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Can brands extend into services?
Shweta Jain |
November 02, 2004
Surf the laundry service. Lakme the beauty salon chain. Asian Paints the painting contractor. Godrej, appliance repair. Four years ago, all these branded product companies ventured into services. Were they successful?
Godrej has been delighted with the results, Asian Paints has revised its expectations, the Lakme Beauty Salon chain is in the midst of a makeover and the Surf Laundry Service is looking at a new business model. Clearly, no one is daunted by the challenge, but the learning curve is still steep.
What does the transition entail? As growing numbers of companies look to stretching their brands into this arena -- Maruti being a well-documented success, selling more than 2,000 cars a month -- we look at three attempts at entering the branded services arena.
Asian Paints efforts to set up a turnkey paint-contracting service is a case in point. Home Solutions was originally meant to be a revenue earner. Today, despite a year-on-year growth of 30 per cent, the company is still looking at ways to make it a profitable venture, the principle issue being the heavy infrastructure costs. Yet the exercise can by no means be called a failure.
Home Solutions, which is currently offered in eight cities, had its origins in the feedback from a help-line service the company started in 1998. It turned out that 40 per cent of the callers were looking for turnkey contract services.
Says K B S Anand, vice president, sales and marketing, "The help-line helped us realise the fact that customers didn't want to take the trouble of selecting the right colour, deciding which paint to buy and from where."
Now, the help-line is used as a single communication point for Home Solutions. This is how it works: A customer calls the company's help-line and requests a salesman to visit his house.
Once the paint is chosen, the company takes care of the rest of the job, including scrubbing and cleaning. While one of its contractors does the painting the company's supervisors regularly do the rounds to check quality of work. The service includes a one-year warranty.
But several issues arose. One was that, despite the 10 to 15 per cent premium, the service was not really exclusive. Customers often found that their Asian Paints expert -- variously called "paint inspectors", and now either "sales associates" or "relationship associates" -- was often the same friendly neighbourhood contractor.
Anand argues that the contractors under Asian Paints's aegis offered a certain standard of service that they need not when they operated on their own. But some customers we spoke to were less than satisfied with the service.
Says one: "The terms of the contract that one signs with the company, should be tighter and the deliverable should be put upfront. For instance, the time promised for getting the job done is more like an informal understanding. It should be put down on paper. So, there is a slight delay which takes place and one would not expect that from a service that's branded."
Part of the problem, of course, was that Asian Paints is trying to make the tough transition from manufacturing to services. It is an exercise that can throw up unexpected issues, not least of which is managing the network of contractors, who are effectively the company's interface with the customer.
Midway through the exercise, sources said contractors' salaries were found to be inadequate, and this accounted for some sub-standard work. After under performers were weeded out, salaries were increased and tied with commissions. Contractors were also subsequently equipped with advanced gadgets like the laser measuring torch for quicker and more accurate service.
All of this may not have resulted in a high conversion rate, but the company claims to have painted 10,000 houses in two years. Says Anand, "If we grow any faster, we may not be able to offer the best quality." But Asian Paints expects 5 per cent of the paint volumes to come from Home Solutions (it is negligible right now).
Fast moving consumer goods giant HLL turned a new leaf in 2001 when it set up Lakmé Beauty Salons under its beauty brand, Lakmé and Surf laundry service for its detergent brand, Surf. The idea, once again, was to offer a complete brand experience. LBS has not been a major success, since its branded service was often as uneven as the local beauty parlour. But, like Asian Paints, the effort cannot be called a failure either. Today, LBS contributes 11 per cent to the company's turnover, but only one per cent of Lakmé product sales are through LBS outlets.
As for Surf laundry service, HLL is still working on the right strategy model after its initial efforts proved a wash-out. In 2001, HLL tied up with Bharat Petroleum to offer 24- to 48-hour laundry service. The service, which was 10 to 15 per cent more expensive than the regular dry-cleaners, ran for about a year-and-a-half at six BPCL outlets in Mamba's western suburbs. But the company shut shop beginning of this year, for reasons neither HLL nor BPCL want to specify.
Godrej Appliance's technicians started knocking on customers' doors, offering to repair and maintain their household appliances. But they were not offering to repair just Godrej appliances as one would expect. Called Smart Care, the service spans all appliance brands.
In this case, however, some success has been achieved. The intention is to garner a larger share of the home appliances market through the service. Consider this. Godrej sells 30,000 appliances by way of Smart Care in a year through 350 Smart Care centres across 25 cities. And out of the 200,000 maintenance contracts that the company gets in a year, about 25 per cent of the brands serviced are rival brands, an increase from 12 per cent till three years back.
Says Soumitra Ghatak, executive vice-president, marketing, sales and service, Godrej Appliances, "The idea is to gradually move consumers to the Godrej brand, by offering efficient after-sales service." For this, the company targets brands, which are out of warranty. But how does the company find that out? "We make cold calls. That's the only way of knowing when the competing brand's warranty period gets over," Ghatak says. Godrej also offers a one-year warranty after the repair. Ghatak says 3,000 calls per day, about 500 materialise into contracts.
Just like others, the competition for Godrej here is not an LG or a Samsung, but the local repair man. But while the company charges about 40 per cent over the market rate, it assures service within eight hours. Besides, the company also sells accessories for appliances through Smart Care.
Godrej now plans to make Smart Care a one-stop-shop for all its appliances. Says Ghatak, "We will gradually start servicing all Godrej machines and appliances in a house, including cupboards and so on."
If Godrej's efforts succeed, the company may manage to achieve its aim of garnering about 20 per cent of the revenues from Smart Care, in four or five years against 10 per cent at present.
"It will continue to be our revenue model as it allows us to study consumer behaviour," says Ghatak.Like Maruti, Godrej has been able to cash in on its wide existing user base and back it up with reasonably reliable service.Achieving that consistency is what manufacturer-service providers have to aspire for.