 "Right at your door")
After decades of market domination, if a brand faces the spectre of sliding sales and eroding market share, the first reaction of the brands custodian would be ask if his star product was the right product for the market after all. And look for answers in the changing consumption patterns or to find out what the competition is doing right. However, the answer sometimes lies elsewhere. Rather that overhauling the product, it might be a good idea to check if there are any bottlenecks at the supply end. Indeed, getting your product in the hands of even one customer can make a world of difference.
Thats exactly what printer market leader Hewlett-Packard (HP) found when it flagged off home delivery of cartridges in 2010. In one go, the move arrested the slide in its market share and helped HP wrest the initiative from grey market products that were eating away sales of its consumables. Check these figures for proof. Between 2010 and 2012, HP managed to better its share in the inkjet consumables market from close to 80 per cent in 2010 to upwards of 83 per cent in 2012. Arch rival Canon has stayed at nine per cent whereas Epson has slipped from 11 per cent to settle at six per cent. Whats best, it has achieved this without making huge investments either in putting together an in-house delivery network or a cluster of warehouses.
Before we discuss how HP laid out the delivery plan, heres a look at how the market had started shifting from under its feet. HPs monopoly in the printer market in India (it had more than 80 per cent share in the early 2000s) came under attack from the year 2003 and became worse as the decade wore on. By 2009, most players in the market took a serious hit. The first half of 2009, each of the top five vendors in India's printer, copier and MFP (multi-functional products) market recorded a steep fall in sales the only player to buck the trend was Canon.
HP shipped 562,300 pieces in total, a decline of 18.7 per cent compared to 692,100 in 2008. Worse, rival Canon improved its market position with 178,100 pieces, an increase of 22.2 per cent compared to the first half of 2008. While HP remained the leader with 49.8 per cent market share in the first half of 2009, its performance was worse than ever before. This was a reflection of the slowdown in the market according to a Gartner report, the shipments of combined printer, copier and multi-functional product market in India declined by 12.7 per cent in the first half of 2009but HP was ready to take the bull by the horns.
As a first step, it commissioned a study to understand why the market was slacking off. The findings showed the opportunity that was waiting to be tapped. The study showed that while institutional buyers were moving towards laserjet printers, for individual buyers printers were a low priority item. Inside a home, while a personal computer is a prized possession (like other valuable assets such as car, television etc), a printer is a dispensable peripheral, says Mohit Raizada, senior market analyst at IDC. Despite end user promotions and heavy marketing campaigns, peripheral products such as printers remain a secondary product for Indian consumers, he adds.
For HP, the low penetration of printers at homes it was a third of the total PC penetration meant big opportunity. PC penetration itself in India was 10 per cent at that time and the opportunity for printers as a category suddenly seemed endless.
Now, the other side to the printer business is that of consumables, the part that keeps the business going so to speak. The consumables market for inkjet printers is almost three times that for laser toners. Also, this is the business where the volumes and the margins lie.
Armed with this insight, HP embarked on its way to charting a new course for the future.
The research showed that the average consumer regarded the cartridge prices prohibitive. Not surprising, given the culture of running down to a neighbourhood cyber cafe for a Rs 5 -7 print out.
HP tackled the pricing issue at two levels. One, by making its products more affordable: today (since 2012) its inkjet printer range, christened Inkjet Advantage starts at around Rs 4,500, where it began at Rs 7,000 earlier. The top end model in the category is priced at around Rs 8,000 now. Even the cartridges, priced between Rs 900 and Rs 1,000 previously, are now available between Rs 450 and Rs 475. HP has a campaign around this price point, assuring 550 pages for Rs 450.
Bringing down the price point of cartridges was, however, not sufficient for the company. Unlike before, where each piece of hardware required a unique cartridge, today there are third party cartridge manufacturers in the market that can beat HP at supplying the consumables for its hardware. And then there is the issue of dealing with counterfeits. HPs response to contend with both these is a first in the industry enabling consumers to order a cartridge as easily as ordering pizzas.
