1Case Study: Tanishq ‐ The Turnaround StoryThe Unsuccessful LaunchIn 1995, Titan Industries, Indias leading manufacturer o...
and the concept of branded jewellery did not exist. In the late 1990s, India had around 0.2million jewellers scattered acr...
Traditionally, conventional jewellers used the touchstone to test the purity of gold. Apartfrom the fact that the customer...
Rs 600 million. The unit had facilities like refining, alloying and stone casting and adustextractionsystem that kept gold...
Titan believes that this market is right for consolidation. A consumer‐oriented, highly ethicalcorporate player will have ...
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Tanishq the turnaround story

  1. 1. 1Case Study: Tanishq ‐ The Turnaround StoryThe Unsuccessful LaunchIn 1995, Titan Industries, Indias leading manufacturer of watches, launched the Tanishqrange of gold watches and jewellery. Till then, the Indian jewellery market was to a largeextent unorganized, with a few recognized names such as Tribhovandas Bhimji Jhaveri andMehrasons. Tanishq, an entirely new concept in the Indian market, thus had to strugglehard to be accepted by the customers. Industry watchers were extremely skeptical ofTanishq and doubts were being cast over its prospects. Tanishq began by offering jewelleryin the 18‐carat gold range, with designs borrowed heavily from contemporary Europeanbrands. The company justified its decision saying that it wanted to be different from thetraditional Indian offerings.Tanishq performed very badly in the next three years, posting a huge loss in 1997‐98,proving its detractors right. Jacob Kurian, Tanishqs chief operating officer admitted,"Tanishq, as a concept, was far too ahead of its times." Even if one agreed with Kurian, itcould not be denied that Tanishq did commit mistakes.Analysts decreed that the companys strategies were wary. At this point, Tanishq tookvarious steps to correct the mistakes it had committed and very soon, posted its first everoperating profit in 1999. In 1999‐00, sales doubled to Rs 1532 million against Rs 743.8million recorded in 1998‐99 and reached Rs 2000 million in 2000‐01. Tanishq fared equallywell on the export front also with heavy exports to UK, US, Australia and West Asia.Tanishq was the largest overseas chain in US with 1,200 outlets. In the year 2000, exportscontributed 10% to the companys turnover. The story of Tanishq, once written off as alosing proposition, making a remarkable turnaround was an example of a companysinglemindedlyworking to make its own mark in the tradition bound Indian jewellery market.Behind this success was, of course, a well‐planned and well‐executed marketing plan.Background NoteTitan Watches Limited was promoted jointly by Questar Investments Limited (a Tata groupcompany) and Tamil Nadu Industrial Development Corporation Limited (TIDCO). Thecompany, incorporated in July 1984 in Chennai, was started in technical collaboration withFrance Ebauches (a French company), one of the worlds largest manufacturers of watchmovements. Initially involved in the watches and clocks business, Titan later ventured intothe jewellery businesses. The company was Indias leading manufacturer of watches,2marketed under the Titan and Sonata brand names with a 25% share of the total domesticmarket.Titan established its first manufacturing facility in Hosur, Tamil Nadu and its first satellitewatch assembly unit at Dehradun, Uttar Pradesh was started in 1990. In 1992, Titan set up ajoint venture, Timex Watches Limited, with Timex Corporation of USA to market Timexwatches in India.1 And in 1995, Titan changed its name from Titan Watches Ltd. to TitanIndustries Ltd. in order to change its image from that of a watch manufacturer to that of afashion accessories manufacturer. In the same year, it also started its jewellery divisionunder the Tanishq brand. At this point of time, the jewellery business was highly localized
  2. 2. and the concept of branded jewellery did not exist. In the late 1990s, India had around 0.2million jewellers scattered across the country.Jewellery had predominantly been used as an investment rather than adornment. Hence, achange in the perception of jewellery from an asset to a fashion accessory was extremelydifficult to bring about. People generally bought gold from the same family jeweller theyhad trusted implicitly for generations. Moreover, these jewellers made the jewellery toorder and often bought back their products at the prevailing market rates.Thus, from the very beginning, Tanishq found it hard to overcome the Indian consumerspreference for buying traditional jewellery only from family jewellers. The sleek andcontemporary designs being offered did not go down well with the Indian customer whowas used to heavy, traditional designs.Vasant Nangia, erstwhile Chief Operating Officer, Tanishq said, "When we launched theTanishq range, our designs were not appreciated initially as they were believed to beextremely Western. Also, we