Tuesday, December 15, 2009
Bhavana Ravindran, Sydenham Institute Of Management Studies, Research & Entrepreneurship Education, Mumbai
Since forever, marketers have engaged consumers in monologues, splashing advertisements that painted glorified albeit myopic versions of their brands, and left the consumer to make buying decisions depending upon the advertising prowess of the brand & frequency of ad-spends. This tilted the scales largely in favour of big companies with the financial muscle to engage in high-budget marketing campaigns.
But technology has time and again made the traditional obsolete, & the latest to take the hit is the traditional marketing ecosystem. As brands realize the growing importance of consumer engagement, “Democratic Consumerism” is the new mantra for marketers seeking innovative ways to create dialogues between consumers and brands.
Social networks in marketing
This brings us to the topic of contention - social networking & their reinforcement as powerful cost-effective marketing solutions. I say reinforcement because this is not a new-fangled fad of the internet era, but is a tried & tested successful marketing technique – be it the familiar “Friends & Family” mobile talk-plan or the Amway network marketing strategy.
Even more than a decade ago, the Journal of Marketing Research in an article on networks in marketing (Iacobucci & Hopkins, 1992) & Philip Kotler (1991) had declared that future marketing practice will focus on “building value-laden relationships & marketing networks”.
Power of social networking sites
Metcalfe’s Law states that the value of a network is proportional to the square of the number of connected users of the system (n2). Thus we can quantify the worth of any network in direct proportion to its users. Now take into consideration an internet powered social network with the ability of potentially connecting the whole world under a single network. The social networking sites of today come close to this, with the power of networking of over hundreds of millions of users.
Wiki-ly put, “A social networking site is an online place where a user can create a profile & build a personal network that connects him or her to other users”.
The 4 inherent benefits of using networking sites for marketing vis-à-vis traditional media:
• Dialogues v/s Monologues: It is not a forced monologue, but a meaningful 2-way interaction engaging the consumer in real conversations with the brand
• Reach: The scale of reach of this mode is unsurpassed by any traditional media
• Inbound v/s outbound: It is more direct & engaging, because social networking is never inflicted upon the consumers, but it is the other way around, where the consumers flock around brands they are interested in(inbound)
• Measurable: Metrics like the number of conversations, level of interaction, follower size of fan pages, etc, make it easier to measure its impact as a marketing medium
The networking leaders
In a recent survey conducted by MarketingProfs on the importance of various social media platforms like blogs, social network sites etc in providing business value, networking sites like Twitter, Facebook & LinkedIn have emerged as clear winners in the social networking space, as shown in adjacent graph.
Let us study the various features that make facebook.com & twitter.com the leaders in this front.
Founded by Mark Zuckerberg in February 2004 as an exclusive network for Harvard students, Facebook is today the world’s largest social network, with over 300 million users. In India, it is the 4th most trafficked website, & the most popular social networking site. [Source: Alexa.com]
Innovative marketing tools on Facebook: Apart from traditional sponsored ad/links:
Pages: People can choose to be "fans" of the organization that sets up a fan page, & are voluntarily engaged in various marketing campaigns like status updates about new offers etc.
Virtual Gift shop: This unique tool enables marketers to target over 8 million unique users within 24 hours & is stocked with images which can be posted on friends’ profile pages which can be bought using cheap credits. Samples of music will soon be made available in the store which can become a useful music sampling centre for record companies & artists.
Even though the store currently forms a small chunk of its total revenues, it is a way for Facebook to obtain the credit card numbers of more customers & develop a one-click payment mechanism that third-party developers can later use to sell virtual goods on the applications they are creating for the site. Going forward, this can become a potent tool for companies to conduct product trials & marketing for new merchandise to a targeted user.
Facebook Blue Ribbon "Best Campaign" award winners for best campaigns each month:
• Sponsored ads - Use of Event/Movie RSVPs: Walt Disney movie Hannah Montana built teen awareness by showcasing exclusive clips on Facebook & asking for RSVPs. It was hugely popular with over 1 million attendees.
• Virtual gifts from gift store: Cadbury’s Crème Egg campaign promoted its offering letting users gift these eggs to their friends along with a personal message.
• Use of fan-pages & engaging videos: The Adidas Originals’ US campaign used engagement videos with top athletes & celebrities like David Beckham to encourage users to become a fan of Adidas Fan Page.