The home deliveries are facilitated via two initiatives dial-a-cartridge and click-a-cartridge. Globally, HP offers both these services, though the latter is predominant. Dial-a-cartridge is present in a handful of markets (like the West Asia where it was introduced in 2007) and focuses on small and medium enterprises.
To set the ball rolling, HP leveraged its existing set up, including the channel partners and its call centre. The channel partners here are the original cartridge stores (OCS) that sold HP cartridges. These also include the mom-and-pop stationery stores. A bulk of these partners is concentrated in the metros. Though we also offer the dial-a-cartridge service in tier 2 and 3 cities and towns, the mainstay of the initiative are the metros, says Nitin Hiranandani, director, printing systems, HP-Printers and Personal Systems, India.
The cornerstone of the entire system the recruitment of the OCS partners is led by the sales team, but it is also a key concern for HP because it guarantees end user satisfaction. The on-field sales agent is entrusted with the job of identifying the OCS partner for deliveries within his area of operation, adds Hiranandani. HP does not assure its OCS partner of a particular volume of sales through the initiative the reason why the OCS partner need not have a dedicated team to handle deliveries for HP.
Each OCS partner must deliver products within an area with the radius not exceeding five kms. A single OCS partner usually services the entire area, eliminating any chances of conflict with regard to servicing a single order.
The entire equation is driven by the relationship between the sales agent and the OCS partner, which makes both parties take the initiative doubly seriously. Apart from identifying the OCS partner, the sales agent must ensure that the partner is well stocked and the dial-a-cartridge system works like a well oiled machine.
Whats the incentive? Delivery partners get assured inbound traffic. We route our orders to them. The business visibility goes up to that extent, says Hiranandani. The company also adds that with home deliveries one is selling at the maximum retail price (MRP), whereas with in-store sales there is a chance that the consumer may ask for discounts. Industry players also say that with the delivery mechanism in place, HP is reducing the possibility of channel partners pushing competing products.
Most of the communication between the call centre agent and the OCS partner happens manually. The only serious technology intervention is the usage of Google maps to locate an OCS partner closest to the order location. There is no mechanism in place otherwise for the call centre agent to view the stock levels with the partner electronically. Perhaps thats why the company concedes that we are no Dominos with a 30-minute-or-free promise.
In short, the entire process is evolving and, as the company admits, there is scope for improvement.
Thats exactly what printer market leader Hewlett-Packard (HP) found when it flagged off home delivery of cartridges in 2010. In one go, the move arrested the slide in its market share and helped HP wrest the initiative from grey market products that were eating away sales of its consumables. Check these figures for proof. Between 2010 and 2012, HP managed to better its share in the inkjet consumables market from close to 80 per cent in 2010 to upwards of 83 per cent in 2012. Arch rival Canon has stayed at nine per cent whereas Epson has slipped from 11 per cent to settle at six per cent. Whats best, it has achieved this without making huge investments either in putting together an in-house delivery network or a cluster of warehouses.
Before we discuss how HP laid out the delivery plan, heres a look at how the market had started shifting from under its feet. HPs monopoly in the printer market in India (it had more than 80 per cent share in the early 2000s) came under attack from the year 2003 and became worse as the decade wore on. By 2009, most players in the market took a serious hit. The first half of 2009, each of the top five vendors in India's printer, copier and MFP (multi-functional products) market recorded a steep fall in sales the only player to buck the trend was Canon.
HP shipped 562,300 pieces in total, a decline of 18.7 per cent compared to 692,100 in 2008. Worse, rival Canon improved its market position with 178,100 pieces, an increase of 22.2 per cent compared to the first half of 2008. While HP remained the leader with 49.8 per cent market share in the first half of 2009, its performance was worse than ever before. This was a reflection of the slowdown in the market according to a Gartner report, the shipments of combined printer, copier and multi-functional product market in India declined by 12.7 per cent in the first half of 2009but HP was ready to take the bull by the horns.
