Companies need to work on segmentation, polarisation and individualisation to overcome challenges in the market and should adapt by de-risking products, says Managing Director of Bajaj Auto Rajiv Bajaj.
In a freewheeling conversation with Axis Bank CEO Amitabh Chaudhry, Bajaj shared his thoughts on the new NDA government, consumer behaviour, electric vehicles, two-wheelers and more.
Excerpts from the interview: When you go back 10 years, how has the journey been and why this repositioning to the World’s Favourite Indian?
I joined Bajaj in December 1990 and those were good old days of the Bajaj scooter. I was a manufacturing engineer. Manufacturing is a wonderful area because it is an area where you can apply what you have studied or what you want to do. You can see the results literally overnight as opposed to, say product development, in which you see a result after two or three years.
So I was working in manufacturing and enjoying it. But to be honest it was not very exciting because even in those days, although it is hard to believe now, the Bajaj scooter had a two- or three-year waiting period. Just put yourself in my shoes, you go to work, you are supposed to be motivated to do better things but you know the customer is waiting there for the next three years for you. So I was not very motivated.
So I asked my father what he wanted me to do there because everything was fine. He told me that when he had asked his father the same question, the answer he got was this: Do what you think best, but be the best in what you do. So I told him as a ‘gyaan’ it was very good, but what does it mean actually? He said to be the best means to be world class, to be global. Although we were very successful, everything we made was sold in India. So, I asked what does that mean -- to be global? He said: ‘I think if we export 20 percent of what we make then maybe we are a global company’. You know how bosses are right? If they say 20 percent, their expectation is actually 40 percent. That's why last year we managed to export 40 percent of what we made because I knew that he meant 40 percent when he said 20 percent. Therefore he gave me a certain direction, a certain purpose.
So what does the ‘World’s favourite Indian’ mean to you?
I will tell you what motivated that tagline. It's a very practical business reason. See our success in Africa and I have never visited Africa myself for example. I don’t think anybody from our CTO to our CFO has been there. So this whole thing about knowing the market, knowing the customer, is grossly overdone. All you need to know is your competition and how to outsmart your competition.
I always give people this example. Look at Africa where nobody knows Bajaj, they cannot even pronounce Bajaj correctly in most places and we certainly don't know Africa but we have great success. On the other hand, look at this country, everybody knows Bajaj, Bajaj knows India, familiarity breeds contempt and we are not number one in this market. So what explains this? This explains two of marketing principles – one, what works in this industry more than anything else is being the first to market. Unfortunately Hero Honda was first to market a 100cc 4 stroke motorcycle, we came in 10 years later and that's not my fault, my father was in-charge at that time, so you can take it up with him. Anyway we were late to market and you pay a very heavy price for doing that. The point is you don't give up. What do you do when you are late to market and there is a leader there? The answer comes in what Einstein said: ‘You never solve a problem at the level at which it is created, you have to find the solution at the next level’. So my problem is not the specification of the motorcycle because at least I believe that my motorcycle is a better motorcycle than Hero’s motorcycle. My problem is the perception of the customer who thinks Hero is ‘Desh Ki Dhadkan hain’ because that is the thought they have propagated for so much time. Now I have to find a solution that is superior to ‘Desh Ki Dhadkan’. What does my salesman say to a customer who walks in the dealership and says, “Main toh Desh Ki Dhadkan kharidna chahta hoon?” Leave ‘Desh Ki Dhadkan’ buy the ‘World's Favourite Indian’, this is our line.
If you were to go 10 years back, what would you change in the way you have done things?
Do better, but if you look at our track record – compared to our peers – you would have to admit that we have not done too badly. So I think in terms of what we did with motorcycles in India, what we did with our three-wheeler business here, what we did with the premium segment through our shareholding in KTM, what I hope we can repeat through our association and partnership with Triumph, what we have done in export markets so far – I think all pretty good. So I would say if I look back on the last 10-20 years, in terms of direction, I would not change much because I think our ideas are pretty good. Not everything may have worked but I think our ideas are good.