offered only 18 carat gold." Over a period of time, Tanishqsresearch revealed many other loopholes in its strategies.Setting Things RightTanishq found out that it had gone wrong mainly in two areas ‐ the product proposition andretailing. Initially with a focus on the export market, its designs were predominantlyWestern, and the same line of jewellery was sold in India as well. However, when it shiftedits focus to the domestic market, it was unable to sell these designs. Therefore the first stepwas to change the brand positioning from that of an elitist and Westernized offering to amore mainstream, Indian one. The 18‐carat jewellery range was expanded to include 22 and24 carat ornaments as well. Tanishq also made attempts to redefine traditional styles in its3designs. Tanishq realized that, given the diverse nature of Indian ethnicity, it would have tocater to tastes of all regions.Therefore, the emphasis shifted from the erstwhile modern designs to more ethnic onesand traditional ornaments (based on designs from various states) were launched. Thecompany also began seasonal and localized promotions based on Indian festivals, such asduring Durga Puja in West Bengal, Onam in Kerala, Diwali in north India, etc. JohnsonVerghese, divisional head, sales and marketing, said, "We also decided to go in fortransmigration of designs. So we not only got in more Indian motifs but also startedstocking typical designs from Tamil Nadu in Mumbai and those from Bengal in Delhi. Thesedesigns, though Indian, provided variety to what the people in a particular area were usedto seeing."Tanishqs team of in‐house designers came out with about 3,500 designs based on currenttrends and the feedback from stores. At least 10% of these designs were changed everyquarter and fresh ones were added to the stock.Tanishq gave complete freedom to the retail outlets to pick up designs, which they thoughtwould sell in their stores. Almost all the outlets stocked the best selling range of designs,which did well across the country.Tanishq was now pitted directly against the traditional jewellers who were offering similarornaments. In order to add some value proposition to rise above the competition, Tanishqdecided to address the issue of gold purity, which was most important to the customers.
  3. 3. Traditionally, conventional jewellers used the touchstone to test the purity of gold. Apartfrom the fact that the customers did not trust the method, it was also alleged that a slightamount of gold was always lost while testing. The customers had to accept this for want ofan alternative. In 1999, Tanishq introduced the revolutionary concept of Karatmeters in itsretail boutiques. The Karatmeter used X‐rays to give an accurate reading of the constitutionof gold in the ornament within three minutes. Imported from Germany at a cost of Rs 1million each, Karatmeters though expensive, proved to be the biggest USP for Tanishq in thecoming years.In fact, its sales increased by 20‐30%. The concept was later on heralded as a bold steptowards professionalizing the Indian jewellery business. In an attempt to elbow outcompetition, Tanishq conducted tests on 10,000 ornaments selected at random. In somecases the caratage was found to be as low as 10% and almost 65% of the gold tested wasbelow 22 carats. As the caratage offered was on the lower side in traditional jewels, the4jewellers kept the making charges very low to entice customers. This had become the normall over the country. Tanishq had to struggle hard to break this convention.As the concept of Karatmeter became more widely known, customers began to realize thatthe rates they were paying for Tanishq jewellery were indeed justified. A Tanishq officialcommented, "They have begun to understand the total value proposition that Tanishqoffers."An all‐India customer satisfaction survey conducted by Tanishq in 2001 revealed that over50% of all Tanishq customers intended to make it their jeweller, replacing many longstandingrelationships with the traditional jeweller. When Tanishq was launched, it soldmost of its products through multibrand stores. This did not help the Tanishq brand to makeits mark. Having realized this, Tanishq decided to set up its own chain of retail showroomsin 1998.This proved to be a very wise move as sales picked up almost immediately. By July 2001, ithad 47 Tanishq boutiques in 37 cities – 12 were in the metros ‐ Delhi, Mumbai, Kolkata,Chennai and Bangalore, the rest in smaller cities with a population of at least 0.5 millionsuch as Trichy, Nagpur, Amritsar and Patna.The focus on smaller cities paid off well with the annual growth being as high as 150% ascompared to the 45% growth in metros. The number of boutiques was expected to reach 50by the end of 2001 and to 70 by 2002. Tanishqs efforts to standardize the price of itsornaments proved to be another milestone in its success.Gold prices differed across the country as they were based on different parametersconcerning the local markets. In a bid to control gold price variations in different parts ofthe country, Tanishq decided to have a standard gold price across all its showrooms fromMarch 2000.The standard price was made binding on all Tanishq showrooms. Tanishq based its goldprices on international exchange prices, resulting in prices often being lower than the localmarket prices. Nangia said, "We already have a kind of standard pricing in place, but thiswould represent a formalization of that system to the public." Tanishq even had plans tolink directly with the London Metal Exchange (LME) for daily quotes in the future. Tanishqset up an ultra‐modern and large‐scale manufacturing unit in Hosur, Tamil Nadu at a cost of
