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Leicester City relegated, Rooney top scorer & Hazard as MVP: How bad were Goal's pre-season predictions? On the first of every month, two-wheeler companies disclose their sale figures for the previous month. Image: Brijmohan Lall (L), Chairman of India's top motorcycle maker, Hero Honda Motors Ltd. New segmentsTraditionally, the motorcycle market has been seen as three distinct segments: Entry (100 cc engine capacity, 65 per cent of the market), executive (125-135 cc, 20 per cent of the market) and premium (150 cc, 15 per cent).
More important, this view of the market has become the cornerstone of Hero Honda's strategy.
Two-wheelers for allHigh-decibel advertising does not work if not backed by the right products. Some time in early-2006, Hero Honda got into scooters with Pleasure, again with a unique positioning - "Why should boys have all the fun?" "We were a late entrant and therefore had to do something innovative," says Munjal.
Rural rescueAround mid-2007, consumer finance companies started to pull the plug on automobile finance. Challenges ahead Sector experts say the going could get tough for Hero Honda in the days to come as Honda has launched its 100 cc motorcycle in India. And, there's only one thing that they all seem to want to talk about: the phenomenon called Patanjali. Patanjali Ayurved, on the other hand, added almost the same quantum of revenue, and, in the process, is likely to double its revenues to Rs 5,000 crore (Rs 50 billion) by end of March. It is clearly the fastest growing FMCG firm in the country, with the widest product portfolio.
That's the kind of traction that most former FMCG veterans like Mr Chawla have ever seen in their entire career. For the FMCG companies though, the disruption that Patanjali has wrought is for real, because it challenges many of the long-held assumptions in the classical FMCG world. That gives the company the leverage to price its products at least 15-30 per cent cheaper than other branded competition. For an entire generation of FMCG managers, who have grown up on a different menu, the Patanjali phenomenon is proving to be a bit hard to digest. Much of this criticism may well be true, except that it isn't just about Baba Ramdev's magic or about the power of herbal and ayurveda alone. The writer is co-founder of Founding Fuel, a learning platform that serves a community of entrepreneurial leaders.
From a producer of fuel-efficient motorcycles, Hero Honda has morphed into a marketing-led organisation.


All three have different price points; entry-level bikes are for the rural markets, while the other two are sold and bought in the urban markets.
When it decided to chase market share and not profits, it also decided that it would offer no discounts on its motorcycles. The consumer insight here was that women want freedom of movement and a scooter could address that demand. Bad loans had risen with alarming rapidity and they had no option but to reduce their exposure to two-wheelers.
Bajaj Auto too is learnt to be working on a slew of new models to take on the market leader. The Future Group, which announced its tie-up to stock Patanjali's wide range of products last year, is furiously reworking its sales forecasts because the products are simply flying off the shelves. The savings in distribution margins and the low overheads straightaway translate into a 20-25 per cent cost advantage.
Advertising campaigns, product refreshes and brand health - walk blindfolded into the Hero Honda office in a crowded south Delhi market and the language spoken there could lead you to mistake it for an FMCG company. Hero Honda, conventional wisdom said, is strong in the entry segment with a market share of 80 per cent and weak in the other two where its share ranges between 15 per cent and 20 per cent. Hero Honda comes out with new motorcycles, variants and refreshes keeping the customer profile of each segment in mind. It subsequently roped in Priyanka Chopra as the brand ambassador and started 20 "Just for Her" sale and service outlets staffed only by women. Five hundred sales representatives were taken on board for the mission Har gaon, har angan (every village, every courtyard.) These representatives have been given work tasks and not sale targets - they need to meet potential customers and opinion leaders in villages. Instead of selling to the retail trade through distributors, it has its own branded outlets around the country. This shows in the commercials which no longer talk of fuel economy (remember "Fill it, shut it, forget it?") or power alone. Thus, the advertisement for the Karizma (premium segment) comes with the punch line, "Always game." The ad for the premium segment Hunk doesn't talk of speed or power at all - the focus is on the looks even while standing. Production is up to 14,000-15,000 per month and Hero Honda's market share has reached 13-14 per cent.
Customers, for instance, trade freely between a top-end 100 cc motorcycle and a low-end 125 cc motorcycle or between a premium 125 cc motorcycle and a basic 150 cc motorcycle. The CBZ Extreme comes with the promise, "Thinking is such a waste of time." "Both the Hunk and CBZ Extreme are 150 cc bikes but talk to different customers," says Dua. You need to look at the total cost of ownership - installments, cost of fuel, maintenance, service, insurance, parking and road tax," says he.


It shows in its domination of cricket, selection of youth and style icons, and association with shows like MTV Roadies which improves involvement with the hinterland." This was the first change Hero Honda internalised in those turbulent days. So, Hero Honda decided to look at the motorcycle market not from engine capacity but from the customer's point of view - how he brackets the products available in the market through his demographic and psychographic profile. The company has decided to launch eight or nine new products, variants or refreshes every year. These "waves" are mounted just before the harvest so that Hero Honda is on their radar screen when they have cash in hand.
There will be one more motorcycle in the market." Still, Hero Honda is not taking any chances. Hero Honda has a large portfolio of products (13 motorcycles and one scooter), so it has to create distinct position for each so as to avoid customer-confusion and cannibalisation of products. And these launches will be spread across the three categories because, says Dua, all are growing at a fast clip. This was because of its strong sales in the rural markets - almost 40 per cent of total volumes, say Munjal and Dua. Munjal has tasked his engineers to come out with a low-cost motorcycle, one that combines the price of a moped and the performance of a motorcycle, through value engineering and tax planning.
As consumers get confident, they like contemporary things that spring from their cultural identity, says Mr Mall. The diagnosis was that the company's differentiation in terms of propositioning to customers was weak. Knocking a couple of thousand rupees from the current price points (Hero Honda's cheapest bike currently costs around Rs 31,000) will not help. Thus, it roped in film stars Hrithik Roshan and Priyanka Chopra, joined the Indian Premier League sponsorship bandwagon, and got associated with television shows like Sa Re Ga Ma Pa on Zee TV and MTV Roadies.
Still, it is a known fact that urban consumers depend more on finance than their rural counterparts. So, the drop in the flow of consumer finance impacted urban customers much more than rural customers.



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