However, the execution needs to be better because there are things I wish we had done better, there are things I wish we had done faster, there are things we should have done more decisively. So if I look back and reflect, I would have stayed with the same ideas because they are good but I would have tried to execute better. So in that sense, we are a bit like the National Democratic Alliance (NDA) government, they have the right ideas but they don’t know to execute very well.
Coming to the auto sector, the last couple of quarters saw a clear slowdown. What do you think is the reason for the slowdown from your perspective and what do you think can be the trigger for the consumption or the sales in the auto sector?
I personally don’t know why things slowed down. If you see the narrative until September, everybody else was also very gung ho, so I think by asking anybody in industry, you are not going to get any answer because everybody was caught on the wrong foot. My understanding is this -- there are cycles, so maybe there is something cyclical.
Secondly, as we all know well, there were at least three tangible factors -- The liquidity issue apparently triggered by IL&FS, the insurance hike and fuel prices. I don’t know how much of a role that played but obviously that was also important. When growth will come back by overcoming these factors, I don’t know. Some people say there was a consumer resistance to buy in anticipation of elections. These are subjective stuff, but I know one thing: if I look back 20 years, there was a crisis in 1993, then in 1997-1998, in 2008 and in 2009. What I do know is there is no way to predict the future, nobody knows the future and at least I don’t waste my time asking people what do they think will happen. What is very important is to adapt and to adapt means to de-risk. So we have de-risked by de-risking products. We are not just in one segment, but in resonant, harmonious, synergistic segments. Motorcycles largely, and we are not just in one market. So unlike Hero, which exports almost nothing, they would go down if India goes down. If India goes down, we would only be half the company we are because we are still exporting the other half of what we make. So the smart thing is to de-risk.
Now to spur growth, I think we have to think like engineers and marketers and we can see evidence of that in the market place already. We did grow 29 percent last year. Some people think it is because of one SKU, which was at the lowest price of the pyramid. That is not true because if we grew by 29 percent, the Pulsar grew by 60 percent and that is not our cheapest SKU by any means.
So I think what we can do, our mantra is in three words. One is to differentiate, so that you can segment the market. For example there was a time when people went from motorcycles to scooters. Today the drain is the other way. Even within motorcycles, you can see that people are moving away from the middle segment either down or up, so there are downtrading and uptrading, you can motivate this to your advantage, we did that and that is why we grew at both ends of this spectrum. So through differentiation, through segmentation one can achieve this. The other is polarisation, which means within that segment, you can use different levers. Price is the obvious one but also field economy, comfort, performance, style or design, features -- you can use all of these as we have done with our Pulsar to grow the franchise from 40,000 to 80,000. So you can polarise. I told you we are like the NDA government. We can polarise the market in different directions.
Thirdly and finally, I think you can individualise it more. That is something we have not been very good at. My friend Siddharth Lal at Enfield is outstanding at that, where you can individualise the product more and inspire people to come to you. So I think if you keep the ship steady and work on segmentation, polarisation and individualisation, then whenever the cycle turns around, you will benefit.
Speaking about consumer patterns, you said people went from mobikes to scooters and then back to mobikes. Don’t you feel the need somewhere because it seems to be shifting back and forth, that there is a need for also having a scooter side or you are very clear mobike is what will keep the customers this side of the fence?
I think the biggest enemy of auto companies around the world, not only two-wheelers but four-wheelers also, is this notion that to be successful, you have to be a full portfolio player. This is a problem for airlines also, this is a problem for autos also. I don’t know how it is for banks. I am not familiar with it.
We have this problem.
So I think this is a false sense of security that he who does everything is on safer ground. There is a reason why Harley Davidson is so much more valuable than companies that make everything or there is a reason why Porsche is worth more than Volkswagen. So less is more. From this point of view, I think this applies to us.