Twitter.com - micro-blogging & live information site:
Twitter is a social networking & micro-blogging service that allows users to post their latest updates. Twitter allows users to post text updates via SMS, instant messaging, email, Twitter’s website & third party applications. Its growing importance as a media tool can be gauged from the fact that it is being introduced as mandatory course-load for journalism students in universities abroad.
In a survey of twitter marketers by MarketingProfs, it was revealed that Twitter is used mostly for Brand awareness, followed by networking & community-building. Other uses include: Brand-reputation management, Customer service, Prospecting & Selling.
Some of the most successful campaigns on Twitter:
• One of the most successful twitter campaigns is Dell which offered exclusive discounts to users who followed them on twitter
• 'Paranormal Activity', a low budget Hollywood movie, is a perfect case of awareness building using Twitter where people rallied around a movie they cared about by tweeting about it. It went on to become one of the top grossing films in the country.
Tracking conversations on Social networking sites can be valuable research aids for testing various stages in the innovation funnel of product development. Apart from this, one should also track the Voice of the Customer about own & competitor’s brand. Also with over 5 years of successful socialization, networking sites are ready to reap their rich data mine – user profiling & targeted marketing is expected to be a major trend in the coming years.
Optimisation of social networking sites:
Conventional wisdom suggests that the best form of using networking sites to your advantage is by having your presence in the network, for e.g., through a fan page on Facebook or a twitter link, where followers get regular updates about the company’s promotions, which also serves as a platform to seek valuable feedback & criticism. As Harsh Gadia, CEO, Smursh (a Mumbai-based social media marketing agency) says, “For Optimal usage of social networking sites in brand building, one should go a step ahead, & translate the networking effect to building communities. It is a wrong strategy to use networking sites as the main focus; they should just serve as a connecting door for the correct user engagement by directing users to a social media portal or company blog. The winning move is when we succeed in building & sustaining communities around the brand.” Sunsilk Gang of Girls was one such successful campaign that built communities of loyalists.
Today the internet is dominated by the search engines like Google which mainly collect & provide information, while social networking sites like Facebook are still unsuccessfully stalking the perfect monetisation technique. But going forward, this story is set to undergo a reversal of roles, provided the networking sites leverage their biggest strength i.e., connecting people. The search & information giants of today will face a setback in this backdrop, because for an industry where maximum revenue generation stems from advertising, collecting data is less valuable than connecting people.
There has been a paradigm shift over the years as to how business is conducted in Bollywood. Professionalism and a sense of identity have been the outcome of the increased corporate presence in the tinsel-town. The multiplex and mall culture have brought a new segment of audience for the film makers and encouraged them to be innovative in their product design as well as promotions. The exciting times for Bollywood Inc. have only started…
With over a 1000 movies releasing annually, the Indian Film Industry, popularly known as Bollywood, is the second largest in the world. Even though India sees the largest movie tickets sales, the market penetration is still low. According to FICCI, the Indian film industry is projected to grow at a CAGR of 11.6% reaching to Rs. 185 billion in 2013 from the present Rs. 107 billion in 2008.
Traditionally, Bollywood has been dominated by either family-run production companies or independent producers. The marketing and branding often relied on the shoulders of individual “stars” or the music content of the movie. Movies usually catered to mass markets with hardly any effort to differentiate and target a specific audience. The last two to three years have seen a tremendous shift with increasing corporatization of the industry. But the seeds were sown 10 years back when Sushma Swaraj, then the Union Information and Broadcasting minister, accorded “industry” status to the business of film making. It allowed filmmakers to fund their productions from legitimate sources and provided the opportunity for banks and financial institutes to invest in movies. The film industry was brought under the purview of FICCI and was made a part of a larger FICCI Entertainment Committee.
