball-point pens. They are neither exclusive or life-style related. Attaching the Hertig brand name to ball-points will only further dilute the brand's image.

Retailing strategy: Selective retailing does not help support a brand's premium image keeping a product out of shops that can sell the product is just a lost sales opportunity. A related misconception is that retailing ambience is all important, and that selling through only

premium outlets adds to the brand value. While it is not irrelevant, it has nothing to do with selective retailing.The key issue is to focus on outlets frequented by the target consumers and then expand distribution with time.

Overall way forward, plus image and volume: Based on the above, it would seem that Hertig is facing an irreconcilable situation the simultaneous, but conflicting needs to preserve brand image/ exclusivity, and generate volumes to sustain the business by entering the lower priced segments.

Assuming that Hertig is willing and able to enter the lower-priced segments (apparently they already have the products), a possible answer lies in not just differentiating on price, but offering different brand values/propositions for each segment.

Thus, Hertig should examine the possibility of using different brands to address the different price segments. Using the name Hertig for all offering will dilute the core brand, and will not generate any positive rub-off-for the lower priced products, as the brand is relatively unknown. Hertig would be better off marketing segment-specific brands, with appropriate pricing and images. However, ball-points are best avoided for the moment.

Hertig could possibly be used as a mother brand for the lower priced products, with the marketing message centred around Brand XYZ, from the House of Hertig, the makers of the world's most exclusive fountain pens.

This may mean additional marketing and advertising expenditure, but is probably a better proposition than sending confused signals to the market about the image associated with Hertig. The marketing inve-stment would be best spent by focusing on the various target segments with different messages.

Broad brand strategy: It see-ms that there is a need for at least three different brand franchises:

Hertig: Could be used in the collectors and corporate gift segments. The potential risk of using the same brand across these segments is potentially low.

Mid-range brand: Could be used in the Rs 445 and upwards segment. The possibility does exist of further segmenting this range, but would require further research. Ball-points should be avoided.

Mass brand: This segment seems to be most attractive and the largest (Rs 65-70 crore). However, two things are critical here Hertig needs to be sure that they are willing to go that far down the line in terms of price and image, and needs to be able to differentiate its products in this range. A possibility would be to launch a mild-premium brand (at Rs 95-110). The additional realisation from this position could be used to build the basis of differentiation. These bases could be:

Significantly superior design and packaging, which would reposition current competition.

Aggressive use of media, since current spend levels in the category are low.

Take Titan and its range of watches. It offers inexpensive plastic watches under the Timex label, mid range watches under the Titan label and high-end jewellery watches under the Tanishq label. Titan was initially launched at a mild-premium to HMT, but differentiated on design/packaging and large investments in media.

Once they had successfully att-acked this segment, they were able to easily extend the brand in both the upward and downward direction. That Titan offers inexpensive plastic watches has not eroded its brand image nor has its come in the way of the success of its jewellery watches its just that each segment has been handled differently in terms of product offering, image and positioning.

Retailing strategy: No one can refute the argument that wide and deep coverage in retailing is critical to sales volumes. However, for exclusive products just entering the market, there is merit in looking beyond the obvious while formulating an entry strategy.

One route that companies often overlook is that of the duty-free shops at Indian airports, and at those most frequented by Indian travellers. If the product is not well known and could use some local image development, showcasing the product in the duty-free stores is a good option. Retail shops in 5-star hotels can also be tried out.

As the product gains in market acceptance, Hertig should expand distribution, but ensure that the outlets are frequented by the target consumers for the various brands. But it should not make the mistake of adopting selective retailing indiscriminately that will only mean lost sales.

Pankaj Vaish is associate partner, Andersen Consulting.