More practically, you have to understand that when we wanted to be a global player, I looked at one data point of Honda because Honda was going to be our biggest global competitor. We were all of 10,000 people in Bajaj Auto, from the chairman to the watchman, Honda was all of 10,000 people in the R&D alone. How do you compete with something like that. It is foolish for a CEO – I wasn’t even the CEO at that time – to venture out there and try to climb two big mountains, motorcycles and scooters, both at the same time and hope to be successful against global competition that was so much bigger than us. The best marketing advise I have ever got was from a book titled
The Origin of Brands by Al Ries, the great marketing thinker who says ‘when in trouble, narrow your focus’. So do less. Look at ‘narrow your focus’ playing out in Amethi. One lady did only Amethi and she won. So this is what happens when you narrow your focus. This is the story of our success, we focused on motorcycles exclusively and that is why at least in one area, we are a force to reckon with.
On the other hand, I just give you for the sake of illustration, the example of Yamaha, which entered this market before us, which, after Honda, is our second-biggest competitor worldwide. All who track the industry know that after 35 years in India, Yamaha has only 3 percent market share in motorcycles in India and what do they do? Instead of making 3X10, they start making scooters. Is this the way to compete? So this business school ‘gyaan’ of de-risking is okay upto a point, beyond that it is fragmentation and it is distraction and it is counterproductive.
There is always this talk about India versus Bharat. So in the two-wheeler side, you see a difference between urban and rural. How do you expect that to evolve in the next five-ten years?
In terms of brand and product, I don’t see any difference. The mix may change. Obviously we will sell more Pulsars in Mumbai as a percentage of the total portfolio than we will sell in Ahmednagar. However, the person who is buying it in Mumbai and the person who is buying it in Ahmednagar, the mindset, the expectation, the motivation to buy it is exactly the same. So I don’t think qualitatively there is any change between India and Bharat.
I tell all these marketing ‘gyaanchandjis’ who talk to me about all this. This anthropology don’t get into the industry. Then you should have been in a different stream in life. The study of people, demographics, psychographics and all, I have found it to be absolutely worthless in making a better motorcycle.
However, one difference is there in India and Bharat. Not in terms of customer acquisition or demand generation but in demand fulfilment or customer satisfaction because distribution is quite different, financing is quite different, even the way you may service is quite different, your ability to reach out to its genuine parts is quite different. So in terms of customers, most people confuse customer satisfaction with customer acquisition. So I am a manufacturer engineer, I am a great fan of Japanese approach, total quality management, total productive maintenance, ‘kaizen’. I have learnt this is the hard way, whether it is right or not, everybody can think for themselves – all this ‘kaizen’ business of improvement is very good for customer satisfaction but it doesn’t help you for customer acquisition. Ultimately, a better horse is not a car. So these are two different things. So from the West, we can learn more about this, from the East we can learn more about this.
A lot of brands are getting launched in a market place including motorcycles and most of them fail. Why are they failing?
I will lean again on this book
Origin of Brands – there are marketers here, they can read it if they haven’t and if there are people who don’t understand marketing also, please read it because then you will understand marketing by Al Ries again. He has given a very crisp answer to this question and he has given two data points. One is Ernst & Young 2004 study, which says exactly what you are saying that 85-90 percent of products and services launched worldwide fail. If you also pick up subsequently a Harvard Business Review from April 2011, you will see that they have quoted exactly the same statistics. They have put it at 75-80 percent but anyway the vast majority fail. So that is no consolation to us. Imagine, taking off on an airline whose aircraft failed to land 84 percent of the time, it is crazy. You cannot comprehend it.
What Al Ries says is very simple. He says most of these products and services fail because they were launched not to create a market but to serve an existing market. This is the problem.
