Brand Management - Royal Enfield


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This report provides you an overview of the brand Royal Enfield.

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Brand Management - Royal Enfield

  1. 1. Brand Management Project- Royal Enfield Tanmay Vankalas Akshit Somani 129278069 Bhuvan Gupta 1292780 Jyotirmay Mandal 1292780 Manish Ahlawat 129278062 Samveg Sethi SJMSOM, IIT Bombay 129278005 129278
  2. 2. Royal Enfield is the oldest surviving brand of motorcycles in the world. With its heritage as a weapons maker and ‘Made like a gun’ as tag line, Royal Enfield started in the 1890s making bicycles, lawn mowers and motorcycles in England. Since the 1940s, the company hasn’t much altered the technology in the single- cylinder engined two-wheelers except for modern features such as direct fuel injection and switch ignition. The British military used the bikes, including the ‘Flying Flea’ designed for parachute drops with airborne troops during the Second World War.The manufacturer Enfield India was bought over by Eicher Motors Limited in 1994. The brand is now owned by Eicher Motors. Thus, it is now an Indian brand. The legacy of weapons manufacture is reflected in the logo, a cannon, and their motto "Made like a gun, goes like a bullet". Use of the brand name Royal Enfield was licensed by The Crown in 1890. ROYAL ENFIELD LOGO : Tag-line: ‘Made like a gun’ The first customers of the Bullet was the Indian Army. More often than not people from defence forces, police and head or landlords from villages in India were seen using this mean machine which helped in defining the brand as an aspirational brand. The bullet was often seen as the vehicle of power and affluence. The love for the bullet is often passed on as lineage from generation to generation. Often bullet owners have felt the magic for the thump as kids when their parents or elders in the family got home a bullet. Brand Management Royal Enfield Page 1
  3. 3. Brand communication Designing brand communication for such an iconic brand is always a challenge since the right mix of portraying heritage and legacy vs modern well equipped machine has to be chosen. The Bullet has always been associated with independence, self expression, power and passion. Even the marketing campaign ‘Leaving Home’, ‘Selfism’ focussed on the same aspect as it showed a boy cutting his umbilical cord to ride his dream bike. The brand communication was based on the insight that many young men stay at home for too long missing out on the fun of an independent life. Recently the brand communication revolves around being independent, being free and power. Earlier in 1980s, it was more about power and authority. But during 2000, Royal Enfield changed its communication from targeting people above 30 years to the youth. The brand then started communicating the values of self-respect, independence , power and adventure. The different branding activities of Royal Enfield are all encircled around this brand communication. ====================================================================================== Brand Building activities of Royal Enfield Advertisements Royal Enfield rarely uses television and radio advertisements for its promotions compared to other two wheeler manufacturers in India. The first Ad of Royal Enfield was released in the year 1960 showing Bullet as ‘ShaankiSawari’ communicating the exact brand personality and positioning as a premium product and associating it with the pride of the owner. Later on after the revival of the brand in early 2000 they launched the Ad campaign ‘Jab Bullet Chalet oh Duniya Rasta De’ again highlighting the pride and respect for the brand amongst its owner and the masses. Thus RE has never been a brand which advertises heavily through television or media. Branding through Royal Enfield Rider Mania One of the most important branding activity of Royal Enfield is the Royal Enfield Rider Mania. To keep users engaged with the brand, Royal Enfield organizes adventure filled, fun and leisure motorcycle trips all around the year with Himalayan Odyssey being the most prominent. Royal Enfield also organizes Rider Mania in Goa each year in December where all the Bullet enthusiasts all over India assemble for a 4 day long fun filled union of bullet lovers. All bullet clubs in the country make it a point to be a part of this grand event organized by RE. There are long waitlists of enthusiasts wanting to go on such trips. A lot of publicity is also achieved through these events as a lot of news channels showing automobile programmes are present here to cover the entire grand event. Brand Management Royal Enfield Page 2
  4. 4. Branding through Royal Enfield Riders Club and Communities Following the Harley Davidson model of riders club, Royal Enfield also heavily promotes the Club culture amongst its riders. The first Royal Enfield club was started in Dec 1995 and since then a lot of similar clubs have evolved all across the country. Today, there are a large number of riders club formed all across India. These clubs not only promote the feeling of brotherhood amongst fellow bullet riders but also organises a lot of rides to different places, training sessions, sessions for improving riding skills of the riders etc. All these clubs arrange meets, trips, competitions with fellow riders, clubs and also become a part of the Rider Mania organised by Royal Enfield every year. It is one of the reasons for the cult brand that Royal Enfield is today. These clubs are also a major reason why people want to own a Bullet so that they can be a part of one of these coveted clubs. Some of the oldest and notable clubs are Roadshakers, Indie-thumpers, Shimoga Bulls etc. Brand Management Royal Enfield Page 3
