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7/27/2019 On the First of Every Month
1/12
On the first of every month, two-wheeler companies disclose their sale figures for theprevious month. May 1 was no different.
Hero Honda, the country's largest and most valuable two-wheeler company, said it
logged sales of 370,575 two-wheelers in April, up 29.5 per cent from April 2008. Its
closest rival, Bajaj Auto, said sales fell 24 per cent to 169,119 during the month. The gapbetween the two rivals had expanded to over 200,000.
Not so long ago, Bajaj Auto was giving sleepless nights to Hero Honda. In September
2006, it had come close to displacing Hero Honda from the top slot.
Hero Honda's rule as the leader of the Indian motorcycle market, second only to China in
size, it looked would soon be history.
The partnership with Honda of Japan (it provides technology and owns 26 per cent of
Hero Honda) meant exports couldn't make up for loss of domestic market share. (Hero
Honda's exports are restricted to markets where Honda doesn't have a presence - Nepal,Bangladesh, Colombia and so on).
There was palpable tension in the company. Left with no choice, it took a decision thatchanged its face for ever. "We said we will focus on market share rather than profits,"
recollects Hero Honda Managing Director and CEO Pawan Munjal.
Result? From a producer of fuel-efficient motorcycles, Hero Honda has morphed into amarketing-led organisation. 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.
"Every two-wheeler company is focused at the product-end of the story. But all productsare similar," says brand consultant Harish Bijoor. "Hero Honda is the first to go beyond
that. 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. All
motorcycles and their advertisements looked similar. The diagnosis was that the
company's differentiation in terms of propositioning to customers was weak. That was the
first gap that needed to be plugged.
Traditionally, 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).
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. Hero Honda, conventional wisdom
7/27/2019 On the First of Every Month
2/12
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 found that these are not watertight categories. Customers, for instance, tradefreely 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.
While a customer does look at the engine capacity, what he seeks is a holistic experience.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.
This took the company to unchartered waters of consumer profiling - what is his lifestyle
and attitude, what is it that he holds dear in life and so on. The segments, in Hero Honda's
scheme of things, are: Entry (35 per cent of the market), deluxe (50 per cent) and
premium (15 per cent).
Hero Honda Vice-president (sales and marketing) Anil Dua, who joined Hero Honda
around September 2006 from Hindustan Unilever, says the company has a lion's share ofthe first two segments and a "growing" share of the premium segment.
Prev Next
More important, this view of the market has become the cornerstone of Hero Honda's
strategy. It now shapes the company's product development, placement and promotionmoves. Hero Honda comes out with new motorcycles, variants and refreshes keeping the
customer profile of each segment in mind.
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
7/27/2019 On the First of Every Month
3/12
Hero Honda has upped the advertising ante in the last couple of years. When it decidedto chase market share and not profits, it also decided that it would offer no discounts onits motorcycles.
(Even when the Cenvat rate was cut 4 per cent late last year, it did not cut prices of its
models uniformly - well-entrenched models were left untouched, prices of some otherswere dropped more than 4 per cent. Clever!) The money saved by plugging the discountswas ploughed back into brand promotion.
And there was some aggressive planning. Last year, the company launched a three-
minute advertisement on television to mark its silver jubilee. That would have cost a
bomb. But Dua and his team worked with channels for six months. They were able tobring the air-time price down by half against firm commitments.
Research showed that Hero Honda's target customers (age bracket of 18 to 35 years)
relate to four subjects: Cricket, music, movies and adventure. Thus, it roped in film stars
Hrithik Roshan and Priyanka Chopra, joined the Indian Premier League sponsorshipbandwagon, and got associated with television shows like Sa Re Ga Ma Pa on Zee TV
and MTV Roadies.
Hunk doesn't talk of speed or power at all - the focus is on the looks even while standing.
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. "We have created very sharp positions for all our brands. You can't substitute one
model for another in any advertisement." This is important. Hero Honda has a largeportfolio 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.
Several automobile companies in the world put their products through a group of users
before launch. It is standard practice. Hero Honda even puts all its advertisementsthrough such groups.
"We don't move an inch without consumer feedback," says Dua. On behalf of Hero
Honda, TNS talks to thousands of customers every month to monitor the brand health -share of mind (a lead indicator of share of market) and first-choice, cut-through (how the
brand and its advertisements stand in the clutter), share of voice, loyalty indices and so
on.