So if I have not misunderstood, I will say that you can find three types of companies in the auto sector. There are companies like Honda in India – I am talking only India motorcycles – they can create products. We have seen it but they have not created any new segments. There are products like Enfield to some extent. I will take the liberty because Siddharth is my friend. They have created a nice new segment but I am not sure they can make products. They have created two products but let us see how they do. Then of course our biggest opportunity is a company like Hero because so far they have neither created products nor segments. Everything they make has come from Honda. What I want to say is that it is very important that one is able to create not just a new product, anybody can create a new product today but creating a new segment where you look like the pioneer of that segment and dominated from day one, that is how you are first to market in that segment. This is very important.
I give you an example to my detriment. When we were making a motorcycle, which was like Hero’s motorcycle in the 1990s and we tried to make it more and more like Hero’s motorcycle at that time – remember my father was in-charge – what was the feeling with which we made it. The feeling was that, this is the market leader, if I am like the market leader, I will also get a slice or a pie. This is the mentality of serving the market.
What happened is, the penny fell in my head when once a dealer told me, customer had come into Bajaj dealership and asked for Hero’s Splendour. So all you do when you clone someone, is you endorse eventually. You have to do it differently. So we come back to differentiation, individualisation, segmentation, polarisation, we come back to the same things and Al Ries is absolutely right. Ninty percent of all products and services fail because somebody says there is a market leader over there, this is what he is doing, I want a slice of that, I am going to go for that and you fail.
Since you talked so much about the brand, the Bajaj brand cuts across insurance, finance, consumer durables and all of that, is it a detriment to what you are trying to do or it actually feeds into your overall brand?
It is perhaps one of my biggest problems. I am very clear, one reason why Bajaj is more successful in markets overseas where we are much less known is because there is no Bajaj Electricals, there is no Bajaj Finance, there is no Bajaj Insurance, there is none of those.
Can you imagine Mercedes mixer grinder, Audi almond ‘kesh tel’? Difficult concept. But it exists. The ‘Bajaj tel’ is there and the Bajaj mixer grinder is there. So the most important asset in marketing is the name you own and the image it gets into your mind. So if I say Bajaj to someone and he does not get an image in India of a motorcycle, this is a big problem for me.
You are seeing a lot of changes in the auto sector, especially in technology. Two-wheelers in China have completely become electric vehicles, where do you see this going in India and some of the other 70 countries which you serve?
Personally I am a believer in this. I believe that a brand will exist or any business will exist if society wants it to exist. This is not my own thought of wisdom. This I heard a Honda CEO say in 2001 at the Tokyo Motor Show. He said Honda will exist because the world will want Honda to exist. As far as EVs are concerned, the common criticisms are, the EV is not profitable or viable today. But the point is that if you put an electric vehicle in the hands of the consumer, he is delighted because the experience of using an electric vehicle is extraordinary. Similarly, people say, ultimately if you take the whole chain, the EV may not be greener than internal combustion engines but the fact still is that at least in the cities where pollution is the biggest problem, the EV will make a difference.
So I had a great guru who taught me that one should not defend the past, attack the future. Sometimes you have to do the business which is beyond the business. We all have children, they will all inherit this. Somewhere you have to have in a company a small company, that is, thinking purely on behalf of the consumer and not only on the behalf of the shareholder.
I saw a wonderful video the other day that said, all these people report to the CEO, who does the CEO report to? Not to the board. The CEO reports to the consumer. I know that if we made a great electric two-wheeler tomorrow, like Elon Musk’s great electric car, people would love it.
When we take that plunge or that leap of faith, everything else will happen after that. If we approach it correctly with the right technology, the right brand solution, the right product solution, the right price solution, the right distribution solution, then in five years’ time we may find that EVs are viable, they are attractive. The government is making so much noise about making three-wheelers 100 percent electric.
So I can only say this confidentially in this room because I am sure it will not go back to my competition that when we are 10 years late making the 100cc motorcycle, till today after 35 years, we still don’t make much money making a 100 cc motorcycle because once you are late, you are out forever. Let us say worst case scenario – a company like Bajaj Auto puts Rs 50-200 crore into EV and it is a failure. I would still content that the cost of a failed experiment is less than the cost of being late to market because we cannot afford to be late to market.