The year 2008 saw many global players entering the Indian Film Industry. The most notable was Walt Disney, which produced and released its first film in India Roadside Romeo with the leading player Yash Raj films. Warner Bros also released its film made in association with Ramesh and Rohan Sippy: Chandni Chowk to China in January 2009. It ventured in India as distributors with the film Saas, Bahu Aur Sensex. Fox STAR Studios, a joint venture between Twentieth Century Fox and the Star Entertainment has tied up with the immensely successful director Vipul Amrutlal Shah for a multiple-film exclusive deal. Even Indian filmmakers are going global with UTV India collaborating with 20th Century Fox for M. Night Shamaylan’s The Happening. Anil Ambani owned Reliance Big Entertainment struck a deal worth US$ 1.5 billion with Steven Speilberg’s DreamWorks SKG to set up a new DreamWorks studio in Los Angeles
The dynamics of movie marketing in India have changed enormously with both domestic and international houses going for professional and innovative strategies. Digital marketing is one such example. Corporates are investing huge amounts on online platforms to reach and interact with around 50 million Indians accessing the internet. Digital promotions and viral marketing go hand in hand and can have a huge impact. Jaane Tu..Ya Jaane Na (UTV Motions Pictures) used the eye blaster technology for the first time in Bollywood, which caused Imran Khan come alive to interact with the user on his desktop, walk on the website and knock on the screen and even move to the tune of a song from the movie.
With the slowdown looming over Bollywood last year, corporates relied more on product placements in their movies to generate greater revenues. In this form of marketing, branded goods or services are placed in a context usually devoid of advertisements, such as movies, the story line of television shows, or news programs. In-film placement gets brands a better recall value, provided the communication is aligned well with the theme and is also more cost effective than the conventional methods. Several production houses utilized this concept of co-branding including UTV, which tied up with Motorola for Delhi 6.
Corporate biggies like Yash Raj films have begun to segment their audiences and are deviating from their tried and tested formula of romantic movies in order to fill all the niches. Indian public is now exposed to different genres and styles and they expect good scripts ranging across varying storylines. Filmmakers can no longer ignore the diverse needs and are producing movies accordingly. For e.g., New York was targeted at a younger audience whereas Thoda Pyaar Thoda Magic was positioned as a family movie. This trend is getting increasingly common, with most of the production houses diversifying their product portfolio to reach greater number of audiences.
An added advantage of corporatization of Bollywood is that these businesses possess the entire product mix needed to market the film including state of the art studio facilities, distribution rights, movie promotion campaigns, and online music and DVD sales etc. This integrates and streamlines the entire value chain involved in the film making process. This helps in a huge decrease in the average production time for a movie. Thus, the film budget is utilized in the efficient use of technology and marketing. Such developments also have the potential to minimize piracy which drains large amounts of revenues from Indian Film Industry. Digitization (in which the projection of the movie is in digital format, without the need of actual film prints) would not only help in speedy distribution to all the parts of the country but would also minimize the time frame for piracy.
If one looks at the bigger picture, it can be comprehended that corporatization is helping in branding Bollywood itself. Since the phenomenon started in the early years of the millennium, the presence of the Indian Film Industry is being increasingly felt at international film festivals and awards like the Cannes and the Academy Awards. There is an increasing sense of uniformity in the erstwhile unorganized and fragmented Bollywood with new standards being on par with those at the international level.
With the great financial backing to the producers and directors, we can expect more innovative marketing campaigns, better audio and visual quality and last but not the least original and revolutionary stories. The Indian Film Industry is ready to reach newer heights not only in terms of quantity but quality too. The era of Bollywood Inc. has arrived.
UTV has been a premier name in the Indian entertainment scene, whether on TV with serials like Shanti or on the big screen with hits like Rang De Basanti. Credited with pioneering Hollywood concepts such as co-financing, diversified revenue models and brand extensions in India; in 2007 it launched UTV Spotboy which has since then delivered critically acclaimed hits like Dev D. and Welcome to Sajjanpur. Dev D. was made on a paltry Rs 10-crore budget, went on to pull Rs 20-22 crore from the box office and reinforced the sub-branding decision.
The production company promotes quality workers in the film industry, without looking at either their age or
their experience. Welcome to Sajjanpur by the legendary Shyam Benegal with a strong script not only drew audiences to the theatres but also won critical acclaim at international festivals. On the other hand, Aamir, a movie made entirely by debutants-from the lead actor to the director- talked about the sensitive issue of terrorism and religion. Not only do such niche movies capture the multiplex crowd; in their after-life, they also earn through the sale of TV rights, home videos, merchandise and games. UTV Spotboy plans to explore newer revenue opportunities like pay-per-view on DTH.