Rediff.com Business The secret behind Hero Honda's success
The secret behind Hero Honda's success
May 20, 2009 12:05 IST
http://www.rediff.com/http://www.rediff.com/http://www.rediff.com/businesshttp://www.rediff.com/http://www.rediff.com/business7/27/2019 On the First of Every Month
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On the first of every month, two-wheeler companies disclose their sale figures for theprevious month. May 1 was no different.
Hero Honda, the country's largest and most valuable two-wheeler company, said it
logged sales of 370,575 two-wheelers in April, up 29.5 per cent from April 2008. Its
closest rival, Bajaj Auto, said sales fell 24 per cent to 169,119 during the month. The gap
between the two rivals had expanded to over 200,000.
http://mypage.rediff.com/qna?article_url=http%3A%2F%2Fbusiness.rediff.com%2Fslide-show%2F2009%2Fmay%2F20%2Fslide-show-1-the-secret-behind-hero-honda-success.htm&article_title=The%20secret%20behind%20Hero%20Honda%27s%20successhttp://mypage.rediff.com/qna?article_url=http%3A%2F%2Fbusiness.rediff.com%2Fslide-show%2F2009%2Fmay%2F20%2Fslide-show-1-the-secret-behind-hero-honda-success.htm&article_title=The%20secret%20behind%20Hero%20Honda%27s%20successhttp://messageboard.rediff.com/newboard/board.php?service_name=&boardid=money2009may20slide-show-1-the-secret-behind-hero-honda-success&from=story&dom=world&title=yeshttp://messageboard.rediff.com/newboard/board.php?service_name=&boardid=money2009may20slide-show-1-the-secret-behind-hero-honda-success&from=story&dom=world&title=yeshttp://mypage.rediff.com/qna?article_url=http%3A%2F%2Fbusiness.rediff.com%2Fslide-show%2F2009%2Fmay%2F20%2Fslide-show-1-the-secret-behind-hero-honda-success.htm&article_title=The%20secret%20behind%20Hero%20Honda%27s%20successhttp://mypage.rediff.com/qna?article_url=http%3A%2F%2Fbusiness.rediff.com%2Fslide-show%2F2009%2Fmay%2F20%2Fslide-show-1-the-secret-behind-hero-honda-success.htm&article_title=The%20secret%20behind%20Hero%20Honda%27s%20successhttp://messageboard.rediff.com/newboard/board.php?service_name=&boardid=money2009may20slide-show-1-the-secret-behind-hero-honda-success&from=story&dom=world&title=yeshttp://messageboard.rediff.com/newboard/board.php?service_name=&boardid=money2009may20slide-show-1-the-secret-behind-hero-honda-success&from=story&dom=world&title=yes7/27/2019 On the First of Every Month
5/12
Not so long ago, Bajaj Auto was giving sleepless nights to Hero Honda. In September
2006, it had come close to displacing Hero Honda from the top slot.
Hero Honda's rule as the leader of the Indian motorcycle market, second only to China in
size, it looked would soon be history.
The partnership with Honda of Japan (it provides technology and owns 26 per cent of
Hero Honda) meant exports couldn't make up for loss of domestic market share. (Hero
Honda's exports are restricted to markets where Honda doesn't have a presence - Nepal,Bangladesh, Colombia and so on).
There was palpable tension in the company. Left with no choice, it took a decision that
changed its face for ever. "We said we will focus on market share rather than profits,"recollects Hero Honda Managing Director and CEO Pawan Munjal.
Powered by
Image: Brijmohan Lall (L), Chairman of India's top motorcycle maker, Hero Honda
Motors Ltd. and Managing Director Pawan Kant Munjal
Photographs: Kamal Kishore/Reuters
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May 20, 2009 12:05 IST
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6/12
Prev NextResult? From a producer of fuel-efficient motorcycles, Hero Honda has morphed into amarketing-led organisation. Advertising campaigns, product refreshes and brand health -
walk blindfolded into the Hero Honda office in a crowded south Delhi market and thelanguage spoken there could lead you to mistake it for an FMCG company.
"Every two-wheeler company is focused at the product-end of the story. But all products
are similar," says brand consultant Harish Bijoor. "Hero Honda is the first to go beyondthat. 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. Allmotorcycles and their advertisements looked similar. The diagnosis was that the
company's differentiation in terms of propositioning to customers was weak. That was the
first gap that needed to be plugged.