  5. 5. Online Media and Social Media marketing Royal Enfield actively uses online media and social media marketing for branding. Through their website they organise contests like best trip story writing contest and encourage people to go on rides and express their stories to everyone through their trip story blog on the official website of RE. They also have a members directory where a consumer can enrol himself in the members directory once he has purchased the bullet and then he can stay informed and connected with all the activities of Royal Enfield. Apart from the official website of Royal Enfield there are various online communities and groups on Facebook of Royal Enfield riders where they discuss their experiences, share photos, videos, discuss problems related to their bike etc. Thus Royal Enfield has effectively used the online media to bond all the bullet riders together and spread the feeling of brotherhood. Royal Enfield Merchandise Following the Harley Davidson’s model of branding, Royal Enfield has also started selling their own merchandise for riders including riding jackets, helmets, t-shirts, gloves etc promoting safety for riders. All these merchandise are sold in the Royal Enfield showrooms all over the country. The RE showrooms have started allocating a separate section in the showrooms for displaying all these merchandises of Royal Enfield. So when a person walks into the showroom for the delivery of his bike, seldom do we observe him walking out without picking up one of these RE merchandise. Brand Management Royal Enfield Page 4
  6. 6. Branding through Film Industry Bollywood and Hollywood movie makers have been using Royal Enfield since a long time. May it be Brad Pitt’s ‘Curious case of benjamin button’ or Bollywood’s ‘Karan Arjun’, Royal Enfield has always been shown as a hero’s vehicle. Royal Enfield was first shown in the movie ‘Sholay’ and the song ‘YehDosti Hum nahiTodenge’ was shot on the bike.But recently Celebrity endorsements of the Bullets through films have reached the next level as due credits are given to the Royal Enfield and its logo is highlighted in the film. Recently, Katrina Kaif drove it in the movie ‘Zindagi Na MilegiDobara’, Ajay Devgan in ‘Singham’, KanganaRaut in ‘Tanu Weds Manu’. Also Shahrukh Khan’s ‘Jab takhaiJaan’ and FarhanAkhtar’s ‘BhaagMilkhaBhaag’ saw extensive use of this cult bike. Customer Insights gathered from interviews :               There is a sense of aura around the brand. Very few people drive Bullet but many many more aspire for it. The brand offers a riding experience which no other bike can. The thumping sound, the road presence, the classic crome finish, the sheer 'ego' boost which the brand gives its rider makes him feel 'arrived'. It gives a feeling of power, authority, independence and pleasure while riding a Royal Enfield. People like to be associated with the legacy and community of the brand Royal Enfield. People are ready to wait for a waiting period of 6-12 months for Royal Enfield. Every Bullet loyalist has agreed to the fact the once you drive a Royal Enfield, it’s hard to switch to another bike. The bike lasts for a really longer time, from generations to generations and thus becomes an integral part of the life cycle of the consumer. The percentage of brand loyal people of Royal Enfield is large compared to other motorcycle manufacturers in India. Royal Enfield remains an aspirational brand for a lot of people using 150cc and 200cc bikes. Brand awareness and Brand loyalty is very high. Very high Top of mind recall. Word of mouth publicity is the major factor for high brand equity of Royal Enfield. Brand Management Royal Enfield Page 5
  7. 7. Perceptual Mapping In the perceptual mapping matrix Royal Enfield is bound to take up the elite class top right corner beating all the other brands, hands down. The brand value and image which Royal Enfield has built over the years is out of the bounds for any other brand. They are currently the most respected motorcycles in the market and lie in the premium sector. They have established a cult image for themselves and carved out a niche for themselves in the market giving the owners more than simply a means of transport. The brand is perceived to give a sense of pride and authority to the owner and adds up a definition to the person’s character. In India Royal Enfield has the same image as Harley Davidson has in west, it gives a sense of pride, freedom, passion and distinctiveness. They have also set their image as a very manly bike, as being very heavy it becomes a little difficult to handle making it possible only for well-built people to handle it. This further gives a hint of muscularity and pride to the owner, to be a part of the few who can handle the beast. The people who don’t or rather can’t, own a Royal Enfield aspire to own one and the owners are generally looked at with respect. Many brands like Bajaj and Kawasaki tried to enter the segment with their cruiser bikes like Avenger and Enticer respectively but could not come anywhere near to the leader ‘Bullet’. Although they fulfilled the dream of owning a cruiser bike for those who couldn’t afford a Bullet, but were unable to tap the image which Royal Enfield had its old on. The brand has worked hard in building this perception from the