Messages in coats

MARKETING: Asian Paints sharpens its distribution innovations and customer involvement initiatives.

In the 1970s, recalls K B S Anand, army jawans would rush to buy black paint just before an inspection. "They would blacken their shoes with it, even though they knew that the enamel would ruin them," says Anand, vice-president, sales and marketing at Asian Paints (AP).

For the jawans it was a quick-fix method to get through the inspection, but for the company it was a lesson in packaging.

"We needed to sell the paint in small cans of just 50 ml because they wouldn't buy more, and we realised how important packaging can be," recounts Anand.

Even today, the company sells paint in these small cans for the Pongal festival in Tamil Nadu, where painting cows' horns is part of the festivities.

Learn something new from the customer. And then go back and learn something new again. It is this philosophy that has helped the Rs 1,932-crore Asian Paints raise its share of the Indian paints market from 35 per cent in the early 1990s to 46 per cent in 2004-05, gaining two percentage points in the last five years alone.

It's not an easy market to figure out. The Rs 5,200 crore organised paints market is highly competitive within itself, even as it faces competition from the unorganised sector (especially in decorative paints).

The good news is that it has achieved double-digit growth consistently over the past few years, and has proved itself resilient on other counts too.

Asian Paints, for its part, has not sacrificed profitability for the sake of either growth or market leadership. Its operating margins, at around 15 per cent, have been well in line with industry trends.

According to the management, the retail distribution model by which the company sells directly to retailers instead of using a wholesaler, has helped enormously.

Today, Asian Paints services 19,000 dealers (retailers) across the country""and it is is hoping to add around 1,000 dealers every month, taking the tally to around 25,000 in five years. To supply these retailers, the company has set up 72 warehouses.

Says Anand, "Dealing directly with dealers makes us far more sensitive to customers' needs so we can respond faster. Also, it's much easier to launch a new product."

For instance, the company came up with an algae-resistant paint exclusively for the Kerala market. Despite it being priced at a 25-per cent premium, the product was a hit.

"We understood what customers needed," says Anand, "and they bought the product because it had value." It was this "being in touch" factor that led to the installation of tinting machines at retail outlets.

The machines achieved two purposes. First, the customer could get whatever shades he or she wanted by simply mixing colours. And dealers loved the idea because they did not have to stock every colour: any shade could be blended out on the spot and delivered.

According to Anand, the machines were a key factor for the success of emulsion paints, which are slightly more expensive than distempers. Dealers typically pay cash for their stock, because the commissions (about 8-10 per cent) are better than if they buy on credit (which means a 1.5-per cent reduction).

They saw a clear benefit in keeping lower stocks without the risk of disappointing a customer (Asian Paints', remember, is the "mera wala cream" brand that started the shade-sensitivity revolution).

Dealer commissions are important because dealers often get pressured to pass on some of their share to the customer to win a supply job. By generating end-user demand and assuring efficiency of supply, however, Asian Paints manages to keep their stock rotation high (some 15 times a year), so despite squeezed commissions, dealers make a a fairly good return on investment of 30-40 per cent. This ensures dealer loyalty.

Observes Vikram Bhalla, director, The Boston Consulting Group, "While all paint companies use the same model, Asian Paints has possibly been more successful because it has a larger proportion of exclusive dealers and also because it has chosen the right dealers for installing the machines."

Bhalla believes that the huge scale that the brand has built results in better channel economics, so that margins for the company as also dealers are higher at the end of the day.

To reach out further to potential customers, Asian Paints has been pressing forth its Home Solutions service. By this, the customer can get a home painted by the brand's own painting unit.

While the service does not make money for the company, it has helped the company gain additional insight into colour preferences. Moreover, it allows the brand to finish the job to utmost customer satisfaction.

Explains Anand, "We want customers to identify with the brand, because most people don't even remember what paint they use. Besides, the final product is better because we train our painters."

Observes Bhalla, "What Asian Paints is trying to do is to shift the market so that customer involvement is greater. By spending large amounts on advertising, they create high brand visibility, and now they're interacting more closely with the customer."

The advertising, of course, has always had something to say beyond the ordinary. Every house has a message, as its campaign says, and all the brand wants to do is help you express it.