Film-making at UTV Spotboy is a matter of tight shooting schedules unlike the ‘chalta hai’ attitude of the Bollywood of yore. Vikas Behl, the CEO of UTV Spot Boy says “We can’t let money go waste by over-extending our shoots and paying extravagant sums to market the film.”For content development, there is a tie-up with Virgin Comics to focus on Indian superhero characters. Arjun, an animated movie, will be the first in this series.
Apart from being made on small budgets with experimental storylines, the movies from the UTV Spotboy stable are also characterized by their out-of-the-box promotional campaigns.
Aamir, a thriller, used an unconventional soundtrack throughout; a sufi number was the background for the promotional video which was shot in a single go on the busy streets of Mumbai. Shreyas Talpade, the protagonist of Welcome to Sajjanpur visited the Mumbai GPO and wrote letters; just like his reel persona Mahadev who is the village letter-writer.
However, the coming-of-age of Indian movie marketing was marked by the innovative “Shockvertising” for the movie Dev D. The movie attracted a huge traffic on its official website and on the ‘Lustline’ on phone as well, for hearing the lead character Chanda talk dirty.
Shikha Kapur from UTV said, "From the beginning we have been a bit outlandish on the promotion of Dev.D.” So the movie with the tagline “Come Fall in Lust” saw the premiere invites including a pack of condoms to promote the cause of safe sex along with the movie. Even the pre-release party was held at a tattoo-parlor, with the lead actor Abhay Deol cutting the ceremonial cake with a tattoo machine!
An established global player in the fast-growing Indian media and entertainment arena, Eros operates in more than 50 countries. It works with the vision of integrating the fragmented industry and to achieve the same, it extensively uses technology and innovation while implementing vertical integration.
Eros has played a major role in popularizing Indian cinema in the global market, courtesy its strong content library and distribution. With around 30-40 film releases a year, of which 10 have global theatrical releases; it makes sure that it caters to multi-faceted customers in the global market. Leveraging their extensive network Kambakht Ishq was released across an unprecedented 2000 plus screens worldwide, making it one of the widest releases in recent times. This translates to 1400 screens in India and over 600 overseas. The reach of Bollywood is now better than ever before.
Eros concentrates equally on tech-savvy consumers - provides free online content from the Eros movie catalogue of various titles, music videos, behind the scenes, ‘making of movie’ footage & even events such as IIFA. The video stream is supported by periodic advertisements - a model similar to the television model. They also offer rental without advertisements under different schemes. With ‘Om Shanti Om’, for the first time, a full length Bollywood movie was made available on the Apple iTunes Video Store. In 2008, the smash hit Heyy Babyy earned the distinction of having the first global release of a Bollywood film on Blu-ray disc format. Their collaboration with Sony Entertainment and Lionsgate will open new opportunities for the Indian Cinema and also help create market for Hollywood in India.
Film promotion is now a mixture of innovation and technology. Eros has increasingly been practicing digital marketing – almost 20% of its marketing budget is allotted to the same. It makes use of websites like MSN, Rediff, AOL, Yahoo to markets its videos and also ropes in Bollywood Hungama, Orkut, and Facebook for online activities. It is the first company, of the Indian entertainment sector, to launch an official channel on YouTube. Love Aaj Kal was promoted across three digital platforms – mobile, internet and DTH- in association with Hungama Digital Media. Development of games with the central idea of a Bollywood movie is also not uncommon.
Aladin, a family movie with target customer of children & their guardians, was promoted by teaming up with Baskin Robbins and Godrej Appliances. Baskin Robbins introduced three new flavors with names associated with the lead characters of the movie. Eros also launched a Godrej-Aladin ‘Make a Wish’ offer which granted the customers three wishes – acting in a Bollywood blockbuster, dinner with Amitabh Bachchan (who plays the genie in the movie) and free home appliances. Another innovative promotion effort was creating a band, “ADZ – Rising” for Aa Dekhen Zarra. The band after the launch, performed in some of the hotspot of various cities all the while being accompanied by Neil Nitin Mukesh.