As a first step, it commissioned a study to understand why the market was slacking off. The findings showed the opportunity that was waiting to be tapped. The study showed that while institutional buyers were moving towards laserjet printers, for individual buyers printers were a low priority item. Inside a home, while a personal computer is a prized possession (like other valuable assets such as car, television etc), a printer is a dispensable peripheral, says Mohit Raizada, senior market analyst at IDC. Despite end user promotions and heavy marketing campaigns, peripheral products such as printers remain a secondary product for Indian consumers, he adds.
For HP, the low penetration of printers at homes it was a third of the total PC penetration meant big opportunity. PC penetration itself in India was 10 per cent at that time and the opportunity for printers as a category suddenly seemed endless.
Now, the other side to the printer business is that of consumables, the part that keeps the business going so to speak. The consumables market for inkjet printers is almost three times that for laser toners. Also, this is the business where the volumes and the margins lie.
Armed with this insight, HP embarked on its way to charting a new course for the future.
The research showed that the average consumer regarded the cartridge prices prohibitive. Not surprising, given the culture of running down to a neighbourhood cyber cafe for a Rs 5 -7 print out.
HP tackled the pricing issue at two levels. One, by making its products more affordable: today (since 2012) its inkjet printer range, christened Inkjet Advantage starts at around Rs 4,500, where it began at Rs 7,000 earlier. The top end model in the category is priced at around Rs 8,000 now. Even the cartridges, priced between Rs 900 and Rs 1,000 previously, are now available between Rs 450 and Rs 475. HP has a campaign around this price point, assuring 550 pages for Rs 450.
Bringing down the price point of cartridges was, however, not sufficient for the company. Unlike before, where each piece of hardware required a unique cartridge, today there are third party cartridge manufacturers in the market that can beat HP at supplying the consumables for its hardware. And then there is the issue of dealing with counterfeits. HPs response to contend with both these is a first in the industry enabling consumers to order a cartridge as easily as ordering pizzas.
The home deliveries are facilitated via two initiatives dial-a-cartridge and click-a-cartridge. Globally, HP offers both these services, though the latter is predominant. Dial-a-cartridge is present in a handful of markets (like the West Asia where it was introduced in 2007) and focuses on small and medium enterprises.
To set the ball rolling, HP leveraged its existing set up, including the channel partners and its call centre. The channel partners here are the original cartridge stores (OCS) that sold HP cartridges. These also include the mom-and-pop stationery stores. A bulk of these partners is concentrated in the metros. Though we also offer the dial-a-cartridge service in tier 2 and 3 cities and towns, the mainstay of the initiative are the metros, says Nitin Hiranandani, director, printing systems, HP-Printers and Personal Systems, India.
The cornerstone of the entire system the recruitment of the OCS partners is led by the sales team, but it is also a key concern for HP because it guarantees end user satisfaction. The on-field sales agent is entrusted with the job of identifying the OCS partner for deliveries within his area of operation, adds Hiranandani. HP does not assure its OCS partner of a particular volume of sales through the initiative the reason why the OCS partner need not have a dedicated team to handle deliveries for HP.
Each OCS partner must deliver products within an area with the radius not exceeding five kms. A single OCS partner usually services the entire area, eliminating any chances of conflict with regard to servicing a single order.
The entire equation is driven by the relationship between the sales agent and the OCS partner, which makes both parties take the initiative doubly seriously. Apart from identifying the OCS partner, the sales agent must ensure that the partner is well stocked and the dial-a-cartridge system works like a well oiled machine.
Whats the incentive? Delivery partners get assured inbound traffic. We route our orders to them. The business visibility goes up to that extent, says Hiranandani. The company also adds that with home deliveries one is selling at the maximum retail price (MRP), whereas with in-store sales there is a chance that the consumer may ask for discounts. Industry players also say that with the delivery mechanism in place, HP is reducing the possibility of channel partners pushing competing products.
Most of the communication between the call centre agent and the OCS partner happens manually. The only serious technology intervention is the usage of Google maps to locate an OCS partner closest to the order location. There is no mechanism in place otherwise for the call centre agent to view the stock levels with the partner electronically. Perhaps thats why the company concedes that we are no Dominos with a 30-minute-or-free promise.
In short, the entire process is evolving and, as the company admits, there is scope for improvement.