Powered by
Image: Hero Honda Dawn
Prev NextMay 20, 2009 12:05 IST
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Prev NextNew segments
Traditionally, 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).
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. Hero Honda, conventional wisdom
said, is strong in the entry segment with a market share of 80 per cent and weak in theother two where its share ranges between 15 per cent and 20 per cent.
Hero Honda found that these are not watertight categories. Customers, for instance, trade
freely between a top-end 100 cc motorcycle and a low-end 125 cc motorcycle or betweena premium 125 cc motorcycle and a basic 150 cc motorcycle.
While a customer does look at the engine capacity, what he seeks is a holistic experience.
http://mypage.rediff.com/qna?article_url=http%3A%2F%2Fbusiness.rediff.com%2Fslide-show%2F2009%2Fmay%2F20%2Fslide-show-1-the-secret-behind-hero-honda-success.htm&article_title=The%20secret%20behind%20Hero%20Honda%27s%20successhttp://mypage.rediff.com/qna?article_url=http%3A%2F%2Fbusiness.rediff.com%2Fslide-show%2F2009%2Fmay%2F20%2Fslide-show-1-the-secret-behind-hero-honda-success.htm&article_title=The%20secret%20behind%20Hero%20Honda%27s%20successhttp://messageboard.rediff.com/newboard/board.php?service_name=&boardid=money2009may20slide-show-1-the-secret-behind-hero-honda-success&from=story&dom=world&title=yeshttp://messageboard.rediff.com/newboard/board.php?service_name=&boardid=money2009may20slide-show-1-the-secret-behind-hero-honda-success&from=story&dom=world&title=yeshttp://mypage.rediff.com/qna?article_url=http%3A%2F%2Fbusiness.rediff.com%2Fslide-show%2F2009%2Fmay%2F20%2Fslide-show-1-the-secret-behind-hero-honda-success.htm&article_title=The%20secret%20behind%20Hero%20Honda%27s%20successhttp://mypage.rediff.com/qna?article_url=http%3A%2F%2Fbusiness.rediff.com%2Fslide-show%2F2009%2Fmay%2F20%2Fslide-show-1-the-secret-behind-hero-honda-success.htm&article_title=The%20secret%20behind%20Hero%20Honda%27s%20successhttp://messageboard.rediff.com/newboard/board.php?service_name=&boardid=money2009may20slide-show-1-the-secret-behind-hero-honda-success&from=story&dom=world&title=yeshttp://messageboard.rediff.com/newboard/board.php?service_name=&boardid=money2009may20slide-show-1-the-secret-behind-hero-honda-success&from=story&dom=world&title=yes7/27/2019 On the First of Every Month
8/12
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.
This took the company to unchartered waters of consumer profiling - what is his lifestyle
and attitude, what is it that he holds dear in life and so on. The segments, in Hero Honda'sscheme of things, are: Entry (35 per cent of the market), deluxe (50 per cent) and
premium (15 per cent).
Hero Honda Vice-president (sales and marketing) Anil Dua, who joined Hero Honda
around September 2006 from Hindustan Unilever, says the company has a lion's share ofthe first two segments and a "growing" share of the premium segment.
Powered by
Image: Models pose with the 125 cc 'Glamour' Hero Honda motorcycle
Photographs: Jayanta Shaw/Reuters
Prev NextMay 20, 2009 12:05 IST
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9/12
Prev Next
More important, this view of the market has become the cornerstone of Hero Honda'sstrategy. It now shapes the company's product development, placement and promotion
moves. Hero Honda comes out with new motorcycles, variants and refreshes keeping thecustomer profile of each segment in mind.
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.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. "We have created very sharp positions for all our brands. You can't substitute one
model for another in any advertisement." This is important. Hero Honda has a largeportfolio 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.
Several automobile companies in the world put their products through a group of users
before launch. It is standard practice. Hero Honda even puts all its advertisements
through such groups.
"We don't move an inch without consumer feedback," says Dua. On behalf of Hero
Honda, TNS talks to thousands of customers every month to monitor the brand health -share of mind (a lead indicator of share of market) and first-choice, cut-through (how the
brand and its advertisements stand in the clutter), share of voice, loyalty indices and so
on.