Eros, has many times helped in giving Bollywood a face-lift. It was the first to take Indian cinema to the multiplexes. It has formed joint ventures with Ayngaran (its counterpart in Kollywood) and EyeCube –a state of the art visual studio. This would not only open up a new section of market for Eros but also help in consolidating the much fragmented Indian film industry. Considering the high growth rate of the TV industry, Eros has undertaken a series of television syndication deals with Star India Pvt Ltd, Sony Entertainment Television and Sahara Television. Growth in revenue from this segment was better than that from theatrical and digital segments. In the period 2007-09, television segment exhibited a growth of $42.9m while theatrical and digital segments showed a growth of $25.2m and $22.3m.
Eros in the course of its 30 years existence has made tremendous contribution to the industry and was acknowledged for the same at a recent IIFA function. Bollywood continues to grow with the corporate leading the way. Hope this teamwork translates India into “creative superpower”
Percept Picture Company
Animation has traditionally been one of the most successful forms of entertainment worldwide. From the time that Walt Disney introduced the first commercially successful animated cinema, it was largely positioned as movies that kids love to watch. However Hollywood has been largely successful in creating a wider appeal for this genre of movies. Movies like Shrek, Up, Monsters Inc. etc. have generated huge box office receipts and some have even become established franchisees in Hollywood.
This success however could not be replicated by the Indian film industry. Bollywood was so immersed in its formulaic school of film making that it missed out on creating new audiences through this medium. But all that seems to have changed with the entry of corporate film studios into the mix. Animation seems to be the next great frontier with everyone from the venerable Yash Raj Studios to smaller studios like Toonz Animation testing the animation waters in India. While their efforts have met with mixed success, it seems clear that animation is the way to go as far as Bollywood is concerned.
This trend of animation in India was started by the Percept Picture Company which in association with Sahara Motion Pictures and Silvertoons produced India’s first certified full length animation feature, Hanuman.
The Percept Picture Company was formed in 2002. It is not a pure movie house but rather has a mix of products including Television Software, Ad Film Production, Live Events and Motion Pictures. It is this depth in its product mix that gives it a greater leverage as a corporate brand. It claims to be India’s first integrated entertainment content creation, aggregation
and distribution conglomerate. Percept Picture Company is a division of Percept Limited, a huge entertainment, media and communications company. This financial base gives the Percept Picture Company a huge reserve of cash from which they can use to strengthen their position in the Indian film industry.
Hanuman was released in 2005 and met with instant success earning almost Rs. 15 crore in revenue at the box office. The producers of the movie did not follow the niche marketing strategy but pushed the movie toward a wider mass audience. This move represented a major shift in the thinking of film marketers as previous successes like Shrek were released only in the metros as it was estimated that these films would not find an audience outside the cosmopolitan elite. But the success of Hanuman proved them wrong with a significant percentage of its revenues coming from the tier 1 and 2 cities. This showcased to the world that there was a significant market lying untapped in the Indian heartland. This identification of a huge latent market played a major part in spurring the animation industry into action.
The film had a merchandising strategy that followed a symbiotic approach i.e. merchandise like the Hanuman dolls were used to promote the film and the dolls themselves proved to be major hits in their own right thus increasing the revenue channels for the company. The success of the film in turn increased the sales of the dolls leading to a virtuous circle that exponentially increased the overall revenues of the film.
Non-ticketing sales form a major part of the film’s overall revenues and the studio tied up with Microsoft to screen Hanuman on Xbox Live and the television premiere too was promoted with the help of the “Hanuman Dekho, Lanka Jao” that used the Internet to target specific interest groups of children.
Thus the movie Hanuman played a huge role in changing the face of movie marketing in India and facilitated the transition of Bollywood into a modern and dynamic industry.
AVINASH SHARMA, MEDHAVI SINGH | NMIMS
Everything was fine until the Indian market was flooded with Hero Honda Splendor motorcycles. It stemmed from a changing business environment with increased consumer focus on fuel efficiency, comfort, purchasing power and lifestyle. Hence by the time Bajaj realized Splendor had eaten into its market share. Bajaj did introduce bikes like Boxer, Kawasaki Bajaj 4S champion, Caliber etc but none of these could add to the distinct Brand Identity that could “define” Bajaj as did the Chetak.
It was then in 2001 when Bajaj introduced the Pulsar bike. This was in direct competition to Hero Honda’s CBZ (both in 150cc segment). The introduction of Pulsar was executed with a completely different approach with the “Definitely Male” positioning. The Pulsar worked wonders for Bajaj and created a super dent in Hero Honda’s market.