very beginning, for instance the motorcycle was first to be seen owned by the powerful people only, like police officials, zamindars etc. making it an aspiration for others. Royal Enfield advertises their motorcycles in a completely different manner, unlike other brands they never show comfort and economy, they simply concentrate on the sheer power of the machine and the respect it brings along with it. Association of customers with the brand has grown very deep with the years and customer loyalty simply breaks the charts. Transition from Royal Enfield to some other motorcycle is a very rare phenomenon as the attitude which is perceived for the brand, the association with power, strength and ruggedness with unique touch of luxury is not to be seen in any other brand. Royal Enfield can very well be termed as an epitome of brand loyalty and this can be sensed by the fact that unlike for any other brand, people are ready to wait for 6-8 months to get their Royal Enfield. Brand Management Royal Enfield Page 6
  8. 8. Other brands in the market like Bajaj, Hero Honda, TVS, Suzuki, Yamaha etc. have their customer base diversified and they cater to different market segments with different line of products ranging from 100 cc to 200-250 cc. This widened their customer base but also loses the sense of individuality among the owners and the motorcycles are bound to remain just a mean of transport. On the contrary Royal Enfield cater to only one segment and maintain their core competency, i.e. lifestyle biking. They give the riders a sense of belonging that the motorcycle has been specially built for someone like him/her. They don’t have any low range products maintaining the premium image of the brand and even in the future they plan to go further up the ladder of power and thrill. Marketing Program Investment: Product:Motor cycle which represent power, matchless stability and rugged looks with state of the art technology Communication:well positioned cult brand to capitalize on trend towards lifestyle biking Trade: The bike is traded through agencies and dedicated showrooms Employee: Employees of the company are also highly involved in communicating the brand as well in keeping the brand activity high Customer Mindset: Awareness: Very high, due to high brand equity and strong brand loyalty Associations: Royal Enfield is associated with power, strength, luxury, ruggedness. It is the bike holding record of carrying 48 persons on a single bike for over 1000 mts. Attitudes: It is perceived as a proud asset, it initially was a favourite of police and army personnel which gave it a strong association with power and authority Attachment: Customers are very loyal to this brand, the transition from enfield to other competitor is generally low Activity: There are regular engagement events that keep happening ex. tours organized by Royal Enfield or groups of Royal Enfield bike owners Market Performance: Price Premium: Royal Enfield does charge a slight price premium on its products. This is owing to the fact that the bike offers higher engine capacity (350cc to 500cc) and also being Handmade; it has Brand Management Royal Enfield Page 7
  9. 9. positioned a cult and superior brand image in customers mind and hence is able to charge a price premium on its products Price Elasticity: The Royal Enfield products have moderate Price Inelasticity, which means that since they have superior brand image in the customers mind, even if the price of the products are increased, to a certain level the demand for the products will remain mostly inelastic and will only go down considerably if the price of its products are increased too high. Hence Royal Enfield can leverage the Price Inelasticity of its products to increase its revenues. Market Share: In the premium segment of motorbikes (350cc to 500cc), Royal Enfield currently has about 95% market share in India which shows that it has virtually a monopoly in this market segment and is also trying to attack the market share of higher segments (500cc to 1600cc) against Harley Davidson by introducing newer models. Expansion Success: While the current annual installed capacity is 60k units for Royal Enfield, over the last couple of years, the company has been consistently increasing its monthly output. Despite production increasing by 50% YoY in recent months, the average waiting period for Royal Enfield motorcycles is 6-12 months. To meet the increasing demand and further improve product profitability, Royal Enfield is setting up a new plant with capacity of 150k units/year in Chennai at a capex of INR 1.5 billion. Capacity expansion will enable it to improve availability and expand its reach – both domestic and global. In India, it currently has 250 dealers, catering largely to Tier 1 & 2 cities. It is yet to tap the potential of semi-urban/rural markets, where affordability for its product is improving. Profitability: The Profit After tax (excluding Dividend) of Royal Enfield is about INR 1.064 billion at the end of FY2013, which has almost doubled from FY2012 end PAT of INR 0.529 billion, shows that the profitability of the Royal Enfield has been increasing and it is forecasted that the profitability (PAT) will touch about INR 2.28 billion mark by FY2015 end which is an extremely good sign from the investors point of view. Shareholder value: Predictable Revenue: Having 95% of the Market Share in the premium segment of 350cc to 500cc motorbikes and also a waiting period of 6-12 months shows that the demand for Royal Enfield is growing