7/27/2019 On the First of Every Month
10/12
Powered by
Image: Hero Honda Hunk
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Hero Honda has upped the advertising ante in the last couple of years. When it decidedto chase market share and not profits, it also decided that it would offer no discounts onits motorcycles.
(Even when the Cenvat rate was cut 4 per cent late last year, it did not cut prices of its
models uniformly - well-entrenched models were left untouched, prices of some others
were dropped more than 4 per cent. Clever!) The money saved by plugging the discountswas ploughed back into brand promotion.
http://mypage.rediff.com/qna?article_url=http%3A%2F%2Fbusiness.rediff.com%2Fslide-show%2F2009%2Fmay%2F20%2Fslide-show-1-the-secret-behind-hero-honda-success.htm&article_title=The%20secret%20behind%20Hero%20Honda%27s%20successhttp://mypage.rediff.com/qna?article_url=http%3A%2F%2Fbusiness.rediff.com%2Fslide-show%2F2009%2Fmay%2F20%2Fslide-show-1-the-secret-behind-hero-honda-success.htm&article_title=The%20secret%20behind%20Hero%20Honda%27s%20successhttp://messageboard.rediff.com/newboard/board.php?service_name=&boardid=money2009may20slide-show-1-the-secret-behind-hero-honda-success&from=story&dom=world&title=yeshttp://messageboard.rediff.com/newboard/board.php?service_name=&boardid=money2009may20slide-show-1-the-secret-behind-hero-honda-success&from=story&dom=world&title=yeshttp://www.business-standard.com/http://mypage.rediff.com/qna?article_url=http%3A%2F%2Fbusiness.rediff.com%2Fslide-show%2F2009%2Fmay%2F20%2Fslide-show-1-the-secret-behind-hero-honda-success.htm&article_title=The%20secret%20behind%20Hero%20Honda%27s%20successhttp://mypage.rediff.com/qna?article_url=http%3A%2F%2Fbusiness.rediff.com%2Fslide-show%2F2009%2Fmay%2F20%2Fslide-show-1-the-secret-behind-hero-honda-success.htm&article_title=The%20secret%20behind%20Hero%20Honda%27s%20successhttp://messageboard.rediff.com/newboard/board.php?service_name=&boardid=money2009may20slide-show-1-the-secret-behind-hero-honda-success&from=story&dom=world&title=yeshttp://messageboard.rediff.com/newboard/board.php?service_name=&boardid=money2009may20slide-show-1-the-secret-behind-hero-honda-success&from=story&dom=world&title=yes7/27/2019 On the First of Every Month
11/12
And there was some aggressive planning. Last year, the company launched a three-
minute advertisement on television to mark its silver jubilee. That would have cost a
bomb. But Dua and his team worked with channels for six months. They were able tobring the air-time price down by half against firm commitments.
Research showed that Hero Honda's target customers (age bracket of 18 to 35 years)relate to four subjects: Cricket, music, movies and adventure. Thus, it roped in film stars
Hrithik Roshan and Priyanka Chopra, joined the Indian Premier League sponsorshipbandwagon, and got associated with television shows like Sa Re Ga Ma Pa on Zee TV
and MTV Roadies.
Powered by
Image: Hero Honda: A great ride so far
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12/12
Two-wheelers for all
High-decibel advertising does not work if not backed by the right products. The lifecycleof motorcycles has dropped sharply in the last few years. If it was 10 years earlier, it is
not more than two or three years now, reckons Munjal. "Customers have become more
demanding now," says he.
So, Hero Honda has refreshed its entire line of motorcycles. None of its 13 motorcycles
in the market is more than two years old. The company has decided to launch eight or
nine new products, variants or refreshes every year. And these launches will be spreadacross the three categories because, says Dua, all are growing at a fast clip.
Hero Honda relies heavily on variants and refreshes because they cost less than a whole
new product. "That way, you get more bang for the buck," says Dua.
The Passion Pro, for instance, was an all-new motorcycle but was launched under the
bestselling Passion brand. Sometimes, the profile of an existing brand fits the newproduct. For example, the company had a new product ready for launch in October 2006.
It decided to call it CBZ Extreme, though the CBZ brand had been discontinued in 2005!
"CBZ is a brand about the spirit, so we can stretch it," says Dua.