Yet there was something lagging in their strategy. Until Chetak ruled, Bajaj had a clearly identifiable Brand Recall of being “Humara Bajaj”. This was not carried forward with every new variant since each was being introduced with a different positioning. True, that each product has its own merits and should have its own positioning. But it should have also added or supplemented to the overall Bajaj’s position statement. Until Chetak, Bajaj had various brands under its umbrella like Bajaj M-80, Bajaj Sunny etc and yet the “Brand Identity” remained “Humara Bajaj”.
Bajaj kept coming up with better products like the Pulsar 180cc, then the Pulsar DTSi followed by the 200 and 220cc Pulsars. It is then that they realized the need for a clear positioning, what “Bajaj” stood for, and also the fact that it was a mistake discarding or ignoring the “Humara Bajaj” which was such a strong and successful statement. It was critical especially when Hero Honda kept its “Desh ki Dhadkan” positioning intact. Thus, Bajaj finally came up with the famous, new and revamped “Humara Bajaj” communication where in they showed the rendition of the “Humara Bajaj” jingle in a very ‘Next Generation’ style by doing a fusion of the classical jingle with rock music , showing that Bajaj was now new and advanced and more Gen X but still communicated the value of “Humara Bajaj” to India.
Thus Bajaj came a full circle by coming back to its successful “Humara Bajaj” brand identity. Yet Bajaj was now synonymous only with powerful bikes ( 150cc and above segment ) whereas Hero Honda still had its presence both in the 150cc category with CBZ as well as the 100+cc category with the Splendor and Passion. This gap Bajaj sought to explore by coming up with bikes like the Bajaj XCD and Platina which fell in the 125 – 135cc category. This helped Bajaj regain some lost ground in the market leadership it had during the Chetak days.
It was in 2004 when Bajaj completely revamped its identity, gave up the “Humara Bajaj” umbrella and came up with a completely new enhanced positioning focusing more on the technology and experience. With a new, sharp brand logo, Bajaj pressed itself as “Digital Biking” and “Distinctly Ahead”.
Kapferer’s Prism is a tool that can be used to analyze and understand brands. It basically looks at a brand’s analysis from 6 key parameters:
- Physique: Key product and brand attributes.
- Personality: The lifestyle and traits of the brand.
- Relationship: What type of relationship does a brand signify with its consumers?
- Culture: The core values that the brand portrays.
- Reflection: What image of itself does the brand reflect?
- Self-Image: What does the brand think of the self?
This is a powerful tool to analyze any brand and also, more importantly, to compare brands. Applying this analysis to the old and new Bajaj Brand Identities reveals the traits as shown in figures.
Hence, as can be seen from the above analysis, the name Bajaj, which was once well known, famous and sold as a family vehicle, gradually has evolved into a two wheeler which offers excitement, experience and enhanced technological excellence etc. In all this, Bajaj went through cycles of using a positioning, abandoning it, going back to it and then phasing it out completely to give way to a new distinct positioning to the ‘Brand Bajaj’. We believe that shunning the “Humara Bajaj” positioning should have been carefully thought through, as it was a legacy that Bajaj had carefully built through all these years with hard work and was almost synonymous with instant brand recall, something that every brand aspires to get. This is crucial since the new positioning of Bajaj, though modern and more focussed on the technological superiority of Bajaj, does not IDENTIFY Bajaj as distinctly as “Humara Bajaj” did.
Dr. Dinesh A. Keskar is President of Boeing India and Vice President of Boeing International. He is responsible for leading Boeing’s efforts in pursuit of new growth and productive initiatives in India. Before joining Boeing, Dr. Keskar worked as a research associate in the Flight Dynamics and Control Division at NASA Langley Research Centre. He has served on several boards and organizations including the American Society of Engineers of Indian Origin and as the chairman of FICCI’s civil aviation committee.
Markathon: Please tell us about the various sales and marketing approaches and strategies involved in the aircraft manufacturing industry?
Dr. Keskar: The most critical marketing approach in the aircraft manufacturing industry is to ensure that the customer’s requirements are well understood. These requirements are with regard to aircraft performance characteristics such as weight, range, speed, fuel efficiency, strike capability (in the case of defence aircraft) and so on. Such a customer-centric approach may be said to be common for any industry but it assumes even more importance in the aircraft manufacturing sector. This is because aircraft manufacturing is extremely cost and time intensive which means that any error in comprehending customer requirements invariably means heavy penalties either in terms of product modifications or lost sales.