constantly and it has a very predictable Revenue stream with Revenues predicted to grow by 100% by end of FY2013. Stock Price: In a year’s time from Dec 2012, since the work of plant expansion has started and with higher demand, the stock of Eicher Motors (parent company of Royal Enfield), has increased from INR 2841 to INR 4126.9 per share. This shows the tremendous faith the investors have in the Eicher Motors and Royal Enfield and has led to very good returns for the investors. P/E Ratios: The P/E Ratio of the parent company Eicher Motors is 76.97 and EPS of INR 53.61, which is pretty good from the investor’s point of view. Market Cap: The Market Capitalization of Eicher Motors is INR 111.4263 billion. Program Quality: Clarity: Advertising program and marketing communication of royal enfield is very clear. It is clearly perceived as a powerful bike for enthusiasts. It's owners take proud in being amongst the few to dare to handle this bike. Consistency: Program has been consistent in its communication, royal enfield still represents what it represented 20 years back. Just that the customer base has increased over the period of time, but the brand equity has only increased. Distinctiveness: Product clearly differentiates itself from other motorcycles.While other motorcycles focus on speed and comfort alone, royal enfield has always leveraged on the advantage of being the powerful and respectable bike. It distinguishes itself clearly against other popular motor cycles like Pulsar or FZ 16 or Hero Honda. Brand Management Royal Enfield Page 8
  10. 10. Relevance: The product has been communicated well and also the marketing program has been very relevant to the product's positioning. The product is considered a niche to some extent and therefore the communication is more towards a targeted set of customers rather than the entire population. Marketing program for Royal Enfield is more about customer engagement and loyalty. Market Conditions: Competitive Response: Although Royal Enfield is the only player in 350cc to 500cc, many players have entered in the 200cc to 250cc motorbikes and then there are players in the 500cc -1600cc range. Royal Enfield has been able to maintain its market share in the premium range but may lose out to other players if it loses its premium cult image in customers mind. Channel Support: Royal Enfield has about 250 Dealers serving the customers in mainly Tier 1 and 2 cities. It is yet to tap the potential of semi-urban/rural markets, where affordability for its product is improving. Also the After Sales Service of Royal Enfield is not great and numerous Customer dissatisfaction reports have been recorded and Royal Enfield needs to work on this. Segment Size and Profile: Royal Enfield has a niche segment in motorbikes with a demand of about 250,000 motorbikes a year. But due to the Price Premium that Royal Enfield charges, it is able to achieve higher profit margins. Royal Enfield mainly comes in the Premium and Cult Category with a Niche market aimed at Lifestyle Biking among customers with rising income and aspiration levels. Investor Sentiment: Market Dynamics: According to the Society of Indian Automobile Manufacturers’ data, the premium segment, which comprises motorcycles with the engine capacity above 350cc till 1,600cc, grew by 49% to 54,425 units for the April-July period this year, at a time when the overall two-wheelers, comprising scooters and motorcycles, decline by 2%. Growth Potential: Royal Enfield has a very good growth potential with an expected growth in Sales Volume and PAT of about 100% by end of FY2015. Risk Profile: There is only a Risk of a very large capex being involved of INR 1.5 billion for manufacturing expansion but this risk will also help to meet the demand and increase revenues and profitability for the company for the next 3-4 years. Hence this risk needs to be taken Brand Contribution: Due to the Cult and Superior Brand Image in India, Royal Enfield has carved out a niche market for itself owning largely to the Brand value built over the years. The Brand contributes around 40% EBITDA to Eicher Motors and is a significant part of their portfolio which will help them maintain higher profitability and revenues in future. Recommendations: 1) Improve the After Sales Service by opening more service centres, as lot of customers have complained about lack of service and lot of problems with the Royal Enfield bikes. Availability of spares is also a issues especially for old bullets. 2) In India, Royal Enfield currently has 250 dealers, catering largely to Tier 1 & 2 cities. It is yet to tap the potential of semi-urban/rural markets, where affordability for its product is improving. Try and tap that market. 3) Due to numerous complaints on delivery of bike - scratches, ignition problems, break down and other complaints, try and make the manufacturing more automated - from current levels of 30% automation to 50-60% automation, so that many of the problems can be eliminated. 4) Try and build bikes to compete against Harley Davidson (500cc - 1600cc) - INR 6 lakh above bikes, as they can have the potential to capture that very niche market segment as well before Harley Davidson does. 5) Royal Enfield brand ambassadors should come and join in some rides happening to different parts of India. Brand Management Royal Enfield Page 9
  11. 11. 6) The RE merchandise should be available outside RE showroom too like at malls, etc so that people get greater access to these merchandises. Brand Management Royal Enfield Page 10