  4. 4. Rs 600 million. The unit had facilities like refining, alloying and stone casting and adustextractionsystem that kept gold losses down to 2% of the raw material while local jewellerstypically lost 8‐10%.5This in‐house manufacturing facility was the main reason, which enabled Tanishq to chargethe same price across the country. One of the companys most important initiatives wascustomer service enhancement.Tanishq launched a direct consumer contact programme and conducted surveys to monitorstore walk‐ins and footfalls and percentage of repeat customers.The company also kept the entry‐level price as low as Rs 600 (for a pendant) and offered arange, which far exceeded that offered by any other jeweller. All Tanishq outlets gave a100% return guarantee on its brand of jewellery and also exchanged other jewellery afterdeductions depending on purity.A customer satisfaction measurement program was started with the help of CustomerSatisfaction Measurement Management (CSMM), an associate of IMRB. CSMM trackedcustomer satisfaction parameters for Tanishq on a quarterly basis. This gave the companythe benefit of benchmarking against local and international players and also aided inimproving repeat purchases. As a result, Tanishq was able to directly link the remunerationof franchisees with customer satisfaction. The companys corporate gold gift scheme(When you want to say thank you, say it in gold), launched in December 1998 proved to bea major success. Tanishq delivered 50,000 customized gold coins to 0.25 million Maruti carowners nationwide as part of the 15th anniversary celebrations of Maruti Udyog. By 2001,the scheme accounted for almost 5% of the turnover and over 30 corporate clients likeCoca‐Cola, the UB Group, Whirlpool, the TVS Group, Ceat and Liberty Shoes.The communication and promotion budget was increased from Rs. 65 million in 1999‐2000to Rs 100 million in 2000‐01. A majority of this was spent towards advertising, while aportion was also earmarked for promotions tailored to match regional preferences. Forinstance, in New Delhi, which was Tanishqs single largest market, substantial promotionswere carried out. The Rs 100 million was split into four parts, comprising national‐levelspends (both electronic and print media), regional budgets, direct mail and research. Forthe first time, Tanishq initiated a long‐term media plan, aiming to give the brand a roundthe‐year presence and enhance awareness. The communication focused on design andquality instead of the price.Future Prospects6The Indian branded jewellery market, though nascent, grew at the rate of 20‐30% during1998‐2000. Besides Tanishq, other major players included Intergold, Gili and Carbon.However, in the Rs 400 billion Indian jewellery market, Tanishqs share was not even 1%.Not willing to accept this as a poor show, Tanishq saw it as a vast opportunity instead. Thecompany planned to attain a 2% market share in the next few years. Kurian said, "Thejewellery market is one of the largest consumer segments in the country. It has anestimated 2,50,000 retailers with no national or international brand and no corporateplayer.
  5. 5. Titan believes that this market is right for consolidation. A consumer‐oriented, highly ethicalcorporate player will have great opportunity. Our growth rates in the past three years havefully substantiated this hypothesis." Tanishq had ambitious plans to invest in informationtechnology and utilize Intranets and the Internet to link all of its showrooms to one another.There were also plans to do online monitoring of sales and design popularity as well asusing the Internet to place orders. The Intranet was to contain a photo collection of all thedesigns in all the stores so that even those not in stock in a particular store could beordered by customers. In a highly innovative move, Tanishq tied up with CountrywideFinance for providing pre‐approved credit line to the customers at selective outlets. Thiswas expected to boost sales significantly in the future. In May 2000, Tanishq unveiled plansto surpass its parent companys turnover by 2002. Jacob Kurian who had taken over as theCEO the same month, said, "We have finally figured out the jewellery business and shouldbe solidly profitable, shorn of any caveat, this year."