The second most important marketing approach is to appeal to a customer’s airline economics – particularly for commercial airplane customers. As a result, it is essential to get the product pricing right - not just the initial acquisition cost but also the total lifecycle cost of operating an aircraft.
Given that the typical service life of an aircraft can range from 30-40 years, the after-sales support is another key differentiator in the sales process.
Finally, aircraft sales are often accompanied by reciprocal obligations to invest a certain proportion of the sale back into the purchasing country to “offset” its purchase of the aircraft. In India too, offset obligations are incurred by an aircraft manufacturer when making a sale to government customers (Air India and the Indian Armed Forces). Boeing’s approach towards fulfilling offset requirements has been to demonstrate its commitment to partnership with India. This commitment is evident through high-technology manufacturing that Boeing has initiated with the Indian industry as well as through our technology collaborations with research institutions and government labs.
Markathon: The airline industry has been deeply affected by the recession and thus the aircraft manufacturers are also feeling the heat. What steps are you taking to counter this?
Dr. Keskar: The aerospace industry is a cyclical industry. In times of downturn, we continue to focus our efforts on both customers and suppliers to drive costs down at various stages of the value chain. To do so, we leverage tools such as Lean+ and Six Sigma to drive operational efficiencies. We also work with the customer in areas such as route optimization, flight scheduling and crew management so as to help them make adjustments that optimize yields in times of reduced demand. Developing a strong and long term relationship with the customer enables us to serve as their trusted partner to help them consolidate and utilize their resources effectively.
Markathon: What are the important characteristics that should be analyzed, to find out the market potential for airline manufacturer like you?
Dr. Keskar: At a macroeconomic level, the demand for both commercial aircrafts and military products is directly correlated to a country’s GDP. To gain a deeper understanding of the drivers of market potential, one has to start by examining the customer’s motivation to purchase.
In the commercial airline business, the objectives for air travel could be any of the following: tourism, conduct of business, Visit Friends and Relatives (VFR) or connectivity to remote parts where travel by other modes of transport is difficult. One of the most important driving factors that influence these objectives is disposable income. The quality and network of associated aviation infrastructure such as airports and Air Traffic Control (ATC) services is another key driver. A proper fuel policy to help reduce the cost to fly is another important driver. Finally, air travel is driven by the relative availability of air services as compared to other modes of transport. This could be either in terms of low ticket prices or the number of available flight options to the customer. By analyzing these and many other drivers for India, we estimate a demand for 1000 commercial aircraft valued at $100 billion over the next 20 years.
From a defence standpoint, a country’s motivation to purchase is driven by its need to safeguard its economic interests, protect its borders and combat terrorism. The Indian government has embarked on an ambitious fleet modernization drive, positioning India among the top 10 military spenders in the world today. Boeing estimates an addressable market potential of $31 billion in Indian defence over the coming 10 years.
Markathon: How is Boeing planning to take on competition in the Indian market by other players especially Airbus?
Dr. Keskar: The Boeing Company has focused on continuous innovation throughout the history of its evolution. The 787 Dreamliner will be the most advanced and efficient commercial airplane in its class and will set new standards for environmental performance and passenger comfort. Its exceptional performance will come from improvements in engine technology, aerodynamics, materials and systems. It comprises over 50% composites, an industry first, that makes it 15% more fuel efficient than previous generation aircraft.
Another discriminator for Boeing is that our product strategy is based on a point to point transportation paradigm. Boeing believes that passengers would want to fly from their port of origin directly to their end destination with no intermediate stops. The 777 aircraft transformed inter-continental travel by offering non-stop travel to the US. Similarly, the 787-8 and 787-9 variants offer a range of over 15,000 kms non-stop. Point to point travel reduces overall travel time as well as the likelihood of lost baggage and missed connecting flights.
Markathon: In India, Boeing is mainly focusing on the defence and the government carriers and not on the private players. What are your opinions on this?
Dr. Keskar: Boeing is committed to the growth of the entire aerospace market. We focus on both private and government carriers in civil aviation and defence. The close relationship between Boeing and India goes back over 60 years when India entered the jet age on the wings of Boeing commercial jetliners. Boeing jets continue to be the mainstay of the country’s domestic and intercontinental commercial fleets not only through the national carrier, Air India but also through established private players like Jet Airways and SpiceJet. As in other parts of the world, the efficient 737 aircraft has become India’s preferred choice for domestic and low cost flights. Jet Airways has one of the youngest aircraft fleet in the world and is dominated by Boeing aircrafts such as the 737 and 777. In addition, Jet Airways has also placed orders for the 787 Dreamliner.
New opportunities for partnership with India have also emerged in the area of defence. In January 2009, the Government of India selected the P-8I to fulfil its long-range maritime reconnaissance and anti-submarine requirements. Boeing has a diverse portfolio of products on offer to India such as the combat-proven F/A 18 Super Hornet multi-role strike fighter, the C-17 Globemaster strategic-lift cargo aircraft, the Harpoon missile, the CH-47F heavy-lift Chinook helicopters and the AH-64-D Apache attack helicopters. We are also a leading provider of aerospace support systems and systems that enable Network-Centric Operations.
Markathon: How do you see India’s potential as R&D and manufacturing hub for Boeing?
Dr. Keskar: India’s technological prowess through the evolution of its 5000 year old civilization is world renowned. With over 380 universities, 11,200 colleges and 1,500 research institutions, India has the second largest pool of scientists and engineers in the world. Boeing’s belief in India’s potential for technology collaboration was reaffirmed when we opened our Research and Technology centre in Bengaluru earlier this year. This is only our third such centre anywhere in the globe outside of the US and will serve as a nodal point to further collaborate and grow our relationships with research institutes in India – in the areas of R&D, Engineering and IT.
The Indian Institute of Science (IISc) has been established as only one of the eight Boeing Strategic Universities worldwide and only one of the two internationally. In addition, several collaborative research projects are being undertaken with NAL, HAL, IITs and other leading public and private sector organizations in India. These projects span a wide range of aerospace technology – from Computational Fluid Dynamics, Radio Frequency Identification (RFID) and computational electromagnetism to composites, manufacturing processes, high strength alloys and smart structures. We have formed an alliance with industry and academia to form an Aerospace Network Research Consortium (ANRC) to collaborate on next-generation wireless and network
Boeing is also undertaking several high-technology manufacturing projects with Indian industry. These include both commercial as well as defence related work packages. Flight critical parts such as the floor beams and flaperons will be manufactured by Indian companies for Boeing aircraft sold around the world. These components incorporate some of the latest technologies involving hybrid composites and are being used first time anywhere in the world.
Another good example of the growth of the ecosystem is the recently started facility in Belgaum. Magellan and Quest together started a much needed sheet metal manufacturing facility and a precision machining facility. This is one of a kind facility and we believe is another important milestone in the growth of the aerospace ecosystem in India
Markathon: With so many Indian companies planning to enter in the aero component market, how it is going to help Boeing?
Dr. Keskar: Boeing follows a collaborative model in its supply chain. Boeing aircraft comprise components manufactured by suppliers from all over the world, including India. Boeing is strategically working with its Tier 1 partners to grow the network of Small and Medium Enterprises in India. The objective is to enhance collaboration that will lead to development of a mature aerospace ecosystem in India. Such an approach will not only increase number of jobs and enhance India’s industrial output but will also make Indian manufacturing capabilities available for the benefit of the global aerospace supply chain.
Markathon: Finally, we would like to hear about the scope of management graduates in the aircraft manufacturing industry.
Dr. Keskar: One of the most important constituents of any industry ecosystem is the presence of a large and skilled technical and managerial workforce. This is especially a critical constituent for our sector given the relatively nascent stage that the Indian aerospace ecosystem is in. This rapidly growing sector offers tremendous opportunities for management graduates across various functional disciplines. Operational experts can help incorporate quality and reliability best practices into aerospace manufacturing. Supply chain and logistics specialists are required to help Indian companies get better integrated into the global supply chain. Business development professionals will help highlight awareness of Indian aerospace capabilities across the globe. And finally, finance specialists will be crucial to identify innovative business models to drive investments in Indian aerospace as well as to ensure that products delivered are in line with overall budgetary estimates.